First Midwest Bancorp (ONBPP) 10-Q 2001 Q1 Quarterly report

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, 2001 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 (State or other jurisdiction of incorporation or organization)	36-3161078 (IRS Employer Identification No.)
300 Park Blvd., Suite 405, P.O. Box 459 Itasca, Illinois 60143-9768 (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 11, 2001, 40,586,750 shares of the Registrant's $.01 par value common stock were outstanding, excluding treasury shares.
Exhibit Index is located on page 20.

FIRST MIDWEST BANCORP, INC.
FORM 10-Q
TABLE OF CONTENTS
		Page
Part I. FINANCIAL INFORMATION
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 4. Submission of Matters to a Vote of Security Holders			19
Item 6. Exhibits and Reports on Form 8-K			19

PART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTS FIRST MIDWEST BANCORP, INC. CONSOLIDATED STATEMENTS OF CONDITION (Amounts in thousands)
						March 31, 2001					December 31, 2000
						(Unaudited)
Assets
	Cash and due from banks				$		186,525					$		166,423
	Federal funds sold and other short-term investments						2,900					18,070
	Mortgages held for sale						9,647					5,438
	Securities available for sale, at market value						1,937,236					2,130,148
	Securities held to maturity, at amortized cost						95,940					84,797
	Loans, net of unearned discount						3,279,473					3,233,196
	Reserve for loan loss						(45,421)					(45,093)
			Net loans				3,234,052					3,188,103
	Premises, furniture and equipment						81,178					81,840
	Accrued interest receivable						38,500					41,589
	Investment in corporate owned life insurance						129,858					126,860
	Other assets						55,052					63,216
			Total assets		$		5,770,888					$				5,906,484
Liabilities
	Demand deposits				$		698,271					$		705,404
	Savings deposits						458,760					447,455
	NOW accounts						432,573					450,503
	Money market deposits						542,433					535,391
	Time deposits						2,013,576					2,113,452
			Total deposits				4,145,613					4,252,205
	Borrowed funds						1,099,028					1,145,872
	Accrued interest payable						17,258					20,568
	Other liabilities						43,498					41,116
			Total liabilities				5,305,397					5,459,761
Stockholders' equity
	Preferred stock, no par value; 1,000 shares authorized, none issued						-					-
	Common stock, $.01 par value; authorized 60,000 shares; issued    45,548 shares; Outstanding: March 31, 2001 - 40,726 shares;    December 31, 2000 - 40,866 shares						455					455
	Additional paid-in capital						77,908					78,269
	Retained earnings						499,048					487,878
	Accumulated other comprehensive income (loss), net of tax						4,821					(7,039)
	Treasury stock, at cost: March 31, 2001 - 4,822 shares    December 31, 2000 - 4,682 share						(116,741)					(112,840)
				Total stockholders' equity			465,491					446,723
				Total liabilities and stockholders' equity	$		5,770,888					$		5,906,484
See notes to consolidated financial statements.
FIRST MIDWEST BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands, except per share data) (Unaudited)
								Quarters Ended March 31,
								2001					2000
Interest Income
Loans								$		69,212			$				64,535
Securities available for sale								31,829					34,025
Securities held to maturity								1,407					680
Federal funds sold and other short-term investments								193					233
		Total interest income						102,641					99,473
Interest Expense
Deposits								40,117					34,569
Borrowed funds								15,636					16,712
		Total interest expense						55,753					51,281
		Net interest income						46,888					48,192
Provision for loan losses								3,458					1,962
		Net interest income after provision for loan losses						43,430					46,230
Noninterest Income
Service charges on deposit accounts								5,492					4,989
Trust and investment management fees								2,673					2,478
Other service charges, commissions, and fees								4,267					3,538
Mortgage banking revenues								-					405
Corporate owned life insurance income								2,268					1,423
Security gains (losses), net								704					(8)
Other income								1,522					1,883
		Total noninterest income						16,926					14,708
Noninterest Expense
Salaries and wages								14,361					15,702
Retirement and other employee benefits								4,077					3,837
Occupancy expense of premises								4,114					3,467
Equipment expense								1,954					2,056
Technology and related costs								2,541					2,998
Professional services								1,400					1,704
Advertising and promotions								891					985
Other expenses								5,755					6,384
		Total noninterest expense						35,093					37,133
Income before income tax expense								25,263					23,805
Income tax expense								5,939					5,665
		Net income						$	19,324				$		18,140
Per Share Data
		Basic earnings per share						$	0.47				$		0.44
		Diluted earnings per share						$	0.47				$		0.44
		Cash dividends per share						$	0.20				$		0.18
		Weighted average shares outstanding						40,864					41,130
		Weighted average diluted shares outstanding						41,085					41,353
See notes to consolidated financial statements.

FIRST MIDWEST BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) (Unaudited)
				Quarters Ended March 31,
				2001		2000
Operating Activities
Net income				$	19,324	$	18,140
Adjustments to reconcile net income to net cash provided by operating activities:
	Provision for loan losses			3,458		1,962
	Depreciation of premises, furniture, and equipment			2,168		2,228
	Net (accretion) of (discount) on securities			(28)		(619)
	Net (gains) losses on sales of securities			(704)		8
	Net (gains) on sales of other real estate owned			(54)		(130)
	Net losses (gains) on sales of premises, furniture, and equipment			29		(150)
	Net loss on sale of mortgage servicing rights			-		207
	Tax benefits from employee exercises of nonqualified stock options			252		176
	Net (increase) in deferred income taxes			(321)		(3,871)
	Net amortization of goodwill and other intangibles			748		914
	Originations and purchases of mortgage loans held for sale			(35,934)		(27,193)
	Proceeds from sales of mortgage loans held for sale			31,725		34,052
	Net (increase) in corporate owned life insurance			(2,998)		(6,423)
	Net decrease (increase) in accrued interest receivable			3,089		(4,475)
	Net (decrease) increase in accrued interest payable			(3,310)		2,409
	Net (increase) in other assets			(1,062)		(843)
	Net increase in other liabilities			2,439		124
		Net cash provided by operating activities		18,821		16,516
Investing Activities
Securities available for sale:
	Proceeds from maturities, repayments, and calls			236,241		102,778
	Proceeds from sales			354,581		56,607
	Purchases			(376,934)		(294,722)
Securities held to maturity:
	Proceeds from maturities, repayments, and calls			5,825		461
	Purchases			(16,921)		(4)
Net (increase) in loans				(49,676)		(122,287)
Proceeds from sales of other real estate owned				414		1,240
Proceeds from sales of premises, furniture, and equipment				1		213
Purchases of premises, furniture, and equipment				(1,506)		(2,918)
Proceeds from sale of mortgage servicing rights				-		22,564
			Net cash provided (used) by investing activities	152,025		(236,068)
Financing Activities
Net (decrease) increase in deposit accounts				(106,592)		23,115
Net (decrease) increase in borrowed funds				(46,844)		216,703
Purchase of treasury stock				(5,118)		-
Proceeds from issuance of treasury stock				4		5
Cash dividends paid				(8,185)		(7,414)
Exercise of stock options				821		309
			Net cash (used) provided by financing activities	(165,914)		232,718
			Net increase in cash and cash equivalents	4,932		13,166
			Cash and cash equivalents at beginning of period	184,493		156,973
			Cash and cash equivalents at end of period	$	189,425	$	170,139
See notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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" or the "Company") 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 2000 data to conform to the 2001 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 year ended December 31, 2000.

Disclosures about Segments of an Enterprise and Related Information

Operating segments are components of a business about which separate financial information is available and that are evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assess performance. Public companies are required to report certain financial information about operating segments in interim and annual financial statements. First Midwest's chief operating decision maker evaluates the operations of the Company as one operating segment, commercial banking, due to the materiality of the commercial banking operation to the Company's financial condition and results of operations taken as a whole, and, as a result, separate segment disclosures are not required. First Midwest offers the following products and services to external customers: deposits, loans, and trust services. Revenues for each of these products and services are disclosed separately in the Consolidated Statements of Income.

Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities

In September 2000, FASB issued Statement No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities" ("FASB No. 140") that replaces, in its entirety, FASB Statement No. 125. Although FASB No. 140 has changed many of the rules regarding securitizations, it continues to require an entity to recognize the financial and servicing assets it controls and the liabilities it has incurred and to derecognize financial assets when control has been surrendered in accordance with the criteria provided in the Statement. As required, the Company will apply the new rules prospectively to transactions beginning in the second quarter of 2001. Based on current circumstances, the Company believes the application of the new rules will not have a material impact on the financial position or results of operations of the Company.

2. SECURITIES

The aggregate amortized cost, gross unrealized gains and losses, and market value of securities were as follows:

				March 31, 2001										December 31, 2000
				Amortized		Gross Unrealized					Market			Amortized			Gross Unrealized							Market
				Cost		Gains		Losses		Value				Cost			Gains		Losses					Value
Securities Available
	for Sale
U.S. Treasury				$	401	$	6	$	-		$		407	$		602	$	2	$		-		$			604
U.S. Agency				167,640		383		(171)			167,852			423,211			546		(1,068)					422,689
Mortgage-backed				1,214,307		8,609		(3,601)			1,219,315			1,172,187			5,648		(11,311)					1,166,524
State and municipal				480,432		9,553		(4,002)			485,983			480,730			6,202		(8,413)					478,519
Other				65,706		111		(2,138)			63,679			64,958			102		(3,248)					61,812
			Total	$	1,928,486	$	18,662	$	(9,912)		$	1,937,236		$	2,141,688		$	12,500		$	(24,040)			$			2,130,148
Securities Held
		to Maturity
U.S. Treasury				$	1,824	$	-	$	-		$		1,824	$		1,821	$	17		$	-	$			1,838
U.S. Agency				75		-		-			75			75			-			(1)				74
State and municipal				71,209		742		(4)			71,947			60,392			709			(5)				61,096
Other				22,832		-		-			22,832			25,509			-			-				22,509
			Total	$	95,940	$	742	$	(4)		$		96,678	$		84,797	$	726		$	(6)	$			85,517

For additional details of the securities available for sale portfolio and the related impact of unrealized gains/(losses) thereon, see Note 6 to the interim consolidated financial statements on page 9.

3. LOANS

The major classifications of loans are as follows:

	March 31,		December 31,
	2001		2000
Commercial, industrial and agricultural	$	895,255	$	884,944
Consumer	929,659		924,189
Real estate - 1 - 4 family	241,250		250,635
Real estate - commercial	951,072		900,781
Real estate - construction	262,237		272,647
Total loans, net of unearned discount	$	3,279,473	$	3,233,196

4. RESERVE FOR LOAN LOSSES/IMPAIRED LOANS

A summary of the transactions in the reserve for loan losses and details regarding impaired loans for the quarters ended March 31, 2001 and 2000 are summarized below:

				Quarters Ended March 31,
				2001		2000
Balance at beginning of period				$	45,093	$	42,645
	Provision for loan losses			3,458		1,962
	Loans charged-off			(3,704)		(2,354)
	Recoveries of loans previously charged-off			574		731
			Net loans (charged-off)	(3,130)		(1,623)
Balance at end of period				$	45,421	$	42,984
Impaired Loans:
	Requiring valuation reserve(1)			$	7,934	$	89
	Not requiring valuation reserve			8,071		15,063
			Total impaired loans	$	16,005	$	15,152
Valuation reserve related to impaired loans				$	1,417	$	74
Average impaired loans				$	14,493	$	16,162
(1)		These impaired loans require a valuation reserve allocation because the value of the loans is less than the recorded investments in the loans.

Specific reserves are established for any impaired commercial, real estate commercial and real estate construction loans for which the recorded investment in the loan exceeds the measured value of the loan. A loan is considered impaired when it is probable that a creditor will be unable to collect all contractual principal and interest due according to the terms of the loan agreement. Loans subject to impairment valuation are defined as nonaccrual and restructured loans exclusive of smaller balance homogeneous loans such as home equity, installment and 1-4 family residential loans. The value of the loan is determined based on the present value of expected future cash flows discounted at the loan's effective interest rate, the market price of the loan or the fair value of the underlying collateral less costs to sell, if the loan is collateral dependent.

5. EARNINGS PER COMMON SHARE

The following table sets forth the computation of basic and diluted earnings per share for the quarters ended March 31, 2001 and 2000:

		Quarters Ended March 31,
		2001		2000
Basic Earnings Per Share:
	Net income	$	19,324	$	18,140
	Average common shares outstanding	40,864		41,130
	Basic earnings per share	$	0.47	$	0.44
Diluted Earnings Per Share:
	Net income	$	19,324	$	18,140
	Average common shares outstanding	40,864		41,130
	Dilutive effect of stock options	221		223
	Diluted average common shares outstanding	41,085		41,353
	Diluted earnings per share	$	0.47	$	0.44

6. COMPREHENSIVE INCOME

The components of comprehensive income, net of related taxes, for the quarters ended March 31, 2001 and 2000 are as follows:

				Quarters Ended March 31,
				2001		2000
Net Income				$	19,324	$	18,140
Unrealized holding gains on securities available
	for sale, net of reclassification adjustment			12,377		3,703
Unrealized holding (loss) on hedging activity				(517)		-
		Comprehensive income		$	31,184	$	21,843
Disclosure of Reclassification Amount:
Unrealized holding gains on securities
	available for sale arising during the period			$	12,806	$		3,698
Less: Reclassification adjustment for net
	gains (losses) realized during the period			429		(5)
	Net unrealized holding gains on securities available for sale			$	12,377	$		3,703
Provided below is the change in accumulated other comprehensive income (loss) for the quarters ended March 31, 2001 and 2000:
			Quarters Ended March 31,
			2001			2000
Beginning balance				$	(7,039)	$			(49,072)
Current year change				11,860		3,703
Ending balance				$	4,821	$			(45,369)

For additional details of the securities available for sale portfolio and the related impact of unrealized gains/(losses) thereon, see Note 2 to the interim consolidated financial statements on page 7.

7. SUPPLEMENTARY CASH FLOW INFORMATION

Supplemental disclosures to the consolidated statements of cash flows for the three months ended March 31, 2001 and 2000 are as follows:

	Quarters Ended March 31,
	2001		2000
Income taxes paid	$	38	$	1,222
Interest paid to depositors and creditors	59,063		48,872
Noncash transfers of loans to foreclosed real estate	269		860
Dividends declared but unpaid	8,153		7,412

8. ADOPTION OF NEW ACCOUNTING STANDARD - ACCOUNTING FOR DERIVATIVE
   INSTRUMENTS AND HEDGING ACTIVITIES

Effective January 1, 2001, First Midwest adopted Financial Accounting Standards Board ("FASB") Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended by FASB Nos. 137 and 138. The Statement establishes accounting and reporting standards requiring that derivative instruments (including certain derivative instruments embedded in other contracts) be recorded on the balance sheet as either assets or liabilities measured at fair value. FASB No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. If the derivative is designated as a hedge, depending on the nature of the hedge, changes in the fair value of derivatives that are considered to be effective, as defined, will either offset the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or will be recorded in other comprehensive income until the hedged item is recorded in earnings. Any portion of a change in a derivative's fair value that is consider to be ineffective, as defined, may have to be immediately recorded in earnings. The adoption of these standards may cause volatility in both the income statement and the shareholders' equity section of the balance sheet.

First Midwest enters into derivative contracts to manage its sensitivity to interest rate risk. This is accomplished by using derivative instruments to offset the inherent price or interest rate risk of specific balance sheet assets or liabilities. All such derivative instruments are designated as hedges on the trade date and are recognized on the balance sheet at their fair value as other assets or other liabilities. The fair value of derivative instruments in a gain position is reported on the balance sheet in other assets, and the fair value of derivative contracts in a loss position is reported in other liabilities. Derivatives designated as hedges of changes in the fair value of an asset or liability are considered to be fair value hedges. Derivatives designated as hedges of a forecasted transaction or of the variability of cash flows to be received or paid related to an asset or liability are considered to be cash flow hedges. First Midwest formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. A formal assessment, both at the inception of the hedge and on an ongoing quarterly basis is performed to determine whether the derivative instruments that are used in hedging transactions have been effective and whether they are expected to continue to be effective in future periods.

As of March 31, the only derivative contracts employed by First Midwest were interest rate swaps used to lengthen the duration of certain indexed deposit accounts. These interest rate swaps are designated as cash flow hedges under FASB No. 133. No ineffectiveness was recorded for such cash flow hedges for the quarter ended March 31, 2001. Changes in the fair value of these cash flow hedges are reported in the accumulated other comprehensive income component of stockholders' equity.

For additional details of the unrealized gains/(losses) on hedging activity, see Note 6 to the interim financial statements on page 9.

9. 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, 2001. 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.

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 quarters ended March 31, 2001 and 2000. 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 2000 Annual Report on Form 10-K. Results of operations for the quarter ended March 31, 2001 are not necessarily indicative of results to be expected for the full year of 2001.Unless otherwise stated, all earnings per share data included in this section and throughout the remainder of this discussion are presented on a diluted basis. All financial information is presented in thousands, except per share data.

Summary of Performance

Net income for the quarter ended March 31, 2001 increased to $19,324, or $.47 per share, as compared $18,140, or $.44 per share for the same period in 2000, representing an increase of 6.8% on a per share basis. Performance for the first quarter of 2001 resulted in annualized returns on average stockholders' equity and assets of 17.06% and 1.36%, respectively, as compared to returns of 19.85% and 1.30% for the same quarter in 2000.

Book value per share as of March 31, 2001 was $11.43 as compared to $9.34 a year-ago for an increase of $2.09, or 22.4%. The increase in book value was related in significant part to the improvement in the market value of the available for sale securities portfolio resulting in an increase in that component of stockholders' equity of approximately $50 million as of March 31, 2001 as compared to the year earlier level. Further, the approximate $82 million increase in total stockholders equity at March 31, 2001 over the year earlier level explains the reduction in return on average equity for the quarter just ended.

Net interest income for the first quarter of 2001 declined by 3.0% on a tax equivalent basis from last year's like quarter. However, although net interest margin declined on a year-to-year basis, it improved by 16 basis points to 3.77% from the 3.61% reported for the fourth quarter of 2000.

The provision for loan losses of $3,458 recorded during first quarter 2001 exceeded both the quarters' net charge-offs by $328 and the provision recorded for the like quarter of 2000 by $1,496, resulting in a ratio of reserve for loan losses to total loans at March 31, 2001 of 1.39%, which was consistent with levels maintained at year-end 2000.

Total noninterest income for the quarter grew 15.1% over last year's first quarter with the three major categories of service charges and fees growing 13.0%. Corporate owned life insurance income also increased $845 resulting from higher outstanding balances and the renegotiation of certain terms of the underlying insurance policies to achieve improved earnings rates.

Noninterest expenses for the first quarter 2001 continued to be vigorously controlled and declined by $2,040, or 5.5%, as compared to 2000's like quarter. Across-the-board cost containment measures resulted in the year-over-year improvement with the major reductions being realized in the categories of salaries and benefits, technology and other expenses. Partially offsetting such declines was a seasonal increase in occupancy expense resulting from $481 in increased snow removal and related costs as well as to higher utility costs. As a result, the efficiency ratio stood at 51.4% for the 2001 quarter as compared to 54.6 % for last year's like quarter and 53.1% for full year 2000.

Credit quality ratios weakened slightly at March 31, 2001 from the historically low levels achieved in 2000's fourth quarter. The ratio of nonperforming loans to total loans increased by 7 basis points to .68% from .61% at year end 2000 and net loan charge-offs to average loans increased to .39% for the first quarter 2001 as compared to .23% for the fourth quarter 2000. Net charge-offs for the current quarter included partial charge-offs of $750 on two loans that had been carried as nonperforming since last year and are in the process of rehabilitation. These two charge-offs represent 9 basis points of the quarter's total 39 basis point charge-off ratio.

Net Interest Income, Loan Growth and Funding Sources

Net interest income on a tax equivalent basis totaled $50,515 for the first quarter 2001, representing a decrease of $1,579, or 3.0%, over the year-ago quarter which totaled $52,094. As shown in the Volume/Rate Analysis on page 13, the decrease in net interest income is attributable to higher interest expense of $4,472 net of higher interest income of $2,893. Net interest margin for the first quarter 2001 decreased to 3.77% as compared to 3.96% for the same period in 2000. The decrease in net interest margin is primarily due to higher rates paid on interest bearing liabilities, generally, during the 2001 period.

Again, as shown in the Analysis on page 13, the $2,893 increase in interest income is largely attributable to higher volumes of earning assets in both the securities held to maturity and loan portfolios which increased $42,433 and $254,061, respectfully, from year-ago levels. The increase of $4,472 in interest expense on paying liabilities is due to higher volumes of time deposits coupled with higher rates paid thereon. The effect of these factors on net interest income is discussed below.

First Midwest continued to experience growth in both average loans and deposits during the first quarter of 2000 versus last year's like quarter. Total average loans increased by 8.5% in the first quarter of 2000 as compared to last year's like quarter. However, on a linked quarter basis, average loans decreased by 1.4% due primarily to the sale of $30 million home equity loans and the transfer of $40 million of other loans to the securities available for sale portfolio, both occurring at the end of the fourth quarter 2000. Furthermore, the first quarter is generally affected to a greater degree by seasonality relating to the winter months than are the remaining three quarters of the year.

Consistent with the growth in average loans, total average deposits increased by 3.4% in the first quarter of 2001 as compared to the prior year's. The increase in average deposits permitted First Midwest to reduce its reliance on higher cost wholesale funding with the latter decreasing by 6.7% on average in the first quarter of 2001 as compared to the prior year's like quarter. Wholesale funding continued to drop during the first quarter of 2001 by 3.2% on a linked quarter basis as compared with the fourth quarter of 2000.

The combination of continued loan growth and reduced wholesale funding positively impacted the net interest margin in the first quarter of 2001. The net interest margin for the quarter was 3.77%, reflecting a 16 basis point improvement from the 3.61% reported for the fourth quarter of 2000 and representing the first linked-quarter improvement in net interest margin since the second quarter of 1999 Further improvement in net interest margin is projected, assuming no material change in the anticipated economic climate and monetary policy.

Loan Growth

The following table summarizes growth in loans based upon both average and period end balances:

		Average Balances
		2001		2000					March 31 % Change From
		March 31		December 31			March 31		12/31/00		3/31/00
Commercial, industrial and agricultural		$	886,406	$		892,525	$	827,341	(0.7%)	7.1%
Consumer		926,694		955,537			863,106		(3.0%)	7.4%
Real estate - 1 - 4 family		247,407		253,672			257,091		(2.5%)	(3.8%)
Real estate - commercial		910,012		909,187			839,961		0.1%	8.3%
Real estate - construction		287,483		291,991			216,442		(1.5%)	32.8%
	Loans, net of unearned discount	$	3,258,002	$	3,302,912		$	3,003,941	(1.4%)	8.5%

		As of Period End
		2001		2000					March 31 % Change From
		March 31		December 31			March 31		12/31/00		3/31/00
Commercial, industrial and agricultural		$	895,255	$		884,944	$	839,432	1.2%	6.7%
Consumer		929,659		924,189			888,907		0.6%	4.6%
Real estate - 1 - 4 family		241,250		250,635			257,760		(3.7%)	(6.4%)
Real estate - commercial		951,072		900,781			851,456		5.6%	11.7%
Real estate - construction		262,237		272,647			244,736		(3.8%)	7.2%
	Loans, net of unearned discount	$	3,279,473	$	3,233,196		$	3,082,291	1.4%	6.4%

Core Funding Sources

		Average Balances
		2001		2000					March 31 % Change From
		March 31		December 31			March 31		12/31/00		3/31/00
Demand Deposits		$	656,312	$		669,806	$	665,341	(2.0%)	(1.4%)
Savings deposits		450,701		445,546			479,616		1.2%	(6.0%)
NOW accounts		438,707		468,913			446,034		(6.4%)	(1.6%)
Money market deposits		531,628		528,921			457,523		0.5%	16.2%
Time deposits		2,054,015		2,140,411			1,946,481		(4.0%)	5.5%
Total deposits		4,131,363		4,253,597			3,994,995		(2.9%)	3.4%
Borrowed funds		1,110,898		1,147,500			1,191,047		(3.2%)	(6.7%)
	Total funding sources	$	5,242,261	$	5,401,097		$	5,186,042	(2.9%)	1.1%

Volume/Rate Analysis

The table below summarizes the changes in average interest-bearing 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, 2001 and 2000. 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. Interest income and yields are presented on a tax-equivalent basis.

Quarters Ended March 31, 2001 and 2000
			Average Balances									Average Interest Rates Earned/Paid							Interest Income/Expense								Increase/(Decrease) in Interest Income/Expense Due to:
																Basis
								Increase								Points									Increase
			2001		2000			(Decrease)				2001		2000		Inc/(Dec)				2001		2000			(Decrease)		Volume		Rate		Total
Fed funds sold and other investments
	short-term investments		$	5,966		$	5,025		$	941		6.44%		5.65%		0.79%				$	96	$	71		$	25	$	14	$	11	$	25
Mortgages held for sale			5,583		8,014			(2,431)				6.95%		8.09%		(1.14)%				97		162			(65)		(44)		(21)		(65)
Securities available for sale			2,000,944		2,204,058			(203,114)				6.98%		6.79%		0.19%				34,907		37,425			(2,518)		(3,583)		1,065		(2,518)
Securities held to maturity			84,897		42,464			42,433				8.46%		7.73%		0.73%				1,796		821			975		891		84		975
Loans, net of unearned discount			3,258,002		3,003,941			254,061				8.52%		8.64%		(0.12)%				69,372		64,896			4,476		5,394		(918)		4,476
Total interest-earning assets			$	5,355,392	$		5,263,502	$		91,890		7.94%		7.86%		0.08%				$	106,268	$	103,375		$	2,893	$	2,672	$	221	$	2,893
Savings deposits			$	450,701	$		479,616	$		(28,915)		1.94%		1.93%		0.01%				$	2,185	$	2,318		$	(133)	$	(140)	$	7	$	(133)
NOW accounts			438,707		446,034			(7,327)				1.92%		1.87%		0.05%				2,109		2,090			19		(32)		51		19
Money market deposits			531,628		457,523			74,105				4.07%		3.93%		0.14%				5,409		4,492			917		749		168		917
Time deposits			2,054,015		1,946,481			107,534				5.92%		5.27%		0.65%				30,414		25,669			4,745		1,472		3,273		4,745
Borrowed funds			1,110,898		1,191,047			(80,149)				5.63%		5.61%		0.02%				15,636		16,712			(1,076)		(1,128)		52		(1,076)
Total interest-bearing liabilities			$	4,585,949	$		4,520,701	$		65,248		4.86%		4.54%		0.32%				$	55,753	$	51,281		$	4,472	$	921	$	3,551	$	4,472
Net interest margin / income												3.77%		3.96%		-0.19%		%		$	50,515	$	52,094	$		(1,579)	$	1,751	$	(3,330)	$		(1,579)
							2001				2000
							1st				4th		3rd		2nd		1st
		Net Interest Margin Trend By Quarter
		Yield on interest earning assets					7.94%				8.12%		8.13%		7.97%		7.86%
		Rates paid on interest bearing liabilities					4.86%				5.26%		5.16%		4.79%		4.54%
		Net Interest Margin					3.77%				3.61%		3.66%		3.84%		3.96%

Noninterest Income

Noninterest income increased by $2,218, or 15.1%, to $16,296 for the quarter ended March 31, 2001, as compared to $14,708 for the same period in 2000. Exclusive of net security gains which totaled $704 for the first quarter 2001 as compared to net security (losses) of ($8) for the same 2000 period, non interest income increased by $1,514, or 10.3%, with all major component of noninterest income excluding mortgage banking revenues and other income contributing to the increase. The factors resulting in the year-to-year changes are discussed below.

Service charges on deposit accounts increased 10.1% to $5,492 in the first quarter of 2001 as compared to $4,989 for the same 2000 period. The $503 increase is primarily attributable to higher returned check (NSF) revenue as a result of a tightening in fee waiver practices in addition to increases in service charges on business checking and NOW accounts. Other service charges, commissions and fees increased by $729, or 20.6%, to $4,267 for the quarter ended March 31, 2001 over the year-ago like quarter of $3,538 due primarily to increases of $214 in commissions on mortgage sales, $246 in debit card fee income as a result of greater usage volumes, $177 in nonyield loan fees and $172 in higher commissions on sales of annuity, insurance and investment products.

Trust and investment management fees for the first quarter 2001 increased $195, or 7.9%, to $2,673 as compared to the year-ago period of $2,478 due to growth in new business and expansion of existing relationships.

First Midwest's investment in corporate owned life insurance generated $2,268 in income for the first quarter 2001 for an increase of $845, or 59.4%, as compared to the year-ago like period as a result of higher outstanding balances and the renegotiation of certain terms of the underlying insurance policies to achieve improved earnings rates. Other income decreased by $361 or 19.2%, to $1,522 for the first quarter 2001 as compared to the 2000 period of which $325 of the total decrease is due to one-time asset sales that occurred in the prior year period.

Noninterest Expense

Noninterest expense totaled $35,093 for the quarter ended March 31,2001 as compared to the year-ago period of $37,133 for a decrease of $2,040, or 5.5%. A comparison of the major categories of noninterest expense is discussed below.

Salaries and wages decreased by $1,341, or 8.5%, for the quarter March 21, 2001 as compared to prior year levels. The decrease was a result of the elimination of approximately 100 full time equivalent employees of First Midwest Mortgage Corporation ("FMMC") in 2000. Additionally, modest other staffing reductions were experienced as a result of the reorganization of certain support operations of First Midwest Bank.

Retirement and other employee benefits increased by $240, or 6.3%, in the first quarter of 2001 compared to the same year-ago period. Higher pension and healthcare costs principally accounted for the increase in the current period.

For the quarter ended March 31, 2001, occupancy expenses increased $647, or 18.7%, as compared to the same year-ago period of $3,467. The increase in occupancy expense is primarily attributable to $500 in snow removal costs and higher utility costs. Equipment expense decreased $102, or 5.0%, as compared to the same year-ago period of $2,056, due primarily to reduced depreciation expense relating to the discontinuation of FMMC operations.

Technology and related costs decreased $457 to $2,541 in the first quarter 2001 as compared to $2,998 for the same year-ago period. $314 of the total decrease is incident to the discontinuation of FMMC operations in 2000.

Professional services declined by $304, or 17.8%, to $1,400 for the quarter ended March 31, 2001 as compared to the prior year period of $1,704 with 60% of the reduction attributable to the elimination of costs associated with FMMC's lending and recordkeeping operations. Other expenses decreased $629, or 9.9%, for the first quarter 2001 as compared to the year-ago like period due to approximately $297 in certain costs recorded in the prior year relating to the winding down of FMMC operations in addition to $100 in cost savings from the elimination of operations thereof and lower costs experienced amongst various categories including supplies and printing, telephone, other real estate owned expense and miscellaneous losses due to generally tighter cost controls.

As a result of the forgoing cost reductions, the efficiency ratio for the quarter ended March 31, 2001 was 51.35% as compared to the 2000 first quarter ratio of 54.61%.

Income Tax Expense

Income tax expense totaled $5,939 for the quarter ended March 31, 2001, increasing from $5,665 for the same period in 2000 and reflects effective income tax rates of 23.5% and 23.8%, respectively. The decrease in effective tax rate is primarily attributable to an increase in corporate owned life insurance income and state tax exempt income in 2001.

Nonperforming Assets and Past Due Loans

The following table summarizes nonperforming assets and past due loans as of the close of the last five calendar quarters:

		2001		2000
		March 31		December 31			September 30		June 30		March 31
Nonaccrual loans		$	22,453	$	19,849	$	$	20,313	$	19,838	$	19,137
Foreclosed real estate		1,246		1,337			2,467		1,295		907
	Total nonperforming assets	$	23,699	$	21,186		$	22,780	$	21,133	$	20,044
% of total loans plus
	foreclosed real estate		0.72%		0.65%			0.69%		0.66%		0.65%
90 days past due and still accruing interest		$	5,339	$	7,045		$	6,217	$	6,099	$	6,226

Total nonperforming assets increased $2,513, or 11.9% on a linked quarter basis with $1,500 of the increase attributable to a single real estate construction credit that was placed on nonaccrual during the first quarter 2001.

Nonaccrual loans, totaling $22,453 at March 31, 2001 are comprised of commercial and agricultural loans (28%), real estate loans (60%) and consumer loans (12%). Foreclosed real estate, totaling $1,246 at March 31, 2001, primarily represents real estate loans on 1-4 family properties.

First Midwest's disclosure with respect to impaired loans is contained in Note 4 to the interim consolidated financial statements, located on page 8.

Provision and Reserve for Loan Losses

Transactions in the reserve for loan losses during the quarters ended March 31, 2001 and 2000 are summarized in the following table:

			Quarters Ended March 31
			2001			2000
Balance at beginning of period			$		45,093		$	42,645
	Provision for loan losses		3,458				1,962
	Loans charged-off		(3,704)				(2,354)
	Recoveries of loan previously charged-off		574				731
		Net loans (charged-off)	(3,130)				(1,623)
Balance at end of period			$	45,421			$	42,984

Loan charge-offs, net of recoveries, for the quarter totaled $3,130, or 0.39% of average loans, as compared to $1,623, or 0.22% for the first quarter of 2000. Approximately one half of the $1,507 increase in charge-offs includes write downs on two loans carried as nonperforming since 2000 that are currently in the process of rehabilitation.

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-offs, delinquencies, collateral values and Management's assessment of current and prospective economic conditions. The provision for loan losses charged to operating expense for the first quarter of 2001 totaled $3,458 as compared to $1,962 for the same quarter in 2000. The provision for loan losses for the current quarter exceeded net charge-offs by $328.

First Midwest maintains a reserve for loan losses to absorb losses inherent in the loan portfolio. The appropriate level of the reserve for loan losses is determined by systematically performing a review of the loan portfolio quality as required by First Midwest's credit administration policy. The reserve for loan losses consists of three elements; (i) specific reserves established for any impaired commercial, real estate commercial and real estate construction loan for which the recorded investment in the loan exceeds the measured value of the loan; (ii) reserves based on historical loan loss experience; and, (iii) reserves based on general economic conditions as well as specific economic factors in the markets in which First Midwest operates.

Loans within the portfolio that are selected for review to determine whether specific reserves are required include both loans over a specified dollar limit as well as loans where the internal credit rating is below a predetermined classification. Loans subject to this review process generally include commercial and agricultural loans, real estate commercial and real estate construction loans. Specific reserves for these loans are determined in accordance with the provisions of Financial Accounting Standards Board Statements 114 and 118, "Accounting by Creditors for Impairment of a Loan." Consumer and other retail loan reserve allocations are based upon the evaluation of pools or groups of such loans. The portion of the reserve based on historical loan loss experience is determined statistically using a loss migration analysis that examines loss experience and the related internal rating of loans charged off. The loss migration analysis is performed quarterly and loss factors are periodically updated based on actual experience. The portion of the reserve based on general economic conditions and other factors is considered the unallocated portion of the reserve. This portion is determined based upon general economic conditions and involves a higher degree of subjectivity in its determination. This segment of the reserve considers risk factors that may not have manifested themselves in First Midwest's historical loss experience which is used to determine the allocated component of the reserve.

The distribution of the loan portfolio is presented in Note 3 to the interim consolidated financial statement located on page 7. The loan portfolio consists predominantly of loans originated by First Midwest from its primary markets and generally represents credit extension to multi-relationship customers.

Capital

Capital Measurements

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 in excess of the levels required by their respective bank regulatory authorities to be considered "well-capitalized" which is the highest capital category established under the FDICIA.

		Bank Holding Company		Subsidiary Bank
						Minimum
			Minimum		Minimum	Well-
		First	Required	FMB,	Required	Capitalized
		Midwest	FRB	N.A.	OCC	FDICIA
As of March 31, 2001:
	Tier I capital to risk-based assets	10.72%	4.00%	9.37%	4.00%	6.00%
	Total capital to risk-based assets	11.82%	8.00%	10.48%	8.00%	10.00%
	Leverage ratio	7.70%	3.00%	6.72%	3.00%	5.00%
As of December 31, 2000:
	Tier I capital to risk-based assets	10.51%	4.00%	9.57%	4.00%	6.00%
	Total capital to risk-based assets	11.61%	8.00%	10.67%	8.00%	10.00%
	Leverage ratio	7.36%	3.00%	6.67%	3.00%	5.00%

Dividends

As a result of improved performance from operations as well as First Midwest's perceived future prospects, the Board of Directors has increased the quarterly dividend every year since 1993. The following table summarizes the dividend increases declared during the years 1994 through 2000:

	Quarterly Rate
Date	Per Share		% Increase
November 2000	$	0.200	11%
November 1999		0.180	13%
November 1998		0.160	7%
November 1997		0.150	13%
November 1996		0.133	18%
February 1996		0.113	13%
February 1995		0.100	15%
February 1994		0.087	13%

FORWARD LOOKING STATEMENTS

Statements made in the preceding "Management's Discussion and Analysis of Financial Condition and Results of Operations" section which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and business of First Midwest, including, without limitation, (i) loan and deposit growth, market interest rates on net interest income and net interest margin, wholesale funding sources, provision and reserve for loan losses, nonperforming loan levels and net charge-offs, collateral value and economic conditions, noninterest income and expenses, diluted earnings per share growth rates for 2001, and dividends to shareholders, and (ii) statements preceded by, followed by or that include the words "may", "would", "could", "should", "expects", "projects", "anticipates", "believes", "estimates", "plans", "intends", "targets" or similar expressions.

Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond First Midwest's control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following, in addition to those contained in First Midwest's reports on file with the Securities and Exchange Commission: general economic or industry conditions, nationally and/or in the communities in which First Midwest conducts business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, deposit flows, cost of funds, demand for loan products, demand for financial services, competition, changes in quality or composition of First Midwest's loan and investment portfolios, assumptions used to evaluate the appropriate level of the reserve for loan losses, the impact of future earnings performance and capital levels on dividends declared by the Board of Directors, changes in accounting principals, policies or guidelines, other economic, competitive, governmental, regulatory and technical factors affecting First Midwest's operations, products, services and prices.

Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made. 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 statement.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Submission of matters to a vote of security holders is incorporated herein by reference to Item 5 to the Current Report on Form 8-K and Form 8-K/A, both dated April 30, 2001.

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits -

See Exhibit Index appearing on page 20.

(b) Form 8-K -

On January 18, 2001, First Midwest filed a report on Form 8-K announcing its earnings results for the three and twelve-month periods ended December 31, 2000. On February 21, 2001, First Midwest filed a report on Form 8-K announcing the declaration of a quarterly cash dividend on its common stock of $0.20 per share. On February 22, 2001, First Midwest filed a report on Form 8-K to announce its participation in the Midwest 2001 Super-Community Bank Conference.

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

Donald J. Swistowicz
Executive Vice President*

Date: May 14, 2001

* Duly authorized to sign on behalf of the Registrant.

EXHIBIT INDEX

Exhibit Number	Description of Documents	Sequential Page Number
10	Amendment to the Restated 1989 Omnibus Stock and Incentive Plan	21
15	Acknowledgment of Ernst & Young LLP	23
99	Independent Accountant's Review Report	24