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, 1996, 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, $.01 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 8, 1996, 13,684,359 shares of the Registrant's $.01 par value
common stock were outstanding, excluding treasury shares.
Exhibit Index is located on page 17.
FIRST MIDWEST BANCORP, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
----
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 16
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST MIDWEST BANCORP, INC.
CONSOLIDATED STATEMENTS OF CONDITION
(Dollar amounts in thousands)
JUNE 30, DECEMBER 31,
1996 (1) 1995 (2)
--------- ------------
ASSETS
Cash and due from banks $ 162,901 $ 141,336
Funds sold and other short term investments 4,073 7,927
Mortgages held for sale 21,374 20,011
Securities available for sale, at market value 831,747 831,030
Securities held to maturity, at
amortized cost 25,105 27,527
Loans 1,979,313 2,085,604
Reserve for loan losses (28,597) (29,194)
--------- ----------
Net loans 1,950,716 2,056,410
Premises, furniture and equipment 47,135 47,108
Accrued interest receivable 22,720 24,786
Other assets 52,633 51,162
------ ----------
TOTAL ASSETS $3,118,404 $3,207,297
========= ==========
LIABILITIES
Demand deposits $ 362,520 $ 360,895
Savings deposits 292,829 251,468
NOW accounts 294,205 262,959
Money market deposits 230,578 285,058
Time deposits 1,118,656 1,111,678
--------- ----------
Total deposits 2,298,788 2,272,058
Short-term borrowings 531,188 649,821
Accrued interest payable 10,185 12,262
Other liabilities 23,609 23,923
--------- ----------
TOTAL LIABILITIES 2,863,770 2,958,064
--------- ----------
STOCKHOLDERS' EQUITY
Preferred stock, no par value: 1,000,000
shares authorized, none issued --- ---
Common stock, $.01 par value: 30,000,000
shares authorized 14,007,291 shares
issued; 13,697,487 and 13,679,747 outstanding
at June 30, 1996 and
December 31, 1995, respectively 137 23,475
Additional paid-in capital 57,543 35,516
Retained earnings 206,192 195,853
Unrealized net appreciation (depreciation)
on securities, net of tax (3,214) 486
Treasury stock, at cost - 309,804 and 327,544
shares at June 30, 1996
and December 31, 1995, respectively (6,024) (6,097)
--------- ----------
TOTAL STOCKHOLDERS' EQUITY 254,634 249,233
--------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,118,404 $3,207,297
========= ==========
See notes to consolidated financial statements.
(1) Unaudited
(2) Audited - See December 31, 1995 Form 10-K for Auditor's Report.
<TABLE>
FIRST MIDWEST BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollar amounts in thousands, except per share data)
<CAPTION>
QUARTERS ENDED SIX MONTHS ENDED
JUNE 30, (1) JUNE 30, (1)
---------------------------- ---------------------------
1996 1995 1996 1995
------------ ------------- ----------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans . . . . . . . . . . . . . . . . . . . . . . . . . $ 43,975 $ 45,245 $ 90,170 $ 87,514
Securities available for sale . . . . . . . . . . . . . 13,578 10,767 25,383 22,460
Securities held to maturity . . . . . . . . . . . . . . 416 4,285 839 8,286
Funds sold and other short-term investments . . . . . . 901 997 1,661 1,289
------------ ------------ ----------- ----------
TOTAL INTEREST INCOME . . . . . . . . . . . . . . . 58,870 61,294 118,053 119,549
------------ ------------ ----------- ----------
INTEREST EXPENSE
Deposits . . . . . . . . . . . . . . . . . . . . . . . 21,095 20,391 42,531 37,976
Short-term borrowings . . . . . . . . . . . . . . . . . 7,249 11,434 15,596 22,879
------------ ------------ ----------- ----------
TOTAL INTEREST EXPENSE . . . . . . . . . . . . . . . 28,344 31,825 58,127 60,855
------------ ------------ ----------- ----------
NET INTEREST INCOME . . . . . . . . . . . . . . . . 30,526 29,469 59,926 58,694
PROVISION FOR LOAN LOSSES . . . . . . . . . . . . . . . 1,767 2,544 2,626 4,192
------------ ------------ ----------- ----------
Net interest income after provision for loan losses 28,759 26,925 57,300 54,502
------------ ------------ ----------- ----------
NONINTEREST INCOME
Service charges on deposit accounts . . . . . . . . . . 2,637 2,393 4,975 4,749
Trust and investment management fees . . . . . . . . . 1,605 2,098 3,228 3,587
Other service charges, commissions and fees . . . . . . 1,469 1,306 2,856 2,537
Mortgage banking revenues . . . . . . . . . . . . . . . 803 851 1,718 1,398
Other income . . . . . . . . . . . . . . . . . . . . . 509 1,004 1,080 1,605
Security gains, net . . . . . . . . . . . . . . . . . . 469 859 545 1,042
------------ ------------ ----------- ----------
TOTAL NONINTEREST INCOME . . . . . . . . . . . . . . 7,492 8,511
14,402 14,918
------------ ------------ ----------- ----------
NONINTEREST EXPENSE
Salaries and wages . . . . . . . . . . . . . . . . . . 10,235 10,221 20,189 20,182
Retirement and other employee benefits . . . . . . . . 2,374 2,935 4,924 5,694
Occupancy expense of premises . . . . . . . . . . . . . 1,480 1,286 3,180 2,773
Equipment expense . . . . . . . . . . . . . . . . . . . 1,370 1,437 2,829 2,955
Computer processing expense . . . . . . . . . . . . . . 1,673 1,492 3,263 3,076
FDIC insurance premiums . . . . . . . . . . . . . . . . 155 1,182 304 2,364
Acquisition credit . . . . . . . . . . . . . . . . . . --- --- (324) ---
Other expenses . . . . . . . . . . . . . . . . . . . . 5,914 5,980 11,989 11,115
------------ ------------ ----------- ----------
TOTAL NONINTEREST EXPENSE . . . . . . . . . . . . . 23,201 24,533 46,354 48,159
------------ ------------ ----------- ----------
Income before income tax expense . . . . . . . . . . . 13,050 10,903 25,348 21,261
INCOME TAX EXPENSE . . . . . . . . . . . . . . . . . . 4,833 3,866 9,206 7,516
------------ ------------ ----------- ----------
NET INCOME . . . . . . . . . . . . . . . . . . . . . $ 8,217 $ 7,037 $ 16,142 $13,745
============ ============ =========== ==========
NET INCOME PER SHARE . . . . . . . . . . . . . . . . $ 0.60 $ 0.52 $ 1.18 $ 1.01
Cash dividends declared per share . . . . . . . . . $ 0.21 $ 0.19 $ 0.42 $ 0.38
Weighted average shares outstanding . . . . . . . .
13,693,990 13,563,701 13,695,004 13,536,285
============ ============ =========== ==========
<FN>
See notes to consolidated financial statements.
(1) Unaudited
</TABLE>
<TABLE>
FIRST MIDWEST BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
<CAPTION>
SIX MONTHS ENDED
JUNE 30, (1)
-----------------------------
1996 1995
------------- -------------
OPERATING
ACTIVITIES
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,142 $ 3,745
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . 2,626 4,192
Provision for depreciation . . . . . . . . . . . . . . . . . . . . . . . . . 3,390 2,862
Net (accretion) amortization of securities available for sale
premiums and discounts . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,611) 1,265
Net (accretion) of securities held to maturity premiums
and discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30) (1,059)
Net (gains) on securities available for sale transactions . . . . . . . . . . (545) (1,042)
Net (gains) on sales of premises, furniture and equipment . . . . . . . . . . (74) (103)
Net increase (decrease) in deferred income taxes . . . . . . . . . . . . . . 1,120 (256)
Net amortization of purchase accounting adjustments and goodwill . . . . . . 559 718
Changes in operating assets and liabilities:
Net (increase) in loans held for sale . . . . . . . . . . . . . . . . . . . (1,879) (9,612)
Net decrease (increase) in accrued interest receivable . . . . . . . . . . 2,066 (2,904)
Net decrease in other assets . . . . . . . . . . . . . . . . . . . . . . . 814 3,211
Net (decrease) increase in accrued interest payable . . . . . . . . . . . . (2,077) 874
Net (decrease) increase in other liabilities . . . . . . . . . . . . . . . (1,434) 914
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . . . . . . . . . 19,067 12,805
------------- -------------
INVESTING ACTIVITIES
Securities available for sale:
Proceeds from sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 929,584 347,737
Proceeds from maturities, calls and paydowns . . . . . . . . . . . . . . . . . . 218,254 14,202
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,011,300) (96,193)
Securities held to maturity:
Proceeds from maturities, calls and paydowns . . . . . . . . . . . . . . . . . . 4,447 67,478
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,995) (173,269)
Loans made to customers, net of principal collected . . . . . . . . . . . . . . . . (40,930) (110,171)
Proceeds from sales of foreclosed real estate . . . . . . . . . . . . . . . . . . . 2,452 3,034
Proceeds from sales of premises, furniture and equipment . . . . . . . . . . . . . 138 123
Purchases of premises, furniture and equipment . . . . . . . . . . . . . . . . . . (3,092) (6,670)
------------- -------------
NET CASH USED BY INVESTING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . 97,558 46,271
------------- -------------
FINANCING ACTIVITIES
Net increase in deposit accounts . . . . . . . . . . . . . . . . . . . . . . . . .
26,730 104,423
Net (decrease) increase in short-term borrowings . . . . . . . . . . . . . . . . . (118,633) (57,496)
Purchases of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,447) (90)
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,771) (4,650)
Cash dividends paid by acquiree . . . . . . . . . . . . . . . . . . . . . . . . . . -- (363)
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,207 1,320
------------- -------------
NET CASH USED BY FINANCING ACTIVITIES . . . . . . . . . . . . . . . . . . . . .
(98,914) 43,144
------------- -------------
Net (decrease) increase in cash and cash equivalents . . . . . . . . . . . . . . 17,711 102,220
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . 149,263
130,394
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . . . . . . . $
166,974 $ 232,614
============= =============
Supplemental disclosures:
Interest paid to depositors and creditors . . . . . . . . . . . . . . . . . . . $ 60,204 $
59,981
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,488 9,457
Non-cash transfers to foreclosed real estate from loans . . . . . . . . . . . . 3,370 866
Non-cash transfers to securities available for sale from loans . . . . . . . . . 141,164 --
============= =============
<FN>
See notes to consolidated financial statements.
(1) Unaudited
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited interim consolidated financial statements of First
Midwest Bancorp, Inc. ("First Midwest") have been prepared in accordance with
generally accepted accounting principles and with the rules and regulations of
the Securities and Exchange Commission for interim financial reporting.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
The preparation of financial statements requires Management to make estimates
and assumptions that affect the recorded amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reported period. Actual results could differ from those estimates. In
addition, certain reclassifications have been made to the 1995 data to conform
to the 1996 presentation. For further information with respect to significant
accounting policies followed by First Midwest in the preparation of its
consolidated financial statements, refer to First Midwest's Annual Report on
Form 10-K for the ended December 31, 1995.
On December 20, 1995, First Midwest acquired CF Bancorp, Inc. ("CF"), whose
principal subsidiary was Citizens Federal Savings Bank ("Citizens Federal"),
in a transaction accounted for as a pooling of interests. Accordingly, prior
period financial statements and other financial disclosures have been restated
as if the combining companies had been consolidated for all periods presented.
2. ACQUISITION
Pursuant to the acquisition of CF on December 20, 1995, each share of common
stock of CF was converted into 1.4545 shares of First Midwest, with 1,339,989
First Midwest shares being issued to CF stockholders.
Coincident with the acquisition, First Midwest recorded $4,887 in acquisition-
related costs consisting of $4,339 in acquisition expenses and $548 in
provisions for loan losses incident to conforming Citizens Federal's credit
policies to First Midwest's. The acquisition expenses, certain of which are
nondeductible for income tax purposes, were recorded through the establishment
of a reserve which is comprised of the following components as of the dates
indicated:
<TABLE>
June 30, December 20,
Acquisition Reserve: 1996 1995
- ------------------- --------- -----------
<S> <C> <C>
Executive severance agreements $ 919 $ 1,290
Employee severance 168 545
Outplacement and other employee costs 73 275
Bad debt reserve recapture 992 992
Investment advisor fees --- 410
Legal, accounting and other professional fees 233 827
------- --------
$ 2,385 $ 4,339
======= ========
</TABLE>
During the first six months of 1996 the acquisition reserve was reduced by
$1,954, of which $1,699 was recorded in the first quarter of 1996 with the
remaining $255 being recorded in the second quarter. Of the total $1,954,
$1,630 was paid out for acquisition related expenses with the remaining $324
being reversed. The reversal was primarily related to reduced severance
payments to former Citizens Federal's executives and employees who either
resigned or accepted renegotiated payouts during the first quarter of 1996.
The bad debt reserve recapture component of the acquisition reserve represents
the estimated after-tax cost that, under current law, would be incurred when
Citizens Federal converts from a thrift to a bank. It is currently
anticipated that Citizens Federal will convert to a bank and be merged into
First Midwest Bank, N.A. before year end. As part of the minimum wage
increase/small business tax relief legislation recently passed by Congress and
now awaiting Presidential action, pre-1988 bad debt reserves of thrifts would
not be subject to recapture (i.e., expensed and recorded as a tax liability)
upon conversion to a bank. If this legislation is approved by the President
and becomes law and Citizens Federal is thereafter converted to a bank, the
need for the bad debt reserve recapture component of the acquisition reserve,
in substantial part, would be eliminated permitting its reversal.
Additional information with respect to the components of the acquisition
reserve can be found in First Midwest's Annual Report on Form 10-K for the
year ended December 31, 1995 in Footnote 2 located on page 47.
3. SECURITIES
SECURITIES AVAILABLE FOR SALE - The amortized cost and market value of
securities available for sale at June 30, 1996 and December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
Securities Available for Sale
------------------------------------------------------------------------------------
June 30, 1996 December 31, 1995
----------------------------------------- -----------------------------------------
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 . . . . . . . . . $ 65,672 $ 48 $ (244) $ 65,476 $188,854 $ 803 $ - $ 189,657
U.S. Agency securities . . . 339,316 405 (2,876) 336,845 266,534 620 (279) 266,875
Mortgage-backed securities . 426,891 1,797 (4,359) 424,329 369,888 876 (1,248) 369,516
Other securities . . . . . . 5,097 - - 5,097 4,958 24 - 4,982
--------- --------- -------- --------- -------- --------- -------- ---------
Total . . . . . . . . . . $ 836,976 $ 2,250 $(7,479) $ 831,747 $830,234 $ 2,323 $(1,527) $ 831,030
========= ========= ======== ========= ======== ========= ======== =========
</TABLE>
SECURITIES HELD TO MATURITY - The amortized cost and market value of
securities held to maturity at June 30, 1996 and December 31, 1995 are as
follows:
<TABLE>
Securities Held to Maturity
------------------------------------------------------------------------------------
June 30, 1996 December 31, 1995
----------------------------------------- -----------------------------------------
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 . . . . . . . . . $ 930 $ - $ - $ 930 $ 828 $ 8 $ - $ 836
State and municipal securities 12,882 119 (108) 12,893 14,403 320 (241) 14,482
Other securities . . . . . . 11,293 21 - 11,314 12,296 27 - 12,323
--------- --------- -------- --------- -------- --------- -------- --------
Total . . . . . . . . . . $ 25,105 $ 140 $ (108) $ 25,137 $27,527 $ 355 $ (241) $ 27,641
========= ========= ======== ========= ======== ========= ======== ========
</TABLE>
4. LOANS
The following table provides the book value of loans, by major classification,
as of the dates indicated:
June 30, December 31,
1996 1995
--------- ---------
Commercial and industrial . . . . . . . . . . $ 566,370 $ 625,210
Agricultural . . . . . . . . . . . . . . . . . 42,853 32,111
Consumer . . . . . . . . . . . . . . . . . . . 569,149 568,344
Real estate - 1-4 family . . . . . . . . . . . 197,240 325,056
Real estate - commercial . . . . . . . . . . . 491,581 422,073
Real estate - construction . . . . . . . . . . 102,913 98,688
Other . . . . . . . . . . . . . . . . . . . . 9,207 14,122
--------- ----------
Total . . . . . . . . . . . . . . . . . . . . $1,979,313 $2,085,604
========== ==========
During the first quarter of 1996, First Midwest securitized approximately
$140,000 in 1-4 family real estate loans, retaining such assets in its
securities available for sale portfolio as mortgage-backed securities.
5. RESERVE FOR LOAN LOSSES/IMPAIRED LOANS
Transactions in the reserve for loan losses for the quarters and six month
periods ended June 30, 1996 and 1995 are summarized below:
<TABLE>
Quarters ended Six months ended
June 30, June 30,
---------------------- -----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balance at
beginning of period . . . . . . . . . . . . . . . . . . . . $ 28,076 $ 25,270 $ 29,194 $ 25,154
Provision for loan losses . . . . . . . . . . . . . . . . . 1,767 2,544 2,626 4,192
Loans charged-off . . . . . . . . . . . . . . . . . . . (1,773) (2,563) (4,443) (4,542)
Recoveries of loans previously charged-off . . . . . . . 527 650 1,220 1,097
---------- ---------- ---------- ----------
Net loans charged-off . . . . . . . . . . . . . . . . . (1,246) (1,913) (3,223) (3,445)
---------- ---------- ---------- ----------
Balance at end of period . . . . . . . . . . . . . . . . . $ 28,597 $ 25,901 $ 28,597 $ 25,901
========== ========== ========== =========
</TABLE>
At June 30, 1996, the recorded investment in loans considered impaired as
defined by Financial Accounting Standards Board Statement No. 114, was $16,653
of which $10,133 have collateral values equal to or greater than the recorded
investment in such loans; the $6,520 balance of impaired loans have collateral
values less than the recorded investment in such loans for which a specific
loan loss reserve of $1,874 is maintained. For the six months ended June 30,
1996, the average recorded investment in impaired loans was approximately
$17,734.
6. RESTATED CERTIFICATE OF INCORPORATION
At its Annual Meeting of Shareholders held on April 16, 1996, First Midwest's
Certificate of Incorporation was amended to increase the number of shares of
authorized common stock and change the par value of such stock. The number of
shares of authorized stock increased from 20,000,000 to 30,000,000, while
First Midwest's no par value common stock was changed to $.01 par value.
Incident to such change, the recorded common stock balance of the Company was
adjusted to reflect the aggregate par value of the shares outstanding, with
the excess recorded common stock being transferred to additional paid-in
capital. The amendments do not dilute the ownership interests of stockholders
nor do they have any other impact on the rights and privileges of common
stockholders.
7. CONTINGENT LIABILITIES AND OTHER MATTERS
There are certain legal proceedings pending against First Midwest and its
Subsidiaries in the ordinary course of business at June 30, 1996. In
assessing these proceedings, including the advice of counsel, First Midwest
believes that liabilities arising from these proceedings, if any, would not
have a material adverse effect on the consolidated financial condition of
First Midwest.
During the second quarter of 1995 settlement discussions were initiated
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. A bench
trial commenced in February, 1996 with First Midwest presenting its case and
the matter being continued until April, 1996. Because of the judge's health,
the trial was again continued during which time the judge passed away. The
case is currently pending reassignment to another judge and the scheduling of
a new trial date. Neither the outcome of the trial nor the possibility of
settlement can be reasonably quantified or determined at this time.
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, 1996 as compared to the same periods in 1995. Management's
discussion and analysis should be read in conjunction with the consolidated
financial statements and accompanying notes presented elsewhere in this report
as well as First Midwest's 1995 Annual Report on Form 10-K. Results of
operations for the quarter and six month periods ended June 30, 1996 are not
necessarily indicative of results to be expected for the full year of 1996.
The consolidated financial information for all periods presented herein have
been restated to include First Midwest's 1995 acquisition of CF Bancorp, Inc.
accounted for as a pooling of interests. All financial information is
presented in thousands of dollars, except per share data.
SUMMARY OF PERFORMANCE
Net Income
- ----------
Net income for the second quarter of 1996 increased to $8,217, or $.60 per
share from $7,037, or $.52 per share in the second quarter of 1995,
representing an increase of 15% on a per share basis. Net income for the six
months ended June 30, 1996, totaled $16,142, or $1.18 per share from $13,745,
or $1.01 per share for the same period in 1995, representing a 17% increase
per share.
Return on Average Assets and Stockholders' Equity
- -------------------------------------------------
Return on average assets was 1.06% for the second quarter of 1996 as compared
to 0.89% for the same quarter in 1995. Return on average assets was 1.04% for
the six months ended June 30, 1996, as compared to 0.89% for the same period
in 1995.
Return on average stockholders' equity was 13.03% for the second quarter of
1996, as compared to 12.28% for the same quarter in 1995. Return on average
stockholders' equity was 12.85% for the six months ended June 30, 1996, as
compared to 12.47% for the same period in 1995.
NET INTEREST INCOME
Net interest income on a tax equivalent totaled $31,079 for the second quarter
of 1996, representing an increase of $1,293 over the year ago quarter totaling
$29,786. As shown in the Volume/Rate Analysis for the quarter ended June 30,
1996 located on page 11, net interest margin for the second quarter of 1996
increased to 4.33% as compared to 4.06% in the 1995 period. As a result of the
improvement in net interest margin, tax equivalent net interest income
increased by $1,293 in the second quarter of 1996 as compared to 1995,
comprised of $2,188 in reduced interest income net of $3,481 in lower interest
expense.
A decrease in loans outstanding was the primary contributor to the reduction
in total interest income in the second quarter of 1996 of $2,188 as compared
to 1995. Such decrease resulted primarily from the securitization of
approximately $140,000 in 1-4 family residential real estate loans at the end
of the first quarter of 1996 which were securitized and transferred to the
securities available for sale portfolio. Offsetting, in part, the reduction
in loans outstanding from such securitization was core growth in total loans
resulting in a net decrease in average loans outstanding of approximately
$22,000 in the second quarter of 1996 as compared to the same period in 1995.
The decrease in total interest expense of $3,481 in the second quarter of 1996
was primarily due to decreases in both the volume of and rates paid on short-
term borrowings, primarily wholesale repurchase agreements.
For the six month period ended June 30, 1996, net interest margin increased to
4.23% from 4.12% for 1995. The Volume/Rate Analysis for the six months ended
June 30, 1996 as compared to 1995 is presented on page 12.
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,
1996 and 1995. 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>
QUARTERS ENDED JUNE 30, 1996 AND 1995
-------------------------------------------------------------
AVERAGE INTEREST
AVERAGE BALANCES RATES EARNED/PAID
---------------------------- ----------------------------
BASIS
INCREASE POINTS
1996 1995 (DECREASE) 1996 1995 INC/(DEC)
--------- ------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Funds sold and other
short-term investments . . . . . . $ 40,839 46,123 (5,284) 8.87 % 8.67 % 0.20 %
Securities available for sale (1) . . 859,457 659,247 200,210 6.53 6.55 (0.02)
Securities held to maturity (1) . . . 24,879 250,834 (225,955) 8.34 7.25 1.09
Loans, net of unearned discount (2) . 1,962,445 1,984,100 (21,655) 9.03 9.16 (0.13)
--------- --------- ---------- -------- -------- ---------
Total interest-earning assets (2) . $2,887,620 2,940,304 (52,684) 8.28 % 8.40 % (0.12)%
========== ========= ========== ======== ======== =========
Savings deposits . . . . . . . . . . $ 259,450 267,611 (8,161) 2.18 % 2.18 % 0.00 %
NOW accounts . . . . . . . . . . . . 314,262 312,858 1,404 2.34 2.47 (0.13)
Money market deposits . . . . . . . . 266,683 252,084 14,599 3.56 3.55 0.01
Time deposits . . . . . . . . . . . . 1,108,726 1,045,866 62,860 5.62 5.67 (0.05)
Short-term borrowings . . . . . . . . 542,598 688,526 (145,928) 5.37 6.66 (1.29)
---------- --------- ---------- --------- -------- ----------
Total interest-bearing liabilities $2,491,719 2,566,945 (75,226) 4.58 % 4.97 % (0.39)%
========== ========= ========== ========= ======== =========
Net interest margin/income (2) . . 4.33 % 4.06 % 0.27 %
========= ======== =========
---------------------------- --------------------------------
INTEREST INCREASE/(DECREASE) IN
INCOME/EXPENSE INTEREST INCOME/EXPENSE DUE TO:
-------------------------- --------------------------------
INCREASE
1996 1995 (DECREASE) VOLUME RATE TOTAL
-------- -------- -------- --------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Funds sold and other
short-term investments . . . . . . $ 901 997 (96) $ (116) 20 (96)
Securities available for sale (1) . . 13,955 10,767 3,188 3,251 (63) 3,188
Securities held to maturity (1) . . . 516 4,535 (4,019) (4,803) 784 (4,019)
Loans, net of unearned discount (2) . 44,051 45,312 (1,261) (491) (770) (1,261)
-------- -------- --------- --------- ------ -------
Total interest-earning assets (2) . $ 59,423 61,611 (2,188) $ (2,161) (27) (2,188)
======== ======== ========= ========= ====== =======
Savings deposits . . . . . . . . . . $ 1,404 1,455 (51) $ (45) (6) (51)
NOW accounts . . . . . . . . . . . . 1,828 1,925 (97) 9 (106) (97)
Money market deposits . . . . . . . . 2,360 2,234 126 129 (3) 126
Time deposits . . . . . . . . . . . . 15,502 14,777 725 877 (152) 725
Short-term borrowings . . . . . . . . 7,250 11,434 (4,184) (2,177) (2,007) (4,184)
------- -------- --------- --------- ----- --------
Total interest-bearing liabilities $ 28,344 31,825 (3,481) $ (1,207) (2,274) (3,481)
======= ========= ========= ========= ===== ========
Net interest margin/income (2) . . $ 31,079 29,786 1,293 $ (954) 2,247 1,293
======= ========= ========= ========= ===== ========
<FN>
(1)
In December 1995, a reclassification was made from securities held to
maturity to securities available for sale.
(2)
Interest income and yields are presented on a tax-equivalent basis.
</TABLE>
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,
1996 and 1995. 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>
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
------------------------------------------------------------------
AVERAGE INTEREST
AVERAGE BALANCES RATES EARNED/PAID
---------------------------- --------------------------
BASIS
INCREASE POINTS
1996 1995 (DECREASE) 1996 1995 INC/(DEC)
------- ------ ------- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Funds sold and other
short-term investments . . . . . . $ 38,209 31,255 6,954 8.75 % 8.32 % 0.43 %
Securities available for sale (1) . . 823,560 682,537 141,023 6.40 6.64 (0.24)
Securities held to maturity (1) . . . 25,916 239,935 (214,019) 8.05 7.36 0.69
Loans, net of unearned discount (2) . 2,018,863 1,948,464 70,399 9.00 9.07 (0.07)
--------- --------- ---------- ------- ------- ---------
Total interest-earning assets (2) . $2,906,548 2,902,191 4,357 8.25 % 8.35 % (0.10)%
========= ========= ========== ======= ======= =========
Savings deposits . . . . . . . . . . $ 254,090 272,202 (18,112) 2.15 % 2.17 % (0.02)%
NOW accounts . . . . . . . . . . . . 287,817 298,397 (10,580) 2.33 2.43 (0.10)
Money market deposits . . . . . . . . 272,134 240,456 31,678 3.63 3.38 0.25
Time deposits . . . . . . . . . . . . 1,112,223 1,011,456 100,767 5.71 5.47 0.24
Short-term borrowings . . . . . . . . 577,547 705,590 (128,043) 5.43 6.54 (1.11)
--------- --------- ---------- ------- ------- ---------
Total interest-bearing liabilities $2,503,811 2,528,101 (24,290) 4.67 % 4.85 % (0.18)%
========= ========= ========== ======= ======= =========
Net interest margin/income (2) . . 4.23 % 4.12 % 0.11 %
======= ======= =========
-----------------------------------------------------------
INTEREST INCREASE/(DECREASE) IN
INCOME/EXPENSE INTEREST INCOME/EXPENSE DUE TO:
------------------------- -------------------------------
INCREASE
1996 1995 (DECREASE) VOLUME RATE TOTAL
--------- ------- -------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Funds sold and other
short-term investments . . . . . . $ 1,662 1,290 372 $ 299 73 372
Securities available for sale (1) . . 26,206 22,460 3,746 4,459 (713) 3,746
Securities held to maturity (1) . . . 1,038 8,758 (7,720) (8,665) 945 (7,720)
Loans, net of unearned discount (2) . 90,326 87,647 2,679 3,148 (469) 2,679
-------- -------- -------- -------- ------ -------
Total interest-earning assets (2) . $119,232 120,155 (923) $ (760) (164) (923)
======== ======== ======== ======== ====== =======
Savings deposits . . . . . . . . . . $ 2,714 2,930 (216) $ (194) (22) (216)
NOW accounts . . . . . . . . . . . . 3,339 3,589 (250) (125) (126) (250)
Money market deposits . . . . . . . . 4,908 4,026 882 556 326 882
Time deposits . . . . . . . . . . . . 31,569 27,431 4,138 2,820 1,318 4,138
Short-term borrowings . . . . . . . . 15,597 22,879 (7,282) (3,791) (3,491) (7,282)
-------- -------- -------- -------- ----- -------
Total interest-bearing liabilities $ 58,127 60,855 (2,728) $ (734) (1,994) (2,728)
======== ======== ======== ======== ===== =======
Net interest margin/income (2) . . $ 61,105 59,300 1,805 $ (2 1,831 1,805
======== ======== ======== ======== ===== =======
<FN>
(1)
In December 1995, a reclassification was made from securities held to
maturity to securities available for sale.
(2)
Interest income and yields are presented on a tax-equivalent basis.
</TABLE>
NONINTEREST INCOME
Noninterest income totaled $7,492 for the quarter ended June 30, 1996, as
compared to $8,511 for the same quarter in 1995. Exclusive of NET SECURITY
GAINS which totaled $469 for the second quarter of 1996 as compared to $859
for the same quarter of 1995, noninterest income decreased by $629. The
largest components of this decrease were $493 in TRUST AND INVESTMENT
MANAGEMENT FEES resulting from a nonrecurring accounting adjustment recorded
in 1995, and $495 in OTHER INCOME due to gains from the sale of $13 million in
student loans recorded in 1995. Partially offsetting the decrease was growth
in SERVICE CHARGES ON DEPOSIT ACCOUNTS of $244 primarily attributable to a
higher volume of business accounts and an increase in OTHER SERVICE CHARGES,
COMMISSIONS AND FEES of $163 representing growth in annuity sales and merchant
fees on credit card sales.
Noninterest income totaled $14,402 for the six months ended June 30, 1996, as
compared to $14,918 for the same period in 1995. Exclusive of NET SECURITY
GAINS which totaled $545 for the 1996 six month period as compared to $1,042
for the 1995 period, noninterest income decreased by $19. In addition to the
changes noted above, MORTGAGE BANKING REVENUES for the 1996 six month period
were $320 in excess of such revenues in 1995. This variance resulted from a
higher level of real estate loan originations in 1996 which totaled $111,000,
as compared to $66,000 in 1995.
NONINTEREST EXPENSE
Noninterest expense totaled $23,201 for the quarter ended June 30, 1996,
decreasing by $1,332 from $24,533 for the same quarter in 1995. The largest
component of the decline was FDIC INSURANCE PREMIUMS, which decreased by
$1,027 in the second quarter of 1996 as compared to the like 1995 period,
reflective of premiums assessed on deposits insured by the Bank Insurance Fund
("BIF") decreasing from $.23 per $100 of insured deposits in 1995 to $.00 in
1996; deposits insured by the Savings Association Insurance fund ("SAIF")
remained unchanged at $.23 cents per $100 of deposits in both years.
RETIREMENT AND OTHER EMPLOYEE BENEFITS decreased by $561 primarily as a result
of the Company's 1995 restructuring and the corresponding decrease in full-
time equivalent employees. OCCUPANCY EXPENSE increased by $194 in the second
quarter of 1996 resulting from rental expense incurred on a new operations
center which began in mid-1995. Additionally, COMPUTER PROCESSING EXPENSE
increased by $181 due primarily to software upgrades occurring at various
locations in the first six months of 1996.
Noninterest expense totaled $46,354 for the six months ended June 30, 1996, as
compared to $48,159 for the same period in 1995. Of the $1,805 decrease,
$2,060 was due to reduced FDIC premiums, as discussed above. In addition to
the changes noted above, an ACQUISITION CREDIT of $324 was recorded in the
1996 six month period due to forfeited severance resulting from voluntary
resignations and renegotiated payouts during the first quarter of 1996 at
Citizens Federal. Note 2 to the consolidated financial statements provides
additional information with respect to acquisition expenses/credits.
The efficiency ratio for the quarter ended June 30, 1996 was 60.41%, as
compared to the 1995 second quarter ratio of 64.19%. For the six months ended
June 30, 1996, the efficiency ratio of 61.45% was favorable as compared to the
prior year's six month ratio of 64.69%. The improvement in the 1996
efficiency ratio reflects the impact of the companywide restructuring which
occurred in the second and third quarters of 1995.
INCOME TAX EXPENSE
Income tax expense totaled $4,833 for the second quarter of 1996, increasing
from $3,866 for the same period in 1995 and reflects effective income tax
rates of 37.03% and 35.46%, respectively. Income tax expense totaled $9,206
for the six months ended June 30, 1996 increasing from $7,516 for the 1995 six
month period and reflects effective income tax rates of 36.32% and 35.35%,
respectively. The higher effective tax rates in the 1996 periods are
primarily due to reduced state tax exempt income recorded in 1996.
NONPERFORMING ASSETS AND 90 DAY PAST DUE LOANS
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>
Nonperforming Assets and 1996 1995
-------------------- ----------------------------
90 Day Past Due
Loans June 30 March 31 Dec. 31 Sept. 30 June 30
-------- ---------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $ 10,790 $ 11,428 $11,219 $ 9,208 $ 11,924
Renegotiated loans 7,760 7,963 7,917 7,942 7,779
-------- ---------- ------- -------- --------
Total nonperforming loans 18,550 19,391 19,136 17,150 19,703
Foreclosed real estate 5,393 5,779 4,752 5,664 7,746
-------- ---------- ------- -------- --------
Total nonperforming assets $ 23,943 $ 25,170 $23,888 $22,814 $ 27,449
======== ========== ======= ======== ========
% of total loans plus foreclosed real estate 1.21% 1.29% 1.13% 1.11% 1.36%
======== ========== ======= ======== ========
90 Day past due loans accruing interest $ 4,318 $ 8,206 $ 3,626 $ 8,676 $ 3,800
======== ========== ======= ======== ========
</TABLE>
Nonaccrued loans, totaling $10,790 at June 30, 1996, is comprised of
commercial loans (61%), real estate loans (33%) and consumer loans (6%). The
renegotiated loan balance of $7,760 represents loans to certain related
borrowers that have performed in compliance with all contractual loan terms
during 1996. Foreclosed real estate, totaling $5,393 at June 30, 1996,
primarily represents commercial real estate properties.
First Midwest's disclosure with respect to impaired loans is contained in note
5 to the consolidated financial statements, located on page 8.
PROVISION AND RESERVE FOR LOAN LOSSES
Transactions in the reserve for loan losses during the quarters and six months
ended June 30, 1996 and 1995 are summarized below:
<TABLE>
Quarters ended Six months ended
June 30, June 30,
-------------------- ------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Balance at beginning of period . . . . . $ 28,076 $ 25,270 $ 29,194 $ 25,154
Provision for loan losses . . . . . . . . 1,767 2,544 2,626 4,192
Loans charged-off . . . . . . . . . . . (1,773) (2,563) (4,443) (4,542)
Recoveries of loans previously charged-off 527 650 1,220 1,097
-------- -------- -------- --------
Net loans charged-off . . . . . . . . . (1,246) (1,913) (3,223) (3,445)
-------- -------- -------- --------
Balance at end of period . . . . . . . . $ 28,597 $ 25,901 $ 28,597 $ 25,901
======== ======== ======== ========
Reserve as a % of loans at period end . . 1.44% 1.28%
======== ========
</TABLE>
The provision for loan losses for the second quarter of 1996 totaled $1,767 as
compared to $2,544 for the same quarter in 1995. Net loans charged off for
the quarter totaled $1,246, or .26% of average loans in 1996 as compared to
$1,913, or .39% in 1995. The amount of the provision for loan losses in
any given period is dependent upon many factors, including loan
growth, 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.
At June 30, 1996, the reserve for loan losses was comprised of three parts:
allocated for specific impaired loans, $1,874; allocated for general segments of
unimpaired loans, $9,259; and unallocated, $17,464. That part of the reserve
allocated for unimpaired general loan segments represents First Midwest's best
judgement as to potential loss exposure based upon both historical loss
trends as well as loan ratings and qualitative evaluations of such segments.
The unallocated portion of the reserve is that part not allocated to either a
specific loan on which loss is anticipated or allocated to general segments of
the unimpaired loan portfolio.
The reserve for loan losses as a percentage of total loans outstanding
increased to 1.44% at June 30, 1996 as compared to 1.28% at June 30, 1995.
Such reserve level is considered adequate in relation to the estimated risk of
future losses within the loan portfolio. The distribution of the loan portfolio
is presented in Note 4 to the consolidated financial statements located on page
8. The loan portfolio, which contains no sub-prime credit nor consumer credit
card loans, consists dominantly of loans originated by First Midwest from its
primary markets and generally represents credit extensions to multi-
relationship customers.
CAPITAL
The table below compares First Midwest's capital structure to the minimum
capital ratios required by its primary regulator, the Federal Reserve Board
("FRB"). Also provided is a comparison of capital ratios for First Midwest's
national banking subsidiary, First Midwest Bank, N.A., to its primary
regulator, the Office of the Comptroller of the Currency ("OCC"). Both First
Midwest and First Midwest Bank, N.A. are subject to the minimum capital ratios
defined by banking regulators pursuant to the FDIC Improvement Act ("FDICIA")
and have capital measurements well in excess of the minimums required by their
respective bank regulatory authorities to be considered "well-capitalized"
which is the highest capital category established under the FDICIA.
<TABLE>
As of June 30, 1996
-------------------------------------------------------------
Bank Holding Company National Bank Minimum
------------------------- ---------------
CAPITAL MEASUREMENTS - FRB/OCC Minimum Minimum Well-
First Required Required Capitalized
Midwest FRB FMB, N.A. OCC FDICIA
------------ ---------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C>
Tier 1 capital to risk-
based assets 10.57% 4.00% 8.84% 4.00% 6.00%
Total capital to risk-based assets 11.81% 8.00% 10.06% 8.00% 10.00%
Leverage ratio 7.88% 3.00% 6.50% 3.00% 5.00%
</TABLE>
Citizens Federal's primary regulator is the Office of Thrift Supervisions
("OTS"). As of June 30, 1996, Citizens Federal exceeded all applicable
capital ratio requirements of the OTS.
DIVIDENDS
First Midwest's strong capital position has allowed it to increase its
quarterly dividend in 1996, for the fourth consecutive year, to the following
indicated annual rates:
Dividends Annual % Increase
Paid in Rate over Prior year
--------- ------ ---------------
1996 $ .84 11%
1995 $ .76 12%
1994 $ .68 13%
1993 $ .60 15%
====== ===============
Special Note:
Certain statements contained within Item 2 of Part I of this Report which are
not historical facts, including statements relating to First Midwest's plans,
objectives and expectations of future performance and occurrences may be deemed
to be forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are found in, but are not
limited to, the section captioned Provision and Reserve for Loan Losses.
Actual results may differ materially from those set forth in the forward-
looking statements due to market, economic and other business-related risks and
uncertainties affecting the realization of such statements. These risks and
uncertainties are discussed by First Midwest in the Company's periodic filings
with the Securities and Exchange Commission.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - See Exhibit Index appearing on page 17.
(b) Form 8-K - On May 31, 1996, First Midwest filed a report on
Form 8-K announcing Management's intention to recommend the
rescission of the share repurchase program authorized in
November, 1995. On June 15, 1996, the Company's Executive
Committee, exercising the authority of the Board of Directors,
concurred with Management's recommendation and rescinded ab
initio the remainder of such program.
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 12, 1996 DONALD J. SWISTOWICZ
--------------------
Donald J. Swistowicz
Executive Vice President*
* Duly authorized to sign on behalf of the Registrant.
EXHIBIT INDEX
Exhibit Sequential
Number Description of Documents Page Number
- ------ ------------------------ -----------
10 First and Second Amendments to 1989 Omnibus Stock and
Incentive Plan of the Company 18
27 Financial Data Schedule 22
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 162,901
<INT-BEARING-DEPOSITS> 3,919
<FED-FUNDS-SOLD> 154
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 831,747
<INVESTMENTS-CARRYING> 25,105
<INVESTMENTS-MARKET> 25,137
<LOANS> 1,979,313
<ALLOWANCE> 28,597
<TOTAL-ASSETS> 3,118,404
<DEPOSITS> 2,298,788
<SHORT-TERM> 531,188
<LIABILITIES-OTHER> 33,794
<LONG-TERM> 0
0
0
<COMMON> 137
<OTHER-SE> 254,497
<TOTAL-LIABILITIES-AND-EQUITY> 3,118,404
<INTEREST-LOAN> 90,170
<INTEREST-INVEST> 26,222
<INTEREST-OTHER> 1,661
<INTEREST-TOTAL> 118,053
<INTEREST-DEPOSIT> 42,531
<INTEREST-EXPENSE> 58,127
<INTEREST-INCOME-NET> 59,926
<LOAN-LOSSES> 2,626
<SECURITIES-GAINS> 545
<EXPENSE-OTHER> 46,354
<INCOME-PRETAX> 25,348
<INCOME-PRE-EXTRAORDINARY> 16,142
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,142
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.18
<YIELD-ACTUAL> 4.23
<LOANS-NON> 10,790
<LOANS-PAST> 4,318
<LOANS-TROUBLED> 7,760
<LOANS-PROBLEM> 33,790
<ALLOWANCE-OPEN> 29,194
<CHARGE-OFFS> 4,443
<RECOVERIES> 1,220
<ALLOWANCE-CLOSE> 28,597
<ALLOWANCE-DOMESTIC> 11,133
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 17,464
</TABLE>
FIRST MIDWEST BANCORP, INC.
1989 OMNIBUS STOCK AND INCENTIVE PLAN
-------------------------------------
The following sections of the First Midwest Bancorp, Inc. 1989
Omnibus Stock and Incentive Plan have been hereby amended, as
follows:
1. Section 1.2: Purpose
---------------------
The purpose of the Plan is to advance the interests of
the Company, by encouraging and providing for the
acquisition of an equity interest in the success of the
Company by key employees, by providing additional incentives
and motivation toward superior performance of the Company,
and by enabling the Company to attract and retain the
services of key employees upon whose judgment, interest and
special effort the successful conduct of its operations is
largely dependent.
2. Section 2.1 (e)
---------------
"Committee" means the Compensation Committee of the
Board of Directors or such other committee appointed from
time to time by the Board of Directors to administer this
Plan. The Committee shall consist of three or more members,
each of whom shall qualify as a "disinterested person," as
the term is defined by Rule 16b-3, and as an "outside
director" within the meaning of Code Section 162(m) and
regulations thereunder.
3. Section 5.1: Number and Amount Available for Award to
Single Participant
-----------------------------------------------------------
The total number of shares of Stock subject to Awards
under the Plan may not exceed 1,677,500 (of this total
number, up to 80,000 shares of Stock may be issued in
Restricted Stock), and the total number of shares of Stock
which may be made subject to Awards granted under the Plan
in any calendar year to any single Participant may not
exceed 65,000. Such numbers of shares shall be subject to
adjustment upon occurrence of any of the events described in
Section 5.3. The shares to be delivered under the Plan may
consist, in whole or in part, of authorized but unissued
Stock or treasury Stock, not reserved for any other purpose.
4. Section 5.2: Reuse
-------------------
If, and to the extent:
(a) An Option shall expire or terminate for any reason
without having been exercised in full (including, without
limitation, cancellation and re-grant), or in the event that
an Option is exercised or settled in a manner such that some
or all of the shares of Stock related to the Option are not
issued to the Participant (or beneficiary) (including as the
result of the use of shares for withholding taxes), the
shares of Stock subject thereto which have not become
outstanding shall (unless the Plan shall have terminated)
become available for issuance under the Plan; provided,
however, that with respect to a share-for-share exercise,
only the net shares issued shall be deemed to have become
outstanding as a result thereof.
(b) Restricted Stock, Performance Shares or
Performance Units under the Plan forfeited for any reason,
or settled in cash in lieu of Stock or in a manner such that
some or all of the shares of Stock related to the award are
not issued to the Participant (or beneficiary), such shares
of Stock shall (unless the Plan shall have terminated)
become available for issuance under the Plan; provided,
however, that if any dividends paid with respect to shares
of Restricted Stock or Performance Shares were paid to the
Participant prior to the forfeiture thereof, such shares
shall not be reused for grants or awards.
(c) SARs expire or terminate for any reasons without
having been earned in full, an equal number of SARs shall
(unless the 1989 Plan shall have terminated) become
available for issuance under the Plan.
4. Section 6.1: Duration of Plan
------------------------------
The Plan shall remain in effect, subject to the Board's
right to earlier terminate the Plan pursuant to Section 14
hereof, until all Stock subject to it shall have been
purchased or acquired pursuant to the provisions hereof.
Notwithstanding the foregoing, no Award may be granted under
the Plan on or after February 21, 2006.
5. Section 9.2: Transferability
-----------------------------
Except as provided in Sections 9.8 and 9.9 hereof, the
shares of Restricted Stock granted hereunder may not be
sold, transferred, pledged, assigned, or otherwise alienated
or hypothecated for such period of time as shall be
determined by the Committee and shall be specified in the
Restricted Stock grant, or upon earlier satisfaction of
other conditions (which may include the attainment of
performance goals as defined in Section 10.8 hereof), as
specified by the Committee in its sole discretion and set
forth in the Restricted Stock grant.
6. Section 10.8: Performance Goals
--------------------------------
For purposes of Sections 9.2 and 10.2 hereof,
"performance goals" shall mean the criteria and objectives,
determined by the Committee pursuant to the Plan, which
shall be satisfied or met during the applicable restriction
period or performance period, as the case may be, as a
condition to the Participant's receipt, in the case of a
grant of the Restricted Stock or a grant of Performance
Shares, of the shares of Stock subject to such grant, or in
the case of a Performance Unit Award, of payment with
respect to such Award. Such criteria and objectives may
include, but are not limited to, return on assets, return on
equity, growth in net earnings, growth in earnings per
share, asset growth, deposit growth, loan growth, asset
quality levels, growth in the Fair Market Value of the
Stock, or any combination of the foregoing or any other
criteria and objectives determined by the Committee. Upon
completion of the restricted period or the performance
period, as the case may be, the Committee shall certify the
level of the performance goals attained and the amount of
the Award payable as a result thereof.
7. Section 13.2: Definition
-------------------------
For purposes of the Plan, a "change in control" shall
mean any of the following events:
(a) Any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended), other than (i) a trustee or other fiduciary
holding securities under an employee benefit plan of the
Company or a subsidiary, or (ii) a corporation owned
directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of
stock of the Company, is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing 10% or
more of the total voting power of the then outstanding
shares of capital stock of the Company entitled to vote
generally in the election of directors (the "Voting Stock"),
or
(b) During any period of two consecutive years,
individuals, who at the beginning of such period constitute
the Board, and any new director, whose election by the
Board, or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease
for any reason to constitute a majority thereof, or
(c) The stockholders of the Company approve a merger
of consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in
the Voting Stock outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or
by being converted into voting securities of the surviving
entity) at least 80% of the total voting power represented
by the Voting Stock or the voting securities of such
surviving entity outstanding immediately after such merger
or consolidation, or the stockholders of the Company approve
a Plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets.
The Board has final authority to determine the exact date on
which a change in control has been deemed to have occurred
under (a), (b), and (c) above.
*********************************
SECRETARY'S CERTIFICATE
-----------------------
The foregoing First Amendment to the First Midwest Bancorp, Inc.
1989 Omnibus Stock and Incentive Plan was duly adopted and
approved by the Company's Board of the Directors on November 15,
1995 and shall become effective as of such date, subject to
ratification thereof by the Company's stockholders at the 1996
Annual Meeting of Stockholders. Awards granted under the Plan on
or after the effective date of this First Amendment with respect
to the additional shares of Stock authorized hereby, or pursuant
to any of the amendments made to the Plan hereby, shall not be
exercisable or payable to a Participant without such stockholder
approval.
This First Amendment to the First Midwest Bancorp, Inc. 1989
Omnibus Stock and Incentive Plan was duly approved by the
stockholders of the Company at the Annual Meeting of Stockholders
held on April 16, 1996.
CORPORATE
-----------------------------------------
SEAL By: Alan R. Milasius
Senior Vice President & Corporate
Secretary
SECOND AMENDMENT TO THE
FIRST MIDWEST BANCORP, INC.
OMNIBUS STOCK AND INCENTIVE PLAN
--------------------------------
The First Midwest Bancorp, Inc. 1989 Omnibus Stock and Incentive Plan is
hereby amended as follows:
Section 2.1(e) is amended to read:
"Committee" means the Compensation Committee of the Board of
Directors or such other committee appointed from time to time by
the Board of Directors to administer this Plan. The Committee
shall consist of two or more members, each of whom shall qualify
as a "disinterested person," as the term (or similar or successor
term) is defined by Rule 16b-3, and as an "outside director"
within the meaning of Code Section 162(m) and regulations
thereunder.
* * * * *
The foregoing Second Amendment to the 1989 Omnibus Stock and Incentive
Plan was duly adopted and approved by the Board of Directors of the Company on
May 15, 1996 and shall become effective as of such date.
/s/ Alan R. Milasius
--------------------------
Secretary of the Company
