Exhibit 13
Dear Shareholder:
It is a pleasure to report to you on our financial performance for the fourth
quarter and full year 1997 and an important acquisition just announced.
Net income before special charges for the quarter ended December 31, 1997
increased to $11.7 million, or 58 cents per share, as compared to last year's
like quarter of $10.5 million, or 52 cents per share, an increase on a per share
basis of 11.5%. For full year 1997, net income before special charges increased
to $43.9 million, or $2.20 per share, as compared to 1996's net income before
special credits of $39.6 million, or $1.95 per share, an increase on a per share
basis of 12.8%
During the fourth quarter we completed the earlier announced acquisition of
SparBank Incorporated and its subsidiary, McHenry State Bank.
We are very pleased and excited to inform you that on January 15, 1998 the
Company entered into a definitive agreement to acquire Heritage Financial
Services, Inc., a $.13 billion bank holding company serving southwest suburban
Chicago. This strategically important acquisition will increase the Company's
assets to approximately $5.0 billion, deposits to nearly $4.0 billion and
shareholders' equity to $450 million making First Midwest the premier suburban
Chicago banking franchise. As this acquisition will require shareholder
approval, we will be required to postpone the Annual Shareholders Meeting until
approximately June 15 to consider this matter. More about this later.
As always, we remain committed to enhancing the value of your investment in
First Midwest.
Sincerely,
ROBERT P. O'MEARA
Robert P. O'Meara
President and CEO
January 20, 1998
PERFORMANCE SUMMARY (unaudited)
(amounts in thousands except per share data)
Quarters Ended Years Ended
December 31, December 31,
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1997 1996 1997 1996
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STATEMENTS OF INCOME
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Net interest income $36,476 $36,235 $ 144,724 $ 138,974
Provision for loan losses 3,209 3,512 8,765 7,789
Noninterest income 9,696 9,448 37,240 33,750
Noninterest expense 32,055 25,895 113,828 104,732
Income taxes 4,274 5,744 20,556 20,331
Net Income $ 6,634 $10,532 $ 38,815 $ 39,872
Net Income - before special charges/credits(1) $11,716 $10,532 $ 43,897 $ 39,644
Net Income Per Share $ 0.33 $ 0.52 $ 1.94 $ 1.96
Net Income Per Share - before special
charges/credits(1) $ 0.58 $ 0.52 $ 2.20 $ 1.95
Net Income Per Share, assuming dilution $ 0.33 $ 0.52 $ 1.92 $ 1.95
Dividends per share $ 0.225 $ 0.20 $ 0.825 $ 0.70
Return on average assets 0.73% 1.19% 1.10% 1.12%
Return on average assets - before special
charges/credits(1) 1.29% 1.19% 1.25% 1.11%
Return on average stockholders' equity 7.87% 13.37% 12.13% 13.08%
Return on average stockholders' equity - before
special charges/credits(1) 13.89% 13.37% 13.72% 13.00%
STATEMENTS OF CONDITION December 31,
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1997 1996
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Cash $ 115,642 $ 119,189
Investments 1,055,102 993,789
Loans 2,333,252 2,352,225
Reserve for loan losses (37,344) (32,202)
Other assets 168,490 141,999
Total Assets $3,635,142 $3,575,000
Deposits $2,795,975 $2,636,823
Other liabilities 501,655 625,618
Stockholders' equity 337,512 312,559
Total Liabilities and Stockholders' Equity $3,635,142 $3,575,000
Quarters Ended Years Ended
December 31, December 31,
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FMBI STOCK PRICE
(NASDAQ:NMS) 1997 1996 1997 1996
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At Period End $ 43.75 $ 32.63 $ 43.75 $ 32.63
Period High 45.25 33.00 45.25 33.00
Period Low 36.00 23.81 29.38 21.38
Book value per share at period end 16.82 15.49 16.82 15.49
Market price to book value at period end 2.6 x 2.1 x 2.6 x 2.1 x
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(1) Special Charges/Credits - The 1997 periods exclude $5,082 ($6,742 pretax)
or $.25 per share in expense related to the acquisition of SparBank, Inc.
consisting of $4,292 ($5,446 pretax) in acquisition expenses and $790
($1,296 pretax) in provisions for loan losses incident to conforming
SparBank's credit policies to First Midwest's. The 1996 periods exclude
$228 ($287 pretax) or $.01 per share from acquisition credits net of a one-
time Savings Association Insurance Fund assessment.
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Financial information for all periods presented have been restated to include
the October, 1997 acquisition of SparBank, Incorporated that was accounted for
as a pooling of interests.