<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
Washington, D.C. 20549
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarter ended JUNE 30, 1995, or
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from
___________________________ to ___________________________
COMMISSION FILE NUMBER 0-10967
--------------------------------------------------------------------------------
FIRST MIDWEST BANCORP, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-3161078
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
300 PARK BLVD., SUITE 405, P.O. BOX 459
ITASCA, ILLINOIS 60143-0459
(Address of principal executive offices) (zip code)
(708) 875-7450
(Registrant's telephone number, including area code)
COMMON STOCK, NO PAR VALUE
PREFERRED SHARE PURCHASE RIGHTS
Securities Registered Pursuant to Section 12(g) of the Act
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
As of August 4, 1995, 12,243,886 shares of the Registrant's no par value
common stock were outstanding, excluding treasury shares.
Exhibit Index is located on page 22.
<PAGE>
FIRST MIDWEST BANCORP, INC.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
----
<S> <C>
Item 1. Financial Statements
Consolidated Statements of Condition........................................................ 3
Consolidated Statements of Income........................................................... 4
Consolidated Statements of Cash Flows....................................................... 5
Notes to Consolidated Financial Statements.................................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.. 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K....................................................... 21
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST MIDWEST BANCORP, INC.
CONSOLIDATED STATEMENTS OF CONDITION
(Dollar amounts in thousands except per share data)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 /(1)/ 1994 /(2)/
------------ -------------
<S> <C> <C>
ASSETS
Cash and due from banks................................................... $ 196,688 $ 107,180
Federal funds sold and other short term investments....................... 26,794 15,694
Securities available for sale, at market value............................ 463,695 696,384
Securities held to maturity, at amortized cost (market value of $278,447
and $165,536 at June 30, 1995 and December 31, 1994, respectively)...... 276,240 168,644
Loans, net of unearned discount........................................... 1,898,477 1,785,200
Reserve for loan losses................................................... (24,844) (24,083)
----------- -----------
Net loans................................................................. 1,873,633 1,761,117
Premises, furniture and equipment......................................... 44,174 40,329
Accrued interest receivable............................................... 21,247 18,358
Other assets.............................................................. 49,194 67,395
----------- -----------
TOTAL ASSETS.............................................................. $ 2,951,665 $ 2,875,101
=========== ===========
LIABILITIES
Demand deposits........................................................... $ 348,370 $ 346,864
Savings deposits.......................................................... 254,620 270,192
NOW accounts.............................................................. 285,946 292,570
Money market deposits..................................................... 232,532 194,548
Time deposits............................................................. 979,902 890,234
----------- -----------
Total deposits.......................................................... 2,101,370 1,994,408
Short-term borrowings..................................................... 606,254 665,500
Accrued interest payable.................................................. 9,988 9,120
Other liabilities......................................................... 20,230 19,958
----------- -----------
TOTAL LIABILITIES......................................................... 2,737,842 2,688,986
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, no par value: 1,000,000 shares authorized, none issued... --- ---
Common stock, no par value: 20,000,000 shares authorized; 12,551,430
issued; 12,237,113 and 12,197,480 outstanding at June 30, 1995 and
December 31, 1994, respectively........................................ 23,465 23,465
Additional paid-in capital................................................ 25,779 25,913
Retained earnings......................................................... 173,569 165,893
Unrealized net depreciation on securities, net of tax..................... (1,708) (20,767)
Treasury stock, at cost - 314,317 and 353,950 shares at June 30, 1995
and December 31, 1994, respectively..................................... (7,282) (8,389)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY................................................ 213,823 186,115
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................ $ 2,951,665 $ 2,875,101
=========== ===========
</TABLE>
See notes to consolidated financial statements.
/(1)/ Unaudited
/(2)/ Audited - See December 31, 1994 Form 10-K for Auditor's Report.
3
<PAGE>
FIRST MIDWEST BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
QUARTERS ENDED SIX MONTHS ENDED
JUNE 30, (1) JUNE 30, (1)
------------------------- -------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans............................ $ 42,564 $ 34,061 $ 82,308 $ 66,008
Interest on securities available for sale............. 10,766 10,890 22,463 21,244
Interest on securities held to maturity............... 2,625 640 4,988 1,213
Interest on federal funds sold and other
short-term investments............................... 978 435 1,246 477
----------- ----------- ----------- -----------
TOTAL INTEREST INCOME............................... 56,933 46,026 111,005 88,942
----------- ----------- ----------- -----------
INTEREST EXPENSE......................................
Interest on deposits.................................. 18,725 13,779 34,751 26,455
Interest on short-term borrowings..................... 10,478 5,747 20,992 10,117
----------- ----------- ----------- -----------
TOTAL INTEREST EXPENSE.............................. 29,203 19,526 55,743 36,572
----------- ----------- ----------- -----------
NET INTEREST INCOME................................. 27,730 26,500 55,262 52,370
PROVISION FOR LOAN LOSSES............................. 2,540 1,780 4,172 3,292
----------- ----------- ----------- -----------
Net interest income after provision for loan losses. 25,190 24,720 51,090 49,078
----------- ----------- ----------- -----------
NONINTEREST INCOME
Service charges on deposit accounts................... 2,262 2,493 4,506 4,759
Trust income.......................................... 2,098 1,603 3,586 3,146
Other service charges, commissions and fees........... 1,365 1,474 2,895 2,818
Net revenues on real estate loans held for sale....... 497 323 595 823
Security transactions, net............................ 527 (21) 532 1,259
Other income.......................................... 959 505 1,532 1,086
----------- ----------- ----------- -----------
TOTAL NONINTEREST INCOME............................ 7,708 6,377 13,646 13,891
----------- ----------- ----------- -----------
NONINTEREST EXPENSE
Salaries and wages.................................... 9,612 9,326 19,037 18,343
Retirement and other employee benefits................ 2,588 2,404 5,257 5,169
Occupancy expense of premises......................... 1,190 1,299 2,607 2,708
Equipment expense..................................... 1,396 1,267 2,846 2,498
Computer processing expense........................... 1,430 1,149 2,951 2,344
FDIC insurance premiums............................... 1,104 1,134 2,208 2,268
Advertising and promotions expense.................... 547 693 1,178 1,136
Foreclosed real estate expense, net................... 492 230 809 873
Other expenses........................................ 4,642 4,710 8,653 9,820
----------- ----------- ----------- -----------
TOTAL NONINTEREST EXPENSE........................... 23,001 22,212 45,546 45,159
----------- ----------- ----------- -----------
Income before income tax expense...................... 9,897 8,885 19,190 17,810
Income tax expense.................................... 3,544 3,283 6,858 6,693
----------- ----------- ----------- -----------
NET INCOME.......................................... $ 6,353 $ 5,602 $ 12,332 $ 11,117
=========== =========== =========== ===========
NET INCOME PER SHARE................................ $ 0.52 $ 0.46 $ 1.01 $ 0.91
Cash dividends declared per share................... $ 0.19 $ 0.17 $ 0.38 $ 0.34
Weighted average shares outstanding................. 12,233,382 12,168,625 12,217,828 12,181,910
=========== =========== =========== ===========
</TABLE>
-----------------------------------
See notes to consolidated financial statements.
(1) Unaudited
4
<PAGE>
FIRST MIDWEST BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, (1)
---------------------
1995 1994
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income......................................................................... $ 12,332 $ 11,117
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses......................................................... 4,172 3,292
Provision for depreciation........................................................ 2,744 2,421
Net amortization of securities available for sale premiums and discounts.......... 1,265 1,320
Net accretion of securities held to maturity premiums and discounts............... (1,063) (180)
Net gains on securities available for sale transactions........................... (532) (1,237)
Net gains on securities held to maturity.......................................... - (22)
Net gains on sales of premises, furniture and equipment........................... (68) (67)
Net decrease in deferred income taxes............................................. (275) (295)
Net amortization of purchase accounting adjustments and goodwill.................. 718 745
Changes in operating assets and liabilities:
Net (increase) decrease in loans held for sale................................... (9,397) 6,670
Net (increase) decrease in accrued interest receivable........................... (2,889) 179
Net decrease in other assets..................................................... 3,566 4,299
Net increase (decrease) in accrued interest payable.............................. 868 (216)
Net increase (decrease) in other liabilities..................................... 547 (5,657)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES....................................... 11,988 22,369
--------- ---------
INVESTING ACTIVITIES
Securities available for sale:
Proceeds from sales................................................................ 341,888 206,047
Proceeds from maturities, calls and paydowns....................................... 14,202 125,103
Purchases.......................................................................... (92,908) (296,215)
Securities held to maturity:
Proceeds from maturities, calls and paydowns....................................... 66,743 12,226
Purchases.......................................................................... (173,269) (30,814)
Loans made to customers, net of principal collected................................. (108,079) (97,321)
Proceeds from sales of foreclosed real estate....................................... 2,512 11,273
Proceeds from sales of premises, furniture and equipment............................ 119 218
Purchases of premises, furniture and equipment...................................... (6,627) (3,483)
--------- ---------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES................................... 44,581 (72,966)
--------- ---------
FINANCING ACTIVITIES
Net increase in deposit accounts.................................................... 106,962 61,761
Net (decrease) increase in short-term borrowings.................................... (59,246) 27,385
Purchases of treasury stock......................................................... (78) (2,097)
Cash dividends...................................................................... (4,650) (4,138)
Exercise of stock options........................................................... 1,051 265
--------- ---------
NET CASH USED BY FINANCING ACTIVITIES.............................................. 44,039 83,176
--------- ---------
Net increase in cash and cash equivalents.......................................... 100,608 32,579
Cash and cash equivalents at beginning of period................................... 122,874 118,301
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD......................................... $ 223,482 $ 150,880
========= =========
Supplemental disclosures:
Interest paid to depositors and creditors.......................................... $ 54,875 $ 36,788
Income taxes paid.................................................................. 8,651 7,682
Non-cash transfers to foreclosed real estate from loans............................ 540 3,647
========= =========
</TABLE>
See notes to consolidated financial statements.
(1) Unaudited
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited interim consolidated financial statements of First Midwest
Bancorp, Inc. ("First Midwest") included in this report reflect all normal and
recurring adjustments which are, in the opinion of Management, necessary to
fairly present the results for the interim periods presented. Certain
reclassifications have been made to the 1994 data to conform to the 1995
presentation, and the results of operations for the interim periods presented
are not necessarily indicative of the results to be expected for the full year
1995. The accounting and reporting policies of First Midwest conform to
generally accepted accounting principles and general practice within the banking
industry. For details of significant accounting policies and practices, in
addition to that provided below, refer to First Midwest's Annual Report on Form
10-K for the year ended December 31, 1994.
ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN - In May, 1993, the Financial
Accounting Standards Board ("FASB") issued Statement No. 114 "Accounting by
Creditors for Impairment of a Loan", and in 1994 issued Statement No. 118, which
amends Statement No. 114. These Statements, which First Midwest adopted as of
January 1, 1995, address the accounting by creditors for an impaired loan by
specifying how the reserve for loan losses related to such loan should be
determined. A loan is considered impaired when it is probable that a creditor
will be unable to collect all contractual principal and interest due according
to the contractual terms of the loan agreement. The amount of impairment is the
difference between a creditor's recorded investment in a loan and the present
value of expected future cash flows from such loan or, as a practical expedient,
at either such loan's observable market price or the fair value of the
collateral supporting such loan. These Statements also prescribe the accounting
treatment for certain loans that are restructured in a troubled debt
restructuring and impose new rules with respect to the classification of in-
substance foreclosed loans. First Midwest's disclosure with respect to the
Statements is provided in the accounting policies that follow entitled "Loans"
and "Foreclosed Real Estate" and in note 4, located on page 9, of this Form
10-Q.
LOANS - Loans are carried at the principal amount outstanding, net of unearned
income, including certain deferred loan fees. Interest income on loans is
accrued based on principal amounts outstanding. Unearned discount on certain
consumer installment loans is credited to income over the term of the loan using
the sum-of-the-month's digits method which approximates the level yield method.
Generally a loan, including an impaired loan, is classified as nonaccrual and
the accrual of interest thereon discontinued when, in the opinion of Management,
there is reasonable doubt as to the timely collection of interest or principal.
When a loan is placed on nonaccrual status, unpaid interest credited to income
in the current year is reversed and unpaid interest accrued in prior years is
charged against the reserve for loan losses. Interest received on nonaccrual
loans is either applied against principal or reported as interest income,
according to management's judgment as to the collectibility of principal.
Nonaccrual loans are returned to an accrual status when, in the opinion of
Management, the financial position of the borrower and other relevant factors
indicate there is no longer reasonable doubt as to the timely payment of
principal or interest.
FORECLOSED REAL ESTATE - Foreclosed real estate, including certain in-substance
foreclosures, includes properties acquired in partial or total satisfaction of
certain loans and is included in other assets in the accompanying consolidated
statements of condition.
In accordance with FASB Statement No. 114, a loan is classified as an in-
substance foreclosure when First Midwest takes possession of loan collateral
regardless of whether a formal foreclosure proceeding takes place. Loans
previously classified as in-substance foreclosure but for which First Midwest
had not taken possession of the collateral have been reclassified to loans
effective January 1, 1995. This reclassification had no impact on First
Midwest's financial condition or results of operations.
GOODWILL AND OTHER INTANGIBLES - Goodwill, representing the excess of the
purchase price over the fair value of net assets acquired using the purchase
method of accounting, is being amortized using the straight-line method over
periods not exceeding twenty years. At June 30, 1995, goodwill totaling $14,205
is included in other assets in the accompanying consolidated statements of
condition.
6
<PAGE>
Included in other assets in the accompanying consolidated statement of condition
at June 30, 1995 are other intangibles, primarily core deposit premiums and
organizational costs, totaling $1,711.
First Midwest assesses the recoverability of its goodwill and other intangibles
on a periodic basis through review of various economic factors in determining
whether impairment, if any, exists.
2. SECURITIES
SECURITIES AVAILABLE FOR SALE - The amortized cost and market value of
securities available for sale at June 30, 1995 and December 31, 1994 are as
follows:
<TABLE>
<CAPTION>
Securities Available for Sale
------------------------------------------------------------------------------------------
June 30, 1995 December 31, 1994
-------------------------------------------- --------------------------------------------
Gross Gross Gross Gross
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
Cost Gains Losses Value Cost Gains Losses Value
--------- ---------- ----------- -------- --------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities.. $199,757 $1,910 $ (160) $201,507 $134,204 $ -- $ (2,666) $131,538
U.S. Agency securities.... 257,330 - (2,111) 255,219 536,950 87 (26,966) 510,071
Other securities.......... 7,182 - (213) 6,969 57,037 24 (2,286) 54,775
-------- ---------- ------- -------- -------- ---- -------- --------
Total................... $464,269 $1,910 $(2,484) $463,695 $728,191 $111 $(31,918) $696,384
======== ========== ======= ======== ======== ==== ======== ========
</TABLE>
U.S. Treasury Securities - Since December 31, 1994 approximately $76,000 in
U.S. Treasury securities were purchased. Such purchases were funded from the
proceeds of paydowns and sales of agency and other securities classified as
available for sale. A decline in general market interest rates during 1995
resulted in a reduction in gross unrealized losses from ($2,666) at year-end
1994 to gross unrealized gains and losses of $1,910 and ($160), respectively as
of June 30, 1995.
U.S. Agency Securities - The majority of agency securities represent
collateralized mortgage obligation bonds (CMOs) and mortgage-backed pass-
through securities. These securities are primarily normal pass-through
certificates issued by agencies of the U.S. government or are AAA-rated agency-
backed CMOs with specific tranches selected for their cashflow and prepayment
characteristics. The approximate $280,000 reduction in the amortized cost
since year-end 1994 primarily reflects sales of securities during 1995 totaling
approximately $261,000. These sales were conducted to reposition the portfolio
in order to enhance the overall portfolio liquidity as well as to reduce price
volatility.
Gross unrealized losses in this security category totaled ($2,111) at June 30,
1995 of which approximately ($1,100) is attributable to CMOs that were
purchased in conjunction with the arbitrage transaction discussed in
Management's Discussion and Analysis under the section entitled "Net Interest
Income" located on page 12 of this Form 10-Q. The principal CMO securities
balance related to the ($1,100) in unrealized loss was reduced from $206,000 as
of December 31, 1994, to $174,000 as of June 30, 1995; such reduction is
attributable to the portfolio repositioning as discussed above. Interest rates
on these CMOs reset monthly and are indexed to one-month LIBOR, plus a spread
of approximately 125 basis points. These CMOs are subject to lifetime interest
rate caps which represent ceilings set on the interest coupons of the
securities, which are in the range of 9 - 9 1/2%. The general decline in
interest rates since the end of 1994 has positively affected the market value
of the caps imbedded within such CMOs. As a result, the ($1,100) in unrealized
losses on the CMOs as of June 30, 1995 represents a reduction from such
unrealized loss outstanding at year-end 1994 which totaled ($18,400).
Other Securities - Other securities totaled approximately $7,000 as of June 30,
1995, representing an approximate $48,000 reduction since year-end 1994. This
reduction represents the paydowns and sales of whole-loan mortgage-backed
securities during 1995 with the proceeds reinvested in higher-yielding U.S.
Treasury securities with durations similar to those of the securities sold.
For the six months ended June 30, 1995, proceeds from sales and paydowns of
securities available for sale totaled $341,888 and $14,202, respectively, with
gross gains and losses realized on such sales totaling $1,552 and ($1,020),
respectively. For the year ended December 31, 1994, proceeds from the sale of
securities available for sale totaled $206,388. Gross gains and losses realized
on sales for the year ended December 31, 1994 were $1,780 and ($541),
respectively.
7
<PAGE>
SECURITIES HELD TO MATURITY - The amortized cost and market value of securities
held to maturity at June 30, 1995 and December 31, 1994 are as follows:
<TABLE>
<CAPTION>
Securities Held to Maturity
------------------------------------------------------------------------------------------
June 30, 1995 December 31, 1994
-------------------------------------------- --------------------------------------------
Gross Gross Gross Gross
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
Cost Gains Losses Value Cost Gains Losses Value
--------- ---------- ----------- -------- --------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities........ $ 927 $ 8 $ (2) $ 933 $ 721 $ -- $ (9) $ 712
U.S. Agency securities.......... 232,176 1,969 (39) 234,106 131,950 -- (3,069) 128,881
State and municipal securities.. 30,807 345 (96) 31,056 25,731 324 (351) 25,704
Other securities................ 12,330 22 - 12,352 10,242 -- (3) 10,239
-------- ------ ----- -------- -------- ---------- ------- --------
Total......................... $276,240 $2,344 $(137) $278,447 $168,644 $324 $(3,432) $165,536
======== ====== ===== ======== ======== ========== ======= ========
</TABLE>
The increase in the securities held to maturity portfolio since December 31,
1994 is attributable to purchases of U.S. Agency securities in the second
quarter of 1995. These funds were primarily provided by sales of U.S. Agency
securities classified as available for sale, as discussed in the previous
section entitled "Securities Available for Sale". Also increasing the portfolio
size was the purchase of short-term tax anticipation warrants ("TAWs")
classified as State and municipal securities.
U.S. Agency Securities - Included in U.S. Agency securities in the table above
are approximately $88,000 in CMOs that were purchased in conjunction with the
arbitrage transaction discussed in Management's Discussion and Analysis under
the section entitled "Net Interest Income" located on page 12 of this Form
10-Q. Interest rates on these CMOs reset monthly and are indexed to one month
LIBOR, plus a spread of approximately 125 basis points. These CMOs are subject
to lifetime interest rate caps which represent ceilings set on the interest
coupons of the securities. Of the total approximate $88,000 in securities,
$28,000 have a 10% cap and the remaining $60,000 have a 9% cap. The general
decline in interest rates since the end of 1994 has positively affected the
market value of the caps imbedded within such CMOs. As a result, the $1,969
unrealized gains as of June 30, 1995 represent a significant fluctuation from an
unrealized loss outstanding at year-end 1994 which totaled ($3,033).
For the six months ended June 30, 1995, proceeds from calls of securities held
to maturity totaled $6,038; no gains or losses were realized on such calls.
Proceeds from calls of securities held to maturity for the year ended December
31, 1994 totaled $41,722. Gross gains and losses realized on those calls
totaled $22 and ($1), respectively.
3. LOANS
The following table provides the book value of loans, by major classification,
as of the dates indicated:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
---------- ------------
<S> <C> <C>
Commercial and industrial... $ 573,946 $ 514,628
Agricultural................ 31,273 33,546
Consumer.................... 525,896 499,313
Real estate - 1-4 family.... 246,714 215,821
Real estate - commercial.... 428,968 441,570
Real estate - construction.. 73,896 67,356
Other....................... 17,784 12,966
---------- ----------
Total....................... $1,898,477 $1,785,200
========== ==========
</TABLE>
Real estate 1-4 family loans, in the table above, include loans held for sale
totaling $13,460 and $4,063, at June 30, 1995 and December 31, 1994,
respectively.
Effective April 1, 1995 First Midwest adopted FASB Statement No. 122 ("FASB No.
122") "Accounting for Mortgage Servicing Rights". FASB No. 122 amends Statement
No. 65 "Accounting for Certain Mortgage Banking Activities" to require that a
mortgage banking enterprise recognize as separate assets the rights to service
mortgage loans for others, however those servicing rights are acquired,
eliminating the previously existing accounting distinctions between servicing
8
<PAGE>
rights acquired through purchase transactions and those acquired through loan
originations. The statement also requires the assessment of capitalized
mortgage servicing rights for impairment to be based on the current fair value
of those rights.
Pursuant to the requirements of FASB No. 122, First Midwest's mortgage servicing
rights are carried at fair value which approximated $385 at June 30, 1995. Such
servicing rights are amortized over the average life of the loans serviced which
approximates seven years. As of June 30, 1995 the valuation allowance for
servicing rights totaled $128; no writedowns were recorded during the quarter.
4. RESERVE FOR LOAN LOSSES/IMPAIRED LOANS
The following table presents changes in the reserve for loan losses for the
quarter and six months ended June 30, 1995 and 1994:
<TABLE>
<CAPTION>
Quarters ended Six months ended
June 30, June 30,
------------------- -------------------
1995 1994 1995 1994
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Balance at beginning of period................... $24,208 $21,692 $24,083 $21,654
Provision for loan losses................... 2,540 1,780 4,172 3,292
Loans charged-off........................... (2,546) (2,476) (4,498) (4,456)
Recoveries of loans previously charged-off.. 642 575 1,087 1,081
------- ------- ------- -------
Net loans charged-off................... (1,904) (1,901) (3,411) (3,375)
------- ------- ------- -------
Balance at end of period......................... $24,844 $21,571 $24,844 $21,571
======= ======= ======= =======
</TABLE>
The recorded investment in loans determined to be impaired at June 30, 1995
totaled $19,400. For a definition of impairment, in addition to methods of
measuring the amount of impairment, refer to the section entitled "Accounting
for Creditors for Impairment of a Loan" in Note 1 to the consolidated financial
statements located on Page 6 of this Form 10-Q. Of such $19,400, $14,360 have
collateral values less than the recorded investment in such loans for which a
specific loan loss reserve of $3,831 is maintained; the $5,040 balance of
impaired loans have collateral values equal to or greater than the recorded
investment in such loans. Further, of the $19,400 in impaired loans, $11,261
were classified as nonaccrual and $7,779 as renegotiated.
At June 30, 1995 the reserve for loan losses totaled $24,844 and consisted of
specific reserves for impaired loans of $3,831, general allocated reserves of
$7,675 and unallocated reserves of $13,338. An explanation of the methodology
used to determine the level of the reserve for loan losses is provided in
Management's Discussion and Analysis under the section entitled "Provision and
Reserve for Loan Losses" beginning on page 18 of this Form 10-Q.
Information with respect to the average recorded investment in impaired loans
and interest income recorded on such loans is provided below:
<TABLE>
<CAPTION>
Quarter ended Six months ended
June 30, 1995 June 30, 1995
------------- ----------------
<S> <C> <C>
Average recorded investment in impaired loans.. $14,522 $16,741
Interest income recorded - total............... 170 332
Interest income recorded - cash basis.......... 133 295
======= =======
</TABLE>
9
<PAGE>
5. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, First Midwest is a party to financial
instruments with off-balance sheet risk to meet the financing needs of its
customers and to reduce its own exposure to fluctuations in interest rates.
These instruments include commitments to extend credit, standby letters of
credit, commercial letters of credit, forward sales contracts and interest rate
swap transactions. Those instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the
statement of condition. The contract or notional amounts of those instruments
reflect the extent of involvement that First Midwest has in particular classes
of financial instruments.
As of June 30, 1995, the contractual amount of commitments to extend credit
totaled $415,293, $69,355 of which represents unused home equity lines of
credit. The contractual amount of standby letters of credit totaled $40,505 and
commercial letters of credit were $413.
First Midwest enters into certain sales contracts for the future delivery of
loans at a specified price and date. These contracts, in the form of forward
sales agreements, are entered into to limit exposure to fluctuation in interest
rates in First Midwest's mortgage loan sales operations. As part of such loan
sales operations, First Midwest generally contracts for the sale of loans
without recourse. Forward sales agreements outstanding as of June 30, 1995
totaled $18,000.
Interest rate swap transactions generally involve the exchange of fixed and
floating rate interest payment obligations without the exchange of the
underlying principal amounts. First Midwest enters into interest rate swaps
with third parties in order to limit variations in net interest income. First
Midwest has also utilized interest rate swaps referred to as "basis" swaps to
lock in spreads on its prime rate-based loan portfolios. Credit exposure on the
interest rate swaps is comprised of the aggregate net interest payable to First
Midwest by the counterparty in addition to the aggregate unrealized gain on the
interest rate swap position. First Midwest maintains a policy limiting credit
exposure to any counterparty to not more than 2.5% of consolidated stockholders'
equity. In addition, First Midwest's interest rate swaps generally require the
establishment of a mutual mark-to-market arrangement whereby cash collateral may
be required to be on deposit with First Midwest and/or the agreement's
counterparty.
First Midwest had interest rate swaps with an aggregate notional amount totaling
$344,100 in place, hedging various balance sheet categories, as of June 30,
1995. Further information with respect to these interest rate swap contracts is
presented below:
<TABLE>
<CAPTION>
Weighted Weighted Average Rate
Average Fair Value ---------------------
Notional Maturity as of Interest Interest
Type of Interest Rate Swap Amount (in years) 6/30/95 Received Paid
-------------------------------------- -------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Receive fixed rate/Pay variable rate.. $104,100 1.0 $ 651 6.43% 6.11%
Pay fixed rate/Receive variable rate.. $ 40,000 0.1 $ (12) 6.06% 6.65%
Basis swaps $200,000 3.2 $ (4,920) 5.06% 6.63%
======== === ======== ==== ====
</TABLE>
The fair value of interest rate swaps is the estimated amount that First Midwest
would pay to terminate the swap agreements at the reporting date, taking into
account current interest rates and the creditworthiness of the swap counter-
parties.
6. PENDING ACQUISITION
On June 1, 1995 First Midwest announced that it had entered into a definitive
agreement to acquire CF Bancorp, Inc. ("CF"). CF is the holding company of
Citizens Federal Savings Bank, F.S.B. ("Citizens Federal") which is
headquartered in Davenport, Iowa with additional offices in Davenport and
Bettendorf, Iowa. CF had total assets and stockholders' equity of approximately
$225,000 and $23,000, respectively, as of June 30, 1995. For the six months
ended June 30, 1995, CF recorded net income of $1,400, resulting in return on
average assets and stockholder's equity of 1.27% and 12.37%, respectively.
10
<PAGE>
Under the agreement, CF shareholders will receive 1.4545 shares of First Midwest
common stock for each share of CF common stock in a tax-free exchange. Based on
First Midwest's June 30 closing price of $24.69, each share of CF's common stock
has an implied value of $35.91, with the total transaction valued at
approximately $32.9 million based upon total CF common shares currently
outstanding.
The agreement has been approved by the Boards of Directors of both First Midwest
and CF, and is subject to CF shareholder ratification and customary regulatory
approvals. The transaction, to be accounted for as a pooling of interests, is
expected to be completed in late 1995 or early 1996.
7. OTHER MATTERS
During the second quarter of 1995 settlement discussions occurred arising out of
litigation brought by First Midwest relating to a claim against its fidelity
bond insurance carrier. Incident thereto the carrier informally communicated a
settlement offer which was rejected by First Midwest. Neither the possibility
nor the timing of settlement or litigation outcome can be reasonably determined
or quantified at this time.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The discussion presented below provides an analysis of First Midwest's results
of operations and financial condition for the quarter and six months ended June
30, 1995 as compared to the same period in 1994. Management's discussion and
analysis should be read in conjunction with the consolidated financial
statements and accompanying notes presented elsewhere in this Form 10-Q.
Amounts are presented in thousands, except for per share data.
SUMMARY OF PERFORMANCE
Net Income
----------
Net income for the second quarter of 1995 increased to $6,353, or $.52 per share
from $5,602, or $.46 per share in the second quarter of 1994 representing an
increase of 13% on a per share basis. Net income for the six months ended June
30, 1995 increased to $12,332, or $1.01 per share, from $11,117, or $.91 per
share for the like period in 1994, representing an 11% increase per share.
Presented in the table below is an income statement analysis, presented on a per
share basis, comparing the after-tax change in the components of net income for
the periods ended June 30, 1995 and 1994. The increase or decrease in each net
income component is further detailed in the management discussion and analysis
that follows.
<TABLE>
<CAPTION>
Quarter Six months
-------- -----------
<S> <C> <C>
Net income per share - Period ended June 30, 1994.... $ 0.46 $ 0.91
Increase (decrease) in after-tax net income in 1995
as compared to 1994 resulting from changes in:
Net interest income (tax equivalent)............... 0.06 0.14
Provision for loan losses.......................... (0.04) (0.04)
Noninterest income................................. 0.04 0.02
Securities gains................................... 0.02 (0.04)
Noninterest expense................................ (0.04) (0.02)
Income tax expense /*/............................. 0.02 0.04
------ ------
Net increase......................................... 0.06 0.10
------ ------
Net income per share - Period ended June 30, 1995.... $ 0.52 $ 1.01
====== ======
</TABLE>
/*/ Refer to the discussion on page 18, entitled "Income Tax Expense".
Return on Average Assets and Stockholders' Equity
-------------------------------------------------
Return on average assets was 0.87% for the second quarter of 1995 as compared to
0.82% for the same quarter in 1994. Return on average assets for the six months
ended June 30, 1995 was 0.86%, as compared to 0.83% for the like period in 1994.
Return on average stockholders' equity for the second quarter of 1995 was
12.34%, as compared to 11.69% for the 1994 quarter. Return on average
stockholders' equity was 12.48% for the six months ended June 30, 1995, as
compared to 11.47% for the like period in 1994.
NET INTEREST INCOME
Net interest income is the principal source of earnings for First Midwest and
represents the difference between interest income and fees earned on loans,
securities and other earning assets and the interest expense paid for the
funding sources used to finance those assets. Net interest income is impacted
by both the volume of earning assets and paying liabilities and the rates earned
and paid, respectively, on those assets and liabilities. Net interest margin
represents net interest income as a percentage of total interest earning assets.
12
<PAGE>
For purposes of the following discussion, both net interest income and margin
have been adjusted to a fully tax-equivalent basis for certain tax-exempt loans
and securities. The following summarizes net interest income and margin for the
periods ended June 30, 1995 and 1994:
<TABLE>
<CAPTION>
Quarters ended Six months ended
June 30, June 30,
------------------ -------------------
1995 1994 1994 1995
------- ------- -------- -------
<S> <C> <C> <C> <C>
Interest income, as reported........... $56,933 $46,026 $111,005 $88,942
Tax equivalent adjustment........... 317 354 606 704
------- ------- -------- -------
Tax equivalent interest income......... 57,250 46,380 111,611 89,646
Interest expense....................... (29,203) (19,526) (55,743) (36,572)
------- ------- -------- -------
Tax equivalent net interest income.. $28,047 $26,854 $ 55,868 $53,074
======= ======= ======== =======
Tax equivalent net interest margin.. 4.13% 4.23% 4.19% 4.28%
======= ======= ======== =======
- excluding arbitrage /(1)/....... 4.46% 4.62% 4.54% 4.68%
======= ======= ======== =======
</TABLE>
/(1)/ Refer to the following discussion for a description of the arbitrage.
Net interest income on a tax equivalent basis increased to $28,047 for the
second quarter of 1995, representing an increase of $1,193, or 4.4% over the
year ago quarter totaling $26,854. That interest margin decreased to 4.13% for
the 1995 quarter as compared to 4.23% for the same quarter in 1994. For the six
months ended June 30, 1995, net interest income increased to $55,868,
representing an increase of $2,794 or 5.3% over the like period in 1994 totaling
$53,074. Net interest margin decreased to 4.19% for the 1995 period as compared
to 4.28% for the same period in 1994.
Included in average earning assets during the second quarter of 1995 was
approximately $286,000 in securities purchased incident to an arbitrage
transaction; the average balance of such securities for the second quarter of
1994 was approximately $303,000. The arbitrage involves the purchase of floating
rate securities and the simultaneous financing of this purchase through
repurchase agreements with investment banks who are primary dealers in U.S.
Government securities. The arbitrage adds to net interest income as a result of
the spread between the rate of interest earned on the securities and that paid
on the underlying funding source. The average interest rate earned on the
securities during the second quarter of 1995 was 7.62% while the average
interest rate paid on the underlying funding source was 6.22% for a net positive
interest rate spread of 1.40%. The average interest rates earned and paid on the
arbitrage investment in the second quarter of 1994 were 5.41% and 4.13%,
respectively, for a positive net interest spread of 1.28%. Excluding the effect
of the arbitrage, which reduces the net interest margin due to the addition of a
significant volume of lower-yielding securities, tax equivalent net interest
margin would have been 4.46% for the 1995 quarter and 4.62% for the 1994
quarter.
For the six months ended June 30, 1995 the average principal position of the
arbitrage was $286,000 with a positive net spread on such position of
approximately 150 basis points. For the same period in 1994 the average
principal position of the arbitrage was $295,000 with a net spread of
approximately 130 basis points.
As shown in the Volume/Rate Analysis on page 15, the $10,870 increase in
interest income for the quarter is largely attributable to volume and interest
rate variances on loans totaling $8,497. Slightly more than half of the loan
interest income variance resulted from loan volumes, which increased by
$223,031 in the current quarter over the like quarter last year, primarily due
to growth in the commercial, real estate, and indirect consumer loan portfolios.
The remaining loan interest income variance resulted from interest rates, which
increased to an average of 9.17% for the 1995 quarter from 8.34% in 1994.
13
<PAGE>
Interest expense increased by $9,677 for the second quarter of 1995 as compared
to the same period in 1994, dominantly due to interest rates on time deposits
and short-term borrowings. The interest rate increase on time deposits, which
average rates were 5.66% for the 1995 quarter as compared to 4.38% for the 1994
quarter, resulted primarily from an upward shift in the interest rate
environment and reflects growth in First Midwest's fixed term deposits. Short-
term borrowings, in the form of federal funds purchased, repurchase agreements
and Federal Home Loan Bank notes, increased to 6.71% in 1995 from 4.13% in 1994.
Volume and interest rate variances for the six months ended June 30, 1995 as
compared to 1994 are provided in the Volume/Rate Analysis on page 16 and
generally follow those provided for the quarterly periods. In addition, a
positive interest rate variance in securities available for sale reflects the
repricing of certain short-term securities in a higher interest-rate
environment.
First Midwest manages interest rate risk by conducting simulations that
demonstrate the changes that would occur in net interest income under different
interest rate scenarios and balance sheet structures. This form of modeling is
conducted monthly, involves adjustments to balance sheet volumes over a 24 month
forward period, incorporates a repricing analysis of earning assets and funding
sources and considers certain other balance sheet hedging vehicles such as
interest rate swaps. First Midwest has generally followed a policy of
maintaining a balanced mix of rate-sensitive assets and liabilities, making each
side of the balance sheet equally flexible in reacting to changes in market
interest rates so that net interest income will not be adversely affected by
more than 1-3%, regardless of whether rates rise or fall rapidly.
14
<PAGE>
VOLUME/RATE ANALYSIS
The table below summarizes the changes in average interest-earning assets and
interest-bearing liabilities as well as the average rates earned and paid on
these assets and liabilities, respectively, for the quarters ended June 30, 1995
and 1994. The table also details the increase and decrease in income and
expense for each major category of assets and liabilities and analyzes the
extent to which such variances are attributable to volume and rate changes.
<TABLE>
<CAPTION>
QUARTERS ENDED JUNE 30, 1995 AND 1994
----------------------------------------------------------------------------------------
AVERAGE INTEREST INTEREST
AVERAGE BALANCES RATES EARNED/PAID INCOME/EXPENSE
---------------------------------- ---------------------- ----------------------------
BASIS
INCREASE POINTS INCREASE
1995 1994 (DECREASE) 1995 1994 INC/(DEC) 1995 1994 (DECREASE)
---------- --------- ---------- ---- ---- --------- ------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal funds sold and other
short-term investments.................. $ 44,104 42,236 1,868 8.89% 4.13% 476 $ 978 435 543
Securities available for sale............. 656,943 818,235 (161,292) 6.57 5.34 123 10,766 10,890 (124)
Securities held to maturity:..............
Taxable................................. 119,370 8,273 111,097 7.26 5.77 149 2,162 119 2,043
Nontaxable (1).......................... 36,726 34,599 2,127 7.79 9.30 (151) 713 802 (89)
Loans, net of unearned discount (1)....... 1,865,624 1,642,593 223,031 9.17 8.34 83 42,631 34,134 8,497
---------- --------- -------- ---- ---- ---- ------- ------ ------
Total interest-earning assets (1)....... $2,722,767 2,545,936 176,831 8.43% 7.31% 113 $57,250 46,380 10,870
========== ========= ======== ==== ==== ==== ======= ====== ======
Savings deposits.......................... $ 257,156 282,644 (25,488) 2.18% 2.39 (21) $ 1,399 1,681 (282)
NOW accounts.............................. 305,372 319,131 (13,759) 2.48 2.18 30 1,890 1,732 158
Money market deposits..................... 216,289 225,969 (9,680) 3.21 2.51 70 1,729 1,414 315
Time deposits............................. 970,684 819,581 151,103 5.66 4.38 128 13,707 8,952 4,755
Short-term borrowings..................... 626,191 558,140 68,051 6.71 4.13 258 10,478 5,747 4,731
---------- --------- -------- ---- ---- ---- ------- ------ ------
Total interest-bearing liabilities...... $2,375,692 2,205,465 170,227 4.93% 3.55 138 $29,203 19,526 9,677
========== ========= ======== ==== ==== ==== ======= ====== ======
Net interest margin/income (1).......... 4.13% 4.23 (10) $28,047 26,854 1,193
==== ==== ==== ======= ====== ======
Net interest income/margin - excluding
arbitrage transaction (1) (2).......... 4.46% 4.62% (16) $27,154 25,986 1,168
==== ==== ==== ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED JUNE 30, 1995 AND 1994
-------------------------------------
INCREASE/(DECREASE) IN
INTEREST INCOME/EXPENSE DUE TO:
-------------------------------------
VOLUME/
VOLUME RATE RATE TOTAL
------- ------ ------- ------
<S> <C> <C> <C> <C>
Federal funds sold and other
short-term investments.................. $ 19 502 22 543
Securities available for sale............. (2,375) 2,251 - (124)
Securities held to maturity:..............
Taxable................................. 2,004 39 - 2,043
Nontaxable (1).......................... 49 (130) (8) (89)
Loans, net of unearned discount (1)....... 4,902 3,595 - 8,497
------- ------ --- ------
Total interest-earning assets (1)....... $ 4,599 6,257 14 10,870
======= ====== === ======
Savings deposits......................... $ (152) (143) 13 (282)
NOW accounts............................. (75) 243 (10) 158
Money market deposits.................... (61) 393 (17) 315
Time deposits............................ 1,837 2,918 - 4,755
Short-term borrowings.................... 773 3,958 - 4,731
------- ------ --- ------
Total interest-bearing liabilities...... $ 2,322 7,369 (14) 9,677
======= ====== === ======
Net interest margin/income (1).......... $ 2,277 (1,112) 28 1,193
======= ====== === ======
Net interest income/margin - excluding
arbitrage transaction (1) (2).......... $(1,541) 2,709 - 1,168
======= ====== === ======
</TABLE>
(1) Interest income and yields are presented on a tax-equivalent basis assuming
a statutory Federal Income tax rate of 35%.
(2) Refer to the discussion contained in "Net Interest Income" for a
description of the arbitrage.
15
<PAGE>
VOLUME/RATE ANALYSIS
The table below summarizes the changes in average interest-earning assets and
interest-bearing liabilities as well as the average rates earned and paid on
these assets and liabilities, respectively, for the six months ended June 30,
1995 and 1994. The table also details the increase and decrease in income and
expense for each major category of assets and liabilities and analyzes the
extent to which such variances are attributable to volume and rate changes.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
----------------------------------------------------------------------------------------
AVERAGE INTEREST INTEREST
AVERAGE BALANCES RATES EARNED/PAID INCOME/EXPENSE
---------------------------------- ---------------------- ----------------------------
BASIS
INCREASE POINTS INCREASE
1995 1994 (DECREASE) 1995 1994 INC/(DEC) 1995 1994 (DECREASE)
---------- --------- ---------- ---- ---- --------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal funds sold and other
short-term investments.................. $ 29,563 23,743 5,820 8.51% 4.05% 446 $ 1,247 477 770
Securities available for sale............. 680,216 825,458 (145,242) 6.66 5.19 147 22,463 21,244 1,219
Securities held to maturity:..............
Taxable................................. 113,382 5,774 107,608 7.32 6.18 114 4,113 117 3,936
Nontaxable (1).......................... 31,646 33,710 (2,064) 8.58 9.54 (96) 1,347 1,594 (247)
Loans, net of unearned discount (1)....... 1,830,881 1,614,739 216,142 9.08 8.26 82 82,442 66,154 16,288
---------- --------- -------- ---- ---- --- -------- ------ ------
Total interest-earning assets (1)....... $2,685,688 2,503,424 182,264 8.38% 7.22% 117 $111,611 89,646 21,966
========== ========= ======== ==== ==== === ======== ====== ======
Savings deposits.......................... $ 261,308 280,329 (19,021) 2.18% 2.39 (21) $ 2,821 3,317 (496)
NOW accounts.............................. 290,736 298,364 (7,628) 2.44 2.14 30 3,518 3,170 348
Money market deposits..................... 206,992 231,129 (24,137) 3.01 2.47 54 3,094 2,835 259
Time deposits............................. 934,485 801,165 133,320 5.46 4.31 115 25,318 17,133 8,185
Short-term borrowings..................... 643,562 541,817 101,745 6.58 3.77 281 20,992 10,117 10,875
---------- --------- -------- ---- ---- --- -------- ------ ------
Total interest-bearing liabilities...... $2,337,083 2,152,804 184,279 4.81% 3.43 138 $ 55,743 36,572 19,171
========== ========= ======== ==== ==== === ======== ====== ======
Net interest margin/income (1)......... 4.19% 4.28 (09) $ 55,868 53,074 2,795
==== ==== === ======== ====== ======
Net interest income/margin - excluding
arbitrage transaction (1) (2).......... 4.54% 4.68% (16) $ 54,020 51,221 2,799
==== ==== === ======== ====== ======
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
---------------------------------------
INCREASE/(DECREASE) IN
INTEREST INCOME/EXPENSE DUE TO:
---------------------------------------
VOLUME/
VOLUME RATE RATE TOTAL
------- ------ ------- ------
<S> <C> <C> <C> <C>
Federal funds sold and other
short-term investments.................. $ 117 525 128 770
Securities available for sale............. (4,143) 5,362 - 1,219
Securities held to maturity:..............
Taxable................................. 3,898 38 - 3,936
Nontaxable (1).......................... (98) (159) 10 (247)
Loans, net of unearned discount (1)....... 9,359 6,929 - 16,288
------- ------ --- ------
Total interest-earning assets (1)....... $ 9,133 12,695 138 21,966
======= ====== === ======
Savings deposits.......................... $ (225) (291) 20 (496)
NOW accounts.............................. (81) 440 (11) 348
Money market deposits..................... (296) 620 (65) 259
Time deposits............................. 3,143 5,042 - 8,185
Short-term borrowings..................... 2,185 8,690 - 10,875
------- ------ --- ------
Total interest-bearing liabilities...... $ 4,726 14,501 (56) 19,171
======= ====== === ======
Net interest margin/income (1).......... $ 4,407 (1,806) 194 2,795
======= ====== === ======
Net interest income/margin - excluding
arbitrage transaction (1) (2)........... $(2,506) 5,305 - 2,799
======= ====== === ======
</TABLE>
(1) Interest income and yields are presented on a tax-equivalent basis assuming
a statutory Federal Income tax rate of 35%.
(2) Refer to the discussion contained in "Net Interest Income" for a
description of the arbitrage.
16
<PAGE>
NONINTEREST INCOME
Noninterest income totaled $7,708 for the quarter ended June 30, 1995, as
compared to $6,377 for the same quarter in 1994. The increase totaling $1,331
is attributable to the categories of trust income, security transaction and
other income. For the six months ended June 30, 1995, noninterest income
totaled $13,646, as compared to $13,891 for the same period in 1994. The $245
decline over 1994 is primarily attributable to the lower level of security
transactions recorded in 1995 as compared to 1994. Provided below is a
discussion covering period-to-period variances in the major categories of
noninterest income.
Service charges on deposit accounts declined by $231 for the 1995 quarter as
compared to 1994, while declining by $253 for the first six months of 1995 as
compared to 1994. Such decline is primarily attributable to service charges on
nonsufficient funds and business demand accounts.
Trust income increased by $495 for the quarter as compared to 1994, and by $441
for the first six months in 1995. The increase resulted from a combination of
growth in new business and certain nonrecurring accounting adjustments.
Other service charges, commissions and fees declined by $110 in the second
quarter of 1995 as compared to 1994 and increased by $76 for the first six
months of 1995 as compared to the same period in 1994, due to seasonal factors.
Included in this category of noninterest income are fees earned on various
revenue producing products and services including merchant fees on credit card
sales, mutual fund and annuity sales commissions and debit card fees.
Net revenues on real estate loans held for sale increased by $174 for the 1995
quarter as compared to 1994 and decreased by $228 for the first six months of
1995 as compared to 1994. The increase for the quarter reflects the impact of
the adoption of FASB No. 122. Incident to such adoption, additional revenues
totaling approximately $257 were recognized in the second quarter of 1995.
Refer to note 3 to the consolidated financial statements for a discussion of
FASB No. 122. Revenues for the first six months of 1995 as compared to 1994
declined in this category as a result of the decline in real estate loan
originations which totaled $66,000 in 1995 and $72,000 in 1994.
Other income increased by $454 for the 1995 quarter as compared to 1994 and $446
for the first six months of 1995 as compared to 1994 primarily as a result of a
gain on the sale of approximately $13 million in student loans which was
recorded in the second quarter of 1995.
NONINTEREST EXPENSE
Noninterest expense totaled $23,001 for the quarter ended June 30, 1995,
increasing from $22,212 for the same quarter in 1994. The $789 increase is
attributable to salaries and employee benefits and computer processing costs.
Noninterest expense totaled $45,546 for the first six months of 1995, increasing
from $45,159 for the same period in 1994. Provided below is a discussion
covering period-to-period variances in major categories of noninterest expense.
Salaries and wages increased by $286, or 3.1% in the second quarter of 1995 as
compared to the 1994 quarter due to general merit increases in 1995, which
approximated 4% on average. For the first six months of 1995 salaries and wages
increased by $694, or 3.8% over the same period in 1994.
Retirement and other employee benefits increased by $184 in the second quarter
of 1995 as compared to the 1994 quarter and by $88 for the first six months of
1995 as compared to the same period in 1994. Variances for both periods
resulted from higher employer health care premiums in 1995 as compared to 1994.
Computer processing expense increased by $281 for the 1995 quarter as compared
to the 1994 quarter and by $607 for the first six months of 1995 as compared to
the same period in 1994. Computer processing expense was lower in 1994 due to
$170 in various computer conversion fees which were waived by a third party
servicer. In addition, computer processing costs are generally higher in the
1995 periods as a result of additional digital circuits installed to transmit
voice and data communications between computer networks to support the
restructuring of operational centers as well as to enhance the efficiency and
effectiveness of sales and support activities.
Other expenses for the first quarter of 1995 were within 2% of the 1995 level
while such expense for the first six month of 1995 was less than 1994 by $1,167.
Approximately $350 of the decline is due to reduced fidelity bond and other
liability insurance, another
17
<PAGE>
$350 is due to reduced legal and other professional service fees and
approximately $100 is due to reduced discretionary employee education expenses.
The remaining variance is spread among various individual categories of
miscellaneous expenses.
INCOME TAX EXPENSE
Income tax expense totaled $3,544 for the second quarter of 1995, increasing
from $3,283 for the same period in 1994 and reflects effective income tax rates
of 35.8% and 36.9%, respectively. For the first six months of 1995, income tax
expense totaled $6,858 as compared to $6,693 in 1994, reflecting effective
income tax rates of 35.7% and 37.6%, respectively. The variance in income tax
expense and the effective tax rates is primarily due to $249 in state enterprise
zone income exclusions, of which $149 was recognized in the first quarter of
1995 and $100 in the second quarter.
NONPERFORMING ASSETS AND 90 DAY PAST DUE LOANS
At June 30, 1995, nonperforming assets totaled $26,688 and loans past due 90
days or more and still accruing totaled $3,697. The following table summarizes
nonperforming assets and loans past due 90 days or more and still accruing, as
of the close of the last five calendar quarters:
<TABLE>
<CAPTION>
1995 1994
Nonperforming Assets and ------------------ ----------------------------
90 Day Past Due Loans June 30 Mar. 31 Dec. 31 Sept. 30 June 30
---------------------------------------------------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans.................................... $11,261 $12,481 $10,214 $16,385 $16,999
Renegotiated loans.................................. 7,779 7,704 8,317 3 62
------- ------- ------- ------- -------
Total nonperforming loans....................... 19,400 20,185 18,531 16,388 17,061
Foreclosed real estate.............................. 7,288 8,542 9,483 7,580 9,074
------- ------- ------- ------- -------
Total nonperforming assets..................... $26,688 $28,727 $28,014 $23,968 $26,135
======= ======= ======= ======= =======
% of total loans plus foreclosed real estate... 1.40% 1.57% 1.56% 1.38% 1.55%
======= ======= ======= ======= =======
90 Day past due loans accruing interest............. $ 3,697 $ 5,894 $ 3,888 $ 6,571 $ 4,233
======= ======= ======= ======= =======
</TABLE>
Nonaccrual loans increased by $1,047 since December 31, 1994 primarily due to
the addition of two commercial credits. Renegotiated loans declined by $538 and
reflects payments recorded on such loans since year-end 1994 while foreclosed
real estate declined by $2,195 primarily due to the sale of several commercial
properties and single-family homes.
First Midwest's discussion of FASB Statement No. 114 and the disclosure with
respect to impaired loans is contained in notes 1 and 4 to the consolidated
financial statements, located on pages 6 and 9, respectively.
PROVISION AND RESERVE FOR LOAN LOSSES
Transactions in the reserve for loan losses during the quarters and six months
ended June 30, 1995 and 1994 are summarized in the following table:
<TABLE>
<CAPTION>
Quarters ended Six months ended
June 30, June 30,
----------------- ------------------
1995 1994 1995 1994
------- ------- -------- --------
<S> <C> <C> <C> <C>
Balance at beginning of period.................. $24,208 $21,692 $24,083 $21,654
Provision for loan losses................... 2,540 1,780 4,172 3,292
Loans charged-of............................ (2,546) (2,476) (4,498) (4,456)
Recoveries of loans previously charged-off.. 642 575 1,087 1,081
------- ------- ------- -------
Net loans charged-off................... (1,904) (1,901) (3,411) (3,375)
------- ------- ------- -------
Balance at end of period........................ $24,844 $21,571 24,844 21,571
======= ======= ======= =======
</TABLE>
The provision for loan losses is the cost of providing a reserve for anticipated
future loan losses. The provision charged to operating expense for the second
quarter of 1995 totaled $2,540 as compared to $1,780 for the same quarter in
1994 and $4,172 for the first six months of 1995 as compared to $3,292 for the
same period in 1994. Loans charged off, net of recoveries totaled $1,904, or
.41%
18
<PAGE>
of average loans in 1995 as compared to $1,901, or .46% in 1994. For the six
month periods, net charge offs totaled $3,411 or .38% of average loans in 1995
and $3,375 or .41% in 1994. The level of the provision for loan losses charged
to operating expense in any given period is dependent upon many factors,
including loan growth and changes in the composition of the loan portfolio, net
charge-off levels, delinquencies, collateral values, and Management's assessment
of current and prospective economic conditions in First Midwest's primary market
areas.
At June 30, 1995, the reserve for loan losses totaled $24,844, or 1.31% of
loans. The reserve for loan losses is maintained at a level which is considered
adequate in relation to the risk of future losses within the loan portfolio. The
reserve is comprised of specific allocations for impaired loans, general
allocations and unallocated reserves. The portion of the reserve applicable to
impaired loans is discussed in note 4 to the consolidated financial statements
located on page 9. The general reserve, which is allocated to specific
categories of the loan portfolio, represents First Midwest's judgement as to
potential loss exposure based on both actual loan losses experienced over the
preceding three years as well as the results of independent loan ratings and
credit reviews performed for loans identified to have unfavorable credit
characteristics.
The unallocated portion of the reserve is that part that is not specifically
allocated to either a particular loan on which a loss is anticipated or
allocated to a general loan category based upon historical loan loss experience.
The unallocated portion of the reserve for loan losses totaled $13,338 at June
30, 1995.
ANALYSIS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
Period Ended
---------------------------------------------
Change
June 30, December 31, -------------------
1995 1994 $ %
---------- ------------ --------- -------
<S> <C> <C> <C> <C>
Total assets................... $2,951,665 $2,875,101 76,564 2.66
Loans.......................... 1,898,477 1,785,200 113,277 6.35
Securities available for sale.. 463,695 696,384 (232,689) (33.41)
Securities held to maturity.... 276,240 168,644 107,596 63.80
Deposits....................... 2,101,370 1,994,408 106,962 5.36
Short-term borrowings.......... 606,254 665,500 (59,246) 8.90
Stockholders' equity........... 213,823 186,115 27,708 14.89
========== ========== ======== ======
</TABLE>
At June 30, 1995, assets totaled $2,951,665 and were $76,564, or 2.7% in excess
of the December 31, 1994 level of $2,875,101. Loans increased by $113,277 to
$1,898,477 at June 30, 1995, from $1,785,200 at December 31, 1994. Such
increase was comprised of $59,318 in commercial loans, $30,884 in 1-4 family
real estate and $27,214 in indirect consumer loans.
A discussion regarding changes in the period-end balances of securities
available for sale and held to maturity is provided in note 2 to the
consolidated financial statements located on pages 7 and 8.
Stockholders' equity increased to $213,823 at June 30, 1995 from $186,115 at
December 31, 1994. The majority of the increase is attributable to a $19,059
after-tax reduction since December 31, 1994 of the net unrealized loss on
securities which is recorded as a separate component of stockholders' equity.
Note 2, located on page 7 of this Form 10-Q, provides additional information
with respect to the gross unrealized gains and losses in the securities
portfolios.
CAPITAL ANALYSIS
First Midwest and its national Bank Affiliate are subject to risk-based capital
guidelines promulgated by their respective regulatory authority. These
guidelines are used to evaluate capital adequacy and are based on an
institution's asset risk profile and off-balance sheet exposure. Capital ratios
in excess of the minimum required regulatory ratios must be maintained in order
for financial institutions to take advantage of more favorable risk-based
deposit insurance assessments and to receive favorable regulatory treatment
incident to acquisition and other expansion activities.
The table below compares First Midwest's capital structure to the minimum
capital ratios required by the Federal Reserve Board ("FRB") and the minimum
capital ratios defined by banking regulators pursuant to the FDIC Improvement
Act ("FDICIA"). First Midwest's capital measurements are well in excess of the
minimums required by bank regulatory authorities to be considered "well-
capitalized" which is the highest capital category established under the FDICIA.
19
<PAGE>
<TABLE>
<CAPTION>
As of June 30, 1995
--------------------------------------
<S> <C> <C> <C>
Minimum
Minimum Well-
Required Capitalized
First Midwest FRB FDICIA
------------- -------- -----------
Tier 1 capital to risk-based assets.. 9.82% 4.00% 6.00%
Total capital to risk-based assets... 11.03% 8.00% 10.00%
Leverage ratio....................... 6.86% 3.00% 5.00%
====== ===== ======
</TABLE>
As of June 30, 1995 the capital ratios of First Midwest's national Bank
Affiliate were in excess of the minimum levels required by both the Office of
the Comptroller of the Currency ("OCC"), its primary regulator, and the "Well
Capitalized" designation of the FDICIA, as follows:
<TABLE>
<CAPTION>
As of June 30, 1995
-----------------------------
<S> <C> <C> <C>
Minimum
Minimum Well-
Required Capitalized
FMB, N.A. OCC FDICIA
--------- -------- -----------
Tier 1 capital to risk-based assets.. 8.93% 4.00% 6.00%
Total capital to risk-based assets... 10.14% 8.00% 10.00%
Leverage ratio....................... 6.69% 3.00% 5.00%
====== ===== ======
</TABLE>
First Midwest believes that it has a responsibility to reward its stockholders
with a meaningful current return on their investment and, as part of the
Company's dividend policy, First Midwest's Board of Directors reviews the
Company's dividend payout ratio periodically to ensure that it is consistent
with internal capital guidelines and industry standards. As a result of such
review, in February, 1995, First Midwest's Board of Directors authorized a
quarterly dividend increase to $0.19 per share representing a 12% increase
compared to the previous quarterly dividend of $0.17. On an annualized basis
such quarterly dividend translates to a dividend payout ratio of 36.6%.
COMMON STOCK REPURCHASE PROGRAM
On November 17, 1993 First Midwest's Board of Directors authorized the Company
to purchase up to 600,000 shares of its common stock on the open market or in
private transactions. Since such authorization, 172,563 treasury shares were
purchased at an average cost of $26.23 per share. The purchases, in part, are
being used to fund the exercise of stock options by employees, and sales of
treasury stock to employee benefit plans. First Midwest intends to continue to
utilize its common stock repurchase program as needs and market conditions
warrant.
COMPANY RESTRUCTURING
In August 1994, First Midwest announced a major plan of restructuring intended
to improve its financial performance and enhance the efficiency and
effectiveness of both the Company's sales and support operations. Pursuant to
the restructuring, during the second quarter of 1995 First Midwest's four
Affiliates merged into a single bank, First Midwest Bank, National Association.
Concurrent with the merger and related activities was the consolidation of a
myriad of administrative, clerical and support functions that is expected to
result in the reduction of approximately 15% of total full-time equivalent
staff.
A restructure charge in the pretax amount of $3,900 was recorded during the
fourth quarter of 1994 to establish an accrual for various expenses to be
incurred incident to the restructuring. For the six months ended June 30, 1995,
approximately $1.8 million in restructure expenses were incurred, resulting in
an accrual balance as of such date of approximately $2.1 million. All remaining
restructure expenses are expected to be incurred by year end 1995.
The consolidation activities giving rise to the restructure charge are
proceeding and are expected to be fully implemented by September 30, 1995. When
fully implemented, the consolidation is anticipated to result in permanent
annualized pretax savings of approximately $7 million, such savings being
primarily related to compensation and benefit expense saved on the approximate
180 positions eliminated. It is expected that First Midwest will begin
realizing such savings during the 4th quarter of 1995.
20
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - See Exhibit Index appearing on page 22.
(b) Form 8-K - A Report on Form 8-K was filed during the second quarter of
1995 as follows:
On June 1, 1995, First Midwest filed a report on Form 8-K under
Item 5 announcing a definitive agreement to acquire C.F. Bancorp,
the holding company of Citizens Federal Savings Bank of Davenport,
Iowa.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
First Midwest Bancorp, Inc.
-----------------------------------------
Date: August 11, 1995 DONALD J. SWISTOWICZ
-----------------------------------------
Donald J. Swistowicz
Executive Vice President*
* Duly authorized to sign on behalf of the Registrant.
21
<PAGE>
EXHIBIT INDEX
Exhibit Sequential
Number Description of Documents Page Number
------- ------------------------ -----------
19 Quarterly Report to Shareholders for 23
the Quarter ended June 30, 1995
27 Financial Data Schedule 27
22
<PAGE>
SECOND QUARTER LETTER
Letter to Shareholders
It is a pleasure to report that net income for the quarter ended June 30, 1995
of $6.4 million, or 52 cents per share, an increase on a per-share basis of 13%
over last year's like quarter of $5.6 million, or 46 cents per share. For the
first six months of 1995, net income was $12.3 million, or $1.01 per share, an
increase on a per-share basis of 11% over last year's like period of $11.1
million, or 91 cents per share.
The higher results for the second quarter and six months were primarily
attributable to increased net interest income related to continued broad-based
loan growth. Also contributing to the positive results was increased non-
interest income represented by higher levels of trust income and other income.
During the quarter, the Company announced the entry into an agreement to acquire
CF Bancorp, Inc. and its $225 million asset Citizens Federal Savings Bank of
Davenport, Iowa. Under the agreement, CF shareholders will receive 1.4545
shares of First Midwest common stock for each share of CF common stock owed in a
tax-free exchange. Based on First Midwest's June 30 closing price of $24.69,
this results in an implied price for each share of CF common stock of $35.90 and
a total transaction valued at approximately $32.9 million based upon total CF
common shares currently outstanding. With offices in Davenport and Bettendorf,
Iowa, CF is a long established, highly respected and very profitable company
that serves the Iowa half of the Illinois-Iowa Quad Cities market that is
comprised of the cities of Moline and Rock Island, Illinois and Davenport and
Bettendorf, Iowa. CF's Iowa presence complements First Midwest's substantial
$375 million bank asset presence in the Illinois half of the Quad Cities market.
The Quad Cities is a significant market having a population approaching 400,000,
employment in excess of 200,000 jobs and annual retail sales of some $2.5
billion. As such, from the perspectives of population, employment and retail
sales, the Quad Cities' Metropolitan Statistical Area (MSA) is larger than the
MSAs of each of the perhaps better-known Illinois cities of Peoria, Rockford,
Springfield, Bloomington-Normal and Champaign-Urbana. Upon completion of the
acquisition, CF's operations will be combined with those of our bank creating an
approximate $600 million asset bank that will rank as the largest financial
institution serving the entire Quad Cities market through seven offices located
in Illinois and Iowa. The acquisition is expected to be completed by year-end
1995 and will immediately enhance book value per share of and is projected to
enhance earnings per share within one year.
Significant progress was made during the quarter in furtherance of the major
restructuring initiative that was announced last year. Our four banks were
merged and today constitute the approximate $2.9 billion First Midwest Bank that
ranks as one of Illinois' largest banks operating 44 offices in northern
Illinois. With the merger and related activities has come the consolidation of
a myriad of administrative, clerical and support functions that will result in
the planned reduction of approximately 15% of total staff. The restructuring
proceeds on schedule and is anticipated to be fully implemented by September 30,
1995. Cost savings resulting from the restructuring are estimated to be $7
million annually and will begin to be realized in the fourth quarter of this
year.
The quarter saw continued performance improvement with momentum for the second
half of the year building. We are excited about the future prospects and look
forward to reporting to you about the same. As always, thank you for your
continued support.
23
<PAGE>
<TABLE>
<CAPTION>
Quarters Ended Six Months Ended
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) June 30, June 30,
------------------------------------------------------------------------------------------------
(Amounts in thousands except per share data) 1995 1994 1995 1994
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans............................... $42,564 $34,061 $ 82,308 $66,008
Interest on securities................................... 13,391 11,530 27,451 22,457
Interest on funds sold and other short-term investments.. 978 435 1,246 477
------------------------------------------------------------------------------------------------
Total interest income.................................. 56,933 46,026 111,005 88,942
------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest on deposits..................................... 18,725 13,779 34,751 26,455
Interest on short-term borrowings........................ 10,478 5,747 20,992 10,117
------------------------------------------------------------------------------------------------
Total interest expense................................. 29,203 19,526 55,743 36,572
------------------------------------------------------------------------------------------------
Net interest income.................................... 27,730 26,500 55,262 52,370
PROVISIONS FOR LOAN LOSSES............................... 2,540 1,780 4,172 3,292
------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses.... 25,190 24,720 51,090 49,078
------------------------------------------------------------------------------------------------
NONINTEREST INCOME
Service charges on deposit accounts...................... 2,262 2,493 4,506 4,759
Trust fees............................................... 2,098 1,603 3,586 3,146
Other service charges, commissions and fees.............. 1,365 1,474 2,895 2,818
Net revenues on real estate loans held for sale.......... 497 323 595 823
Securities transactions, net............................. 527 (21) 532 1,259
Other income............................................. 959 505 1,532 1,086
------------------------------------------------------------------------------------------------
Total noninterest income............................... 7,708 6,377 13,646 13,891
------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Salaries and wages....................................... 9,612 9,326 19,037 18,343
Retirement and other employee benefits................... 2,588 2,404 5,257 5,169
Occupancy expenses....................................... 1,190 1,299 2,607 2,708
Equipment expenses....................................... 1,396 1,267 2,846 2,498
Computer processing costs................................ 1,430 1,149 2,951 2,344
FDIC insurance premiums.................................. 1,104 1,134 2,208 2,268
Other expenses........................................... 5,681 5,633 10,640 11,829
------------------------------------------------------------------------------------------------
Total noninterest expense.............................. 23,001 22,212 45,546 45,159
------------------------------------------------------------------------------------------------
Income before income tax expense....................... 9,897 8,885 19,190 17,810
------------------------------------------------------------------------------------------------
Income tax expense....................................... 3,544 3,283 6,858 6,693
------------------------------------------------------------------------------------------------
NET INCOME............................................. $ 6,353 $ 5,602 $ 12,332 $11,117
------------------------------------------------------------------------------------------------
NET INCOME PER SHARE................................... $0.52 $0.46 $1.01 $0.91
------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION (unaudited) June 30,
---------------------------------------------------------------------------------------------
(Amounts in thousands) 1995 1994
---------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks............................................. $ 196,688 $ 100,396
Funds sold and other short-term investments......................... 26,794 50,484
Securities available for sale....................................... 463,695 795,177
Securities held to maturity......................................... 276,240 57,584
Loans............................................................... 1,898,477 1,672,982
Reserve for loan losses............................................. (24,844) (21,571)
---------------------------------------------------------------------------------------------
Net loans......................................................... 1,873,633 1,651,411
---------------------------------------------------------------------------------------------
Premises, furniture and equipment................................... 44,174 39,905
Accrued interest receivable and other assets........................ 70,441 65,616
---------------------------------------------------------------------------------------------
Total assets...................................................... $2,951,665 $2,760,573
---------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits............................................................ $2,101,370 $1,995,757
Short-term borrowings............................................... 606,254 552,127
Accrued interest payable and other liabilities...................... 30,218 22,464
---------------------------------------------------------------------------------------------
Total liabilities................................................. 2,737,842 2,570,348
---------------------------------------------------------------------------------------------
Stockholders' Equity:
Common stock........................................................ 23,465 23,465
Additional paid-in capital.......................................... 25,779 26,181
Retained earnings................................................... 173,569 160,779
Unrealized net depreciation on securities available for sale /(1)/.. (1,708) (10,527)
Treasury stock, at cost............................................. (7,282) (9,673)
---------------------------------------------------------------------------------------------
Total stockholders' equity........................................ 213,823 190,225
---------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity.......................... $2,951,665 $2,760,573
</TABLE>
/(1)/ Represents the difference, after tax, between the amortized cost and
market value of securities available for sale; this difference will
fluctuate as the market value of such securities changes.
<TABLE>
<CAPTION>
CREDIT QUALITY (unaudited) June 30,
------------------------------------------------------------------------------
(Amounts in thousands) 1995 1994
------------------------------------------------------------------------------
<S> <C> <C>
Nonaccrual loans........................................... $11,621 $16,999
Renegotiated loans......................................... $ 7,779 $ 62
Foreclosed real estate..................................... $ 7,288 $ 9,074
Loans past due 90 days and still accruing.................. $ 3,697 $ 4,233
------------------------------------------------------------------------------
Nonperforming loans to loans............................... 1.02% 1.02%
Nonperforming assets to loans plus foreclosed real estate.. 1.40% 1.55%
Reserve for loan losses to loans........................... 1.31% 1.29%
Reserve for loan losses to nonperforming loans............. 128.06% 126.43%
------------------------------------------------------------------------------
Net loan charge-offs....................................... $ 3,411 $ 3,375
------------------------------------------------------------------------------
Net loan charge-offs to average loans...................... 0.38% 0.42%
------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Quarters Ended Six Months Ended
FINANCIAL HIGHLIGHTS (unaudited) June 30, June 30,
-----------------------------------------------------------------------------------------
(Amounts in thousands except per share data) 1995 1994 1995 1994
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income.................................... $6,353 $5,602 $12,332 $11,117
Net income per share.......................... $ 0.52 $ 0.46 $ 1.01 $ 0.91
Return on average equity...................... 12.34% 11.69% 12.48% 11.47%
Return on average assets...................... 0.87% 0.82% 0.86% 0.83%
-----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Quarters Ended Six Months Ended
STOCK PERFORMANCE (unaudited) June 30, June 30,
-----------------------------------------------------------------------------------------
1995 1994 1995 1994
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Market Price:
At period end................................ $24.69 $26.75 $ 24.69 $ 26.75
High......................................... $24.75 $28.75 $ 25.50 $ 28.75
Low.......................................... $23.50 $24.50 $ 23.25 $ 24.50
Book value per share at period end............ $17.47 $15.66 $ 17.47 $ 15.66
Market price to book value at period end...... $ 1.4X $ 1.7x $ 1.4X $ 1.7x
Dividends paid per share...................... $ 0.19 $ 0.17 $ 0.38 $ 0.34
-----------------------------------------------------------------------------------------
</TABLE>
26
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 196,688
<INT-BEARING-DEPOSITS> 6,751
<FED-FUNDS-SOLD> 20,043
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 463,695
<INVESTMENTS-CARRYING> 276,240
<INVESTMENTS-MARKET> 278,447
<LOANS> 1,898,477
<ALLOWANCE> 24,844
<TOTAL-ASSETS> 2,951,665
<DEPOSITS> 2,101,370
<SHORT-TERM> 606,254
<LIABILITIES-OTHER> 30,218
<LONG-TERM> 0
<COMMON> 23,465
0
0
<OTHER-SE> 190,358
<TOTAL-LIABILITIES-AND-EQUITY> 2,951,665
<INTEREST-LOAN> 82,308
<INTEREST-INVEST> 27,451
<INTEREST-OTHER> 1,246
<INTEREST-TOTAL> 111,005
<INTEREST-DEPOSIT> 34,751
<INTEREST-EXPENSE> 55,743
<INTEREST-INCOME-NET> 55,262
<LOAN-LOSSES> 4,172
<SECURITIES-GAINS> 532
<EXPENSE-OTHER> 45,546
<INCOME-PRETAX> 19,190
<INCOME-PRE-EXTRAORDINARY> 12,332
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,332
<EPS-PRIMARY> 1.01
<EPS-DILUTED> 1.01
<YIELD-ACTUAL> 4.54
<LOANS-NON> 11,261
<LOANS-PAST> 3,697
<LOANS-TROUBLED> 7,779
<LOANS-PROBLEM> 17,500
<ALLOWANCE-OPEN> 24,083
<CHARGE-OFFS> 4,498
<RECOVERIES> 1,087
<ALLOWANCE-CLOSE> 24,844
<ALLOWANCE-DOMESTIC> 11,506
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 13,338
</TABLE>
