-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HwHBOhFvMsMb0l5be3JPZTgUvlaHxkDpTH/gk8N226MDn8fkqx5r/PsasdCgm/r0 r8N04fG4BuSoUje+6HFcVg== 0000702325-96-000009.txt : 19960517 0000702325-96-000009.hdr.sgml : 19960517 ACCESSION NUMBER: 0000702325-96-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST MIDWEST BANCORP INC CENTRAL INDEX KEY: 0000702325 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 363161078 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-10967 FILM NUMBER: 96567897 BUSINESS ADDRESS: STREET 1: 300 PARK BLVD SUITE 405 STREET 2: P O BOX 459 CITY: ITASCA STATE: IL ZIP: 60143-0459 BUSINESS PHONE: 7088757450 MAIL ADDRESS: STREET 1: 300 PARK BLVD SUITE 405 STREET 2: P O BOOX 459 CITY: ITASCA STATE: IL ZIP: 60143-0459 10-Q 1 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 MARCH 31, 1996, or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to 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 May 8, 1996, 13,690,997 shares of the Registrant's $.01 par value common stock were outstanding, excluding treasury shares. (Refer to footnote (1) under Item 4 located on page 14 for April, 1996 change made to par value of common stock.) Exhibit Index is located on page 15. 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 . . . . . . . . . . . . . . . . . . . . . . . . . 9 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 14 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS FIRST MIDWEST BANCORP, INC. CONSOLIDATED STATEMENTS OF CONDITION (Dollar amounts in thousands except per share data)
MARCH 31, DECEMBER 31, 1996 (1) 1995 (2) ASSETS Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 136,908 $ 141,336 Funds sold and other short term investments . . . . . . . . . . . . . . . . . 7,403 7,927 Mortgages held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,919 20,011 Securities available for sale, at market value . . . . . . . . . . . . . . . . 920,639 831,030 Securities held to maturity, at amortized cost (market value of $26,733 and $27,641 at March 31, 1996 and December 31, 1995, respectively) . . . . . . 26,511 27,527 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,939,500 2,085,604 Reserve for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . (28,076) (29,194) Net loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,911,424 2,056,410 Premises, furniture and equipment . . . . . . . . . . . . . . . . . . . . . . 46,851 47,108 Accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . 20,396 24,786 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,160 51,162 TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,147,211 $ 3,207,297 LIABILITIES Demand deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 349,447 $ 360,895 Savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,219 251,468 NOW accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 258,960 262,959 Money market deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 282,424 285,058 Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,107,927 1,111,678 Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,248,977 2,272,058 Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 610,302 649,821 Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,978 12,262 Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,169 23,923 TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,895,426 2,958,064 STOCKHOLDERS' EQUITY Preferred stock, no par value: 1,000,000 shares authorized, none issued . . . --- Common stock, no par value: 20,000,000 shares authorized (3); 14,007,291 shares issued; 13,689,424 and 13,679,747 outstanding at March 31, 1996 and December 31, 1995, respectively . . . . . . . . . . . . . . . . . . . . . 23,475 23,475 Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . 34,368 35,516 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,888 195,853 Unrealized net appreciation (depreciation) on securities, net of tax . . . . . (691) 486 Treasury stock, at cost - 317,867 and 327,544 shares at March 31, 1996 and December 31, 1995, respectively . . . . . . . . . . . . . . . . . . . . (6,255) (6,097) TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . 251,785 249,233 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . $ 3,147,211 $ 3,207,297 See notes to consolidated financial statements. (1) Unaudited (2) Audited - See December 31, 1995 Form 10-K for Auditor's Report. (3) Refer to footnote (1) under Item 4 located on page 14 for April, 1996 change made to par value and authorized number of shares of common stock.
FIRST MIDWEST BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME (Dollar amounts in thousands, except per share data)
THREE MONTHS ENDED MARCH 31, (1) 1996 1995 INTEREST INCOME Loans . . . . . . . . . . . . . . . . . . . . . . . . . $ 46,759 $ 42,347 Securities available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,805 11,728 Securities held to maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423 3,966 Funds sold and other short-term investments . . . . . . . . . . . . . . . . . . . . . 196 293 TOTAL INTEREST INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,183 58,334 INTEREST EXPENSE Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,436 17,585 Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,347 11,524 TOTAL INTEREST EXPENSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,783 29,109 NET INTEREST INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,400 29,225 PROVISION FOR LOAN LOSSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 859 1,648 Net interest income after provision for loan losses . . . . . . . . . . . . . . . 28,541 27,577 NONINTEREST INCOME Service charges on deposit accounts . . . . . . . . . . . . . . . . . . . . . . . . . 2,338 2,356 Trust and investment management fees . . . . . . . . . . . . . . . . . . . . . . . . 1,623 1,488 Other service charges, commissions and fees . . . . . . . . . . . . . . . . . . . . . 1,387 1,231 Mortgage banking revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 915 547 Security gains, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 183 Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 571 602 TOTAL NONINTEREST INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,910 6,407 NONINTEREST EXPENSE Salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,955 9,960 Retirement and other employee benefits . . . . . . . . . . . . . . . . . . . . . . . 2,550 2,760 Occupancy expense of premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,700 1,488 Equipment expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,459 1,518 Computer processing expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,590 1,584 FDIC insurance premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149 1,182 Acquisition credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (324) - Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,074 5,134 TOTAL NONINTEREST EXPENSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,153 23,626 Income before income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . 12,298 10,358 Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,373 3,650 NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,925 $ 6,708 NET INCOME PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.58 $ 0.49 Cash dividends declared per share . . . . . . . . . . . . . . . . . . . . . . . . $ 0.21 $ 0.19 Weighted average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . 13,696,018 13,518,207 See notes to consolidated financial statements. (1) Unaudited
FIRST MIDWEST BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollar amounts in thousands)
THREE MONTHS ENDED MARCH 31, (1) 1996 1995 OPERATING ACTIVITIES Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,925 $ 6,708 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . 859 1,648 Provision for depreciation . . . . . . . . . . . . . . . . . . . . . . . . . 1,522 1,409 Net (accretion) amortization of securities available for sale premiums and discounts . . . . . . . . . . . . . . . . . (1,378) 701 Net accretion of securities held to maturity premiums and discounts . . . . . (15) (130) Net gains on securities available for sale transactions . . . . . . . . . . . (76) (183) Net gains on sales of premises, furniture and equipment . . . . . . . . . . . (28) (12) Net decrease in deferred income taxes . . . . . . . . . . . . . . . . . . . . (174) (1,161) Net amortization of purchase accounting adjustments and goodwill . . . . . . 457 358 Changes in operating assets and liabilities: Net increase in loans held for sale . . . . . . . . . . . . . . . . . . . . (2,908) (2,896) Net decrease (increase) in accrued interest receivable . . . . . . . . . . 4,390 (2,030) Net (increase) decrease in other assets . . . . . . . . . . . . . . . . . . (2,672) 5,095 Net (decrease) increase in accrued interest payable . . . . . . . . . . . . (1,284) 403 Net increase in other liabilities . . . . . . . . . . . . . . . . . . . . . 1,420 3,054 NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . . . . . . . . . 8,038 12,964 INVESTING ACTIVITIES Securities available for sale: Proceeds from sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 415,430 71,540 Proceeds from maturities, calls and paydowns . . . . . . . . . . . . . . . . . . 209,700 10,352 Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (572,926) (79,302) Securities held to maturity: Proceeds from maturities, calls and paydowns . . . . . . . . . . . . . . . . . . 2,707 51,173 Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,676) (20,502) Loans made to customers, net of principal collected . . . . . . . . . . . . . . . . 625 (31,869) Proceeds from sales of foreclosed real estate . . . . . . . . . . . . . . . . . . . 1,185 1,973 Proceeds from sales of premises, furniture and equipment . . . . . . . . . . . . . 64 38 Purchases of premises, furniture and equipment . . . . . . . . . . . . . . . . . . (1,301) (2,542) NET CASH USED BY INVESTING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . 53,808 861 FINANCING ACTIVITIES Net decrease in deposit accounts . . . . . . . . . . . . . . . . . . . . . . . . . (23,081) (16,877) Net (decrease) increase in short-term borrowings . . . . . . . . . . . . . . . . . (39,519) 8,337 Purchases of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,266) (78) Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,890) (2,320) Cash dividends paid by acquiree . . . . . . . . . . . . . . . . . . . . . . . . . . - (181) Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 958 713 NET CASH USED BY FINANCING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . (66,798) (10,406) Net (decrease) increase in cash and cash equivalents . . . . . . . . . . . . . . (4,952) 3,419 Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . 149,263 130,394 CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . . . . . . . $ 144,311 $ 133,813 Supplemental disclosures: Interest paid to depositors and creditors . . . . . . . . . . . . . . . . . . . $ 31,066 $ 28,627 Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,402 575 Non-cash transfers to foreclosed real estate from loans . . . . . . . . . . . . 2,350 596 Non-cash transfers to securities available for sale from loans . . . . . . . . . $ 141,164 $ - 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 accompanying unaudited interim consolidated financial statements of First Midwest Bancorp, Inc. ("First Midwest") have been prepared in accordance with generally accepted accounting principals and with the rules and regulations of the Securities and Exchange Commission for interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principals for complete financial statements. The preparation of financial statements requires Management to make estimates and assumptions that affect the recorded amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the recorded period. Actual results could differ from those estimates. In addition, certain reclassifications have been made to the 1995 data to conform to the 1996 presentation. For further information with respect to significant accounting policies followed by First Midwest in the preparation of its consolidated financial statements, refer to First Midwest's Annual Report on Form 10-K for the ended December 31, 1995. On December 20, 1995, First Midwest acquired CF Bancorp, Inc. ("CF"), whose principal subsidiary was Citizens Federal Savings Bank ("Citizens Federal"), in a transaction accounted for as a pooling of interests. Accordingly, prior period financial statements and other financial disclosures have been restated as if the combining companies had been consolidated for all periods presented. 2. ACQUISITION Pursuant to the acquisition of CF on December 20, 1995, each share of common stock of CF was converted into 1.4545 shares of First Midwest, with 1,339,989 First Midwest shares being issued to CF stockholders. Coincident with the acquisition, First Midwest recorded $4,887 in acquisition-related costs consisting of $4,339 in acquisition expenses and $548 in provisions for loan losses incident to conforming Citizens Federal's credit policies to First Midwest's. The acquisition expenses, certain of which are nondeductible for income tax purposes, were recorded through the establishment of a reserve which is comprised of the following components for the dates indicated: March 31, December 20, Acquisition Reserve: 1996 1995 Executive severance agreements $ 923 $ 1,290 Employee severance 416 545 Outplacement and other employee costs 112 275 Bad debt reserve recapture 992 992 Investment advisor fees - 410 Legal, accounting and other professional fees 197 827 $ 2,640 $ 4,339
During the first quarter of 1996, the acquisition reserve was reduced by $1,699 as a result of $1,375 in acquisition related expenses being paid out and $324 of the reserve being reversed. The reversal was primarily related to lesser severance being paid to former Citizens Federal executives and employees who resigned or accepted reduced payouts during the first quarter of 1996. The bad debt reserve recapture totaling $992 in the above table represents the after-tax cost incident to Citizens Federal's converting from a thrift institution to a national bank. Upon conversion, the institution becomes subject to recapture of all or a portion of its bad debt reserve and would be required to immediately record, for financial accounting purposes, a current or deferred tax liability for the amount of recaptured taxes for which liabilities previously have not been recorded. Citizens Federal's conversion from a thrift to a national bank, as contemplated by the acquisition contract and as currently planned, will take place in 1996 prior to its merger with the Bank. In late 1995, legislation was introduced in Congress under which pre-1988 bad debt reserves of thrifts would not be subject to recapture upon conversion to a national bank. The legislation was a part of the budget reconciliation bill which was vetoed by President Clinton in December, 1995. The bad debt legislation is currently under consideration as part of both the House and Senate health care reform bills. The likelihood of passage of the thrift bad debt tax relief legislation is unknown at this time and is difficult to predict because the outcome of the health care reform rests largely on the reconciliation of several controversial provisions. Importantly, enactment of the thrift bad debt relief legislation would eliminate the need for the bad debt reserve recapture portion of the acquisition expenses and permit its reversal. Additional information with respect to the components of the acquisition reserve can be found in First Midwest's Annual Report on Form 10-K for the year ended December 31, 1995 in Footnote 2 located on page 47. 3. SECURITIES SECURITIES AVAILABLE FOR SALE - The amortized cost and market value of securities available for sale at March 31, 1996 and December 31, 1995 are as follows:
Securities Available for Sale March 31, 1996 December 31, 1995 Gross Gross Gross Gross Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market Cost Gains Losses Value Cost Gains Losses Value U.S. Treasury securities . . $ 115,835 $ 62 $ (177) $ 115,720 $188,854 $ 803 $ - $ 189,657 U.S. Agency securities . . . 276,888 137 (1,285) 275,740 266,534 620 (279) 266,875 Mortgage-backed securities . 524,050 2,733 (2,537) 524,246 369,888 876 (1,248) 369,516 Other securities . . . . . . 4,931 2 - 4,933 4,958 24 - 4,982 Total . . . . . . . . . . $ 921,704 $ 2,934 $(3,999) $ 920,639 $830,234 $ 2,323 $(1,527) $ 831,030
SECURITIES HELD TO MATURITY - The amortized cost and market value of securities held to maturity at March 31, 1996 and December 31, 1995 are as follows:
Securities Held to Maturity March 31, 1996 December 31, 1995 Gross Gross Gross Gross Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market Cost Gains Losses Value Cost Gains Losses Value U.S. Treasury securities . . $ 902 $ 4 $ - $ 906 $ 828 $ 8 $ - $ 836 State and municipal securities . . . 14,301 227 (35) 14,493 14,403 320 (241) 14,482 Other securities . . . . . . 11,308 26 - 11,334 12,296 27 - 12,323 Total . . . . . . . . . . $ 26,511 $ 257 $ (35) $ 26,733 $ 27,527 $ 355 $ (241) $ 27,641
4. LOANS The following table provides the book value of loans, by major classification, as of the dates indicated:
March 31, December 31, 1996 1995 Commercial and industrial . . . . . . . . . . . . . . . . . . . . . $ 585,138 $ 525,210 Agricultural . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,055 32,111 Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 567,540 568,344 Real estate - 1-4 family . . . . . . . . . . . . . . . . . . . . . 186,204 325,056 Real estate - commercial . . . . . . . . . . . . . . . . . . . . . 446,079 422,073 Real estate - construction . . . . . . . . . . . . . . . . . . . . 112,576 98,688 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,908 17,122 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,939,500 $ 2,085,604
During the first quarter of 1996, First Midwest securitized approximately $140,000 in 1-4 family real estate loans, retaining such assets in its securities available for sale portfolio as mortgage-backed securities. 5. RESERVE FOR LOAN LOSSES/IMPAIRED LOANS Transactions in the reserve for loan losses for the quarters ended March 31, 1996 and 1995 are summarized below:
Quarters ended March 31, 1996 1995 Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . $ 29,194 $ 25,154 Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . 859 1,648 Loans charged-off . . . . . . . . . . . . . . . . . . . . . . . . . . (2,670) (1,979) Recoveries of loans previously charged-off . . . . . . . . . . . . . . 693 447 Net loans charged-off . . . . . . . . . . . . . . . . . . . . . . . (1,977) (1,532) Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . $ 28,076 $ 25,270
The recorded investment in loans considered impaired at March 31, 1996, as defined by Financial Accounting Standards Board Statement No. 114, was $17,476 of which $9,709 have collateral values equal to or greater than the recorded investment in such loans; the $7,767 balance of impaired loans have collateral values less than the recorded investment in such loans for which a specific loan loss reserve of $2,200 is maintained. For the three months ended March 31, 1996, the average recorded investment in impaired loans was approximately $17,700. 6. CONTINGENT LIABILITIES AND OTHER MATTERS There are certain legal proceedings pending against First Midwest and its Affiliates in the ordinary course of business at March 31, 1996. In assessing these proceedings, including the advise of counsel, First Midwest believes that liabilities arising from these proceedings, if any, would not have a material adverse effect on the consolidated financial condition of First Midwest. 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. A bench trial commenced on February 26, 1996 with First Midwest presenting its case over the ensuing five days with the trial being continued to late June, 1996 when the insurance carrier will present its defense. Neither the outcome of the trial nor the possibility of settlement can be reasonably quantified or determined at this time. 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 three months ended March 31, 1996 as compared to the same period in 1995. Management's discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying notes presented elsewhere in this report as well as First Midwest's 1995 Annual Report on Form 10-K. Results of operations for the three month period ended March 31, 1996 are not necessarily indicative of results to be expected for the full year of 1996. The consolidated financial information for all periods presented herein have been restated to include First Midwest's 1995 acquisition of CF Bancorp, Inc. accounted for as a pooling of interests. All financial information is presented in thousands of dollars, except per share data. ACQUISITION On December 20, 1995, First Midwest consummated the acquisition of CF Bancorp, Inc. ("CF"), the holding company for Citizens Federal Savings Bank ("Citizens Federal"). Pursuant to the acquisition, each share of common stock of CF was converted into 1.4545 shares of First Midwest, resulting in 1,339,989 First Midwest shares being issued to CF stockholders. Citizens Federal, with assets of $220 million and offices in Davenport and Bettendorf, Iowa, is currently planned to be converted to a national bank and merged into First Midwest Bank, N.A. in 1996. SUMMARY OF PERFORMANCE Net Income Net income for the first quarter of 1996 increased to $7,925 , or $.58 per share from $6,708, or $.49 per share in the first quarter of 1995, representing an increase of 18% 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 March 31, 1996 and 1995. The increase or decrease in each category is further detailed in the discussion and analysis that follows.
Three Months Ended March 31, Change 1996 1995 $ % Net interest income (tax equivalent) . . . . . . . . . . . . . . $ 30,026 $ 29,515 $ 511 1.7% Provision for loan losses . . . . . . . . . . . . . . . . . . . . 859 1,648 (789) (47.9) Noninterest income . . . . . . . . . . . . . . . . . . . . . . . 6,910 6,407 503 7.9 Noninterest expense . . . . . . . . . . . . . . . . . . . . . . . 23,153 23,626 (473) (2.0) Income before income taxes . . . . . . . . . . . . . . . . . . . 12,924 10,648 2,276 Income tax expense/tax equivalent adjustment . . . . . . . . . . 4,999 3,940 1,059 26.9 Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,925 $ 6,708 $ 1,217 18.1% Net Income per share . . . . . . . . . . . . . . . . . . . . . . $ 0.58 $ 0.49 $ 0.09 18.4%
Return on Average Assets and Stockholders' Equity Return on average assets was 1.02% for the first quarter of 1996 as compared to 0.89% for the same quarter in 1995. Return on average stockholders' equity for the first quarter of 1996 was 12.66%, as compared to 12.67% for the 1995 quarter. NET INTEREST INCOME Net interest income on a tax equivalent totaled $30,026 for the first quarter of 1996, representing an increase of $511 over the year ago quarter totaling $29,515. As shown in the Volumes/Rate Analysis located on page 11, the increase in net interest income is comprised of $1,185 in interest income, net of $674 in interest expense. Interest income increased as a result of volume growth, with average interest earning assets totaling $2,922,622 for the first quarter of 1996 as compared to $2,864,443 for the same quarter 1995, for an increase of $58,219. Loans increased by $160 million and represented 71% of total earning assets for the first quarter of 1996 as compared to 67% for the 1995 quarter. Interest income on loans increased by $3,860 due to the volume growth as average interest rates were unchanged between periods. Securities held to maturity declined by $202 million in the first quarter of 1996 as compared to 1995 resulting primarily from a December, 1995 reclassification to the available for sale portfolio. The reclassification stemmed from both a Financial Accounting Standards Board- allowed redesignation between securities classifications and to conforming CF's acquired securities portfolio to First Midwest's. The total securities portfolio, including held to maturity and available for sale securities, declined by $124 million and represented 28% of earning assets for 1996 as compared to 33% in 1995. Such decline reduced interest income by $3,142 in the first quarter of 1996 as compared to 1995 and reflects a redeployment of available funds into higher-yielding loans. Funds sold and other short-term investments, representing the smallest component of earning assets, increased by $21 million in the first quarter of 1996, resulting in increased interest income of $467. The $674 increase in interest expense resulted from increases in both volumes of and rates on interest bearing liabilities. The most significant changes occurred in higher volumes and rates on money market and time deposits, which were partly offset by lower volumes and rates on short-term borrowings. New product offerings resulted in the growth in deposits, with certain new money market deposits being tied to the prime rate while the time deposit promotions offered high introductory interest rates. Short-term borrowing balances declined with discretionary funding needs, the rates on which dropped commensurate with short-term market interest rates. The net interest margin declined by five basis points for the first quarter of 1996 to 4.13% from 4.18% in 1995. As shown in the Volume/Rate Analysis, although interest rates on average earning assets decreased by seven basis points from 8.30% in 1995 to 8.23% in 1996, rates on average interest bearing liabilities increased by three basis points, resulting in a cost of funds of 4.77% in 1996 as compared to 4.74% in 1995. The decline in the yield on average earning assets resulted primarily from the securities available for sale portfolio, and is reflective of the relatively short effective duration of First Midwest's securities portfolio which approximates 1.8 years as of March 31, 1996. The average interest rate on interest bearing liabilities increased due to higher rates on money market and time deposits, due to the new product offerings at higher rates previously described. 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 March 31, 1996 and 1995. 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. THREE MONTHS ENDED MARCH 31, 1996 AND 1995 AVERAGE INTEREST AVERAGE BALANCES RATES EARNED/PAID BASIS INCREASE POINTS 1996 1995 (DECREASE) 1996 1995 INC/(DEC) Funds sold and other short-term investments . . . . . . $ 37,624 16,319 21,305 8.12% 7.28% 0.84% Securities available for sale . . . . 785,134 706,664 78,470 6.28 6.73 (0.45) Securities held to maturity . . . . . 26,971 228,984 (202,013) 7.80 7.42 0.38 Loans, net of unearned discount (1) . 2,072,933 1,912,476 160,457 8.98 8.99 (0.01) Total interest-earning assets (1) . $2,922,662 2,864,443 58,219 8.23 % 8.30% (0.07)% Savings deposits . . . . . . . . . . $ 247,121 276,994 (29,873) 2.13 2.16 (0.03) NOW accounts . . . . . . . . . . . . 261,473 283,829 (22,356) 2.32 2.38 (0.06) Money market deposits . . . . . . . . 278,943 228,580 50,363 3.67 3.18 0.49 Time deposits . . . . . . . . . . . . 1,115,611 976,636 138,975 5.79 5.26 0.53 Short-term borrowings . . . . . . . . 610,245 723,124 (112,879) 5.50 6.46 (0.96) Total interest-bearing liabilities $2,513,393 2,489,163 24,230 4.77% 4.74% 0.03% Net interest margin/income (1) . . 4.13% 4.18% (0.05)% (1) Interest income and yields are presented on a tax-equivalent basis.
INTEREST INCREASE/(DECREASE) IN INCOME/EXPENSE INTEREST INCOME/EXPENSE DUE TO: INCREASE 1996 1995 (DECREASE) VOLUME RATE TOTAL Funds sold and other short-term investments . . . . . . . . . . . $ 760 293 467 $ 427 40 467 Securities available for sale . . . . . . . . . 12,251 11,728 523 1,133 (610) 523 Securities held to maturity . . . . . . . . . . 523 4,188 (3,665) (3,934) 269 (3,665) Loans, net of unearned discount (1) . . . . . . 46,275 42,415 3,860 3,582 278 3,860 Total interest-earning assets (1) . . . . . . $ 59,809 58,624 1,185 1,208 (23) 1,185 Savings deposits . . . . . . . . . . . . . . . $ 1,309 1,475 (166) (159) (7) (166) NOW accounts . . . . . . . . . . . . . . . . . 1,511 1,663 (152) (129) (23) (152) Money market deposits . . . . . . . . . . . . . 2,548 1,792 756 432 324 756 Time deposits . . . . . . . . . . . . . . . . . 16,067 12,655 3,412 1,914 1,498 3,412 Short-term borrowings . . . . . . . . . . . . . 8,348 11,524 (3,176) (1,665) (1,511) (3,176) Total interest-bearing liabilities . . . . . $ 29,783 29,109 674 $ 393 281 674 Net Interest margin/income (1) . . . . . . . $ 30,026 29,515 511 $ 814 (303) 511 (1) Interest income and yields are presented on a tax-equivalent basis.
NONINTEREST INCOME Noninterest income totaled $6,910 for the quarter ended March 31, 1996, as compared to $6,407 for the same quarter in 1995. Exclusive of net security gains which totaled $76 for the first quarter of 1996 as compared to $183 for the same quarter of 1995, noninterest income increased by $610. The largest component of this increase was $368 in mortgage banking revenues resulting from growth in real estate loan originations which totaled $58,000 in the 1996 quarter as compared to $34,000 for the same quarter in 1995. Other service charges, commissions and fees contributed $156 of the increase primarily due to revenues on merchants fees on credit card sales and annuity sales revenues. Growth in new trust business resulted in an increase in trust income of $135, while decreases between quarters were realized in service charges on deposits accounts totaling $18 and other income totaling $31. NONINTEREST EXPENSE Noninterest expense totaled $23,153 for the quarter ended March 31, 1996, decreasing by $473 from $23,626 for the same quarter 1995. The largest component of the decline in expense was FDIC insurance premiums, which decreased by $1,033 in the first quarter of 1996 as compared to the like 1995 period, reflective of a reduced premium assessment to approximately .04 cents per $100 of deposits in 1996 as compared to .23 cents per $100 of deposits in 1995. Retirement and other employee benefits expense decreased by $210 primarily as a result of the Company's 1995 restructuring initiative, and foreclosed real estate expense decreased by $216 due to a $3.3 million reduction in principal balances of foreclosed property held from period to period. An acquisition credit of $324 was recorded in the first quarter of 1996 due to forfeited severance resulting from voluntary resignations during the first quarter of 1996 at Citizens Federal. Note 2 to the consolidated financial statements provides additional information with respect to acquisition expenses/credits. In part offsetting the impact of the above referenced expense reductions was an increase in occupancy expenses of $212 in the first quarter of 1996 resulting from rental expense incurred on a new operations center which began in mid-1995. Additionally, other expenses increased by $940, $260 of which was due to insurance expense and reflects the affect of a one- time credit recorded in the 1995 quarter, and $230 of which resulted from legal and professional fees primarily related to the litigation referred to in note 6 to the consolidated financial statements. Also incurred were increases totaling $110 in repossession expense and $90 in advertising and promotions, with the remaining $250 increase in other expense spread among various categories of miscellaneous expense. INCOME TAX EXPENSE Income tax expense totaled $4,373 for the first quarter of 1996, increasing from $3,650 for the same period in 1995 and reflects effective income tax rates of 35.6% and 35.2%, respectively. NONPERFORMING ASSETS AND 90 DAY PAST DUE LOANS At March 31, 1996, nonperforming assets totaled $25,170 and loans past due 90 days or more and still accruing totaled $8,206. 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 1996 1995 90 Day Past Due Loans March 31 Dec. 31 Sept. 30 June 30 March 31 Nonaccrual loans . . . . . . . . . . . . . . . $ 11,428 $ 11,219 $ 9,208 $ 11,924 $ 12,558 Renegotiated loans . . . . . . . . . . . . . . 7,963 7,917 7,942 7,779 7,704 Total nonperforming loans . . . . . . . . . 19,391 19,136 17,150 19,703 20,262 Foreclosed real estate . . . . . . . . . . . . 5,779 4,752 5,664 7,746 9,089 Total nonperforming assets . . . . . . . . . $ 25,170 $ 23,888 $ 22,814 $ 27,449 $ 29,351 % of total loans plus foreclosed real estate 1.29% 1.13% 1.11% 1.36% 1.51% 90 Day past due loans accruing interest . . . . $ 8,206 $ 3,626 $ 8,676 $ 3,800 $ 5,980
The $1,027 increase in foreclosed real estate is primarily due to the addition of a commercial property totaling $1,500, which was partially offset by dispositions in 1-4 family properties of approximately $500. First Midwest's disclosure with respect to impaired loans is contained in note 5 to the consolidated financial statements, located on page 8. PROVISION AND RESERVE FOR LOAN LOSSES Transactions in the reserve for loan losses during the three months ended March 31, 1996 and 1995 are summarized in the following table:
Three months ended March 31, 1996 1995 Balance at beginning period . . . . . . . . . . . . . . . . . . . . . . . $ 29,194 $ 25,154 Provision for loan process . . . . . . . . . . . . . . . . . . . . . . 859 1,648 Loans charged of . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,670) (1,979) Recoveries of loans previously charged-off . . . . . . . . . . . . . . 693 447 Net loans charged-off . . . . . . . . . . . . . . . . . . . . . . . (1,977) (1,532) Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . $ 28,076 $ 25,270
The provision for loan losses charged to operating expense for the first quarter of 1996 totaled $859 as compared to $1,648 for the same quarter in 1995. Loans charged off, net of recoveries, for the quarter totaled $1,977, or .38% of average loans in 1996 as compared to $1,532, or .33% in 1995. 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 March 31, 1996, the reserve for loan losses totaled $28,076, or 1.45% of loans, a level which is considered adequate in relation to the risk of future losses within the loan portfolio. The reserve is comprised of three parts: allocated for specific impaired loans, $2,200; allocated for general segments of unimpaired loans, $9,143; and unallocated, $16,733. That part of the reserve allocated for specific impaired loans is discussed in note 5 to the consolidated financial statements located on page 8. That part of the reserve allocated for general unimpaired loan segments represents First Midwest's best judgment as to potential loss exposure based upon both historical loss trends as well as loan ratings and qualitative evaluations of such segments. The unallocated portion of the reserve is that part not allocated to either a specific loan on which loss is anticipated or allocated to general segments of the unimpaired loan portfolio. CAPITAL ANALYSIS 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. CAPITAL MEASUREMENTS - FRB/OCC
As of March 31, 1996 Bank Holding Company National Bank Minimum Minimum Minimum Well- First Required Required Capitalized Midwest FRB FMB, N.A. OCC FDICIA Tier 1 capital to risk-based assets . . . . . . . . 10.81% 4.00% 8.83% 4.00% 6.00% Total capital to risk-based assets . . . . . . . . 12.06% 8.00% 10.07% 8.00% 10.00% Leverage ratio . . . . . . . . . . . . . . . . . . 7.61% 3.00% 6.28% 3.00% 5.00%
Citizens Federal's primary regulator is the Office of Thrift Supervisions ("OTS"). As of March 31, 1996, Citizens Federal exceeded all applicable capital ratio requirements of the OTS. 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, 1996, First Midwest's Board of Directors authorized a quarterly dividend increase to $0.21 per share representing a 10.5% increase over the previous quarterly dividend of $0.19. As of March 31, 1996, the dividend payout ratio was 35.3% based on net income from operations for the trailing four quarters. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At First Midwest's Annual Meeting of Shareholders held on April 16, 1996, the following matters were submitted to vote: Number of Shares Voted: For Against Abstain - Approving two proposals to amend the Company's Restated Certificate of Incorporation (1) . . . . . . . . . . . . . . . . . . . . . . 9,887,000(2) 1,169,000 137,000 - Approving a proposal to amend the Company's 1989 Omnibus Stock and Incentive Plan (3) . . . . . . . . . . . . . . . . . . 8,515,000(4) 1,479,000 217,000 - Election of four directors . . . . . . . . . . . . . . . . . . . . . ---(5) --- --- (1) The proposals to amend the Company's Restated Certificate of Incorporation increased the number of shares of Common Stock which the Company is authorized to issue from 20 million to 30 million and changed the par value per share of such stock from no stated par value to a par value of $0.01. A copy of the approved Restated Certificate of Incorporation is provided herein as Exhibit 3. (2) Represents 72.3% of shares outstanding. (3) The proposal to amend the Company's 1989 Omnibus Stock and Incentive Plan is fully described in the Company's Proxy Statement filed with the Securities and Exchange Commission on March 8, 1996. (4) Represents 76.1% of shares voted. (5) Each of the four directors received votes in favor of at least 94% of shares voted.
PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - See Exhibit Index appearing on page 15. (b) Form 8-K - On January 4, 1996 First Midwest filed a report on Form 8-K announcing the consummation of the acquisition of CF Bancorp, Inc. on December 20, 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: May 14, 1996 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 3 Restated Articles of Incorporation, as amended 16 27 Financial Data Schedule 26
EX-27 2 FINANCIAL DATA SCHEDULE
9 1000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 136908 3968 3435 0 920639 26511 26733 1939500 28076 3147211 2248977 610302 36147 0 23475 0 0 228310 3147211 46759 12228 196 59183 21436 29783 29400 859 76 23153 12298 7925 0 0 7925 0.58 0.58 4.13 11428 8206 7963 11581 29194 2670 693 28076 11343 0 16733
EX-3 3 EXHIBIT A RESTATED CERTIFICATE OF INCORPORATION OF FIRST MIDWEST BANCORP, INC. ARTICLE FIRST. Name. The name of the Corporation is FIRST MIDWEST BANCORP, INC. ARTICLE SECOND. Registered Agent. The registered office of the Corporation in the State of Delaware is located at 306 South State Street, in the City of Dover, County of Kent. The name of its registered agent at such address is United States Corporation Company. ARTICLE THIRD. Purpose. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. ARTICLE FOURTH. Authorized Stock The total number of shares of stock which the Corporation shall have authority to issue is Thirty-One Million (31,000,000) shares, of which One Million (1,000,000) shares shall be shares of Preferred Stock without par value (hereinafter sometimes referred to as "Preferred Stock"), and Thirty Million (30,000,000) shares shall be shares of Common Stock, $0.01 par value per share (hereinafter sometimes referred to as "Common Stock"). PART I - PREFERRED STOCK The Board of Directors is expressly authorized to adopt, from time to time, a resolution or resolutions providing for the issue of Preferred Stock in one or more series, to fix the number of shares in each such series and to fix the designations and the powers, preferences and relative, optional or other special rights, and the qualifications, limitations and restrictions thereof, of each such series. The authority of the Board of Directors with respect to each such series shall include a determination of the following (which may vary as between the different series of Preferred Stock): (a) The number of shares constituting the series and the distinctive designation of the series; (b) The dividend rate on the shares of the series, the conditions and dates upon which dividends thereon shall be payable, the extent, if any, to which dividends thereon shall be cumulative, and the relative rights of preference, if any, of payment of dividends thereon; (c) Whether or not the shares of the series are redeemable and, if redeemable, including whether such shares shall be redeemable for cash, property or rights or any combination thereof and the times during which such shares shall be redeemable and the amount per share payable in case of redemption, which amount may, but need not, vary according to the time and circumstances of such action; (d) The amount payable in respect of the shares of the series, in the event of any liquidation, dissolution or winding up of the Corporation, which amount may, but need not, vary according to the time or circumstances of such action, and the relative rights of preference, if any, of payment of such amount; (e) Any requirement as to a sinking fund for the shares of the series, or any requirement as to the redemption, purchase or other retirement by the Corporation of the shares of the series; (f) The right, if any, to exchange or convert shares of the series into shares of any other series or class of stock of the Corporation and the rate or basis, time, manner and condition of exchange or conversion; (g) The voting rights, if any, to which the holders of shares of the series shall be entitled; and (h) Any other term, condition or provision [not involving any further participation in the assets or profits of the Corporation other than as permitted and provided for pursuant to the provisions of paragraphs (b), (c), (d), (e) and (f) of this Part I] with respect to the series as the Board of Directors may deem advisable and as shall not be inconsistent with the provisions of this Article Fourth. PART II - COMMON STOCK (a) Dividends. Subject to any rights to receive dividends to which the holders of any outstanding Preferred Stock may be entitled, the holders of the Common Stock shall be entitled to receive dividends, if and when declared payable from time to time by the Board of Directors from any funds legally available therefore. (b) Liquidation. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the Corporation and the preferential amounts to which the holders of any outstanding Preferred Stock shall be entitled, the holders of the Common Stock shall be entitled to share ratably in the remaining assets of the Corporation. The merger or consolidation of the Corporation into or with any other corporation, or the merger of any other corporation into it, or a sale of all or substantially all of the assets of the Corporation, or any purchase or redemption of shares of stock of the Corporation of any class, shall not be deemed to be a liquidation, dissolution or winding up of the Corporation for purposes of this paragraph (b). (c) Voting. Each outstanding share of Common Stock of the Corporation shall entitle the holder thereof to one vote, and, except as otherwise stated or expressed in a resolution or resolutions adopted by the Board of Directors providing for the issue of any Preferred stock or as otherwise provided by law, the exclusive voting power for all purposes shall be vested in the holders of Common Stock. PART III - GENERAL PROVISIONS (a) No Stockholder Consents in Lieu of Voting. No action required to be taken or which may be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, and the power of stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied. (b) Right to Call Special Meetings. Special meetings of the stockholders of the Corporation may be called only by the Board of Directors or the Chairman of the Board of Directors or President of the Corporation; provided, however, that, notwithstanding the foregoing, a special meeting of stockholders may be called by the holders of at least 51% of the voting power of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (the "Voting Stock") solely for the purpose of removing a director or directors for cause [it being understood that, for purposes of this paragraph (b), each share of the Voting Stock shall have the number of votes granted to it pursuant to this Article Fourth]. (c) Removal of Directors. No director may be removed from office except for cause; provided, that, in addition to any affirmative vote required by law or any other provision of this Restated Certificate of Incorporation, the removal of any director shall require the affirmative vote of the holders of at least 67% of the voting power of the then outstanding Voting Stock [it being understood that, for purposes of this paragraph (c), each share of the Voting Stock shall have the number of votes granted to it pursuant to this Article Fourth], and such affirmative vote shall be required notwithstanding the fact that a lesser percentage may be specified by law or in any agreement with any national securities exchange or otherwise. (d) Advance Notice of Stockholder Proposals. At any annual or special meeting of stockholders, proposals by stockholders and persons nominated by stockholders for election as directors shall be considered only if advance notice thereof has been timely given as provided herein by a stockholder of record as of the time of such notice who is entitled to vote at the meeting and such proposals or nominations are otherwise proper for consideration under applicable law and this Restated Certificate of Incorporation and the By-laws of the Corporation. Notice of any proposal to be presented by any stockholder or of the name of any person to be nominated by any stockholder for election as a director of the Corporation at any meeting of stockholders shall be delivered to the Secretary of the Corporation at its principal executive office not less than 120 nor more than 180 days prior to the date of the meeting; provided, however, that if the date of the meeting is first publicly announced or disclosed (in a public filing or otherwise) less than 130 days prior to the date of the meeting, such advance notice shall be given not more than 10 days after such date is first so announced or disclosed. Public notice shall be deemed to have been given more than 130 days in advance of the annual meeting if the Corporation shall have previously disclosed, in the By-laws or otherwise, that the annual meeting in each year is to be held on a determinable date, unless and until the Board determines to hold the meeting on a different date. Any stockholder who gives notice of any such proposal shall deliver therewith the text of the proposal to be presented and a brief written statement of the reasons why such stockholder favors the proposal and setting forth such stockholder's name and address, the number and class of all shares of each class of stock of the Corporation beneficially owned by such stockholder and any material interest of such stockholder in the proposal (other than as a stockholder). Any stockholder desiring to nominate any person for election as a director of the Corporation shall deliver with such notice a statement in writing setting forth the name of the person to be nominated, the number and class of all shares of each class of stock of the Corporation beneficially owned by such person, the information regarding any such person required by paragraphs (a), (e) and (f) of Item 401 of Regulation S-K adopted by the Securities and Exchange Commission (or the corresponding provisions of any regulation subsequently adopted by the Securities and Exchange Commission applicable to this Corporation), such person's signed consent to serve as a director of the Corporation if elected, such stockholder's name and address and the number and class of all shares of each class of stock of the Corporation beneficially owned by such stockholder. As used herein, shares "beneficially owned" shall mean all shares as to which such person, together with such person's affiliates and associates (as defined in Rule 12b-2 under the Securities Exchange Act of 1934), may be deemed to beneficially own pursuant to Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as well as all shares as to which such person, together with such person's affiliates and associates, has the right to become the beneficial owner pursuant to any agreement or understanding, or upon the exercise of warrants, options or rights to convert or exchange (whether such rights are exercisable immediately or only after the passage of time or the occurrence of conditions). The person presiding at the meeting, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall determine whether such notice has been duly given and shall direct that proposals and nominees not be considered if such notice has not been given. ARTICLE FIFTH. Board of Directors. (a) The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. (b) The number of directors constituting the Board of Directors of the Corporation shall be such number, not fewer than three nor more than twenty, as shall be fixed from time to time by resolution of the Board of Directors adopted by the affirmative vote of at least a majority of all members thereof. (c) The Board of Directors shall be and is divided into three classes, Class I, Class II and Class III, which shall be as nearly equal in number as possible. Each director shall serve for a term ending on the date of the third annual meeting of stockholders of the Corporation following the annual meeting at which such director was elected; provided, however, that (1) each director in Class I elected at the annual meeting of stockholders in 1985 shall hold office until the annual meeting of stockholders in 1986, (2) each director in Class II elected at the annual meeting of stockholders in 1985 shall hold office until the annual meeting of stockholders in 1987, and (3) each director in Class III elected at the annual meeting of stockholders in 1985 shall hold office until the annual meeting of stockholders in 1988. (d) In the event of any increase or decrease in the authorized number of directors, (1) each director then serving as such shall nevertheless continue as a director of the class of which he or she is a member until the expiration of his or her current term, or his or her prior death, retirement, resignation, or removal, and (2) the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board of Directors among the three classes of directors so as to maintain such classes as nearly equal in number as possible. (e) Notwithstanding any of the foregoing provisions of this Article Fifth, each director shall serve until his or her successor is elected and qualified or until his or her death, retirement, resignation or removal. Should a vacancy occur or be created, whether arising through death, retirement, resignation or removal of a director or through an increase in the number of directors of any class, such vacancy shall be filled by a majority vote of the remaining directors of all classes then in office although less than a quorum, or by the sole remaining director. A director so elected to fill a vacancy shall serve for the remainder of the then present term of office of the class in which the vacancy shall have occurred or shall have been created. (f) Notwithstanding any of the foregoing provisions of this Article Fifth, whenever the holders of any outstanding class or series of Preferred Stock shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of this Restated Certificate of Incorporation and of the resolution of the Board of Directors providing for the issue of such class or series of Preferred Stocked applicable thereto, and such directors so elected shall not be divided into classes pursuant to this Article Fifth, unless expressly provided by such terms. (g) The Board of Directors, by resolution adopted by the affirmative vote of at least a majority of all members thereof, shall have concurrent power with the stockholders to adopt, amend or repeal the By-laws of the Corporation; provided, however, that the By-laws of the Corporation shall not be adopted, amended or repealed by the stockholders except by the affirmative vote of the holders of at least 67% of the voting power of the then outstanding Voting Stock, voting together as a single class [it being understood that, for purposes of this paragraph (h), each share of the Voting Stock shall have the number of votes granted to it pursuant to Article Fourth hereof], and such affirmative vote shall be required notwithstanding the fact that a lesser percentage may be specified by law or in any agreement with any national securities exchange or otherwise. (h) Wherever the term "Board of Directors" is used in this Restated Certificate of Incorporation, such term shall mean the Board of Directors of the Corporation; provided, however, that, to the extent any committee of directors of the Corporation is lawfully entitled to exercise the powers of the Board of Directors, such committee, to the extent provided by resolution of the Board of Directors or the By-laws, may exercise any power or authority of the Board of Directors under this Restated Certificate of Incorporation in the management of the business and affairs of the Corporation. (i) The books of the Corporation (subject to the provisions of the laws of the State of Delaware) may be kept outside of the State of Delaware at such places as may be from time to time designated by the Board of Directors. Elections of directors need not be by ballot unless the By- laws so provide. (j) No Director of the Corporation shall be personally liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a Director, except to the extent that such exemption from liability or limitation thereof is not permitted under the General Corporation Law of the State of Delaware, as it may be in effect from time to time. No amendment to or repeal of this paragraph (k) shall apply to or have any effect on the liability or alleged liability of any Director of the Corporation for or with respect to any acts or omissions of such Director occurring prior to such amendment or repeal. ARTICLE SIXTH. Indemnification. Without limiting in any manner any power of the Corporation conferred by statute, each person who is or was a director or officer of the Corporation shall be indemnified by the Corporation to the full extent permitted by the General Corporation Law of the State of Delaware, as it may be in effect from time to time, against any liability, cost or expense incurred by him in his capacity as a director or officer or arising out of his status as a director or officer. ARTICLE SEVENTH. Certain Business Combinations. (a) Higher Vote for Certain Business Combinations. In addition to any affirmative vote required by law or any other provision of this Restated Certificate of Incorporation, and except as otherwise expressly provided in paragraph (b) of this Article Seventh: (1) Any merger or consolidation of the Corporation or any Subsidiary with (A) any Interested Stockholder or (B) any other corporation (whether or not itself an Interested Stockholder) which is, or after such merger or consolidation would be, an Affiliate of an Interested Stockholder; or (2) Any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Stockholder or any Affiliate of any Interested Stockholder of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value of $5 million or more; or (3) The issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to any Interested Stockholder or any Affiliate of any Interested Stockholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market value of $5 million or more; or (4) The adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Stockholder or any Affiliate of any Interested Stockholder; or (5) Any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Stockholder or any Affiliate of any Interested Stockholder; shall require the affirmative vote of the holders of at least 80% of the voting power of the then outstanding Voting Stock, voting together as a single class [it being understood that, for purposes of this paragraph (a), each share of the Voting Stock shall have the number of votes granted to it pursuant to Article Fourth hereof]. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise. The term "Business Combination", as used in this Article Seventh, means any transaction which is referred to in any one or more of clauses (1) through (5) of this paragraph (a). (b) When Higher Vote is Not Required. The provisions of paragraph (a) of this Article Seventh shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote, if any, as is required by law or any other provision of this Restated Certificate of Incorporation or the By-laws of the Corporation, if all the conditions specified in either subparagraph (b) (1) or (2) below are met: (1) Approval by Disinterested Directors. Such Business Combination shall have been approved by a majority of the Disinterested Directors. (2) Price and Procedure Requirements. All of the following conditions shall have been met: (A) The aggregate amount of the cash and the Fair Market value as of the date of the consummation of such Business Combination of consideration other than cash to be received per share by holders of Common Stock in such Business Combination shall be at least equal to the highest of the following: (i) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder involved for any shares of Common Stock acquired by it (I) within the two-year period ending on the date of the first public announcement of the proposal of such Business Combination (the "Announcement Date") or (II) in the transaction in which it became an Interested Stockholder, whichever is higher; (ii) (if applicable) an amount which bears the same or a greater percentage relationship to the Fair Market Value per share of Common Stock on the Announcement Date or on the date on which the Interested Stockholder involved became an Interested Stockholder (such latter date is referred to in this Article Seventh as the "Determination Date"), whichever is higher, as the highest per share price determined under subparagraph (b)(2)(A)(i) bears to the Fair Market Value per share of Common Stock on the first day within the two-year period ending on the Announcement Date on which such Interested Stockholder acquired beneficial ownership of any share of Common Stock; and (iii) the Fair Market Value per share of Common Stock on the Announcement Date or on the Determination Date, whichever is higher. (B) The aggregate amount of the cash and the Fair Market Value as of the date of the consummation of such Business Combination of consideration other than cash to be received per share by holders of shares of any class of outstanding Voting Stock, other than Common Stock, shall be at least equal to the highest of the following [it being intended that the requirements of this subparagraph (b)(2)(B) shall be required to be met with respect to each class of outstanding Voting Stock, other than Common Stock, whether or not the Interested Stockholder involved has previously acquired any shares of such class of Voting Stock]: (i) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder involved for any share of such class of Voting Stock acquired by it (I) with the two-year period ending on the Announcement Date or (II) in the transaction in which it became an Interested Stockholder, whichever is higher; (ii) (if applicable) the highest preferential amount per share to which the holders of shares of such class of Voting Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation; (iii) (if applicable) an amount which bears the same or a greater percentage relationship to the Fair Market Value per share of such class of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher, as the highest per share price determined under subparagraph (b)(2)(B)(i) bears to the Fair Market Value per share of such class of Voting Stock on the first day within two year period ending on the Announcement Date on which the Interested Stockholder involved acquired beneficial ownership of any share of such class of Voting Stock; and (iv) the Fair Market Value per share of such class of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher. (C) The consideration to be received by holders of a particular class of outstanding Voting Stock (including Common Stock) shall be in cash or in the same form as the Interested Stockholder involved has previously paid for shares of such class of Voting Stock. If such Interested Stockholder has paid for shares of any class of Voting Stock with varying forms of consideration, the form of consideration for such class of Voting Stock shall be either cash or the form used to acquire the largest number of shares of such class of Voting Stock previously acquired by it. The prices determined in accordance with subparagraphs (b)(2)(A) and (b)(2)(B) shall be subject to appropriate adjustment in the event of any stock dividend, stock split, combination of shares or similar event. (D) After the Interested Stockholder involved has become an Interested Stockholder and prior to the consummation of such Business Combination: (i) there shall have been (I) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by a majority of the Disinterested Directors, and (II) an increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of the Common Stock, unless the failure so to increase such annual rate is approved by a majority of the Disinterested Directors; and (ii) such Interested Stockholder shall not have become the beneficial owner of any additional shares of Voting Stock except as part of the transaction which results in such Interested Stockholder becoming an Interested Stockholder. (E) After the Interested Stockholder involved has become an Interested Stockholder, such Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a stockholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise. (F) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to public stockholders of the Corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). (c) Certain Definitions. For purposes of this Restated Certificate of Incorporation: (1) The term "person" means any individual, firm, corporation or other entity. (2) The term "Interested Stockholder" means any person (other than the Corporation or any Subsidiary and other than any profit-sharing, employee stock ownership or other employee benefit plan of the Corporation or any Subsidiary or any trustee of or fiduciary with respect to any such plan when acting in such capacity) who or which: (A) is the beneficial owner, directly or indirectly, of 5% or more of the voting power of the outstanding Voting Stock; or (B) is an Affiliate of the Corporation and at any time within the two-year period ending on the date in question was the beneficial owner, directly or indirectly, of 5% or more of the voting power of the then outstanding Voting Stock; or (C) is an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the two-year period ending on the date in question beneficially owned by any Interested Stockholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933, as amended. (3) A person shall be a "beneficial owner" of any Voting Stock: (A) which such person or any of his or its Affiliates or Associates beneficially owns, directly or indirectly, or (B) which such person or any of his or its Affiliates or Associates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or understanding; or (C) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock. (4) For purposes of determining whether a person is an Interested Stockholder pursuant to subparagraph (c)(2), the number of shares of Voting Stock deemed to be outstanding shall include shares deem owned through application of subparagraph (c)(3) but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. The phrase "Interested Stockholder involved" means, in respect of any Business Combination, the Interested Stockholder that, or whose Affiliate, is a party to or otherwise involved (other than merely as a stockholder of the Corporation) in such Business Combination. (5) The terms "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on March 1, 1985. (6) The term "Subsidiary" means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the corporation; provided, however, that, for purposes of the definition of Interested Stockholder set forth in subparagraph (c)(2), the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation. (7) The term "Disinterested Director" means, in respect of any Business Combination, any member of the Board of Directors who is unaffiliated with the Interested Stockholder involved in such Business Combination and who was a member of the Board of Directors prior to the time that such Interested Stockholder became an Interested Stockholder, and any successor of a Disinterested Director who is unaffiliated with such Interested Stockholder and who is recommended to succeed a Disinterested Director by a majority of Disinterested Directors then on the Board of Directors. (8) The term "Fair Market Value" means: (A) in the case of stock, the highest closing sale price during the 30-day period ending on the date in question of a share of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period ending on the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by the Board of Directors in good faith; and (B) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by the Board of Directors in good faith. (9) In the event of any Business Combination in which the Corporation survives, the phrase "consideration other than cash to be received", as used in subparagraphs (b)(2)(A) and (b)(2)(B), shall include the shares of any Common Stock and the shares of any other class of outstanding Voting Stock retained by the holders of such shares. (d) Certain Powers of the Board of Directors. A majority of the Board of Directors shall have the power and duty to determine, for purposes of this Article Seventh, on the basis of information known to them after reasonable inquiry, (1) whether a person is an Interested Stockholder, (2) the number of shares of Voting Stock beneficially owned by any person, (3) whether a person is an Affiliate or Associate of another, and (4) whether the assets which are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of $5 million or more. A majority of the Board of Directors shall have the further power to interpret all of the terms and provisions of this Article Seventh. (e) No Effect on Fiduciary Obligations of Interested Stockholders. Nothing contained in this Article Seventh shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. ARTICLE EIGHTH. Considerations for Board of Directors in Evaluation of Certain Acquisition Proposals. In connection with the exercise of its judgment in determining what is in the best interests of the Corporation and its stockholders when evaluating a proposal by another person or persons to make a tender or exchange offer for any equity security of the Corporation or any Subsidiary, to merge or consolidate with the Corporation or any Subsidiary or to purchase or otherwise acquire all or substantially all of the assets of the Corporation or any Subsidiary, the Board of Directors of the Corporation shall, in addition to considering the adequacy of the amount to be paid in connection with any such transaction, consider all of the following factors and any other factors which it deems relevant: (a) the social and economic effects of the transaction on the Corporation and its Subsidiaries, the employees, depositors, loan and other customers and creditors or the Corporation and its Subsidiaries and the other elements of the communities in which the Corporation and its Subsidiaries operate or are located; (b) the business and financial condition and earnings prospects of the acquiring person or persons, including, but not limited to, debt service and other existing or likely financial obligations of the acquiring person or persons, and the possible effect of such conditions upon the Corporation and its Subsidiaries and the other elements of the communities in which the Corporation and its Subsidiaries operate or are located; and (c) the competence, experience, and integrity of the acquiring person or persons and its or their management. ARTICLE NINTH. Perpetual Existence. The Corporation shall have perpetual existence. ARTICLE TENTH. Amendments and Repeal. (a) Notwithstanding the fact that a lesser percentage vote for the amendment or repeal of this Restated Certificate of Incorporation shall be specified by law or in any agreement with any national securities exchange or otherwise, and in addition to any affirmative vote required by law or any other provision of this Restated Certificate of Incorporation, the provisions of this Article Tenth and of Articles Fourth through Ninth hereof may not be amended or repealed in any respect, unless such action is approved by the affirmative vote of the holders of at least 80% of the voting power of the then outstanding Voting Stock, voting together as a single class [it being understood that, for purposes of this paragraph (a), each share of the Voting Stock shall have the number of votes granted to it pursuant to Article Fourth hereof]; provided, however, that the foregoing provisions of this paragraph (a) shall not be applicable to any particular proposal to amend or repeal any provision of this Restated Certificate of Incorporation, and such proposed amendment or repeal shall require only such affirmative vote as is required by law or any other provision of this Restated Certificate of Incorporation or the By-laws of the Corporation, if such proposed amendment or repeal shall have been approved by resolution of the Board of Directors adopted by the affirmative vote of at least 80% of all members thereof. (b) Subject to paragraph (a) of this Article Tenth, the Corporation reserves the right to amend, alter, change or repeal any provision of this Restated Certificate of Incorporation, in the manner now or hereafter prescribed by the laws of the State of Delaware, and all rights and powers conferred herein upon stockholders and directors are granted subject to this reservation. All references herein to "this Restated Certificate of Incorporation" shall be deemed to encompass this Restated Certificate of Incorporation, as the same shall be amended from time to time. -----END PRIVACY-ENHANCED MESSAGE-----