News Release
First Midwest Bancorp
[FIRST MIDWEST BANCORP, INC. LOGO GOES HERE] 300 Park Blvd., Suite 405
P.O. Box 459
Itasca, Illinois 60143-9768
(630) 875-7450
FOR IMMEDIATE RELEASE
CONTACT: James M. Roolf
630/875-7452
TRADED: NASDAQ/NMS
SYMBOLS: FMBI HERS
FIRST MIDWEST BANCORP TO ACQUIRE
HERITAGE FINANCIAL SERVICES
ITASCA, IL., JANUARY 15, 1998 -- First Midwest Bancorp, Inc. (NASDAQ:FMBI) and
Heritage Financial Services, Inc. (NASDAQ:HERS) today jointly announced that
they have entered into a definitive agreement whereby First Midwest will acquire
Heritage, a $1.3 billion holding company headquartered in southwest suburban
Chicago's Tinley Park, Illinois. The combined company will have assets of
approximately $5.0 billion, deposits of nearly $4.0 billion, shareholders'
equity of $450 million and a market capitalization exceeding $1.3 billion.
The agreement provides that Heritage's shareholders will receive .7695 shares of
First Midwest common stock for each share of Heritage common stock resulting in
the issuance of approximately 9.7 million First Midwest shares. Based on First
Midwest's January 14 closing price of $42.38 per share, the transaction is
valued at approximately $411 million. The transaction will be structured as a
tax-free share exchange and accounted for as a pooling of interests. In
connection with the agreement, Heritage has granted First Midwest an option to
purchase 19.9% of its common stock under certain circumstances. The agreement
has been approved by the Board of Directors of both First Midwest and Heritage.
Following receipt of shareholder and customary regulatory approvals, the
acquisition is expected to close in the second quarter. After closing, three
Directors of Heritage will join the current 11 member Board of Directors of
First Midwest.
Based upon projected savings only, the transaction is expected to be
approximately 3.5% dilutive to 1998 earnings and accretive to 1999 earnings.
Cost savings approximating 30% of Heritage's noninterest expense are projected
with 40% being realized in 1998 and full realization in 1999. A one-time, pre-
tax acquisition charge of approximately $15.5 million will be taken in the
quarter the transaction is closed.
Commenting on the acquisition, First Midwest Bancorp President and CEO, Robert
P. O'Meara, said, "in addition to being the largest, this is clearly the most
important acquisition we have made and we couldn't be more excited. This
acquisition represents a significant strategic market fill-in that increases our
suburban Chicago deposit base by a dramatic 48% while increasing deposits
overall by 40%. In Heritage we are talking about southwest Cook County's
preeminent bank, a bank that is a historically solid performer and that enjoys
longstanding relationships with a variety of commercial and retail customers.
With this acquisition we are creating the premier independent suburban Chicago
banking franchise."
Richard T. Wojcik, Heritage Chairman and CEO, commented, "in First Midwest we
found local suburban bankers of a like business philosophy who are both
intensely focused on satisfying customers' financial needs and maintaining
strong commitments to communities served. We have built a strong franchise and
are pleased to be a part of this important new Company."
As a result of the combination, First Midwest will enjoy the #1 or #2 deposit
market share rank in 3 of the 5 suburban counties contiguous to Cook County, #1
in Will and #2 in each of Lake and McHenry Counties. (Away from suburban
Chicago, the Company also holds the #2 deposit share rank in the Illinois-Iowa
Quad Cities MSA, the largest banking market in Illinois outside of Chicago.)
Heritage's 17 branches will bring First Midwest's suburban Chicago office
network to 56 and its total network to 72. This important acquisition magnifies
First Midwest's focus on the suburban Chicago market where approximately 85%
of the Company's franchise will now be located.
With the acquisition, First Midwest's assets increase to approximately $5.0
billion, continuing it as the third largest banking company headquartered in
Illinois. It provides commercial banking, trust, investment management, mortgage
and related financial services to a variety of consumer, business and
governmental customers in 47 communities, primarily in northern Illinois.
FORWARD LOOKING INFORMATION
This presentation contains certain estimates and projections regarding the
combined company following the merger. These estimates and projections
constitute forward-looking statements (within the meaning of the Private
Securities Litigation Reform Act of 1995), which involve significant risks and
uncertainties. Actual results may differ materially from the results discussed
in these forward-looking statements. Internal and external factors that might
cause such a difference include, but are not limited to: (1) expected cost
savings from the mergers cannot be fully realized or realized within the
expected time frame; (2) revenues following mergers are lower than expected; (3)
competitive pressures among depository institutions increase significantly; (4)
costs or difficulties related to the integration; (5) changes in the interest
rate environment reduce net interest income; (6) general economic conditions
deteriorate, either nationally or in the states in which the combined company
will be doing business; and (7) legislation or regulatory changes adversely
affect the businesses in which the combined company would be engaged.
FIRST MIDWEST TO ACQUIRE HERITAGE FINANCIAL
TRANSACTION OVERVIEW
Purchase Price: $32.61* per share.
Deal Value: $411 million*.
Accounting Treatment: Pooling of interests.
Structure: Tax-free share exchange.
Exchange Ratio: .7695 First Midwest shares for each share
of Heritage. 9.7 million* First Midwest
shares to be issued.
Terms: Fixed exchange ratio. No collar.
Heritage has the right to terminate if
First Midwest stock falls 20% and
underperforms a peer index by 20%.
Option: 19.9% option granted to First Midwest.
Agreement: Definitive merger agreement signed January
14, 1998. Due diligence completed.
Approvals: Shareholders of First Midwest and
Heritage. Customary regulatory approvals.
Anticipated Closing: May-June, 1998.
Nonrecurring Charge: Approximately $15.5 million
* Based on First Midwest's closing price of $42.38 on January 14, 1998
FIRST MIDWEST TO ACQUIRE HERITAGE FINANCIAL
TRANSACTION MULTIPLES
Earnings Impact: Based on cost savings only,
3.5% dilutive in 1998 and
accretive in 1999.
Price/1997(1) Earnings: 23.0x
Price/1998(2) Earnings: 22.0x
Price/ 12/31/97(3) Book Value: 3.3x
Price/ 12/31/97(3) Tangible Book Value: 3.8x
Premium to 12/31/97(3) Deposits 27.1%
(1) 9 months actual + 4Q consensus estimate
(2) Consensus estimate
(3) Estimated
FIRST MIDWEST TO ACQUIRE HERITAGE FINANCIAL
STRATEGIC RATIONALE
Significant Strategic Market Expansion in Highly Desirable Suburban Chicago.
Heritage Contributes Strong Profitability, Excellent Asset Quality and Seasoned
Management.
FMBI's Suburban Chicago Deposit Base Expands by a Dramatic 48%, Overall
Deposits by 40%.
Propels FMBI to the Next Level - $5 Bil in Assets, $1.3 Bil in Market Cap -
Enhances Its Relevancy.
CREATES THE PREMIER INDEPENDENT SUBURBAN CHICAGO
BANKING FRANCHISE.
_______________________________
Accretive to Earnings in 1999 Based Solely on Cost Savings.
Successful Integration of SparBank will be completed in February 1998.
________________________________
Attractive Opportunities Exist for the "New FMBI" Going Forward.
Profile of the "New" First Midwest
Leading Independent Illinois BHC
. $5.0 Bil Assets
. 72 Offices - 87 ATMS
. $3.0 Bil in Loans
. $3.9 Bil in Deposits
. 550,000 Relationships
. $1.3 Bil Market Cap
. Largest BHC in Illinois Outside Chicago
Premier Independent Suburban Chicago Franchise
. Suburban Chicago Headquartered
. $4.2 Bil Assets - 85% of Company
. 56 Offices - 79 ATMs
. Dynamic and Growing Markets
. #1 in Will County
. #2 in Lake & McHenry Counties
. #14 in Cook County
Map of state of Illinois highlighting FMBI'S current suburban Chicago presence
of 33 offices in Will, DuPage, Kane, and Lake Counties. In addition, the map
emphasizes Southern Cook County and Will (the counties in which Heritage is
located) reflecting FMBI's expanded suburban Chicago presence as a result of the
announced acquisition with Heritage Financial Services, Inc.
Deposit Market Share Rank by County
FMBI HERS Combined
---- ---- ----------
Will 2 8 1 (20%)
Lake 2 - 2 (8%)
McHenry 2 - 2 (14%)
Cook 75 16 14(1%)
DuPage NM NM NM
Kane NM - NM
FIRST MIDWEST BANCORP, INC. AND HERITAGE FINANCIAL SERVICES, INC.
Proforma Consolidated Statements of Income
(Unaudited)
Nine Months Ended September 30, 1997
(dollars in thousands, except per share data)
First
Midwest Heritage Proforma
---------- ---------- ----------
Total interest income....................................... $201,363 $67,692 $269,055
Total interest expense...................................... 93,109 31,493 124,602
-------- ------- --------
Net interest income..................................... 108,254 36,199 144,453
Provision for loan losses................................... 5,556 450 6,006
-------- ------- --------
Net interest income after
provision for loan losses............................. 102,698 35,749 138,447
-------- ------- --------
Noninterest income
------------------
Service charges on deposit accounts......................... 8,554 3,846 12,400
Trust, investment management and investment product fees.... 5,650 1,586 7,236
Other income................................................ 12,509 1,295 13,804
Security transactions, net.................................. 831 150 981
-------- -------- --------
Total noninterest income.................................. 27,544 6,877 34,421
-------- -------- --------
Noninterest expense
-------------------
Employee-related costs...................................... 43,213 12,820 56,033
Occupancy and equipment..................................... 11,596 3,702 15,298
Computer processing costs................................... 6,138 896 7,034
All other costs............................................. 20,835 6,086 26,921
-------- -------- --------
Total noninterest expense................................. 81,782 23,504 105,286
-------- -------- --------
Income before income tax expense........................ 48,460 19,122 67,582
Income tax expense ......................................... 16,282 6,041 22,323
-------- -------- --------
Net income.............................................. $32,178 $13,081 $45,259
======== ======== ========
Net income per share ................................... $1.61
==========
Weighted avg shares outstanding ............................ 19,960,497
==========
----------------------------------------------------------------------------------------------------------------------
First
Performance Ratios Midwest Heritage Proforma
---------------------------------------------------------------------------- ---------- ----------
Return on average assets ................................... 1.23% 1.39% 1.27%
Return on average stockholders' equity ..................... 13.55% 15.78% 14.12%
Net interest margin - tax equivalent........................ 4.58% 4.49% 4.56%
Efficiency ratio ........................................... 58.35% 50.80% 56.50%
FIRST MIDWEST BANCORP, INC. AND HERITAGE FINANCIAL SERVICES, INC.
Proforma Consolidated Statements of Condition
(Unaudited)
30-Sep-97
(dollars in thousands, except for per share data)
First
Assets Midwest Heritage Proforma
---------- ----------- ------------
Cash and short-term investments.............................. $175,939 $36,524 $212,463
Securities available for sale, held to maturity and trading.. 971,247 514,617 1,485,864
Loans, net of unearned discount.............................. 2,339,063 697,395 3,036,458
Reserve for loan losses.................................... (35,926) (9,761) (45,687)
Goodwill..................................................... 11,820 13,680 25,500
Mortgage servicing rights and other intangible assets........ 9,296 3,015 12,311
Premises and equipment...................................... 60,087 19,567 79,654
Accrued interest receivable and other assets................. 73,483 9,666 83,149
--------- -------- ---------
Total Assets............................................. $3,605,009 $1,284,703 $4,889,712
========== ========== ==========
Liabilities and Stockholders' Equity
Liabilities:
Noninterest-bearing deposits............................... $442,207 $170,063 $612,270
Interest-bearing deposits.................................. 2,348,381 936,392 3,284,773
--------- --------- ---------
Total deposits........................................... 2,790,588 1,106,455 3,897,043
Short-term borrowings...................................... 430,654 52,641 483,295
Accrued interest payable and other liabilities............. 50,495 9,579 60,074
--------- --------- ---------
Total liabilities........................................ 3,271,737 1,168,675 4,440,412
--------- --------- ---------
Total stockholders' equity .................................. 333,272 116,028 449,300
--------- --------- ---------
Total Liabilities and Stockholders' Equity............... $3,605,009 $1,284,703 $4,889,712
========== ========== ==========
- -------------------------------------------------------------------------------------------------------------------
First
Statement of Condition Ratios at Period End Midwest Heritage Proforma
- ------------------------------------------------------------ ---------- ----------- ----------
Loans to assets............................................. 64.88% 54.28% 62.10%
Loans to deposits........................................... 83.82% 63.03% 77.92%
Earning assets to total assets.............................. 92.38% 93.58% 92.89%
Equity to assets............................................ 9.24% 9.03% 9.19%
Tangible equity to assets................................... 8.71% 7.83% 8.48%
Asset Quality Ratios at Period End
- -------------------------------------------------------------
Reserve for loan losses to loans............................. 1.54% 1.40% 1.50%
Nonperforming loans to loans................................. 0.53% 0.39% 0.50%
Nonperforming assets to loans and foreclosed real estate..... 0.74% 0.47% 0.68%