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 SEPTEMBER 30, 1995, or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from
------------------
to
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COMMISSION FILE NUMBER 0-10967
FIRST MIDWEST BANCORP, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-3161078
(State or other jurisdiction of (IRS Employer
Identification No.)
incorporation or organization)
300 PARK BLVD., SUITE 405, P.O. BOX 459
ITASCA, ILLINOIS 60143-0459
(Address of principal executive offices) (zip code)
(708) 875-7450
(Registrant's telephone number, including area code)
COMMON STOCK, NO PAR VALUE
PREFERRED SHARE PURCHASE RIGHTS
Securities Registered Pursuant to Section 12(g) of the Act
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
As of November 8, 1995, 12,349,052 shares of the Registrant's no par value
common stock were outstanding, excluding treasury shares.
Exhibit Index is located on page 23.
FIRST MIDWEST BANCORP, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Consolidated Statements of Condition . . . . . . . . . . . . . . . 3
Consolidated Statements of Income . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . 22
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST MIDWEST BANCORP, INC.
CONSOLIDATED STATEMENTS OF CONDITION
(Dollar amounts in thousands except per share data)
SEPTEMBER 30, DECEMBER 31,
1995 (1) 1994 (2)
ASSETS
Cash and due from banks $ 124,941 $ 107,180
Federal funds sold and other short term
investments 56,162 15,694
Securities available for sale, at market value 716,817 696,384
Securities held to maturity, at amortized cost
(market value of $126,495 and $165,536 at
September 30, 1995 and December 31, 1994,
respectively) 124,213 168,644
Loans, net of unearned discount 1,929,487 1,785,200
Reserve for loan losses (26,776) (24,083)
----------- ------------
Net loans 1,902,711 1,761,117
Premises, furniture and equipment 44,074 40,329
Accrued interest receivable 24,705 18,358
Other assets 50,630 67,395
----------- ------------
TOTAL ASSETS $3,044,253 $ 2,875,101
=========== ============
LIABILITIES
Demand deposits $ 330,885 $ 346,864
Savings deposits 241,202 270,192
NOW accounts 298,284 292,570
Money market deposits 237,321 194,548
Time deposits 1,043,621 890,234
------------ ------------
Total deposits 2,151,313 1,994,408
Short-term borrowings 646,222 665,500
Accrued interest payable 10,097 9,120
Other liabilities 15,775 19,958
----------- ------------
TOTAL LIABILITIES 2,823,407 2,688,986
----------- ----------
STOCKHOLDERS' EQUITY
Preferred stock, no par value: 1,000,000 shares
authorized, none issued --- ---
Common stock, no par value: 20,000,000 shares
authorized; 12,551,430 issued;
12,344,118 and 12,197,480 outstanding at
September 30, 1995 and December 31, 1994,
respectively 23,465 23,465
Additional paid-in capital 25,762 25,913
Retained earnings 177,979 165,893
Unrealized net depreciation on securities,
net of tax (1,968) (20,767)
Treasury stock, at cost - 207,312 and 353,950
shares at September 30, 1995 and December 31, 1994,
respectively (4,392) (8,389)
----------- ------------
TOTAL STOCKHOLDERS' EQUITY 220,846 186,115
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,044,253 $2,875,101
=========== ============
See notes to consolidated financial statements.
(1) Unaudited
(2) Audited - See December 31, 1994 Form 10-K for Auditor's Report.
FIRST MIDWEST BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollar amounts in thousands, except per share data)
QUARTERS ENDED NINE MONTHS ENDED
SEPTEMBER 30, (1) SEPTEMBER 30, (1)
------------------------ -------------------------
1995 1994 1995 1994
------------ ------------ --------- --------------
INTEREST INCOME
Interest and fees on loans . . . . . . . . . . . . . . $ 43,391 $ 36,313 $ 125,699 $ 102,321
Interest on securities available for sale . . . . . . . 10,574 9,848 33,037 31,093
Interest on securities held to maturity . . . . . . . . 2,872 2,175 7,860 3,387
Interest on federal funds sold and other
short-term investments . . . . . . . . . . . . . . . . 1,059 785 2,305 1,262
------------ ------------ ------------- -----------
TOTAL INTEREST INCOME . . . . . . . . . . . . . . . 57,896 49,121 168,901 138,063
------------ ------------ ------------- -----------
INTEREST EXPENSE
Interest on deposits . . . . . . . . . . . . . . . . . 20,567 14,620 55,318 41,075
Interest on short-term borrowings . . . . . . . . . . . 9,617 7,373 30,609 17,490
------------ ------------ ------------- -----------
TOTAL INTEREST EXPENSE . . . . . . . . . . . . . . . 30,184 21,993 85,927 58,565
------------ ------------ ------------- -----------
NET INTEREST INCOME . . . . . . . . . . . . . . . . 27,712 27,128 82,974 79,498
PROVISION FOR LOAN LOSSES . . . . . . . . . . . . . . . 3,810 1,838 7,982 5,130
------------ ------------ ------------- -----------
Net interest income after provision for loan losses 23,902 25,290 74,992 74,368
------------ ------------ ------------- -----------
NONINTEREST INCOME
Service charges on deposit accounts . . . . . . . . . . 2,333 2,472 6,839 7,232
Trust income . . . . . . . . . . . . . . . . . . . . . 1,481 1,478 5,067 4,624
Other service charges, commissions and fees . . . . . . 1,686 1,706 4,655 4,524
Net revenues on real estate loans held for sale . . . . 471 91 992 913
Security transactions, net . . . . . . . . . . . . . . 7 4 539 1,263
Other income . . . . . . . . . . . . . . . . . . . . . 628 449 2,160 1,535
------------ ------------ ------------- -----------
TOTAL NONINTEREST INCOME . . . . . . . . . . . . . . 6,606 6,200 20,252 20,091
------------ ------------ ------------- -----------
NONINTEREST EXPENSE
Salaries and wages . . . . . . . . . . . . . . . . . . 9,574 9,447 28,611 27,790
Retirement and other employee benefits . . . . . . . . 1,865 2,268 7,122 7,436
Occupancy expense of premises . . . . . . . . . . . . . 1,560 1,373 4,167 4,081
Equipment expense . . . . . . . . . . . . . . . . . . . 1,467 1,313 4,313 3,811
Computer processing expense . . . . . . . . . . . . . . 1,805 1,306 4,756 3,650
FDIC insurance premiums . . . . . . . . . . . . . . . . (42) 1,082 2,166 3,349
Advertising and promotions expense . . . . . . . . . . 511 592 1,689 1,727
Foreclosed real estate expense, net . . . . . . . . . . 43 337 852 1,211
Restructure reserve adjustment . . . . . . . . . . . . (810) --- (810) ---
Other expenses . . . . . . . . . . . . . . . . . . . . 3,942 4,580 12,595 14,402
------------ ------------ ------------- -----------
TOTAL NONINTEREST EXPENSE . . . . . . . . . . . . . 19,915 22,298 65,461 67,457
------------ ------------ ------------- -----------
Income before income tax expense . . . . . . . . . . . 10,593 9,192 29,783 27,002
Income tax expense . . . . . . . . . . . . . . . . . . 3,831 3,484 10,689 10,177
------------ ------------ ------------- -----------
NET INCOME . . . . . . . . . . . . . . . . . . . . . $ 6,762 $ 5,708 $ 19,094 $ 16,825
============ ============ ============= ===========
NET INCOME PER SHARE . . . . . . . . . . . . . . . . $ 0.55 $ 0.47 $ 1.56 $ 1.38
Cash dividends declared per share . . . . . . . . . $ 0.19 $ 0.17 $ 0.57 $ 0.51
Weighted average shares outstanding . . . . . . . . 12,293,483 12,144,913 12,243,323 12,169,442
============ ============ ============= ===========
<FN>
See notes to consolidated financial statements.
(1) Unaudited
FIRST MIDWEST BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
NINE MONTHS ENDED
SEPTEMBER 30, (1)
----------------------------
1995 1994
------------- -------------
OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,094 $ 16,825
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . 7,982 5,130
Provision for depreciation . . . . . . . . . . . . . . . . . . . . . . . . . 4,095 3,684
Net amortization of securities available for sale premiums and discounts . . 1,324 1,966
Net accretion of securities held to maturity premiums and discounts . . . . . (1,982) (415)
Net gains on securities available for sale transactions . . . . . . . . . . . (537) (1,237)
Net gains on securities held to maturity . . . . . . . . . . . . . . . . . . (1) (22)
Net gains on sales of premises, furniture and equipment . . . . . . . . . . . (103) (78)
Net decrease in deferred income taxes . . . . . . . . . . . . . . . . . . . . (71) (450)
Net amortization of purchase accounting adjustments and goodwill . . . . . . 1,046 1,116
Changes in operating assets and liabilities:
Net (increase) decrease in loans held for sale . . . . . . . . . . . . . . (14,052) 3,031
Net increase in accrued interest receivable . . . . . . . . . . . . . . . . (6,347) (1,910)
Net increase in other assets . . . . . . . . . . . . . . . . . . . . . . . (95) (3)
Net increase in accrued interest payable . . . . . . . . . . . . . . . . . 977 576
Net decrease in other liabilities . . . . . . . . . . . . . . . . . . . . . (4,112) (3,283)
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . . . . . . . . . 7,218 24,930
------------- -------------
INVESTING ACTIVITIES
Securities available for sale:
Proceeds from sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342,706 206,388
Proceeds from maturities, calls and paydowns . . . . . . . . . . . . . . . . . . 96,682 143,929
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (429,891) (296,224)
Securities held to maturity:
Proceeds from maturities, calls and paydowns . . . . . . . . . . . . . . . . . . 223,213 15,179
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (176,710) (38,495)
Loans made to customers, net of principal collected . . . . . . . . . . . . . . . . (136,415) (155,179)
Proceeds from sales of foreclosed real estate . . . . . . . . . . . . . . . . . . . 4,697 13,245
Proceeds from sales of premises, furniture and equipment . . . . . . . . . . . . . 158 327
Purchases of premises, furniture and equipment . . . . . . . . . . . . . . . . . . (7,895) (4,834)
------------- -------------
NET CASH USED BY INVESTING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . (83,455) (115,664)
------------- -------------
FINANCING ACTIVITIES
Net increase in deposit accounts . . . . . . . . . . . . . . . . . . . . . . . . . 156,905 30,314
Net (decrease) increase in short-term borrowings . . . . . . . . . . . . . . . . . (19,278) 181,021
Purchases of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . (78) (3,220)
Sale of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,697 --
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,007) (6,203)
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,227 866
------------- -------------
NET CASH USED BY FINANCING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . 134,466 202,778
------------- -------------
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . 58,229 112,044
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . 122,874 118,301
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . . . . . . . $ 181,103 $ 230,345
============= =============
Supplemental disclosures:
Interest paid to depositors and creditors . . . . . . . . . . . . . . . . . . . $ 84,950 $ 57,989
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,123 10,242
Non-cash transfers to foreclosed real estate from loans . . . . . . . . . . . . 649 4,004
============= ============
<FN>
See notes to consolidated financial statements.
(1) Unaudited
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, except per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited interim consolidated financial statements of First Midwest
Bancorp, Inc. ("First Midwest") included in this report reflect all normal and
recurring adjustments which are, in the opinion of Management, necessary to
fairly present the results for the interim periods presented. Certain
reclassifications have been made to the 1994 data to conform to the 1995
presentation, and the results of operations for the interim periods presented
are not necessarily indicative of the results to be expected for the full year
1995. The accounting and reporting policies of First Midwest conform to
generally accepted accounting principles and general practice within the
banking industry. For details of significant accounting policies and
practices, in addition to that provided below, refer to First Midwest's Annual
Report on Form 10-K for the year ended December 31, 1994.
ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN - In May, 1993, the Financial
Accounting Standards Board ("FASB") issued Statement No. 114 "Accounting by
Creditors for Impairment of a Loan", and in 1994 issued Statement No. 118,
which amends Statement No. 114. These Statements, which First Midwest adopted
as of January 1, 1995, address the accounting by creditors for an impaired
loan by specifying how the reserve for loan losses related to such loan should
be determined. A loan is considered impaired when it is probable that a
creditor will be unable to collect all contractual principal and interest due
according to the contractual terms of the loan agreement. The amount of
impairment is the difference between a creditor's recorded investment in a
loan and the present value of expected future cash flows from such loan or, as
a practical expedient, at either such loan's observable market price or the
fair value of the collateral supporting such loan. These Statements also
prescribe the accounting treatment for certain loans that are restructured in
a troubled debt restructuring and impose new rules with respect to the
classification of in-substance foreclosed loans. First Midwest's disclosure
with respect to the Statements is provided in the accounting policies that
follow entitled "Loans" and "Foreclosed Real Estate" and in note 4, located on
page 9, of this Form 10-Q.
LOANS - Loans are carried at the principal amount outstanding, net of unearned
income, including certain deferred loan fees. Interest income on loans is
accrued based on principal amounts outstanding. Unearned discount on certain
consumer installment loans is credited to income over the term of the loan
using the sum-of-the-month's digits method which approximates the level yield
method.
Generally a loan, including an impaired loan, is classified as nonaccrual and
the accrual of interest thereon discontinued when, in the opinion of
Management, there is reasonable doubt as to the timely collection of interest
or principal. When a loan is placed on nonaccrual status, unpaid interest
credited to income in the current year is reversed and unpaid interest accrued
in prior years is charged against the reserve for loan losses. Interest
received on nonaccrual loans is either applied against principal or reported
as interest income, according to management's judgment as to the
collectibility of principal. Nonaccrual loans are returned to an accrual
status when, in the opinion of Management, the financial position of the
borrower and other relevant factors indicate there is no longer reasonable
doubt as to the timely payment of principal or interest.
FORECLOSED REAL ESTATE - Foreclosed real estate, including certain in-
substance foreclosures, includes properties acquired in partial or total
satisfaction of certain loans and is included in other assets in the
accompanying consolidated statements of condition.
In accordance with FASB Statement No. 114, a loan is classified as an in-
substance foreclosure when First Midwest takes possession of loan collateral
regardless of whether a formal foreclosure proceeding takes place. Loans
previously classified as in-substance foreclosure but for which First Midwest
had not taken possession of the collateral were reclassified to loans
effective January 1, 1995. The reclassification had no impact on First
Midwest's financial condition or results of operations.
GOODWILL AND OTHER INTANGIBLES - Goodwill, representing the excess of the
purchase price over the fair value of net assets acquired using the purchase
method of accounting, is being amortized using the straight-line method over
periods not exceeding twenty years. At September 30, 1995, goodwill totaling
$13,941 is included in other assets in the accompanying consolidated
statements of condition.
Included in other assets in the accompanying consolidated statement of
condition at September 30, 1995 are other intangibles, primarily core deposit
premiums and organizational costs, totaling $3,316.
First Midwest assesses the recoverability of its goodwill and other
intangibles on a periodic basis through review of various economic factors in
determining whether impairment, if any, exists.
ACCOUNTING FOR MORTGAGE SERVICING RIGHTS - Effective April 1, 1995 First
Midwest adopted FASB Statement No. 122 ("FASB No. 122") "Accounting for
Mortgage Servicing Rights". FASB No. 122 amends Statement No. 65 "Accounting
for Certain Mortgage Banking Activities" to require that a mortgage banking
enterprise recognize as separate assets the rights to service mortgage loans
for others, however those servicing rights are acquired, eliminating the
previously existing accounting distinctions between servicing rights acquired
through purchase transactions and those acquired through loan originations.
The Statement also requires the assessment of capitalized mortgage servicing
rights for impairment to be based on the current fair value of those rights.
Impairment is recognized through a valuation allowance established through a
charge to expense.
Pursuant to the requirements of FASB No. 122, First Midwest's originated
mortgage servicing rights are carried at fair value which approximated $905 at
September 30, 1995. Such servicing rights are amortized over the average life
of the loans serviced which approximates seven years. As of September 30,
1995 the valuation allowance for originated mortgage servicing rights totaled
$163; no writedowns were recorded during the quarter.
2. SECURITIES
SECURITIES AVAILABLE FOR SALE - The amortized cost and market value of
securities available for sale at September 30, 1995 and December 31, 1994 are
as follows:
Securities Available for Sale
----------------------------------------------------------------------------------
September 30, 1995 December 31, 1994
---------------------------------------- ----------------------------------------
Gross Gross Gross Gross
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
Cost Gains Losses Value Cost Gains Losses Value
--------- --------- -------- --------- -------- --------- ---------- -----
U.S. Treasury securities . . $ 298,967 $ 1,483 $ (569) $ 299,881 $134,204 $ --- $(2,666) $ 131,538
U.S. Agency securities . . . 172,502 9 (151) 172,360 10,012 --- (705) 9,307
Mortgage-backed securities . 245,552 301 (2,151) 243,702 566,640 87 (27,882) 538,845
Other securities . . . . . . 874 - - 874 17,335 24 (665) 16,694
--------- --------- -------- --------- -------- --------- -------- ---------
Total . . . . . . . . . . $ 717,895 $ 1,793 $(2,871) $ 716,817 $728,191 $ 111 $(31,918) $ 696,384
========= ========= ======== ========= ======== ========= ======== =========
U.S. Treasury Securities - Since December 31, 1994 approximately $176,500 in
U.S. Treasury securities were purchased. Such purchases were funded from
the proceeds of paydowns and sales of U.S. Agency and other securities
classified as available for sale and maturities of U.S. Agencies classified
as held to maturity. A decline in general market interest rates during 1995
resulted in a reduction in gross unrealized losses from ($2,666) at year-end
1994 to gross unrealized gains and losses of $1,483 and ($569), respectively
as of September 30, 1995.
U.S. Agency Securities - The growth in this portfolio of approximately
$162,000 since December 31, 1994 is due primarily to purchases of short-term
discount securities and were funded by sales and maturities of mortgage-
backed securities as discussed below.
Mortgage-Backed Securities - Mortgage-backed securities represent
collateralized mortgage obligation bonds (CMOs) and mortgage-backed pass-
through securities. These securities are primarily normal pass-through
certificates issued by agencies of the U.S. government or are AAA-rated
agency-backed CMOs with specific tranches selected for their cashflow and
prepayment characteristics. The approximate $320,000 reduction in the
amortized cost since year-end 1994 primarily reflects sales of securities
during 1995 totaling approximately $305,000 and maturities of $15,000. These
transactions were conducted to reposition the portfolio in order to enhance
the overall portfolio liquidity as well as to reduce price volatility.
Gross unrealized losses in this security category totaled ($2,151) at
September 30, 1995 of which approximately ($790) is attributable to CMOs
that were purchased in conjunction with the arbitrage transaction discussed
in Management's Discussion and Analysis under the section entitled "Net
Interest Income" located on page 12 of this Form 10-Q (also refer to
"Mortgage-Backed Securities" discussion below). The principal CMO
securities balance related to the ($790) in unrealized loss was reduced from
$206,000 as of December 31, 1994, to $175,000 as of September 30, 1995; such
reduction is attributable to the portfolio repositioning as discussed above.
Interest rates on these CMOs reset monthly and are indexed to one-month
LIBOR, plus a spread of approximately 125 basis points. These CMOs are
subject to lifetime interest rate "caps" which represent ceilings set on the
interest coupons of the securities, which are in the range of 9 - 9 1/2%.
The general decline in interest rates since the end of 1994 has positively
affected the market value of the caps imbedded within such CMOs. As a
result, the ($2,151) in gross unrealized losses on the CMOs as of September
30, 1995 represents a reduction from such gross unrealized loss outstanding
at year-end 1994 which totaled ($27,882).
Other Securities - Other securities totaled $874 as of September 30, 1995,
representing a $16,461 reduction since year-end 1994. This reduction
represents the sale of an equity mutual fund security during 1995 with the
proceeds reinvested in higher-yielding U.S. Treasury securities with
durations similar to those of the securities sold.
For the nine months ended September 30, 1995, proceeds from sales of
securities available for sale totaled $342,706 with gross gains and losses
realized on such sales totaling $1,552 and ($1,014), respectively. For the
year ended December 31, 1994, proceeds from the sale of securities available
for sale totaled $206,388. Gross gains and losses realized on sales for the
year ended December 31, 1994 were $1,780 and ($541), respectively.
SECURITIES HELD TO MATURITY - The amortized cost and market value of
securities held to maturity at September 30, 1995 and December 31, 1994 are as
follows:
Securities Held to Maturity
----------------------------------------------------------------------------------
September 30, 1995 December 31, 1994
---------------------------------------- ----------------------------------------
Gross Gross Gross Gross
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
Cost Gains Losses Value Cost Gains Losses Value
--------- --------- -------- --------- -------- --------- ---------- ---
U.S. Treasury securities . . $ 926 $ 6 $ - $ 932 $ 721 $ - $ (9) $ 712
U.S. Agency securities . . . - - - - 46,149 - (36) 46,113
Mortgage-backed securities . 85,879 1,905 - 87,784 85,801 - (3,033) 82,768
State and municipal securities 25,063 402 (52) 25,413 25,731 324 (351) 25,704
Other securities . . . . . . 12,345 21 - 12,366 10,242 --- (3) 10,239
--------- --------- -------- --------- -------- --------- -------- --------
Total . . . . . . . . . . $124,213 $ 2,334 $ (52) $126,495 $168,644 $ 324 $(3,432) $ 165,536
========= ========= ======== ========= ======== ========= ======== =======
Securities held to maturity declined by approximately $44,000 to $124,213 as
of September 30, 1995 from $168,644 as of December 31, 1994, due primarily to
U.S. Agency securities.
U.S. Agency Securities - U.S. Agency securities declined by approximately
$46,000 since December 31, 1994. The decline resulted from purchases for the
nine months of 1995 totaling approximately $100,000 less maturities totaling
$146,000. Residual proceeds from maturities were reinvested in U.S. Treasury
securities classified as available for sale, as discussed on page 7.
Mortgage-Backed Securities - The mortgage-backed securities in the table above
consist of approximately $86,000 in CMOs that were purchased in conjunction
with the arbitrage transaction discussed in Management's Discussion and
Analysis under the section entitled "Net Interest Income" located on page 12
of this Form 10-Q. Interest rates on these CMOs reset monthly and are indexed
to one month LIBOR, plus a spread of approximately 125 basis points. These
CMOs are subject to lifetime interest rate caps of 9% which represent ceilings
set on the interest coupons of the securities. The general decline in
interest rates since the end of 1994 has positively affected the market value
of the caps imbedded within such CMOs. As a result, the $1,905 unrealized
gains as of September 30, 1995 represent a significant fluctuation from an
unrealized loss outstanding at year-end 1994 which totaled ($3,033).
For the nine months ended September 30, 1995, proceeds from calls of
securities held to maturity totaled $223,213; gross gains of $1 and no gross
losses were realized on such calls. Proceeds from calls of securities held to
maturity for the year ended December 31, 1994 totaled $41,722. Gross gains
and losses realized on those calls totaled $22 and ($1), respectively.
3. LOANS
The following table provides the book value of loans, by major classification,
as of the dates indicated:
September 30, December 31,
1995 1994
Commercial and industrial . . . . . . $ 572,284 $514,628
Agricultural . . . . . . . . . . . . 30,946 33,546
Consumer . . . . . . . . . . . . . . 531,953 499,313
Real estate - 1-4 family . . . . . . 269,447 215,821
Real estate - commercial . . . . . . 424,035 441,570
Real estate - construction . . . . . 88,757 67,356
Other . . . . . . . . . . . . . . . 12,065 12,966
-------- -------
Total . . . . . . . . . . . . . . . $1,929,487 $1,785,200
======== =======
Real estate 1-4 family loans, in the table above, include loans held for sale
totaling $18,115 and $4,063, at September 30, 1995 and December 31, 1994,
respectively.
4. RESERVE FOR LOAN LOSSES/IMPAIRED LOANS
The following table presents changes in the reserve for loan losses for the
quarter and nine months ended September 30, 1995 and 1994:
Quarters ended Nine months ended
September 30, September 30,
--------------------- ----------------------
1995 1994 1995 1994
--------- --------- --------- ----------
Balance at beginning of period . . . . . . . . . . . . . . . . $ 24,844 $ 21,571 $ 24,083 $ 21,654
Provision for loan losses . . . . . . . . . . . . . . . . 3,810 1,838 7,982 5,130
Loans charged-off . . . . . . . . . . . . . . . . . . . . (2,659) (1,169) (7,157) (5,625)
Recoveries of loans previously charged-off . . . . . . . . 781 612 1,868 1,693
--------- --------- --------- ----------
Net loans charged-off . . . . . . . . . . . . . . . . (1,878) (557) (5,289) (3,932)
--------- --------- --------- ----------
Balance at end of period . . . . . . . . . . . . . . . . . . . $ 26,776 $ 22,852 $ 26,776 $ 22,852
========= ========= ========= =========
The recorded investment in loans determined to be impaired at September 30,
1995 totaled $16,759. For a definition of impairment, in addition to methods
of measuring the amount of impairment, refer to the section entitled
"Accounting for Creditors for Impairment of a Loan" in Note 1 to the
consolidated financial statements located on Page 6 of this Form 10-Q. Of
such $16,759, $8,797 have collateral values less than the recorded investment
in such loans for which a specific loan loss reserve of $3,318 is maintained;
the $7,962 balance of impaired loans have collateral values equal to or
greater than the recorded investment in such loans. Further, of the $16,759
in impaired loans, $8,817 were classified as nonaccrual and $7,942 as
renegotiated.
At September 30, 1995 the reserve for loan losses totaled $26,776 and
consisted of specific reserves for impaired loans of $3,318, general allocated
reserves of $8,376 and unallocated reserves of $15,082. An explanation of the
methodology used to determine the level of the reserve for loan losses is
provided in Management's Discussion and Analysis under the section entitled
"Provision and Reserve for Loan Losses" beginning on page 19 of this Form 10-
Q.
Information with respect to the average recorded investment in impaired loans
and interest income recorded on such loans is provided below:
Quarter ended Nine months ended
Sept. 30, 1995 Sept. 30, 1995
------------- -------------
Average recorded investment
in impaired loss . . . . . . . $ 17,465 $ 16,973
Interest income - total . . . . 167 499
Interest income - cash basis . $ 133 $ 465
============= =============
5. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, First Midwest is a party to financial
instruments with off-balance sheet risk to meet the financing needs of its
customers and to reduce its own exposure to fluctuations in interest rates.
These instruments include commitments to extend credit, standby letters of
credit, commercial letters of credit, forward sales contracts and interest
rate swap transactions. Those instruments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount recognized
in the statement of condition. The contract or notional amounts of those
instruments reflect the extent of involvement that First Midwest has in
particular classes of financial instruments.
As of September 30, 1995, the contractual amount of commitments to extend
credit totaled $420,287, $73,114 of which represents unused home equity lines
of credit. The contractual amount of standby letters of credit totaled
$40,181 and commercial letters of credit were $402.
First Midwest enters into certain sales contracts for the future delivery of
loans at a specified price and date. These contracts, in the form of forward
sales agreements, are entered into to limit exposure to fluctuation in
interest rates in First Midwest's mortgage loan sales operations. As part of
such loan sales operations, First Midwest generally contracts for the sale of
loans without recourse. Forward sales agreements outstanding as of September
30, 1995 totaled $19,000.
Interest rate swap transactions generally involve the exchange of fixed and
floating rate interest payment obligations without the exchange of the
underlying principal amounts. First Midwest enters into interest rate swaps
with third parties in order to limit variations in net interest income. First
Midwest has also utilized interest rate swaps referred to as "basis" swaps to
lock in spreads on its prime rate-based loan portfolios. Credit exposure on
the interest rate swaps is comprised of the aggregate net interest payable to
First Midwest by the counterparty in addition to the aggregate unrealized gain
on the interest rate swap position. First Midwest maintains a policy limiting
credit exposure to any counterparty to not more than 2.5% of consolidated
stockholders' equity. In addition, First Midwest's interest rate swaps
generally require the establishment of a mutual mark-to-market arrangement
whereby cash collateral may be required to be on deposit with First Midwest
and/or the agreement's counterparty.
First Midwest had interest rate swaps with an aggregate notional amount
totaling $255,900 in place, hedging various balance sheet categories, as of
September 30, 1995. Further information with respect to these interest rate
swap contracts is presented below:
Weighted
Average Fair Value Weighted Average Rate
-------------------------
Notional Maturity as of Interest Interest
Type of Interest Rate Swap Amount (in years) 9/30/95 Received Paid
- -------------------------------------------- ------------ ------------ ------------ ---------- -----------
Receive fixed rate/Pay variable rate . . $ 55,900 1.6 $ 527 6.53% 5.88%
Basis swaps . . . . . . . . . . . . . . . $ 200,000 3.0 $ (3,740) 5.31% 6.37%
============ ============ =========== ========== ===========
The fair value of interest rate swaps is the estimated amount that First
Midwest would pay to terminate the swap agreements at the reporting date,
taking into account current interest rates and the creditworthiness of the
swap counter-parties.
6. PENDING ACQUISITION
First Midwest's pending acquisition of CF Bancorp, Inc. ("CF"), announced in
the second quarter of 1995, continues on schedule. CF is the holding company
of Citizens Federal Savings Bank, F.S.B., which is headquartered in
Davenport, Iowa with three additional offices in Davenport and Bettendorf, Iowa.
Pursuant to the acquisition, CF Shareholders will receive 1.4545 shares of First
Midwest common stock for each share of CF's common stock in a tax-free exchange.
Based on First Midwest's September 30 closing price of $28.50 per share, each
share of CF's common stock has an implied value of $41.45, with the total
transaction valued at approximmately $38.0 million based upon total CF, common
shares currently outstanding. Requisite regulatory approval was received
from the Federal Reserve Board during the third quarter and the remaining
regulatory approvals are anticipated so as to permit a late-December, 1995
closing. Incident to the acquisition, First Midwest will record an acquisition
charge estimated to be in the range of $3,700 to $4,200. The actual acquisition
charge will be determined and recorded in the quarter in which the
acquisition is consummated.
CF had total assets and stockholders' equity of $222,OO0 and $23,000,
respectively, at Septemher 30, 1995. For the nine months ended September 30,
1993, CF reported net income of $2,223 and return on average assets and equity
of 1.32% and 12.81%, respectively.
7. OTHER MATTERS
During the second quarter of 1995 settlement discussions were initiated
arising out of litigation brought by First Midwest relating to a claim against
its fidelity bond insurance carrier. Incident thereto the carrier informally
communicated a settlement offer which was rejected by First Midwest. While
the possibility of settlement still exists, First Midwest is preparing for
trial which is tentatively scheduled to commence late in the fourth quarter of
1995 or the first quarter of 1996. Neither the possibility nor the timing of
settlement or litigation outcome can be reasonably determined or quantified at
this time.
During the third quarter of 1995, pursuant to a registration statement filed
with the Securities and Exchange Commission, First Midwest sold 100,000 shares
of its common stock held in treasury through a licensed broker/dealer to
certain institutional and accredited investor clients of such dealer. Net
proceeds from the sale of such stock is approximately $2.7 million which will
be used by First Midwest for general corporate purposes.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The discussion presented below provides an analysis of First Midwest's results
of operations and financial condition for the quarter and nine months ended
September 30, 1995 as compared to the same period in 1994. Management's
discussion and analysis should be read in conjunction with the consolidated
financial statements and accompanying notes presented elsewhere in this Form
10-Q. Dollar amounts are presented in thousands, except for per share data.
SUMMARY OF PERFORMANCE
Net Income
- ----------
Net income for the third quarter of 1995 increased to $6,762, or $.55 per
share from $5,708, or $.47 per share in the third quarter of 1994 representing
an increase of 17% on a per share basis. Net income for the nine months ended
September 30, 1995 totaled $19,094, or $1.56 per share as compared to $16,825,
or $1.38 per share for the like period in 1994, representing a 13% increase on
a per share basis.
Presented in the table below is an income statement analysis comparing the
change in the components of net income for the periods ended September 30,
1995 and 1994. The increase or decrease in each net income component is
further detailed in the discussion and analysis that follows.
Quarters Ended Nine Months Ended
September 30, September 30,
---------------------------------- ----------------------
1995 1994 Change 1995 1994 Change
--------- --------- --------- --------- --------- --------
Net interest income (tax equivalent) . . . $ 28,039 $ 27,471 $ 568 $ 83,907 $ 80,545 $ 3,362
Provision for loan losses . . . . . . . . . 3,810 1,838 1,972 7,982 5,130 2,852
Noninterest income . . . . . . . . . . . . 6,606 6,200 406 20,252 20,091 161
Noninterest expense . . . . . . . . . . . . 19,915 22,298 (2,383) 65,461 67,457 (1,996)
---------- --------- --------- --------- --------- ---------
Income before income taxes . . . . . . . . 10,920 9,535 1,385 30,716 28,049 2,667
Income tax expense . . . . . . . . . . . . 3,831 3,484 347 10,689 10,177 512
Tax equivalent adjustment . . . . . . . . . 327 343 (16) 933 1,047 (114)
---------- --------- --------- --------- --------- ---------
Net Income . . . . . . . . . . . . . . $ 6,762 $ 5,708 $ 1,054 $ 19,094 $ 16,825 $ 2,269
========== ========= ========= ========= ========= =========
Net Income Per Share . . . . . . . . . . $ .55 $ .47 $ .08 $ 1.56 $ 1.38 $ .18
========== ========= ========= ========= ========= =========
Return on Average Assets and Stockholders' Equity
- -------------------------------------------------
Return on average assets was 0.89% for the third quarter of 1995 as compared
to 0.81% for the same quarter in 1994. Return on average assets for the nine
months ended September 30, 1995 was 0.87%, as compared to 0.82% for the like
period in 1994.
Return on average stockholders' equity for the third quarter of 1995 was
12.39%, as compared to 11.97% for the 1994 quarter. Return on average
stockholders' equity was 12.47% for the nine months ended September 30, 1995,
as compared to 11.62% for the like period in 1994.
NET INTEREST INCOME
Net interest income is the principal source of earnings for First Midwest and
represents the difference between interest income and fees earned on loans,
securities and other earning assets and the interest expense paid for the
funding sources used to finance those assets. Net interest income is impacted
by both the volume of earning assets and paying liabilities and the rates
earned and paid, respectively, on those assets and liabilities. Net interest
margin represents net interest income as a percentage of total interest
earning assets.
For purposes of the following discussion, both net interest income and margin
have been adjusted to a fully tax-equivalent basis for certain tax-exempt
loans and securities. The following summarizes net interest income and margin
for the periods ended September 30, 1995 and 1994:
Quarters ended Nine months ended
September 30, September 30,
------------------------- -------------------------
1995 1994 1995 1994
----------- ----------- ---------- ------------
Interest income, as reported . . . . . . . . . $ 57,896 $ 49,121 $ 168,901 $ 138,063
Tax equivalent adjustment . . . . . . 327 343 933 1,047
----------- ----------- ---------- ------------
Tax equivalent interest income . . . . . . 58,223 49,464 169,834 139,110
Interest expense . . . . . . . . . . . . . (30,184) (21,993) (85,927) (58,565)
----------- ----------- ---------- ------------
Tax equivalent net interest income . . $ 28,039 $ 27,471 $ 83,907 $ 80,545
=========== =========== ========== ============
Tax equivalent net interest margin . . 3.99% 4.18% 4.12% 4.24%
=========== =========== ========== ============
- excluding arbitrage(1) . . . . . 4.27% 4.56% 4.44% 4.64%
=========== =========== ========== ============
<FN>
(1) Refer to the following discussion for a description of the arbitrage.
Net interest income on a tax equivalent totaled $28,039 for the third quarter
of 1995, representing an increase of $568, or 2.1% over the year ago quarter
totaling $27,471. The interest margin decreased to 3.99% for the 1995 quarter
as compared to 4.18% for the same quarter in 1994. For the nine months ended
September 30, 1995, net interest income totaled $83,907, representing an
increase of $3,362 or 4.2% over the like period in 1994 totaling $80,545. Net
interest margin decreased to 4.12% for the 1995 period as compared to 4.24%
for the same period in 1994.
Included in average earning assets during the third quarter of 1995 was
approximately $260,000 in securities purchased incident to an arbitrage
transaction; the average balance of such securities for the third quarter of
1994 was approximately $298,000. The arbitrage involves the purchase of
floating rate securities and the simultaneous financing of this purchase
through repurchase agreements with investment banks who are primary dealers in
U.S. Government securities. The arbitrage adds to net interest income as a
result of the spread between the rate of interest earned on the securities and
that paid on the underlying funding source. The average interest rate earned
on the securities during the third quarter of 1995 was 7.28% while the average
interest rate paid on the underlying funding source was 6.03% for a positive
net interest rate spread of 1.25%. The average interest rates earned and paid
on the arbitrage investment in the third quarter of 1994 were 5.95% and 4.75%,
respectively, for a positive net interest spread of 1.20%. Excluding the
effect of the arbitrage, which reduces the net interest margin due to the
addition of a significant volume of lower-yielding securities, tax equivalent
net interest margin would have been 4.27% for the third quarter of 1995 and
4.44% for the first.
For the nine months ended September 30, 1995 the average principal position of
the arbitrage was $278,000 with a positive net spread on such position of
approximately 142 basis points. For the same period in 1994 the average
principal position of the arbitrage was $303,000 with a net spread of
approximately 126 basis points.
As shown in the Volume/Rate Analysis on page 15, the $8,759 increase in
interest income for the quarter is largely attributable to volume and interest
rate variances on loans totaling $7,078. The majority of the loan interest
income variance resulted from loan volumes, which increased by $216,197 in
the current quarter over the like quarter last year, primarily due to growth
in the commercial, real estate, and indirect consumer loan portfolios. The
remaining loan interest income variance resulted from interest rates, which
increased to an average of 9.00% for the 1995 quarter from 8.49% in 1994.
Interest expense increased by $8,191 for the third quarter of 1995 as compared
to the same period in 1994, due to volumes and interest rates on time deposits
and interest rates in short-term borrowings. Interest expense on time
deposits increased by $5,099 primarily from an upward shift in the interest
rate environment resulting in increased average rates of 5.88% for the 1995
quarter as compared to 4.55% for the 1994 quarter, and also reflects the
impact of $149,635 in growth in First Midwest's fixed term deposits. Interest
rates on short-term borrowings, in the form of federal funds purchased,
repurchase agreements and Federal Home Loan Bank notes, increased to 6.15% in
1995 from 4.82% in 1994.
Volume and interest rate variances for the nine months ended September 30,
1995 as compared to 1994 are provided in the Volume/Rate Analysis on page 16
and generally follow those provided for the quarterly periods. In addition, a
positive interest rate variance in securities available for sale reflects the
repricing of certain short-term securities in a higher interest-rate
environment.
First Midwest manages interest rate risk by conducting simulations that
demonstrate the changes that would occur in net interest income under
different interest rate scenarios and balance sheet structures. This form of
modeling is conducted monthly, involves adjustments to balance sheet volumes
over a 24 month forward period, incorporates a repricing analysis of earning
assets and funding sources and considers certain other balance sheet hedging
vehicles such as interest rate swaps. First Midwest has generally followed a
policy of maintaining a balanced mix of rate-sensitive assets and liabilities,
making each side of the balance sheet equally flexible in reacting to changes
in market interest rates so that net interest income will not be adversely
affected by more than 1-3%, regardless of whether rates rise or fall rapidly.
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 September
30, 1995 and 1994. The table also details the increase and decrease in income
and expense for each major category of assets and liabilities and analyzes the
extent to which such variances are attributable to volume and rate changes.
QUARTERS ENDED SEPTEMBER 30, 1995 AND 1994
--------------------------------------------------------------------------------------------------------
AVERAGE INTEREST INTEREST INCREASE/(DECREASE) IN
AVERAGE BALANCES RATES EARNED/PAID INCOME/EXPENSE INT. INCOME/EXPENSE DUE TO:
------------------------------- -------------------- ----------------------- ---------------------------
BASIS
INCREASE POINTS INCR. VOLUME/
1995 1994 (DECREASE) 1995 1994 INC/(DEC) 1995 1994 (DECR.) VOL RATE RATE TOTAL
---------- -------- --------- ----- ----- ------- ------ ----- ----- ----- ---- ------ -----
Federal funds sold
and other short-term
investments $ 56,836 65,343 (8,507) 7.39% 4.77% 262 $ 1,058 785 273 $(102) 431 (56) 273
Securities available
for sale 626,754 694,838 (68,084) 6.69 5.62 107 10,574 9,848 726 (1,028)1,754 -- 726
Securities held
to maturity:
Taxable 160,391 116,575 43,816 5.93 5.69 24 2,398 1,673 725 629 70 26 725
Nontaxable (1) 26,789 33,034 (6,245) 10.80 9.27 153 729 772 (43) (146) 127 (24) (43)
Loans, net of unearned
discount (1) 1,916,102 1,699,905 216,197 9.00 8.49 51 43,464 36,386 7,078 4,816 2,262 -- 7,078
---------- --------- --------- ---- ---- ----- -------- ------ ----- ----- ----- ---- -----
Total interest-
earning assets (1) $2,786,872 2,609,695 177,177 8.29% 7.52% 77 $ 58,223 49,464 8,759 $4,169 4,644 (54) 8,759
========== ========= ========= ===== ==== ===== ======== ====== ===== ===== ===== ==== =====
Savings deposits $ 247,036 281,560 (34,524) 2.18% 2.28% (10) $ 1,355 1,621 (266) $(199) (77) 10 (266)
NOW accounts 326,592 316,946 9,646 2.60 2.28 32 2,137 1,821 316 55 253 8 316
Money market deposits 241,565 211,676 29,889 3.55 2.55 100 2,160 1,361 799 192 532 75 799
Time deposits 1,005,938 856,303 149,635 5.88 4.55 133 14,916 9,817 5,099 1,903 3,196 -- 5,099
Short-term borrowings 620,576 606,496 14,080 6.15 4.82 133 9,616 7,373 2,243 171 2,024 48 2,243
---------- --------- --------- ----- ---- ----- -------- ------ ----- ----- ----- --- -----
Total interest-
bearing liabilities $2,441,707 2,272,981 168,726 4.90% 3.84% 106 $ 30,184 21,993 8,191 $2,122 5,928 141 8,191
========== ========= ========= ===== ==== ===== ======== ====== ===== ===== ===== === =====
Net interest
margin/income 3.99% 4.18% (19) $ 28,039 27,471 568 $2,047(1,284) (195) 568
===== ==== ===== ======== ======= ===== ===== ==== === ====
Net interest income/
margin - excluding
arbitrage transaction
(1)(2) 4.27% 4.56% (29) $ 27,233 $26,698 535 $1,999(1,464) -- 535
===== ==== ===== ======== ======= ===== ==== === === ===
<FN>
(1)Interest income and yields are presented on a tax-equivalent basis assuming
a statutory Federal Income tax rate of 35%.
(2)Refer to the discussion contained in "Net Interest Income" for a
description of the arbitrage.
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 nine months ended
September 30, 1995 and 1994. The table also details the increase and decrease
in income and expense for each major category of assets and liabilities and
analyzes the extent to which such variances are attributable to volume and
rate changes.
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
--------------------------------------------------------------------------------------------------------
AVERAGE INTEREST INTEREST INCR/(DECR) IN
AVERAGE BALANCES RATES EARNED/PAID INCOME/EXPENSE INT INCOME/EXP DUE TO:
------------------------------ --------------------- --------------------- --------------------------
BASIS
INCREASE POINTS INCR. VOLUME/
1995 1994 (DECREASE) 1995 1994 INC/(DEC) 1995 1994 (DECR) VOL. RATE RATE TOTAL
--------- -------- -------- ------ ----- ------ ------ ------ ------ ---- ------ ---- ------
Federal funds sold
and other short-
term investments $ 41,123 37,762 3,361 7.49% 4.47% 302 $ 2,304 1,262 1,042 $112 854 76 1,042
Securities available
for sale 661,613 781,729 (120,116) 6.68 5.32 136 33,037 31,092 1,945 (5,236) 7,181 -- 1,945
Securities held
to maturity:
Taxable 129,284 43,097 86,187 6.73 5.74 99 6,511 1,849 4,662 4,290 372 -- 4,662
Nontaxable (1) 30,007 33,486 (3,479) 9.25 9.45 (20) 2,076 2,366 (290) (246) (49) 5 (290)
Loans, net of
unearned discount (1) 1,859,599 1,643,442 216,157 9.05 8.34 71 125,906 102,541 23,365 14,184 9,181 -- 23,365
---------- --------- --------- ----- ---- ----- -------- ------- ------ ------ ----- --- ------
Total interest-
earning assets (1) $2,721,626 2,539,516 182,110 8.34% 7.32% 102 $169,834 139,110 30,724 $13,104 17,539 81 30,724
========== ========= ========= ===== ==== ===== ======== ======= ====== ======= ======= === ======
Savings deposits $ 256,473 280,744 (24,271) 2.18% 2.35% (17) $ 4,177 4,939 (762)$ (427) (367) 32 (762)
NOW accounts 302,819 304,626 (1,807) 2.50 2.19 31 5,655 4,991 664 (30) 698 (4) 664
Money market deposits 218,666 224,601 (5,935) 3.21 2.50 71 5,254 4,196 1,058 (111) 1,201 (32) 1,058
Time deposits 958,564 819,746 138,818 5.61 4.40 121 40,232 26,949 13,283 5,044 8,239 -- 13,283
Short-term borrowings 638,184 563,410 74,774 6.41 4.15 226 30,609 17,490 13,119 2,569 10,550 -- 13,119
---------- --------- --------- ----- ---- ----- -------- ------ ----- ----- ------ --- ------
Total interest-
bearing liabilities $2,374,706 2,193,127 181,579 4.84% 3.57% 127 $ 85,927 58,565 27,362 $7,045 20,321 (4)27,362
========== ========= ========= ===== ==== ===== ======== ====== ===== ===== ====== === ======
Net interest margin/
income (1) 4.12% 4.24% (12) $ 83,907 80,545 3,362 $6,059 (2,782) 85 3,362
===== ==== ===== ======== ======= ===== ==== ===== === =====
Net interest income/
margin - excluding
arbitrage transaction
(1)(2) 4.44% 4.64% (20) $ 81,254 77,919 3,335 $5,828 (2,493) -- 3,335
===== ==== ===== ======== ======= ===== ==== ====== === =====
<FN>
(1)Interest income and yields are presented on a tax-equivalent basis assuming
a statutory Federal Income tax rate of 35%.
(2)Refer to the discussion contained in "Net Interest Income" for a
description of the arbitrage.
NONINTEREST INCOME
Noninterest income totaled $6,606 for the quarter ended September 30, 1995, as
compared to $6,200 for the same quarter in 1994. The increase totaling $406
is attributable to the categories of net revenues on real estate loans held
for sale and other income. For the nine months ended September 30, 1995,
noninterest income totaled $20,252 as compared to $20,091 for the same period
in 1994. The $161 increase over 1994 is primarily attributable to the higher
level of trust income and other income, net of declines in service charges on
deposit accounts and security gains, recorded in 1995 as compared to 1994.
Provided below is a discussion covering period-to-period variances in the
major categories of noninterest income.
Service charges on deposit accounts declined by $139 for the 1995 quarter as
compared to 1994, while declining by $393 for the first nine months of 1995 as
compared to 1994. Such decline is primarily attributable to service charges
on nonsufficient funds and business demand accounts, the latter due primarily
to higher rate credits given to business customers for services, thereby
reducing hard dollar service charges assessed.
Trust income for the quarter was increased by $3 as compared to 1994 and by
$443 for the first nine months in 1995 as compared to 1994. The year-to-date
increase resulted from a combination of growth in new business and certain
nonrecurring accounting adjustments.
Other service charges, commissions and fees includes fees derived from a wide
range of products and services. Such fees declined by $20 in the third
quarter of 1995 as compared to 1994 and increased by $131 for the first nine
months of 1995 as compared to the same period in 1994. The increase for the
year-to-date period is due primarily to increased revenues on merchant fees on
credit card sales and debit card income.
Net revenues on real estate loans held for sale increased by $380 for the 1995
quarter as compared to 1994 and increased by $79 for the first nine months of
1995 as compared to 1994. The increase for the quarter resulted from the
growth in real estate loan originations which totaled $66,000 in the 1995
quarter and $26,000 for the same quarter in 1994.
Other income increased by $179 for the 1995 quarter as compared to 1994 and
$625 for the first nine months of 1995 as compared to 1994 primarily as a
result of increased ATM income and certain miscellaneous gains on asset sales.
The increase for the first nine months of 1995 also reflects a $431 gain on
the sale of approximately $13 million in student loans recorded in the second
quarter of 1995.
NONINTEREST EXPENSE
Noninterest expense totaled $19,915 for the quarter ended September 30, 1995,
decreasing from $22,298 for the same quarter in 1994. The $2,383 decrease is
attributable to reduced retirement benefits, FDIC insurance premiums,
foreclosed real estate and other expense and a restructure charge adjustment.
Partially offsetting these reduced expenses were increases in salaries and
wages, occupancy and equipment, and computer processing costs. Noninterest
expense totaled $65,461 for the first nine months of 1995, decreasing from
$67,457 for the same period in 1994. Provided below is a discussion covering
period-to-period variances in major categories of noninterest expense.
Retirement and other employee benefits decreased by $403 in the third quarter
of 1995 as compared to the 1994 quarter and by $314 for the first nine months
of 1995 as compared to the same period in 1994. Variances for both periods
resulted primarily from reduced plan participants, the salaries of which are
used as a base in determining retirement plan accruals.
FDIC insurance premiums decreased by $1,124 in the third quarter of 1995 as
compared to the like 1994 period, and declined $1,183 for the nine months
ended September 30, 1995 as compared to the 1994 nine month period. Revised
rate assessments became effective during the third quarter of 1995, reducing
assessed premiums from $.23 to $.04 per $100 of deposits retroactive to June
1, 1995. As a result, a savings of $1,000 was recognized in the 1995 third
quarter, approximately $800 of which represents permanent quarterly premium
reductions and $200 representing an additional refund of June, 1995 premiums.
Including premiums assessed on First Midwest's Oakar deposits, deposit
insurance premiums should average approximately $.05 per $100 of deposits in
prospective periods.
Foreclosed real estate expense for the third quarter of 1995 decreased by $294
as compared to the same period in 1994; year-to-date, such expense was $359
less than the 1994 nine month period. Such decreases are due primarily to a
$2,300 reduction in principal balances of foreclosed property held.
Other expenses for the third quarter of 1995 decreased by $638 as compared to
the same period in 1994, and by $1,807 for the first nine months of 1995 as
compared to the same 1994 period. Approximately $170 of the quarter decrease
and $287 of the year-to-date decrease is due to reduced legal fees, while $516
of the quarter decrease and $747 of the nine month decrease is due to
reductions in other professional services. The nine month variance also
reflects a $400 reduction in fidelity bond and other liability insurance and
$110 in reduced discretionary employee education expense.
A restructure reserve adjustment of $810 was recorded in the third quarter of
1995. The adjustment reduced the $3,900 restructure reserve, established
through a charge recorded in December, 1994, in order to reduce such reserve
to a level necessary to accommodate estimated payouts that will be made during
the fourth quarter of 1995. Additional information with respect to the
restructure reserve is provided on page 21 of this Form 10-Q.
Salaries and wages increased by $127, or 1.3% in the third quarter of 1995 as
compared to the 1994 quarter and by $821, or 3.0% for the first nine months of
1995 over the same period in 1994. The increase, more predominant in the year
to date period than in the current quarter, is attributable to a general merit
increase of 4% on average in 1995, offset by a declining full-time equivalent
employee complement in the third quarter of 1995 as compared to 1994.
Equipment expense increased by $154 in the third quarter of 1995 and by $502
on a year-to-date basis as compared to like 1994 periods due primarily to
depreciative expense of technology-related system upgrades and capitalized
purchases of furniture and equipment.
Computer processing expense increased by $499 for the 1995 quarter as compared
to the 1994 quarter and by $1,106 for the first nine months of 1995 as
compared to the same period in 1994 due primarily to one-time systems
conversion and other computer processing costs incurred during the third
quarter to facilitate the bank consolidation activities.
INCOME TAX EXPENSE
Income tax expense totaled $3,831 for the third quarter of 1995, increasing
from $3,484 for the same period in 1994 and reflects effective income tax
rates of 36.2% and 37.9%, respectively. For the first nine months of 1995,
income tax expense totaled $10,689 as compared to $10,177 in 1994, reflecting
effective income tax rates of 35.9% and 37.7%, respectively. The variance in
income tax expense and the effective tax rates is primarily due to $414 in
state enterprise zone tax credits, of which $149 was recognized in the first
quarter of 1995, $100 in the second quarter, and $165 in the third quarter.
NONPERFORMING ASSETS AND 90 DAY PAST DUE LOANS
At September 30, 1995, nonperforming assets totaled $22,012 and loans past due
90 days or more and still accruing totaled $8,629. 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:
Nonperforming Assets and 1995 1994
--------------------------------------- ------------------------
90 Day Past Due Loans Sept. 30 June 30 March 31 Dec. 31 Sept. 30
- -------------------------------------------------- ----------- ----------- ------------ ----------- -----------
Nonaccrual loans . . . . . . . . . . . . . . . $ 8,817 $ 11,621 12,481 $ 10,214 $ 16,385
Renegotiated loans . . . . . . . . . . . . . . 7,942 7,779 7,704 8,317 3
----------- ----------- ------------ ----------- -----------
Total nonperforming loans . . . . . . . . . 16,759 19,400 20,185 18,531 16,388
Foreclosed real estate . . . . . . . . . . . . 5,253 7,288 8,542 9,483 7,580
----------- ----------- ------------ ----------- -----------
Total nonperforming assets . . . . . . . . . $ 22,012 $ 26,688 $ 28,727 $ 28,014 $ 23,968
=========== =========== ============ =========== ===========
% of total loans plus foreclosed real estate 1.14% 1.40% 1.57% 1.56% 1.38%
=========== =========== ============ =========== ===========
90 Day past due loans accruing interest . . . . $ 8,629 $ 3,697 $ 5,894 $ 3,888 $ 6,571
=========== =========== ============ =========== ===========
Nonaccrual loans decreased by $1,397 since December 31, 1994 and renegotiated
loans declined by $375, primarily reflecting payments recorded on such loans
since year-end 1994. Foreclosed real estate declined by $4,230 primarily due
to the sale of several commercial properties and single-family homes.
First Midwest's discussion of FASB Statement No. 114 and the disclosure with
respect to impaired loans is contained in notes 1 and 4 to the consolidated
financial statements, located on pages 6 and 9, respectively.
PROVISION AND RESERVE FOR LOAN LOSSES
Transactions in the reserve for loan losses during the quarters and nine
months ended September 30, 1995 and 1994 are summarized in the following
table:
Quarters ended Nine months ended
September 30 September 30
------------------------- ------------------------
1995 1994 1995 1994
----------- ----------- ----------- --------
Balance at beginning period $ 24,844 $ 21,571 $ 24,083 $ 21,654
Provision for loan process . . . . . . . 3,810 1,838 7,982 5,130
Loans charged of . . . . . . . . . . . . (2,659) (1,169) (7,157) (5,625)
Recoveries of loans previously charged-off 781 612 1,868 1,693
----------- ----------- ----------- -----------
Net loans charged-off . . . . . . . . (1,878) (557) (5,289) (3,932)
----------- ----------- ----------- -----------
Balance at end of period . . . . . . . . . . . $ 26,776 $ 22,852 $ 26,776 $ 22,852
=========== =========== =========== ===========
The provision for loan losses is the cost of providing a reserve for
anticipated future loan losses. The provision charged to operating expense
for the third quarter of 1995 totaled $3,810 as compared to $1,838 for the
same quarter in 1994 and $7,982 for the first nine months of 1995 as compared
to $5,130 for the same period in 1994. The increase in the provision totaling
$1,972 and $2,852 for the quarter and nine months, respectively, is due in
part to an additional provision of $1,400 recorded in the third quarter of
1995, resulting from Management's decision to increase the reserve for loan
losses to a level more closely approximating peers. The remaining increase in
the provision for both periods is due to approximately $200,000 in growth in
loans outstanding since September 30, 1994. Loans charged off, net of
recoveries for the quarter totaled $1,878, or .39% of average loans in 1995 as
compared to $557, or .13% in 1994. For the nine month period, net charge offs
totaled $5,289 or .38% of average loans in 1995 and $3,932 or .32% in 1994.
The level of the provision for loan losses charged to operating expense in any
given period is dependent upon many factors, including loan growth and changes
in the composition of the loan portfolio, net charge-off levels,
delinquencies, collateral values, and Management's assessment of current and
prospective economic conditions in First Midwest's primary market areas.
At September 30, 1995, the reserve for loan losses totaled $26,776, or 1.39%
of loans. The reserve for loan losses is maintained at a level which is
considered adequate in relation to the risk of future losses within the loan
portfolio. The reserve is comprised of specific allocations for impaired
loans, general allocations and unallocated reserves. The portion of the
reserve applicable to impaired loans is discussed in note 4 to the
consolidated financial statements located on page 9. The general reserve,
which is allocated to specific categories of the loan portfolio, represents
First Midwest's judgement as to potential loss exposure based on both actual
loan losses experienced over the preceding three years as well as the results
of independent loan ratings and credit reviews performed for loans identified
to have unfavorable credit characteristics.
The unallocated portion of the reserve is that part that is not specifically
allocated to either a particular loan on which a loss is anticipated or
allocated to a general loan category based upon historical loan loss
experience. The unallocated portion of the reserve for loan losses totaled
$15,082, or 56% of the total reserve, at September 30, 1995.
ANALYSIS OF FINANCIAL CONDITION
Period Ended
----------------------------
September 30, December 31, Change
-------------------
1995 1994 $ %
---------- --------- -------- ----------
Total assets . . . . . . . . . . $3,044,253 $2,875,101 169,152 5.88
Loans . . . . . . . . . . . . . . 1,929,487 1,785,200 144,287 8.08
Securities available for sale . . 716,817 696,384 20,433 2.93
Securities held to maturity . . . 124,213 168,644 (44,431) 26.35
Deposits . . . . . . . . . . . . 2,151,313 1,994,408 156,905 7.87
Short-term borrowings . . . . . . 646,222 665,500 (19,278) 2.90
Stockholders' equity . . . . . . 220,846 186,115 34,731 18.66
========= ========= ========= =========
At September 30, 1995, assets totaled $3,044,253 and were $169,152, or 5.9%
in excess of the December 31, 1994 level of $2,875,101. Loans increased by
$144,287 to $1,929,487 at September 30, 1995, from $1,785,200 at December 31,
1994. Such increase was attributable to approximately $58,000 in commercial
loans, $54,000 in 1-4 family real estate and $45,000 in indirect consumer
loans.
A discussion regarding changes in the period-end balances of securities
available for sale and held to maturity is provided in note 2 to the
consolidated financial statements located on pages 7 and 8.
Deposits increased by $156,905 at September 30, 1995 as compared to December
31, 1994 primarily in the category of time deposits, which grew $153,387 due
to promotional offerings of various term certificates of deposit products.
Stockholders' equity increased to $220,846 at September 30, 1995 from $186,115
at December 31, 1994. In addition to capital growth through net income
retained in excess of dividends paid, the increase is attributable to a
$18,799 after-tax recovery since December 31, 1994 of the net unrealized loss
on securities, which is recorded as a separate component of stockholders'
equity. Note 2, located on page 7 of this Form 10-Q, provides additional
information with respect to the gross unrealized gains and losses in the
securities portfolios. Stockholders' equity also increased due to the sale of
approximately $2,700 of common stock held in treasury in August, 1995.
CAPITAL ANALYSIS
First Midwest and its national Bank Affiliate are subject to risk-based
capital guidelines promulgated by their respective regulatory authority.
These guidelines are used to evaluate capital adequacy and are based on an
institution's asset risk profile and off-balance sheet exposure. Capital
ratios in excess of the minimum required regulatory ratios must be maintained
in order for financial institutions to take advantage of more favorable risk-
based deposit insurance assessments and to receive favorable regulatory
treatment incident to acquisition and other expansion activities.
The table below compares First Midwest's capital structure to the minimum
capital ratios required by its primary regulator, the Federal Reserve Board
("FRB"). Also provided is a comparison of capital ratios for First Midwest's
national banking subsidiary, First Midwest Bank, N.A., to its primary
regulator, the Office of the Comptroller of the Currency ("OCC"). Both First
Midwest and First Midwest Bank, N.A. are subject to the minimum capital ratios
defined by banking regulators pursuant to the FDIC Improvement Act ("FDICIA")
and have capital measurements well in excess of the minimums required by their
respective bank regulatory authorities to be considered "well-capitalized"
which is the highest capital category established under the FDICIA.
As of September 30, 1995
----------------------------------------------------------------
Bank Holding Company National Bank Minimum
-------------------- ---------------------
Minimum Minimum Well-
Required Required Capitalized
First Midwest FRB FMB, N.A. OCC FDICIA
-------------- -------- -------- -------- ---
Tier 1 capital to risk-based assets . . . . . . . . 10.19% 4.00% 9.23% 4.00% 6.00%
Total capital to risk-based assets . . . . . . . . 11.44% 8.00% 10.48% 8.00% 10.00%
Leverage ratio . . . . . . . . . . . . . . . . . . 6.94% 3.00% 6.68% 3.00% 5.00%
====== ===== ====== ====== ======
First Midwest believes that it has a responsibility to reward its stockholders
with a meaningful current return on their investment and, as part of the
Company's dividend policy, First Midwest's Board of Directors reviews the
Company's dividend payout ratio periodically to ensure that it is consistent
with internal capital guidelines and industry standards. As a result of such
review, in February, 1995, First Midwest's Board of Directors authorized a
quarterly dividend increase to $0.19 per share representing a 12% increase
compared to the previous quarterly dividend of $0.17. As of September 30,
1995, the dividend payout ratio was 36.1% on a trailing four quarters basis.
COMPANY RESTRUCTURING
In August 1994, First Midwest announced a major plan of restructuring intended
to improve its financial performance and enhance the efficiency and
effectiveness of both the Company's sales and support operations. Pursuant to
the restructuring, during the second quarter of 1995 First Midwest's four
Affiliates merged into a single bank, First Midwest Bank, National
Association.
A restructure charge in the pretax amount of $3,900 was recorded during the
fourth quarter of 1994 to establish a reserve for various expenses to be
incurred incident to the restructuring. For the nine months ended September
30, 1995, approximately $2.3 million in restructure expenses were incurred,
primarily for severance and related employee costs. Such expenses were
originally estimated at approximately $3.1 million, with the difference due to
certain accelerated employee terminations and reduced outplacement usage and
costs. As a result, an adjustment to the restructure reserve in the amount of
$810 was recorded which brought the reserve to a level necessary to
accommodate estimated payouts that will be made during the fourth quarter of
1995. The restructure reserve, which totaled $745 at September 30, 1995, is
expected to be closed out by December 31, 1995.
The restructuring activities giving rise to the charge were substantially
completed during the third quarter of 1995. The restructuring is anticipated
to result in permanent annualized pretax savings of approximately $7 million,
such savings being primarily related to compensation and benefit expense saved
on the approximate 180 positions eliminated.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - See Exhibit Index appearing on page 23.
(b) Form 8-K - No reports on Form 8-K were filed during the third
quarter of 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
First Midwest Bancorp, Inc.
-----------------------------------------------
Date: November 11, 1995 DONALD J. SWISTOWICZ
----------------------------
Donald J. Swistowicz
Executive Vice President*
* Duly authorized to sign on behalf of the Registrant.
EXHIBIT INDEX
Exhibit Sequential
Number Description of Documents Page Number
- ------ ------------------------ -----------
19 Quarterly Report to Shareholders for 24
the Quarter ended September 30, 1995
27 Financial Data Schedule 28
Exhibit 19
Letter to Shareholders
We are pleased to report to you on the positive results for the quarter and
nine months ended September 30, 1995.
Net income for the quarter ended September 30, 1995 rose 17% to $6.8 million,
or 55 cents per share, from last year's third quarter of $5.7 million, or 47
cents per share. For the first nine months of 1995, net income rose 13% to
$19.1 million, or $1.56 per share, as compared to last year's like period of
$16.8 million, or $1.38 per share.
The increase in core earnings for both the third quarter and nine month
periods was consistent with plan and consensus estimates. Nonrecurring items
that impacted the results for both periods include FDIC insurance rebates, a
restructuring reserve adjustment, a one-time charge for Bank consolidation-
related costs and an increase in the provision for loan losses, as follows:
o Reductions in FDIC insurance premiums contributed approximately $1.0
million in savings during the third quarter of 1995.
o The $3.9 million restructuring reserve established in December, 1994 was
adjusted by $810,000. With restructuring activities virtually completed
as of September 30, 1995, the reserve was adjusted to a level necessary to
accommodate payouts that will be made during the fourth quarter.
o The consolidation of the Company's four Banks into a single operating unit
was completed during the third quarter and resulted in approximately
$400,000 in one-time costs including computer processing and conversion,
overtime and temporary help, supplies and printing, and other initial set-
up costs.
o Loan loss expense increased due to a one time additional provision of $1.4
million recorded during the quarter. The increase resulted from
Management's decision to increase the reserve for loan losses to a level
more closely approximating peer levels.
The quarter saw continued improvement in credit quality with nonperforming
representing 0.87% of total loans at September 30, 1995 compared to 0.95% a
year ago and 1.04% at December 31, 1994. Further, nonperforming assets
represented 1.14% of total loans plus foreclosed assets at September 30, 1995,
again comparing favorably to both 1.38% a year ago and 1.56% at December 31,
1994.
Our pending acquisition of CF Bancorp continues on schedule with requisite
regulatory approvals being anticipated so as to permit a late December 1995-
early January 1996 closing. The acquisition is expected to enhance book value
per share immediately and enhance earnings per share within one year.
In addition to the positive performance discussed, the critically important
restructuring and consolidation of our four Banks into a single operating unit
was successfully concluded during the quarter.
As always we are appreciative of your support.
C. D. OBERWORTMANN ROBERT P. O'MEARA
- ------------------ -----------------
C. D. Oberwortmann Robert P. O'Meara
Chairman of the Board President and Chief Executive
Officer
Quarters Ended Nine Months Ended
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) September 30, September 30,
(Amounts in thousands except per share data) 1995 1994 1995 1994
INTEREST INCOME
Interest and fees on loans . . . . . . . . . . . . . . . . . . $ 43,391 $ 36,313 $ 125,699 $ 102,321
Interest on securities . . . . . . . . . . . . . . . . . . . . 13,446 12,023 40,897 34,480
Interest on funds sold and other short-term investments . . . . 1,059 785 2,305 1,262
Total interest income . . . . . . . . . . . . . . . . . . 57,896 49,121 168,901 138,063
INTEREST EXPENSE
Interest on deposits . . . . . . . . . . . . . . . . . . . . . 20,567 14,620 55,318 41,075
Interest on short-term borrowings . . . . . . . . . . . . . . . 9,617 7,373 30,609 17,490
Total interest expense . . . . . . . . . . . . . . . . . . 30,184 21,993 85,927 58,565
Net interest income . . . . . . . . . . . . . . . . . . . 27,712 27,128 82,974 79,498
PROVISIONS FOR LOAN LOSSES . . . . . . . . . . . . . . . . . . 3,810 1,838 7,982 5,130
Net interest income after provision for loan losses . . . 23,902 25,290 74,992 74,368
NONINTEREST INCOME
Service charges on deposit accounts . . . . . . . . . . . . . . 2,333 2,472 6,839 7,232
Trust fees . . . . . . . . . . . . . . . . . . . . . . . . . . 1,481 1,478 5,067 4,624
Other service charges, commissions and fees . . . . . . . . . . 1,686 1,706 4,655 4,524
Net revenues on real estate loans held for sale . . . . . . . . 471 91 992 913
Securities transactions, net . . . . . . . . . . . . . . . . . 7 4 539 1,263
Other income . . . . . . . . . . . . . . . . . . . . . . . . . 628 449 2,160 1,535
Total noninterest income . . . . . . . . . . . . . . . . . 6,606 6,200 20,252 20,091
NONINTEREST EXPENSE
Salaries and wages . . . . . . . . . . . . . . . . . . . . . . 9,574 9,447 28,611 27,790
Retirement and other employee benefits . . . . . . . . . . . . 1,865 2,268 7,122 7,436
Occupancy expenses . . . . . . . . . . . . . . . . . . . . . . 1,560 1,373 4,167 4,081
Equipment expenses . . . . . . . . . . . . . . . . . . . . . . 1,467 1,313 4,313 3,811
Computer processing costs . . . . . . . . . . . . . . . . . . . 1,805 1,306 4,756 3,650
FDIC insurance premiums . . . . . . . . . . . . . . . . . . . . (42) 1,082 2,166 3,349
Restructure reserve adjustment . . . . . . . . . . . . . . . . (810) - (810) -
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . 4,496 5,509 15,136 17,340
Total noninterest expense . . . . . . . . . . . . . . . . 19,915 22,298 65,461 67,457
Income before income tax expense . . . . . . . . . . . . . 10,593 9,192 29,783 27,002
Income tax expense . . . . . . . . . . . . . . . . . . . . . . 3,831 3,484 10,689 10,177
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . $ 6,762 $ 5,708 $ 19,094 $ 16,825
NET INCOME PER SHARE . . . . . . . . . . . . . . . . . . . $ 0.55 $ 0.47 $ 1.56 $ 1.38
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION (unaudited) . . September 30,
(Amounts in thousands) 1995 1994
ASSETS
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . $ 124,941 $ 146,918
Funds sold and other short-term investments . . . . . . . . . . . . . . . . 56,162 83,427
Securities available for sale . . . . . . . . . . . . . . . . . . . . . . . 716,817 679,397
Securities held to maturity . . . . . . . . . . . . . . . . . . . . . . . . 124,213 149,089
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,929,487 1,733,578
Reserve for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . (26,776) (22,852)
Net loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,902,711 1,710,726
Premises, furniture and equipment . . . . . . . . . . . . . . . . . . . . . 44,074 39,895
Accrued interest receivable and other assets . . . . . . . . . . . . . . . 75,335 73,685
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,044,253 $ 2,883,137
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,151,313 $ 1,964,310
Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . 646,222 705,763
Accrued interest payable and other liabilities . . . . . . . . . . . . . . 25,872 25,474
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 2,823,407 2,695,547
Stockholders' Equity:
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,465 23,465
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 25,762 26,155
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177,979 164,416
Unrealized net depreciation on securities available for sale (1) . . . . . (1,968) (16,277)
Treasury stock, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . (4,392) (10,169)
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . 220,846 187,590
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . . $ 3,044,253 $ 2,883,137
<FN>
(1) Represents the difference, after tax, between the amortized cost and market value of securities available for sale; this
difference will fluctuate as the market value of such securities changes.
CREDIT QUALITY (unaudited)
September 30,
(Amounts in thousands) 1995 1994
Nonaccrual loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,817 $ 16,385
Renegotiated loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,942 $ 3
Foreclosed real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,253 $ 7,580
Loans past due 90 days and still accruing . . . . . . . . . . . . . . . . . . $ 8,629 $ 6,571
Nonperforming loans to loans . . . . . . . . . . . . . . . . . . . . . . . . 0.87% 0.95%
Nonperforming assets to loans plus foreclosed real estate . . . . . . . . . . 1.14% 1.38%
Reserve for loan losses to loans . . . . . . . . . . . . . . . . . . . . . . 1.39% 1.32%
Reserve for loan losses to nonperforming loans . . . . . . . . . . . . . . . 159.77% 139.44%
Net loan charge-offs - year to-date . . . . . . . . . . . . . . . . . . . . . $ 5,289 $ 3,932
Net loan charge-offs (annualized) to average loans . . . . . . . . . . . . . 0.38% 0.32%
Quarters Ended Nine Months Ended
Financial Highlights (unaudited) September 30, September 30,
(Amounts in thousands except per share data) 1995 1994 1995 1994
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,762 $ 5,708 $ 19,094 $ 16,825
Net income per share . . . . . . . . . . . . . . . . . . . . . $ 0.55 $ 0.47 $ 1.56 $ 1.38
Return on average equity . . . . . . . . . . . . . . . . . . . 12.39% 11.97% 12.47% 11.62%
Return on average assets . . . . . . . . . . . . . . . . . . . 0.89% 0.81% 0.87% 0.82%
Quarters Ended Nine Months Ended
STOCK PERFORMANCE (unaudited) September 30, September 30,
1995 1994 1995 1994
Market Price:
At period end . . . . . . . . . . . . . . . . . . . . . . $ 28.50 $ 28.25 $ 28.50 $ 28.25
High . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29.75 $ 28.50 $ 29.75 $ 28.75
Low . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24.25 $ 24.75 $ 23.25 $ 24.50
Book value per share at period end . . . . . . . . . . . . . . $ 17.89 $ 15.46 $ 17.89 $ 15.46
Market price to book value at period end . . . . . . . . . . . $ 1.6X $ 1.8x $ 1.6X $ 1.8x
Dividends paid per share . . . . . . . . . . . . . . . . . . . $ 0.19 $ 0.17 $ 0.57 $ 0.51