CONTACT: James M. Roolf FOR IMMEDIATE RELEASE (630) 875-7452 TRADED: NASDAQ/NMS SYMBOL: FMBI FIRST MIDWEST TO ACQUIRE McHENRY STATE BANK ITASCA, IL., JUNE 20, 1997 -- First Midwest Bancorp, Inc. (NASDAQ:FMBI) today announced that it has entered into a definitive agreement to acquire SparBank, Incorporated, the holding company of the $445 million McHenry State Bank ("MSB") located in the McHenry, Illinois. The agreement provides that SparBank shareholders will receive 21.72 shares of First Midwest common stock for each share of SparBank common stock resulting in the issuance of 3,230,769 First Midwest shares. Based on First Midwest's June 19 closing price of $32.75 per share, the transaction is valued at approximately $105 million. The acquisition will be structured as a tax free exchange and accounted for as a pooling of interests. It is expected to be closed by September 30, 1997 following receipt of customary regulatory approvals. MSB is a historically superior performer that has consistently earned in the range of 1.30% to 1.50% of average earning assets. It is McHenry County's largest bank and enjoys a 16% county deposit share. McHenry County is a dynamic, fast growing area of northwest suburban Chicago that ranks as Illinois' 4th wealthiest county with average household income of $80,000 and its 9th largest with a population approaching 250,000. The transaction is anticipated to be neutral to First Midwest's 1997 earnings and accretive to its 1998 earnings by approximately 2-3%. The 1998 accretion results primarily from annualized net cost savings of approximately $1.8 million, representing some 18% of MSB's current expense base, which will be realized when MSB is merged into First -1- Midwest in first quarter 1998 in addition to modest first year revenue enhancements. A pre-tax merger related charge of approximately $6.5 million will be recognized in the quarter the transaction is closed that includes costs related to systems conversions, elimination of excess operating capacity, professional fees, and a one-time provision to bring MSB's loan loss reserves to First Midwest required levels. Commenting on the acquisition, First Midwest Bancorp President and CEO, Robert P. O'Meara, said, "We could not be more excited about this significant and strategically important acquisition of the largest bank in such a vibrant, fast growing part of suburban Chicago. It expands our existing overall suburban Chicago presence and complements particularly well our $1.1 billion asset, 13 banking office business in adjoining Lake County. A superior performer known for its customer service and community focus, McHenry State Bank is the bank in McHenry County. This is what every acquisition should be about!" The acquisition will increase First Midwest's north suburban Chicago presence by approximately 41% to $1.6 billion in assets and its overall suburban Chicago presence by approximately 20% to $2.8 billion. Further, MSB's four branches will bring First Midwest suburban Chicago banking office network to 38 and its total network to 54. The acquisition represents a continuation of First Midwest's primary focus on the market of suburban Chicago, a market that is both one of the fastest growing and least banking consolidated in the country. The agreement has been approved by both the Board of Directors and shareholders of SparBank as well as by the Board of Directors of First Midwest. First Midwest shareholder approval is not necessary. In connection with the signing of the agreement, First Midwest's Board of Directors also rescinded the balance of the 900,000 share stock repurchase program authorized in November 1996. With the acquisition First Midwest's assets increase to approximately $3.5 billion, continuing it as the third largest banking company headquartered in Illinois. It provides -2- commercial banking, trust, investment management, mortgage and related financial services to a variety of consumer, business and governmental customers operating 50 banking offices in 31 communities, primarily in northern Illinois. First Midwest is headquartered in suburban Chicago where 34 of its banking offices and approximately 80% of its overall business is situated. (Accompanying this news release is an overview of the transaction and proforma Statements of Income and Condition of First Midwest and SparBank for the quarter ended and as of March 31, 1997.) -3- FIRST MIDWEST TO ACQUIRE McHENRY STATE BANK PROFILE OF PARTIES ------------------ First Midwest Bancorp, Inc. - --------------------------- . Headquarters: Itasca (suburban Chicago), Illinois . 3/31/97 Assets: $3.0 bil. . Performance, Quarter ended 3/31/97: Net Income: $8.7 mil Return on Average Assets: 1.17% Return on Average Equity: 13.66% Efficiency Ratio: 59.10% Book Value Per Share: $15.46 . Customers: 417,000 Households: 161,000 Businesses: 14,000 . Banking offices: Total 50; 34 in suburban Chicago. ---------------------------------------------------------------------- SparBank, Incorporated (McHenry State Bank) - ------------------------------------------- . Headquarters: City of McHenry, McHenry County, Illinois . 3/31/97 Assets: $445 mil. . Performance, Quarter ended 3/31/97: Net Income: $1.7 mil Return on Average Assets: 1.52% Return on Average Equity: 13.44% Efficiency Ratio: 53.96% . Customers: 46,000 Households: 18,000 Businesses: 1,800 . Banking offices: 4, all in McHenry County (suburban Chicago). -4- FIRST MIDWEST TO ACQUIRE McHENRY STATE BANK ------------------------------------------- TRANSACTION SUMMARY ------------------- Agreement: Definitive acquistion agreement executed. Structure: Common stock-for common-stock exchange on a tax-free basis. Exchange Ratio: 21.72 shares of First Midwest for each share of SparBank; 3,230,769 shares of First Midwest to be issued. Terms: Fixed exchange ratio; no collar or walk away provision. Accounting Treatment: Pooling of interests. Purchase Price: $105 mil based on First Midwest's 6/19/97 closing price. Price/Earnings: 16.1x trailing 12 months earnings as of 3/31/97. Price/Tangible Book: 2.2x tangible book value at 3/31/97. Approvals: . Customary regulatory approvals. . Already approved by Board and Shareholders of SparBank. . Already approved by Board of First Midwest; First Midwest shareholder approval not necessary. Due Diligence: Completed. Expected Closing: September 30, 1997. Anticipated Accretion: 1997: neutral 1998: 2-3% Other: First Midwest has rescinded its stock buyback authorization. -5- FIRST MIDWEST TO ACQUIRE McHENRY STATE BANK ------------------------------------------- McHENRY STATE BANK ------------------ Overview - -------- . $450 mil Assets . Largest Bank in McHenry County . $370 mil Deposits . 16% McHenry County Deposit Share - #2 Share Rank . $180 mil Trust Assets Under Management/Administration Financial Highlights (unaudited) - ------------------------------- Quarter ended Years Ended December 31, March 31, ------------------------------- 1997 1996 1995 1994 --------- --------- --------- --------- Performance Ratios - ------------------ Return on average assets 1.55% 1.36% 1.28% 1.47% Return on average stockholders' equity 13.25% 12.68% 12.83% 15.63% Net interest margin - tax equivalent 3.86% 4.12% 4.08% 4.61% Efficiency ratio 53.31% 50.23% 52.42% 51.09% Statement of Condition Highlights - --------------------------------- Total assets $444,463 $455,713 $454,031 $441,387 Total loans $269,801 $266,278 $278,913 $262,168 Total deposits $368,674 $376,624 $386,162 $373,632 Statement of Condition Ratios at Period End - ------------------------------------------- Loans to assets 60.70% 58.43% 61.43% 59.40% Loans to deposits 73.18% 70.70% 72.23% 70.17% Earning assets to total assets 95.39% 94.78% 93.71% 93.07% Capital Ratios at Period End - ---------------------------- Tier 1 capital to risk-adjusted assets 18.48% 17.95% 16.70% 16.86% Leverage ratio 11.37% 10.74% 10.09% 9.69% Asset Quality Ratios at Period End - ---------------------------------- Reserve for loan losses to loans 0.78% 0.77% 0.74% 0.83% Nonperforming loans to loans 1.15% 1.17% 0.00% 0.24% Nonperforming assets to loans and foreclosed real estate 1.21% 1.23% 0.34% 0.35% -6- Map of state of Illinois highlighting FMBI's current suburban Chicago presence of 34 offices in LaSalle, Grundy, Will, DuPage, Kane and Lake Counties. In addition, the map emphasizes McHenry County (the county in which SparBank is located) reflecting FMBI's expanded suburban Chicago presence adjacent to Lake and Kane counties as a result of the announced acquisition. McHenry County Profile Population 234,000 County Rank/1/ 9 Growth 1997-2007 19% Households 80,000 County Rank/1/ 9 Growth 1997-2007 21% Average HH Income $80,000 County Rank/1/ 4 Growth 1997-2007 48% Employment 104,000 County Rank/1/ 11 Growth 1997-2007 17% Retail Sales $1.7 Bil County Rank/1/ 11 Growth 1997-2007 23% Bank Deposits $2.4 Bil MSB Dep Share/2/ 16% MSB Dep Share Rank/2/ 2 1. Of 102 Illinois Counties 2. MSB - McHenry State Bank Sources: Woods & Poole Economics, Inc; Sheshunoff June 30, 1996 7 FIRST MIDWEST BANCORP, INC. AND SPARBANK, INC. Proforma Consolidated Statements of Income (Unaudited) Quarter ended March 31, 1997 (dollars in thousands, except per share data) First Midwest SparBank Proforma ----------- ---------- ---------- Total interest income....................................... $57,899 $7,896 $65,795 Total interest expense...................................... 26,608 3,822 30,430 ---------- --------- ---------- Net interest income..................................... 31,291 4,074 35,365 Provision for loan losses................................... 2,078 30 2,108 ---------- --------- ---------- Net interest income after provision for loan losses............................. 29,213 4,044 33,257 ---------- --------- ---------- Noninterest income - ------------------ Service charges on deposit accounts......................... 2,638 211 2,849 Trust and investment management fees........................ 1,632 268 1,900 Other service charges, commissions and fees................. 1,581 130 1,711 Mortgage banking revenues................................... 1,279 0 1,279 Other income................................................ 966 269 1,235 Security transactions, net.................................. 365 (3) 362 ---------- --------- ---------- Total noninterest income.............................. 8,461 875 9,336 ---------- --------- ---------- Noninterest expense - ------------------- Employee-related costs...................................... 12,832 1,507 14,339 Occupancy and equipment..................................... 3,517 405 3,922 Computer processing costs................................... 1,618 318 1,936 Advertising and promotions.................................. 886 41 927 Professional services....................................... 707 94 801 All other costs............................................. 4,209 303 4,512 ---------- --------- ---------- Total noninterest expense............................. 23,769 2,668 26,437 ---------- --------- ---------- Income before income tax expense........................ 13,905 2,251 16,156 Income tax expense ......................................... 5,179 568 5,747 ---------- --------- ---------- Net income.............................................. $8,726 $1,683 $10,409 ========== ========= ========== Net income per share (Proforma for SparBank)............ $0.52 $0.52 $0.52 ========== ========= ========== Weighted avg shares outstanding (Proforma for SparBank)..... 16,767,413 3,230,769 19,998,182 ========== ========= ========== - ---------------------------------------------------------------------------------------------- First Performance Ratios Midwest Sparbank Proforma - --------------------------------------------------------------------- ---------- ----------- Return on average assets ................................... 1.17% 1.52% 1.22% Return on average stockholders' equity ..................... 13.66% 13.44% 13.62% Net interest margin - tax equivalent........................ 4.57% 3.86% 4.48% Efficiency ratio ........................................... 59.10% 53.96% 58.53% - 8 - FIRST MIDWEST BANCORP, INC. AND SPARBANK, INC. Proforma Consolidated Statements of Condition (Unaudited) March 31, 1997 (dollars in thousands, except for per share data) First Assets Midwest SparBank Proforma ----------- ----------- ------------ Cash and short-term investments..................................... $ 146,501 $ 8,905 $ 155,406 Securities available for sale and held to maturity.................. 719,611 154,173 873,784 Loans, net of unearned discount..................................... 2,058,677 269,275 2,327,952 Reserve for loan losses........................................ (33,747) (2,097) (35,844) Goodwill............................................................ 12,350 45 12,395 All other intangible assets......................................... 6,742 0 6,742 Premises and equipment........................ 49,597 9,624 59,221 Accrued interest receivable and other assets........................ 52,017 4,762 56,779 ----------- ----------- ------------ Total Assets.............................................. $ 3,011,748 $ 444,687 $ 3,456,435 =========== =========== ============ Liabilities and Stockholders' Equity Liabilities: Noninterest-bearing deposits................................... $ 380,451 $ 47,329 $ 427,780 Interest-bearing deposits...................................... 1,888,813 321,879 2,210,692 ----------- ----------- ------------ Total deposits............................................ 2,269,264 369,208 2,638,472 Short-term borrowings.......................................... 451,018 19,752 470,770 Accrued interest payable and other liabilities................. 33,377 4,428 37,805 ----------- ----------- ------------ Total liabilities......................................... 2,753,659 393,388 3,147,047 ----------- ----------- ------------ Total stockholders' equity ......................................... 258,089 51,299 309,388 ----------- ----------- ------------ Total Liabilities and Stockholders' Equity................ $ 3,011,748 $ 444,687 $ 3,456,435 =========== =========== ============ - ------------------------------------------------------------------------------------------------------------------------------------ Book value per share (Proforma for SparBank)........................ $ 15.46 $ 15.88 $ 15.53 =========== =========== ============ Total shares outstanding (Proforma for SparBank) ................... 16,697,260 3,230,769 19,928,029 =========== =========== ============ - ------------------------------------------------------------------------------------------------------------------------------------ First Statement of Condition Ratios at Period End Midwest Sparbank Proforma - -------------------------------------------------------------------- ----------- ------------ ------------ Loans to assets..................................................... 68.35% 60.55% 67.35% Loans to deposits................................................... 90.72% 72.93% 88.23% Earning assets to total assets...................................... 92.63% 95.22% 92.96% Capital Ratios at Period End - -------------------------------------------------------------------- Tier 1 capital to risk-adjusted assets.............................. 10.76% 18.48% 11.54% Total capital to risk-adjusted assets............................... 11.98% 19.25% 12.79% Leverage ratio...................................................... 8.28% 11.37% 8.69% Asset Quality Ratios at Period End - -------------------------------------------------------------------- Reserve for loan losses to loans.................................... 1.64% 0.78% 1.54% Nonperforming loans to loans........................................ 0.62% 1.15% 0.68% Nonperforming assets to loans and foreclosed real estate............ 0.95% 1.21% 0.98% - 9 - FIRST MIDWEST BANCORP, INC. AND SPARBANK, INC. Proforma Perfomance Highlights Quarter ended March 31, 1997 (dollars in thousands) First Midwest Sparbank Proforma ----------- --------- ----------- Performance Ratios - ------------------------------------------- Return on average assets .................. 1.17% 1.52% 1.22% Return on average equity .................. 13.66% 13.44% 13.62% Net interest margin - tax equivalent....... 4.64% 3.90% 4.48% Efficiency ratio .......................... 59.10% 53.96% 58.53% Statement of Condition Highlights - ---------------------------------- Total assets............................... $3,011,748 $444,687 $3,456,435 Total loans................................ $2,058,677 $269,275 $2,327,952 Total deposits............................. $2,269,264 $369,208 $2,638,472 Stockholders' equity....................... $258,089 $51,299 $309,388 Statement of Condition Ratios at Period End - ------------------------------------------- Loans to assets............................ 68.35% 60.55% 67.35% Loans to deposits.......................... 90.72% 72.93% 88.23% Earning assets to total assets............. 92.63% 95.22% 92.96% Capital Ratios at Period End - ------------------------------------------- Total equity to assets..................... 8.57% 11.54% 8.95% Tier 1 capital to risk-adjusted assets..... 10.73% 18.48% 11.54% Leverage ratio............................. 8.28% 11.37% 8.69% Asset Quality Ratios at Period End - ------------------------------------------- Reserve for loan losses to loans........... 1.64% 0.78% 1.54% Nonperforming loans to loans............... 0.62% 1.15% 0.68% Nonperforming assets to loans and foreclosed real estate................. 0.95% 1.21% 0.98%