Exhibit 13
LETTER TO SHAREHOLDERS
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We are very pleased to report on the performance improvement achieved in both
the fourth quarter and full year 1995. Net income from operations for the
quarter ended December 31, 1995 was $8.0 million, or 59 cents per share, as
compared to last year's like quarter of $6.5 million, or 48 cents per share, an
increase on a per share basis of 23%. Financial information for all periods has
been restated to include the results of operations and financial condition of CF
Bancorp, Inc. ("CF"), acquired by First Midwest in the fourth quarter of 1995
and accounted for as a pooling of interests.
As a result of CF's acquisition, First Midwest recorded $4.9 million ($3.7
million after-tax) in acquisition-related costs in the fourth quarter of 1995.
Such costs included customary acquisition expenses, bad debt reserve recapture
expense and one-time provisioning for loan losses recorded incident to
conforming CF's credit policies to First Midwest's. Including the acquisition
related costs, net income for the quarter totaled $4.4 million, or 32 cents per
share. 1994's fourth quarter included nonrecurring restructuring expenses that
totaled $3.9 million ($2.4 million after-tax), resulting in net income for the
quarter of $4.2 million, or 31 cents per share.
Net income from operations for 1995 increased to $29.4 million, or $2.16 per
share, as compared to 1994's $25.5 million, or $1.89 per share, an increase on a
per share basis of 14%. Inclusive of the acquisition and restructuring costs
recorded in the respective years, net income for 1995 increased to $25.7
million, or $1.89 per share, from $23.2 million, or $1.72 per share in 1994.
The improved net income from operations for the quarter and full year 1995 was
primarily
attributable to higher net interest income related to loan growth as well as
improved noninterest income. Negatively impacting results were provisions for
loan losses that, while flat for the quarter, increased $2.8 million for the
year. The $2.8 million increase was generally attributable to the combination of
CF's $550,000 one-time provisioning and $1.4 million in third quarter
provisioning resulting from Management's decision to increase the loan loss
reserve to a level more closely approximating peers.
At year-end 1995 both nonperforming loans and nonperforming assets reflected
continued improvement with nonperforming loans decreasing to 0.91% of loans from
1994's year-end level of 0.98% and nonperforming assets dropping to 1.13% of
loans plus foreclosed assets from year-end 1994's 1.52%. Similarly, the reserve
for loan losses increased to 1.39% of loans at year-end 1995 up from 1.32% at
year-end 1994 while the loan loss reserve's coverage of nonperforming loans
increased to 153% from 135% a year ago.
With the acquisition of CF, Citizens Federal Savings Bank, a $220 million
savings bank with offices in Davenport and Bettendorf, Iowa, becomes a
subsidiary of First Midwest. It will be converted to a national bank and merged
into First Midwest's $2.7 billion banking subsidiary, First Midwest Bank, in
1996.
More about the positive results for the year as well as 1995 merger and
acquisition activities in the Annual Report that you will be receiving in mid-
March, 1996.
We are most appreciative of your support and confidence.
C.D. OBERWORTMANN ROBERT P. O'MEARA
C.D. Oberwortmann Robert P. O'Meara
Chairman of the Board President and Chief Executive
Officer
January 19, 1996
Quarters Ended Years Ended
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) December 31, December 31,
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(Amounts in thousands except per share data) 1995 1994 1995 1994
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INTEREST INCOME
Loans.................................................... $47,739 $40,897 $181,405 $150,306
Securities............................................... 14,970 15,082 60,832 53,281
Other.................................................... 602 462 2,950 1,772
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Total interest income.................................. 63,311 56,441 245,187 205,359
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INTEREST EXPENSE
Deposits................................................. 22,380 16,627 82,564 61,541
Short-term borrowings.................................... 10,651 9,978 44,056 29,251
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Total interest expense................................. 33,031 26,605 126,620 90,792
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Net interest income.................................... 30,280 29,836 118,567 114,567
PROVISIONS FOR LOAN LOSSES............................... 3,331 3,352 11,334 8,543
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Net interest income after provision for loan losses.... 26,949 26,484 107,233 106,024
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NONINTEREST INCOME
Securities gains, net.................................... 1,673 (2) 2,937 1,700
Service charges on deposit accounts...................... 2,521 2,560 9,739 10,181
Trust and investment management fees..................... 1,642 1,535 6,708 6,159
Other service charges, commissions and fees.............. 1,869 1,731 7,154 6,748
Mortgage banking revenues................................ 353 227 1,358 1,209
Other.................................................... 662 635 2,939 2,204
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Total noninterest income............................... 8,720 6,686 30,835 28,201
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NONINTEREST EXPENSE
Salaries and other employee benefits..................... 12,423 12,141 50,487 49,248
Occupancy and equipment expenses......................... 3,320 2,901 12,210 11,232
Acquisition and restructure - related expenses........... 4,339 3,900 3,529 3,900
Other.................................................... 8,190 8,123 31,373 33,328
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Total noninterest expense.............................. 28,272 27,065 97,599 97,708
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Income before income tax expense....................... 7,397 6,105 40,469 36,517
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Income tax expense....................................... 3,029 1,942 14,784 13,359
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NET INCOME (1)......................................... $ 4,368 $ 4,163 $ 25,685 $ 23,158
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NET INCOME PER SHARE (1)............................... $0.32 $0.31 $1.89 $1.72
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DIVIDENDS DECLARED PER SHARE........................... $0.19 $0.17 $0.76 $0.68
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(1) Includes $4,339 pretax acquisition expenses, or $3,336 ($.24 per share)
after tax in the 1995 periods and $3,900 pretax restructure expenses, or
$2,379 ($.18 per share) after tax in the 1994 periods.
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION (unaudited) December 31,
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(Amounts in thousands) 1995 1994
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ASSETS
Cash and due from banks................................... $ 141,336 $ 112,923
Funds sold and other short-term investments............... 7,927 17,471
Securities available for sale............................. 831,030 698,761
Securities held to maturity............................... 27,527 263,925
Loans..................................................... 2,105,615 1,901,789
Reserve for loan losses................................... (29,194) (25,154)
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Net loans............................................... 2,076,421 1,876,635
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Premises, furniture and equipment......................... 47,108 42,124
Accrued interest receivable and other assets.............. 75,948 89,191
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Total assets............................................ $3,207,297 $3,101,030
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LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits.................................................. $2,272,058 $2,133,526
Short-term borrowings..................................... 649,821 727,035
Accrued interest payable and other liabilities............ 36,185 32,302
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Total liabilities....................................... 2,958,064 2,892,863
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Common stock.............................................. 23,475 23,475
Additional paid-in capital................................ 35,516 35,680
Retained earnings......................................... 195,853 180,473
Unrealized net appreciation (depreciation) on securities
available for sale (1).................................. 486 (20,784)
Treasury stock, at cost................................... (6,097) (10,205)
Other, net................................................ -- (472)
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Total stockholders' equity.............................. 249,233 208,167
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Total liabilities and stockholders' equity................ $3,207,297 $3,101,030
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(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) December 31,
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(Amounts in thousands) 1995 1994
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Nonaccrual loans........................................... $ 11,219 $ 10,307
Renegotiated loans......................................... $ 7,917 $ 8,317
Foreclosed real estate..................................... $ 4,752 $ 10,441
Loans past due 90 days and still accruing.................. $ 3,626 $ 3,979
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Nonperforming loans to loans............................... 0.91% 0.98%
Nonperforming assets to loans plus foreclosed real estate.. 1.13% 1.52%
Reserve for loan losses to loans........................... 1.39% 1.32%
Reserve for loan losses to nonperforming loans............. 152.56% 135.06%
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Net loan charge-offs - year to-date........................ $ 7,294 $ 6,145
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Net loan charge-offs (annualized) to average loans......... 0.36% 0.34%
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Quarters Ended Year Ended
FINANCIAL HIGHLIGHTS (unaudited) December 31, December 31,
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(Amounts in thousands except per share data) 1995 1994 1995 1994
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Net income........................................ $4,368 $4,163 $25,685 $23,158
Net income - from operations/(1)/................. $7,704 $6,542 $29,029 $25,537
Net income per share.............................. $ 0.32 $ 0.31 $ 1.89 $ 1.72
Net income per share - from operations/(1)/....... $ 0.59 $ 0.49 $ 2.16 $ 1.90
Return on average equity.......................... 6.97% 7.91% 11.02% 10.87%
Return on average equity - from operations/(1)/... 12.30% 12.43% 12.45% 11.99%
Return on average assets.......................... 0.53% 0.54% 0.81% 0.78%
Return on average assets - from operations/(1)/... 0.94% 0.84% 0.91% 0.86%
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Quarters Ended Year Ended
STOCK PERFORMANCE (unaudited) December 31, December 31,
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(Amounts in thousands except per share data) 1995 1994 1995 1994
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Market Price:
At period end.................................... $28.88 $24.00 $ 28.88 $ 24.00
High............................................. $29.75 $28.50 $ 29.75 $ 28.75
Low.............................................. $28.00 $22.00 $ 23.25 $ 22.00
Book value per share at period end................ $18.22 $15.40 $ 18.22 $ 15.40
Market price to book value at period end.......... $ 1.6X $ 1.6x $ 1.6X $ 1.6x
Dividends declared per share...................... $ 0.19 $ 0.17 $ 0.76 $ 0.68
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/(1)/
Includes $4,339 pretax acquisition expenses, or $3,336 ($.24 per share)
after tax in the 1995 periods and $3,900 pretax restructure expenses, or
$2,379 ($.18 per share) after tax in the 1994 periods.