Earnings Call Excerpt
Midwest Banc Holdings Inc. (MBHI)
Q4 2007 Earnings Call
January 29, 2008 10:00 am ET
Executives
Jim Giancola - President and Chief Executive Officer
Jay Fritz - Executive Vice President
Dan Kadolph - Chief Financial Officer
Analysts
David Rochester - FBR Capital Markets
David Konrad - KBW
Brad Milsaps - Sandler O'Neill
Daniel Cardenas - Howe Barnes
Terry Burke - Private Investor
Presentation
Operator
Welcome to the Midwest Banc Holdings Incorporated Fourth Quarter Conference Call. (Operator Instructions).
This presentation contains forward-looking statements. Actual results may differ materially from the results suggested by these forward-looking statements for a number of reasons. These forward-looking statements are within the meaning of Section 27-A of the Securities Act of 1933, as amended, and Section 21-E of the Securities Exchange Act of 1934, as amended, and should be reviewed in conjunction with the company's annual report on Form 10-K and other publicly available information regarding the company, copies of which are available from the company upon request and on the company's website at www.midwestbanc.com. Such publicly available information sets forth certain risks and uncertainties related to the company's business, which should be considered in evaluating forward-looking statements.
(Operator Instructions).
Now I would like to turn the conference over to Jim Giancola, President and CEO. Please go ahead, sir.
Jim Giancola
Thank you. Good morning, everyone. Thank you for participating this morning. There are a number of members of our management team in the room with me this morning to help with questions at the end. As is our fashion, we are not going to reread the press release data, but rather try and hit on the strategic issues and the major trends that we see in our business.
About 85% of our income comes from spread. Margins in 2007 were at approximately 20-year lows. A flat to inverted yield curve is obviously very negative to our regional banks' net interest margin. At least, as importantly, and in our case, perhaps more important, the aberration in the relationship between LIBOR and Fed funds at the time really exacerbated the problems with margin at Midwest in the fourth quarter.
To say it as simply as possible, we borrow at LIBOR, we lend at prime. LIBOR, until January, was about 100 to 125 points above the Fed funds. Today, it's 25 points below the Fed funds. That change will be margin-friendly as our pricing resets make their way through our balance sheet.
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