<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 March 31, 1997, 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)
(630) 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 May 9, 1997, 16,660,986 shares of the Registrant's $.01 par value common
stock were outstanding, excluding treasury shares.
Exhibit Index is located on page 16.
<PAGE>
FIRST MIDWEST BANCORP, INC.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
<S> <C>
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....... 9
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................................................15
</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>
March 31, December 31,
1997 /(1)/ 1996 /(2)/
----------- ------------
<S> <C> <C>
Assets
Cash and due from banks........................................................ $ 134,980 $ 107,595
Federal funds sold and other short term investments............................ 4,035 23,076
Mortgages held for sale........................................................ 7,486 13,492
Securities available for sale, at market value................................. 699,990 770,256
Securities held to maturity, at amortized cost................................. 19,621 21,336
Loans.......................................................................... 2,058,677 2,085,277
Reserve for loan losses........................................................ (33,747) (30,148)
----------- -----------
Net loans...................................................................... 2,024,930 2,055,129
Premises, furniture and equipment.............................................. 49,597 49,354
Accrued interest receivable.................................................... 19,246 22,634
Other assets................................................................... 51,863 56,366
----------- -----------
Total assets................................................................... $ 3,011,748 $ 3,119,238
=========== ===========
Liabilities
Demand deposits................................................................ $ 380,451 $ 349,759
Savings deposits............................................................... 287,828 284,317
NOW accounts................................................................... 279,931 282,016
Money market deposits.......................................................... 230,533 239,027
Time deposits.................................................................. 1,090,521 1,105,548
----------- -----------
Total deposits............................................................... 2,269,264 2,260,667
Short-term borrowings.......................................................... 451,018 493,142
Accrued interest payable....................................................... 9,823 10,430
Other liabilities.............................................................. 23,554 92,859
----------- -----------
Total liabilities.............................................................. 2,753,659 2,857,098
----------- -----------
Stockholders' equity
Preferred stock, no par value: 1,000,000 shares authorized, none issued........ --- ---
Common stock, $.01 par value: 30,000,000 shares authorized; 17,509,114 shares
issued; 16,697,260 and 16,906,540 outstanding at March 31, 1997 and
December 31, 1996, respectively............................................. 167 169
Additional paid-in capital..................................................... 56,922 57,084
Retained earnings.............................................................. 222,897 217,522
Unrealized net (depreciation) on securities, net of tax........................ (3,292) (540)
Treasury stock, at cost: 811,854 and 602,574 shares at March 31, 1997
and December 31, 1996, respectively.......................................... (18,605) (12,095)
----------- -----------
Total stockholders' equity..................................................... 258,089 262,140
----------- -----------
Total liabilities and stockholders' equity..................................... $ 3,011,748 $ 3,119,238
=========== ===========
</TABLE>
- -----------------------
See notes to consolidated financial statements.
/(1)/ Unaudited
/(2)/ Audited - See December 31, 1996 Form 10-K for Auditors' Report.
3
<PAGE>
FIRST MIDWEST BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
March 31, /(1)/
-------------------------
1997 1996
---------- ----------
<S> <C> <C>
Interest Income
Loans.................................................. $ 45,525 $ 46,194
Securities available for sale.......................... 11,668 11,805
Securities held to maturity............................ 321 423
Funds sold and other short-term investments............ 385 761
---------- ----------
Total interest income................................ 57,899 59,183
---------- ----------
Interest Expense
Deposits............................................... 20,321 21,436
Short-term borrowings.................................. 6,287 8,347
---------- ----------
Total interest expense............................... 26,608 29,783
---------- ----------
Net interest income.................................. 31,291 29,400
Provision for Loan Losses.............................. 2,078 859
---------- ----------
Net interest income after provision for loan losses.. 29,213 28,541
---------- ----------
Noninterest Income
Service charges on deposit accounts.................... 2,638 2,338
Trust and investment management fees income............ 1,632 1,623
Other service charges, commissions and fees............ 1,581 1,387
Mortgage banking revenues.............................. 1,279 915
Security gains, net.................................... 365 76
Other income........................................... 966 571
---------- ----------
Total noninterest income............................. 8,461 6,910
---------- ----------
Noninterest Expense
Salaries and wages..................................... 10,183 9,955
Retirement and other employee benefits................. 2,649 2,550
Occupancy expense of premises.......................... 2,002 1,700
Equipment expense...................................... 1,515 1,459
Computer processing expense............................ 1,618 1,590
Advertising and promotions............................. 886 736
Professional services.................................. 707 1,263
Acquisition credit..................................... --- (324)
Other expenses......................................... 4,209 4,224
---------- ----------
Total noninterest expense............................ 23,769 23,153
---------- ----------
Income before income tax expense....................... 13,905 12,298
Income tax expense..................................... 5,179 4,373
---------- ----------
Net Income........................................... $ 8,726 $ 7,925
========== ==========
Net Income per share................................. $ 0.52 $ 0.46
Cash dividends declared per share.................... $ 0.20 $ 0.17
Weighted average shares outstanding.................. 16,767,413 17,120,023
========== ==========
</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>
Three months ended
March 31, /(1)/
----------------------
1997 1996
--------- ---------
<S> <C> <C>
Operating Activities
Net income .............................................................................. $ 8,726 $ 7,925
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses ........................................................... 2,078 859
Provision for depreciation .......................................................... 1,535 1,522
Net (accretion) of securities available for sale premiums and discounts ............. (465) (1,378)
Net amortization (accretion) of securities held to maturity premiums and discounts .. 2 (15)
Net gains on securities available for sale transactions ............................. (365) (76)
Net gains on sales of premises, furniture and equipment ............................. (191) (28)
Net decrease in deferred income taxes ............................................... (688) (174)
Net amortization of purchase accounting adjustments, goodwill, & other intangibles .. 575 457
Changes in operating assets and liabilities:
Net decrease (increase) in loans held for sale .................................. 6,006 (2,908)
Net decrease in accrued interest receivable ..................................... 3,388 4,390
Net decrease (increase) in other assets ......................................... 7,512 (2,672)
Net (decrease) in accrued interest payable ...................................... (607) (1,284)
Net (decrease) increase in other liabilities .................................... (69,305) 1,420
--------- ---------
Net cash (used) provided by operating activities ............................ (41,799) 8,038
--------- ---------
Investing Activities
Securities available for sale:
Proceeds from sales ..................................................................... 120,543 415,430
Proceeds from maturities, calls and paydowns ............................................ 73,224 209,700
Purchases ............................................................................... (127,184) (572,926)
Securities held to maturity:
Proceeds from maturities, calls and paydowns ............................................ 2,178 2,707
Purchases ............................................................................... (464) (1,676)
Loans made to customers, net of principal collected ......................................... 26,912 625
Proceeds from sales of foreclosed real estate ............................................... 94 1,185
Proceeds from sales of premises, furniture and equipment .................................... 102 64
Purchases of premises, furniture and equipment .............................................. (1,709) (1,301)
--------- ---------
Net cash provided by investing activities ............................................... 93,696 53,808
--------- ---------
Financing Activities
Net increase (decrease) in deposit accounts ................................................. 8,597 (23,081)
Net (decrease) in short-term borrowings ..................................................... (42,124) (39,519)
Purchases of treasury stock ................................................................. (7,687) (2,266)
Cash dividends .............................................................................. (3,353) (2,890)
Exercise of stock options ................................................................... 1,014 958
--------- ---------
Net cash used by financing activities ................................................... (43,553) (66,798)
--------- ---------
Net increase (decrease) in cash and cash equivalents .................................... 8,344 (4,952)
Cash and cash equivalents at beginning of period ........................................ 130,671 149,263
--------- ---------
Cash and cash equivalents at end of period .............................................. $ 139,015 $ 144,311
========= =========
Supplemental disclosures:
Interest paid to depositors and creditors ............................................... $ 27,215 $ 31,066
Income taxes paid ....................................................................... 1,538 1,402
Non-cash transfers to foreclosed real estate from loans ................................. 1,209 2,350
Non-cash transfers to securities available for sale from loans .......................... --- 141,164
========= =========
</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 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.
In the opinion of Management, all normal and recurring adjustments which are
necessary to fairly present the results for the interim periods presented have
been included. 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 1996 data to
conform to the 1997 presentation. All common stock and per share data have been
adjusted to reflect the 5-for-4 stock split affected in the form of a stock
dividend which was paid in December, 1996. 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 year ended December 31, 1996.
Earnings Per Share - In February 1997, the Financial Accounting Standards Board
("FASB") issued Statement No. 128 ("FASB No. 128"), "Earnings Per Share" which
provides new accounting guidelines governing the computation of earnings per
share effective for financial statement periods ending after December 15, 1997.
At that time, all public companies will be required to change the method
currently used to compute earnings per share and to restate all prior periods.
Under the new requirements of FASB No. 128, the primary ("basic") earnings per
share calculation will exclude the dilutive effect of all common stock
equivalents. Further, FASB No. 128 requires additional disclosures including
dual presentation of basic and diluted earnings per share on the face of the
Statement of Income. Under FASB No. 128, First Midwest's calculation of basic
earnings per share for the quarters ending March 31, 1997 and 1996 was $.52 and
$.46 per share, respectively, reflecting no change from the current accounting
guidelines. FASB No. 128 is not anticipated to have a material effect on First
Midwest's calculation of diluted earnings per share for these quarters.
2. ACQUISITION
On December 20, 1995, First Midwest acquired CF Bancorp, Inc. ("CF"), whose
principal subsidiary was Citizens Federal Savings Bank ("Citizens Federal").
This transaction was accounted for as a pooling of interests and 1,675 shares
were issued to CF stockholders.
Coincident with the acquisition, First Midwest recorded $4,887 in costs
consisting of $4,339 in acquisition expenses and $548 in provisions for loan
losses incident to conforming Citizen 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, the
balance of which totaled $624 as of March 31, 1997.
During the first quarter of 1997 the acquisition reserve was reduced by $226
representing severance payments to former Citizens Federal executives and
employees. Citizens Federal converted to a bank and was merged with First
Midwest Bank, N.A. in the fourth quarter of 1996.
6
<PAGE>
3. SECURITIES
Securities Available for Sale - The amortized cost and market value of
securities available for sale at March 31, 1997 and December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
Securities Available for Sale
--------------------------------------------------------------------------------------
March 31, 1997 December 31, 1996
--------------------------------------- ------------------------------------------
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....... $ 65,550 $ 5 $ (292) $ 65,263 $ 65,592 $ 314 $ (2) $ 65,904
U.S. Agency securities......... 323,378 51 (3,462) 319,967 356,491 607 (1,527) 355,571
Mortgage-backed securities..... 314,283 1,259 (3,004) 312,538 347,287 1,454 (1,731) 347,010
State and municipal
securities.................... 1,012 14 --- 1,026 --- --- --- ---
Other securities............... 1,162 34 --- 1,196 1,771 --- --- 1,771
-------- ------ ------- -------- -------- ------ ------- --------
Total....................... $705,385 $1,363 $(6,758) $699,990 $771,141 $2,375 $(3,260) $770,256
======== ====== ======= ======== ======== ====== ======= ========
</TABLE>
Securities Held to Maturity - The amortized cost and market value of securities
held to maturity at March 31, 1997 and December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Securities Held to Maturity
--------------------------------------------------------------------------------------
March 31, 1997 December 31, 1996
--------------------------------------- ------------------------------------------
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....... $ 1,001 $ 2 $ (5) $ 998 $ 929 $ - $ - $ 929
State and municipal
securities.................... 7,254 133 (8) 7,379 9,135 132 (28) 9,239
Other securities............... 11,366 16 (1) 11,381 11,272 16 - 11,288
-------- ------ ------- -------- -------- ------ ------- --------
Total....................... $ 19,621 $ 151 $ (14) $ 19,758 $ 21,336 $ 148 $ (28) $ 21,456
======== ====== ======= ======== ======== ====== ======= ========
</TABLE>
4. LOANS
The following table provides the book value of loans, by major classification,
as of the dates indicated:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------- ------------
<S> <C> <C>
Commercial and industrial............................................ $ 564,920 $ 571,181
Agricultural......................................................... 40,705 48,461
Direct home equity................................................... 159,196 157,174
Other direct installment............................................. 75,418 78,402
Indirect installment................................................. 402,991 413,680
Real estate - 1-4 family............................................. 186,608 189,000
Real estate - commercial............................................. 509,077 494,835
Real estate - construction........................................... 114,659 122,504
Other................................................................ 5,103 10,040
----------- -----------
Total................................................................ $ 2,058,677 $ 2,085,277
=========== ===========
</TABLE>
7
<PAGE>
5. RESERVE FOR LOAN LOSSES/IMPAIRED LOANS
Transactions in the reserve for loan losses for the three months ended March 31,
1997 and 1996 are summarized below:
<TABLE>
<CAPTION>
Three months ended
March 31,
-------------------
1997 1996
-------- --------
<S> <C> <C>
Balance at beginning of period......................... $ 30,148 $ 29,194
Provision for loan losses.............................. 2,078 859
Loans charged-off..................................... (3,066) (2,670)
Recoveries of loans previously charged-off............ 4,587 693
-------- --------
Net loan recoveries/(charge-offs)................... 1,521 (1,977)
-------- --------
Balance at end of period................................. $ 33,747 $ 28,076
======== ========
</TABLE>
Information with respect to impaired loans at March 31, 1997 and 1996 is
provided below:
<TABLE>
<CAPTION>
March 31,
------------------
1997 1996
------- -------
<S> <C> <C>
Recorded Investment in Impaired Loans:
Recorded investment requiring specific loan loss reserves /(1)/..... $ 2,861 $ 7,767
Recorded investment not requiring specific loan loss reserves....... 7,714 9,709
------- -------
Total recorded investment in impaired loans......................... $10,575 $17,476
======= =======
Specific loan loss reserve related to impaired loans.................. $ 1,647 $ 2,200
======= =======
</TABLE>
/(1)/ These impaired loans require a specific reserve allocation because the
value of the loans are less than the recorded investments in the loans.
For the three months ended March 31, 1997 and 1996, the average recorded
investment in impaired loans was approximately $11,187 and $17,700,
respectively.
6. CONTINGENT LIABILITIES AND OTHER MATTERS
There are certain legal proceedings pending against First Midwest and its
Subsidiaries in the ordinary course of business at March 31, 1997. 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.
On January 29, 1997 First Midwest received $4,050 in settlement of a lawsuit
that had been pending since 1993 against its former bond insurer related to
loans charged off in 1992. The settlement proceeds have been credited to the
reserve for loan losses while Management undertakes an assessment of the impact
of the recovery on loan loss provisioning and reserve levels going forward.
8
<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 three months ended March 31, 1997 as
compared to the same period in 1996. 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
1996 Annual Report on Form 10-K. Results of operations for the three months
ended March 31, 1997 are not necessarily indicative of results to be expected
for the full year of 1997.
Summary of Performance
Net income for the first quarter increased to $8,726, or $.52 per share from
last year's first quarter of $7,925, or $.46 per share representing an increase
of 13% on a per share basis.
Return on average assets was 1.17% for the first quarter of 1997 as compared to
1.02% for the same quarter in 1996. Return on average stockholders' equity was
13.66% for the first quarter of 1997, as compared to 12.66% for the same 1996
quarter.
Net Interest Income
Net interest income on a tax equivalent basis totaled $31,889 for the first
quarter of 1997, representing an increase of $1,863 or 6.2% over the year-ago
quarter totaling $30,026. As shown in the Volume/Rate Analysis on page 10, the
improvement in net interest income is attributable to reduced interest income of
$1,312 net of lower interest expense of $3,175. The net interest margin for the
first quarter of 1997 increased to 4.57% as compared to 4.13% for the same
period in 1996. The advancement in net interest margin is primarily due to
higher yields on earning assets coupled with decreasing interest costs for
paying liabilities.
As shown in the Volume/Rate Analysis, the $1,312 decrease in interest income for
the quarter is largely attributable to volume and interest rate variances on the
loan portfolio, totaling to a net decline of $685. The majority of the
securities portfolio interest income variance resulted from securities volumes,
which decreased by $74,298 in the current quarter as compared to the like
quarter last year and was partially offset by higher rates. Such decrease
resulted in the re-deployment of securities fundings into reductions of more
expensive short term borrowings.
The $3,175 decrease in interest expense resulted from decreases in both volumes
of and rates on interest bearing liabilities. A major contributor to the
reduction in interest expense occurred in lower volumes and rates on higher
yielding money market and time deposits reflecting a shift in deposit mix to
lower costing savings and NOW deposits. Short term borrowing balances decreased
in the first quarter of 1997 by $128,870 from year ago levels as discretionary
funding needs declined as discussed above.
9
<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 March 31,
1997 and 1996. 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>
Three Months Ended March 31, 1997 and 1996
-------------------------------------------------------------------
Average Interest
Average Balances Rates Earned/Paid
----------------------------------- ------------------------------
Basis
Increase Points
1997 1996 (Decrease) 1997 1996 Inc/(Dec)
---------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Federal funds sold and other
short-term investments.............. $ 15,173 12,608 2,565 5.77% 6.25% (0.48%)
Mortgages held for sale............... 8,749 25,016 (16,267) 7.83% 9.07% (1.24%)
Securities available for sale (1)..... 719,274 785,134 (65,860) 6.85% 6.28% 0.57%
Securities held to maturity (1)....... 18,533 26,971 (8,438) 8.29% 7.80% 0.49%
Loans, net of unearned discount (1)... 2,066,492 2,072,933 (6,441) 8.95% 8.98% (0.03%)
---------- --------- ---------- --------- --------- ---------
Total interest-earning assets (1)... $2,828,221 2,922,662 (94,441) 8.39% 8.23% 0.16%
========== ========= ========== ========= ========= =========
Savings deposits...................... $ 285,986 247,121 38,865 2.50% 2.13% 0.37%
NOW accounts.......................... 276,398 261,473 14,925 2.32% 2.32% 0.00%
Money market deposits................. 233,791 278,943 (45,152) 3.43% 3.67% (0.24%)
Time deposits......................... 1,095,376 1,115,611 (20,235) 5.55% 5.79% (0.24%)
Short-term borrowings................. 481,375 610,245 (128,870) 5.30% 5.50% (0.20%)
---------- --------- ---------- --------- --------- ---------
Total interest-bearing liabilities.. $2,372,926 2,513,393 (140,467) 4.55% 4.77% (0.22%)
========== ========= ========== ========= ========= =========
Net interest margin/income /(1)/.... 4.57% 4.13% 0.44%
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Interest Increase/(Decrease) in
Income/Expense Interest Income/Expense Due to:
----------------------------------- -------------------------------
Increase
1997 1996 (Decrease) Volume Rate Total
---------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Federal funds sold and other
short-term investments.............. $ 216 196 20 $ 35 (15) 20
Mortgages held for sale............... 169 564 (395) (324) (71) (395)
Securities available for sale (1)..... 12,143 12,251 (108) (4,626) 4,518 (108)
Securities held to maturity (1)....... 379 523 (144) (175) 31 (144)
Loans, net of unearned discount (1)... 45,590 46,275 (685) (145) (540) (685)
---------- --------- ---------- --------- --------- ---------
Total interest-earning assets (1)... $ 58,497 59,809 (1,312) $ (5,235) 3,923 (1,312)
========== ========= ========== ========= ========= =========
Savings deposits...................... $ 1,761 1,310 451 $ 222 229 451
NOW accounts.......................... 1,580 1,511 69 85 (16) 69
Money market deposits................. 1,979 2,548 (569) (391) (178) (569)
Time deposits......................... 15,001 16,067 (1,066) (287) (779) (1,066)
Short-term borrowings................. 6,287 8,347 (2,060) (1,697) (363) (2,060)
---------- --------- ---------- --------- --------- ---------
Total interest-bearing liabilities.. $ 26,608 29,783 (3,175) $ (2,068) (1,107) (3,175)
========== ========= ========== ========= ========= =========
Net interest margin/income /(1)/.... $ 31,889 30,026 1,863 $ (3,167) 5,030 1,863
========== ========= ========== ========= ========= =========
</TABLE>
(1) Interest income and yields are presented on a tax-equivalent basis.
10
<PAGE>
Noninterest Income
Noninterest income totaled $8,461 for the quarter ended March 31, 1997, as
compared to $6,910 for the same period in 1996. Exclusive of net security gains
which totaled $365 for the three months as compared to $76 for the like period
in 1996, noninterest income increased by $1,262 or 18.5% with every major
component of operating income contributing to the increase.
The $300 increase in service charges on deposit accounts was essentially
attributable to a higher volume of NSF fees. Other service charges, commissions
and fees added $194 from higher merchant credit card fees and credit life
insurance premiums. The $364 improvement in mortgage banking revenues was
primarily due to gains from sales of loans and servicing. Other income for the
quarter ended March 31, 1997, was $395 in excess of the like period in 1996 due
primarily to growth in ATM revenues of $248.
Noninterest Expense
Noninterest expense totaled $23,769 for the quarter ended March 31, 1997,
increasing by $616 from the same period in 1996. Exclusive of a $324
acquisition credit recorded during the first quarter of 1996, noninterest
expense increased by a nominal $292, or 1.2% increase from the same quarter in
1996.
Salaries and wages and retirement and other employee benefits increased to a
combined $12,832 for the first quarter of 1997 from the same period in 1996 for
an increase of $327, or 2.6%. The majority of such increase is attributable to
general 4% merit raises effective January 1997 offset by decreases in temporary
help and employee insurance costs.
Occupancy expense increased to $2,002 for the first quarter of 1997 from $1,700
for the same period in 1996 and reflects the costs of four additional branches
which were established in the second half of 1996.
Equipment expense and computer processing expense increased by $84 or 2.7% in
the first quarter of 1997 as compared to the like period in 1996. Such increase
reflects continuing general efficiencies and cost stabilizations being realized
from the 1995 Companywide restructuring.
In part offsetting the impact of the above referenced increases was a decline in
professional services of $556 in the first quarter of 1997 resulting from less
legal and professional fees incurred primarily related to the resolution of
litigation referred to in Note 6 to the consolidated financial statements and
fees related to the whole loan purchase consummated in the fourth quarter of
1996. Additionally, other expenses declined by $15 in which such decreases were
spread among various categories of miscellaneous expense.
The efficiency ratio for the quarter ended March 31, 1997 was 59.10% as compared
to the 1996 first quarter ratio of 63.42%. The improvement in the 1997
efficiency ratio reflects well-controlled noninterest expenses and the
realization of cost benefits from the 1995 Companywide restructuring.
Income Tax Expense
Income tax expense totaled $5,179 for the quarter ended March 31,1997,
increasing from $4,373 for the same period in 1996 and reflects effective income
tax rates of 37.2% and 35.6% respectively. The increase in effective tax rate
is primarily attributable to decreases in federal and state tax exempt income in
the 1997 quarter.
11
<PAGE>
Nonperforming Assets and 90 Day Past Due Loans
At March 31, 1997, nonperforming assets totaled $19,631 and loans past due 90
days or more and still accruing totaled $3,720. 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>
1997 1996
Nonperforming Assets and --------- ---------------------------------------
90 Day Past Due Loans March 31 Dec. 31 Sept. 30 June 30 March 31
- ----------------------------------------------- --------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans............................... $12,830 $10,448 $11,435 $10,790 $11,428
Renegotiated loans............................. --- --- 7,876 7,760 7,963
------- ------- ------- ------- -------
Total nonperforming loans.................... 12,830 10,448 19,311 18,550 19,391
Foreclosed real estate......................... 6,801 5,811 5,587 5,393 5,779
------- ------- ------- ------- -------
Total nonperforming assets................... $19,631 $16,259 $24,898 $23,943 $25,170
======= ======= ======= ======= =======
% of total loans plus foreclosed real estate. 0.95% 0.78% 1.24% 1.21% 1.29%
======= ======= ======= ======= =======
90 days past due loans accruing interest....... $ 3,720 $ 3,982 $ 4,998 $ 4,318 $ 8,206
======= ======= ======= ======= =======
</TABLE>
Nonaccrual loans, totaling $12,830 at March 31, 1997 are comprised of commercial
and agricultural loans (64%), real estate loans (30%) and consumer loans (6%).
Foreclosed real estate, totaling $6,801 at March 31, 1997, 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 three months ended March
31, 1997 and 1996 are summarized in the following table:
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------
1997 1996
------- -------
<S> <C> <C>
Balance at beginning period........................................... $30,148 $29,194
Provision for loan process.......................................... 2,078 859
Loans charged of.................................................... (3,066) (2,670)
Recoveries of loans previously charged-off.......................... 4,587 693
------- -------
Net loan recoveries/(charge-offs)................................ 1,521 (1,977)
------- -------
Balance at end of period.............................................. $33,747 $28,076
======= =======
</TABLE>
The provision for loan losses charged to operating expense for the first quarter
of 1997 totaled $2,078 as compared to $859 for the same quarter in 1996. 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. Loan
recoveries, net of charge-offs, for the quarter totaled $1,521, or 0.30% of
average loans in 1997 as compared to 1996 net charge-offs of $1,977, or 0.38%. A
major component of loan recoveries for the first quarter of 1997 was a $4,050
litigation settlement, refer to Note 6 to the consolidated financial statements
located on Page 8.
The reserve for loan losses at March 31, 1997 was comprised of three parts:
allocated for specific impaired loans, $1,647; allocated for general segments of
unimpaired loans, $7,633; and unallocated, $24,467. That part of the reserve
allocated for specific impaired loans is discussed in Note 5 to the consolidated
financial statements located on page 8. 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.
12
<PAGE>
At March 31, 1997, the reserve for loan losses totaled $33,747, or 1.64% of
total loans outstanding as compared to $28,076, or 1.45% at March 31, 1996.
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 statement located on page 7. 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 extension 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. ("FMB, N.A."), to its
primary regulator, the Office of the Comptroller of the Currency ("OCC)". Both
First Midwest and FMB, 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.
Capital Measurements - FRB/OCC
- ------------------------------
<TABLE>
<CAPTION>
As of March 31, 1997
-------------------------------------------------------------------------------------
Bank Holding Company National Bank
--------------------- ---------------------------------------- Minimum
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.. 10.73% 4.00% 9.27% 4.00% 6.00%
Total capital to risk-based assets... 11.98% 8.00% 10.52% 8.00% 10.00%
Leverage ratio....................... 8.28% 3.00% 7.15% 3.00% 5.00%
========= =========== ===================== ================= =================
</TABLE>
Dividends
First Midwest's strong capital position has allowed it to increase its quarterly
dividend five times during the last four years including twice in 1996. The
following table summarizes the dividend increases declared during the years 1994
through 1996:
<TABLE>
<CAPTION>
Quarterly Rate
Date Per Share * % Increase
- ------------------------------------ ----------------------------------- -----------------------------
<S> <C> <C>
November 1996 $.20 18%
February 1996 $.17 13%
February 1995 $.15 15%
February 1994 $.13 13%
* Adjusted for the 5-for-4 stock split paid in December 1996
</TABLE>
13
<PAGE>
FORWARD LOOKING STATEMENTS
The preceding "Management's Discussion and Analysis of Financial Condition and
Results of Operations" sections of this Form 10-Q contain various "forward
looking statements" within the meaning of Section 27 A of the Securities Act of
1933, as amended, and Section 21 E of the Securities Exchange Act of 1934, as
amended, which represents First Midwest's expectations and beliefs concerning
future events including, but not limited to, the following: the impact of the
settlement proceeds from a law suit on loan loss provisioning and loan loss
reserve levels going forward; the impact of the 1995 plan of restructuring on
its financial performance and future growth; Management's assessment of its
provision and reserve for loan loss levels based upon future changes in the
composition of its loan portfolio, loan losses, collateral value and economic
conditions.
The Company cautions that these statements are further qualified by important
factors that could cause actual results to differ materially from those set
forth in the forward looking statements due to market, economic and other
business related risks and uncertainties effecting the realization of such
statements. Certain of these risks and uncertainties included in such forward
looking statements include, without limitations, the following: significant
fluctuations in market interest rates and operational limitations; deviations
from the assumptions used to evaluate the appropriate level of the reserve for
loan losses as well as future purchases and sales of loans may affect the
appropriate level of the reserve for loan losses and thereby affect the future
levels of provisioning.
Accordingly, results actually achieved may differ materially from expected
results in these statements. First Midwest does not undertake, and specifically
disclaims, any obligation to update any forward looking statements to reflect
events or circumstances occurring after the date of such statements.
14
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At First Midwest's Annual Meeting of Shareholders held on April 16, 1997, the
following matter was submitted to vote:
<TABLE>
<CAPTION>
Number of Shares Voted /(1)/
-------------------------------------
% of Votes
For Abstain Cast
---------- ------ ----------
<S> <C> <C> <C>
Election of three directors:
Bruce S. Chelberg........................ 13,578,588 178,857 98.7%
Joseph W. England........................ 13,578,588 178,857 98.7%
Robert P. O'Meara........................ 13,611,466 145,980 98.9%
</TABLE>
/(1)/ Represents 82% of shares outstanding
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - See Exhibit Index appearing on page 16.
(b) Form 8-K - On February 11, 1997, First Midwest filed a report on Form
8-K announcing the settlement of a lawsuit against its former fidelity
bond insurer, resulting in the recovery of $4,050.
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.
--------------------------
/s/ Donald J. Swistowicz
--------------------------
Date: May 12, 1997 Donald J. Swistowicz
Executive Vice President *
* Duly authorized to sign on behalf of the Registrant.
15
<PAGE>
EXHIBIT INDEX
Exhibit Sequential
Number Description of Documents Page Number
- ------ ------------------------ -----------
27 Financial Data Schedule 17
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 134980
<INT-BEARING-DEPOSITS> 3881
<FED-FUNDS-SOLD> 154
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 699990
<INVESTMENTS-CARRYING> 19621
<INVESTMENTS-MARKET> 19758
<LOANS> 2058677
<ALLOWANCE> 33747
<TOTAL-ASSETS> 3011748
<DEPOSITS> 2269264
<SHORT-TERM> 451018
<LIABILITIES-OTHER> 33377
<LONG-TERM> 0
<COMMON> 167
0
0
<OTHER-SE> 257922
<TOTAL-LIABILITIES-AND-EQUITY> 3011748
<INTEREST-LOAN> 45525
<INTEREST-INVEST> 11989
<INTEREST-OTHER> 385
<INTEREST-TOTAL> 57899
<INTEREST-DEPOSIT> 20321
<INTEREST-EXPENSE> 26608
<INTEREST-INCOME-NET> 31291
<LOAN-LOSSES> 2078
<SECURITIES-GAINS> 365
<EXPENSE-OTHER> 23769
<INCOME-PRETAX> 13905
<INCOME-PRE-EXTRAORDINARY> 8726
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8726
<EPS-PRIMARY> .52
<EPS-DILUTED> .52
<YIELD-ACTUAL> 4.57
<LOANS-NON> 12830
<LOANS-PAST> 3720
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 27331
<ALLOWANCE-OPEN> 30148
<CHARGE-OFFS> 3066
<RECOVERIES> 4587
<ALLOWANCE-CLOSE> 33747
<ALLOWANCE-DOMESTIC> 9280
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 24467
</TABLE>
