10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________ FORM 10-Q (Mark One)
[X]	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2011
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 (State or other jurisdiction of incorporation or organization)		36-3161078 (IRS Employer Identification No.)
One Pierce Place, Suite 1500 Itasca, Illinois 60143-9768 (Address of principal executive offices) (zip code) ______________ Registrant’s telephone number, including area code: (630) 875-7450 ______________
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 [ ].
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ].
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ].
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X].
As of August 9, 2011, there were 74,476,360 shares of $.01 par value common stock outstanding.

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FIRST MIDWEST BANCORP, INC.

FORM 10-Q

TABLE OF CONTENTS

		Page
Part I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Financial Condition	6
	Consolidated Statements of Income	7
	Consolidated Statements of Changes in Stockholders’ Equity	8
	Consolidated Statements of Cash Flows	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition  and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	65
Item 4.	Controls and Procedures	66
Part II.	OTHER INFORMATION
Item 1.	Legal Proceedings	66
Item 1A.	Risk Factors	67
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	68
Item 3.	Defaults Upon Senior Securities	68
Item 4.	Removed and Reserved	68
Item 5.	Other Information	68
Item 6.	Exhibits	69

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GLOSSARY OF TERMS
First Midwest Bancorp, Inc. provides the following list of acronyms as a tool for the reader. The acronyms identified below are used in the Notes to Consolidated Financial Statements and in Management’s Discussion and Analysis of Financial Condition & Results of Operations.
ALCO:	Asset Liability Committee
ATM:	automated teller machine
Bank:	First Midwest Bank (one of the Company’s two wholly owned subsidiaries)
BOLI:	bank owned life insurance
CDOs:	collateralized debt obligations
CMOs:	collateralized mortgage obligations
Code:	the Code of Ethics and Standards of Conduct of First Midwest Bancorp, Inc.
Common Stock:	shares of common stock of First Midwest Bancorp, Inc. $0.01 par value per share, which are traded on the Nasdaq Stock Market under the symbol “FMBI”
Company:	First Midwest Bancorp, Inc.
CPP:	Capital Purchase Program enacted under TARP and the Emergency Economic Stabilization Act of 2008
CSV:	cash surrender value
Dodd-Frank Act:	the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act
FASB:	Financial Accounting Standards Board
FDIC:	Federal Deposit Insurance Corporation
Federal Reserve:	Board of Governors of the Federal Reserve system
FHLB:	Federal Home Loan Bank
GAAP:	U.S. generally accepted accounting principles
HAMP:	U.S. Department of the Treasury Home Affordable Modification Program
LIBOR:	London Interbank Offered Rate
NSF:	non-sufficient-funds
OREO:	Other real estate owned, or properties acquired through foreclosure in partial or total satisfaction of certain loans as a result of borrower defaults
OTTI:	other-than-temporary impairment
PSLRA:	Private Securities Litigation Reform Act of 1995
SEC:	U.S. Securities and Exchange Commission
TARP:	Troubled Asset Relief Program
Treasury:	U.S. Department of the Treasury
VIE:	variable interest entity

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First Midwest Bancorp, Inc. (the “Company”) is a bank holding company headquartered in the Chicago suburb of Itasca, Illinois with operations throughout the greater Chicago metropolitan area as well as central and western Illinois and eastern Iowa. Our principal subsidiary is First Midwest Bank, which provides a broad range of commercial and retail banking services to consumer, commercial and industrial, and public or governmental customers. We are committed to meeting the financial needs of the people and businesses in the communities where we live and work by providing customized banking solutions, quality products, and innovative services that fulfill those financial needs.

AVAILABLE INFORMATION

We file annual, quarterly, and current reports; proxy statements; and other information with the U.S. Securities and Exchange Commission (“SEC”), and we make this information available free of charge on or through the investor relations section of our web site at www.firstmidwest.com/aboutinvestor_overview.asp. You may read and copy materials we file with the SEC from its Public Reference Room at 100 F. Street, NE, Washington DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The following documents are also posted on our web site or are available in print upon the request of any stockholder to our Corporate Secretary:

·   Certificate of Incorporation,

·   Company By-laws,

·   Charters for our Audit, Compensation, and Nominating and Corporate Governance Committees,

·   Related Person Transaction Policies and Procedures,

·   Corporate Governance Guidelines,

·   Code of Ethics and Standards of Conduct (the “Code”), which governs our directors, officers, and employees,

·   Code of Ethics for Senior Financial Officers, and

·   Luxury Policy.

Within the time period required by the SEC and the Nasdaq Stock Market, we will post on our web site any amendment to the Code and any waiver applicable to any executive officer, director, or senior financial officer (as defined in the Code). In addition, our web site includes information concerning purchases and sales of our securities by our executive officers and directors. The Company’s accounting and reporting policies conform to U.S. generally accepted accounting principles (“GAAP”) and general practice within the banking industry. We post on our website any disclosure relating to certain non-GAAP financial measures (as defined in the SEC’s Regulation G) that we may make public orally, telephonically, by webcast, by broadcast, or by similar means from time to time.

Our Corporate Secretary can be contacted by writing to First Midwest Bancorp, Inc., One Pierce Place, Itasca, Illinois 60143, Attn: Corporate Secretary. The Company’s Investor Relations Department can be contacted by telephone at (630) 875-7533 or by e-mail at investor.relations@firstmidwest.com.

CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES

LITIGATION REFORM ACT OF 1995

We include or incorporate by reference in this Quarterly Report on Form 10-Q, and from time to time our management may make, statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not historical facts, but instead represent only management’s beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside our control. Although we believe the expectations reflected in any forward-looking statements are reasonable, it is possible that our actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in such statements. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “probable,” “potential,” or “continue,” and the negative of these terms and other comparable terminology. We caution you not to place undue reliance on forward-looking statements, which speak only as of the date of this report, or when made.

Forward-looking statements are subject to known and unknown risks, uncertainties, and assumptions and may contain projections relating to our future financial performance including our growth strategies and anticipated trends in our business. For a detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements, you should refer to our Annual Report on Form 10-K for the year ended December 31, 2010 and the sections entitled “Risk Factors” in Part II Item 1A of this report and “Management’s Discussion and Analysis of Results of Operations,” as well as our subsequent periodic and current reports filed with the SEC. However,

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these risks and uncertainties are not exhaustive. Other sections of this report describe additional factors that could adversely impact our business and financial performance.

Since mid-2007 the financial services industry and the securities markets in general have been materially and adversely affected by significant declines in the values of nearly all asset classes and by a serious lack of liquidity. While liquidity has improved and market volatility has generally lessened, the overall loss of investor confidence has brought a new level of risk to financial institutions in addition to the risks normally associated with competition and free market economies. The Company has attempted to list those risks in item 1A, “Risk Factors,” in its 2010 Annual Report on Form 10-K and consider them as it makes disclosures regarding forward-looking statements. Nevertheless, given the uncertain economic times, new risks and uncertainties may emerge quickly and unpredictably, and it is not possible to predict all risks and uncertainties. We cannot assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We are under no duty to update any of these forward-looking statements after the date of this report to conform our prior statements to actual results or revised expectations, and we do not intend to do so.

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PART 1. FINANCIAL INFORMATION (Unaudited)

ITEM 1. FINANCIAL STATEMENTS

FIRST MIDWEST BANCORP, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Amounts in thousands, except per share data)

				June 30, 2011		December 31, 2010
Assets				(Unaudited)
Cash and due from banks				$	110,159	$	102,495
Interest-bearing deposits in other banks					601,310		483,281
Trading securities, at fair value					16,230		15,282
Securities available-for-sale, at fair value					1,009,873		1,057,802
Securities held-to-maturity, at amortized cost					76,142		81,320
Federal Home Loan Bank and Federal Reserve Bank stock, at cost					58,187		61,338
Loans, excluding covered loans					5,112,911		5,100,560
Covered loans					314,942		371,729
Allowance for loan losses					(137,331)		(142,572)
Net loans					5,290,522		5,329,717
Other real estate owned (“OREO”), excluding covered OREO					24,407		31,069
Covered OREO					14,583		22,370
Federal Deposit Insurance Corporation (“FDIC”) indemnification asset					95,752		95,899
Premises, furniture, and equipment					131,952		140,907
Accrued interest receivable					28,883		29,953
Investment in bank-owned life insurance (“BOLI”)					198,149		197,644
Goodwill and other intangible assets					284,120		286,033
Other assets					189,122		203,192
Total assets				$	8,129,391	$	8,138,302
Liabilities
Demand deposits				$	1,494,390	$	1,329,505
Savings deposits					937,839		871,166
NOW accounts					1,087,945		1,073,211
Money market deposits					1,211,155		1,245,610
Time deposits					1,764,220		1,991,984
Total deposits					6,495,549		6,511,476
Borrowed funds					272,024		303,974
Subordinated debt					137,748		137,744
Accrued interest payable and other liabilities					82,479		73,063
Total liabilities					6,987,800		7,026,257
Stockholders’ Equity
Preferred stock					191,220		190,882
Common stock					858		858
Additional paid-in capital					424,877		437,550
Retained earnings					802,072		787,678
Accumulated other comprehensive loss, net of tax					(15,339)		(27,739)
Treasury stock, at cost					(262,097)		(277,184)
Total stockholders’ equity					1,141,591		1,112,045
Total liabilities and stockholders’ equity				$	8,129,391	$	8,138,302
	June 30, 2011			December 31, 2010
	Preferred Shares	Common Shares		Preferred Shares		Common Shares
Par Value	None	$	0.01	None		$		0.01
Shares authorized	1,000		100,000	1,000				100,000
Shares issued	193		85,787	193				85,787
Shares outstanding	193		74,473	193				74,096
Treasury shares	-		11,314	-				11,691
See accompanying notes to unaudited consolidated financial statements.

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FIRST MIDWEST BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except per share data)

(Unaudited)

	Quarters Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Interest Income
Loans	$	63,089	$	65,439	$	126,006	$	129,919
Investment securities		9,848		13,699		19,713		27,651
Covered loans		7,655		2,598		15,477		5,560
Federal funds sold and other short-term investments		704		538		1,383		923
Total interest income		81,296		82,274		162,579		164,053
Interest Expense
Deposits		6,969		9,626		14,640		20,171
Borrowed funds		687		749		1,367		1,759
Subordinated debt		2,279		2,280		4,565		4,566
Total interest expense		9,935		12,655		20,572		26,496
Net interest income		71,361		69,619		142,007		137,557
Provision for loan losses		18,763		21,526		38,255		39,876
Net interest income after provision for loan losses		52,598		48,093		103,752		97,681
Noninterest Income
Service charges on deposit accounts		9,563		9,052		17,707		17,433
Trust and investment advisory fees		4,118		3,702		8,234		7,295
Other service charges, commissions, and fees		5,362		4,628		10,276		8,800
Card-based fees		5,162		4,497		9,691		8,390
BOLI income		259		349		511		597
Securities gains, net		1,531		1,121		2,071		4,178
Gain on FDIC-assisted transaction		-		4,303		-		4,303
Other		499		(342)		2,221		635
Total noninterest income		26,494		27,310		50,711		51,631
Noninterest Expense
Salaries and wages		25,493		21,146		51,158		43,282
Retirement and other employee benefits		5,765		5,394		12,623		10,142
OREO expense, net		5,223		11,850		9,154		22,637
FDIC premiums		1,708		2,546		4,433		5,078
Net occupancy and equipment expense		8,012		7,808		17,115		15,976
Technology and related costs		2,697		2,785		5,320		5,268
Professional services		5,640		5,652		10,759		12,192
Other expenses		10,885		10,274		19,984		18,353
Total noninterest expense		65,423		67,455		130,546		132,928
Income before income tax expense		13,669		7,948		23,917		16,384
Income tax expense		2,841		139		2,871		494
Net income		10,828		7,809		21,046		15,890
Preferred dividends and accretion		(2,582)		(2,573)		(5,163)		(5,145)
Net income applicable to non-vested restricted shares		(102)		(65)		(242)		(146)
Net income applicable to common shares	$	8,144	$	5,171	$	15,641	$	10,599
Per Common Share Data
Basic earnings per common share	$	0.11	$	0.07	$	0.21	$	0.15
Diluted earnings per common share	$	0.11	$	0.07	$	0.21	$	0.15
Dividends declared per common share	$	0.01	$	0.01	$	0.02	$	0.02
Weighted-average common shares outstanding		73,259		73,028		73,205		71,756
Weighted-average diluted common shares outstanding		73,259		73,028		73,205		71,756
See accompanying notes to unaudited consolidated financial statements.

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FIRST MIDWEST BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Amounts in thousands, except per share data)

(Unaudited)

	Common Shares Outstanding	Preferred Stock		Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
Balance at January 1, 2010	54,793	$	190,233	$	670	$	252,322	$	810,626	$	(18,666)	$	(293,664)	$	941,521
Comprehensive income:
Net income	-		-		-		-		15,890		-		-		15,890
Other comprehensive income (1):
Unrealized gains on securities	-		-		-		-		-		5,863		-		5,863
Total comprehensive income															21,753
Common dividends declared   ($0.02 per common share)	-		-		-		-		(1,481)		-		-		(1,481)
Preferred dividends declared   ($25.00 per preferred share)	-		-		-		-		(4,825)		-		-		(4,825)
Accretion on preferred stock	-		320		-		-		(320)		-		-		-
Issuance of common stock	18,818		-		188		195,857		-		-		-		196,045
Share-based compensation   expense	-		-		-		2,871		-		-		-		2,871
Restricted stock activity	441		-		-		(15,386)		-		-		15,011		( 375)
Treasury stock issued   to(purchased for)   benefit plans	(3)		-		-		(59)		-		-		62		3
Balance at June 30,  2010	74,049	$	190,553	$	858	$	435,605	$	819,890	$	(12,803)	$	(278,591)	$	1,155,512
Balance at January 1, 2011	74,096	$	190,882	$	858	$	437,550	$	787,678	$	(27,739)	$	(277,184)	$	1,112,045
Comprehensive income:
Net income	-		-		-		-		21,046		-		-		21,046
Other comprehensive income (1):
Unrealized gains on securities	-		-		-		-		-		12,400		-		12,400
Total comprehensive income															33,446
Common dividends declared   ($0.02 per common share)	-		-		-		-		(1,489)		-		-		(1,489)
Preferred dividends declared   ($25.00 per preferred share)	-		-		-		-		(4,825)		-		-		(4,825)
Accretion on preferred stock	-		338		-		-		(338)		-		-		-
Share-based compensation   expense	-		-		-		3,354		-		-		-		3,354
Restricted stock activity	381		-		-		(15,977)		-		-		15,045		( 932)
Treasury stock purchased for   benefit plans	(4)		-		-		(50)		-		-		42		(   8)
Balance at June 30, 2011	74,473	$	191,220	$	858	$	424,877	$	802,072	$	(15,339)	$	(262,097)	$	1,141,591

(1)	Net of taxes and reclassification adjustments.
See accompanying notes to unaudited consolidated financial statements.

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FIRST MIDWEST BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollar amounts in thousands) (Unaudited)
	Six Months Ended June 30,
	2011		2010
Net cash provided by operating activities	$	100,402	$	101,048
Investing Activities
Proceeds from maturities, repayments, and calls of securities available-for-sale		135,320		113,918
Proceeds from sales of securities available-for-sale		97,330		147,601
Purchases of securities available-for-sale		(167,174)		(64,352)
Proceeds from maturities, repayments, and calls of securities held-to-maturity		35,497		33,530
Purchases of securities held-to-maturity		(30,319)		(32,185)
Redemption (purchase) of Federal Reserve Bank stock		3,151		(3,000)
Net increase in loans		(17,785)		(76,222)
Proceeds from claims on BOLI		6		160
Proceeds from sales of OREO		21,435		30,800
Proceeds from sales of premises, furniture, and equipment		5,526		7
Purchases of premises, furniture, and equipment		(2,483)		(7,459)
Net cash proceeds received in an FDIC-assisted transaction		-		26,609
Net cash provided by investing activities		80,504		169,407
Financing Activities
Net (decrease) increase in deposit accounts		(15,927)		153,987
Net decrease in borrowed funds		(31,950)		(367,474)
Proceeds from the issuance of common stock		-		196,045
Cash dividends paid		(6,310)		(6,114)
Restricted stock activity		(1,100)		(1,004)
Excess tax benefit (expense) related to share-based compensation		74		(194)
Net cash used in financing activities		(55,213)		(24,754)
Net increase in cash and cash equivalents		125,693		245,701
Cash and cash equivalents at beginning of period		585,776		127,379
Cash and cash equivalents at end of period	$	711,469	$	373,080
Supplemental Disclosures:
Non-cash transfers of loans to OREO	$	13,477	$	58,019
Non-cash transfer of loans held-for-investment to loans held-for-sale	$	5,395	$	-
Non-cash transfer of OREO to premises, furniture, and equipment	$	841	$	9,455
Dividends declared but unpaid	$	746	$	741
See accompanying notes to unaudited consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation - The accompanying unaudited consolidated interim financial statements of First Midwest Bancorp, Inc. (the “Company”), a Delaware corporation, have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission for quarterly reports on Form 10-Q and do not include certain information and footnote disclosures required by U.S. generally accepted accounting principles (“GAAP”) for complete annual financial statements. Accordingly, these financial statements should be read in conjunction with the Company’s 2010 Annual Report on Form 10-K (“2010 10-K”).

The accompanying unaudited consolidated interim financial statements have been prepared in accordance with GAAP and reflect all adjustments that are, in the opinion of management, necessary for the fair presentation of the financial position and results of operations for the periods presented. All such adjustments are of a normal recurring nature. The results of operations for the quarter and six-month periods ended June 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.

Certain reclassifications have been made to prior periods to conform to the current period presentation.

In third quarter 2010, the Company acquired approximately $297.0 million in loans, $23.7 million in OREO, and $121.5 million in cash and securities and assumed $215.2 million in core deposits and $246.6 million in time deposits of a former bank in an FDIC-assisted transaction. The transaction resulted in the recognition of goodwill of $7.9 million. The fair values initially assigned to the assets acquired and liabilities assumed were preliminary and subject to refinement for up to one year after the closing date of the acquisition as new information relative to closing date fair values became available.

Subsequent to the acquisition date, the Company obtained specific information (including the completion of appraisals or other valuations) relating to the acquisition-date value of certain assets and liabilities acquired, which required an adjustment to those assets and liabilities and to goodwill. In accordance with accounting guidance applicable to business combinations, such adjustments were recognized as if they had happened as of the acquisition date. After considering this additional information, the estimated fair value of covered loans decreased $2.9 million, covered OREO decreased $7.3 million, the FDIC indemnification asset increased $6.9 million; and accrued interest payable and other liabilities decreased $8.7 million from that originally reported in the quarter ended September 30, 2010. These revised estimates resulted in a $5.4 million decrease in goodwill and other intangible assets. As of June 30, 2011, the Company finalized its purchase price allocation.

GAAP requires management to make certain estimates and assumptions. Although these and other estimates and assumptions are based on the best available information, actual results could be materially different from these estimates.

Principles of Consolidation - The consolidated financial statements include the accounts and results of operations of the Company and its subsidiaries after elimination of all significant intercompany accounts and transactions.

The Company owns an interest in certain variable interest entities (“VIE”s) as described in Note 22, “Variable Interest Entities,” contained in the Company’s 2010 10-K. A VIE is a partnership, limited liability company, trust, or other legal entity that does not have sufficient equity to finance its activities without additional subordinated financial support from other parties, or whose investors lack certain characteristics associated with owning a controlling financial interest. The VIEs are not consolidated in the Company’s financial statements since the Company is not the primary beneficiary of any of the VIEs.

The accounting policies related to loans and the allowance for credit losses are presented below. For a summary of all other significant accounting policies, please refer to Note 1, “Summary of Significant Accounting Policies,” contained in the Company’s 2010 10-K.

Loans - Loans are carried at the principal amount outstanding, including certain net deferred loan origination fees. Loans held-for-sale are carried at the lower of aggregate cost or fair value and included in other assets in the Consolidated Statements of Condition. Interest income on loans is accrued based on principal amounts outstanding. Loan and lease origination fees, fees for commitments that are expected to be exercised, and certain direct loan origination costs are deferred and the net amount amortized over the estimated life of the related loans or commitments as a yield adjustment. Fees related to standby letters of credit, whose ultimate exercise is remote, are amortized into fee income over the estimated life of the commitment. Other credit-related fees are recognized as fee income when earned.

Purchased Impaired Loans - Purchased impaired loans are recorded at their estimated fair values on the respective purchase dates and are accounted for prospectively based on expected cash flows in accordance with applicable authoritative

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accounting guidance. No allowance for credit losses is recorded on these loans at the acquisition date. In determining the acquisition date fair value of purchased impaired loans, and in subsequent accounting, the Company generally aggregates purchased consumer loans and certain smaller balance commercial loans into pools of loans with common risk characteristics such as delinquency status, credit score, and internal risk rating. Larger balance commercial loans are usually accounted for on an individual basis. Expected future cash flows in excess of the fair value of loans at the purchase date (“accretable yield”) are recorded as interest income over the life of the loans if the timing and amount of the future cash flows can be reasonably estimated. The non-accretable yield represents estimated losses in the portfolio and is equal to the difference between contractually required payments and the cash flows expected to be collected at acquisition.

Subsequent to the purchase date, increases in cash flows for purchased impaired loans over those expected at the purchase date are recognized as interest income prospectively. The present value of any decreases in expected cash flows after the purchase date is recognized by recording a charge-off through the allowance for loan losses.

Non-accrual loans-Generally, commercial loans and loans secured by real estate are placed on non-accrual status: (a) when either principal or interest payments become 90 days or more past due based on contractual terms unless the loan is sufficiently collateralized such that full repayment of both principal and interest is expected and is in the process of collection within a reasonable period; or (b) when an individual analysis of a borrower’s creditworthiness indicates a credit should be placed on non-accrual status whether or not the loan is 90 days or more past due. When a loan is placed on non-accrual status, unpaid interest credited to income in the current year is reversed, and unpaid interest accrued in prior years is charged against the allowance for loan losses. Both principal and interest payments are applied to the principal on the loan. Future interest income may only be recorded on a cash basis after recovery of principal is reasonably assured. Non-accrual loans are returned to accrual status when the financial position of the borrower and other relevant factors indicate there is no longer doubt that the Company will collect all principal and interest due.

Commercial loans and loans secured by real estate are generally charged-off when deemed uncollectible. A loss is recorded at that time if the net realizable value can be quantified and it is less than the associated principal and interest outstanding. Consumer loans that are not secured by real estate are subject to mandatory charge-off at a specified delinquency date and are usually not classified as non-accrual prior to being charged-off. Closed-end consumer loans, which include installment, automobile, and single payment loans are generally charged-off in full no later than the end of the month in which the loan becomes 120 days past due.

Generally, purchased impaired loans are considered accruing loans. However, the timing and amount of future cash flows for some loans may not be reasonably estimable. Those loans were classified as non-accrual loans as of June 30, 2011, and interest income will not be recognized until the timing and amount of the future cash flows can be reasonably estimated.

Restructured Loans - In cases where a borrower experiences financial difficulties and the Company makes certain concessions or modifications to contractual terms, the loan is classified as a restructured loan. Restructured loans are loans for which the original contractual terms have been modified, including forgiveness of principal or interest, due to deterioration in the borrower’s financial condition. Loans granted concessions or modifications are classified as restructured loans unless the modification is short-term, or results in only an insignificant delay or shortfall in the payments to be received. The Company’s restructured loans are determined on a case-by-case basis in connection with ongoing loan collection processes. The allowance for loan losses on restructured loans is determined by discounting the restructured cash flows at the original effective rate of the loan before modification or is based on the underlying collateral value.

The Company does not accrue interest on any restructured loan unless and until it believes collection of all principal and interest under the modified terms is reasonably assured. Generally, six months of consecutive payment performance by the borrower under the restructured terms is required before a restructured loan is returned to accrual status assuming the loan is restructured at reasonable market terms (e.g., not at below market terms). However, the period could vary depending upon the individual facts and circumstances of the loan.

For a restructured loan to begin accruing interest, the borrower must demonstrate both some level of performance and the capacity to perform under the modified terms. A history of timely payments and adherence to financial covenants generally serve as sufficient evidence of the borrower’s performance. An evaluation of the borrower’s current creditworthiness is used to assess whether the borrower has the capacity to repay the loan under the modified terms. This evaluation includes an estimate of expected cash flows, evidence of strong financial position, and estimates of the value of collateral, if applicable.

Impaired Loans-Impaired loans consist of corporate non-accrual loans and restructured loans in accordance with applicable authoritative accounting guidance.

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With the exception of loans that were restructured and still accruing interest, a loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all contractual principal and interest due according to the terms of the loan agreement. Loans deemed to be impaired are classified as non-accrual and are exclusive of smaller homogeneous loans, such as home equity, installment, and 1-4 family mortgages. When a loan is designated as impaired, any subsequent principal and interest payments received are applied to the principal on the loan. Future interest income may only be recorded on a cash basis after recovery of principal is reasonably assured.

Certain impaired loans with balances under a specified threshold are not individually evaluated for impairment. For all other impaired loans, impairment is measured by estimating the value of the loan based on the present value of expected future cash flows discounted at the loan’s initial effective interest rate or the fair value of the underlying collateral less costs to sell, if repayment of the loan is collateral-dependent. The Company evaluates the collectability of both principal and interest when assessing the need for loss accrual. All impaired loans are included in non-performing assets. Purchased credit impaired loans are not reported as impaired loans provided that they continue to perform in accordance with expected cash flows.

90-Day Past Due Loans - 90 days or more past due loans are loans for which principal or interest payments become 90 days or more past due, but that still accrue interest. The Company continues to accrue interest if it determines these loans are well secured and in the process of collection.

Allowance for Credit Losses- The allowance for credit losses is comprised of the allowance for loan losses and the reserve for unfunded commitments and is maintained by management at a level believed adequate to absorb estimated losses inherent in the existing loan portfolio. Determination of the allowance for credit losses is inherently subjective, as it requires significant estimates, including the amounts and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience, consideration of current economic trends, and other factors, all of which may be susceptible to significant change.

The allowance for loan losses takes into consideration such internal and external qualitative factors as changes in the nature, volume, size, and current risk characteristics of the loan portfolio; an assessment of individual problem loans; actual and anticipated loss experience; current economic conditions that affect the borrower’s ability to pay; and other pertinent factors. Credit exposures deemed to be uncollectible are charged-off against the allowance for loan losses, while recoveries of amounts previously charged-off are credited to the allowance for loan losses. Additions to the allowance for loan losses are established through the provision for loan losses charged to expense. The amount charged to operating expense in any given period is dependent upon a number of factors including historic loan growth, changes in the composition of the loan portfolio, net charge-off levels, and the Company’s assessment of the allowance for loan losses based on the methodology discussed below.

The allowance for loan losses consists of (i) specific reserves established for probable losses on individual loans for which the recorded investment in the loan exceeds the value of the loan, (ii) an allowance based on historical credit loss experience for each loan category, and (iii) the impact of other internal and external qualitative factors.

The specific reserves component of the allowance for loan losses is based on a periodic analysis of impaired loans exceeding a fixed dollar amount where the internal credit rating is at or below a predetermined classification, as well as other loans regardless of internal credit rating that management believes are subject to a higher risk of loss. The value of the loan is measured based on the present value of expected future cash flows, discounted at the loan’s initial effective interest rate, or the fair value of the underlying collateral less costs to sell, if repayment of the loan is collateral-dependent. If the resulting amount is less than the recorded book value, the Company either establishes a valuation allowance (i.e., a specific reserve) as a component of the allowance for loan losses or charges-off the impaired balance if it determines that such amount is a confirmed loss.

The component of the allowance for loan losses based on historical credit loss experience is determined using a loss migration analysis that examines actual loss experience over a rolling 8-quarter period and, for corporate loans, the related internal rating of loans charged-off. The loss migration analysis is performed quarterly and loss factors are updated regularly based on actual experience. The loss component based upon historical loss experience is then adjusted for management’s estimate of those losses inherent in the loan portfolio that have yet to be manifested in historical charge-off experience. Management takes into consideration many internal and external qualitative factors when estimating this adjustment, including:

·   Changes in the composition of the loan portfolio and trends in volume and terms of loans, as well as trends in delinquent and non-accrual loans that could indicate historical averages do not reflect current conditions;

·   Changes in credit policies and procedures, including underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses;

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·   Changes in the experience, ability, and depth of credit management and other relevant staff;

·   Changes in the quality of the Company’s loan review system and Board oversight;

·   The existence and effect of any concentration of credit, and changes in the level of concentrations, whether it is by market, loan type, or risk taking;

·   Changes in the value of underlying collateral for collateral-dependent loans;

·   Changes in the national and local economy that affect the collectability of the portfolio, including the condition of various market segments; and

·   The effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the Company’s existing portfolio.

The Company also maintains a reserve for unfunded credit commitments, including letters of credit, to provide for the risk of loss inherent in these arrangements. The reserve for unfunded credit commitments is computed based on a loss migration analysis similar to that used to determine the allowance for loan losses, taking into consideration probabilities of future funding requirements. This reserve for unfunded commitments is included in other liabilities in the Consolidated Statements of Financial Condition.

The establishment of the allowance for credit losses involves a high degree of judgment and includes a level of imprecision given the difficulty of identifying all of the factors impacting loan repayment and the timing of when losses actually occur. While management utilizes its best judgment and information available, the ultimate adequacy of the allowance for credit losses is dependent upon a variety of factors beyond the Company’s control, including the performance of its loan portfolio, the economy, changes in interest rates and property values, and the interpretation by regulatory authorities of loan risk classifications. While each component of the allowance for credit losses is determined separately, the entire balance is available for the entire loan portfolio.

2.  RECENT ACCOUNTING PRONOUNCEMENTS

Credit Quality and Allowance for Credit Losses Disclosures: In July 2010, the Financial Accounting Standards Board (“FASB”) issued guidance that requires companies to provide more information about the credit risks inherent in its loan and lease portfolios and how management considers those credit risks in determining the allowance for credit losses. A company is required to disclose its accounting policies, the methods it uses to determine the components of the allowance for credit losses, and qualitative and quantitative information about the credit quality of its loan portfolio, such as aging information and credit quality indicators. Both new and existing disclosures are required, either by portfolio segment or class, based on how a company develops its allowance for credit losses and how it manages its credit exposure. The guidance is effective for all financing receivables, including loans and trade accounts receivables. However, short-term trade accounts receivables, receivables measured at fair value or lower of cost or fair value, and debt securities are exempt from these disclosure requirements. For public companies, any period-end disclosure requirements were effective for periods ending on or after December 15, 2010. This disclosure is presented in Note 1, “Summary of Significant Accounting Policies,” and Note 6, “Past Due Loans, Allowance for Credit Losses, and Impaired Loans.” Any disclosures about activity that occurs during a reporting period, excluding disclosures related to troubled debt restructurings (“TDRs”), were effective for the Company beginning January 1, 2011 and included in Note 6, “Past Due Loans, Allowance for Credit Losses, and Impaired Loans.” Disclosures related to TDRs will be effective for the Company beginning with third quarter 2011. As this guidance affects only disclosures, the adoption of this guidance on December 31, 2010 for period-end disclosures, and on January 1, 2011 for intra-period activity did not impact the Company’s financial position, results of operations, or liquidity.

Clarification to Accounting for Troubled Debt Restructurings: In April 2011, the FASB issued guidance to clarify the accounting for TDRs. Given the recent economic downturn, many banks have seen an increase in the number of loan modifications. Diversity in practice exists in terms of identifying whether a loan modification qualifies as a TDR, such that the FASB was asked to provide guidance. This new guidance was developed to assist creditors in determining whether a loan modification meets the criteria to be considered a TDR, both for purposes of recording an impairment and for disclosure of TDRs. The guidance is effective for the Company beginning in third quarter 2011, and prior periods presented will be restated to apply this guidance to restructurings occurring on or after January 1, 2011. Since the new guidance applies primarily to disclosures, it is not expected to impact the Company’s financial position, results of operations, or liquidity.

Statement of Comprehensive Income: In April 2011, the FASB issued accounting guidance requiring companies to include a statement of comprehensive income as part of its interim and annual financial statements. The new guidance gives companies the option to present net income and comprehensive income either in one continuous statement or in two separate but consecutive statements. This approach represents a change from current GAAP, which allows companies to report other comprehensive income (“OCI”) and its components in the statement of shareholder’s equity. The guidance also allows companies to present OCI either net of tax with details in the notes or shown gross of tax (with tax effects shown parenthetically). The Company’s disclosure of OCI for the quarters ended June 30, 2011 and June 30, 2010 is presented in

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Note 8, “Comprehensive Income.” Under the new guidance, the information set forth in Note 8 would be shown in the new statement of comprehensive income. This guidance is effective for fiscal years beginning after December 15, 2011. Since the new guidance impacts disclosures only, it will not have an impact on the Company’s financial position, results of operations, or liquidity.

3.  SECURITIES

Securities available-for-sale are carried at fair value with unrealized gains and losses, net of related deferred income taxes, recorded in stockholders’ equity as a separate component of other comprehensive loss. Securities classified as held-to-maturity are securities management has the positive intent and ability to hold to maturity and are stated at cost. Trading securities are reported at fair value. Trading gains, net, represents changes in the fair value of the trading securities portfolio and are included as a component of noninterest income in the Consolidated Statements of Income.

Securities Portfolio

(Dollar amounts in thousands)

		June 30, 2011							December 31, 2010
		Amortized	Gross Unrealized				Fair		Amortized		Gross Unrealized				Fair
		Cost	Gains		Losses		Value		Cost		Gains		Losses		Value
Securities Available-for-Sale
U.S. agency securities	$	8,122	$	23	$	(32)	$	8,113	$	18,000	$	7	$	(121)	$	17,886
Collateralized residential    mortgage obligations    (“CMOs”)		373,600		3,824		(722)		376,702		377,692		4,261		(2,364)		379,589
Other residential    mortgage-backed    securities		91,539		6,290		(24)		97,805		100,780		5,732		(61)		106,451
Municipal securities		471,617		10,487		(2,185)		479,919		512,063		4,728		(12,800)		503,991
Collateralized debt    obligations (“CDOs”)		49,695		-		(33,208)		16,487		49,695		-		(34,837)		14,858
Corporate debt securities		25,325		2,597		-		27,922		29,936		2,409		-		32,345
Equity securities:
Hedge fund investment		1,231		651		-		1,882		1,245		438		-		1,683
Other equity securities		927		117		(1)		1,043		889		110		-		999
Total equity securities		2,158		768		(   1)		2,925		2,134		548		-		2,682
Total	$	1,022,056	$	23,989	$	(36,172)	$	1,009,873	$	1,090,300	$	17,685	$	(50,183)	$	1,057,802
Securities Held-to-Maturity
Municipal securities	$	76,142	$	2,343	$	-	$	78,485	$	81,320	$	1,205	$	-	$	82,525
Trading Securities (1)							$	16,230							$	15,282

(1) Trading securities held by the Company represent diversified investment securities held in a grantor trust under deferred compensation arrangements in which plan participants may direct amounts earned to be invested in securities other than Company stock.

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Remaining Contractual Maturity of Securities

(Dollar amounts in thousands)

	June 30, 2011
	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
One year or less	$	8,301	$	7,967	$	7,010	$	7,226
One year to five years		201,321		193,222		15,137		15,603
Five years to ten years		115,597		110,947		21,468		22,129
After ten years		229,540		220,305		32,527		33,527
CMOs		373,600		376,702		-		-
Other residential mortgage-backed securities		91,539		97,805		-		-
Equity securities		2,158		2,925		-		-
Total	$	1,022,056	$	1,009,873	$	76,142	$	78,485

Purchases and sales of securities are recognized on a trade date basis. Realized securities gains or losses are reported in securities gains, net in the Consolidated Statements of Income. The cost of securities sold is based on the specific identification method.

Securities Gains (Losses)

(Dollar amounts in thousands)

	Quarters Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Proceeds from sales	$	53,118	$	66,618	$	97,330	$	147,601
Gains (losses) on sales of securities:
Gross realized gains	$	1,974	$	2,367	$	2,782	$	8,187
Gross realized losses		(443)		(112)		(711)		(112)
Net realized gains on securities sales		1,531		2,255		2,071		8,075
Non-cash impairment charges
Other-than-temporary securities impairment		-		(1,581)		-		(4,344)
Portion of other-than-temporary impairment         recognized in other comprehensive income		-		447		-		447
Net non-cash impairment charges		-		(1,134)		-		(3,897)
Net realized gains	$	1,531	$	1,121	$	2,071	$	4,178
Income tax expense on net realized gains	$	636	$	437	$	847	$	1,629
Trading gains (losses), net (1)	$	(2)	$	(1,022)	$	742	$	(561)

(1) All trading gains (losses) relate to trading securities still held as of June 30, 2011.

The non-cash impairment charges in the table above primarily relate to other-than-temporary (“OTTI”) charges on CDOs. Accounting guidance requires that only the credit portion of an OTTI charge be recognized through income. In deriving the credit component of the impairment on the CDOs, projected cash flows were discounted at the contractual rate ranging from the London Interbank Offered Rate (“LIBOR”) plus 125 basis points to LIBOR plus 160 basis points. Fair values are computed by discounting future projected cash flows at higher rates, ranging from LIBOR plus 1,200 basis points to LIBOR plus 1,300 basis points. The higher rates are used to account for other market factors such as liquidity. If a decline in fair value below carrying value is not attributable to credit loss and the Company does not intend to sell the security or believe it would not be more likely than not required to sell the security prior to recovery, the Company records the decline in fair value in other comprehensive loss.

Changes in the amount of credit losses recognized in earnings on CDOs and other securitiesare summarized in the following table.

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Changes in Credit Losses Recognized in Earnings

(Dollar amounts in thousands)

	Quarter Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Cumulative amount recognized at beginning of period	$	35,589	$	33,709	$	35,589	$	30,946
Credit losses included in earnings (1)
Losses recognized on securities that previously had               credit losses		-		1,048		-		3,568
Losses recognized on securities that did not               previously have credit losses		-		86		-		329
Cumulative amount recognized at end of period	$	35,589	$	34,843	$	35,589	$	34,843

(1) Included in securities gains, net in the Consolidated Statements of Income.

Securities in an Unrealized Loss Position

(Dollar amounts in thousands)

		Less Than 12 Months				12 Months or Longer				Total
	Number of Securities	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
As of June 30, 2011
U.S. agency security	1	$	3,045	$	32	$	-	$	-	$	3,045	$	32
CMOs	10		50,412		323		9,698		399		60,110		722
Other residential mortgage-   backed securities	2		317		18		159		6		476		24
Municipal securities	134		17,005		582		53,943		1,603		70,948		2,185
CDOs	6		-		-		16,487		33,208		16,487		33,208
Equity security	1		-		-		30		1		30		1
Total	154	$	70,779	$	955	$	80,317	$	35,217	$	151,096	$	36,172
As of December 31, 2010
U.S. agency securities	4	$	9,096	$	120	$	-	$	1	$	9,096	$	121
CMOs	19		131,056		1,727		7,843		637		138,899		2,364
Other residential mortgage-   backed securities	5		6,084		51		159		10		6,243		61
Municipal securities	479		99,537		3,142		166,403		9,658		265,940		12,800
CDOs	6		-		-		14,858		34,837		14,858		34,837
Total	513	$	245,773	$	5,040	$	189,263	$	45,143	$	435,036	$	50,183

Approximately 98% of CMOs and other mortgage-backed securities are either backed by U.S. government-owned agencies or issued by U.S. government-sponsored enterprises. Municipal securities are issued by municipal authorities, and the majority is supported by third-party insurance or some other form of credit enhancement. Management does not believe any individual unrealized loss as of June 30, 2011 represents an other-than-temporary impairment. The unrealized losses associated with these securities are not believed to be attributed to credit quality, but rather to changes in interest rates and temporary market movements. In addition, the Company does not intend to sell the securities with unrealized losses, and it is not more likely than not that the Company will be required to sell them before recovery of their amortized cost basis, which may be at maturity.

The unrealized losses on CDOs as of June 30, 2011 reflect the market’s unfavorable view of structured investment vehicles given the current interest rate and liquidity environment. Management does not believe the unrealized losses on the CDOs represent an other-than-temporary impairment. In addition, the Company does not intend to sell the CDOs with unrealized losses, and the Company does not believe it is more likely than not that it will be required to sell them before recovery of their amortized cost basis, which may be at maturity.

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Significant judgment is required to calculate the fair value of the CDOs, all of which are pooled. Generally, fair value determinations are based on several factors regarding current market and economic conditions relating to such securities and the underlying collateral. For these reasons and due to the illiquidity in the secondary market for these CDOs, the Company estimates the fair value of these securities using discounted cash flow analyses with the assistance of a structured credit valuation firm.

Prepayment assumptions are a key factor in estimating the cash flows. Prepayments may occur on the collateral underlying the Company’s CDOs based on call options or other factors. Most of the collateral underlying the CDOs have a 5-year call option (on the fifth anniversary of issuance, the issuer has the right to call the security at par). In addition, most underlying indentures trigger an issuer call right if a capital treatment event occurs, such as a regulatory change that affects its status as Tier 1 capital (as defined in federal regulations). The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) constituted such an event for certain holding companies. Specifically, companies with $15 billion or more in consolidated assets can no longer include hybrid capital instruments, such as trust-preferred securities, in Tier 1 capital beginning January 1, 2013. As of June 30, 2011, the Company has assumed a 15% prepayment rate for those banks with greater than $15 billion in assets in year 3 (the start of the phase out period for Tier 1 capital treatment), followed by an annual prepayment rate of 1%.

For additional discussion of the CDO valuation methodology, refer to Note 12, “Fair Value.”

Certain Characteristics and Metrics of the CDOs as of June 30, 2011

(Dollar amounts in thousands)

Number	Class	Original Par		Amortized Cost		Fair Value				Number of Banks/ Insurers	% of Banks/ Insurers Currently Performing	Actual Deferrals and Defaults as a % of the Original Collateral (1)	Expected Deferrals and Defaults as a % of the Remaining Performing Collateral (1)	Excess Subordination as a % of  the Remaining Performing Collateral (2)
								Lowest Credit Rating Assigned to the Security
								Moody’s	Fitch
1	C-1	$	17,500	$	7,140	$	3,353	Ca	C	46	73.9%	15.8%	20.7%	0.0%
2	C-1		15,000		7,657		2,477	Ca	C	57	84.2%	12.1%	18.8%	0.0%
3	C-1		15,000		13,480		4,016	Ca	C	63	81.0%	7.8%	15.5%	6.0%
4	B1		15,000		13,922		4,344	Ca	C	64	59.4%	35.0%	23.5%	0.0%
5	C		10,000		1,317		212	C	C	56	60.7%	44.6%	28.1%	0.0%
6	C		6,500		6,179		2,085	Ca	C	77	68.8%	23.1%	12.8%	10.5%
7 (3)	A-3L		6,750		-		-	N/A	N/A	N/A	N/A	N/A	N/A	N/A
		$	85,750	$	49,695	$	16,487

(1)	Deferrals and defaults are provided net of recoveries. No recovery is assumed for collateral that has already defaulted. For deferring collateral, the Company assumes a recovery rate of 10% of par for banks, thrifts, and other depository institutions and 15% of par for insurance companies.
(2)	Excess subordination represents additional defaults in excess of current defaults that the CDO can absorb before the security experiences any credit impairment. The excess subordination percentage is calculated by dividing the amount of potential additional loss that can be absorbed (before the receipt of all expected future principal and interest payments is affected) by the total balance of performing collateral. Even with excess subordination, the CDO could experience an OTTI charge if future deterioration of underlying collateral in excess of current excess subordination is anticipated.
(3)	Characteristics and metrics are not reported for this CDO since the security had an amortized cost and fair value of zero as of June 30, 2011.

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Credit-Related CDO Impairment Losses

(Dollar amounts in thousands)

	Quarters Ended June 30,				Six Months Ended June 30,
Number	2011		2010		2011		2010		Life-to-Date
1	$	-	$	-	$	-	$	-	$	10,360
2		-		794		-		794		7,343
3		-		-		-		-		1,159
4		-		-		-		684		1,078
5		-		254		-		2,091		8,570
6		-		-		-		242		243
7		-		-		-		-		6,750
	$	-	$	1,048	$	-	$	3,811	$	35,503

For the equity security with an unrealized loss, the Company has evaluated the near-term prospects of the investment in relation to the severity and duration of the impairment and, based on that evaluation, believes it has the ability and intent to hold this investment until a recovery of fair value.

For additional details of the securities available-for-sale portfolio and the related impact of unrealized gains (losses) thereon, see Note 8, “Comprehensive Income.”

The carrying value of securities available-for-sale that were pledged to secure deposits and for other purposes as permitted or required by law totaled $768.7 million at June 30, 2011 and $808.3 million at December 31, 2010. No securities held-to-maturity were pledged as of June 30, 2011 or December 31, 2010.

4.  LOANS

Loan Portfolio

(Dollar amounts in thousands)

	June 30, 2011		December 31, 2010
Commercial and industrial	$	1,518,772	$	1,465,903
Agricultural		237,518		227,756
Commercial real estate:
Office, retail, and industrial		1,229,100		1,203,613
Multi-family		336,138		349,862
Residential construction		129,327		174,690
Commercial construction		146,679		164,472
Other commercial real estate		852,966		856,357
Total commercial real estate		2,694,210		2,748,994
Total corporate loans		4,450,500		4,442,653
Home equity		429,923		445,243
1-4 family mortgages		185,002		160,890
Installment loans		47,486		51,774
Total consumer loans		662,411		657,907
Total loans, excluding covered loans		5,112,911		5,100,560
Covered loans (1)		314,942		371,729
Total loans	$	5,427,853	$	5,472,289
Deferred loan fees included in total loans	$	7,965	$	8,042
Overdrawn demand deposits included in total loans	$	3,111	$	4,281

(1) For information on covered loans, refer to Note 5, “Covered Assets.”

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The Company primarily lends to small and mid-sized businesses, commercial real estate customers, and consumers in the markets in which the Company operates. Within these areas, the Company diversifies its loan portfolio by loan type, industry, and borrower.

It is the Company’s policy to review each prospective credit in order to determine the appropriateness and the adequacy of security or collateral prior to making a loan. In the event of borrower default, the Company seeks recovery in compliance with state lending laws, the Company’s lending standards, and credit monitoring and remediation procedures.

5.  COVERED ASSETS

In 2009 and 2010, the Company acquired the majority of the assets of three financial institutions in FDIC-assisted transactions. Most loans and OREO acquired in the acquisitions are covered by loss sharing agreements with the FDIC (the “Agreements”), whereby the FDIC will reimburse the Company for the majority of the losses incurred on these assets. A detailed discussion of these transactions is presented in Note 5, “Covered Assets” contained in the Company’s 2010 10-K.

Covered Assets

(Dollar amounts in thousands)

	June 30, 2011		December 31, 2010
Home equity lines (1)	$	47,488	$	52,980
Covered impaired loans		226,286		281,893
Other covered loans (2)		41,168		36,856
Total covered loans		314,942		371,729
FDIC indemnification asset		95,752		95,899
Covered OREO		14,583		22,370
Total covered assets	$	425,277		489,998
Covered non-accrual loans	$	3,588	$	-
Covered loans past due 90 days or more and still accruing interest	$	68,324	$	84,350

(1)	These loans are open-end consumer loans that are not categorized as impaired loans.
(2)	These are loans that did not have evidence of impairment on the date of acquisition.

The loans purchased in the three FDIC-assisted transactions were recorded at their estimated fair values on the respective purchase dates and are accounted for prospectively based on expected cash flows. An allowance for loan losses was not recorded on these loans at the acquisition date. Except for leases and revolving loans, including lines of credit and credit card loans, management determined that a significant portion of the acquired loans (“purchased impaired loans”) had evidence of credit deterioration since origination, and it was probable at the date of acquisition that the Company would not collect all contractually required principal and interest payments. Evidence of credit quality deterioration included factors such as past due and non-accrual status. Other key considerations and indicators include the past performance of the troubled institutions’ credit underwriting standards, completeness and accuracy of credit files, maintenance of risk ratings, and age of appraisals.

Although some loans were contractually 90 days or more past due at the acquisition date, most of the purchased impaired loans at June 30, 2011 and December 31, 2010 were not classified as non-performing loans since the loans continued to perform substantially in accordance with the Company’s expectations of cash flows. Interest income is being recognized on almost all purchased loans through accretion of the difference between the carrying amount of the loans and the expected cash flows.

The Company has also modified certain loans according to provisions in the Agreements. Losses associated with modifications on these loans are generally eligible for reimbursement under the Agreements. Acquired loans restructured after acquisition date are not considered troubled debt restructurings for purposes of the Company’s accounting and disclosure since the loans evidenced credit deterioration as of the acquisition date.

In connection with the Agreements, the Company recorded an indemnification asset. To maintain eligibility for the loss share reimbursement, the Company is required to follow certain servicing procedures as specified in the Agreements.

19

The accounting policies related to purchased impaired loans are presented in Note 1, “Summary of Significant Accounting Policies.” Accounting for the related FDIC indemnification assets is presented in Note 1, “Summary of Significant Accounting Policies” contained in the Company’s 2010 10-K.

Changes in FDIC Indemnification Asset

(Dollar amounts in thousands)

	Quarters Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Balance at beginning of period	$	85,386	$	54,591	$	95,899	$	67,945
Additions		-		8,338		-		8,338
(Amortization) accretion		(2,255)		812		(4,497)		2,249
Expected reimbursements from the FDIC for changes in    expected credit losses (1)		19,321		12,958		21,834		12,718
Payments received from the FDIC		(6,700)		(708)		(17,484)		(15,259)
Balance at end of period	$	95,752	$	75,991	$	95,752	$	75,991

(1) The increases in indemnification asset were a result of decreases in estimated cash flows on certain loans. The indemnification asset increased by the applicable loss share percentage for additional expected losses.

Changes in the accretable yield for purchased impaired loans were as follows.

Changes in Accretable Yield

(Dollar amounts in thousands)

	Quarters Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Balance at beginning of period	$	51,010	$	7,795	$	63,616	$	9,298
Additions		-		2,591		-		2,591
Accretion		(12,104)		(4,142)		(20,528)		(5,645)
Reclassifications from non-accretable difference, net (1)		16,700		18,230		12,518		18,230
Balance at end of period	$	55,606	$	24,474	$	55,606	$	24,474

(1) Amount represents an increase in the estimated cash flows to be collected on those loans showing improvement in the underlying portfolio.

6.  PAST DUE LOANS, ALLOWANCE FOR CREDIT LOSSES, AND IMPAIRED LOANS

The following table presents an aging analysis of the Company’s past due loans as of June 30, 2011 and December 31, 2010. The aging is determined without regard to accrual status. The table also presents non-performing loans, consisting of non-accrual loans (most of which are past due) and loans 90 days or more past due and still accruing interest, as of each balance sheet date.

20

Aging Analysis of Past Due Loans and Non-Performing Loans by Class

(Dollar amounts in thousands)

	Aging Analysis (Accruing and Non-accrual)										Non-performing Loans
	Current		30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Total Loans		Non-accrual Loans		90 Days Past Due Loans, Still Accruing Interest
June 30, 2011
Commercial and industrial	$	1,478,587	$	11,349	$	28,836	$	40,185	$	1,518,772	$	44,393	$	2,095
Agricultural		236,492		17		1,009		1,026		237,518		1,009		-
Commercial real estate:
Office, retail, and industrial		1,207,733		5,135		16,232		21,367		1,229,100		16,567		303
Multi-family		313,949		16,149		6,040		22,189		336,138		23,385		557
Residential construction		104,237		5,297		19,793		25,090		129,327		23,576		-
Commercial construction		125,230		-		21,449		21,449		146,679		21,449		-
Other commercial real       estate		815,924		3,993		33,049		37,042		852,966		36,984		464
Total commercial real           estate		2,567,073		30,574		96,563		127,137		2,694,210		121,961		1,324
Total corporate loans		4,282,152		41,940		126,408		168,348		4,450,500		167,363		3,419
Home equity		415,463		6,750		7,710		14,460		429,923		5,519		2,392
1-4 family mortgages		177,785		2,278		4,939		7,217		185,002		4,577		656
Installment loans		46,880		535		71		606		47,486		36		35
Total consumer loans		640,128		9,563		12,720		22,283		662,411		10,132		3,083
Total loans, excluding           covered loans		4,922,280		51,503		139,128		190,631		5,112,911		177,495		6,502
Covered loans		217,069		26,180		71,693		97,873		314,942		3,588		68,324
Total loans	$	5,139,349	$	77,683	$	210,821	$	288,504	$	5,427,853	$	181,083	$	74,826
December 31, 2010
Commercial and industrial	$	1,428,841	$	7,706	$	29,356	$	37,062	$	1,465,903	$	50,088	$	1,552
Agricultural		225,007		65		2,684		2,749		227,756		2,497		187
Commercial real estate:
Office, retail, and industrial		1,183,952		4,009		15,652		19,661		1,203,613		19,573		-
Multi-family		345,018		2,811		2,033		4,844		349,862		6,203		-
Residential construction		139,499		1,320		33,871		35,191		174,690		52,122		200
Commercial construction		140,044		4,000		20,428		24,428		164,472		28,685		-
Other commercial real       estate		813,333		9,091		33,933		43,024		856,357		40,605		345
Total commercial           real estate		2,621,846		21,231		105,917		127,148		2,748,994		147,188		545
Total corporate loans		4,275,694		29,002		137,957		166,959		4,442,653		199,773		2,284
Home equity		431,446		4,715		9,082		13,797		445,243		7,948		1,870
1-4 family mortgages		154,999		2,523		3,368		5,891		160,890		3,902		4
Installment loans		50,899		742		133		875		51,774		159		86
Total consumer loans		637,344		7,980		12,583		20,563		657,907		12,009		1,960
Total loans, excluding           covered loans		4,913,038		36,982		150,540		187,522		5,100,560		211,782		4,244
Covered loans		268,934		18,445		84,350		102,795		371,729		-		84,350
Total loans	$	5,181,972	$	55,427	$	234,890	$	290,317	$	5,472,289	$	211,782	$	88,594

21

The Company maintains an allowance for credit losses at a level believed adequate by management to absorb probable losses inherent in the loan portfolio.

Allowance for Credit Losses

(Dollar amounts in thousands)

	Quarters Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Balance at beginning of period	$	145,003	$	144,824	$	145,072	$	144,808
Loans charged-off		(27,748)		(24,732)		(49,317)		(44,729)
Recoveries of loans previously charged-off		3,813		3,859		5,821		5,522
Net loans charged-off		(23,935)		(20,873)		(43,496)		(39,207)
Provision for loan losses		18,763		21,526		38,255		39,876
Balance at end of period	$	139,831	$	145,477	$	139,831	$	145,477
Allowance for loan losses	$	137,331	$	145,027	$	137,331	$	145,027
Reserve for unfunded commitments		2,500		450		2,500		450
Total allowance for credit losses	$	139,831	$	145,477	$	139,831	$	145,477

Allowance for Credit Losses by Portfolio Segment

(Dollar amounts in thousands)

	Commercial, Industrial, and Agricultural		Office, Retail, and Industrial		Multi- Family		Residential Construction		Other Commercial Real Estate		Consumer		Covered Loans		Total Allowance
Six Months ended June 30, 2011
Balance at beginning of period	$	49,545	$	20,758	$	3,996	$	27,933	$	29,869	$	12,971	$	-	$	145,072
Loans charged-off		(11,877)		(1,846)		(7,201)		(9,083)		(8,331)		(5,779)		(5,200)		(49,317)
Recoveries of loans previously     charged-off		2,356		54		-		2,766		472		173		-		5,821
Net loans charged-off		(9,521)		(1,792)		(7,201)		(6,317)		(7,859)		(5,606)		(5,200)		(43,496)
Provision for loan losses		8,510		(2,104)		12,080		2,711		5,425		6,433		5,200		38,255
Balance at end of period	$	48,534	$	16,862	$	8,875	$	24,327	$	27,435	$	13,798	$	-	$	139,831
Six Months ended June 30, 2010
Balance at beginning of period	$	54,452	$	20,164	$	4,555	$	33,078	$	21,084	$	11,475	$	-	$	144,808
Loans charged-off		(11,919)		(4,229)		(1,359)		(14,605)		(6,483)		(5,483)		(651)		(44,729)
Recoveries of loans previously     charged-off		4,090		232		362		159		142		537		-		5,522
Net loans charged-off		(7,829)		(3,997)		( 997)		(14,446)		(6,341)		(4,946)		( 651)		(39,207)
Provision for loan losses		11,526		7,838		2,106		3,883		7,634		6,238		651		39,876
Balance at end of period	$	58,149	$	24,005	$	5,664	$	22,515	$	22,377	$	12,767	$	-	$	145,477

22

A portion of the Company’s allowance for credit losses is allocated to loans deemed impaired. Impaired loans consist of corporate non-accrual loans and restructured loans. Smaller homogeneous loans such as home equity, installment, and 1-4 family mortgages are not individually assessed for impairment.

Impaired Loans

(Dollar amounts in thousands)

	June 30, 2011		December 31, 2010
Impaired loans individually evaluated for impairment:
Impaired loans with a related allowance for credit losses (1)	$	23,362	$	13,790
Impaired loans with no specific related allowance (2)		129,225		173,534
Total impaired loans individually evaluated for impairment		152,587		187,324
Corporate non-accrual loans not individually evaluated for impairment (3)		14,776		12,449
Total corporate non-accrual loans		167,363		199,773
Restructured loans, still accruing interest		14,529		22,371
Total impaired loans	$	181,892	$	222,144
Valuation allowance related to impaired loans	$	9,504	$	6,343

(1)	These impaired loans require a valuation allowance because the present value of expected future cash flows or the estimated value of the related collateral less estimated selling costs is less than the recorded investment in the loans.
(2)	No specific allowance for credit losses is allocated to these loans since they are deemed to be sufficiently collateralized or had charge-offs. However, while each component of the allowance for credit losses is determined separately, the entire balance is available for the entire loan portfolio.
(3)	These are loans with balances under a specified threshold.

23

The table below provides a break-down of loans and the related allowance for credit losses by portfolio segment. Loans individually evaluated for impairment include corporate non-accrual loans with the exception of certain loans with balances under a specified threshold.

The present value of any decreases in expected cash flows of covered loans after the purchase date is recognized by recording a charge-off through the allowance for credit losses. Since covered loans are accounted for as purchased impaired loans and the carrying values of those loans are periodically adjusted for any changes in expected future cash flows, the covered loans are not included in the calculation of the allowance for credit losses and are not displayed in this table.

Loans and Related Allowance for Credit Losses by Portfolio Segment

(Dollar amounts in thousands)

	Loans						Allowance For Credit Losses
	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total		Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
June 30, 2011
Commercial, industrial, and   agricultural	$	36,529	$	1,719,761	$	1,756,290	$	4,265	$	44,269	$	48,534
Commercial real estate:
Office, retail, and industrial		15,316		1,213,784		1,229,100		-		16,862		16,862
Multi-family		22,572		313,566		336,138		-		8,875		8,875
Residential construction		22,510		106,817		129,327		251		24,076		24,327
Other commercial real estate		55,660		943,985		999,645		4,988		22,447		27,435
Total commercial real estate		116,058		2,578,152		2,694,210		5,239		72,260		77,499
Total corporate loans		152,587		4,297,913		4,450,500		9,504		116,529		126,033
Consumer		-		662,411		662,411		-		13,798		13,798
Total	$	152,587	$	4,960,324	$	5,112,911	$	9,504	$	130,327	$	139,831
December 31, 2010
Commercial, industrial, and   agricultural	$	43,365	$	1,650,294	$	1,693,659	$	2,650	$	46,895	$	49,545
Commercial real estate:
Office, retail, and industrial		18,076		1,185,537		1,203,613		-		20,758		20,758
Multi-family		5,696		344,166		349,862		497		3,499		3,996
Residential construction		51,269		123,421		174,690		-		27,933		27,933
Other commercial real estate		68,918		951,911		1,020,829		3,196		26,673		29,869
Total commercial real estate		143,959		2,605,035		2,748,994		3,693		78,863		82,556
Total corporate loans		187,324		4,255,329		4,442,653		6,343		125,758		132,101
Consumer		-		657,907		657,907		-		12,971		12,971
Total	$	187,324	$	4,913,236	$	5,100,560	$	6,343	$	138,729	$	145,072

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The following table presents loans individually evaluated for impairment by class of loan as of June 30, 2011 and December 31, 2010.

Impaired Loans Individually Evaluated by Class

(Dollar amounts in thousands)

	June 30, 2011								December 31, 2010
	Recorded Investment In								Recorded Investment In
	Loans with No Specific Related Allowance		Loans with a Related Allowance for Credit Losses		Unpaid Principal Balance		Allowance for Credit Losses Allocated		Loans with No Specific Related Allowance		Loans with a Related Allowance for Credit Losses		Unpaid Principal Balance		Allowance for Credit Losses Allocated
Commercial and   industrial	$	25,326	$	10,807	$	44,016	$	4,265	$	40,715	$	2,650	$	53,353	$	2,650
Agricultural		396		-		469		-		2,447		-		2,982		-
Commercial real estate:
Office, retail, and          industrial		15,316		-		23,505		-		18,076		-		26,193		-
Multi-family		22,572		-		31,922		-		4,565		1,131		7,322		497
Residential       construction		19,358		3,152		63,081		251		51,269		-		129,698		-
Commercial       construction		20,889		399		28,818		178		28,685		-		38,404		-
Other commercial real       estate		25,368		9,004		55,627		4,810		27,777		10,009		60,465		3,196
Total commercial real           estate		103,503		12,555		202,953		5,239		130,372		11,140		262,082		3,693
Total impaired loans      individually evaluated      for  impairment	$	129,225	$	23,362	$	247,438	$	9,504	$	173,534	$	13,790	$	318,417	$	6,343

	Six Months Ended June 30, 2011				Six Months Ended June 30, 2010
	Average Recorded Investment Balance		Interest Income Recognized (1)		Average Recorded Investment Balance		Interest Income Recognized (1)
Commercial and industrial	$	51,863	$	10	$	31,934	$	83
Agricultural		1,796		-		1,862		-
Commercial real estate:
Office, retail, and industrial		18,989		21		20,987		7
Multi-family		4,736		2		9,172		-
Residential construction		41,455		27		100,110		75
Commercial construction		25,191		-		20,209		-
Other commercial real estate		37,968		18		25,967		-
Total commercial real estate		128,339		68		176,445		82
Total impaired loans individually evaluated for             impairment	$	181,998	$	78	$	210,241	$	165

(1) Recorded using the cash basis of accounting.

Corporate loans and commitments are assessed for risk and assigned ratings based on various characteristics such as the borrower’s cash flow, leverage, collateral, management characteristics, and other factors. Ratings for commercial credits are reviewed periodically. Consumer loans are assessed for credit quality based on the aging status of the loan and payment activity. The assessment of consumer loans is completed at the end of each reporting period. Loans are analyzed on an individual basis when the internal credit rating is at or below a predetermined classification and the loan exceeds a fixed dollar amount.

25

Credit Quality Indicators by Class, Excluding Covered Loans

 (Dollar amounts in thousands)

	Pass		Special Mention (1)		Substandard / Accrual (2)		Substandard / Non-accrual (3)		Total
June 30, 2011
Commercial and industrial	$	1,337,553	$	77,305	$	59,521	$	44,393	$	1,518,772
Agricultural		223,260		13,249		-		1,009		237,518
Commercial real estate:
Office, retail, and industrial		1,058,059		113,657		40,817		16,567		1,229,100
Multi-family		290,077		7,213		15,463		23,385		336,138
Residential construction		48,344		27,305		30,102		23,576		129,327
Commercial construction		72,237		34,291		18,702		21,449		146,679
Other commercial real estate		712,785		82,614		20,583		36,984		852,966
Total commercial real estate		2,181,502		265,080		125,667		121,961		2,694,210
Total corporate loans	$	3,742,315	$	355,634	$	185,188	$	167,363	$	4,450,500
December 31, 2010
Commercial and industrial	$	1,303,142	$	83,259	$	29,414	$	50,088	$	1,465,903
Agricultural		209,317		15,667		275		2,497		227,756
Commercial real estate:
Office, retail, and industrial		1,026,124		123,800		34,116		19,573		1,203,613
Multi-family		307,845		20,643		15,171		6,203		349,862
Residential construction		57,209		35,950		29,409		52,122		174,690
Commercial construction		85,305		35,750		14,732		28,685		164,472
Other commercial real estate		697,971		89,247		28,534		40,605		856,357
Total commercial real estate		2,174,454		305,390		121,962		147,188		2,748,994
Total corporate loans	$	3,686,913	$	404,316	$	151,651	$	199,773	$	4,442,653

	Performing		Non-accrual		Total
June 30, 2011
Home equity	$	424,404	$	5,519	$	429,923
1-4 family mortgages		180,425		4,577		185,002
Installment loans		47,450		36		47,486
Total consumer loans	$	652,279	$	10,132	$	662,411
December 31, 2010
Home equity	$	437,295	$	7,948	$	445,243
1-4 family mortgages		156,988		3,902		160,890
Installment loans		51,615		159		51,774
Total consumer loans	$	645,898	$	12,009	$	657,907

(1)	Loans categorized as special mention have potential weaknesses that deserve the close attention of management. If left uncorrected, these potential weaknesses may result in the deterioration of repayment prospects or in the credit position of the Company at some future date.
(2)	Loans categorized as substandard/accrual continue to accrue interest, but exhibit a well-defined weakness or weaknesses that may jeopardize the liquidation of the debt. These loans continue to accrue interest because they are well secured and collection of principal and interest is expected within a reasonable time.
(3)	Loans categorized as substandard/non-accrual exhibit a well-defined weakness or weaknesses that may jeopardize the liquidation of the debt and are characterized by the distinct possibility that the Company could sustain some loss if the deficiencies are not corrected. These loans have been placed on non-accrual status.

26

7. EARNINGS PER COMMON SHARE

Basic and Diluted Earnings per Common Share

(Amounts in thousands, except per share data)

	Quarters Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Net income	$	10,828	$	7,809	$	21,046	$	15,890
Preferred dividends		(2,412)		(2,412)		(4,825)		(4,825)
Accretion on preferred stock		(170)		(161)		(338)		(320)
Net income applicable to non-vested restricted shares		( 102)		(  65)		( 242)		( 146)
Net income applicable to common shares	$	8,144	$	5,171	$	15,641	$	10,599
Weighted-average common shares outstanding:
Weighted-average common shares outstanding (basic)		73,259		73,028		73,205		71,756
Dilutive effect of common stock equivalents		-		-		-		-
Weighted-average diluted common shares outstanding		73,259		73,028		73,205		71,756
Basic earnings per share	$	0.11	$	0.07	$	0.21	$	0.15
Diluted earnings per share	$	0.11	$	0.07	$	0.21	$	0.15
Anti-dilutive shares not included in the computation of   diluted earnings per share (1)		3,619		3,810		3,676		3,848

(1) Represents outstanding stock options and common stock warrants for which the exercise price is greater than the average market price of the Company’s common stock.

8.  COMPREHENSIVE INCOME

Comprehensive income is the total of reported net income and all other revenues, expenses, gains, and losses that are not included in reported net income under GAAP. The Company includes the following items, net of tax, in other comprehensive income in the Consolidated Statements of Changes in Stockholders’ Equity: changes in unrealized gains or losses on securities available-for-sale, changes in the fair value of derivatives designated under cash flow hedges (when applicable), and changes in the funded status of the Company’s pension plan.

Components of Other Comprehensive Income

(Dollar amounts in thousands)

	Six Months Ended June 30, 2011						Six Months Ended June 30, 2010
	Before Tax		Tax Effect		Net of Tax		Before Tax		Tax Effect		Net of Tax
Securities available-for-sale:
Unrealized holding gains	$	22,386	$	8,762	$	13,624	$	13,763	$	5,351	$	8,412
Less: Reclassification of net gains        included in net income		2,071		847		1,224		4,178		1,629		2,549
Net unrealized holding gains		20,315		7,915		12,400		9,585		3,722		5,863
Total other comprehensive income	$	20,315	$	7,915	$	12,400	$	9,585	$	3,722	$	5,863

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Activity in Accumulated Other Comprehensive Loss

(Dollar amounts in thousands)

	Accumulated Unrealized Loss on Securities Available-for-Sale		Unrecognized Net Pension Costs		Total Accumulated Other Comprehensive Loss
Balance at January 1, 2010	$	(13,015)	$	(5,651)	$	(18,666)
Other comprehensive income		5,863		-		5,863
Balance at June 30, 2010	$	(7,152)	$	(5,651)	$	(12,803)
Balance at January 1, 2011	$	(19,806)	$	(7,933)	$	(27,739)
Other comprehensive income		12,400		-		12,400
Balance at June 30, 2011	$	(7,406)	$	(7,933)	$	(15,339)

9.  INCOME TAXES

Income Tax Expense

(Dollar amounts in thousands)

	Quarters Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Income before income tax expense (benefit)	$	13,669	$	7,948	$	23,917	$	16,384
Income tax expense (benefit):
Federal income tax expense (benefit)	$	1,669	$	(244)	$	2,683	$	(282)
State income tax expense		1,172		383		188		776
Total income tax expense	$	2,841	$	139	$	2,871	$	494
Effective income tax rate		20.8%		1.7%		12.0%		3.0%

Federal income tax expense (benefit) and the related effective income tax rate are primarily influenced by the amount of tax-exempt income derived from investment securities and bank-owned life insurance in relation to pre-tax income. State income tax expense and the related effective tax rate are influenced by state tax rules relating to consolidated/combined reporting and sourcing of income and expense.

Income tax expense increased for both second quarter 2011 and the first six months of 2011 compared to the same periods in 2010. The increases resulted from an increase in pre-tax income in the 2011 periods over that of the prior periods, as well as decreases in tax-exempt income and the impacts of the Illinois tax law change described below.

Effective January 1, 2011, the Illinois corporate income tax rate increased from 7.3% to 9.5%. This rate increase resulted in additional state tax expense of $155,000 for second quarter 2011 and $263,000 for the six months ended June 30, 2011. Also, as a result of this rate change, the Company recorded a $1.6 million state tax benefit in first quarter 2011 related to the write-up of state deferred tax assets.

10.  DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

In the ordinary course of business, the Company enters into derivative transactions as part of its overall interest rate risk management strategy to minimize significant unplanned fluctuations in earnings and cash flows caused by interest rate volatility. To achieve its interest rate risk management objectives, the Company primarily uses interest rate swaps with indices that relate to the pricing of specific assets and liabilities. The nature and volume of the derivative instruments used to manage interest rate risk depend on the level and type of assets and liabilities held and the risk management strategies for the current and anticipated interest rate environment.

All derivative instruments are recorded at fair value as either other assets or other liabilities in the Consolidated Statements of Financial Condition. Subsequent changes in a derivative’s fair value are recognized in earnings unless specific hedge accounting criteria are met. The accounting policies related to derivative instruments and hedging activities are presented in Note 1, “Summary of Significant Accounting Policies,” contained in the Company’s 2010 10-K.

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During the six months ended June 30, 2011 and 2010, the Company hedged the fair value of fixed rate commercial real estate loans through the use of pay fixed, receive variable interest rate swaps. These derivative contracts were designated as fair value hedges and are valued using observable market prices, if available, or third party cash flow projection models. The fair value and notional amounts of the fair value hedges and the amount of hedge ineffectiveness recognized thereon were not material for any period presented.

The Company’s derivative portfolio also includes derivative instruments not designated in a hedge relationship consisting of commitments to originate 1-4 family mortgage loans and foreign exchange contracts. The fair value of these instruments was not material for any period presented. The Company had no other derivative instruments as of June 30, 2011 or December 31, 2010. The Company does not enter into derivative transactions for purely speculative purposes.

11.  COMMITMENTS, GUARANTEES, AND CONTINGENT LIABILITIES

Credit Commitments and Guarantees

In the normal course of business, the Company enters into a variety of financial instruments with off-balance sheet risk to meet the financing needs of its customers and to conduct lending activities. These instruments include commitments to extend credit and standby and commercial letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Statements of Financial Condition.

Contractual or Notional Amounts of Financial Instruments

(Dollar amounts in thousands)

	June 30, 2011		December 31, 2010
Commitments to extend credit:
Home equity lines	$	271,138	$	275,826
Credit card lines to businesses		28,129		26,376
1-4 family real estate construction		26,159		26,682
Commercial real estate		158,092		175,608
Commercial and industrial		568,553		553,168
Overdraft protection program (1)		177,344		169,824
All other commitments		132,096		97,299
Total commitments	$	1,361,511	$	1,324,783
Letters of credit:
1-4 family real estate construction	$	10,608	$	10,551
Commercial real estate		50,104		54,896
All other		74,194		74,594
Total letters of credit	$	134,906	$	140,041
Unamortized fees associated with letters of credit (2) (3)	$	759	$	696
Remaining weighted-average term (in months)		10.1		12.2
Remaining lives (in years)		0.1 to 4.5		0.1 to 9.5
Recourse on securitized assets:
Unpaid principal balance of assets securitized	$	7,301	$	7,424
Cap on recourse obligation	$	2,208	$	2,208
Carrying value of recourse obligation (2)	$	148	$	148

(1)	Federal regulation regarding electronic fund transfers require consumers to affirmatively consent to the institution’s overdraft service for automated teller machine and one-time debit card transactions before overdraft fees may be assessed on the account. Consumers are provided a specific line for the amount they may overdraw.
(2)	Included in other liabilities in the Consolidated Statements of Financial Condition.
(3)	The Company will amortize these amounts into income over the commitment period.

Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party and are most often issued in favor of a municipality where construction is taking place to ensure the borrower adequately completes the construction.

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The maximum potential future payments guaranteed by the Company under standby letters of credit arrangements are equal to the contractual amount of the commitment. If a commitment is funded, the Company may seek recourse through the liquidation of the underlying collateral including real estate, production plants and property, marketable securities, or cash.

Pursuant to the securitization of certain 1-4 family mortgage loans in 2004, the Company is contractually obligated to repurchase at recorded value any non-performing loans, defined as loans past due greater than 90 days. According to the securitization agreement, the Company’s recourse obligation will end on November 30, 2011.

Repurchases and Charge-Offs of Recourse Loans

(Dollar amounts in thousands)

	Quarters Ended June 30,				Six Months Ended June 30,
	2011		2010			2011	2010
Recourse loans repurchased during the period	$	-	$	114	$	-	$	114
Recourse loans charged-off during the period	$	-	$	36	$	-	$	36

Legal Proceedings

As of June 30, 2011, there were certain legal proceedings pending against the Company and its subsidiaries in the ordinary course of business. The Company does not believe that liabilities, individually or in the aggregate, arising from these proceedings, if any, would have a material adverse effect on the consolidated financial condition of the Company as of June 30, 2011.

12.  FAIR VALUE

The Company measures, monitors, and discloses certain of its assets and liabilities at fair value in accordance with fair value accounting guidance. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Fair value is used on a recurring basis to account for trading securities, securities available-for-sale, mortgage servicing rights, derivative assets, and derivative liabilities. It is also used on an annual basis to disclose the fair value of pension plan assets. In addition, fair value is used on a non-recurring basis (i) to apply lower-of-cost-or-market accounting to OREO, loans held-for-sale (excluding mortgage loans held-for-sale), and assets held-for-sale; (ii) to evaluate assets or liabilities for impairment, including collateral-dependent impaired loans, goodwill, and other intangibles; and (iii) for disclosure purposes.

Depending upon the nature of the asset or liability, the Company uses various valuation techniques and assumptions when estimating fair value. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. GAAP establishes a fair value hierarchy that prioritizes the inputs used to measure fair value into three broad levels based on the observability of the inputs. The three levels of the fair value hierarchy are defined as follows:

·   Level 1 – Quoted prices in active markets for identical assets or liabilities.

·   Level 2 – Observable inputs other than level 1 prices, such as quoted prices for similar instruments; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

·   Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The categorization of an asset or liability within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Transfers between levels of the fair value hierarchy are recognized on the actual date of circumstance that resulted in the transfer. There were no transfers of assets or liabilities between levels of the fair value hierarchy during the periods presented.

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Assets and Liabilities Measured at Fair Value

The following table provides the hierarchy level and fair value for each class of assets and liabilities measured at fair value.

Fair Value Measurements

(Dollar amounts in thousands)

	June 30, 2011
	Level 1		Level 2		Level 3		Total
Assets and liabilities measured at fair value on a recurring basis
Assets:
Trading securities:
Money market funds	$	1,152	$	-	$	-	$	1,152
Mutual funds		15,078		-		-		15,078
Total trading securities		16,230		-		-		16,230
Securities available-for-sale:
U.S. agency securities		-		8,113		-		8,113
CMOs		-		376,702		-		376,702
Other residential mortgage-backed securities		-		97,805		-		97,805
Municipal securities		-		479,919		-		479,919
CDOs		-		-		16,487		16,487
Corporate debt securities		-		27,922		-		27,922
Hedge fund investment		-		1,882		-		1,882
Other equity securities		39		1,004		-		1,043
Total securities available-for-sale		39		993,347		16,487		1,009,873
Mortgage servicing rights (1)		-		-		840		840
Total assets	$	16,269	$	993,347	$	17,327	$	1,026,943
Liabilities:
Derivative liabilities (1)	$	-	$	1,877	$	-	$	1,877
Assets measured at fair value on a non-recurring basis
Collateral-dependent impaired loans (2)	$	-	$	-	$	85,101	$	85,101
OREO (3)		-		-		38,990		38,990
Loan held-for-sale (4)		-		-		1,595		1,595
Asset held-for-sale (5)		-		-		7,928		7,928
Total assets	$	-	$	-	$	133,614	$	133,614

Refer to the following page for footnotes.

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	December 31, 2010
	Level 1		Level 2		Level 3		Total
Assets and liabilities measured at fair value on a recurring basis
Assets:
Trading securities:
Money market funds	$	1,196	$	-	$	-	$	1,196
Mutual funds		14,086		-		-		14,086
Total trading securities		15,282		-		-		15,282
Securities available-for-sale:
U.S. agency securities		-		17,886		-		17,886
CMOs		-		379,589		-		379,589
Other residential mortgage-backed securities		-		106,451		-		106,451
Municipal securities		-		503,991		-		503,991
CDOs		-		-		14,858		14,858
Corporate debt securities		-		32,345		-		32,345
Hedge fund investment		-		1,683		-		1,683
Other equity securities		38		961		-		999
Total securities available-for-sale		38		1,042,906		14,858		1,057,802
Mortgage servicing rights (1)		-		-		942		942
Total assets	$	15,320	$	1,042,906	$	15,800	$	1,074,026
Liabilities:
Derivative liabilities (1)	$	-	$	1,833	$	-	$	1,833
Assets measured at fair value on a non-recurring basis
Collateral-dependent impaired loans (2)	$	-	$	-	$	125,258	$	125,258
OREO (3)		-		-		53,439		53,439
Total assets	$	-	$	-	$	178,697	$	178,697

(1)	Mortgage servicing rights are included in other assets, and derivative liabilities are included in other liabilities in the Consolidated Statements of Financial Condition.
(2)	Represents the carrying value of loans for which adjustments are based on the appraised or market-quoted value of the collateral, net of selling costs. Collateral-dependent loans for which no fair value adjustments were necessary during the six months ended June 30, 2011 are not included.
(3)	Represents the estimated fair value, net of selling costs, based on appraised value and includes covered OREO.
(4)	Included in other assets in the Consolidated Statements of Financial Condition.
(5)	Included in premises, furniture, and equipment in the Consolidated Statements of Financial Condition.

Valuation Methodologies

The following describes the valuation methodologies used by the Company for assets and liabilities measured at fair value.

Trading Securities – Trading securities represent diversified investment securities held in a rabbi trust and are invested in money market and mutual funds. The fair value of these money market and mutual funds is based on quoted market prices in active exchange markets and classified in level 1 of the fair value hierarchy. All trading securities are reported at fair value, with unrealized gains and losses included in noninterest income.

Securities Available-for-Sale – Securities available-for-sale are primarily fixed income instruments that are not quoted on an exchange, but may be traded in active markets. The fair value of these securities is based on quoted prices in active markets obtained from external pricing services or dealer market participants. The Company has evaluated the methodologies used by its external pricing services to develop the fair values to determine whether such valuations are representative of an exit price in the Company’s principal markets. Examples of such securities measured at fair value are U.S. agency securities, municipal bonds, CMOs, and other mortgage-backed securities. These securities are generally classified in level 2 of the fair value hierarchy. In certain cases, where there is limited market activity or less transparent inputs to the valuation, securities

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are classified in level 3. For instance, in the valuation of CDOs, the determination of fair value requires benchmarking to similar instruments or analyzing default and recovery rates.

The Company’s CMOs and other mortgage-backed securities are classified in level 2 of the fair value hierarchy. Their fair value is based on quoted market prices obtained from external pricing services or dealer market participants where trading in an active market exists. Substantially all of these securities are either backed by U.S. government-owned agencies or issued by U.S. government-sponsored enterprises.

	Collateralized Mortgage Obligations	Other Mortgage- Backed Securities
Weighted-average coupon rate	4.9%	5.3%
Weighted-average maturity (in years)	2.4	4.4
Information on underlying residential mortgages:
Origination dates	2000 to 2010	2000 to 2010
Weighted-average coupon rate	5.8%	5.8%
Weighted-average maturity (in years)	9.1	7.4

Due to the illiquidity in the secondary market for the Company’s CDOs, the Company estimates the value of these securities using discounted cash flow analyses with the assistance of a structured credit valuation firm, and classifies these investments in level 3 of the fair value hierarchy. The valuation for each of the CDOs relies on historical financial data for the obligors of the underlying collateral. The valuation firm performs a credit analysis of each of the entities comprising the collateral underlying each CDO in order to estimate the entities’ likelihood of default on their trust-preferred obligations. Cash flows are modeled according to the contractual terms of the CDO, discounted to their present values, and are used to derive the estimated fair value of the individual CDO, as well as any credit loss or impairment. The discount rates used in the discounted cash flow analyses range from LIBOR plus 1,200 to LIBOR plus 1,300 basis points, depending upon the specific CDO and reflects the higher risk inherent in these securities given the current market environment.

The Company’s hedge fund investment is classified in level 2 of the fair value hierarchy. The fair value is derived from monthly and annual financial statements provided by hedge fund management. The majority of the hedge fund’s investment portfolio is held in securities that are freely tradable and are listed on national securities exchanges.

Carrying Value of Level 3 Securities Available-for-Sale

(Dollar amounts in thousands)

	Quarters Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Balance at beginning of period	$	16,193	$	12,178	$	14,858	$	11,728
Total income (loss):
Included in earnings (1)		-		(1,049)		-		(3,812)
Included in other comprehensive income		294		2,535		1,629		5,748
Balance at end of period	$	16,487	$	13,664	$	16,487	$	13,664
Change in unrealized losses recognized in earnings relating      to securities still held at end of period	$	-	$	(1,049)	$	-	$	(3,812)

(1) Included in securities gains, net in the Consolidated Statements of Income.

Mortgage Servicing Rights – The Company records its mortgage servicing rights at fair value in other assets in the Consolidated Statements of Financial Condition. Mortgage servicing rights do not trade in an active market with readily observable prices. Accordingly, the Company determines the fair value of mortgage servicing rights by estimating the present value of the future cash flows associated with the mortgage loans being serviced. Key economic assumptions used in measuring the fair value of mortgage servicing rights at June 30, 2011 included prepayment speeds, maturities, and discount rates. While market-based data is used to determine the assumptions, the Company incorporates its own estimates of the assumptions market participants would use in determining the fair value of mortgage servicing rights, which results in a level 3 classification in the fair value hierarchy.

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Carrying Value of Mortgage Servicing Rights

(Dollar amounts in thousands)

	Quarters Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Balance at beginning of period	$	845	$	1,197	$	942	$	1,238
Total (losses) gains included in earnings (1):
Due to changes in valuation inputs and assumptions (2)		28		(2)		(10)		23
Other changes in fair value (3)		(33)		(62)		(92)		(128)
Balance at end of period	$	840	$	1,133	$	840	$	1,133
Key economic assumptions used in measuring fair value, at end   of period:
Weighted-average prepayment speed		18.7%		16.1%		18.7%		16.1%
Weighted-average discount rate		11.5%		11.4%		11.5%		11.4%
Weighted-average maturity, in months		198.5		205.8		198.5		205.8
Contractual servicing fees earned during the period (1)	$	60	$	74	$	123	$	158

	June 30, 2011		December 31, 2010
Total amount of loans being serviced for the benefit of others at end of period (4)	$	88,091	$	114,720

(1)	Included in other service charges, commissions, and fees in the Consolidated Statements of Income and relate to mortgage servicing rights still held at the end of the period.
(2)	Principally reflects changes in prepayment speed assumptions.
(3)	Primarily represents changes in expected cash flows over time due to payoffs and paydowns.
(4)	These loans are serviced for and owned by third parties and are not included in the Consolidated Statements of Financial Condition.

Derivative Assets and Derivative Liabilities –The interest rate swaps entered into by the Company are executed in the dealer market, and pricing is based on market quotes obtained from the counterparty that transacted the derivative contract. The market quotes were developed by the counterparty using market observable inputs, which primarily include LIBOR for swaps. Therefore, derivatives are classified in level 2 of the fair value hierarchy. For its derivative assets and liabilities, the Company also considers non-performance risk, including the likelihood of default by itself and its counterparties, when evaluating whether the market quotes from the counterparty are representative of an exit price. The Company has a policy of executing derivative transactions only with counterparties above a certain credit rating. Credit risk is also mitigated through the pledging of collateral when certain thresholds are reached.

Collateral-Dependent Impaired Loans –The carrying value of impaired loans is disclosed in Note 6, “Past Due Loans, Allowance for Credit Losses, and Impaired Loans.” The Company does not record loans at fair value on a recurring basis. However, from time to time, fair value adjustments are recorded in the form of specific reserves or charge-offs on these loans to reflect (i) specific reserves or partial write-downs that are based on the current appraised value of the underlying collateral or (ii) the full charge-off of the loan’s carrying value. The fair value adjustments are primarily determined by current appraised values of underlying collateral, net of estimated selling costs. For collateral-dependent impaired loans, new appraisals are required every six months for construction loans, and annually for all other commercial real estate loans. In limited circumstances, such as cases of outdated appraisals, the appraised values may be reduced by a certain percentage depending upon the specific facts and circumstances or an internal valuation may be used when the underlying collateral is located in areas where comparable sales data is limited, outdated, or unavailable. Accordingly, collateral-dependent impaired loans are classified in level 3 of the fair value hierarchy.

Other Real Estate Owned – OREO includes properties acquired through foreclosure in partial or total satisfaction of certain loans. Upon initial transfer into OREO, a current appraisal is required (generally less than six months old for residential and commercial land and less than one year old for all other commercial property). Properties are recorded at the lower of the recorded investment in the loans for which the properties previously served as collateral or the fair value, which represents the current appraised value of the properties less estimated selling costs. Fair value assumes an orderly disposition except where a specific disposition strategy is expected, which would require the use of other appraised values such as forced liquidation or as-completed/stabilized values.

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In certain circumstances, the current appraised value may not represent an accurate measurement of the property’s current fair value due to imprecision, subjectivity, outdated market information, or other factors. In these cases, the fair value is determined based on the lower of the (i) current appraised value, (ii) internal valuation, (iii) current listing price, or (iv) signed sales contract. Any appraisal that is greater than twelve months old is adjusted to account for estimated declines in the real estate market until an updated appraisal can be obtained. Given these valuation methods, OREO is classified in level 3. Any write-downs in the carrying value of a property at the time of initial transfer into OREO are charged against the allowance for credit losses.

Subsequent to the initial transfer, periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal. Quarterly impairment analyses take into consideration current real estate market trends and adjustments to listing prices. Any write-downs of the properties subsequent to initial transfer, as well as gains or losses on disposition and income or expense from the operations of OREO, are recognized in operating results in the period in which they occur.

Loan Held-for-Sale –The loan held-for-sale is a residential construction loan. During second quarter 2011, the Company determined that this loan met the held-for-sale criteria and transferred it into the held-for-sale category at its estimated fair value, less costs to sell. The fair value was determined by the sales contract price. Accordingly, the loan held-for-sale is classified in level 3 of the fair value hierarchy. Similarly, during first quarter 2011, the Company classified a commercial construction loan as held-for-sale. That loan was sold during second quarter 2011.

Asset Held-for-Sale – In second quarter 2011, the Company entered into an agreement to sell property held for expansion and classified it as held-for-sale. Based on the sales contract price, the Company wrote-down the book value of the property and classified it in level 3 of the fair value hierarchy. In first quarter 2011, the Company entered into a similar agreement to sell a data storage facility and classified it as held-for-sale. This facility was sold in second quarter 2011.

Fair Value Measurements Recorded for

Assets Measured at Fair Value on a Non-Recurring Basis

(Dollar amounts in thousands)

	Quarter Ended  June 30, 2011				Six Months Ended June 30, 2011
	Charged to Allowance for Loan Losses		Charged to Earnings		Charged to Allowance for Loan Losses		Charged to Earnings
Collateral-dependent impaired loans	$	19,459	$	-	$	36,269	$	-
OREO		-		1,523		-		2,635
Loans held-for-sale		-		-		200		-
Assets held-for-sale		-		286		-		596

Fair Value Disclosure of Other Assets and Liabilities

GAAP requires disclosure of the estimated fair values of certain financial instruments, both assets and liabilities, on and off-balance sheet, for which it is practical to estimate the fair value. Since the estimated fair values provided herein exclude disclosure of the fair value of certain other financial instruments and all non-financial instruments, any aggregation of the estimated fair value amounts presented would not represent the underlying value of the Company. Examples of non-financial instruments having significant value include the future earnings potential of significant customer relationships and the value of the Company’s trust division operations and other fee-generating businesses. In addition, other significant assets including premises, furniture, and equipment and goodwill are not considered financial instruments and, therefore, have not been valued.

Various methodologies and assumptions have been utilized in management’s determination of the estimated fair value of the Company’s financial instruments, which are detailed below. The fair value estimates are made at a discrete point in time based on relevant market information. Since no market exists for a significant portion of these financial instruments, fair value estimates are based on judgments regarding future expected economic conditions, loss experience, and risk characteristics of the financial instruments. These estimates are subjective, involve uncertainties, and cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

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In addition to the valuation methodology explained above for financial instruments recorded at fair value, the following methods and assumptions were used in estimating the fair value of financial instruments that are carried at cost in the Consolidated Statements of Financial Condition.

Short-Term Financial Assets and Liabilities - For financial instruments with a shorter-term or with no stated maturity, prevailing market rates, and limited credit risk, the carrying amounts approximate fair value. Those financial instruments include cash and due from banks, federal funds sold and other short-term investments, mortgages held-for-sale, accrued interest receivable, and accrued interest payable.

Securities Held-to-Maturity - The fair value of securities held-to-maturity is based on quoted market prices or dealer quotes. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

Loans, net of Allowance for Loan Losses - The fair value of loans is estimated using present value techniques by discounting the future cash flows of the remaining maturities of the loans, and prepayment assumptions were considered based on historical experience and current economic and lending conditions. The discount rate was based on the LIBOR yield curve, with rate adjustments for liquidity and credit risk. The primary impact of credit risk on the fair value of the loan portfolio, however, was estimated through the use of the allowance for loan losses, which is believed to represent the current fair value of estimated inherent losses for purposes of the fair value calculation.

Covered Loans (included in Loans, net of Allowance for Loan Losses) - The fair value of the covered loan portfolio is determined by discounting the expected cash flows at a market interest rate based on certain input assumptions. The market interest rate (discount rate) is derived from LIBOR swap rates over the expected weighted-average life of the asset. The expected cash flows are based on contractual terms and default timing assumptions.

FDIC Indemnification Asset - The fair value of the FDIC indemnification asset is calculated by discounting the cash flows expected to be received from the FDIC. These cash flows are estimated by multiplying expected losses by the reimbursement rates set forth in the Agreements.

Investment in Bank-Owned Life Insurance - The fair value of investments in bank-owned life insurance is based on each policy’s respective cash surrender value.

Deposit Liabilities - The fair values disclosed for demand deposits, savings deposits, NOW accounts, and money market deposits are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The fair value for fixed-rate time deposits was estimated using present value techniques by discounting the future cash flows based on the LIBOR yield curve, plus or minus the spread associated with current pricing.

Borrowed Funds - The fair value of repurchase agreements and FHLB advances is estimated by discounting the agreements based on maturities using the rates currently offered for repurchase agreements of similar remaining maturities. The carrying amounts of federal funds purchased, federal term auction facilities, and other borrowed funds approximate their fair value due to their short-term nature.

Subordinated Debt - The fair value of subordinated debt was determined using available market quotes.

Standby Letters of Credit - The fair value of standby letters of credit represent deferred fees arising from the related off-balance sheet financial instruments. These deferred fees approximate the fair value of these instruments and are based on several factors, including the remaining terms of the agreement and the credit standing of the customer.

Commitments - Given the limited interest rate exposure posed by the commitments outstanding at year-end due to their variable nature, combined with the general short-term nature of the commitment periods entered into, termination clauses provided in the agreements, and the market rate of fees charged, the Company has estimated the fair value of commitments outstanding to be immaterial.

36

Financial Instruments

(Dollar amounts in thousands)

	June 30, 2011				December 31, 2010
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial Assets:
Cash and due from banks	$	110,159	$	110,159	$	102,495	$	102,495
Interest-bearing deposits in other banks		601,310		601,310		483,281		483,281
Loans held-for-sale		1,595		1,595		236		236
Trading securities		16,230		16,230		15,282		15,282
Securities available-for-sale		1,009,873		1,009,873		1,057,802		1,057,802
Securities held-to-maturity		76,142		78,485		81,320		82,525
Loans, net of allowance for loan losses		5,290,522		5,306,598		5,329,717		5,323,830
FDIC indemnification asset		95,752		95,752		95,899		95,899
Accrued interest receivable		28,883		28,883		29,953		29,953
Investment in bank-owned life insurance		198,149		198,149		197,644		197,644
Financial Liabilities:
Deposits	$	6,495,549	$	6,494,373	$	6,511,476	$	6,512,626
Borrowed funds		272,024		275,540		303,974		306,703
Subordinated debt		137,748		132,145		137,744		122,261
Accrued interest payable		3,650		3,650		4,557		4,557
Derivative liabilities		1,877		1,877		1,833		1,833
Standby letters of credit		759		759		696		696

13.  SUBSEQUENT EVENTS

The Company has evaluated the impact of events that have occurred subsequent to June 30, 2011 through the date its consolidated financial statements were issued. Based on the evaluation, management does not believe any subsequent events have occurred that would require further disclosure or adjustment to the financial statements.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is intended to address the significant factors affecting our results of operations and financial condition for the quarters and six-month periods ended June 30, 2011 and 2010. When we use the terms “First Midwest,” the “Company,” “we,” “us,” and “our,” we mean First Midwest Bancorp, Inc., a Delaware Corporation, and its consolidated subsidiaries. When we use the term “Bank,” we are referring to our wholly owned banking subsidiary, First Midwest Bank. 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 in our 2010 Annual Report on Form 10-K (“2010 10-K”). Results of operations for the quarter and six months ended June 30, 2011 are not necessarily indicative of results to be expected for the year ending December 31, 2011. Unless otherwise stated, all earnings per common share data included in this section and throughout the remainder of this discussion are presented on a diluted basis.

PERFORMANCE OVERVIEW

General Overview

Our banking network is located primarily in suburban metropolitan Chicago with additional locations in central and western Illinois and eastern Iowa. We provide a full range of business and retail banking and trust and advisory services through some 100 banking offices. Our primary sources of revenue are net interest income and fees from financial services provided to customers. Our largest expenses are interest on deposits and compensation expense. Business volumes tend to be influenced by overall economic factors affecting our market, including market interest rates, business spending, consumer confidence, competitive conditions within the marketplace, and certain seasonal factors.

37

Table 1

Selected Financial Data (1)

(Dollar and share amounts in thousands, except per share data)

	Quarters Ended June 30,					Six Months Ended June 30,
	2011		2010		% Change	2011		2010		% Change
Operating Results
Interest income	$	81,296	$	82,274	(   1.2)	$	162,579	$	164,053	(   0.9)
Interest expense		(9,935)		(12,655)	(  21.5)		(20,572)		(26,496)	(  22.4)
Net interest income		71,361		69,619	2.5		142,007		137,557	3.2
Fee-based revenues		24,205		21,879	10.6		45,908		41,918	9.5
Other noninterest income		758		7	N/M		2,732		1,232	121.8
Noninterest expense, excluding losses   realized on other real estate owned   (“OREO”) and costs associated with   Federal Deposit Insurance Corporation   (“FDIC”)-assisted transactions (2)		(62,000)		(56,759)	9.2		(124,896)		(114,224)	9.3
Pre-tax, pre-provision core operating       earnings (3)		34,324		34,746	(   1.2)		65,751		66,483	(   1.1)
Provision for loan losses		(18,763)		(21,526)	(  12.8)		(38,255)		(39,876)	(   4.1)
Securities gains, net		1,531		2,255	(  32.1)		2,071		8,075	(  74.4)
Securities impairment losses		-		(1,134)	( 100.0)		-		(3,897)	( 100.0)
Gain on FDIC-assisted transaction		-		4,303	( 100.0)		-		4,303	( 100.0)
Integration costs associated with FDIC-    assisted transactions (2)		-		(1,772)	( 100.0)		-		(1,901)	( 100.0)
Write-downs of OREO (2)		(1,523)		(3,272)	(  53.5)		(2,635)		(5,610)	(  53.0)
Losses on sales of OREO, net (2)		(1,900)		(5,652)	(  66.4)		(3,015)		(11,193)	(  73.1)
Income before income tax expense		13,669		7,948	72.0		23,917		16,384	46.0
Income tax expense		(2,841)		( 139)	N/M		(2,871)		( 494)	N/M
Net income		10,828		7,809	38.7		21,046		15,890	32.4
Preferred dividends and accretion		(2,582)		(2,573)	0.3		(5,163)		(5,145)	0.3
Net income applicable to non-vested   restricted shares		( 102)		(  65)	56.9		( 242)		( 146)	65.8
Net income applicable to common shares	$	8,144	$	5,171	57.5	$	15,641	$	10,599	47.6
Weighted average diluted shares outstanding		73,259		73,028			73,205		71,756
Diluted earnings per common share	$	0.11	$	0.07		$	0.21	$	0.15
Performance Ratios (1)
Return on average common equity		3.47%		2.16%			3.37%		2.27%
Return on average assets		0.53%		0.40%			0.52%		0.41%
Net interest margin – tax equivalent		4.10%		4.21%			4.13%		4.25%
Efficiency ratio		60.19%		57.92%			61.29%		58.16%

N/M – Not meaningful.

(1)	All ratios are presented on an annualized basis.
(2)	For further discussion of losses realized on OREO and integration costs associated with FDIC-assisted transactions, see the section titled “Noninterest Expense.”
(3)	Our accounting and reporting policies conform to U.S. generally accepted accounting principles (“GAAP”) and general practice within the banking industry. As a supplement to GAAP, we have provided this non-GAAP performance result. We believe that this non-GAAP financial measure is useful because it allows investors to assess our operating performance. Although this non-GAAP financial measure is intended to enhance investors’ understanding of our business and performance, this non-GAAP financial measure should not be considered an alternative to GAAP. This measure may differ from other similarly named measures used by other companies.

38

	June 30, 2011		December 31, 2010		June 30, 2010		June 30, 2011 Change From
							December 31, 2010		June 30, 2010
Balance Sheet Highlights
Total assets	$	8,129,391	$	8,138,302	$	7,805,089	$	(8,911)	$	324,302
Total loans, excluding covered loans		5,112,911		5,100,560		5,208,347		12,351		(95,436)
Total loans, including covered loans		5,427,853		5,472,289		5,373,271		(44,436)		54,582
Total deposits		6,495,549		6,511,476		6,123,565		(15,927)		371,984
Transactional deposits		4,731,329		4,519,492		4,218,383		211,837		512,946
Loans to deposits ratio		83.6%		84.0%		87.7%
Transactional deposits to total deposits		72.8%		69.4%		68.9%

	June 30, 2011		December 31, 2010		June 30, 2010		June 30, 2011 Change From
							December 31, 2010		June 30, 2010
Asset Quality Highlights (1)
Non-accrual loans	$	177,495	$	211,782	$	193,689	$	(34,287)	$	(16,194)
90 days or more past due loans (still   accruing interest)		6,502		4,244		6,280		2,258		222
Total non-performing loans		183,997		216,026		199,969		(32,029)		(15,972)
Restructured loans (still accruing   interest)		14,529		22,371		9,030		(7,842)		5,499
Other real estate owned		24,407		31,069		57,023		(6,662)		(32,616)
Total non-performing assets	$	222,933	$	269,466	$	266,022	$	(46,533)	$	(43,089)
30-89 days past due loans (still   accruing interest)	$	30,424	$	23,646	$	32,012	$	6,778	$	(1,588)
Allowance for credit losses	$	139,831	$	145,072	$	145,477	$	(5,241)	$	(5,646)
Allowance for credit losses as a   percent of loans		2.73%		2.84%		2.79%

(1) Excludes covered loans and covered OREO. For a discussion of covered assets, refer to Note 5 of “Notes to Consolidated Financial Statements” in Item 1 of this Form 10-Q. Asset quality, including covered loans and covered OREO, is included in the section titled “Loan Portfolio and Credit Quality” elsewhere in this report.

Net income for second quarter 2011 was $10.8 million, before adjustments for preferred dividends and accretion and non-vested restricted shares, and $8.1 million, or $0.11 per share, applicable to common shareholders after such adjustments. This compares to net income of $7.8 million and net income applicable to common shareholders of $5.2 million, or $0.07 per share, for second quarter 2010. For the first six months of 2011, net income was $21.0 million, with $15.6 million, or $0.21 per share, applicable to common shareholders compared to net income of $15.9 million and net income applicable to common shareholders of $10.6 million, or $0.15 per share, for the same period in 2010.

Pre-tax, pre-provision core operating earnings of $34.3 million for second quarter 2011 and $65.8 million for the first six months of 2011 were relatively unchanged compared to the same periods in 2010, as higher net interest income and fee-based revenues offset higher noninterest expense, excluding losses recognized on OREO. A discussion of net interest income and noninterest income and expense is presented in the following section titled “Earnings Performance.”

Non-performing assets, excluding covered loans and covered OREO, were $222.9 million at June 30, 2011, decreasing $46.5 million, or 17.3%, from December 31, 2010. The reduction was substantially due to remediation activities, dispositions, and charge-offs, partially offset by loans downgraded to non-accrual status. For a detailed discussion of non-performing assets, refer to the section titled “Loan Portfolio and Credit Quality” elsewhere in this report.

39

EARNINGS PERFORMANCE

Net Interest Income

Net interest income is our primary source of revenue. Net interest income equals the difference between interest income plus fees earned on interest-earning assets and interest expense incurred on interest-bearing liabilities. The level of interest rates and the volume and mix of interest-earning assets and interest-bearing liabilities impact net interest income. Net interest margin represents net interest income as a percentage of total average interest-earning assets. The accounting policies underlying the recognition of interest income on loans, securities, and other interest-earning assets are presented in Note 1 of “Notes to Consolidated Financial Statements” contained in our 2010 10-K.

Our accounting and reporting policies conform to GAAP and general practice within the banking industry. For purposes of this discussion, both net interest income and net interest margin have been adjusted to a fully tax-equivalent basis to more appropriately compare the returns on certain tax-exempt loans and securities to those on taxable interest-earning assets. Although we believe that these non-GAAP financial measures enhance investors’ understanding of our business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. The effects of these adjustments are presented at the end of Tables 2 and 3. This measure may differ from other similarly named measures held by other companies.

Table 2 summarizes our average interest-earning assets and interest-bearing liabilities for the quarters ended June 30, 2011 and 2010, the related interest income and interest expense for each earning asset category and funding source, and the average interest rates earned and paid. Table 2 also details changes from the prior year in income generated by earning assets and expense incurred for each funding source and analyzes the extent to which any changes are attributable to volume and rate changes. Table 3 presents this same information for the six months ended June 30, 2011 and 2010.

40

Table 2

Net Interest Income and Margin Analysis

(Dollar amounts in thousands)

	Quarters Ended June 30,										Attribution of Change in Net Interest Income (1)
	2011					2010
	Average Balance		Interest		Yield/ Rate (%)	Average Balance		Interest		Yield/ Rate (%)	Volume		Yield/ Rate			Total
Assets:
Federal funds sold and other   short-term investments	$	566,315	$	341	0.24	$	300,346	$	176	0.24	$	160	$	5	$	165
Trading securities		16,255		23	0.57		14,134		27	0.76		5		(   9)		(   4)
Investment securities (2)		1,150,221		12,933	4.50		1,213,455		17,592	5.80		(878)		(3,781)		(4,659)
Federal Home Loan Bank and   Federal Reserve Bank stock		59,745		340	2.28		59,758		335	2.24		-		5		5
Loans, excluding covered   loans (2)		5,108,234		63,521	4.99		5,204,566		65,811	5.07		(1,182)		(1,108)		(2,290)
Covered interest-earning assets (3)		420,108		7,655	7.31		233,907		2,598	4.45		2,802		2,255		5,057
Total loans		5,528,342		71,176	5.16		5,438,473		68,409	5.05		1,620		1,147		2,767
Total interest-earning         assets (2)		7,320,878		84,813	4.64		7,026,166		86,539	4.94		907		(2,633)		(1,726)
Cash and due from banks		120,599					170,524
Allowance for loan losses		(148,092)					(153,537)
Other assets		877,710					862,211
Total assets	$	8,171,095				$	7,905,364
Liabilities and Stockholders’ Equity:
Savings deposits	$	944,802		485	0.21	$	803,353		629	0.31		151		( 295)		( 144)
NOW accounts		1,126,913		316	0.11		1,157,246		548	0.19		(14)		( 218)		( 232)
Money market deposits		1,205,736		789	0.26		1,155,889		1,712	0.59		77		(1,000)		( 923)
Time deposits		1,813,164		5,379	1.19		1,916,116		6,737	1.41		(347)		(1,011)		(1,358)
Borrowed funds		262,525		687	1.05		342,808		749	0.88		(402)		340		(  62)
Subordinated debt		137,747		2,279	6.64		137,738		2,280	6.64		-		(   1)		(   1)
Total interest-bearing         liabilities		5,490,887		9,935	0.73		5,513,150		12,655	0.92		( 535)		(2,185)		(2,720)
Demand deposits		1,465,438					1,181,097
Other liabilities		80,000					58,723
Stockholders’ equity - common		941,770					959,394
Stockholders’ equity - preferred		193,000					193,000
Total liabilities and         stockholders’ equity	$	8,171,095				$	7,905,364
Net interest income/margin (2)			$	74,878	4.10			$	73,884	4.21	$	1,442	$	( 448)	$	994
Net interest income (GAAP)			$	71,361				$	69,619
Tax equivalent adjustment				3,517					4,265
Tax-equivalent net interest         income			$	74,878				$	73,884

(1)	For purposes of this table, changes which are not due solely to volume changes or rate changes are allocated to such categories on the basis of the percentage relationship of each to the sum of the two.
(2)	Interest income and yields are presented on a tax-equivalent basis, assuming a federal income tax rate of 35%.
(3)	Covered interest-earning assets consist of loans acquired through FDIC-assisted transactions and the related FDIC indemnification asset. For additional discussion, please refer to the section titled “Covered Assets.”

41

Table 3

Net Interest Income and Margin Analysis

(Dollar amounts in thousands)

	Six Months Ended June 30,										Attribution of Change in Net Interest Income (1)
	2011					2010
	Average Balance		Interest		Yield/ Rate (%)	Average Balance		Interest		Yield/ Rate (%)	Volume		Yield/ Rate			Total
Assets:
Federal funds sold and other   short-term investments	$	517,370	$	633	0.25	$	171,386	$	203	0.24	$	423	$	7	$	430
Trading securities		15,816		53	0.67		14,208		57	0.80		10		(  14)		(   4)
Investment securities (2)		1,158,560		25,981	4.49		1,255,908		35,471	5.65		(2,594)		(6,896)		(9,490)
Federal Home Loan Bank and   Federal Reserve Bank stock		60,537		697	2.30		59,130		663	2.24		16		18		34
Loans, excluding covered   loans (2)		5,092,126		126,822	5.02		5,201,052		130,616	5.06		(2,743)		(1,051)		(3,794)
Covered interest-earning assets (3)		432,108		15,477	7.22		221,355		5,560	5.07		6,852		3,065		9,917
Total loans		5,524,234		142,299	5.19		5,422,407		136,176	5.06		4,109		2,014		6,123
Total interest-earning         assets (2)		7,276,517		169,663	4.70		6,923,039		172,570	5.02		1,964		(4,871)		(2,907)
Cash and due from banks		121,043					141,640
Allowance for loan losses		(148,072)					(153,015)
Other assets		883,745					874,571
Total assets	$	8,133,233				$	7,786,235
Liabilities and Stockholders’ Equity:
Savings deposits	$	923,124		961	0.21	$	781,690		1,243	0.32		311		( 593)		( 282)
NOW accounts		1,085,825		636	0.12		1,040,362		1,057	0.20		48		( 469)		( 421)
Money market deposits		1,222,991		1,649	0.27		1,133,329		3,500	0.62		302		(2,153)		(1,851)
Time deposits		1,875,183		11,394	1.23		1,936,319		14,371	1.50		(442)		(2,535)		(2,977)
Borrowed funds		274,122		1,367	1.01		409,694		1,759	0.87		(766)		374		( 392)
Subordinated debt		137,746		4,565	6.68		137,737		4,566	6.68		-		(   1)		(   1)
Total interest-bearing         liabilities		5,518,991		20,572	0.75		5,439,131		26,496	0.98		( 547)		(5,377)		(5,924)
Demand deposits		1,404,066					1,152,865
Other liabilities		81,599					58,019
Stockholders’ equity - common		935,577					943,220
Stockholders’ equity - preferred		193,000					193,000
Total liabilities and         stockholders’ equity	$	8,133,233				$	7,786,235
Net interest income/margin (2)			$	149,091	4.13			$	146,074	4.25	$	2,511	$	506	$	3,017
Net interest income (GAAP)			$	142,007				$	137,557
Tax equivalent adjustment				7,084					8,517
Tax-equivalent net interest         income			$	149,091				$	146,074

(1)	For purposes of this table, changes which are not due solely to volume changes or rate changes are allocated to such categories on the basis of the percentage relationship of each to the sum of the two.
(2)	Interest income and yields are presented on a tax-equivalent basis, assuming a federal income tax rate of 35%.
(3)	Covered interest-earning assets consist of loans acquired through FDIC-assisted transactions and the related FDIC indemnification asset. For additional discussion, please refer to the section titled “Covered Assets.”

Average interest-earning assets for second quarter 2011 rose $294.7 million, or 4.2%, from second quarter 2010. For the first six months of 2011, average interest-earning assets grew $353.5 million, or 5.1%, compared to the same period in 2010. These increases were due primarily to the addition of covered interest-earning assets and the investment of deposits acquired in FDIC-assisted transactions in short-term investments, and were partially offset by reductions in loans resulting from sales, paydowns, and charge-offs. We continue to maintain an elevated level of federal funds sold and other short-term investments as we manage our liquidity within the current low-yield interest rate environment.

Second quarter 2011 tax-equivalent net interest income increased $1.0 million, or 1.3%, compared to second quarter 2010. Interest expense declined $2.7 million, as we used proceeds from securities sales and maturities and transactional deposits

42

acquired from FDIC-assisted transactions to reduce higher-costing time deposits and borrowed funds. Tax-equivalent interest income declined $1.7 million due to a 30 basis point decline in tax-equivalent yield discussed below.

For the first six months of 2011, tax-equivalent net interest income increased $3.0 million, or 2.1%, compared to the first six months of 2010 due to the impact of using proceeds from securities sales and maturities and transactional deposits acquired from FDIC-assisted transactions to reduce higher-costing time deposits and borrowed funds.

Tax-equivalent net interest margin for second quarter 2011 was 4.10%, a decline of 11 basis points from second quarter 2010. The reduction in margin resulted from 30 basis point decline in the average yield on interest-earning assets, primarily reflecting the impact of the growth in deposits invested in low-yielding short-term investments, partially offset by a 19 basis point decline in the average rate paid for interest-bearing liabilities, due in large part to a 22 basis point decline in the average rate paid for time deposits.

For the year-to-date periods, tax-equivalent net interest margin declined to 4.13% for the six months ended June 30, 2011, a decline of 12 basis points from the 2010 period. The decline for the six-month period was driven by the same forces as the second quarter decline.

Interest earned on covered loans is generally recognized through the accretion of the discount taken on expected future cash flows. The Company realized actual cash flows in excess of estimates upon final settlement of certain covered loans, resulting in additional income of $1.1 million for second quarter 2011 and $2.0 million for the first six months of 2011. This additional income is included in interest on covered interest-earning assets in the tables above and increased net interest margin by 6 basis points for both second quarter 2011 and the six months ended June 30, 2011. The impact of this type of income in the 2010 periods presented was de minimis.

We use multiple interest rate scenarios to rigorously assess the direction and magnitude of changes in interest rates and their impact on net interest income. A description and analysis of our market risk and interest rate sensitivity profile and management policies is included in Item 3, “Quantitative and Qualitative Disclosures About Market Risk,” of this Form 10-Q.

43

Noninterest Income

Table 4

Noninterest Income Analysis

(Dollar amounts in thousands)

	Quarters Ended June 30,					Six Months Ended June 30,
	2011		2010		% Change	2011		2010		% Change
Service charges on deposit accounts	$	9,563	$	9,052	5.6	$	17,707	$	17,433	1.6
Trust and investment advisory fees		4,118		3,702	11.2		8,234		7,295	12.9
Other service charges, commissions, and   fees		5,362		4,628	15.9		10,276		8,800	16.8
Card-based fees (1)		5,162		4,497	14.8		9,691		8,390	15.5
Total fee-based revenues		24,205		21,879	10.6		45,908		41,918	9.5
Bank-owned life insurance (“BOLI”)   income (2)		259		349	(  25.8)		511		597	(  14.4)
Other income (3)		501		680	(  26.3)		1,479		1,196	23.7
Total operating revenues		24,965		22,908	9.0		47,898		43,711	9.6
Trading (losses) gains, net (4)		(   2)		(1,022)	(  99.8)		742		( 561)	( 232.3)
Gains on securities sales, net (5)		1,531		2,255	(  32.1)		2,071		8,075	(  74.4)
Securities impairment losses (5)		-		(1,134)	( 100.0)		-		(3,897)	( 100.0)
Gain on FDIC-assisted transaction (6)		-		4,303	( 100.0)		-		4,303	( 100.0)
Total noninterest income	$	26,494	$	27,310	(   3.0)	$	50,711	$	51,631	(   1.8)

N/M – Not meaningful.

(1)	Card-based fees consist of debit and credit card interchange fees charged for processing transactions as well as various fees charged on both customer and non-customer automated teller machine (“ATM”) and point-of-sale transactions processed through the ATM and point-of-sale networks.
(2)	BOLI income represents benefit payments received and the change in cash surrender value (“CSV”) of the policies, net of premiums paid. The change in CSV is attributed to earnings or losses credited to the policies based on investments made by the insurer. For a further discussion of our investment in BOLI, see Note 1 to the Consolidated Financial Statements of our 2010 10-K.
(3)	Other income consists of various items including safe deposit box rentals, miscellaneous recoveries, and gains on the sales of various assets.
(4)	Trading gains (losses), net result from the change in fair value of trading securities. Our trading securities represent diversified investment securities held in a grantor trust under deferred compensation arrangements in which plan participants may direct amounts earned to be invested in securities other than Company stock. These changes are substantially offset by an adjustment to salaries and wages expense.
(5)	For a discussion of these items, see the section titled “Investment Portfolio Management” elsewhere in this report.
(6)	The gain on FDIC-assisted transaction in the 2010 periods relates to a second quarter 2010 event in which we acquired the majority of the assets of a financial institution in an FDIC-assisted transaction.

Total noninterest income decreased 3.0% for second quarter 2011 and 1.8% for the first six months of 2011 compared to the same periods in 2010. Increase in fee-based revenues for both periods were more than offset by lower gains on securities sales, net of securities impairment losses, and a gain on an FDIC-assisted transaction in the 2010 periods.

Fee-based revenues for second quarter 2011 rose 10.6% compared to second quarter 2010, and fee-based revenues for the first six months of 2011 grew 9.5% from the same period in 2010, with increases in all categories for both periods.

The rise in service charges for second quarter 2011 compared to second quarter 2010 was due primarily to a combination of higher volume non-sufficient-funds (“NSF”) fees and market-driven pricing increases.

An increase in trust assets under management drove the rise in trust and investment advisory fees for both periods presented. Trust assets under management grew 13.0% from $4.0 billion as of June 30, 2010 to $4.5 billion as of June 30, 2011. Approximately $400 million of this growth was derived equally from improved equity market performance and new sales results, with the remaining $100 million resulting from the addition of managed assets acquired in an FDIC-assisted transaction.

44

Increased merchant fees led to the increase in other service charges, commissions, and fees from both prior periods presented. The year-over-year increase in merchant fees was due primarily to a 25% volume increase resulting from customers acquired in an FDIC-assisted transaction.

We experienced a continued favorable variance in card-based fees for both periods, which was attributed to both volume and transaction rates. Volume increases were due to a higher number of transactions and an increase in the average purchase per transaction. The increase in rates earned on card-based fees resulted from the migration from multi-merchant networks to an exclusive MasterCard network in most areas, which drove higher transaction yields and incentives.

Noninterest Expense

Table 5

Noninterest Expense Analysis

(Dollar amounts in thousands)

	Quarters Ended June 30,					Six Months Ended June 30,
	2011		2010		% Change	2011		2010		% Change
Compensation expense:
Salaries and wages	$	25,493	$	21,146	20.6	$	51,158	$	43,282	18.2
Retirement and other employee          benefits		5,765		5,394	6.9		12,623		10,142	24.5
Total compensation expense		31,258		26,540	17.8		63,781		53,424	19.4
OREO expense, net:
Write-downs of OREO		1,523		3,272	(  53.5)		2,635		5,610	(  53.0)
Losses on the sales of OREO, net (1)		1,900		5,652	(  66.4)		3,015		11,193	(  73.1)
OREO operating expense, net (2)		1,800		2,926	(  38.5)		3,504		5,834	(  39.9)
Total OREO expense		5,223		11,850	(  55.9)		9,154		22,637	(  59.6)
Professional services:
Loan remediation costs		2,878		2,649	8.6		5,726		5,873	(   2.5)
Other professional services		2,762		3,003	(   8.0)		5,033		6,319	(  20.4)
Total professional services		5,640		5,652	(   0.2)		10,759		12,192	(  11.8)
FDIC insurance premiums		1,708		2,546	(  32.9)		4,433		5,078	(  12.7)
Net occupancy expense		5,681		5,657	0.4		12,465		11,697	6.6
Equipment expense		2,331		2,151	8.4		4,650		4,279	8.7
Technology and related costs		2,697		2,785	(   3.2)		5,320		5,268	1.0
Advertising and promotions		1,378		2,473	(  44.3)		2,457		3,532	(  30.4)
Merchant card expense		2,391		1,996	19.8		4,479		3,646	22.8
Other expenses		7,116		5,805	22.6		13,048		11,175	16.8
Total noninterest expense	$	65,423	$	67,455	(   3.0)	$	130,546	$	132,928	(   1.8)
Total noninterest expense, excluding            losses recognized on OREO	$	62,000	$	58,531	5.9	$	124,896	$	116,125	7.6
Full-time equivalent employees		1,846		1,762	4.8		1,846		1,746	5.7
Efficiency ratio (3)		60.19%		57.92%			61.29%		58.16%

(1)	For a discussion of sales of OREO properties, refer to the section titled “Non-performing assets.”
(2)	OREO operating expense, net, consists of real estate taxes, commissions on sales, insurance, and maintenance, net of any rental income.
(3)	The efficiency ratio expresses noninterest expense, excluding OREO expense, as a percentage of tax-equivalent net interest income plus total fees and other income.

Total noninterest expense for second quarter 2011 decreased 3.0% from second quarter 2010. For the first six months of 2011, noninterest expense decreased 1.8% from the same period in 2010.

OREO expenses were elevated in 2010 due to higher levels of write-downs and losses on sales of OREO and related operating expenses incurred due to greater average OREO balances during the year. Excluding OREO expense, total

45

noninterest expense was up 5.9% for the current quarter and 7.6% for the current year-to-date period compared to the same periods in 2010.

The increase in salaries and wages from the 2010 periods to the 2011 periods resulted primarily from additional staff employed through the Company’s FDIC-assisted transactions, the expansion of commercial sales staff, and annual merit increases. The variances in employee benefits for the periods presented were impacted by changes in overall staffing levels.

FDIC premiums decreased for the 2011 periods compared to the same periods in 2010, primarily due to a change in regulatory requirements for calculating the premium. Specifically, the insurance premium assessment base was revised from all domestic deposits to the average of total assets less tangible equity.

High snow removal costs in first quarter 2011 accounted for the increased net occupancy expense for the six months ended June 30, 2011 compared to the same period in 2010. Costs associated with operating branches acquired through FDIC-assisted transactions resulted in an increase in equipment expense for both periods presented.

Advertising and promotions expense for the 2011 periods was down from the same periods in the prior year. Second quarter 2010 advertising costs included costs to implement a new consumer overdraft program and one-time expenses incurred in response to FDIC-assisted transaction activity in the Chicago banking market.

The increases in merchant card expense for both periods presented were due primarily to higher cardholder expenses driven by higher transaction volumes, along with costs acquired through FDIC-assisted transactions. The increases in other noninterest expense were due to higher miscellaneous losses.

Included in noninterest expense for the 2010 periods are integration costs associated with FDIC-assisted transactions of $1.8 million for second quarter 2010 and $1.9 million for the six months ended June 30, 2010.

The efficiency ratio for second quarter 2011 increased to 60.19% compared to 57.92% for second quarter 2010. For the six months ended June 30, 2011, the efficiency ratio rose to 61.29% from 58.16% for the same period in 2010.

Income Taxes

Our accounting policies underlying the recognition of income taxes in the Consolidated Statements of Financial Condition and Income are included in Notes 1 and 16 to the Consolidated Financial Statements of our 2010 10-K.

Federal income tax expense, and the related effective income tax rate, is primarily influenced by the amount of tax-exempt income derived from investment securities and bank-owned life insurance in relation to pre-tax income. State income tax expense, and the related effective tax rate, is influenced by the amount of state tax-exempt income in relation to pre-tax income, and state tax rules related to consolidated/combined reporting and sourcing of income and expense.

Income tax expense was $2.8 million for second quarter 2011, increasing from $139,000 for second quarter 2010. Income tax expense was $2.9 million for the six months ended June 30, 2011, an increase from $494,000 for the six months ended June 30, 2010. The increases resulted from an increase in pre-tax income in the 2011 periods compared to the same periods in the prior year, as well as decreases in tax-exempt income and the impacts of the Illinois tax law change described below.

Effective January 1, 2011, the Illinois corporate income tax rate increased from 7.3% to 9.5%. This rate increase resulted in additional state income tax expense of $155,000 for second quarter 2011 and $263,000 for the six months ended June 30, 2011. Also, as a result of this rate change, we recorded a $1.6 million state tax benefit in first quarter 2011 related to the write-up of state deferred tax assets.

Audits of the Company’s 2006-2007 Illinois tax returns were closed during first quarter 2011 without significant adjustments.

46

FINANCIAL CONDITION

Investment Portfolio Management

Securities that we have the ability and intent to hold until maturity are classified as securities held-to-maturity and are accounted for using historical cost, adjusted for amortization of premiums and accretion of discounts. Trading securities are carried at fair value, with unrealized gains and losses recorded in other noninterest income. Our trading securities relate to securities held in a rabbi trust for our nonqualified deferred compensation plan and are not considered part of the traditional investment portfolio. All other securities are classified as securities available-for-sale and are carried at fair value.

We manage our investment portfolio to maximize the return on invested funds within acceptable risk guidelines, to meet pledging and liquidity requirements, and to adjust balance sheet interest rate sensitivity to insulate net interest income against the impact of changes in interest rates.

We adjust the size and composition of our securities portfolio according to a number of factors, including expected loan growth, anticipated changes in collateralized public funds on account, the interest rate environment, and the related value of various segments of the securities markets. The following table provides a valuation summary of our investment portfolio.

Table 6

Investment Portfolio Valuation Summary

(Dollar amounts in thousands)

	June 30, 2011							December 31, 2010
	Fair Value		Amortized Cost		Unrealized Gains (Losses)		% of Total Amortized Cost	Fair Value		Amortized Cost		Unrealized Gains (Losses)		% of Total Amortized Cost
Available-for-Sale
U.S. agency securities	$	8,113	$	8,122	$	(   9)	0.8	$	17,886	$	18,000	$	( 114)	1.5
Collateralized mortgage      obligations (“CMOs”)		376,702		373,600		3,102	34.0		379,589		377,692		1,897	32.3
Other mortgage-backed      securities		97,805		91,539		6,266	8.3		106,451		100,780		5,671	8.6
Municipal securities		479,919		471,617		8,302	43.0		503,991		512,063		(8,072)	43.7
Collateralized debt     obligations (“CDOs”)		16,487		49,695		(33,208)	4.5		14,858		49,695		(34,837)	4.2
Corporate debt securities		27,922		25,325		2,597	2.3		32,345		29,936		2,409	2.6
Equity securities		2,925		2,158		767	0.2		2,682		2,134		548	0.2
Total available-for-         sale		1,009,873		1,022,056		(12,183)	93.1		1,057,802		1,090,300		(32,498)	93.1
Held-to-Maturity
Municipal securities		78,485		76,142		2,343	6.9		82,525		81,320		1,205	6.9
Total securities	$	1,088,358	$	1,098,198	$	(9,840)	100.0	$	1,140,327	$	1,171,620	$	(31,293)	100.0

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	June 30, 2011			December 31, 2010
	Effective Duration (1)	Average Life (2)	Yield to Maturity	Effective Duration (1)	Average Life (2)	Yield to Maturity
Available-for-Sale
U.S. agency securities	2.34%	0.66	4.29%	1.91%	0.58	3.22%
CMOs	1.44%	2.40	2.27%	0.74%	2.52	2.31%
Other mortgage-backed securities	2.91%	4.43	4.88%	2.36%	3.85	4.62%
Municipal securities	5.14%	5.12	6.16%	5.35%	8.01	6.15%
CDOs	0.25%	8.67	0.00%	0.25%	8.78	0.00%
Other securities	6.51%	11.34	6.74%	6.58%	11.18	6.85%
Total available-for-sale	3.36%	4.35	4.33%	3.22%	5.72	4.37%
Held-to-Maturity
Municipal securities	5.94%	10.64	6.56%	5.78%	9.99	6.61%
Total securities	3.54%	4.79	4.48%	3.40%	6.02	4.52%

(1)

The effective duration of the securities portfolio represents the estimated percentage change in the fair value of the securities portfolio given a 100 basis point change up or down in the level of interest rates. This measure is used as a gauge of the portfolio’s price volatility at a single point in time and is not intended to be a precise predictor of future fair values, as such values will be influenced by a number of factors.

(2)

Average life is presented in years and represents the weighted-average time to receive all future cash flows, using the dollar amount of principal paydowns, including estimated principal prepayments, as the weighting factor.

Portfolio Composition

As of June 2011, our securities portfolio totaled $1.1 billion, which was relatively unchanged compared to December 31, 2010. Approximately 95% of our $1.0 billion available-for-sale portfolio was comprised of U.S. agency securities, municipals, CMOs, and other mortgage-backed securities as of June 30, 2011. The remainder consisted of seven CDOs with a fair value of $16.5 million and an aggregate unrealized loss of $33.2 million, and miscellaneous other securities totaling $30.8 million.

Investments in municipal securities comprised 47.5%, or $479.9 million, of the total available-for-sale securities portfolio at June 30, 2011. This type of security has historically experienced very low default rates and provided a predictable cash flow. Most of our municipal portfolio carries third-party bond insurance or other types of credit enhancement, and the majority is general obligations of local municipalities. Available-for-sale municipal securities declined 4.8% from $504.0 million at December 31, 2010. The decline was driven by sales, maturities, and paydowns.

The average life of our municipal securities declined from 8.01 years as of December 31, 2010 to 5.12 years as of June 30, 2011. The decline reflected the impact of a higher probability of calls at June 30, 2011 compared to December 31, 2010, given the lower interest rate environment and improved economic outlook for this sector, as well as sales during the period of longer-term municipal securities.

Securities Sales

Net securities gains were $1.5 million for second quarter 2011 and $2.1 million for the six months ended June 30, 2011. Gains on sales of securities for the six months ended June 30, 2011 resulted from the sale of $97.3 million in collateralized mortgages obligations, municipal securities, and corporate debt securities, of which $44.2 million was sold in first quarter 2011, and $53.1 million was sold in second quarter 2011.

Net securities gains were $1.1 million for second quarter 2010 and $4.2 million for the first six months of 2010. These gains were net of other-than-temporary impairment charges of $1.1 million for second quarter 2010 and $3.9 million for the first six months of 2010 primarily associated with our investment in CDOs.

Unrealized Gains and Losses

Unrealized gains and losses on securities available-for-sale represent the difference between the aggregate cost and fair value of the portfolio and are reported, on an after-tax basis, as a separate component of stockholders’ equity in accumulated other comprehensive loss. This balance sheet component will fluctuate as current market interest rates and conditions change, thereby affecting the aggregate fair value of the portfolio. Net unrealized losses at June 30, 2011 were $12.2 million, down

48

from $32.5 million at December 31, 2010, reflecting the impact of the change in interest rates on our securities portfolio, which primarily consist of fixed-rate securities, and a narrowing of spreads on municipal securities.

CMOs and other mortgage-backed securities are either backed by U.S. government-owned agencies or issued by U.S. government-sponsored enterprises. We do not believe any individual unrealized loss on these types of securities as of June 30, 2011 represents an other-than-temporary impairment, since the unrealized losses associated with these securities are not believed to be attributable to credit quality, but rather to changes in interest rates and temporary market movements.

As of June 30, 2011, net unrealized gains in the municipal securities portfolio totaled $8.3 million compared to a net unrealized loss of $8.1 million as of December 31, 2010. The change in fair value of municipal securities reflects the impact of the change in market interest rates on these fixed-rate investments as well as an improved economic outlook for municipal securities as consumer confidence rose during the period. Substantially all of these securities carry investment grade ratings, with the bulk of them supported by the general revenues of the issuing governmental entity and supported by third-party insurance. We do not believe the unrealized loss on any of these securities is other-than-temporary.

Our investments in CDOs are supported by the credit of the underlying banks and insurance companies. The unrealized loss on these securities decreased $1.6 million since December 31, 2010. The unrealized loss reflects the difference between amortized cost and fair value that we determined did not relate to credit and reflects the market’s unfavorable bias against these investments. We do not believe the unrealized losses on the CDOs as of June 30, 2011 represent other-than-temporary impairment. We currently have no evidence that would suggest further reductions in net cash flows on these investments from what has already been recognized. In addition, we do not intend to sell the CDOs with unrealized losses, and we do not believe it is more likely than not that we will be required to sell them before recovery of their amortized cost bases, which may be at maturity. Our estimation of cash flows for these investments and resulting fair values were based upon cash flow modeling, as described in Note 12 of “Notes to the Consolidated Financial Statements,” in Item 1 of this Form 10-Q.

Effective Duration

The effective duration of the available-for-sale portfolio was 3.36% as of June 30, 2011 compared to 3.22% as of December 31, 2010, with the increase primarily related to CMOs and other mortgage-backed securities. The effective duration increased on these types of securities due to an increase in interest rates for these types of investments.

49

LOAN PORTFOLIO AND CREDIT QUALITY

Portfolio Composition

Table 7

Loan Portfolio

(Dollar amounts in thousands)

	June 30, 2011		% of Total	December 31, 2010		% of Total	Annualized % Change
Commercial and industrial	$	1,518,772	29.7	$	1,465,903	28.7	7.2
Agricultural		237,518	4.6		227,756	4.5	8.6
Commercial real estate:
Office		415,654	8.1		396,836	7.8	9.5
Retail		324,977	6.4		328,751	6.4	(   2.3)
Industrial		488,469	9.6		478,026	9.4	4.4
Multi-family		336,138	6.6		349,862	6.9	(   7.8)
Residential construction		129,327	2.5		174,690	3.4	(  51.9)
Commercial construction		146,679	2.9		164,472	3.2	(  21.6)
Other commercial real estate		852,966	16.7		856,357	16.8	(   0.8)
Total commercial real estate		2,694,210	52.8		2,748,994	53.9	(   4.0)
Total corporate loans		4,450,500	87.1		4,442,653	87.1	0.4
Home equity		429,923	8.4		445,243	8.7	(   6.9)
1-4 family mortgages		185,002	3.6		160,890	3.2	30.0
Installment loans		47,486	0.9		51,774	1.0	(  16.6)
Total consumer loans		662,411	12.9		657,907	12.9	1.4
Total loans, excluding covered loans		5,112,911	100.0		5,100,560	100.0	0.5
Covered loans (1)		314,942			371,729		(  30.6)
Total loans	$	5,427,853		$	5,472,289		(   1.6)

(1) For a detailed discussion of our covered loans and the related accounting policy for covered loans, refer to Notes 1 and 5 of “Notes to the Consolidated Financial Statements” in Item 1 of this Form 10-Q.

Total loans, including covered loans, of $5.4 billion as of June 30, 2011 remained relatively unchanged from December 31, 2010. Excluding the reduction in residential and commercial construction (which is discussed further below), as well as covered loans, annualized loan growth for the six-month period ending June 30, 2011 was 3.2%. The growth was led by commercial and industrial (7.2%), 1-4 family mortgages (30.0%), and office commercial real estate (9.5%).

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Non-performing Assets

The following table presents our loan portfolio by performing and non-performing status.

Table 8

Loan Portfolio by Performing/Non-Performing Status

(Dollar amounts in thousands)

					Past Due
	Total Loans		Performing		30-89 Days Past Due		90 Days Past Due		Non-accrual		Restructured (still accruing interest)
As of June 30, 2011
Commercial and industrial	$	1,518,772	$	1,457,838	$	6,806	$	2,095	$	44,393	$	7,640
Agricultural		237,518		236,492		17		-		1,009		-
Commercial real estate:
Office		415,654		407,998		2,494		70		3,154		1,938
Retail		324,977		314,978		583		-		7,887		1,529
Industrial		488,469		480,785		1,925		233		5,526		-
Multi-family		336,138		307,587		4,609		557		23,385		-
Residential construction		129,327		102,357		3,394		-		23,576		-
Commercial construction		146,679		125,230		-		-		21,449		-
Other commercial real estate		852,966		813,884		1,406		464		36,984		228
Total commercial real estate		2,694,210		2,552,819		14,411		1,324		121,961		3,695
Total corporate loans		4,450,500		4,247,149		21,234		3,419		167,363		11,335
Home equity		429,923		414,344		6,671		2,392		5,519		997
1-4 family mortgages		185,002		175,743		1,984		656		4,577		2,042
Installment loans		47,486		46,725		535		35		36		155
Total consumer loans		662,411		636,812		9,190		3,083		10,132		3,194
Total loans, excluding covered         loans		5,112,911		4,883,961		30,424		6,502		177,495		14,529
Covered loans		314,942		216,850		26,180		68,324		3,588		-
Total loans	$	5,427,853	$	5,100,811	$	56,604	$	74,826	$	181,083	$	14,529
As of December 31, 2010
Commercial and industrial	$	1,465,903	$	1,403,409	$	5,398	$	1,552	$	50,088	$	5,456
Agricultural		227,756		223,021		65		187		2,497		1,986
Commercial real estate:
Office		396,836		389,936		1,671		-		5,087		142
Retail		328,751		320,477		447		-		7,827		-
Industrial		478,026		468,995		461		-		6,659		1,911
Multi-family		349,862		343,070		486		-		6,203		103
Residential construction		174,690		122,317		51		200		52,122		-
Commercial construction		164,472		135,787		-		-		28,685		-
Other commercial real estate		856,357		802,461		8,115		345		40,605		4,831
Total commercial real estate		2,748,994		2,583,043		11,231		545		147,188		6,987
Total corporate loans		4,442,653		4,209,473		16,694		2,284		199,773		14,429
Home equity		445,243		428,726		4,055		1,870		7,948		2,644
1-4 family mortgages		160,890		149,419		2,267		4		3,902		5,298
Installment loans		51,774		50,899		630		86		159		-
Total consumer loans		657,907		629,044		6,952		1,960		12,009		7,942
Total loans, excluding covered         loans		5,100,560		4,838,517		23,646		4,244		211,782		22,371
Covered loans		371,729		268,934		18,445		84,350		-		-
Total loans	$	5,472,289	$	5,107,451	$	42,091	$	88,594	$	211,782	$	22,371

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The following table provides a comparison of our non-performing assets and past due loans to prior periods.

Table 9

Non-performing Assets and Past Due Loans

(Dollar amounts in thousands)

	2011				2010
	June 30		March 31		December 31		September 30		June 30
Non-performing assets, excluding covered loans and covered OREO
Non-accrual loans	$	177,495	$	186,563	$	211,782	$	211,366	$	193,689
90 days or more past due loans		6,502		5,231		4,244		9,136		6,280
Total non-performing loans		183,997		191,794		216,026		220,502		199,969
Restructured loans (still accruing interest)		14,529		14,120		22,371		11,002		9,030
Other real estate owned		24,407		33,863		31,069		52,044		57,023
Total non-performing assets	$	222,933	$	239,777	$	269,466	$	283,548	$	266,022
30-89 days past due loans	$	30,424	$	28,927	$	23,646	$	41,590	$	32,012
Non-accrual loans to total loans		3.47%		3.66%		4.15%		4.09%		3.72%
Non-performing loans to total loans		3.60%		3.76%		4.24%		4.27%		3.84%
Non-performing assets to loans plus OREO		4.34%		4.67%		5.25%		5.44%		5.05%
Covered loans and covered OREO (1)
Non-accrual loans	$	3,588	$	-	$	-	$	-	$	-
90 days or more past due loans		68,324		88,605		84,350		74,777		47,912
Total non-performing loans		71,912		88,605		84,350		74,777		47,912
Restructured loans (still accruing interest)		-		-		-		-		-
Other real estate owned		14,583		21,543		22,370		31,550		10,657
Total non-performing assets	$	86,495	$	110,148	$	106,720	$	106,327	$	58,569
30-89 days past due loans	$	26,180	$	10,399	$	18,445	$	24,005	$	13,725
Non-performing assets, including covered loans and covered OREO
Non-accrual loans	$	181,083	$	186,563	$	211,782	$	211,366	$	193,689
90 days or more past due loans		74,826		93,836		88,594		83,913		54,192
Total non-performing loans		255,909		280,399		300,376		295,279		247,881
Restructured loans (still accruing interest)		14,529		14,120		22,371		11,002		9,030
Other real estate owned		38,990		55,406		53,439		83,594		67,680
Total non-performing assets	$	309,428	$	349,925	$	376,186	$	389,875	$	324,591
30-89 days past due loans	$	56,604	$	39,326	$	42,091	$	65,595	$	45,737
Non-accrual loans to total loans		3.34%		3.42%		3.87%		3.80%		3.60%
Non-performing loans to total loans		4.71%		5.15%		5.49%		5.31%		4.61%
Non-performing assets to loans plus OREO		5.66%		6.36%		6.81%		6.90%		5.97%

(1) For a discussion of covered loans and covered OREO, refer to Note 5 of “Notes to Consolidated Financial Statements” in Item 1 of this Form 10-Q.

Non-performing assets, excluding covered loans and covered OREO, were $222.9 million at June 30, 2011, decreasing $46.5 million, or 17.3%, from December 31, 2010. The reduction was substantially due to remediation activities, dispositions, charge-offs, and the return of restructured loans to performing status partially offset by loans downgraded to non-accrual status.

During the six months ended June 30, 2011, we had sales and partial sales of non-performing assets totaling $61.9 million, comprised of $41.5 million in non-accrual loans sold, paid off, or transferred to held-for-sale and $20.4 million in OREO properties sold. For further discussion of these dispositions, refer to the section titled “Disposals of Non-performing Assets.”

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During the first six months of 2011, we also returned $19.5 million in restructured loans to performing status as a result of satisfactory payment performance after the modifications of the loans.

Covered loans and covered OREO were recorded at their estimated fair values at the time of acquisition. These assets are covered by loss sharing agreements with the FDIC, whereby the FDIC will reimburse us for the majority of the losses incurred on these assets, substantially mitigating the risk of loss. Although non-performing covered loans are past due based on contractual terms, substantially all of them continue to perform in accordance with our expectations of cash flows.

Non-accrual Loans

Generally, loans are placed on non-accrual status if principal or interest payments become 90 days or more past due or management deems the collectability of the principal or interest to be in question. Loans to customers whose financial condition has deteriorated are considered for non-accrual status whether or not the loan is 90 days or more past due. Once interest accruals are discontinued, accrued but uncollected interest credited to income in the current year is reversed, and unpaid interest accrued in prior years is charged against the allowance for loan losses. Subsequent receipts on non-accrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Classification of a loan as non-accrual does not preclude the ultimate collection of loan principal or interest. We continue to accrue interest on certain loans 90 days or more past due when we determine these loans are well secured and in the process of collection.

Non-accrual loans declined from $211.8 million at December 31, 2010 to $177.5 million at June 30, 2011 as sales, payments, charge-offs, and transfers to OREO exceeded the amount of loans downgraded from performing to non-accrual during the first six months of 2011.

Construction Portfolio

Construction loans totaled $276.0 million at June 30, 2011, a reduction of $63.2 million, or 18.6%, from December 31, 2010. Non-performing construction loans totaled $45.0 million at June 30, 2011, a 44.4% decline in non-performing construction loans compared to December 31, 2010 and represented 16.3% of total construction loans as of June 30, 2011, compared to 23.9% as of December 31, 2010. The decline was due to sales, paydowns, charge-offs, and transfers to OREO upon foreclosure. This portfolio represents loans to developers and is particularly susceptible to declining real estate values.

The following table provides details on the nature of these construction portfolios.

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Table 10

Construction Loans by Type, Excluding Covered Loans

(Dollar amounts in thousands)

	Residential Construction			Commercial Construction			Combined			Non- performing Loans
Underlying Collateral	Amount		Percent of Total	Amount		Percent of Total	Amount		Percent of Total
As of June 30, 2011
Raw Land	$	28,133	21.7	$	44,083	30.1	$	72,216	26.2	$	26,381
Developed Land		66,211	51.2		56,490	38.5		122,701	44.4		10,826
Construction		14,575	11.3		17,108	11.7		31,683	11.5		2,173
Substantially completed    structures		16,946	13.1		25,262	17.2		42,208	15.3		3,807
Mixed and other		3,462	2.7		3,736	2.5		7,198	2.6		1,838
Total	$	129,327	100.0	$	146,679	100.0	$	276,006	100.0	$	45,025
Weighted-average maturity   (in years)		0.43			0.73			0.59
Non-accrual loans	$	23,576		$	21,449		$	45,025
90-days past due loans		-			-			-
Total non-performing loans	$	23,576		$	21,449		$	45,025
Non-performing loans as   a percent of total loans		18.2%			14.6%			16.3%
As of December 31, 2010
Raw land	$	35,401	20.3	$	46,995	28.6	$	82,396	24.3	$	38,605
Developed land		83,229	47.6		71,856	43.7		155,085	45.7		23,320
Construction		14,077	8.1		22,882	13.9		36,959	10.9		1,570
Substantially completed   structures		32,538	18.6		22,284	13.5		54,822	16.2		10,576
Mixed and other		9,445	5.4		455	0.3		9,900	2.9		6,936
Total	$	174,690	100.0	$	164,472	100.0	$	339,162	100.0	$	81,007
Weighted-average   maturity (in years)		0.49			0.68			0.58
Non-accrual loans	$	52,122		$	28,685		$	80,807
90-days past due loans		200			-			200
Total non-performing       loans	$	52,322		$	28,685		$	81,007
Non-performing loans as   a percent of total loans		30.0%			17.4%			23.9%

Of the $45.0 million in non-performing construction loans as of June 30, 2011, 60.0% was comprised of six credits, principally representing raw land, the largest of which was $17.5 million. Life-to-date charge-offs on these six credits totaled $11.4 million. We had valuation allowances related to one of these loans totaling $105,000 as of June 30, 2011.

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Restructured Loans

Restructured loans are loans for which the original contractual terms have been modified, including forgiveness of principal or interest, due to deterioration in the borrower’s financial condition. We do not accrue interest on any restructured loan unless and until we believe collection of all principal and interest under the modified terms is reasonably assured. Generally, six months of consecutive payment performance by the borrower under the restructured terms is required before a restructured loan is returned to accrual status assuming the loan is restructured at market terms consistent with the credit risk of the borrower. However, the period could vary depending upon the individual facts and circumstances of the loan.

For a restructured loan to begin accruing interest, the borrower must demonstrate both some level of performance and the capacity to perform under the modified terms. A history of timely payments and adherence to financial covenants generally serve as sufficient evidence of the borrower’s performance. An evaluation of the borrower’s current creditworthiness is used to assess whether the borrower has the capacity to repay the loan under the modified terms. This evaluation includes an estimate of expected cash flows, evidence of strong financial position, and estimates of the value of collateral, if applicable. Once the borrower demonstrates the ability to meet the modified terms of the restructured loan and we are reasonably assured we will receive the full principal and interest under the restructured terms, we will return the loan to accrual status..

Loan modifications are generally performed at the request of the individual borrower and may include reduction in interest rates, changes in payments, and maturity date extensions. Although we do not have formal, standardized loan modification programs for our commercial or consumer loan portfolios, we do participate in the U.S. Department of the Treasury (“Treasury”)’s Home Affordable Modification Program (“HAMP”) and comply with Regulation Z, the Federal Truth in Lending Act. HAMP gives qualifying homeowners an opportunity to refinance into more affordable monthly payments, with the Treasury compensating us for a portion of the reduction in monthly amounts due from borrowers participating in this program.

At June 30, 2011, we had restructured loans totaling $35.8 million, a decrease of $20.3 million from December 31, 2010. The June 30, 2011 total includes $14.5 million in loans that were restructured at market terms and are accruing interest. After a period of performance under the restructured terms, these loans will be reclassified to performing status. During the first six months of 2011, $19.5 million of restructured loans were returned to performing status as a result of satisfactory payment performance after the modification of the loans.

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Table 11

Restructured Loans by Type

(Dollar amounts in thousands)

	June 30, 2011			March 31, 2011			December 31, 2010			June 30, 2010
	Number of Loans	Amount		Number of Loans	Amount		Number of Loans	Amount		Number of Loans	Amount
Commercial and industrial	25	$	18,887	28	$	22,569	46	$	23,404	33	$	18,682
Agricultural	-		-	-		-	1		1,986	-		-
Commercial real estate:
Office	1		1,938	-		-	1		142	1		142
Retail	1		1,529	-		-	-		-	-		-
Industrial	-		-	1		1,828	2		1,911	-		-
Multi-family	8		2,582	8		3,078	9		3,193	9		4,860
Residential construction	3		3,115	4		4,539	4		8,323	1		1,423
Other commercial real estate	7		2,633	7		6,588	13		7,229	8		3,001
Total commercial real estate       loans	20		11,797	20		16,033	29		20,798	19		9,426
Home equity loans	24		1,701	22		1,641	50		3,233	39		2,260
1-4 family mortgages	28		3,420	23		2,944	49		6,703	37		5,330
Total consumer loans	52		5,121	45		4,585	99		9,936	76		7,590
Total restructured loans	97	$	35,805	93	$	43,187	175	$	56,124	128	$	35,698
Restructured loans, still   accruing interest	56	$	14,529	53	$	14,120	120	$	22,371	81	$	9,030
Restructured loans included in   non-accrual	41		21,276	40		29,067	55		33,753	47		26,668
Total restructured loans	97	$	35,805	93	$	43,187	175	$	56,124	128	$	35,698
Year-to-date charge-offs on   restructured loans		$	1,809		$	63		$	11,534		$	793
Valuation allowance related to   restructured loans		$	-		$	519		$	-		$	-

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OREO

OREO consists of properties acquired as the result of borrower defaults on loans. OREO is recorded at the lower of the outstanding loan balance or the fair value of the property received, less estimated selling costs. Write-downs occurring at foreclosure are charged against the allowance for loan losses. On a periodic basis, the carrying values of OREO are adjusted to reflect reductions in value resulting from new appraisals, new list prices, changes in market conditions, and/or changes in disposition strategies. Write-downs are recorded for these subsequent declines in value and are included in other noninterest expense along with expenses to maintain the properties.

OREO, excluding covered OREO, was $24.4 million at June 30, 2011 compared to $31.1 million at December 31, 2010 and $57.0 million at June 30, 2010.

Table 12

OREO Properties by Type

(Dollar amounts in thousands)

	June 30, 2011			December 31, 2010			June 30, 2010
	Number of Properties	Amount		Number of Properties	Amount		Number of Properties	Amount
Single family homes	7	$	813	6	$	1,113	17	$	3,191
Land parcels:
Raw land	5		7,364	5		7,467	5		11,511
Farmland	1		208	2		4,657	2		9,087
Commercial lots	17		7,558	14		4,096	15		4,885
Single-family lots	18		3,780	27		7,564	53		19,609
Total land parcels	41		18,910	48		23,784	75		45,092
Multi-family units	4		666	4		714	2		444
Commercial properties	14		4,018	12		5,458	11		8,296
Total OREO properties	66	$	24,407	70	$	31,069	105	$	57,023
Covered OREO	38	$	14,583	44	$	22,370	18	$	10,657

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Disposals of Non-performing Assets

During the six months ended June 30, 2011, we had sales and partial sales of non-performing assets totaling $61.9 million, comprised of $41.5 million in non-accrual loans sold, paid off, or transferred to held-for-sale and $20.4 million in OREO properties sold. Approximately 40% of the sales were related to non-performing assets in the construction portfolio. The following table summarizes disposals of non-performing assets during the six months ended June 30, 2011.

Table 13

Disposals of Non-accrual Loans

(Dollar amounts in thousands)

	Six Months Ended June 30, 2011
	Proceeds		Book Value		Charge-offs
Loans sold or identified as held-for-sale
Office retail, and, industrial	$	551	$	997	$	( 446)
Residential construction		3,691		6,269		(2,578)
Commercial construction		3,800		4,000		( 200)
Total loans sold		8,042		11,266		(3,224)
Residential construction loan classified as held-for-sale		1,595		1,595		-
Partial sales and paydowns		28,643		28,643		-
Total loans sold, paid off or transferred to held-for-sale	$	38,280		41,504		(3,224)

For the six months ended June 30, 2011, proceeds from disposals of non-accrual loans represented 92.2% of carrying value. During this period, we disposed of six primarily construction non-accrual loans with a book value of $7.3 million for proceeds of $4.3 million in a bulk sale. Charge-offs of $3.0 million were taken on these loans based on the sales prices once the loans were identified for sale. We also sold a $4.0 million commercial construction loan and recorded a charge-off of $200,000, and transferred a $1.6 million residential construction loan to held-for-sale status as of June 30, 2011.

Table 14

Disposals of OREO Properties

(Dollar amounts in thousands)

	Six Months Ended June 30, 2011
	OREO		Covered OREO		Total
OREO sales
Proceeds from sales	$	17,580	$	3,855	$	21,435
Less: Basis of properties sold		20,402		4,048		24,450
Losses on sales of OREO, net	$	(2,822)	$	( 193)	$	(3,015)
OREO transfers and write-downs
OREO transferred to premises, furniture, and equipment (at fair value)	$	841	$	-	$	841
OREO write-downs	$	1,693	$	942	$	2,635

OREO sales, excluding covered OREO, consisted of 60 properties for the six months ended June 30, 2011, with the majority classified as farmland, residential lots, and 1-4 family.

Almost 60% of the total disposals of loans and OREO represented non-performing assets we identified as part of our shift in strategy in fourth quarter 2010 to more aggressively pursue dispositions, particularly for construction loans and OREO. We received proceeds of $31.3 million from the disposition of these assets, which represented 87.6% of the recorded investment of those assets and resulted in a loss of $4.4 million, about half of which pertained primarily to two residential construction projects sold at auction. Of the assets identified for a change in disposition strategy in fourth quarter 2010, less than half remain.

Management continues to pursue the remediation of non-performing assets in accordance with the previously-established disposition strategies. It is anticipated that additional loan sales will be realized throughout the remainder of the year. As

58

management works to dispose of non-performing assets, our efforts could be impacted by a number of factors, including but not limited to, the pace and timing of the overall recovery of the economy, illiquidity in the real estate market, and higher levels of foreclosed real estate coming into the market.

Allowance for Credit Losses

The allowance for credit losses includes the allowance for loan losses and the reserve for unfunded commitments and represents management’s best estimate of probable losses inherent in the existing loan portfolio. Determination of the allowance for loan losses is inherently subjective, as it requires significant estimates, including the amounts and timing of expected future cash flows on impaired loans, estimated losses on pools of homogenous loans based on historical loss experience, consideration of current economic trends, and other factors, all of which may be susceptible to significant change.

The allowance for loan losses is established through a provision for loan losses charged to expense and takes into consideration such internal and external qualitative factors as changes in the nature, volume, size and current risk characteristics of the loan portfolio, an assessment of individual problem loans, actual and anticipated loss experience, current economic conditions that affect the borrower’s ability to pay, and other pertinent factors. The allowance for loan losses consists of (i) specific reserves established for probable losses on individual loans for which the recorded investment in the loan exceeds the value of the loan, (ii) reserves based on historical credit loss experience for each loan category, and (iii) the impact of other internal and external qualitative factors.

We also maintain a reserve for unfunded credit commitments to provide for the risk of loss inherent in these arrangements. The reserve for unfunded credit commitments is computed based on a loss migration analysis similar to that used to determine the allowance for loan losses.

The establishment of the allowance for credit losses involves a high degree of judgment and includes a level of imprecision given the difficulty of identifying all the factors impacting loan repayment and the timing of when losses actually occur. While management utilizes its best judgment and information available, the ultimate adequacy of the allowance for credit losses is dependent upon a variety of factors beyond our control, including the performance of our loan portfolio, the economy, changes in interest rates and property values, and the interpretation by regulatory authorities of loan risk classifications. While each component of the allowance for credit losses is determined separately, the entire balance is available for the entire loan portfolio. Management believes that the allowance for credit losses of $139.8 million is an appropriate estimate of credit losses inherent in the loan portfolio as of June 30, 2011.

The accounting policies underlying the establishment and maintenance of the allowance for credit losses are discussed in Note 1 of “Notes to Consolidated Financial Statements” in Item 1 of this Form 10-Q.

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Table 15

Allowance for Credit Losses

And Summary of Loan Loss Experience

(Dollar amounts in thousands)

	Quarters Ended
	2011				2010
	June 30		March 31		December 31		September 30		June 30
Change in allowance for credit   losses:
Balance at beginning of quarter	$	145,003	$	145,072	$	145,019	$	145,477	$	144,824
Loans charged-off:
Commercial and industrial		(6,003)		(4,965)		(10,629)		(13,968)		(5,896)
Agricultural		(900)		(9)		(125)		(489)		(546)
Office, retail, and industrial		(647)		(1,199)		(2,888)		(3,205)		(2,377)
Multi-family		(6,652)		(549)		(1,017)		(412)		(732)
Residential construction		(3,661)		(5,422)		(36,435)		(4,571)		(10,048)
Commercial construction		(185)		(261)		(7,743)		(228)		(115)
Other commercial real estate		(2,484)		(5,401)		(12,354)		(10,417)		(1,560)
Consumer		(2,767)		(2,424)		(2,416)		(2,139)		(2,546)
1-4 family mortgages		(341)		(247)		(238)		(364)		(261)
Total loans charged-off		(23,640)		(20,477)		(73,845)		(35,793)		(24,081)
Recoveries on loans previously     charged-off:
Commercial and industrial		418		1,837		431		706		3,217
Agricultural		101		-		-		-		-
Office, retail, and industrial		38		16		-		380		24
Multi-family		-		-		(189)		190		247
Residential construction		2,762		4		500		111		54
Commercial construction		52		-		-		-		-
Other commercial real estate		377		43		152		200		53
Consumer		64		107		42		160		264
1-4 family mortgages		1		1		-		1		-
Total recoveries on loans         previously charged-off		3,813		2,008		936		1,748		3,859
Net loans charged-off, excluding       covered loans		(19,827)		(18,469)		(72,909)		(34,045)		(20,222)
Net (charge-offs) recoveries on          covered loans		(4,108)		(1,092)		(935)		11		(651)
Net loans charged off		(23,935)		(19,561)		(73,844)		(34,034)		(20,873)
Provision charged to operating   expense:
Provision, excluding provision for          covered loans		14,655		18,400		72,962		33,587		20,875
Provision for covered loans		22,356		7,501		14,410		(424)		13,023
Less: expected reimbursement         from the FDIC		(18,248)		(6,409)		(13,475)		413		(12,372)
Net provision for covered loans		4,108		1,092		935		(  11)		651
Total provision charged to operating         expense		18,763		19,492		73,897		33,576		21,526
Balance at end of quarter	$	139,831	$	145,003	$	145,072	$	145,019	$	145,477
Allowance for loan losses		137,331	$	142,503	$	142,572	$	144,569	$	145,027
Reserve for unfunded commitments		2,500		2,500		2,500		450		450
Total allowance for credit losses	$	139,831	$	145,003	$	145,072	$	145,019	$	145,477

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	Quarters Ended
	2011				2010
	June 30		March 31		December 31		September 30		June 30
Average loans, excluding covered   loans	$	5,108,234	$	5,075,840	$	5,155,416	$	5,207,419	$	5,204,566
Net loans charged-off to average   loans, excluding covered loans,   annualized		1.56%		1.48%		5.61%		2.59%		1.56%
Allowance for credit losses at end of    period as a percent of:
Total loans, excluding covered loans		2.73%		2.85%		2.84%		2.81%		2.79%
Non-performing loans, excluding         covered loans		76%		76%		67%		66%		73%
Average loans, including covered   loans	$	5,443,761	$	5,438,978	$	5,545,953	$	5,494,712	$	5,376,861
Net loans charged-off to average   loans, annualized		1.76%		1.46%		5.28%		2.46%		1.56%
Allowance for credit losses at end of    period as a percent of:
Total loans		2.58%		2.66%		2.65%		2.61%		2.71%
Non-performing loans		55%		51%		48%		49%		59%

The allowance for credit losses represented 2.73% of total loans outstanding, excluding covered loans, at June 30, 2011 compared to 2.84% at December 31, 2010 and 2.79% at June 30, 2010. The allowance for credit losses declined $5.2 million from $145.1 million as of December 31, 2010 to $139.8 million as of June 30, 2011. During the first six months of 2011, we saw improvements in non-accrual and non-performing loans, along with improved credit metrics, resulting in a decrease in our estimate of credit losses inherent in the loan portfolio and the amount of allowance for credit losses deemed appropriate to cover those losses.

Net charge-offs for second quarter 2011 were $23.9 million, up $3.1 million, or 14.7%, from second quarter 2010. This increase was primarily attributed to net charge-offs taken on covered loans during second quarter 2011.

Net charge-offs for second quarter 2011, excluding charge-offs related to covered loans, were $19.8 million, compared to $20.2 million for second quarter 2010. Higher charge-offs on multi-family loans were mostly offset by lower charge-offs on residential construction loans. The charge-offs on multi-family loans were largely driven by three loan relationships. For the six months ended June 30, 2011, net charge-offs, excluding charge-offs on covered loans, totaled $38.3 million compared to $38.6 million for the same period in 2010.

Charge-offs related to covered loans for second quarter 2011, as well as the other quarters shown, reflect the decline in estimated cash flows of certain acquired loans, net of the reimbursement from the FDIC under loss sharing arrangements. The comparative increase reflects the initial re-estimation of the present value of loans acquired in a third quarter 2010 FDIC-assisted transaction. Management performs such remeasurements of cash flows periodically, and any declines, net of loss share, are reflected as charge-offs in the period of remeasurement. Conversely, any increases in estimated cash flow, net of loss share, are recorded through prospective yield adjustments over the remaining lives of the specific loans. To date, increases in estimated cash flows have exceeded declines, and such increases will be reflected in higher margins in future periods. Overall, the total portfolio of covered loans has experienced a net increase in estimated cash flows since acquisition and continues to perform better than originally expected.

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FUNDING AND LIQUIDITY MANAGEMENT

The following table provides a comparison of average funding sources for the quarters ended June 30, 2011, December 31, 2010, and June 30, 2010. We believe that average balances, rather than period-end balances, are more meaningful in analyzing funding sources because of the inherent fluctuations that may occur on a monthly basis within most funding categories.

Table 16

Funding Sources – Average Balances

(Dollar amounts in thousands)

	Quarters Ended						Second Quarter 2011 % Change From
	June 30, 2011		December 31, 2010		June 30, 2010		Fourth Quarter 2010	Second Quarter 2010
Demand deposits	$	1,465,438	$	1,348,188	$	1,181,097	8.7	24.1
Savings deposits		944,802		864,334		803,353	9.3	17.6
NOW accounts		1,126,913		1,075,642		1,157,246	4.8	(   2.6)
Money market accounts		1,205,736		1,302,325		1,155,889	(   7.4)	4.3
Transactional deposits		4,742,889		4,590,489		4,297,585	3.3	10.4
Time deposits		1,799,218		2,045,330		1,898,453	(  12.0)	(   5.2)
Brokered deposits		13,946		24,059		17,663	(  42.0)	(  21.0)
Total time deposits		1,813,164		2,069,389		1,916,116	(  12.4)	(   5.4)
Total deposits		6,556,053		6,659,878		6,213,701	(   1.6)	5.5
Repurchase agreements		122,607		143,549		201,078	(  14.6)	(  39.0)
Federal funds purchased		2,418		1		221	N/M	N/M
Federal Home Loan Bank (“FHLB”) advances		137,500		137,500		141,509	0.0	(   2.8)
Total borrowed funds		262,525		281,050		342,808	(   6.6)	(  23.4)
Subordinated debt		137,747		137,743		137,738	0.0	0.0
Total funding sources	$	6,956,325	$	7,078,671	$	6,694,247	(   1.7)	3.9
Average interest rate paid on borrowed funds		1.05%		1.00%		0.88%
Weighted-average maturity of FHLB   advances		21.6 months		27.6 months		33.6 months
Weighted-average interest rate of FHLB   advances		1.95%		1.95%		1.95%

N/M – Not meaningful.

Average funding sources for second quarter 2011 declined $122.3 million, 1.7%, from fourth quarter 2010 due to a $256.2 million, or 12.4%, decline in time deposits, partially offset by a $152.4 million, or 3.3% increase in transactional deposits. The reduction in time deposits from fourth quarter 2010 to second quarter 2011 resulted principally from a reduction in retail time deposits, as we sought to reduce our funding from more expensive single service, non-core customers.

Average funding sources increased $262.1 million, or 3.9%, from second quarter 2010 to second quarter 2011. The growth during this period resulted from a $445.3 million, or 10.4%, rise in average transactional deposits partially offset by a $103.0 million, or 5.4%, decline in average time deposits. The addition of core transactional deposits reflected the acquisition of deposits through FDIC-assisted transactions, ongoing sales efforts, and customers’ liquidity preferences in today’s low interest rate environment.

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Table 17

Borrowed Funds

(Dollar amounts in thousands)

	June 30, 2011			June 30, 2010
	Amount		Rate (%)	Amount		Rate (%)
At period-end:
Securities sold under agreements to repurchase	$	134,524	0.02	$	191,036	0.07
FHLB advances		137,500	1.95		137,434	1.95
Total borrowed funds	$	272,024	0.99	$	328,470	0.86
Average for the year-to-date period:
Securities sold under agreements to repurchase	$	135,407	0.02	$	212,320	0.21
Federal funds purchased		1,215	0.17		8,813	0.14
FHLB advances		137,500	1.98		147,677	2.03
Federal term auction facilities		-	-		40,884	0.25
Total borrowed funds	$	274,122	1.01	$	409,694	0.87
Maximum amount outstanding at the end of any day   during the period:
Securities sold under agreements to repurchase	$	174,810		$	256,238
Federal funds purchased		175,000			60,000
FHLB advances		137,500			272,802
Federal term auction facilities		1			300,000

Average borrowed funds totaled $274.1 million for the first six months of 2011, decreasing $135.6 million, or 33.1%, from the first six months of 2010. The increase in core transactional deposits reduced our reliance on these higher-costing funds.

Securities sold under agreements to repurchase, federal funds purchased, and term auction facilities generally mature within 1 to 90 days from the transaction date.

MANAGEMENT OF CAPITAL

Capital Measurements

The Federal Reserve Board (“FRB”), the primary regulator of the Company and the Bank, establishes minimum capital requirements that must be met by member institutions. We have managed our capital ratios to consistently maintain such measurements in excess of the FRB minimum levels to be considered “well-capitalized,” which is the highest capital category established.

Capital resources of financial institutions are also regularly measured by tangible equity ratios, which are non-GAAP measures. Tangible common equity equals total shareholders’ equity as defined by GAAP less goodwill and other intangible assets and preferred stock, which does not benefit common shareholders. Tangible assets equal total assets as defined by GAAP less goodwill and other intangible assets. The tangible equity ratios are a valuable indicator of a financial institution’s capital strength since they eliminate intangible assets from shareholders’ equity.

The following table presents our consolidated measures of capital as of the dates presented and the capital guidelines established by the FRB to be considered “well-capitalized.”

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Table 18

Capital Measurements

(Dollar amounts in thousands)

	June 30, 2011	December 31, 2010	June 30, 2010	Regulatory Minimum For “Well- Capitalized”	Excess Over Required Minimums at June 30, 2011
Regulatory capital ratios:
Total capital to risk-weighted assets	16.70%	16.27%	17.31%	10.00%	67%	$	419,579
Tier 1 capital to risk-weighted assets	14.63%	14.20%	15.25%	6.00%	144%	$	540,461
Tier 1 leverage to average assets	11.65%	11.21%	12.69%	5.00%	133%	$	523,055
Regulatory capital ratios, excluding   preferred stock (1):
Total capital to risk-weighted assets	13.62%	13.21%	14.27%	10.00%	36%	$	226,579
Tier 1 capital to risk-weighted assets	11.55%	11.15%	12.21%	6.00%	92%	$	347,461
Tier 1 leverage to average assets	9.20%	8.80%	10.17%	5.00%	84%	$	330,055
Tier 1 common capital to risk-       weighted assets (2) (3)	10.20%	9.81%	10.88%	N/A (3)	N/A (3)		N/A (3)
Tangible common equity ratios:
Tangible common equity to tangible       assets	8.47%	8.06%	9.05%	N/A (3)	N/A (3)		N/A (3)
Tangible common equity, excluding       other comprehensive loss, to tangible       assets	8.67%	8.41%	9.22%	N/A (3)	N/A (3)		N/A (3)
Tangible common equity to risk-       weighted assets	10.61%	10.02%	10.71%	N/A (3)	N/A (3)		N/A (3)
Regulatory capital ratios, Bank only (4):
Total capital to risk-weighted assets	14.62%	13.87%	14.02%	10.00%	46%	$	283,305
Tier 1 capital to risk-weighted assets	13.36%	12.61%	12.76%	6.00%	123%	$	450,934
Tier 1 leverage to average assets	10.54%	9.88%	10.59%	5.00%	111%	$	430,340

(1)	These ratios exclude the impact of $193.0 million in preferred shares issued to the Treasury in December 2008 as part of its Capital Purchase Program (“CPP”). For additional discussion of the preferred share issuance and the CPP, refer to Note 12 to the Consolidated Financial Statements of our 2010 Form 10-K.
(2)	Excludes the impact of preferred shares and trust-preferred securities.
(3)	Ratio is not subject to formal Federal Reserve regulatory guidance.
(4)	Ratio presented pertains to our wholly owned banking subsidiary, First Midwest Bank.

All regulatory mandated ratios for characterization as “well-capitalized” were exceeded as of June 30, 2011. The improvement from December 31, 2010 was driven by net income increasing capital.

CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements are prepared in accordance with GAAP and are consistent with predominant practices in the financial services industry. Critical accounting policies are those policies that management believes are the most important to our financial position and results of operations. Application of critical accounting policies requires management to make estimates, assumptions, and judgments based on information available as of the date of the financial statements that affect the amounts reported in the financial statements and accompanying notes. Future changes in information may affect these estimates, assumptions, and judgments, which, in turn, may affect amounts reported in the financial statements.

We have numerous accounting policies, of which the most significant are presented in Note 1, “Summary of Significant Accounting Policies,” to the Consolidated Financial Statements of our 2010 10-K. These policies, along with the disclosures presented in the other financial statement notes and in this discussion, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, management has determined that our accounting policies with respect to the allowance for credit losses, evaluation of impairment of securities, and income taxes are the accounting areas requiring subjective or complex judgments that are most

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important to our financial position and results of operations, and, therefore, are considered to be critical accounting policies, as discussed in our 2010 10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates, exchange rates, and equity prices. Interest rate risk is our primary market risk and is the result of repricing, basis, and option risk. A description and analysis of our interest rate risk management policies is included in Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” contained in our 2010 10-K.

We seek to achieve consistent growth in net interest income and net income while managing volatility that arises from shifts in interest rates. The Bank’s Asset and Liability Committee (“ALCO”) oversees financial risk management by developing programs to measure and manage interest rate risks within authorized limits set by the Bank’s Board of Directors. ALCO also approves the Bank’s asset and liability management policies, oversees the formulation and implementation of strategies to improve balance sheet positioning and earnings, and reviews the Bank’s interest rate sensitivity position. Management uses net interest income and economic value of equity simulation modeling tools to analyze and capture short-term and long-term interest rate exposures.

Net Interest Income Sensitivity

The analysis of net interest income sensitivities assesses the magnitude of changes in net interest income resulting from changes in interest rates over a 12-month horizon using multiple rate scenarios. These scenarios include, but are not limited to, a “most likely” forecast, a flat to inverted or unchanged rate environment, a gradual increase and decrease of 200 basis points that occur in equal steps over a six-month time horizon, and immediate increases and decreases of 200 and 300 basis points.

This simulation analysis is based on actual cash flows and repricing characteristics for balance sheet and off-balance sheet instruments and incorporates market-based assumptions regarding the effect of changing interest rates on the prepayment rates of certain assets and liabilities. This simulation analysis includes management’s projections for activity levels in each of the product lines we offer. The analysis also incorporates assumptions based on the historical behavior of deposit rates and balances in relation to interest rates. Because these assumptions are inherently uncertain, the simulation analysis cannot definitively measure net interest income or predict the impact of the fluctuation in interest rates on net interest income. Actual results may differ from simulated results due to timing, magnitude, and frequency of interest rate changes as well as changes in market conditions and management strategies.

We monitor and manage interest rate risk within approved policy limits. Our current interest rate risk policy limits are determined by measuring the change in net interest income over a 12-month horizon assuming a 200 basis point gradual increase and decrease in all interest rates compared to net interest income in an unchanging interest rate environment. Current policy limits this exposure to plus or minus 8% of the anticipated level of net interest income over the corresponding 12-month horizon assuming no change in current interest rates. We were within policy limits as of June 30, 2011 and December 31, 2010.

Analysis of Net Interest Income Sensitivity

(Dollar amounts in thousands)

	Gradual Change in Rates (1)				Immediate Change in Rates
	-200		+200		-200		+200		-300 (2)		+300
June 30, 2011:
Dollar change	$	(10,508)	$	11,304	$	(10,431)	$	15,837	$	N/M	$	25,141
Percent change		-3.7%		+3.9%		-3.6%		+5.5%		N/M		+8.7%
December 31, 2010:
Dollar change	$	(13,609)	$	7,393	$	(18,736)	$	10,072	$	N/M	$	21,148
Percent change		-4.7%		+2.5%		-6.4%		+3.4%		N/M		+7.2%

(1)	The gradual change in rates reflects an assumed uniform change in interest rates across all terms that occurs in equal steps over a six-month horizon.
(2)	N/M – Due to the low level of interest rates as of June 30, 2011 and December 31, 2010, in management’s judgment, an assumed 300 basis point drop in interest rates was deemed not meaningful in the existing interest rate environment.

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Overall, in rising interest rate scenarios, interest rate risk volatility is more positive at June 30, 2011 than at December 31, 2010 and in declining interest rate scenarios, interest rate risk volatility is less negative at June 30, 2011 compared to December 31, 2010. The increase in positive exposure to rising interest rates resulted from a change in balance sheet strategy to reinvest a greater portion of securities cash flows into shorter-term investments. A decrease in short-term borrowings and a lower level of interest rate floors on loans drove the decline in negative exposure to falling interest rates.

Economic Value of Equity

In addition to the simulation analysis, management uses an economic value of equity sensitivity technique to understand the risk in both shorter-term and longer-term positions and to study the impact of longer-term cash flows on earnings and capital. In determining the economic value of equity, we discount present values of expected cash flows on all assets, liabilities, and off-balance sheet contracts under different interest rate scenarios. The discounted present value of all cash flows represents our economic value of equity. Economic value of equity does not represent the true fair value of asset, liability, or derivative positions because certain factors are not considered, such as credit risk, liquidity risk, and the impact of future changes to the balance sheet. Our policy guidelines call for preventative measures to be taken in the event that an immediate increase or decrease in interest rates of 200 basis points is estimated to reduce the economic value of equity by more than 20%.

Analysis of Economic Value of Equity

(Dollar amounts in thousands)

	Immediate Change in Rates
	-200		+200
June 30, 2011:
Dollar change	$	(72,277)	$	99,897
Percent change		-4.4%		+6.1%
December 31, 2010:
Dollar change	$	(148,859)	$	61,708
Percent change		-9.2%		+3.8%

As of June 30, 2011, the estimated sensitivity of the economic value of equity to changes in rising interest rates is more positive compared to December 31, 2010, and the estimated sensitivity to falling rates is less negative compared to December 31, 2010.

ITEM 4. CONTROLS AND PROCEDURES

At the end of the period covered by this report, (the “Evaluation Date”), the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s President and Chief Executive Officer and its Executive Vice President and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15 of the Securities and Exchange Act of 1934 (the “Exchange Act”). Based on that evaluation, the President and Chief Executive Officer and Executive Vice President and Chief Financial Officer concluded that as of the Evaluation Date, the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms. There were no changes in the Company’s internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company disclosed any material pending litigation matters relating to the Company in Item 3 of Part I of its Annual Report on Form 10-K for the year ended December 31, 2010. For the quarter ended June 30, 2011, there were no material developments with regard to any previously disclosed matters, and no other matters were reported during the period, although there were certain legal proceedings pending against the Company and its subsidiaries in the ordinary course of business at June 30, 2011. Based on presently available information, the Company believes that any liabilities arising from these proceedings would not have a material adverse effect on the consolidated financial position of the Company.

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ITEM 1A. RISK FACTORS

The Company provided a discussion of certain risks and uncertainties faced by the Company in its Annual Report on Form 10-K for the year ended December 31, 2010. However, these factors may not be the only risks or uncertainties the Company faces.

During 2011, the Company has identified the following additional risk factors:

Recent and/or future U.S. credit downgrades or changes in outlook by the major credit rating agencies may have an adverse affect on financial markets, including financial institutions and the financial industry.

Despite the recent actions taken by the U.S. government to raise the U.S. debt limit and address budget deficit concerns, on August 5, 2011, Standard and Poor’s Rating Services (“S & P”) downgraded the U.S.’s credit rating from AAA to AA+ for the first time in history. It is difficult to predict the effect of this action, or of any future downgrades or changes in outlook by S & P or either of the other two major credit rating agencies. However, these events could impact the trading market for U.S. government securities, including agency securities, and the securities markets more broadly, and consequently could impact the value and liquidity of financial assets, including assets in our investment and bank-owned life insurance portfolios. These actions could also create broader financial turmoil and uncertainty, which may negatively affect the global banking system and limit the availability of funding, including borrowings under repurchase arrangements, at reasonable terms. In turn, this could have a material adverse effect on our liquidity, financial condition, and results of operations.

The Company’s business may be adversely affected in the future by the implementation of rules establishing standards for debit card interchange fees.

On June 29, 2011, the Federal Reserve Board approved final rules establishing standards for debit card interchange fees and prohibiting network exclusivity arrangements and routing restrictions as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.  A debit card interchange fee is a fee paid by a merchant’s bank to the customer’s bank for the use of the debit card. 

Under the final rule, the maximum permissible interchange fee that an issuer may receive for an electronic debit transaction will be 21 cents plus an amount equal to five basis points of the transaction value. In addition, under an interim final rule issued concurrently with the final rule, an additional one cent per transaction “fraud prevention adjustment” to the interchange fee is available to those issuers that comply with certain standards outlined by the Board. The effective date for the cap on interchange fees is October 1, 2011.

Currently, the Company is exempt from the interchange fee cap under the “small issuer” exemption, which applies to any debit card issuer with total worldwide assets of less than $10 billion as of the end of the previous calendar year. In the event the Company’s assets reach $10 billion or more, it will become subject to the interchange fee limitations beginning July 1 of the following year, and the fees the Company may receive for an electronic debit transaction will be capped at the statutory limit.

Although the rule applies only to larger institutions and does not currently apply to the Company, future industry responses and developments relating to this rule that are currently unknown may affect the Company’s financial condition and results of operations in ways and to a degree that it cannot currently predict including any impact on its future revenue.

The Company’s business may be adversely affected in the future by the effect of troubled foreign economies on money market funds.

Federal regulators are closely monitoring U.S. money market funds’ exposure to commercial paper issued by European banks. Approximately one-half of all prime money market funds are invested in European bank commercial paper and those European banks are heavily invested in government bonds issued by the troubled economies of Greece, Portugal, and Spain. A default by any of those countries could have a broad negative effect on U.S. and world economies. The Company cannot currently predict the current or future impact this occurrence may have on its financial condition or results of operations.

Based on currently available information, the Company has not identified any additional material changes in the Company’s risk factors as previously disclosed, except as discussed above.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table summarizes the Company’s monthly common stock purchases during second quarter 2011. The Company’s Board of Directors approved a stock repurchase program on November 27, 2007. Up to 2.5 million shares of the Company’s common stock may be repurchased, and the total remaining authorization under the program was 2,494,747 shares as of June 30, 2011. The repurchase program has no set expiration or termination date. Any repurchases are subject to limitations imposed as part of the U.S. Treasury’s Capital Purchase Plan under theEmergency Economic Stabilization Act of 2008.

Issuer Purchases of Equity Securities

(Number of shares in thousands)

	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program	Maximum Number of Shares that May Yet Be Purchased Under the Plan or Program
April 1 – April 30, 2011	-	$	-	-	2,494,747
May 1 – May 31, 2011	76,362		12.24	-	2,494,747
June 1 – June 30, 2011	-		-	-	2,494,747
Total	76,362	$	12.24	-

(1) Consists of shares acquired pursuant to the Company’s share-based compensation plans and not the Company’s repurchase program approved by its Board of Directors on November 27, 2007. Under the terms of these plans, the Company accepts shares of common stock from option holders if they elect to surrender previously owned shares upon exercise to cover the exercise price of the stock options or, in the case of restricted shares of common stock, the withholding of shares to satisfy tax withholding obligations associated with the vesting of restricted shares.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. REMOVED AND RESERVED

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

Exhibit Number	Description of Documents	Sequential Page #
3.1	Restated Certificate of Incorporation of First Midwest Bancorp, Inc. is herein incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2009.
3.2	Restated By-laws of First Midwest Bancorp, Inc. is herein incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2009.
10.1	Employment Agreement between the Company and its Chief Operating Officer.
10.2	Grant of Nonqualified Stock Option between the Company and its Chief Operating Officer.
10.3	Grant of Restricted Stock Letter Agreement between the Company and its Chief Operating Officer.
10.4	Supplemental Salary Stock Compensation Award Agreement between the Company and its Chief Operating Officer.
10.5	Compensation Award Agreement between the Company and its Chief Operating Officer.
11	Statement re: Computation of Per Share Earnings - The computation of basic and diluted earnings per common share is included in Note 7 of the Company’s Notes to Consolidated Financial Statements included in “ITEM 1. FINANCIAL STATEMENTS” of this document.
15	Acknowledgment of Independent Registered Public Accounting Firm.
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 (1)	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 (1)	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99	Report of Independent Registered Public Accounting Firm.
101 (1)	Interactive Data File.

(1) Furnished, not filed.

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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.

                    /s/ PAUL F. CLEMENS                          

                          Paul F. Clemens

Executive Vice President, Chief Financial Officer,

           and Principal Accounting Officer*

Date: August 9, 2011

* Duly authorized to sign on behalf of the Registrant.

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EX-10.1

    Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made by and between FIRST MIDWEST BANCORP, INC. (“Company”) and the undersigned executive (“Executive”), on June 7, 2011.

W I T N E S S E T H:

WHEREAS, Company is desirous of employing Executive as an executive of Company and its wholly owned subsidiary, FIRST MIDWEST BANK (the “Bank”) on the terms and conditions, and for the consideration, hereinafter set forth and Executive is desirous of accepting such employment on such terms and conditions and for such consideration;

WHEREAS, references herein to Executive’s employment by the Company, the Bank or another subsidiary, and references herein to payments of any nature to be made to Executive shall mean that either the Company will make such payments or it will cause the Bank or other applicable subsidiary (reference to “Employer” hereinafter shall mean the Company, the Bank or other subsidiary by which Executive is employed) to make such payments to Executive.

NOW, THEREFORE, for and in consideration of the mutual promises, covenants and obligations contained herein, Company and Executive agree as follows:

1.Employment and Term.

(a)Employment.  The Employer shall employ the Executive as Senior Executive Vice President and Chief Operating Officer of the Company and President and Chief Operating Officer of the Bank, and the Executive shall so serve, for the term set forth in Paragraph 1(b).  Executive shall report directly to the President and Chief Executive Officer of the Company and the Chief Executive Officer of the Bank.

(b)Term.  The term of the Executive’s employment under this Agreement shall commence on June 20, 2011 or such other date as the Employer and the Executive shall mutually agree (“Effective Date”) and end on June 30, 2013, subject to the extension of such term as hereinafter provided and subject to earlier termination as provided in Paragraph 9 (the “period of employment”).  The term of this Agreement shall be extended automatically for two (2) additional years as of the second anniversary of the Effective Date and each second anniversary date thereof unless, no later than ninety (90) days prior to any such renewal date (i) the Employer gives written notice to the Executive, as by either the Board of Directors of the Company, or a duly authorized committee thereof (the “Board”), or (ii) the Executive gives written notice to the Employer, in accordance with Paragraph 19, that the term of this Agreement shall not be so extended.  Anything in this Agreement to the contrary, if at any time during the Executive’s period of employment under this Agreement there is a Change in Control (as defined in Paragraph 9), the term of this Agreement shall automatically extend to a date which is three (3) years from the date of the Change in Control (and shall be further extended pursuant to the

1

foregoing provisions of this Paragraph 1(b), unless written notice to the contrary is given in accordance with this Paragraph 1(b)).

2.Duties and Responsibilities.

(a)The duties and responsibilities of Executive shall be of an executive nature as shall be required by the Employer in the conduct of its business.  Executive’s powers and authority shall be as may be prescribed by the By-laws of the Employer and as may be delegated to Executive, together with the performance of such other duties and responsibilities as from time to time may be assigned to Executive consistent with his position(s), including, but not limited to those of an officer of a public company.  Executive recognizes, that during the period of employment hereunder, Executive owes an undivided duty of loyalty to the Employer, and agrees to devote his entire business time and attention to the performance of said duties and responsibilities.  Recognizing and acknowledging that it is essential for the protection and enhancement of the name and business of the Employer and the goodwill pertaining thereto, the Executive shall perform the duties under this Agreement professionally, in accordance with the applicable laws, rules and regulations and such standards, policies and procedures established by the Employer and the industry from time to time, including the Employer’s Corporate Code of Ethics and Standards of Conduct and, if applicable, Code of Ethics for Senior Financial Officers.  Executive will not perform any duties for any other business without the prior written consent of the Employer, and may engage in charitable, civic or community activities, provided that such duties or activities do not materially interfere with the proper performance of his duties under this Agreement.  During the period of employment, the Executive shall serve as a director of the Bank and may be elected or appointed as a director of its affiliates and agrees to serve in such capacity or capacities without additional compensation.

(b)Notwithstanding anything herein to the contrary, Executive’s employment may be terminated by the Employer, subject to the terms and conditions of this Agreement.

3.Base Salary.  Subject to Paragraph 8 below, for services performed by the Executive for the Employer pursuant to this Agreement, the Employer shall pay the Executive a base salary at the rate of five hundred thousand dollars ($500,000) per year, payable in substantially equal installments in accordance with the Employer’s regular payroll practices.  Executive’s base salary shall be subject to review from time to time and the Employer may (but is not required to) increase the base salary as the Board or a committee thereof, in its discretion, may authorize or determine.

4.Annual Bonuses.  Subject to Paragraph 8 below, for each fiscal year during the term of employment, the Executive shall be eligible to receive a bonus pursuant to the First Midwest Bancorp, Inc. Short Term Incentive Compensation Plan or any successor or replacement plan (“STIC”), in accordance with the terms of such Plan, as adopted and administered by the Board for senior executives of the Employer, as such plan may be amended from time to time by the Board in its discretion.  The Executive’s initial STIC award target will be fifty percent (50%) of the Executive’s base salary in effect under Paragraph 3 above.  The actual amount of any bonus will be determined in accordance with the terms of the STIC.

2

5.Long-Term and Equity Incentive Compensation.  Subject to Paragraph 8 below, during the term of employment hereunder, the Executive shall be eligible to participate in the First Midwest Bancorp, Inc. Omnibus Stock and Incentive Plan, and in any other long-term and/or equity-based incentive compensation plan or program approved by the Board from time to time (collectively, “LTIC”).  The Executive’s initial annual LTIC award target will be seventy-five percent (75%) of the Executive's base salary as in effect under Paragraph 3 above and the initial annual Performance Awarded Restricted Stock (“PARS”) award target will be seventy percent (70%) of the Executive's base salary as in effect under Paragraph 3 above.  The actual amount of any LTIC and PARS awards and the terms thereof shall be determined in accordance with the terms of the LTIC; provided Executive’s initial annual LTIC award to be made in February 2012 shall not be less than the Executive’s initial annual LTIC award target of seventy-five percent (75%) of the Executive’s base salary as in effect under Paragraph 3 above.

6.Other Benefits.  In addition to the compensation described in Paragraphs 3, 4 and 5 above, the Executive shall also be entitled to the following:

(a)Participation in Benefit Plans.  The Executive shall be entitled to participate in all of the various retirement, welfare, fringe benefit and expense reimbursement plans, programs and arrangements of the Employer as may be in effect from time to time to the extent the Executive is eligible for participation under the terms of such plans, programs and arrangements, including, but not limited to non-qualified retirement programs and deferred compensation plans.  In addition, the Executive shall be entitled to receive perquisites available to similarly situated executives of the Employer in accordance with the Employer’s policies as in effect from time to time, such perquisites currently including reimbursements for reasonable professional fees incurred for financial and tax planning services, an auto allowance, and reimbursements for monthly membership dues at one country club of the Executive’s choosing.  For purposes of this Agreement, “similarly situated executives” shall mean the Employer’s senior executive officers.

(b)Vacation.  The Executive shall be entitled to such number of vacation days and sick days with pay during each calendar year during the period of employment in accordance with the Employer’s applicable personnel policy as in effect from time to time.  As of the Effective Date, the applicable personnel policy entitles Executive to twenty (20) vacation days and five (5) sick days with pay per calendar year, with such number of vacation days and sick days pro-rated for 2011 based on Executive's actual employment commencement date.

7.Inducement Compensation.  As an inducement to the Executive to accept employment with the Employer and in recognition of the amounts the Executive will forego by accepting such employment, the Executive shall receive the following on or as soon as practicable after the Effective Date (or as otherwise provided below):

(a)a sign-on bonus of three hundred and fifty thousand dollars ($350,000), consisting of (i) stock options to purchase shares of the Company’s common stock, no par value (the “Common Stock”), having an aggregate grant date fair value, determined using the same valuation methodology as used by the Company in its audited financial statements, of at least

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two hundred thousand dollars ($200,000), a per share exercise price equal to the fair market value of a share of Common Stock on the date of grant, and such other terms as set forth in the stock option award agreement attached hereto as Exhibit A, and (ii) a cash payment equal to the sign-on bonus of three hundred and fifty thousand dollars ($350,000) less the aggregate grant date fair value of the stock option grant awarded pursuant to this Paragraph 7(a), with such cash payment included in the first regular paycheck occurring after the Effective Date;

(b)a one-time ninety-five thousand dollar ($95,000) fully vested contribution on the Executive's behalf to the Company's Non-Qualified Retirement Plan, such contribution to be made by the Employer on or before December 31, 2011;

(c)a restricted stock or restricted stock unit award with an aggregate grant date fair value of four hundred thousand dollars ($400,000), the terms of which are set forth in the restricted stock agreement attached hereto as Exhibit B;

(d)supplemental salary stock in an amount per month of fifteen thousand and five hundred dollars ($15,500), commencing in July 2011 and continuing for thirty (30) months in accordance with the Employer's regular payroll procedures and the terms and conditions of the salary stock agreement attached hereto as Exhibit C; and

(e)reimbursement of up to ten thousand dollars ($10,000) of attorneys’ fees paid by Executive with respect to the negotiation and execution of this Agreement.

8.TARP-Related Adjustments.  The following provisions shall apply with respect to the period of employment during which the Company is subject to the Troubled Asset Relief Program (TARP) Standards for Compensation and Corporate Governance:

(a)The Executive shall receive an annual base salary of seven-hundred and seventy-five thousand dollars ($775,000), of which two-hundred and seventy-five thousand dollars ($275,000) shall be paid as salary stock in accordance with the salary stock agreement attached hereto as Exhibit D;

(b)The Executive shall not participate in the STIC described in Paragraph 4 above or in the PARS program described in Paragraph 5 above; and

(c)Any other LTIC awards described in Paragraph 5 above shall be made on terms which qualify the awards as TARP-compliant long-term restricted stock awards and the form of restricted stock agreement applicable to other similarly situated executives.

9.Termination.  Unless earlier terminated in accordance with the following provisions of this Paragraph 9, the Employer shall continue to employ the Executive and the Executive shall remain employed by the Employer during the entire term of this Agreement as set forth in Paragraph 1(b).   Paragraph 10 hereof sets forth certain obligations of the Employer in the event that the Executive’s employment hereunder is terminated.  Certain capitalized terms used in this Paragraph 9 and in Paragraph 10 hereof are defined in Paragraph 9(d), below.

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(a)Death or Disability.  Except to the extent otherwise provided in Paragraph 10 with respect to certain post-Date of Termination (as defined below) payment obligations of the Employer, this Agreement shall terminate immediately as of the Date of Termination in the event of the Executive’s death or in the event that the Executive becomes disabled.  The Executive will be deemed to be disabled upon the first to occur of (i) the end of a six (6)-consecutive month period, or the end of an aggregate period of nine (9) months out of any consecutive twelve (12) months, during which, by reason of physical or mental injury or disease, the Executive has been unable to perform substantially all of his usual and customary duties under this Agreement or (ii) the date that a reputable physician selected by the Employer determines in writing that the Executive will, by reason of physical or mental injury or disease, be unable to perform substantially all of the Executive’s usual and customary duties under this Agreement for a period of at least six (6) consecutive months.  If any question arises as to whether the Executive is disabled, upon reasonable request therefor by the Board, the Executive shall submit to reasonable examination by a physician for the purpose of determining the existence, nature and extent of any such disability.  The Board shall promptly provide the Executive with written notice of the results of any such determination of disability and of any decision of the Board to terminate the Executive’s employment by reason thereof.  In the event of disability, until the Date of Termination, the base salary payable to the Executive under Paragraph 3 hereof shall be reduced dollar-for-dollar by the amount of disability benefits, if any, paid to the Executive in accordance with any disability policy or program of the Employer.

(b)Discharge for Cause.  In accordance with the procedures hereinafter set forth, the Employer may terminate the Executive’s employment hereunder for Cause.  Except to the extent otherwise provided in Paragraph 10 with respect to certain post-Date of Termination obligations of the Employer, this Agreement shall terminate immediately as of the Date of Termination in the event the Executive is terminated for Cause.  Any termination of the Executive for Cause shall be communicated by a Notice of Termination to the Executive given in accordance with Paragraph 19 of this Agreement.

(c)Termination for Other Reasons.  The Employer may terminate the Executive’s employment without Cause by giving written notice to the Executive in accordance with Paragraph 19 at least thirty (30) days prior to the Date of Termination.  The Executive may resign from employment with or without Good Reason, without liability to the Employer, by giving written notice to the Employer in accordance with Paragraph 19 at least thirty (30) days prior to the Date of Termination; provided, however, that no resignation shall be treated as a resignation for Good Reason unless the written notice thereof is given within ninety (90) days after the occurrence of the event or circumstances which constitutes “Good Reason.”  Except to the extent otherwise provided in Paragraph 10 with respect to certain post-Date of Termination obligations of the Employer, this Agreement shall terminate immediately as of the Date of Termination in the event the Executive is terminated without Cause or resigns for any reason or no reason.

(d)Definitions.  For purposes of this Agreement, the following capitalized terms shall have the meanings set forth below:

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(i)“Accrued Obligations” shall mean, as of the Date of Termination, the sum of (A) Executive’s base salary under Paragraph 3 through the Date of Termination to the extent not theretofore paid, (B) the amount of any other cash compensation earned by the Executive as of the Date of Termination to the extent not theretofore paid, (C) any vacation pay, expense reimbursements and other cash payments to which the Executive is entitled as of the Date of Termination to the extent not theretofore paid, (D) any grants and awards earned and vested but not yet paid under the STIC or any incentive compensation plan or program, and (E) all other benefits which have accrued and are vested as of the Date of Termination.  The “Accrued Obligations” shall also include the right for Executive to maintain medical and dental coverage for himself and his eligible dependents during the period following the Date of Termination through the date Executive attains Medicare eligibility, provided Executive pays the applicable COBRA premiums for such coverage.  For the purpose of this Paragraph 9(d)(i), except as provided in the applicable plan, program or policy, amounts shall be deemed to accrue ratably over the period during which they are earned, but no discretionary compensation shall be deemed earned or accrued until it is specifically approved in accordance with the applicable plan, program or policy.

(ii)“Cause” shall mean (A) the Executive’s willful and continued (for a period of not less than fifteen (15) days after written notice thereof) failure to perform substantially the duties of his employment (other than as a result of physical or mental incapacity, or while on vacation); or (B) the Executive’s willfully engaging in illegal conduct, an act of dishonesty or gross misconduct related to the performance of Executive’s duties and responsibilities under the Agreement; or (C) the Executive’s conviction of a felony involving moral turpitude, dishonesty, fraud, theft or financial impropriety, but specifically excluding any conviction based entirely on vicarious liability (with “vicarious liability” meaning liability based on acts of the Employer for which the Executive is charged solely as a result of his position with the Employer and in which Executive was not directly involved and did not have prior knowledge of such actions or intended actions); or (D) the Executive’s willful violation of a material requirement of any code of ethics or standards of conduct of the Employer applicable to Executive or Executive’s fiduciary duty to the Employer; provided, however, that no act or failure to act, on the part of the Executive, shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Employer; and provided further that no act or omission by the Executive shall constitute Cause hereunder unless the Employer has given detailed written notice thereof to the Executive, and the Executive has failed to remedy such act or omission.

(iii)“Change in Control” shall mean:

(A)Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than (i) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a subsidiary, or (ii) a corporation owned directly or indirectly by the

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       stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly,

of securities of the Company representing more than 25% of the total voting power of the then outstanding shares of capital stock of the Company entitled to vote generally in the election of directors (the “Voting

Stock”); or

(B)During any period of two consecutive years, individuals, who at the beginning of such period constitute the Board, and any new director, whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

(C)Consummation of a reorganization, merger or consolidation or the sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless (1) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Voting Stock immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the total voting power represented by the voting securities entitled to vote generally in the election of directors of the Company resulting from the Business Combination (including, without limitation, an entity which as a result of the Business Combination owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to the Business Combination of the Voting Stock of the Company, and (2) at least a majority of the members of the board of directors of the corporation resulting from the Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or action of the Board, providing for such Business Combination; or

(D)the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company.

The Board has final authority to construe and interpret the provisions of the foregoing paragraphs (A), (B), (C) and (D) and to determine the exact date on which a change in control has been deemed to have occurred thereunder.

(iv)“Date of Termination” shall mean (A) in the event of a discharge of the Executive for Cause, the date the Executive receives a Notice of Termination, or any later date specified in such Notice of Termination, as the case may be, (B) in the event of a discharge of the Executive without Cause or a resignation by the Executive, the date specified in the written notice to the Executive (in the case of discharge) or the Employer (in the case of resignation), which date shall be no less than thirty (30) days

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     from the date of such written notice, (C) in the event of the Executive’s death, the date of the Executive’s death, and (D) in the event of termination of the Executive’s employment by reason of disability pursuant to Paragraph

     9(a), the date the Executive (or Executive’s legal representative) receives written notice of such termination.

(v)“Good Reason”  shall mean the occurrence of any event, other than in connection with a termination of Executive’s employment, which results in a material diminution of Executive’s status, duties, authority, responsibilities or compensation from those contemplated by this Agreement, including, without limitation, any of the following actions without the Executive’s written consent (which, for this purpose, will not include consent given in Executive’s capacity as a director, officer or employee of an Employer):  (A) a significant change in the Executive’s title, or nature or scope of the Executive’s duties, from those described in Paragraphs 1(a) and 2(a), such that the title or duties are inconsistent with, and commonly (in the banking industry) considered to be of lesser authority, status or responsibility, other than a significant change not occurring in bad faith and which is remedied by the Employer promptly after receipt of written notice thereof given by the Executive in accordance with Paragraph 19; or (B) a material reduction in the Executive’s annual STIC, LTIC and PARS target levels from the initial target levels set forth in Paragraph 4 and 5, respectively, other than any such reduction reflecting changes in the amount or mix of such compensation opportunities which is made on a basis consistent with changes applicable to similarly situated executives or a reduction not made in bad faith and which is remedied by the Employer promptly after receipt of written notice thereof given by the Executive in accordance with Paragraph 19; or (C) any material failure by the Employer to comply with any of the provisions of this Agreement, other than any failure not occurring in bad faith and which is remedied by the Employer promptly after receipt of written notice thereof given by the Executive in accordance with Paragraph 19; or (D) the Employer gives notice to the Executive pursuant to Paragraph 1(b) that the term of this Agreement shall not be extended upon the expiration of the then-current term; or (E) the Employer requires the Executive to be based at an office or location which is more than 80 miles from the Executive’s office as of the Effective Date or any renewal date of this Agreement.  In the event of a Change in Control, any good faith determination by the Executive that Good Reason exists shall be conclusive.

(vi)“Notice of Termination” shall mean a  written notice which (A) indicates the specific termination provision in this Agreement relied upon, (B) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (C) if the Date of Termination is to be other than the date of receipt of such notice or the date otherwise specified on this Agreement, specifies the termination date.

10.Obligations of the Employer Upon Termination.  The following provisions describe the post-Date of Termination obligations of the Employer to the Executive under this Agreement upon the termination of Executive’s employment and the Agreement.  However, except as explicitly provided in this Agreement, nothing in this Agreement shall limit or

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otherwise adversely affect any rights which the Executive may have under applicable law, under any other agreement with the Employer or any of its subsidiaries, or under any compensation or benefit plan, program, policy or practice of the Employer or any of its subsidiaries.

(a)Death, Disability, Discharge for Cause, or Resignation Without Good Reason.  In the event the Executive’s employment and this Agreement terminate pursuant to Paragraph 9(a) by reason of the death or disability of the Executive, or pursuant to Paragraph 9(b) by reason of the termination of the Executive by the Employer for Cause, or pursuant to Paragraph 9(c) by reason of the resignation of the Executive other than for Good Reason, the Employer shall pay to the Executive, or his heirs or estate, in the event of the Executive’s death, all Accrued Obligations in a lump sum in cash within thirty (30) days after the Date of Termination; provided, however, that any portion of the Accrued Obligations which consists of bonus, deferred compensation, incentive compensation, insurance benefits or other employee benefits shall be determined and paid in accordance with the terms of the relevant plan or policy as applicable to the Executive, including, where applicable, the forfeiture of such amounts upon a termination for Cause.

(b)Discharge Without Cause or Resignation with Good Reason .  Subject to Paragraph 12, in the event the Executive’s employment and this Agreement terminate pursuant to Paragraph 9(c) by reason of the termination of the Executive by the Employer other than for Cause or disability or by reason of the resignation of the Executive for Good Reason:

(i)The Employer shall pay all Accrued Obligations to the Executive in a lump sum in cash within thirty (30) days after the Date of Termination; provided, however, that any portion of the Accrued Obligations which consists of bonus, deferred compensation, incentive compensation, insurance benefits or other employee benefits shall be determined and paid in accordance with the terms of the relevant plan or policy as applicable to the Executive;

(ii)Within thirty (30) days after the Date of Termination which occurs when Executive is eligible to earn an annual bonus under STIC, the Employer shall pay to the Executive a pro-rated bonus for the year during which the Executive’s employment terminated (“Termination Year”), based on the number of days on which Executive was eligible to earn an annual bonus under STIC and which elapsed during the Termination Year through the Date of Termination (“Service Days”).  The amount of the pro-rated bonus shall be calculated by multiplying the Executive’s target annual bonus for the completed fiscal year immediately preceding the Termination Year (or, in the event the Executive was not eligible for STIC in the immediately preceding fiscal year, the initial target annual bonus set forth in Paragraph 4) (the “Severance Target”), by a fraction, the numerator of which is the Service Days, and the denominator of which is 365;

(iii)The Employer shall pay to the Executive a lump sum payment within thirty (30) days after such termination of employment in an amount equal to the sum of: (A) nine (9) months of the Executive’s then current base salary; (B) to the extent then in effect pursuant to Paragraph 8(a), nine (9) months of salary stock; and (C) to the

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                extent then in effect under Paragraph 7(d), one-half of the remaining months of supplemental salary stock (in each case, determined without regard for any reduction constituting Good Reason);

(iv)Continuation for nine (9) months following the Executive’s termination of employment (the “Severance Period”) of the Executive’s right to maintain COBRA continuation coverage under the applicable plans at premium rates on the same “cost-sharing” basis as the applicable premiums paid for such coverage by active employees as of the Date of Termination; and

(v)Outplacement counseling, the scope and provider of which shall be selected by the Employer for a period beginning on the Date of Termination and ending on the date the Executive is first employed elsewhere or otherwise is providing compensated services of any type, whether as an employee, independent contractor, owner-employee or otherwise, provided that in no event shall such outplacement services be provided for a period greater than two (2) years.

In the event that upon the expiration of the Severance Period, Executive is not employed or otherwise providing compensated services of any type, whether as an employee, independent contractor, owner-employee or otherwise, and has not done so during the final ninety (90) days of the Severance Period, the Employer may, in its sole discretion (which discretion need not be applied in a consistent manner from one Executive to another), agree to pay an additional severance payment in an amount equal to up to six (6) months of the Executive’s base salary, salary stock and supplemental salary stock as in effect on the Date of Termination.  In addition, the Company may extend the reduced COBRA continuation premium described in subparagraph (iv) above for up to an additional six (6) months, subject to earlier termination effective as of the first day of the month following the date on which the Executive becomes employed or provides compensated services of any type, whether as an employee, independent contractor, owner-employee or otherwise.  The Executive shall provide such information as the Employer may reasonably request to determine Executive’s continued eligibility for the benefits provided by this Paragraph 10(b).

(c)Effect of Change in Control.  Subject to Paragraph 12, in the event that a Change in Control occurs and this Agreement thereafter terminates pursuant to Paragraph 9(c) by reason of the discharge of the Executive by the Employer other than for Cause or disability or by reason of the resignation of the Executive for Good Reason:

(i)The Employer shall pay all Accrued Obligations to the Executive in a lump sum in cash within thirty (30) days after the Date of Termination; provided, however, that any portion of the Accrued Obligations which consists of bonus, deferred compensation, incentive compensation, insurance benefits or other employee benefits shall be determined and paid in accordance with the terms of the relevant plan or policy as applicable to the Executive;

(ii)Within thirty (30) days after the Date of Termination, the Employer shall pay to the Executive a pro-rated bonus for the Termination Year. The

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                               amount of the pro-rated bonus shall be calculated by multiplying the Severance Target, by a fraction, the numerator of which is the Service Days, and the denominator of which is 365;

(iii)The Employer shall pay the Executive a lump sum payment within thirty (30) days after such termination of employment in the amount of two and one-half (2.5) times the sum of the following:

(A)the amount of Executive’s annual base salary determined as of the Date of Termination, or the date immediately preceding the date of the Change in Control, whichever is greater (in each case determined without regard for any reduction constituting Good Reason); plus

(B)the amount of Executive’s annual bonus (determined by (1) the average of the sum of the amounts earned by Executive under the annual bonus plan with respect to the three (3) calendar years immediately preceding the Termination Year, or if such sum would be greater, with respect to the three (3) calendar years immediately preceding the calendar year in which the Change in Control occurs, or (2) if the Executive has been employed for less than three (3) calendar years, the Severance Target); plus

(C)the sum of:

(I)the value of the contributions that would have been expected to be made or credited by the Employer to, and benefits expected to be accrued under, the qualified and non-qualified employee pension benefit plans maintained by the Employer to or for the benefit of Executive based on annual base salary amount applicable under clause (iii)(A) above; plus

(II)the annual value of fringe benefits and perquisites described in Paragraph 6(a) above; and

(iv)Outplacement counseling, the scope and provider of which shall be selected by the Employer for a period beginning on the date of termination of employment and ending on the date Executive is first employed or otherwise providing compensated services of any type, whether as an employee, independent contractor, owner-employee or otherwise, provided, that in no event shall Executive be entitled to out-placement counseling after the date which is two (2) years from the date of termination of employment.

For purposes of paragraph (C)(I) above, the value of the contributions and accruals to or under the employee pension benefit plans shall be determined on the basis of the actual rate of contributions or accruals, as applicable, and the provisions of the plans as in effect during the calendar year immediately preceding the calendar year in which the Change in Control occurs, or if the value so determined would be greater, during the calendar year immediately preceding

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the Date of Termination.  The “annual value” of the fringe benefits and perquisites described in Paragraph 6(a) for purposes of paragraph (C)(II) above shall be 7.5% of the annual base salary amount applicable under clause (iii)(A) above.

Notwithstanding the foregoing, if a Change in Control occurs and this Agreement is terminated prior to the Change in Control pursuant to Paragraph 9(c) by reason of the discharge of the Executive by the Employer other than for Cause or disability or by reason of the resignation of the Executive for Good Reason, then Executive shall be deemed for purposes of this Paragraph 10(c) to have so terminated pursuant to Paragraph 9(c) immediately following the date the Change in Control occurs if it is reasonably demonstrated by Executive that such earlier termination (i) was at the request of a third party who had taken steps reasonably calculated to effect the Change in Control, or (ii) otherwise arose, or the circumstances that precipitated the termination otherwise arose, in connection with or in anticipation of the Change in Control.  To the extent the Executive becomes entitled to amounts and benefits under Paragraph 10(c) pursuant to this paragraph, such amounts and benefits shall be reduced by any severance amounts and benefits paid to or received by the Executive pursuant to paragraph 10(b) (excluding the benefits received by Executive pursuant to Paragraph 10(b)(iv)) and the Employer (or the successor thereto) shall pay such additional severance amounts to the Executive in a lump sum payment within thirty (30) days following the date of the Change in Control or, if later, the date the Executive demonstrates he is entitled to such amounts pursuant to this paragraph.

(d)Effect on Other Amounts.  The payments provided for in this Paragraph 10 shall be in addition to all other sums then payable and owing to Executive and shall be subject to applicable federal and state income and other withholding taxes and shall be in full settlement and satisfaction of all of Executive’s claims and demands.

(e)Conditions.  Any payments of benefits made or provided pursuant to this Paragraph 10 are subject to the Executive’s:

(i)compliance with the provisions of Paragraphs 14 and 15 hereof (to the extent applicable);

(ii)delivery  to the Employer within twenty-one (21) days of the Date of Termination of an executed Release and Severance Agreement, which shall be substantially in the form attached hereto as Exhibit E, with such changes therein or additions thereto as needed under then applicable law to give effect to its intent and purpose; and

(iii)delivery to the Employer of a resignation from all offices, directorships and fiduciary positions with the Employer, its affiliates and employee benefit plans.

Notwithstanding the due date of any post-employment payments, any amounts due under this Paragraph 10 shall not be due until after the expiration of any revocation period applicable to the Release and Severance Agreement.

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11.No Excise Tax Gross-Up; Possible Reduction of Payments.

(a)Any provision of this Agreement or any other compensation plan, program or agreement to which Executive is a party or under which Executive is covered to the contrary notwithstanding, Executive will not be entitled to any gross-up or other payment for golden parachute excise taxes that Executive may owe pursuant to Section 4999 of the Internal Revenue Code (the "Code").

(b)Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payments or distributions by the Employer to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) (the "Payments") (i) constitute parachute payments within the meaning of Section 280G of the Code, and (ii) but for this Paragraph 11 would be subject to the excise tax imposed by Section 4999 of the Code, or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then such Payments shall be either: (A) delivered in full, or (B) reduced (but not below zero) to the maximum amount that could be paid to the Employee without giving rise to the Excise Tax (the “Safe Harbor Cap”), whichever of the foregoing amounts, taking into account the applicable federal, state and local income and employment taxes and the Excise Tax (and any equivalent state or local excise taxes), results in the receipt by the Executive, on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be subject to the Excise Tax.  The reduction of the amounts payable hereunder, if applicable, shall be made by reducing first the payment under Paragraph 10(c)(iii).

(c)All determinations required to be made under this Paragraph 11, including the reduction of the Payments to the Safe Harbor Cap, if applicable, and the assumptions to be utilized in arriving at such determinations,  shall be made by the independent public accountants then regularly retained by the Employer for purposes of tax planning or such other nationally-recognized accounting or consulting firm as may be selected by the Employer (the “Accounting Firm”), which shall provide detailed supporting calculations both to the Employer and the Executive within fifteen (15) business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Employer.  All fees and expenses of the Accounting Firm shall be borne solely by the Employer.  Any good faith determinations by the Accounting Firm shall be binding upon the Employer and the Executive.

(d)This subparagraph (d) shall apply to the Executive in the event of the reduction of the Executive's Payments to the Safe Harbor Cap. If it is established pursuant to a final decision of a court or an IRS proceeding which has been finally and conclusively resolved, that Payments have been made to the Executive by the Employer, which are in excess of the limitations provided in this Paragraph 11 (hereinafter referred to as “Excess Payments”), the Executive shall repay the Excess Payments to the Company within thirty (30) business days of a written demand from the Company, together with interest on the Excess Payments at the applicable federal rate (as defined in Code Section 1274(d)) from the date of the Executive’s receipt of such Excess Payment until the date of such repayment.  As a result of the uncertainty

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in the application of Code Section 4999 at the time of the determinations, it is possible that Payments which will not have been made by the Employer should have been made (an “Underpayment”).  In the event that it is determined by the Accounting Firm, the IRS, court order, or the Employer (which shall include the position taken by the Employer alone or together with its consolidated group) on its federal income tax return, that an Underpayment has occurred, the Employer shall pay an amount equal to such Underpayment to the Executive within thirty (30) business days of such decision together with interest on such amount at the applicable federal rate from the date such amount would have been paid to the Executive until the date of payment.

12.Section 409A of the Code.  It is intended that any amounts payable under this Agreement and the Employer’s and Executive’s exercise of authority or discretion hereunder shall be exempt from or comply with Section 409A of the Code (including the Treasury regulations and other published guidance relating thereto) so as not to subject Executive to the payment of any interest or additional tax imposed under Section 409A of the Code.  In furtherance of this intent, (a) if, due to the circumstances giving rise to any lump sum payment or payments under this Agreement, the date of payment or the commencement of such payments thereof must be delayed for six months in order to meet the requirements of Section 409A(a)(2)(B) of the Code applicable to “specified employees,” then such payment or payments shall be so delayed and paid upon expiration of such six month period and (b) each payment which is conditioned upon the Executive’s execution of a release and which is to be paid during a designated period that begins in a first taxable year and ends in a second taxable year shall be paid in the second taxable year.  With regard to any provision herein that provides for reimbursement of expenses or in-kind benefits: (i) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit, and (ii) the amount of expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year, provided that the foregoing shall not be violated with regard to expenses covered by Code Section 105(h) that are subject to a limit related to the period in which the arrangement is in effect.  Any expense or other reimbursement payment made pursuant to this Agreement or any plan, program, agreement or arrangement of the Employer referred to herein, shall be made on or before the last day of the taxable year following the taxable year in which such expense or other payment to be reimbursed is incurred.  To the extent that any Treasury regulations, guidance or changes to Section 409A would result in the Executive becoming subject to interest and additional tax under Section 409A of the Code, the Employer and Executive agree to amend this Agreement in order to bring this Agreement into compliance with Code Section 409A.

13.Dispute Resolution.  With respect to any dispute or controversy arising under or in connection with this Agreement, if the Executive is a prevailing party (as defined below), the Executive shall be entitled to recover all reasonable attorneys’ fees and expenses incurred in connection with the dispute or controversy.  A “prevailing party” is one who is successful on any material substantive issue in the action and achieves either a judgment in such party’s favor or some other affirmative recovery.

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14.Confidential Information.  Executive shall not at any time during or following employment hereunder, directly or indirectly, disclose or use on Executive’s behalf or another’s behalf, publish or communicate, except in the course of the pursuit of the business of the Employer or any of its subsidiaries or affiliates any information or data of the Employer or any of its subsidiaries or affiliates, that the Employer may reasonably regard as confidential or proprietary.  Executive recognizes and acknowledges that all knowledge and information which Executive has or may acquire in the course of his employment, such as, but not limited to the business, developments, procedures, techniques, activities or services of the Employer or the business affairs and activities of any customer, prospective customer, individual, firm or entity doing business with the Employer are its sole valuable property, and shall be held by Executive in confidence and in trust for its sole benefit.  All records of every nature and description which come into Executive’s possession, whether prepared by him, or otherwise, shall remain the sole property of the Employer and upon termination of his employment for any reason, said records shall be left with the Employer as part of its property.

15.Restrictions.  Executive acknowledges that the Employer and its affiliates and subsidiaries by nature of their respective businesses have a legitimate and protectable interest in their clients, customers and employees with whom they have established significant relationships as a result of a substantial investment of time and money, and but for employment hereunder, Executive would not have had contact with such clients, customers and employees.  Executive agrees that during the period of employment with the Employer and for a period of eighteen (18) months after termination of employment for any reason (other than termination of employment by resignation for Good Reason, termination of the Executive by the Employer other than for Cause or for any reason after a Change in Control) (the “Restriction Period”), Executive will not (except in his capacity as an employee of the Employer) directly or indirectly, for his own account, or as an agent, employee, director, owner, partner, or consultant of any corporation, firm, partnership, joint venture, syndicate, sole proprietorship or other entity that has a place of business (whether as a principal, division, subsidiary, affiliate, related entity, or otherwise) located within the Market Area (as hereinafter defined):

(a)solicit or attempt to solicit for the purpose of providing to, or provide to, any customer or any prospective customer of the Employer services or products of any kind that are offered or provided by the Employer, or assist any person, business or entity to do so; or

(b)induce, recruit, solicit or encourage any employee to leave the employ of the Employer, or induce, solicit, recruit, attempt to recruit any employee to accept employment with another person, business or entity, or employ or be employed with an employee, or assist any other person, business or entity to do so; or

(c)make, or cause to be made, any statement or disclosure that disparages the Employer, or any director, officer or employee of the Employer, or assist any other person, business or entity to do so.

For purposes of Paragraph 14 and this Paragraph 15, (i) “Employer” means the Company and all of its subsidiaries, (ii) “customer” means any business, entity or person which is or was a

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customer of the Employer at any time during the period of Executive’s employment and with respect to which Executive had contact or supervisory responsibility or about whom Executive had access to confidential information, other than any customer which had ceased to do business with the Employer at least six (6) months prior to Executive’s Date of Termination, (iii) “prospective customer” means any business, entity or person that was contacted by the Executive or known by the Executive to have been contacted within the six (6) month period prior to Executive’s Date of Termination by any officer of the Employer, for the purpose of soliciting or attempting to solicit to provide services or products to such business,  (iv) “employee” means any person who is or was an employee of the Employer during the period of Executive’s employment, other than a former employee who has not been employed by the Employer for a period of at least three (3) months and who terminated his or her employment with the Employer without any inducement or attempted inducement, recruiting, solicitation or encouragement by Executive or by any other employee of the Employer subject to a similar covenant, (v) “Market Area” for purposes of clauses (a) and (b) above shall be an area encompassed within a twenty-five (25) mile radius surrounding any place of business of the Employer (existing or known to the Executive to be planned as of the Date of Termination), and for clause (c), shall mean the United States of America.

The foregoing provisions shall not be deemed to prohibit (i) Executive’s ownership, not to exceed ten percent (10%) of the outstanding shares, of capital stock of any corporation whose securities are publicly traded on a national or regional securities exchange or in the over-the-counter market or (ii) Executive serving as a director of other corporations and entities to the extent these directorships do not inhibit the performance of his duties hereunder or conflict with the business of the Employer.

16.Remedies.

(a)Executive acknowledges that the restrictions and agreements herein provided are fair and reasonable, that enforcement of the provisions of Paragraphs 14 and 15 will not cause Executive undue hardship and that said provisions are reasonably necessary and commensurate with the need to protect the Employer and its legitimate and proprietary business interests and property from irreparable harm.  Executive acknowledges and agrees that (a) a breach of any of the covenants and provisions contained in Paragraphs 14 or 15 above, will result in irreparable harm to the business of the Employer, (b) a remedy at law in the form of monetary damages for any breach by Executive of any of the covenants and provisions contained in Paragraphs 14 and 15 is inadequate, (c) in addition to any remedy at law or equity for such breach, the Employer shall be entitled to institute and maintain appropriate proceedings in equity, including a suit for injunction to enforce the specific performance by Executive of the obligations hereunder and to enjoin Executive from engaging in any activity in violation hereof and (d) the covenants on Executive’s part contained in Paragraphs 14 and 15, shall be construed as agreements independent of any other provisions in this Agreement, and the existence of any claim, setoff or cause of action by Executive against the Employer, whether predicated on this Agreement or otherwise, shall not constitute a defense or bar to the specific enforcement by the Employer of said covenants.  In the event of a breach or a violation by Executive of any of the covenants and provisions of this Agreement, the running of the Restriction Period (but not of

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Executive’s obligation thereunder), shall be tolled during the period of the continuance of any actual breach or violation.

(b)The parties hereto agree that the covenants set forth in Paragraphs 14 and 15 are reasonable with respect to their duration, geographical area and scope.  If the final judgment of a court of competent jurisdiction declares that any term or provision of Paragraph 14 or 15 is invalid or unenforceable, the parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed.

17.Third-Party Agreements and Rights.  By entering into this Agreement, the Executive represents that he has previously disclosed to the Employer the existence and applicable terms of the Executive Restrictive Covenant Agreement, dated August 17, 2009, between Executive and Associated Banc-Corp, and of any stock option, restricted stock or other agreement with his current employer, and that such agreements are the only agreements with his current employer regarding any obligations to refrain from competition, solicitation of customers or employees, or to refrain from use of confidential information.  In the Executive’s work for the Employer, the Executive will be expected to abide by all such contractual commitments and not to make any unauthorized disclosure or use, and the Executive will not disclose or make use, of any information in violation of any agreements with or rights of his current employer or any other party.

18.TARP and Other Regulatory Requirements. Anything in this Agreement to the contrary notwithstanding, it is intended that, to the extent required, this Agreement and the payments made hereunder comply with the requirements of the TARP Capital Purchase Program (and applicable regulations issued thereunder) and with any other legislative or regulatory limitations or requirements which may become applicable to the Employer and the payments made hereunder, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations issued thereunder (collectively, the "Regulatory Requirements"), including, but not limited to, provisions limiting, delaying or deferring payment of certain bonus, incentive or retention compensation or "golden parachute payments" to certain officers or highly compensated employees, requiring that the Employer may recover (claw-back) bonus and incentive compensation in certain circumstances, and precluding bonus and incentive arrangements that encourage unnecessary or excessive risks that threaten the value of the Employer, in each case within the meaning of the Regulatory Requirements, and only to the extent applicable to the Employer and the Executive.  The application of this Paragraph 18 is intended to, and shall be interpreted, administered and construed to, cause the Agreement to comply with the Regulatory Requirements and, to the maximum extent consistent with this Paragraph 18 and the Regulatory Requirements, to permit the operation of this Agreement in accordance with the terms and conditions hereof before giving effect to the provisions of this Paragraph 18 or the Regulatory Requirements.

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19.Notices.  Any notice or other communication required or permitted to be given hereunder shall be determined to have been duly given to any party (a) upon delivery to the address of such party specified below if delivered personally or by courier; (b) upon dispatch if transmitted by telecopy or other means of facsimile, provided a copy thereof is also sent by regular mail or courier; (c) within forty-eight (48) hours after deposit thereof in the U.S. mail, postage prepaid, for delivery as certified mail, return receipt requested, or (d) within twenty-four (24) hours after deposit thereof with a reputable overnight courier (charges prepaid), addressed, in any case to the party at the following address(es) or telecopy numbers:

(a)If to Executive, at the address set forth on the records of the Employer.

(b)If to the Employer:

First Midwest Bancorp, Inc.

One Pierce Place

Suite 1500

Itasca, Illinois 60143

Attn:  Corporate Secretary

Fax No.:  (630) 875-7360

or to such other address(es) or facsimile number(s) as any party may designate by written notice in the aforesaid manner.

20.Directors and Officers Liability Coverage; Indemnification.  Executive shall be entitled to coverage under such directors and officers liability insurance policies maintained from time to time by the Company, Bank or any subsidiary for the benefit of its directors and officers.  The Company shall indemnify and hold Executive harmless, to the fullest extent permitted by the laws of the State of Delaware, from and against all costs, charges and expenses (including reasonable attorneys’ fees), and shall provide for the advancement of expenses incurred or sustained in connection with any action, suit or proceeding to which the Executive or his legal representatives may be made a party by reason of the Executive’s being or having been a director, officer or employee of the Company, Bank or any of its affiliates or employee benefit plans.  The provisions of this Paragraph 20 shall not be deemed exclusive of any other rights to which the Executive seeking indemnification may have under any by-law, agreement, vote of stockholders or directors, or otherwise.

21.Full Settlement; No Mitigation.  The Employer’s obligation to make the payments and provide the benefits provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Employer may have against the Executive or others.  In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not the Executive obtains other employment.

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22.Payment in the Event of Death.  In the event payment is due and owing by the Employer to Executive under this Agreement upon or following the death of Executive, payment shall be make to such beneficiary as Executive may designate in writing, or failing to make such designation, then the executor of his estate, in full settlement and satisfaction of all claims and demands on behalf of Executive, shall be entitled to receive all amounts owing to Executive at the time of death under this Agreement.  Such payments shall be in addition to any other death benefits of the Employer and in full settlement and satisfaction of all severance benefit payments provided for in this Agreement.

23.Entire Understanding.  This Agreement constitutes the entire understanding between the parties relating to Executive’s employment hereunder and supersedes and cancels all prior written and oral understandings and agreements with respect to such matters, except to the extent to which Executive may have entered into certain split-dollar life insurance agreements, which agreement(s) shall remain in full force and effect, and except for the terms and provisions of any employee benefit or other compensation plans (or any agreements or awards thereunder), referred to in this Agreement, or as otherwise expressly contemplated by this Agreement.

24.Binding Effect.  This Agreement shall be binding upon and inure to the benefit of the heirs and representatives of the Executive and the successors and assigns of the Company.  The Company shall require any successor (whether direct or indirect, by purchase, merger, reorganization, consolidation, acquisition of property or stock, liquidation, or otherwise) to all or a substantial portion of its assets, by agreement in form and substance reasonably satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform this Agreement if no such succession had taken place.  Regardless of whether such an agreement is executed, this Agreement shall be binding upon any successor of the Company in accordance with the operation of law, and such successor shall be deemed the “Company” for purposes of this Agreement.

25.Tax Withholding.  The Employer shall provide for the withholding of any taxes required to be withheld by federal, state, or local law with respect to any payment in cash, shares of stock and/or other property made by or on behalf of the Employer to or for the benefit of the Executive under this Agreement or otherwise.  The Employer may, at its option:  (a) withhold such taxes from any cash payments owing from the Employer to the Executive, (b) require the Executive to pay to the Employer in cash such amount as may be required to satisfy such withholding obligations and/or (c) make other satisfactory arrangements with the Executive to satisfy such withholding obligations.

26.No Assignment.  Except as otherwise expressly provided herein, this Agreement is not assignable by any party and no payment to be made hereunder shall be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or other charge.

27.Execution in Counterparts.  This Agreement may be executed by the parties hereto in two (2) or more counterparts, each of which shall be deemed to be an original, but all

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such counterparts shall constitute one and the same instrument, and all signatures need not appear on any one counterpart.

28.Jurisdiction and Governing Law.  Jurisdiction over disputes with regard to this Agreement shall be exclusively in the courts of the State of Illinois, and this Agreement shall be construed and interpreted in accordance with and governed by the laws of the State of Illinois, without regard to the choice of laws provisions of such laws.

29.Severability.  If any provision of this Agreement shall be adjudged by any court of competent jurisdiction to be invalid or unenforceable for any reason, such judgment shall not affect, impair or invalidate the remainder of this Agreement.  Furthermore, if the scope of any restriction or requirement contained in this Agreement is too broad to permit enforcement of such restriction or requirement to its full extent, then such restriction or requirement shall be enforced to the maximum extent permitted by law, and the Executive consents and agrees that any court of competent jurisdiction may so modify such scope in any proceeding brought to enforce such restriction or requirement.

30.Waiver.  The waiver of any party hereto of a breach of any provision of this Agreement by any other party shall not operate or be construed as a waiver of any subsequent breach.

31.Amendment; Effect of Termination.  No change, alteration or modification hereof may be made except in a writing, signed by each of the parties hereto.  The provisions of Paragraph 10 relating to post-Date of Termination obligations, and the provisions and obligations set forth in Paragraphs 10 through 33 shall survive termination of the Agreement pursuant to Paragraph 9.

32.Construction.  The language used in this Agreement will be deemed to be the language chosen by Employer and Executive to express their mutual intent and no rule of strict construction shall be applied against any person.  Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural, and the pronouns stated in either the masculine, the feminine or the neuter gender shall include the masculine, feminine or neuter.  The headings of the Paragraphs of this Agreement are for reference purposes only and do not define or limit, and shall not be used to interpret or construe the contents of this Agreement.

33.No Duplication.  Notwithstanding anything herein to the contrary, to the extent that any compensation or benefits are paid to or received by the Executive from the Company, Bank or any other subsidiary of Company or the Bank, such compensation or benefits shall be deemed to satisfy the obligations of the Company, Bank and all subsidiaries, such that Executive shall not be entitled to receive any compensation or benefits which are duplicative of such amounts previously paid to or received by Executive.

[Signature page follows]

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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written.

ATTEST:  /s/ CYNTHIA A. LANCE	First Midwest Bancorp, Inc.
Cynthia A. Lance	/s/ MICHAEL L. SCUDDER
Corporate Secretary	By:     Michael L. Scudder
	Title:  President and Chief Executive Officer
	EXECUTIVE: /s/ MARK G. SANDER

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EX-10.2

Exhibit 10.2

Exhibit A to Employment Agreement

June ___, 2011

Mr. Mark G. Sander

RE: Letter Agreement dated June [  ], 2011, Option Number [______]

Grant of Nonqualified Stock Option (the “Letter Agreement” or "Agreement")

Dear Mr. Sander:

I am pleased to advise you that on June [  ], 2011 (the "Date of Grant") and pursuant to the First Midwest Bancorp, Inc. Omnibus Stock and Incentive Plan, as Amended (the "Plan"), the Compensation Committee (the "Committee") of the Board of Directors of First Midwest Bancorp, Inc. (the "Company") approved a grant to you of a "Nonqualified Stock Option" (the "Option"). The Option provides you with the opportunity to purchase, for $_____ per share, up to [___________] shares of the Company's Common Stock.1

The Option is subject to the terms and conditions of the Plan, including any amendments thereto, which are incorporated herein by reference, and to the following provisions:

1.   Exercisability

Except as otherwise provided in paragraphs (3), (4), (5) and (8) below, the Option shall be exercisable only if you continue in the employment of the Company or any of its subsidiaries. The Option will become fully vested and exercisable on December 31, 2011.  In the event of your death, Disability or discharge by the Company without Cause or voluntary termination of employment for Good Reason (in either case as defined in your June __, 2011 Employment Agreement) or in the event of a Change in Control, as defined in paragraph (4), prior to December 31, 2011, the Option will become fully vested and exercisable as set forth in paragraphs (3) and (4), respectively. The Option expires upon the close of business on June [  ], 2021 (the "Expiration Date").

 

1  Option price to be closing price on date of grant (June [  ], 2011) and shares to be equal to $200,000 divided by the Topic 718 value of the option.

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2.   Procedure for Exercise

Subject to the foregoing paragraph (1), you may exercise the Option at any time and from time to time during the term of the Option by:

(a)   delivery of written notification of exercise and payment in full:

(i)   in cash or its equivalent (including a broker-assisted cashless exercise as described in the Plan); or

(ii)   by tendering Previously-Acquired Shares of Company Stock having a fair market value at the exercise date (defined as the average of the high and low prices of the Company's Common Stock as reported by the consolidated tape of the Nasdaq National Market System on the date the written notice of exercise is received by the office of the Corporate Controller) equal to all or part of the total Option price (including for this purpose shares deemed tendered by affirmation of ownership); or

(iii)   by combination of (i) and (ii);

(b)   for all Option shares being purchased, plus the amount of federal and state income tax and FICA/Medicare tax required to be withheld by reason of the exercise of the Option, unless you have properly elected to deliver Previously-Acquired Shares or have Option shares withheld to satisfy such taxes; and

(c)   if requested within the specified time set forth in any such request, delivery to the Company of such written representations and undertakings as may, in the opinion of the Company's counsel, be necessary or desirable to comply with federal and state securities laws.

Further information regarding procedures for exercising your Options, including the definition of Previously-Acquired Shares, can be found in the Plan, the Plan's "Summary Description" and the document entitled "How to Exercise Your Stock Options".  If you are a first time grant recipient, these documents accompany this Letter Agreement.

3.   Termination of Employment

If your employment with the Company or any of its subsidiaries terminates due to your death, Disability, discharge by the Company without Cause or voluntary termination of employment for Good Reason, all vesting exercise restrictions will lapse and the Option will become immediately exercisable in full. If your employment with the Company or any of its subsidiaries terminates prior to the Expiration Date, the Option will continue to be exercisable by you (or in the event of your death, by your beneficiary

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or your estate's executor or administrator) to the same degree that the Option was exercisable on your employment termination date (including any acceleration of vesting which may occur in the event of death, Disability, discharge by the Company without Cause or voluntary termination of employment for Good Reason), until the first of the following occur:

(a)   except as provided in Paragraph 4 for a Change in Control, the expiration of 30 days after the date your employment is terminated for any reason other than Retirement (as defined in the Plan), death, Disability or discharge for Cause (as defined in the Plan);

(b)   the third anniversary of your termination by reason of Retirement, death or Disability;

(c)   the termination date if the termination is for Cause; or

(d)   the Expiration Date.

4.   Merger, Consolidation or Change in Control

In the event of a Change in Control, all holding period and vesting exercise restrictions will lapse and the Options will become immediately exercisable in full and the 30 day period set forth in paragraph (3)(a) above will be extended to three (3) years. For purposes of this Agreement, "Change in Control" shall be as defined in Section 14 of the Plan, provided that notwithstanding the provisions of Section 14(c) of the Plan relating to stockholder approval of a transaction constituting a Business Combination (as defined in Section 14(c)), a Change in Control with respect to a Business Combination shall not occur prior to the date of consummation of such transaction.

5.   Limited Transferability of Option

The Option is personal to you and may not be sold, transferred, pledged, assigned or otherwise alienated, otherwise than by will or by the laws of descent and distribution and other than as provided herein. Your Option shall be exercisable during your lifetime only by you. Notwithstanding the foregoing, you may transfer your Option to:

(a)   your spouse, children or grandchildren ("Immediate Family Members");

(b)   a trust or trusts for the exclusive benefit of such Immediate Family Members, or;

(c)   a partnership in which such Immediate Family Members are the only partners, provided that:

(i)   there may be no consideration for any such transfer;

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(ii)   subsequent transfers of the transferred Option shall be prohibited, except to designated beneficiaries; and

(iii)   such transfer is evidenced by documents acceptable to the Company and filed with the Corporate Secretary.

Following transfer, the Option shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of designating a beneficiary with respect thereto, the transferee shall be entitled to designate the beneficiary. The provisions of this Letter Agreement relating to the period of exercisability and expiration of the Option shall continue to be applied with respect to you and the Option shall be exercisable by the transferee only to the extent, and for the periods, set forth above. Transfer of Common Stock purchased by your transferee upon exercise of the Option may also be subject to the restrictions and limitations described in Paragraph (6) below.

6.   Securities Law Restrictions

You understand and acknowledge that applicable securities laws govern and may restrict your right to offer, sell, or otherwise dispose of any Common Stock purchased upon exercise of the Option. The Company registered the Option shares under The Securities Act of 1933.

Executive Officers of the Company subject to the two (2) day reporting rules of Section 16(a) and short-swing profit recovery rules of Section 16(b) of the Securities Exchange Act of 1934 should consult the Company's Corporate Secretary prior to exercise of this Option or selling any such shares acquired upon exercise thereafter.

Additional information regarding these rules can be found in the Plan's "Summary Description" and the document entitled "How to Exercise Your Stock Options".

7.   Tax Consequences

Information regarding federal tax consequences of the Option can be found in the Plan's "Summary Description" and the document entitled "How to Exercise Your Stock Options". You are strongly encouraged to contact your tax advisor regarding such tax consequences as they relate to you.

8.   Employment of Successors

Nothing herein confers any right or obligation on you to continue in the employment of the Company or any subsidiary or shall affect in any way your right or the right of the Company or any subsidiary, as the case may be, to terminate your employment at any time. This Agreement shall be binding upon, and inure to the benefit of, any successor or successors of the Company.

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9.   Conformity with Plan

The Option is intended to conform in all respects with the Plan. Inconsistencies between this Agreement and the Plan shall be resolved in accordance with the terms of the Plan. By executing and returning the enclosed Confirmation of Acceptance of this Letter Agreement, you agree to be bound by all the terms hereof and of the Plan. Except as otherwise expressly provided herein, all definitions stated in the Plan shall be fully applicable to this Letter Agreement.

Any action taken or decision made by the Compensation Committee of the Company's Board of Directors arising out of or in connection with the construction, administration, interpretation or effect of this Agreement or the Plan shall lie within its sole and absolute discretion, as the case may be, and shall be final, conclusive and binding on you and all persons claiming under or through you. This Agreement shall be binding upon your heirs, executors, administrators and successors.

This Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware.

10.   Post-Vesting Holding Period; Clawback

(a)   For a period of twelve (12) months after any exercise of this Option, you agree to hold and remain the sole owner of, and to not transfer or otherwise reduce your risk with respect to shares acquired upon such exercise.  This post-vesting holding period requirement (i) will not apply to prevent withholding of shares to satisfy taxes under paragraph (2) above, and (ii) will cease upon your death, Disability, discharge by the Company without Cause, voluntary termination of employment for Good Reason or a Change in Control.

(b)   In the event (i) you voluntarily terminate your employment (other than for “Good Reason”) or are terminated for “Cause” after the vesting of the Options on December 31, 2011, and (ii) you provide any services, directly or indirectly, with respect to products or services which are “competing products or services” or breach any of your obligations under your Employment Agreement, then (A) you shall forfeit and may no longer exercise any unexercised portion of the Option, and (B) upon written demand from the Company, you shall repay to the Company a cash sum equal to the fair market value of the net after-tax number of Shares which you had received upon any exercise of the Option during the twelve-month period immediately preceding the date you first provided such services or committed such breach.  Such fair market value shall be determined as of the date of exercise. For purposes of this Letter Agreement, a “competing product or service” is a product or service which is offered by any banking or financial institution within the Market Area that competes with a product or service provided by the Company or its subsidiaries as of the date of your termination of employment. For purposes of this Letter Agreement, “Good Reason” and “Cause” shall have the meaning set forth in your Employment Agreement and “Market Area” shall have the meaning set forth in your Employment Agreement for purposes of clauses (a) and (b) of Section 15 thereof.  Any repayment under this Paragraph (10) shall be in addition to any other remedies which the Company may have under your Employment Agreement.

To confirm your understanding and acceptance of the Option granted to you by this Letter Agreement, please execute and return in the enclosed envelope the following enclosed documents: (a) the "Beneficiary Designation Form" and (b) the Confirmation of Acceptance endorsement of this Letter Agreement. The original copy of this Letter Agreement should be retained for your permanent records.

If you have any questions, please do not hesitate to contact the office of the Corporate Controller of First Midwest Bancorp, Inc. at (630) 875-7459.

Very truly yours,

     /s/ Michael L. Scudder

 Michael L. Scudder

 President and Chief Executive Officer

      First Midwest Bancorp, Inc.

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EX-10.3

Exhibit 10.3

Exhibit B to Employment Agreement

June __, 2011

Mr. Mark G. Sander

RE:           Letter Agreement dated June__, 2011, Restricted Stock Number [___________]

Grant of Restricted Stock (the "Agreement")

Dear Mark:

I am pleased to advise you that on June [  ], 2011 (the "Date of Grant"), and pursuant to the First Midwest Bancorp, Inc. Omnibus Stock and Incentive Plan, as Amended (the "Plan"), the Compensation Committee (the "Committee") of the Board of Directors of First Midwest Bancorp, Inc. (the "Company") has approved a grant to you of a "Restricted Shares Award” (the "Award").  The Award provides you with the opportunity to earn [_________]1 shares of the Company's common Stock, $0.01 par value per share (“Common Stock”).

The Award is subject to the terms and conditions of the Plan, including any Amendments thereto, which are incorporated herein by reference, and to the following provisions:

(1) Award

(a)   The Company hereby grants to you an Award of [______] shares of Common Stock, subject to the restrictions and other conditions set forth herein.  Such shares are referred to in this Letter Agreement as the “Restricted Shares.”  Restricted Shares may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated subject to Sections (2), (3) and (4).  Within a reasonable time after the date of this Award, the Company shall instruct its transfer agent to establish a book entry account representing the Restricted Shares in your name effective as of the Date of Grant, provided that the Company shall retain control of such account until the Restricted Shares have become vested in accordance with the Award.

(b)   As promptly as practical after the date on which a portion or all of the Restricted Shares vest under this Agreement, and after receipt of any required tax withholding under Section 8, the Company shall instruct the transfer agent to transfer the number of vested Restricted Shares (less any shares withheld in satisfaction of tax withholding obligations under Section 8, if any) to an unrestricted account over which only you have control.

(2) Restrictions; Vesting.

Except as otherwise provided in Sections (3) and (4), the Restricted Shares shall vest and become transferable only if you continue in the employment of the Company or any of its subsidiaries up to the applicable vesting date.  The Restricted Shares will vest and become transferable on December 31, 2011, subject to your commitments in Section (12) below.

 

1 $400,000 divided by grant date closing price

This Letter Agreement constitutes part of a prospectus covering securities that have been registered under the Securities Act of 1933, as amended.

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(3) Termination of Employment

If your employment with the Company or any of its subsidiaries terminates due to your death or Disability or discharge by the Company without Cause or your resignation for Good Reason (in either case as defined in your June __, 2011 Employment Agreement with the Company), all restrictions on any unvested Restricted Shares will lapse, the dividends credited to you pursuant to Section 7 will become payable, all such unvested Restricted Shares will become immediately vested and transferable in full and the provision of Section 1(b) shall apply.  If your employment with the Company or any of its subsidiaries terminates for any other reason prior to the full vesting of the Restricted Shares, all dividends credited to you pursuant to Section 7 and non-vested Restricted Shares shall be immediately forfeited and all your rights hereunder shall terminate.

(4) Merger, Consolidation or Change in Control

In the event of a Change in Control, all restrictions on the Restricted Shares will lapse, the dividends credited to you pursuant to Section 7 will become payable, the Restricted Shares shall be vested and fully transferable and the provisions of Section 1(b) shall apply.  For purposes of this Letter Agreement, “Change in Control” shall be as defined in Section 14 of the Plan, provided that notwithstanding the provisions of Section 14(c) of the Plan relating to stockholder approval of a transaction constituting a Business Combination (as defined in Section 14(c)), a Change in Control with respect to a Business Combination shall not occur prior to the date of consummation of such transaction.

(5) Non-Transferability

Subject to the terms of this Agreement, this Award is personal to you and, until vested and transferable hereunder, may not be sold, transferred, pledged, assigned or otherwise alienated, otherwise than by will or by the laws of descent and distribution.

(6) Securities Law Restrictions

You understand and acknowledge that applicable securities laws govern and may restrict your right to offer, sell, or otherwise dispose of any Common Stock received under the Award.

Executive Officers of the Company subject to the two (2) day reporting rules of Section 16(a) and short-swing profit recovery rules of Section 16(b) of the Securities Exchange Act of 1934 should consult the Company's Corporate Secretary prior to selling any such shares.

Additional information regarding these rules can be found in the Plan's "Summary Description" and the document entitled "General Information Regarding Restricted Share Grants".

(7)           Stockholder Rights

Upon the effective date of the book entry pursuant to paragraph (1), you shall have the right to vote the Restricted Shares represented by the Award.

In the event the Company declares the payment of a cash dividend or a stock dividend (as defined in Section 305 of the Internal Revenue Code of 1986, as amended) on the Common Stock with a record date occurring during the Award’s vesting period, you shall be credited with a dollar

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amount equal to the amount of the dividend paid on the Restricted Shares held by you as of the close of business on the record date for such dividend.  The Company will hold all such dividends until the Award vests in full and such amounts shall be paid to you only upon completion of the full vesting period when the restrictions lapse. Subject to the provisions of Sections 3 and 4 above, in the event your employment with the Company terminates prior to full vesting of the Award, dividends held by the Company and credited to you will be forfeited.

(8)           Withholding

You shall pay all applicable federal, state and local income and employment taxes (including taxes of any foreign jurisdiction) which the Company is required to withhold at any time with respect to the Restricted Shares, which will generally occur as the Restricted Shares vest, when cash dividends are paid prior to the time the Restricted Shares vest, or as of the date of grant if you file an election under Section 83(b) of the tax code.  Withholding with respect to cash dividends will be paid through withholding from your next normal payroll check.  Payment of withholding upon vesting of the shares will be accomplished through withholding by the Company of Restricted Shares then vesting under this Award with a value equal to such minimum statutory withholding amount.  Shares withheld as payment of required withholding shall be valued at Fair Market Value on the date such withholding obligation arises.  Payment of withholding as a result of an 83(b) election must be made by you to the Company in cash or by delivering previously-acquired shares with a Fair Market Value equal to the required withholding.

(9) Tax Consequences

Information regarding federal tax consequences of the Award can be found in the Plan's "Summary Description", and the document entitled "General Information Regarding Restricted Share Grants".  You are strongly encouraged to contact your tax advisor regarding such tax consequences as they relate to you.

(10) Employment; Successors

Nothing herein confers any right or obligation on you to continue in the employment of the Company or any subsidiary or shall affect in any way your right or the right of the Company or any subsidiary, as the case may be, to terminate your employment at any time.  Nothing herein shall create any right for you to receive, or obligation on the part of the Company to grant to you, any future Awards under the Plan.  This Agreement shall be binding upon, and inure to the benefit of, any successor or successors of the Company.

(11) Conformity with Plan

(a)   The Award is intended to conform in all respects with the Plan.  Inconsistencies between this Agreement and the Plan shall be resolved in accordance with the terms of the Plan.  By executing and returning the enclosed Confirmation of Acceptance of this Letter Agreement, you agree to be bound by all the terms hereof and of the Plan.  Except as otherwise expressly provided herein, all definitions stated in the Plan shall be fully applicable to this Letter Agreement.

(b)   Any action taken or decision made by the Compensation Committee of the Company’s Board of Directors arising out of or in connection with the construction, administration, interpretation or effect of this Agreement or the Plan, shall lie within sole and absolute discretion, as the case may be, and shall be final, conclusive and binding on you and all

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persons claiming under or through you.  This Agreement shall be binding upon your heirs, executors, administrators and successors.

(c)   This Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware.

(12)           Post-Vesting Holding Period; Clawback.

(a) For a period of twelve (12) months after the Restricted Shares vest, you agree to hold and remain the sole owner of, and to not transfer or otherwise reduce your risk with respect to such Restricted Shares. This post-vesting holding period requirement (i) will not apply to prevent withholding of Restricted Shares under Section (8) above, and (ii) will cease upon your death, Disability, discharge by the Company without Cause, voluntary termination of employment for Good Reason or a Change in Control.

(b) In the event (i) you voluntarily terminate your employment (other than for “Good Reason”) or are terminated for “Cause” after vesting of the Restricted Shares on December 31, 2011, and (ii) you provide any services, directly or indirectly, with respect to products or services which are “competing products or services” or breach any of your obligations under your Employment Agreement, in each case, prior to January 1, 2013, then, upon written demand from the Company, you shall repay to the Company a cash sum equal to the fair market value of the net after-tax number of Restricted Shares in which you vested.  Such fair market value shall be determined as of the date the Restricted Shares vested. For purposes of this Letter Agreement, a “competing product or service” is a product or service which is offered by any banking or financial institution within the Market Area that competes with a product or service provided by the Company or its subsidiaries as of the date of your termination of employment. For purposes of this Letter Agreement, “Good Reason” and “Cause” shall have the meaning set forth in your Employment Agreement and “Market Area” shall have the meaning set forth in your Employment Agreement for purposes of clauses (a) and (b) of Section 15 thereof.

To confirm your understanding and acceptance of the Award granted to you by this Letter Agreement, please execute and return in the enclosed envelope the following enclosed documents:  (a) the "Beneficiary Designation Form" and (b) the Confirmation of Acceptance endorsement of this Letter Agreement. The original copy of this Letter Agreement should be retained for your permanent records.

If you have any questions, please do not hesitate to contact the Equity Compensation Administrator of First Midwest Bancorp, Inc. at (630) 875-7272.

Very truly yours,

/s/ Michael L. Scudder

Michael L. Scudder

President and Chief Executive Officer

First Midwest Bancorp, Inc.

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EX-10.4

Exhibit 10.4

Exhibit C to Employment Agreement

FIRST MIDWEST BANCORP, INC.

COMPENSATION AWARD AGREEMENT

(Supplemental Salary Stock)

This Compensation Award Agreement (the “Agreement”) is effective as of July 1, 2011 by and between First Midwest Bancorp, Inc., a Delaware corporation (“FMBI ”) and the executive of the Company or First Midwest Bank (the “Bank”) named on Exhibit A (“you” or the “Grantee ”).  FMBI and the Bank shall be referred to herein as the “Company”.

1. Award: The Company has approved an adjustment (increase) in your salary in the amount set forth as the “Supplemental Salary Adjustment Amount” to be paid in bi-weekly installments. This Agreement evidences the grant to you of awards (“Awards”) of the portion of such salary increase to be paid in shares of FMBI common stock (“Shares”) pursuant to your election, as provided by and pursuant to the terms and conditions set forth in this Agreement. Unless otherwise determined from time to time by either the FMBI Board of Directors (“Board”) or the Compensation Committee of the Board (“Committee”) in their discretion, the aggregate amount of your Supplemental Salary Adjustment Amount that shall be paid in the form of Awards shall be determined in accordance with Section 2 below. The Supplemental Salary Adjustment Amount paid pursuant to this Agreement will not be taken into account as “salary” or otherwise treated as compensation for purposes of determining the amount of any contributions to any Company employee benefit plan in which you participate or for determining the amount of any benefits to which you may be entitled under any such plan.

2.Pay Period Grants:  The portion of the Supplemental Salary Adjustment Amount payable to you for each pay period ending on or after July 1, 2011 (each a “Pay Period”) shall be the “Supplemental Salary Adjustment Pay Period Amount” as defined on Exhibit A net of applicable federal or state withholding obligations of the Company and deductions, in accordance with established Company payroll procedures (each a “Net Pay Period Amount”) on the Grant Date as defined by Exhibit A.  Pursuant to your payment elections, which you have communicated to the Company and which have been acknowledged and agreed to by the Company, each Net Pay Period Amount shall be paid to the Grantee 100% in an Award of Shares which shall be calculated by dividing the Net Pay Period Amount by the closing price of the shares as of the date immediately preceding the applicable Grant Date.  If any fractional share results from this calculation, the number of Shares shall be rounded down to the nearest whole share with cash paid in lieu of the fractional share.  The Shares awarded will be paid and issued on the Grant Date or as soon thereafter as administratively practicable in accordance with established payroll procedures.

3.Shares:  Any Shares issued pursuant to Section 2 will be 100% vested upon the Grant Dates. As a condition to receiving any Awards under this Agreement, and notwithstanding termination of employment other than due to death or permanent disability, you hereby agree to hold and not transfer, for the entire period during which the Company has any obligations outstanding under the Troubled Asset Relief Program (the “Restriction Period”), 100% of the Shares received.  In furtherance of your agreement to not transfer the Shares, you agree that the Company may retain custody of the Shares. Such transfer restrictions shall terminate upon the

1

earlier of the end of the Restriction Period or the date which is one month following the date of your death or permanent disability. For avoidance of doubt, upon termination of employment for any other reason, the Shares shall remain subject to the transfer restrictions.  Notwithstanding any other provision of this Agreement, the Company may postpone the release of the Shares until it receives satisfactory proof that the subsequent transfer of  such Shares will not violate any of the provisions of the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, any rules or regulations of the Securities and Exchange Commission  (the “SEC”) promulgated thereunder, or the requirements of the securities exchange upon which shares of FMBI stock are then trading or any applicable state law relating to authorization, issuance or sale of securities, or until there has been compliance with the provisions of such acts or rules.  You understand that the Company has not registered the Shares, and is under no obligation to register or qualify the Shares, with the SEC, any state securities commission or any stock exchange to effect such compliance. The issuance of Shares under this Agreement is subject to compliance by the Company and you with all applicable legal requirements applicable thereto, including tax withholding obligations, and with all applicable regulations of any stock exchange on which the common stock may be listed at the time of issuance.  You agree that the Company may place a legend on the Shares reflecting the foregoing.

4.Termination of Employment:  Your rights in respect of future grants of Awards shall immediately terminate upon your termination of employment, except that you shall be entitled to receive an Award determined in accordance with Section 2 accrued through the date of termination of employment but had not yet been paid.  Subject to earlier termination pursuant to Section 7 below, and unless extended by the Committee or Board, your right to Awards under Section 2 will terminate for service periods after December 31, 2013.

5.Nontransferable. Unless the Committee provides otherwise, (i) no rights under this Agreement will be assignable or transferable, and neither you nor your beneficiary will have any power to anticipate, alienate, dispose of, pledge or encumber any rights under this Agreement, and (ii) the rights and the benefits of this Agreement may be exercised and received during your lifetime only by you or your legal representative.

6.No Obligation to Employ.  Nothing in this Agreement shall confer on you any right to continue in the employ of, or to continue or establish any other relationship with, the Company, or limit in any way the right of the Company to terminate your employment or other relationship at any time, with or without cause.  

7.Amendment; Committee Discretion.  Except as may otherwise be required by applicable law, no change, alteration or modification hereof may be made except in a writing, signed by each of the parties hereto.   The Committee shall have full discretion with respect to any actions to be taken or determinations to be made in connection with this Agreement, and its determinations shall be final, binding and conclusive.  In furtherance of the foregoing, in the event the Restriction Period ends or a Change in Control occurs prior to May 31, 2014, the Committee may terminate this Agreement and, in lieu thereof, make an equivalent grant of restricted stock in lieu of continuing the grants under this Agreement.

8.Notices.  Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Corporate Secretary of the

2

Company at its principal corporate offices.  Any notice required to be given or delivered to you shall be in writing and addressed to your address indicated in your employment file. 

9.Successors and Assigns.  The Company may assign any of its rights under this Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company.  Subject to the restrictions on transfer set forth herein, this Agreement shall be binding upon you and your heirs, executors, administrators, legal representatives, successors and assigns. 

10.Governing Law.  This Agreement shall be governed by and construed in accordance with the internal laws of the State of Illinois without regard to that body of law pertaining to choice of law or conflict of laws.

11.Regulatory Matters/Compliance with Laws.  Compensation under this Agreement is subject to applicable regulations issued by the U.S. Department of the Treasury and applicable requirements of agreements between the Company and the U.S. government, as the same are in effect from time to time.  You may receive compensation under this Agreement only to the extent that it is consistent with those regulations and requirements. In the event that the grant, payment, settlement, or accrual of amounts under this Award or any term of this Award is restricted or prohibited or otherwise conflicts with any applicable statute (including, without limitation, the Emergency Economic Stabilization Act of 2008, as amended by the American Recovery and Reinvestment Act of 2009) or any applicable regulation or other guidance thereunder, or any agreement or arrangement with or restriction imposed by, the United States Department of the Treasury, any bank regulatory agency or any other governmental agency (a “Governmental Restriction”), in each case, as determined by Committee in its sole discretion, then the Committee may unilaterally modify the terms of this Agreement or any Award in such manner as the Committee determines in its sole discretion to be necessary to avoid such restriction or prohibition or eliminate such conflict, all without the further consent of you, such consent being given through your acceptance of any Award.   In addition, any Shares acquired by you pursuant to this Agreement or any Award, or any proceeds from the disposition of any such Shares, shall be subject to forfeiture and return to the Company to the extent required by a Governmental Restriction.

{Remainder of Page Intentionally Blank}

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date noted above.

FIRST MIDWEST BANCORP, INC.

By:   /s/ Michael L. Scudder

Name:  Michael L. Scudder

Title:    President and Chief Executive Officer

By:                                                                                     

Name:

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EX-10.5

Exhibit 10.5

Exhibit D to Employment Agreement

FIRST MIDWEST BANCORP, INC.

COMPENSATION AWARD AGREEMENT

This Compensation Award Agreement (the “Agreement”) is effective as of June [___], 2011 by and between First Midwest Bancorp, Inc., a Delaware corporation (“FMBI ”) and the executive of the Company or First Midwest Bank (the “Bank”) named on Exhibit A (“you” or the “Grantee ”).  FMBI and the Bank shall be referred to herein as the “Company”.

1. Award: The Company has approved an adjustment (increase) in your salary for the period of your employment during which the Company is subject to the Troubled Asset Relief Program (TARP) Standards for Compensation and Corporate Governance in the amount set forth as the “Annual Salary Adjustment Amount” to be paid in bi-weekly installments. This Agreement evidences the grant to you of awards (“Awards”) of the portion of such salary increase to be paid in shares of FMBI common stock (“Shares”) pursuant to your election, as provided by and pursuant to the terms and conditions set forth in this Agreement. Unless otherwise determined from time to time by either the FMBI Board of Directors (“Board”) or the Compensation Committee of the Board (“Committee”) in their discretion, the aggregate amount of your Annual Salary Adjustment Amount that shall be paid in the form of Awards shall be determined in accordance with Section 2 below.

2.Pay Period Grants: The portion of the Annual Salary Adjustment Amount payable to you for each pay period ending on or after June [__], 2011 (each a “Pay Period”) shall be the “Annual Salary Adjustment Pay Period Amount” as defined on Exhibit A net of applicable federal or state withholding obligations of the Company and deductions, in accordance with established Company payroll procedures (each a “Net Pay Period Amount”) on the Grant Date as defined by Exhibit A. Pursuant to your payment elections, which you have communicated to the Company and which have been acknowledged and agreed to by the Company,each Net Pay Period Amount shall be paid to the Grantee:

(i)   25% in cash; and

(ii)   75% in an Award of Shares which shall be calculated by: (A) multiplying the Net Pay Period Amount by .75 (the “Share Value Amount”); and (B) dividing the Share Value Amount by the closing price of the Shares as of the date immediately preceding the applicable Grant Date.  If any fractional share results from this calculation, the number of Shares shall be rounded down to the nearest whole share with cash paid in lieu of the fractional share.

The cash paid and Shares awarded pursuant to (i) and (ii) above will be paid and issued on the Grant Date or as soon thereafter as administratively practicable in accordance with established payroll procedures.

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    3.Shares:  Any Shares issued pursuant to Section 2 will be 100% vested upon the Grant Dates. As a condition to receiving any Awards under this Agreement, and notwithstanding termination of employment other than due to death or permanent disability, you hereby agree to hold and not transfer, for the entire period during which the Company has any obligations outstanding under the Troubled Asset Relief Program (the “Restriction Period”), 100% of the Shares received.  In furtherance of your agreement to not transfer the Shares, you agree that the Company may retain custody of the Shares. Such transfer restrictions shall terminate upon the earlier of the end of the Restriction Period or the date which is one month following the date of your death or permanent disability. For avoidance of doubt, upon termination of employment for any other reason, the Shares shall remain subject to the transfer restrictions.  Notwithstanding any other provision of this Agreement, the Company may postpone the release of the Shares until it receives satisfactory proof that the subsequent transfer of  such Shares will not violate any of the provisions of the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, any rules or regulations of the Securities and Exchange Commission  (the “SEC”) promulgated thereunder, or the requirements of the securities exchange upon which shares of FMBI stock are then trading or any applicable state law relating to authorization, issuance or sale of securities, or until there has been compliance with the provisions of such acts or rules.  You understand that the Company has not registered the Shares, and is under no obligation to register or qualify the Shares, with the SEC, any state securities commission or any stock exchange to effect such compliance. The issuance of Shares under this Agreement is subject to compliance by the Company and you with all applicable legal requirements applicable thereto, including tax withholding obligations, and with all applicable regulations of any stock exchange on which the common stock may be listed at the time of issuance.  You agree that the Company may place a legend on the Shares reflecting the foregoing.

4.Termination of Employment:  Your rights in respect of future grants of Awards shall immediately terminate upon your termination of employment, except that you shall be entitled to receive an Award determined in accordance with Section 2 accrued through the date of termination of employment but had not yet been paid.  Subject to earlier termination pursuant to Section 7 below, and unless extended by the Committee or Board, your right to Awards under Section 2 of this Agreement will terminate for service periods after the period of employment during which the Company is subject to TARP.

5.Nontransferable. Unless the Committee provides otherwise, (i) no rights under this Agreement will be assignable or transferable, and neither you nor your beneficiary will have any power to anticipate, alienate, dispose of, pledge or encumber any rights under this Agreement, and (ii) the rights and the benefits of this Agreement may be exercised and received during your lifetime only by you or your legal representative.

6.No Obligation to Employ.  Nothing in this Agreement shall confer on you any right to continue in the employ of, or to continue or establish any other relationship with, the Company, or limit in any way the right of the Company to terminate your employment or other relationship at any time, with or without cause.  

7.Amendment; Committee Discretion.  Except as may otherwise be required by applicable law, no change, alteration or modification hereof may be made except in a writing, signed by each of the parties hereto.   The Committee shall have full discretion with respect to

2

any actions to be taken or determinations to be made in connection with this Agreement, and its determinations shall be final, binding and conclusive.

8.Notices.  Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Corporate Secretary of the Company at its principal corporate offices.  Any notice required to be given or delivered to you shall be in writing and addressed to your address indicated in your employment file. 

9.Successors and Assigns.  The Company may assign any of its rights under this Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company.  Subject to the restrictions on transfer set forth herein, this Agreement shall be binding upon you and your heirs, executors, administrators, legal representatives, successors and assigns. 

10.Governing Law.  This Agreement shall be governed by and construed in accordance with the internal laws of the State of Illinois without regard to that body of law pertaining to choice of law or conflict of laws.

11.Regulatory Matters/Compliance with Laws.  Compensation under this Agreement is subject to applicable regulations issued by the U.S. Department of the Treasury and applicable requirements of agreements between the Company and the U.S. government, as the same are in effect from time to time.  You may receive compensation under this Agreement only to the extent that it is consistent with those regulations and requirements. In the event that the grant, payment, settlement, or accrual of amounts under this Award or any term of this Award is restricted or prohibited or otherwise conflicts with any applicable statute (including, without limitation, the Emergency Economic Stabilization Act of 2008, as amended by the American Recovery and Reinvestment Act of 2009) or any applicable regulation or other guidance thereunder, or any agreement or arrangement with or restriction imposed by, the United States Department of the Treasury, any bank regulatory agency or any other governmental agency (a “Governmental Restriction”), in each case, as determined by Committee in its sole discretion, then the Committee may unilaterally modify the terms of this Agreement or any Award in such manner as the Committee determines in its sole discretion to be necessary to avoid such restriction or prohibition or eliminate such conflict, all without the further consent of you, such consent being given through your acceptance of any Award.   In addition, any Shares acquired by you pursuant to this Agreement or any Award, or any proceeds from the disposition of any such Shares, shall be subject to forfeiture and return to the Company to the extent required by a Governmental Restriction.

{Remainder of Page Intentionally Blank}

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date noted above.

FIRST MIDWEST BANCORP, INC.

By:  /s/ Michael L. Scudder

Name:  Michael L. Scudder

Title:    President and Chief Executive Officer

By:                                                                                     

Name:

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EX-15

Exhibit 15

ACKNOWLEDGEMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

First Midwest Bancorp, Inc.

We are aware of the incorporation by reference in the following Registration Statements of our report dated August 9, 2011 relating to the unaudited consolidated interim financial statements of First Midwest Bancorp, Inc. that are included in its Form 10-Q for the quarter ended June 30, 2011.

·   Registration Statement (Form S-3 No. 33-20439) pertaining to the First Midwest Bancorp, Inc. Dividend Reinvestment and Stock Purchase Plan

·   Registration Statement (Form S-3 No. 333-132137) pertaining to a First Midwest Bancorp, Inc. debt and equity securities offering

·   Registration Statement (Form S-4 No. 333-114406) pertaining to First Midwest Capital Trust I

·   Registration Statement (Form S-8 No. 33-25136) pertaining to the First Midwest Bancorp, Inc. Savings and Profit Sharing Plan

·   Registration Statement (Form S-8 No. 33-42980) pertaining to the First Midwest Bancorp, Inc. 1989 Omnibus Stock and Incentive Plan

·   Registration Statement (Form S-8 No. 333-42273) pertaining to the First Midwest Bancorp, Inc. 1989 Omnibus Stock and Incentive Plan

·   Registration Statement (Form S-8 No. 333-61090) pertaining to the First Midwest Bancorp, Inc. 1989 Omnibus Stock and Incentive Plan

·   Registration Statement (Form S-8 No. 333-50140) pertaining to the First Midwest Bancorp, Inc. Non-employee Directors’ 1997 Stock Option Plan

·   Registration Statement (Form S-8 No. 333-63095) pertaining to the First Midwest Bancorp, Inc. Non-employee Directors’ Stock Option Plan

·   Registration Statement (Form S-8 No. 333-63097) pertaining to the First Midwest Bancorp, Inc. Nonqualified Retirement Plan

·   Registration Statement (Form S-8 No. 333-151072) pertaining to the First Midwest Bancorp, Inc. Amended and Restated Non-employee Director Stock Plan

·   Registration Statement (Form S-3 No. 333-157615) pertaining to a First Midwest Bancorp, Inc. debt and equity securities offering

·   Registration Statement (Form S-8 No. 333-168973) pertaining to the First Midwest Bancorp, Inc. Amended and Restated Omnibus Stock and Incentive Plan

                                                                                                                    /s/ ERNST & YOUNG LLP

Chicago, Illinois

August 9, 2011

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Michael L. Scudder, certify that:
	1.	I have reviewed this report on Form 10-Q of First Midwest Bancorp Inc.;
	2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
	3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
	4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
		a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
		b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
		c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
		d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
	5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
		a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
		b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date:	August 9, 2011			/S/ MICHAEL L. SCUDDER
				[Signature] President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Paul F. Clemens, certify that:
	1.	I have reviewed this report on Form 10-Q of First Midwest Bancorp Inc.;
	2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
	3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
	4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
		a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
		b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
		c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
		d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
	5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
		a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
		b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date:	August 9, 2011			/S/ PAUL F. CLEMENS
				[Signature] Executive Vice President and Chief Financial Officer

EX-32.1

 32.1

Exhibit 32.1

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, the undersigned officer of First Midwest Bancorp, Inc. (the “Company”), hereby certifies that:

(1)   The Company’s Report on Form 10-Q for the quarter ended June 30, 2011 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities and Exchange Act of 1934, as amended; and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/SMICHAEL L. SCUDDER
Name:	Michael L. Scudder
Title:	President and Chief Executive Officer

Dated:  August 9, 2011

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, the undersigned officer of First Midwest Bancorp, Inc. (the “Company”), hereby certifies that:

(1)   The Company’s Report on Form 10-Q for the quarter ended June 30, 2011 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities and Exchange Act of 1934, as amended; and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/S/ PAUL F. CLEMENS
Name:	Paul F. Clemens
Title:	Executive Vice President and Chief Financial Officer

August 9, 2011

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-99

Exhibit 99

Report of Independent Registered Public Accounting Firm

The Board of Directors

First Midwest Bancorp, Inc.

We have reviewed the consolidated statement of financial condition of First Midwest Bancorp, Inc. and subsidiaries as of June 30, 2011 and 2010 and the related consolidated statements of income, changes in stockholders’ equity and cash flows for the three-month and six-month periods ended June 30, 2011 and 2010. These financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with standards of the Public Company Accounting Oversight Board (United States).  A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole.  Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statement of financial condition of First Midwest Bancorp, Inc. as of December 31, 2010, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for the year then ended (not presented herein) and in our report dated March 1, 2011, we expressed an unqualified opinion on those consolidated financial statements.  In our opinion, the information set forth in the accompanying consolidated statement of financial condition as of December 31, 2010, is fairly stated, in all material respects, in relation to the consolidated statement of financial condition from which it has been derived.

/s/ ERNST & YOUNG LLP

Chicago, Illinois

August 9, 2011

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Consolidated Statements of Financial Condition (Parentheticals) (USD $) In Thousands, except Per Share data	Jun. 30, 2011	Dec. 31, 2010
Preferred stock, par value (in Dollars per share)	$ 0	$ 0
Preferred stock, shares authorized	1,000	1,000
Preferred stock, shares issued	193	193
Preferred stock, shares outstanding	193	193
Common stock, par value (in Dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	100,000	100,000
Common stock, shares issued	85,787	85,787
Common stock, shares outstanding	74,473	74,096
Treasury stock, shares	11,314	11,691

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Consolidated Statements of Income (USD $) In Thousands, except Per Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Loans	$ 63,089	$ 65,439	$ 126,006	$ 129,919
Investment securities	9,848	13,699	19,713	27,651
Covered loans	7,655	2,598	15,477	5,560
Federal funds sold and other short-term investments	704	538	1,383	923
Total interest income	81,296	82,274	162,579	164,053
Deposits	6,969	9,626	14,640	20,171
Borrowed funds	687	749	1,367	1,759
Subordinated debt	2,279	2,280	4,565	4,566
Total interest expense	9,935	12,655	20,572	26,496
Net interest income	71,361	69,619	142,007	137,557
Provision for loan losses	18,763	21,526	38,255	39,876
Net interest income after provision for loan losses	52,598	48,093	103,752	97,681
Service charges on deposit accounts	9,563	9,052	17,707	17,433
Trust and investment advisory fees	4,118	3,702	8,234	7,295
Other service charges, commissions, and fees	5,362	4,628	10,276	8,800
Card-based fees	5,162	4,497	9,691	8,390
BOLI income	259	349	511	597
Securities gains, net	1,531	1,121	2,071	4,178
Gain on FDIC-assisted transaction		4,303		4,303
Other	499	(342)	2,221	635
Total noninterest income	26,494	27,310	50,711	51,631
Salaries and wages	25,493	21,146	51,158	43,282
Retirement and other employee benefits	5,765	5,394	12,623	10,142
OREO expense, net	5,223	11,850	9,154	22,637
FDIC premiums	1,708	2,546	4,433	5,078
Net occupancy and equipment expense	8,012	7,808	17,115	15,976
Technology and related costs	2,697	2,785	5,320	5,268
Professional services	5,640	5,652	10,759	12,192
Other expenses	10,885	10,274	19,984	18,353
Total noninterest expense	65,423	67,455	130,546	132,928
Income before income tax expense	13,669	7,948	23,917	16,384
Income tax expense	2,841	139	2,871	494
Net income	10,828	7,809	21,046	15,890
Preferred dividends and accretion	(2,582)	(2,573)	(5,163)	(5,145)
Net income applicable to non-vested restricted shares	(102)	(65)	(242)	(146)
Net income applicable to common shares	$ 8,144	$ 5,171	$ 15,641	$ 10,599
Per Common Share Data
Basic earnings per common share (in Dollars per share)	$ 0.11	$ 0.07	$ 0.21	$ 0.15
Diluted earnings per common share (in Dollars per share)	$ 0.11	$ 0.07	$ 0.21	$ 0.15
Dividends declared per common share (in Dollars per share)	$ 0.01	$ 0.01	$ 0.02	$ 0.02
Weighted-average common shares outstanding (in Shares)	73,259	73,028	73,205	71,756
Weighted-average diluted common shares outstanding (in Shares)	73,259	73,028	73,205	71,756

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Note 8 - Comprehensive Income (Detail) - Components of Other Comprehensive Income (Loss) (USD $) In Thousands	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Securities available-for-sale:
Unrealized holding gains	$ 22,386	$ 13,763
Unrealized holding gains	8,762	5,351
Unrealized holding gains	13,624	8,412
Less: Reclassification of net gains included in net income	2,071	4,178
Less: Reclassification of net gains included in net income	847	1,629
Less: Reclassification of net gains included in net income	1,224	2,549
Net unrealized holding gains	20,315	9,585
Net unrealized holding gains	7,915	3,722
Net unrealized holding gains	12,400	5,863
Total other comprehensive income	20,315	9,585
Total other comprehensive income	7,915	3,722
Total other comprehensive income	$ 12,400	$ 5,863

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Note 5 - Covered Assets (Tables)

6 Months Ended

Jun. 30, 2011

Covered Assets [Text Block]

	June 30, 2011		December 31, 2010
Home equity lines (1)	$	47,488	$	52,980
Covered impaired loans		226,286		281,893
Other covered loans (2)		41,168		36,856
Total covered loans		314,942		371,729
FDIC indemnification asset		95,752		95,899
Covered OREO		14,583		22,370
Total covered assets	$	425,277		489,998
Covered non-accrual loans	$	3,588	$	-
Covered loans past due 90 days or more and still accruing interest	$	68,324	$	84,350

Changes In FDIC Indemnification Asset [Text Block]

	Quarters Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Balance at beginning of period	$	85,386		$	54,591		$	95,899		$	67,945
Additions		-			8,338			-			8,338
(Amortization) accretion		(2,255	)		812			(4,497	)		2,249
Expected reimbursements from the FDIC for changes in expected credit losses (1)		19,321			12,958			21,834			12,718
Payments received from the FDIC		(6,700	)		(708	)		(17,484	)		(15,259	)
Balance at end of period	$	95,752		$	75,991		$	95,752		$	75,991

CertainLoansAcquiredInTransferNotAccountedForAsDebtSecurities Accretable Yield Movement Schedule Roll Forward [Text Block]

	Quarters Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Balance at beginning of period	$	51,010		$	7,795		$	63,616		$	9,298
Additions		-			2,591			-			2,591
Accretion		(12,104	)		(4,142	)		(20,528	)		(5,645	)
Reclassifications from non-accretable difference, net (1)		16,700			18,230			12,518			18,230
Balance at end of period	$	55,606		$	24,474		$	55,606		$	24,474

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Document And Entity Information (USD $)	6 Months Ended
	Jun. 30, 2011	Aug. 09, 2011	Jun. 30, 2010
Document and Entity Information [Abstract]
Entity Registrant Name	FIRST MIDWEST BANCORP INC
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		74,476,360
Entity Public Float			$ 834,080,362
Amendment Flag	false
Entity Central Index Key	0000702325
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Large Accelerated Filer
Entity Well-known Seasoned Issuer	No
Document Period End Date	Jun. 30, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2

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Note 6 - Past Due Loans, Allowance For Credit Losses, and Impaired Loans (Detail) - Impaired Loans Individually Evaluated by Class (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Loans With NoSpecific Related Allowance [Member] | Commercial And Industrial [Member]
Impaired Loans	$ 25,326	$ 40,715	[1]
Loans With NoSpecific Related Allowance [Member] | Agricultural [Member]
Impaired Loans	396	2,447	[1]
Loans With NoSpecific Related Allowance [Member] | Office Retail And Industrial [Member]
Impaired Loans	15,316	18,076
Loans With NoSpecific Related Allowance [Member] | Multi Family [Member]
Impaired Loans	22,572	4,565	[1]
Loans With NoSpecific Related Allowance [Member] | Residential Construction [Member]
Impaired Loans	19,358	51,269	[1]
Loans With NoSpecific Related Allowance [Member] | Commercial Construction [Member]
Impaired Loans	20,889	28,685	[1]
Loans With NoSpecific Related Allowance [Member] | Other Commerical Real Estate [Member]
Impaired Loans	25,368	27,777	[1]
Loans With NoSpecific Related Allowance [Member] | Total Commercial Real Estate [Member]
Impaired Loans	103,503	130,372	[1]
Loans With NoSpecific Related Allowance [Member] | Total Impaired Loans Individually Evaluated For Impairment [Member]
Impaired Loans	129,225	173,534	[1]
Loans WithA Related Allowance For Credit Losses [Member] | Commercial And Industrial [Member]
Impaired Loans	10,807	2,650
Loans WithA Related Allowance For Credit Losses [Member] | Multi Family [Member]
Impaired Loans		1,131
Loans WithA Related Allowance For Credit Losses [Member] | Residential Construction [Member]
Impaired Loans	3,152
Loans WithA Related Allowance For Credit Losses [Member] | Commercial Construction [Member]
Impaired Loans	399
Loans WithA Related Allowance For Credit Losses [Member] | Other Commerical Real Estate [Member]
Impaired Loans	9,004	10,009
Loans WithA Related Allowance For Credit Losses [Member] | Total Commercial Real Estate [Member]
Impaired Loans	12,555	11,140
Loans WithA Related Allowance For Credit Losses [Member] | Total Impaired Loans Individually Evaluated For Impairment [Member]
Impaired Loans	23,362	13,790
Unpaid Principal Balance [Member] | Commercial And Industrial [Member]
Impaired Loans	44,016	53,353
Unpaid Principal Balance [Member] | Agricultural [Member]
Impaired Loans	469	2,982
Unpaid Principal Balance [Member] | Office Retail And Industrial [Member]
Impaired Loans	23,505	26,193
Unpaid Principal Balance [Member] | Multi Family [Member]
Impaired Loans	31,922	7,322
Unpaid Principal Balance [Member] | Residential Construction [Member]
Impaired Loans	63,081	129,698
Unpaid Principal Balance [Member] | Commercial Construction [Member]
Impaired Loans	28,818	38,404
Unpaid Principal Balance [Member] | Other Commerical Real Estate [Member]
Impaired Loans	55,627	60,465
Unpaid Principal Balance [Member] | Total Commercial Real Estate [Member]
Impaired Loans	202,953	262,082
Unpaid Principal Balance [Member] | Total Impaired Loans Individually Evaluated For Impairment [Member]
Impaired Loans	247,438	318,417
Allowance For Credit Losses Allocated [Member] | Commercial And Industrial [Member]
Impaired Loans	4,265	2,650
Allowance For Credit Losses Allocated [Member] | Multi Family [Member]
Impaired Loans		497
Allowance For Credit Losses Allocated [Member] | Residential Construction [Member]
Impaired Loans	251
Allowance For Credit Losses Allocated [Member] | Commercial Construction [Member]
Impaired Loans	178
Allowance For Credit Losses Allocated [Member] | Other Commerical Real Estate [Member]
Impaired Loans	4,810	3,196
Allowance For Credit Losses Allocated [Member] | Total Commercial Real Estate [Member]
Impaired Loans	5,239	3,693
Allowance For Credit Losses Allocated [Member] | Total Impaired Loans Individually Evaluated For Impairment [Member]
Impaired Loans	$ 9,504	$ 6,343

[1] No specific allowance for credit losses is allocated to these loans since they are deemed to be sufficiently collateralized or had charge-offs. However, while each component of the allowance for credit losses is determined separately, the entire balance is available for the entire loan portfolio.

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Note 8 - Comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2011

Schedule of Amounts Recognized in Other Comprehensive Income (Loss) [Table Text Block]

	Six Months Ended June 30, 2011						Six Months Ended June 30, 2010
	Before Tax		Tax Effect		Net of Tax		Before Tax		Tax Effect		Net of Tax
Securities available-for-sale:
Unrealized holding gains	$	22,386	$	8,762	$	13,624	$	13,763	$	5,351	$	8,412
Less: Reclassification of net gains included in net income		2,071		847		1,224		4,178		1,629		2,549
Net unrealized holding gains		20,315		7,915		12,400		9,585		3,722		5,863
Total other comprehensive income	$	20,315	$	7,915	$	12,400	$	9,585	$	3,722	$	5,863

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

	Accumulated Unrealized Loss on Securities Available-for-Sale			Unrecognized Net Pension Costs			Total Accumulated Other Comprehensive Loss
Balance at January 1, 2010	$	(13,015	)	$	(5,651	)	$	(18,666	)
Other comprehensive income		5,863			-			5,863
Balance at June 30, 2010	$	(7,152	)	$	(5,651	)	$	(12,803	)
Balance at January 1, 2011	$	(19,806	)	$	(7,933	)	$	(27,739	)
Other comprehensive income		12,400			-			12,400
Balance at June 30, 2011	$	(7,406	)	$	(7,933	)	$	(15,339	)

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Note 6 - Past Due Loans, Allowance For Credit Losses, and Impaired Loans (Detail) - Loans and Related Allowance for Credit Losses by Portfolio Segment (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Commercial real estate:
Multi-family	$ 336,138	$ 349,862
Residential construction	129,327	174,690
Total commercial real estate	2,694,210	2,748,994
Total corporate loans	4,450,500	4,442,653
Total	5,112,911	5,100,560
Individually Evaluated For Impairment [Member]
Commercial, industrial, and agricultural	36,529	43,365
Commercial real estate:
Office, retail, and industrial	15,316	18,076
Multi-family	22,572	5,696
Residential construction	22,510	51,269
Other commercial real estate	55,660	68,918
Total commercial real estate	116,058	143,959
Total corporate loans	152,587	187,324
Total	152,587	187,324
Collectively Evaluated For Impairment [Member]
Commercial, industrial, and agricultural	1,719,761	1,650,294
Commercial real estate:
Office, retail, and industrial	1,213,784	1,185,537
Multi-family	313,566	344,166
Residential construction	106,817	123,421
Other commercial real estate	943,985	951,911
Total commercial real estate	2,578,152	2,605,035
Total corporate loans	4,297,913	4,255,329
Consumer	662,411	657,907
Total	4,960,324	4,913,236
Loans Total [Member]
Commercial, industrial, and agricultural	1,756,290	1,693,659
Commercial real estate:
Office, retail, and industrial	1,229,100	1,203,613
Multi-family	336,138	349,862
Residential construction	129,327	174,690
Other commercial real estate	999,645	1,020,829
Total commercial real estate	2,694,210	2,748,994
Total corporate loans	4,450,500	4,442,653
Consumer	662,411	657,907
Total	5,112,911	5,100,560
Individually Evaluated For Impairment Allowance [Member]
Commercial, industrial, and agricultural	4,265	2,650
Commercial real estate:
Multi-family		497
Residential construction	251
Other commercial real estate	4,988	3,196
Total commercial real estate	5,239	3,693
Total corporate loans	9,504	6,343
Total	9,504	6,343
Collectively Evaluated For Impairment Allowance [Member]
Commercial, industrial, and agricultural	44,269	46,895
Commercial real estate:
Office, retail, and industrial	16,862	20,758
Multi-family	8,875	3,499
Residential construction	24,076	27,933
Other commercial real estate	22,447	26,673
Total commercial real estate	72,260	78,863
Total corporate loans	116,529	125,758
Consumer	13,798	12,971
Total	130,327	138,729
Total Allowance [Member]
Commercial, industrial, and agricultural	48,534	49,545
Commercial real estate:
Office, retail, and industrial	16,862	20,758
Multi-family	8,875	3,996
Residential construction	24,327	27,933
Other commercial real estate	27,435	29,869
Total commercial real estate	77,499	82,556
Total corporate loans	126,033	132,101
Consumer	13,798	12,971
Total	$ 139,831	$ 145,072

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Note 5 - Covered Assets

6 Months Ended

Jun. 30, 2011

Accounting for Certain Loans and Debt Securities Acquired in Transfer Disclosure [Text Block]

5.  COVERED ASSETS

In 2009 and 2010, the Company acquired the majority of the assets of three financial institutions in FDIC-assisted transactions. Most loans and OREO acquired in the acquisitions are covered by loss sharing agreements with the FDIC (the “Agreements”), whereby the FDIC will reimburse the Company for the majority of the losses incurred on these assets. A detailed discussion of these transactions is presented in Note 5, “Covered Assets” contained in the Company’s 2010 10-K.

Covered Assets

(Dollar amounts in thousands)

	June 30, 2011		December 31, 2010
Home equity lines (1)	$	47,488	$	52,980
Covered impaired loans		226,286		281,893
Other covered loans (2)		41,168		36,856
Total covered loans		314,942		371,729
FDIC indemnification asset		95,752		95,899
Covered OREO		14,583		22,370
Total covered assets	$	425,277		489,998
Covered non-accrual loans	$	3,588	$	-
Covered loans past due 90 days or more and still accruing interest	$	68,324	$	84,350

(1)	These loans are open-end consumer loans that are not categorized as impaired loans.
(2)	These are loans that did not have evidence of impairment on the date of acquisition.

The loans purchased in the three FDIC-assisted transactions were recorded at their estimated fair values on the respective purchase dates and are accounted for prospectively based on expected cash flows. An allowance for loan losses was not recorded on these loans at the acquisition date. Except for leases and revolving loans, including lines of credit and credit card loans, management determined that a significant portion of the acquired loans (“purchased impaired loans”) had evidence of credit deterioration since origination, and it was probable at the date of acquisition that the Company would not collect all contractually required principal and interest payments. Evidence of credit quality deterioration included factors such as past due and non-accrual status. Other key considerations and indicators include the past performance of the troubled institutions’ credit underwriting standards, completeness and accuracy of credit files, maintenance of risk ratings, and age of appraisals.

Although some loans were contractually 90 days or more past due at the acquisition date, most of the purchased impaired loans at June 30, 2011 and December 31, 2010 were not classified as non-performing loans since the loans continued to perform substantially in accordance with the Company’s expectations of cash flows. Interest income is being recognized on almost all purchased loans through accretion of the difference between the carrying amount of the loans and the expected cash flows.

The Company has also modified certain loans according to provisions in the Agreements. Losses associated with modifications on these loans are generally eligible for reimbursement under the Agreements. Acquired loans restructured after acquisition date are not considered troubled debt restructurings for purposes of the Company’s accounting and disclosure since the loans evidenced credit deterioration as of the acquisition date.

In connection with the Agreements, the Company recorded an indemnification asset. To maintain eligibility for the loss share reimbursement, the Company is required to follow certain servicing procedures as specified in the Agreements.

The accounting policies related to purchased impaired loans are presented in Note 1, “Summary of Significant Accounting Policies.” Accounting for the related FDIC indemnification assets is presented in Note 1, “Summary of Significant Accounting Policies” contained in the Company’s 2010 10-K.

Changes in FDIC Indemnification Asset

(Dollar amounts in thousands)

	Quarters Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Balance at beginning of period	$	85,386		$	54,591		$	95,899		$	67,945
Additions		-			8,338			-			8,338
(Amortization) accretion		(2,255	)		812			(4,497	)		2,249
Expected reimbursements from the FDIC for changes in expected credit losses (1)		19,321			12,958			21,834			12,718
Payments received from the FDIC		(6,700	)		(708	)		(17,484	)		(15,259	)
Balance at end of period	$	95,752		$	75,991		$	95,752		$	75,991

(1) The increases in indemnification asset were a result of decreases in estimated cash flows on certain loans. The indemnification asset increased by the applicable loss share percentage for additional expected losses.

Changes in the accretable yield for purchased impaired loans were as follows.

Changes in Accretable Yield

(Dollar amounts in thousands)

	Quarters Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Balance at beginning of period	$	51,010		$	7,795		$	63,616		$	9,298
Additions		-			2,591			-			2,591
Accretion		(12,104	)		(4,142	)		(20,528	)		(5,645	)
Reclassifications from non-accretable difference, net (1)		16,700			18,230			12,518			18,230
Balance at end of period	$	55,606		$	24,474		$	55,606		$	24,474

(1) Amount represents an increase in the estimated cash flows to be collected on those loans showing improvement in the underlying portfolio.

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Note 9 - Income Taxes (Tables)

6 Months Ended

Jun. 30, 2011

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

	Quarters Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Income before income tax expense (benefit)	$	13,669		$	7,948		$	23,917		$	16,384
Income tax expense (benefit):
Federal income tax expense (benefit)	$	1,669		$	(244	)	$	2,683		$	(282	)
State income tax expense		1,172			383			188			776
Total income tax expense	$	2,841		$	139		$	2,871		$	494
Effective income tax rate		20.8	%		1.7	%		12.0	%		3.0	%

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Note 6 - Past Due Loans, Allowance For Credit Losses, and Impaired Loans (Detail) - Aging Analysis of Past Due Loans and Non-Performing Loans by Class (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Total Loans	$ 5,427,853	$ 5,472,289
Commercial And Industrial [Member]
Current	1,478,587	1,428,841
30-89 Days Past Due	11,349	7,706
90 Days or More Past Due	28,836	29,356
Total Past Due	40,185	37,062
Total Loans	1,518,772	1,465,903
Non-accrual Loans	44,393	50,088
90 Days Past Due Loans, Still Accruing Interest	2,095	1,552
Agricultural [Member]
Current	236,492	225,007
30-89 Days Past Due	17	65
90 Days or More Past Due	1,009	2,684
Total Past Due	1,026	2,749
Total Loans	237,518	227,756
Non-accrual Loans	1,009	2,497
90 Days Past Due Loans, Still Accruing Interest		187
Office Retail And Industrial [Member]
Current	1,207,733	1,183,952
30-89 Days Past Due	5,135	4,009
90 Days or More Past Due	16,232	15,652
Total Past Due	21,367	19,661
Total Loans	1,229,100	1,203,613
Non-accrual Loans	16,567	19,573
90 Days Past Due Loans, Still Accruing Interest	303
Multi Family [Member]
Current	313,949	345,018
30-89 Days Past Due	16,149	2,811
90 Days or More Past Due	6,040	2,033
Total Past Due	22,189	4,844
Total Loans	336,138	349,862
Non-accrual Loans	23,385	6,203
90 Days Past Due Loans, Still Accruing Interest	557
Residential Construction [Member]
Current	104,237	139,499
30-89 Days Past Due	5,297	1,320
90 Days or More Past Due	19,793	33,871
Total Past Due	25,090	35,191
Total Loans	129,327	174,690
Non-accrual Loans	23,576	52,122
90 Days Past Due Loans, Still Accruing Interest		200
Commercial Construction [Member]
Current	125,230	140,044
30-89 Days Past Due		4,000
90 Days or More Past Due	21,449	20,428
Total Past Due	21,449	24,428
Total Loans	146,679	164,472
Non-accrual Loans	21,449	28,685
Other Commerical Real Estate [Member]
Current	815,924	813,333
30-89 Days Past Due	3,993	9,091
90 Days or More Past Due	33,049	33,933
Total Past Due	37,042	43,024
Total Loans	852,966	856,357
Non-accrual Loans	36,984	40,605
90 Days Past Due Loans, Still Accruing Interest	464	345
Total Commercial Real Estate [Member]
Current	2,567,073	2,621,846
30-89 Days Past Due	30,574	21,231
90 Days or More Past Due	96,563	105,917
Total Past Due	127,137	127,148
Total Loans	2,694,210	2,748,994
Non-accrual Loans	121,961	147,188
90 Days Past Due Loans, Still Accruing Interest	1,324	545
Total Corporate Loans [Member]
Current	4,282,152	4,275,694
30-89 Days Past Due	41,940	29,002
90 Days or More Past Due	126,408	137,957
Total Past Due	168,348	166,959
Total Loans	4,450,500	4,442,653
Non-accrual Loans	167,363	199,773
90 Days Past Due Loans, Still Accruing Interest	3,419	2,284
Home Equity [Member]
Current	415,463	431,446
30-89 Days Past Due	6,750	4,715
90 Days or More Past Due	7,710	9,082
Total Past Due	14,460	13,797
Total Loans	429,923	445,243
Non-accrual Loans	5,519	7,948
90 Days Past Due Loans, Still Accruing Interest	2,392	1,870
One ToFour Family Mortgages [Member]
Current	177,785	154,999
30-89 Days Past Due	2,278	2,523
90 Days or More Past Due	4,939	3,368
Total Past Due	7,217	5,891
Total Loans	185,002	160,890
Non-accrual Loans	4,577	3,902
90 Days Past Due Loans, Still Accruing Interest	656	4
Installment Loans [Member]
Current	46,880	50,899
30-89 Days Past Due	535	742
90 Days or More Past Due	71	133
Total Past Due	606	875
Total Loans	47,486	51,774
Non-accrual Loans	36	159
90 Days Past Due Loans, Still Accruing Interest	35	86
Total Consumer Loans [Member]
Current	640,128	637,344
30-89 Days Past Due	9,563	7,980
90 Days or More Past Due	12,720	12,583
Total Past Due	22,283	20,563
Total Loans	662,411	657,907
Non-accrual Loans	10,132	12,009
90 Days Past Due Loans, Still Accruing Interest	3,083	1,960
Total Loans Excluding Covered Loans [Member]
Current	4,922,280	4,913,038
30-89 Days Past Due	51,503	36,982
90 Days or More Past Due	139,128	150,540
Total Past Due	190,631	187,522
Total Loans	5,112,911	5,100,560
Non-accrual Loans	177,495	211,782
90 Days Past Due Loans, Still Accruing Interest	6,502	4,244
Covered Loans [Member]
Current	217,069	268,934
30-89 Days Past Due	26,180	18,445
90 Days or More Past Due	71,693	84,350
Total Past Due	97,873	102,795
Total Loans	314,942	371,729
Non-accrual Loans	3,588
90 Days Past Due Loans, Still Accruing Interest	68,324	84,350
Total Loans [Member]
Current	5,139,349	5,181,972
30-89 Days Past Due	77,683	55,427
90 Days or More Past Due	210,821	234,890
Total Past Due	288,504	290,317
Total Loans	5,427,853	5,472,289
Non-accrual Loans	181,083	211,782
90 Days Past Due Loans, Still Accruing Interest	$ 74,826	$ 88,594

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Note 3 - Securities (Detail) - Credit-Related CDO Impairment Losses (USD $)	Jun. 30, 2011 No1 [Member] Life ToDate [Member]	Jun. 30, 2011 No2 [Member] Life ToDate [Member]	Jun. 30, 2010 No2 [Member] June302010 [Member]	Jun. 30, 2010 No2 [Member] June302010 [Member]	Jun. 30, 2011 No3 [Member] Life ToDate [Member]	Jun. 30, 2011 No4 [Member] Life ToDate [Member]	Jun. 30, 2010 No4 [Member] June302010 [Member]	Jun. 30, 2011 No5 [Member] Life ToDate [Member]	Jun. 30, 2010 No5 [Member] June302010 [Member]	Jun. 30, 2010 No5 [Member] June302010 [Member]	Jun. 30, 2011 No6 [Member] Life ToDate [Member]	Jun. 30, 2010 No6 [Member] June302010 [Member]	Jun. 30, 2011 No7 [Member] Life ToDate [Member]	Jun. 30, 2011 Total [Member] Life ToDate [Member]	Jun. 30, 2010 Total [Member] June302010 [Member]	Jun. 30, 2010 Total [Member] June302010 [Member]
CDO Impairment Losses	$ 10,360,000	$ 7,343,000	$ 794,000	$ 794,000	$ 1,159,000	$ 1,078,000	$ 684,000	$ 8,570,000	$ 2,091,000	$ 254,000	$ 243,000	$ 242,000	$ 6,750,000	$ 35,503,000	$ 3,811,000	$ 1,048,000

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Note 7 - Earnings Per Common Share (Tables)

6 Months Ended

Jun. 30, 2011

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Quarters Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Net income	$	10,828		$	7,809		$	21,046		$	15,890
Preferred dividends		(2,412	)		(2,412	)		(4,825	)		(4,825	)
Accretion on preferred stock		(170	)		(161	)		(338	)		(320	)
Net income applicable to non-vested restricted shares		( 102	)		( 65	)		( 242	)		( 146	)
Net income applicable to common shares	$	8,144		$	5,171		$	15,641		$	10,599
Weighted-average common shares outstanding:
Weighted-average common shares outstanding (basic)		73,259			73,028			73,205			71,756
Dilutive effect of common stock equivalents		-			-			-			-
Weighted-average diluted common shares outstanding		73,259			73,028			73,205			71,756
Basic earnings per share	$	0.11		$	0.07		$	0.21		$	0.15
Diluted earnings per share	$	0.11		$	0.07		$	0.21		$	0.15
Anti-dilutive shares not included in the computation of diluted earnings per share (1)		3,619			3,810			3,676			3,848

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Note 10 - Derivative Instruments and Hedging Activities

6 Months Ended

Jun. 30, 2011

Derivative Instruments and Hedging Activities Disclosure [Text Block]

10.  DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

In the ordinary course of business, the Company enters into derivative transactions as part of its overall interest rate risk management strategy to minimize significant unplanned fluctuations in earnings and cash flows caused by interest rate volatility. To achieve its interest rate risk management objectives, the Company primarily uses interest rate swaps with indices that relate to the pricing of specific assets and liabilities. The nature and volume of the derivative instruments used to manage interest rate risk depend on the level and type of assets and liabilities held and the risk management strategies for the current and anticipated interest rate environment.

All derivative instruments are recorded at fair value as either other assets or other liabilities in the Consolidated Statements of Financial Condition. Subsequent changes in a derivative’s fair value are recognized in earnings unless specific hedge accounting criteria are met. The accounting policies related to derivative instruments and hedging activities are presented in Note 1, “Summary of Significant Accounting Policies,” contained in the Company’s 2010 10-K.

During the six months ended June 30, 2011 and 2010, the Company hedged the fair value of fixed rate commercial real estate loans through the use of pay fixed, receive variable interest rate swaps. These derivative contracts were designated as fair value hedges and are valued using observable market prices, if available, or third party cash flow projection models. The fair value and notional amounts of the fair value hedges and the amount of hedge ineffectiveness recognized thereon were not material for any period presented.

The Company’s derivative portfolio also includes derivative instruments not designated in a hedge relationship consisting of commitments to originate 1-4 family mortgage loans and foreign exchange contracts. The fair value of these instruments was not material for any period presented. The Company had no other derivative instruments as of June 30, 2011 or December 31, 2010. The Company does not enter into derivative transactions for purely speculative purposes.

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Note 1 - Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2011

Basis of Presentation and Significant Accounting Policies [Text Block]

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation - The accompanying unaudited consolidated interim financial statements of First Midwest Bancorp, Inc. (the “Company”), a Delaware corporation, have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission for quarterly reports on Form 10-Q and do not include certain information and footnote disclosures required by U.S. generally accepted accounting principles (“GAAP”) for complete annual financial statements. Accordingly, these financial statements should be read in conjunction with the Company’s 2010 Annual Report on Form 10-K (“2010 10-K”).

The accompanying unaudited consolidated interim financial statements have been prepared in accordance with GAAP and reflect all adjustments that are, in the opinion of management, necessary for the fair presentation of the financial position and results of operations for the periods presented. All such adjustments are of a normal recurring nature. The results of operations for the quarter and six-month periods ended June 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.

Certain reclassifications have been made to prior periods to conform to the current period presentation.

In third quarter 2010, the Company acquired approximately $297.0 million in loans, $23.7 million in OREO, and $121.5 million in cash and securities and assumed $215.2 million in core deposits and $246.6 million in time deposits of a former bank in an FDIC-assisted transaction. The transaction resulted in the recognition of goodwill of $7.9 million. The fair values initially assigned to the assets acquired and liabilities assumed were preliminary and subject to refinement for up to one year after the closing date of the acquisition as new information relative to closing date fair values became available.

Subsequent to the acquisition date, the Company obtained specific information (including the completion of appraisals or other valuations) relating to the acquisition-date value of certain assets and liabilities acquired, which required an adjustment to those assets and liabilities and to goodwill. In accordance with accounting guidance applicable to business combinations, such adjustments were recognized as if they had happened as of the acquisition date. After considering this additional information, the estimated fair value of covered loans decreased $2.9 million, covered OREO decreased $7.3 million, the FDIC indemnification asset increased $6.9 million; and accrued interest payable and other liabilities decreased $8.7 million from that originally reported in the quarter ended September 30, 2010. These revised estimates resulted in a $5.4 million decrease in goodwill and other intangible assets. As of June 30, 2011, the Company finalized its purchase price allocation.

GAAP requires management to make certain estimates and assumptions. Although these and other estimates and assumptions are based on the best available information, actual results could be materially different from these estimates.

Principles of Consolidation - The consolidated financial statements include the accounts and results of operations of the Company and its subsidiaries after elimination of all significant intercompany accounts and transactions.

The Company owns an interest in certain variable interest entities (“VIE”s) as described in Note 22, “Variable Interest Entities,” contained in the Company’s 2010 10-K. A VIE is a partnership, limited liability company, trust, or other legal entity that does not have sufficient equity to finance its activities without additional subordinated financial support from other parties, or whose investors lack certain characteristics associated with owning a controlling financial interest. The VIEs are not consolidated in the Company’s financial statements since the Company is not the primary beneficiary of any of the VIEs.

The accounting policies related to loans and the allowance for credit losses are presented below. For a summary of all other significant accounting policies, please refer to Note 1, “Summary of Significant Accounting Policies,” contained in the Company’s 2010 10-K.

Loans - Loans are carried at the principal amount outstanding, including certain net deferred loan origination fees. Loans held-for-sale are carried at the lower of aggregate cost or fair value and included in other assets in the Consolidated Statements of Condition. Interest income on loans is accrued based on principal amounts outstanding. Loan and lease origination fees, fees for commitments that are expected to be exercised, and certain direct loan origination costs are deferred and the net amount amortized over the estimated life of the related loans or commitments as a yield adjustment. Fees related to standby letters of credit, whose ultimate exercise is remote, are amortized into fee income over the estimated life of the commitment. Other credit-related fees are recognized as fee income when earned.

Purchased Impaired Loans - Purchased impaired loans are recorded at their estimated fair values on the respective purchase dates and are accounted for prospectively based on expected cash flows in accordance with applicable authoritative accounting guidance. No allowance for credit losses is recorded on these loans at the acquisition date. In determining the acquisition date fair value of purchased impaired loans, and in subsequent accounting, the Company generally aggregates purchased consumer loans and certain smaller balance commercial loans into pools of loans with common risk characteristics such as delinquency status, credit score, and internal risk rating. Larger balance commercial loans are usually accounted for on an individual basis. Expected future cash flows in excess of the fair value of loans at the purchase date (“accretable yield”) are recorded as interest income over the life of the loans if the timing and amount of the future cash flows can be reasonably estimated. The non-accretable yield represents estimated losses in the portfolio and is equal to the difference between contractually required payments and the cash flows expected to be collected at acquisition.

Subsequent to the purchase date, increases in cash flows for purchased impaired loans over those expected at the purchase date are recognized as interest income prospectively. The present value of any decreases in expected cash flows after the purchase date is recognized by recording a charge-off through the allowance for loan losses.

Non-accrual loans-Generally, commercial loans and loans secured by real estate are placed on non-accrual status: (a) when either principal or interest payments become 90 days or more past due based on contractual terms unless the loan is sufficiently collateralized such that full repayment of both principal and interest is expected and is in the process of collection within a reasonable period; or (b) when an individual analysis of a borrower’s creditworthiness indicates a credit should be placed on non-accrual status whether or not the loan is 90 days or more past due. When a loan is placed on non-accrual status, unpaid interest credited to income in the current year is reversed, and unpaid interest accrued in prior years is charged against the allowance for loan losses. Both principal and interest payments are applied to the principal on the loan. Future interest income may only be recorded on a cash basis after recovery of principal is reasonably assured. Non-accrual loans are returned to accrual status when the financial position of the borrower and other relevant factors indicate there is no longer doubt that the Company will collect all principal and interest due.

Commercial loans and loans secured by real estate are generally charged-off when deemed uncollectible. A loss is recorded at that time if the net realizable value can be quantified and it is less than the associated principal and interest outstanding. Consumer loans that are not secured by real estate are subject to mandatory charge-off at a specified delinquency date and are usually not classified as non-accrual prior to being charged-off. Closed-end consumer loans, which include installment, automobile, and single payment loans are generally charged-off in full no later than the end of the month in which the loan becomes 120 days past due.

Generally, purchased impaired loans are considered accruing loans. However, the timing and amount of future cash flows for some loans may not be reasonably estimable. Those loans were classified as non-accrual loans as of June 30, 2011, and interest income will not be recognized until the timing and amount of the future cash flows can be reasonably estimated.

Restructured Loans - In cases where a borrower experiences financial difficulties and the Company makes certain concessions or modifications to contractual terms, the loan is classified as a restructured loan. Restructured loans are loans for which the original contractual terms have been modified, including forgiveness of principal or interest, due to deterioration in the borrower’s financial condition. Loans granted concessions or modifications are classified as restructured loans unless the modification is short-term, or results in only an insignificant delay or shortfall in the payments to be received. The Company’s restructured loans are determined on a case-by-case basis in connection with ongoing loan collection processes. The allowance for loan losses on restructured loans is determined by discounting the restructured cash flows at the original effective rate of the loan before modification or is based on the underlying collateral value.

The Company does not accrue interest on any restructured loan unless and until it believes collection of all principal and interest under the modified terms is reasonably assured. Generally, six months of consecutive payment performance by the borrower under the restructured terms is required before a restructured loan is returned to accrual status assuming the loan is restructured at reasonable market terms (e.g., not at below market terms). However, the period could vary depending upon the individual facts and circumstances of the loan.

For a restructured loan to begin accruing interest, the borrower must demonstrate both some level of performance and the capacity to perform under the modified terms. A history of timely payments and adherence to financial covenants generally serve as sufficient evidence of the borrower’s performance. An evaluation of the borrower’s current creditworthiness is used to assess whether the borrower has the capacity to repay the loan under the modified terms. This evaluation includes an estimate of expected cash flows, evidence of strong financial position, and estimates of the value of collateral, if applicable.

Impaired Loans-Impaired loans consist of corporate non-accrual loans and restructured loans in accordance with applicable authoritative accounting guidance.

With the exception of loans that were restructured and still accruing interest, a loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all contractual principal and interest due according to the terms of the loan agreement. Loans deemed to be impaired are classified as non-accrual and are exclusive of smaller homogeneous loans, such as home equity, installment, and 1-4 family mortgages. When a loan is designated as impaired, any subsequent principal and interest payments received are applied to the principal on the loan. Future interest income may only be recorded on a cash basis after recovery of principal is reasonably assured.

Certain impaired loans with balances under a specified threshold are not individually evaluated for impairment. For all other impaired loans, impairment is measured by estimating the value of the loan based on the present value of expected future cash flows discounted at the loan’s initial effective interest rate or the fair value of the underlying collateral less costs to sell, if repayment of the loan is collateral-dependent. The Company evaluates the collectability of both principal and interest when assessing the need for loss accrual. All impaired loans are included in non-performing assets. Purchased credit impaired loans are not reported as impaired loans provided that they continue to perform in accordance with expected cash flows.

90-Day Past Due Loans - 90 days or more past due loans are loans for which principal or interest payments become 90 days or more past due, but that still accrue interest. The Company continues to accrue interest if it determines these loans are well secured and in the process of collection.

Allowance for Credit Losses- The allowance for credit losses is comprised of the allowance for loan losses and the reserve for unfunded commitments and is maintained by management at a level believed adequate to absorb estimated losses inherent in the existing loan portfolio. Determination of the allowance for credit losses is inherently subjective, as it requires significant estimates, including the amounts and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience, consideration of current economic trends, and other factors, all of which may be susceptible to significant change.

The allowance for loan losses takes into consideration such internal and external qualitative factors as changes in the nature, volume, size, and current risk characteristics of the loan portfolio; an assessment of individual problem loans; actual and anticipated loss experience; current economic conditions that affect the borrower’s ability to pay; and other pertinent factors. Credit exposures deemed to be uncollectible are charged-off against the allowance for loan losses, while recoveries of amounts previously charged-off are credited to the allowance for loan losses. Additions to the allowance for loan losses are established through the provision for loan losses charged to expense. The amount charged to operating expense in any given period is dependent upon a number of factors including historic loan growth, changes in the composition of the loan portfolio, net charge-off levels, and the Company’s assessment of the allowance for loan losses based on the methodology discussed below.

The allowance for loan losses consists of (i) specific reserves established for probable losses on individual loans for which the recorded investment in the loan exceeds the value of the loan, (ii) an allowance based on historical credit loss experience for each loan category, and (iii) the impact of other internal and external qualitative factors.

The specific reserves component of the allowance for loan losses is based on a periodic analysis of impaired loans exceeding a fixed dollar amount where the internal credit rating is at or below a predetermined classification, as well as other loans regardless of internal credit rating that management believes are subject to a higher risk of loss. The value of the loan is measured based on the present value of expected future cash flows, discounted at the loan’s initial effective interest rate, or the fair value of the underlying collateral less costs to sell, if repayment of the loan is collateral-dependent. If the resulting amount is less than the recorded book value, the Company either establishes a valuation allowance (i.e., a specific reserve) as a component of the allowance for loan losses or charges-off the impaired balance if it determines that such amount is a confirmed loss.

The component of the allowance for loan losses based on historical credit loss experience is determined using a loss migration analysis that examines actual loss experience over a rolling 8-quarter period and, for corporate loans, the related internal rating of loans charged-off. The loss migration analysis is performed quarterly and loss factors are updated regularly based on actual experience. The loss component based upon historical loss experience is then adjusted for management’s estimate of those losses inherent in the loan portfolio that have yet to be manifested in historical charge-off experience. Management takes into consideration many internal and external qualitative factors when estimating this adjustment, including:

· Changes in the composition of the loan portfolio and trends in volume and terms of loans, as well as trends in delinquent and non-accrual loans that could indicate historical averages do not reflect current conditions;

· Changes in credit policies and procedures, including underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses;

· Changes in the experience, ability, and depth of credit management and other relevant staff;

· Changes in the quality of the Company’s loan review system and Board oversight;

· The existence and effect of any concentration of credit, and changes in the level of concentrations, whether it is by market, loan type, or risk taking;

· Changes in the value of underlying collateral for collateral-dependent loans;

· Changes in the national and local economy that affect the collectability of the portfolio, including the condition of various market segments; and

· The effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the Company’s existing portfolio.

The Company also maintains a reserve for unfunded credit commitments, including letters of credit, to provide for the risk of loss inherent in these arrangements. The reserve for unfunded credit commitments is computed based on a loss migration analysis similar to that used to determine the allowance for loan losses, taking into consideration probabilities of future funding requirements. This reserve for unfunded commitments is included in other liabilities in the Consolidated Statements of Financial Condition.

The establishment of the allowance for credit losses involves a high degree of judgment and includes a level of imprecision given the difficulty of identifying all of the factors impacting loan repayment and the timing of when losses actually occur. While management utilizes its best judgment and information available, the ultimate adequacy of the allowance for credit losses is dependent upon a variety of factors beyond the Company’s control, including the performance of its loan portfolio, the economy, changes in interest rates and property values, and the interpretation by regulatory authorities of loan risk classifications. While each component of the allowance for credit losses is determined separately, the entire balance is available for the entire loan portfolio.

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Note 3 - Securities (Detail) - Changes in Credit Losses Recognized in Earnings (USD $) In Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2010	Jun. 30, 2010	Mar. 31, 2011 Balance Beginning OfPeriod [Member]	Dec. 31, 2010 Balance Beginning OfPeriod [Member]	Mar. 31, 2010 Balance Beginning OfPeriod [Member]	Dec. 31, 2009 Balance Beginning OfPeriod [Member]	Jun. 30, 2011 Balance End OfPeriod [Member]	Jun. 30, 2010 Balance End OfPeriod [Member]
Cumulative amount recognized at beginning of period			$ 35,589	$ 35,589	$ 33,709	$ 30,946	$ 35,589	$ 34,843
Losses recognized on securities that previously had credit losses	1,048	3,568
Losses recognized on securities that did not previously have credit losses	86	329
Cumulative amount recognized at end of period			$ 35,589	$ 35,589	$ 33,709	$ 30,946	$ 35,589	$ 34,843

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Note 7 - Earnings Per Common Share

6 Months Ended

Jun. 30, 2011

Earnings Per Share [Text Block]

7. EARNINGS PER COMMON SHARE

Basic and Diluted Earnings per Common Share

(Amounts in thousands, except per share data)

	Quarters Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Net income	$	10,828		$	7,809		$	21,046		$	15,890
Preferred dividends		(2,412	)		(2,412	)		(4,825	)		(4,825	)
Accretion on preferred stock		(170	)		(161	)		(338	)		(320	)
Net income applicable to non-vested restricted shares		( 102	)		( 65	)		( 242	)		( 146	)
Net income applicable to common shares	$	8,144		$	5,171		$	15,641		$	10,599
Weighted-average common shares outstanding:
Weighted-average common shares outstanding (basic)		73,259			73,028			73,205			71,756
Dilutive effect of common stock equivalents		-			-			-			-
Weighted-average diluted common shares outstanding		73,259			73,028			73,205			71,756
Basic earnings per share	$	0.11		$	0.07		$	0.21		$	0.15
Diluted earnings per share	$	0.11		$	0.07		$	0.21		$	0.15
Anti-dilutive shares not included in the computation of diluted earnings per share (1)		3,619			3,810			3,676			3,848

(1) Represents outstanding stock options and common stock warrants for which the exercise price is greater than the average market price of the Company’s common stock.

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Note 12 - Fair Value

6 Months Ended

Jun. 30, 2011

Fair Value Disclosures [Text Block]

12.  FAIR VALUE

The Company measures, monitors, and discloses certain of its assets and liabilities at fair value in accordance with fair value accounting guidance. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Fair value is used on a recurring basis to account for trading securities, securities available-for-sale, mortgage servicing rights, derivative assets, and derivative liabilities. It is also used on an annual basis to disclose the fair value of pension plan assets. In addition, fair value is used on a non-recurring basis (i) to apply lower-of-cost-or-market accounting to OREO, loans held-for-sale (excluding mortgage loans held-for-sale), and assets held-for-sale; (ii) to evaluate assets or liabilities for impairment, including collateral-dependent impaired loans, goodwill, and other intangibles; and (iii) for disclosure purposes.

Depending upon the nature of the asset or liability, the Company uses various valuation techniques and assumptions when estimating fair value. The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. GAAP establishes a fair value hierarchy that prioritizes the inputs used to measure fair value into three broad levels based on the observability of the inputs. The three levels of the fair value hierarchy are defined as follows:

· Level 1 – Quoted prices in active markets for identical assets or liabilities.

· Level 2 – Observable inputs other than level 1 prices, such as quoted prices for similar instruments; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

· Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The categorization of an asset or liability within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Transfers between levels of the fair value hierarchy are recognized on the actual date of circumstance that resulted in the transfer. There were no transfers of assets or liabilities between levels of the fair value hierarchy during the periods presented.

Assets and Liabilities Measured at Fair Value

The following table provides the hierarchy level and fair value for each class of assets and liabilities measured at fair value.

Fair Value Measurements

(Dollar amounts in thousands)

	June 30, 2011
	Level 1		Level 2		Level 3		Total
Assets and liabilities measured at fair value on a recurring basis
Assets:
Trading securities:
Money market funds	$	1,152	$	-	$	-	$	1,152
Mutual funds		15,078		-		-		15,078
Total trading securities		16,230		-		-		16,230
Securities available-for-sale:
U.S. agency securities		-		8,113		-		8,113
CMOs		-		376,702		-		376,702
Other residential mortgage-backed securities		-		97,805		-		97,805
Municipal securities		-		479,919		-		479,919
CDOs		-		-		16,487		16,487
Corporate debt securities		-		27,922		-		27,922
Hedge fund investment		-		1,882		-		1,882
Other equity securities		39		1,004		-		1,043
Total securities available-for-sale		39		993,347		16,487		1,009,873
Mortgage servicing rights (1)		-		-		840		840
Total assets	$	16,269	$	993,347	$	17,327	$	1,026,943
Liabilities:
Derivative liabilities (1)	$	-	$	1,877	$	-	$	1,877
Assets measured at fair value on a non-recurring basis
Collateral-dependent impaired loans (2)	$	-	$	-	$	85,101	$	85,101
OREO (3)		-		-		38,990		38,990
Loan held-for-sale (4)		-		-		1,595		1,595
Asset held-for-sale (5)		-		-		7,928		7,928
Total assets	$	-	$	-	$	133,614	$	133,614

Refer to the following page for footnotes.

	December 31, 2010
	Level 1		Level 2		Level 3		Total
Assets and liabilities measured at fair value on a recurring basis
Assets:
Trading securities:
Money market funds	$	1,196	$	-	$	-	$	1,196
Mutual funds		14,086		-		-		14,086
Total trading securities		15,282		-		-		15,282
Securities available-for-sale:
U.S. agency securities		-		17,886		-		17,886
CMOs		-		379,589		-		379,589
Other residential mortgage-backed securities		-		106,451		-		106,451
Municipal securities		-		503,991		-		503,991
CDOs		-		-		14,858		14,858
Corporate debt securities		-		32,345		-		32,345
Hedge fund investment		-		1,683		-		1,683
Other equity securities		38		961		-		999
Total securities available-for-sale		38		1,042,906		14,858		1,057,802
Mortgage servicing rights (1)		-		-		942		942
Total assets	$	15,320	$	1,042,906	$	15,800	$	1,074,026
Liabilities:
Derivative liabilities (1)	$	-	$	1,833	$	-	$	1,833
Assets measured at fair value on a non-recurring basis
Collateral-dependent impaired loans (2)	$	-	$	-	$	125,258	$	125,258
OREO (3)		-		-		53,439		53,439
Total assets	$	-	$	-	$	178,697	$	178,697

(1)	Mortgage servicing rights are included in other assets, and derivative liabilities are included in other liabilities in the Consolidated Statements of Financial Condition.
(2)	Represents the carrying value of loans for which adjustments are based on the appraised or market-quoted value of the collateral, net of selling costs. Collateral-dependent loans for which no fair value adjustments were necessary during the six months ended June 30, 2011 are not included.
(3)	Represents the estimated fair value, net of selling costs, based on appraised value and includes covered OREO.
(4)	Included in other assets in the Consolidated Statements of Financial Condition.
(5)	Included in premises, furniture, and equipment in the Consolidated Statements of Financial Condition.

Valuation Methodologies

The following describes the valuation methodologies used by the Company for assets and liabilities measured at fair value.

Trading Securities – Trading securities represent diversified investment securities held in a rabbi trust and are invested in money market and mutual funds. The fair value of these money market and mutual funds is based on quoted market prices in active exchange markets and classified in level 1 of the fair value hierarchy. All trading securities are reported at fair value, with unrealized gains and losses included in noninterest income.

Securities Available-for-Sale – Securities available-for-sale are primarily fixed income instruments that are not quoted on an exchange, but may be traded in active markets. The fair value of these securities is based on quoted prices in active markets obtained from external pricing services or dealer market participants. The Company has evaluated the methodologies used by its external pricing services to develop the fair values to determine whether such valuations are representative of an exit price in the Company’s principal markets. Examples of such securities measured at fair value are U.S. agency securities, municipal bonds, CMOs, and other mortgage-backed securities. These securities are generally classified in level 2 of the fair value hierarchy. In certain cases, where there is limited market activity or less transparent inputs to the valuation, securities are classified in level 3. For instance, in the valuation of CDOs, the determination of fair value requires benchmarking to similar instruments or analyzing default and recovery rates.

The Company’s CMOs and other mortgage-backed securities are classified in level 2 of the fair value hierarchy. Their fair value is based on quoted market prices obtained from external pricing services or dealer market participants where trading in an active market exists. Substantially all of these securities are either backed by U.S. government-owned agencies or issued by U.S. government-sponsored enterprises.

	Collateralized Mortgage Obligations			Other Mortgage- Backed Securities
Weighted-average coupon rate		4.9	%		5.3	%
Weighted-average maturity (in years)		2.4			4.4
Information on underlying residential mortgages:
Origination dates	2000 to 2010			2000 to 2010
Weighted-average coupon rate		5.8	%		5.8	%
Weighted-average maturity (in years)		9.1			7.4

Due to the illiquidity in the secondary market for the Company’s CDOs, the Company estimates the value of these securities using discounted cash flow analyses with the assistance of a structured credit valuation firm, and classifies these investments in level 3 of the fair value hierarchy. The valuation for each of the CDOs relies on historical financial data for the obligors of the underlying collateral. The valuation firm performs a credit analysis of each of the entities comprising the collateral underlying each CDO in order to estimate the entities’ likelihood of default on their trust-preferred obligations. Cash flows are modeled according to the contractual terms of the CDO, discounted to their present values, and are used to derive the estimated fair value of the individual CDO, as well as any credit loss or impairment. The discount rates used in the discounted cash flow analyses range from LIBOR plus 1,200 to LIBOR plus 1,300 basis points, depending upon the specific CDO and reflects the higher risk inherent in these securities given the current market environment.

The Company’s hedge fund investment is classified in level 2 of the fair value hierarchy. The fair value is derived from monthly and annual financial statements provided by hedge fund management. The majority of the hedge fund’s investment portfolio is held in securities that are freely tradable and are listed on national securities exchanges.

Carrying Value of Level 3 Securities Available-for-Sale

(Dollar amounts in thousands)

	Quarters Ended June 30,					Six Months Ended June 30,
	2011		2010			2011		2010
Balance at beginning of period	$	16,193	$	12,178		$	14,858	$	11,728
Total income (loss):
Included in earnings (1)		-		(1,049	)		-		(3,812	)
Included in other comprehensive income		294		2,535			1,629		5,748
Balance at end of period	$	16,487	$	13,664		$	16,487	$	13,664
Change in unrealized losses recognized in earnings relating to securities still held at end of period	$	-	$	(1,049	)	$	-	$	(3,812	)

(1) Included in securities gains, net in the Consolidated Statements of Income.

Mortgage Servicing Rights – The Company records its mortgage servicing rights at fair value in other assets in the Consolidated Statements of Financial Condition. Mortgage servicing rights do not trade in an active market with readily observable prices. Accordingly, the Company determines the fair value of mortgage servicing rights by estimating the present value of the future cash flows associated with the mortgage loans being serviced. Key economic assumptions used in measuring the fair value of mortgage servicing rights at June 30, 2011 included prepayment speeds, maturities, and discount rates. While market-based data is used to determine the assumptions, the Company incorporates its own estimates of the assumptions market participants would use in determining the fair value of mortgage servicing rights, which results in a level 3 classification in the fair value hierarchy.

Carrying Value of Mortgage Servicing Rights

(Dollar amounts in thousands)

	Quarters Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Balance at beginning of period	$	845		$	1,197		$	942		$	1,238
Total (losses) gains included in earnings (1):
Due to changes in valuation inputs and assumptions (2)		28			(2	)		(10	)		23
Other changes in fair value (3)		(33	)		(62	)		(92	)		(128	)
Balance at end of period	$	840		$	1,133		$	840		$	1,133
Key economic assumptions used in measuring fair value, at end of period:
Weighted-average prepayment speed		18.7	%		16.1	%		18.7	%		16.1	%
Weighted-average discount rate		11.5	%		11.4	%		11.5	%		11.4	%
Weighted-average maturity, in months		198.5			205.8			198.5			205.8
Contractual servicing fees earned during the period (1)	$	60		$	74		$	123		$	158

	June 30, 2011		December 31, 2010
Total amount of loans being serviced for the benefit of others at end of period (4)	$	88,091	$	114,720

(1)	Included in other service charges, commissions, and fees in the Consolidated Statements of Income and relate to mortgage servicing rights still held at the end of the period.
(2)	Principally reflects changes in prepayment speed assumptions.
(3)	Primarily represents changes in expected cash flows over time due to payoffs and paydowns.
(4)	These loans are serviced for and owned by third parties and are not included in the Consolidated Statements of Financial Condition.

Derivative Assets and Derivative Liabilities –The interest rate swaps entered into by the Company are executed in the dealer market, and pricing is based on market quotes obtained from the counterparty that transacted the derivative contract. The market quotes were developed by the counterparty using market observable inputs, which primarily include LIBOR for swaps. Therefore, derivatives are classified in level 2 of the fair value hierarchy. For its derivative assets and liabilities, the Company also considers non-performance risk, including the likelihood of default by itself and its counterparties, when evaluating whether the market quotes from the counterparty are representative of an exit price. The Company has a policy of executing derivative transactions only with counterparties above a certain credit rating. Credit risk is also mitigated through the pledging of collateral when certain thresholds are reached.

Collateral-Dependent Impaired Loans –The carrying value of impaired loans is disclosed in Note 6, “Past Due Loans, Allowance for Credit Losses, and Impaired Loans.” The Company does not record loans at fair value on a recurring basis. However, from time to time, fair value adjustments are recorded in the form of specific reserves or charge-offs on these loans to reflect (i) specific reserves or partial write-downs that are based on the current appraised value of the underlying collateral or (ii) the full charge-off of the loan’s carrying value. The fair value adjustments are primarily determined by current appraised values of underlying collateral, net of estimated selling costs. For collateral-dependent impaired loans, new appraisals are required every six months for construction loans, and annually for all other commercial real estate loans. In limited circumstances, such as cases of outdated appraisals, the appraised values may be reduced by a certain percentage depending upon the specific facts and circumstances or an internal valuation may be used when the underlying collateral is located in areas where comparable sales data is limited, outdated, or unavailable. Accordingly, collateral-dependent impaired loans are classified in level 3 of the fair value hierarchy.

Other Real Estate Owned – OREO includes properties acquired through foreclosure in partial or total satisfaction of certain loans. Upon initial transfer into OREO, a current appraisal is required (generally less than six months old for residential and commercial land and less than one year old for all other commercial property). Properties are recorded at the lower of the recorded investment in the loans for which the properties previously served as collateral or the fair value, which represents the current appraised value of the properties less estimated selling costs. Fair value assumes an orderly disposition except where a specific disposition strategy is expected, which would require the use of other appraised values such as forced liquidation or as-completed/stabilized values.

In certain circumstances, the current appraised value may not represent an accurate measurement of the property’s current fair value due to imprecision, subjectivity, outdated market information, or other factors. In these cases, the fair value is determined based on the lower of the (i) current appraised value, (ii) internal valuation, (iii) current listing price, or (iv) signed sales contract. Any appraisal that is greater than twelve months old is adjusted to account for estimated declines in the real estate market until an updated appraisal can be obtained. Given these valuation methods, OREO is classified in level 3. Any write-downs in the carrying value of a property at the time of initial transfer into OREO are charged against the allowance for credit losses.

Subsequent to the initial transfer, periodic impairment analyses of OREO are performed and new appraisals are obtained annually unless circumstances warrant an earlier appraisal. Quarterly impairment analyses take into consideration current real estate market trends and adjustments to listing prices. Any write-downs of the properties subsequent to initial transfer, as well as gains or losses on disposition and income or expense from the operations of OREO, are recognized in operating results in the period in which they occur.

Loan Held-for-Sale –The loan held-for-sale is a residential construction loan. During second quarter 2011, the Company determined that this loan met the held-for-sale criteria and transferred it into the held-for-sale category at its estimated fair value, less costs to sell. The fair value was determined by the sales contract price. Accordingly, the loan held-for-sale is classified in level 3 of the fair value hierarchy. Similarly, during first quarter 2011, the Company classified a commercial construction loan as held-for-sale. That loan was sold during second quarter 2011.

Asset Held-for-Sale – In second quarter 2011, the Company entered into an agreement to sell property held for expansion and classified it as held-for-sale. Based on the sales contract price, the Company wrote-down the book value of the property and classified it in level 3 of the fair value hierarchy. In first quarter 2011, the Company entered into a similar agreement to sell a data storage facility and classified it as held-for-sale. This facility was sold in second quarter 2011.

Fair Value Measurements Recorded for

Assets Measured at Fair Value on a Non-Recurring Basis

(Dollar amounts in thousands)

	Quarter Ended  June 30, 2011				Six Months Ended June 30, 2011
	Charged to Allowance for Loan Losses		Charged to Earnings		Charged to Allowance for Loan Losses		Charged to Earnings
Collateral-dependent impaired loans	$	19,459	$	-	$	36,269	$	-
OREO		-		1,523		-		2,635
Loans held-for-sale		-		-		200		-
Assets held-for-sale		-		286		-		596

Fair Value Disclosure of Other Assets and Liabilities

GAAP requires disclosure of the estimated fair values of certain financial instruments, both assets and liabilities, on and off-balance sheet, for which it is practical to estimate the fair value. Since the estimated fair values provided herein exclude disclosure of the fair value of certain other financial instruments and all non-financial instruments, any aggregation of the estimated fair value amounts presented would not represent the underlying value of the Company. Examples of non-financial instruments having significant value include the future earnings potential of significant customer relationships and the value of the Company’s trust division operations and other fee-generating businesses. In addition, other significant assets including premises, furniture, and equipment and goodwill are not considered financial instruments and, therefore, have not been valued.

Various methodologies and assumptions have been utilized in management’s determination of the estimated fair value of the Company’s financial instruments, which are detailed below. The fair value estimates are made at a discrete point in time based on relevant market information. Since no market exists for a significant portion of these financial instruments, fair value estimates are based on judgments regarding future expected economic conditions, loss experience, and risk characteristics of the financial instruments. These estimates are subjective, involve uncertainties, and cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

In addition to the valuation methodology explained above for financial instruments recorded at fair value, the following methods and assumptions were used in estimating the fair value of financial instruments that are carried at cost in the Consolidated Statements of Financial Condition.

Short-Term Financial Assets and Liabilities - For financial instruments with a shorter-term or with no stated maturity, prevailing market rates, and limited credit risk, the carrying amounts approximate fair value. Those financial instruments include cash and due from banks, federal funds sold and other short-term investments, mortgages held-for-sale, accrued interest receivable, and accrued interest payable.

Securities Held-to-Maturity - The fair value of securities held-to-maturity is based on quoted market prices or dealer quotes. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

Loans, net of Allowance for Loan Losses - The fair value of loans is estimated using present value techniques by discounting the future cash flows of the remaining maturities of the loans, and prepayment assumptions were considered based on historical experience and current economic and lending conditions. The discount rate was based on the LIBOR yield curve, with rate adjustments for liquidity and credit risk. The primary impact of credit risk on the fair value of the loan portfolio, however, was estimated through the use of the allowance for loan losses, which is believed to represent the current fair value of estimated inherent losses for purposes of the fair value calculation.

Covered Loans (included in Loans, net of Allowance for Loan Losses) - The fair value of the covered loan portfolio is determined by discounting the expected cash flows at a market interest rate based on certain input assumptions. The market interest rate (discount rate) is derived from LIBOR swap rates over the expected weighted-average life of the asset. The expected cash flows are based on contractual terms and default timing assumptions.

FDIC Indemnification Asset - The fair value of the FDIC indemnification asset is calculated by discounting the cash flows expected to be received from the FDIC. These cash flows are estimated by multiplying expected losses by the reimbursement rates set forth in the Agreements.

Investment in Bank-Owned Life Insurance - The fair value of investments in bank-owned life insurance is based on each policy’s respective cash surrender value.

Deposit Liabilities - The fair values disclosed for demand deposits, savings deposits, NOW accounts, and money market deposits are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The fair value for fixed-rate time deposits was estimated using present value techniques by discounting the future cash flows based on the LIBOR yield curve, plus or minus the spread associated with current pricing.

Borrowed Funds - The fair value of repurchase agreements and FHLB advances is estimated by discounting the agreements based on maturities using the rates currently offered for repurchase agreements of similar remaining maturities. The carrying amounts of federal funds purchased, federal term auction facilities, and other borrowed funds approximate their fair value due to their short-term nature.

Subordinated Debt - The fair value of subordinated debt was determined using available market quotes.

Standby Letters of Credit - The fair value of standby letters of credit represent deferred fees arising from the related off-balance sheet financial instruments. These deferred fees approximate the fair value of these instruments and are based on several factors, including the remaining terms of the agreement and the credit standing of the customer.

Commitments - Given the limited interest rate exposure posed by the commitments outstanding at year-end due to their variable nature, combined with the general short-term nature of the commitment periods entered into, termination clauses provided in the agreements, and the market rate of fees charged, the Company has estimated the fair value of commitments outstanding to be immaterial.

Financial Instruments

(Dollar amounts in thousands)

	June 30, 2011				December 31, 2010
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial Assets:
Cash and due from banks	$	110,159	$	110,159	$	102,495	$	102,495
Interest-bearing deposits in other banks		601,310		601,310		483,281		483,281
Loans held-for-sale		1,595		1,595		236		236
Trading securities		16,230		16,230		15,282		15,282
Securities available-for-sale		1,009,873		1,009,873		1,057,802		1,057,802
Securities held-to-maturity		76,142		78,485		81,320		82,525
Loans, net of allowance for loan losses		5,290,522		5,306,598		5,329,717		5,323,830
FDIC indemnification asset		95,752		95,752		95,899		95,899
Accrued interest receivable		28,883		28,883		29,953		29,953
Investment in bank-owned life insurance		198,149		198,149		197,644		197,644
Financial Liabilities:
Deposits	$	6,495,549	$	6,494,373	$	6,511,476	$	6,512,626
Borrowed funds		272,024		275,540		303,974		306,703
Subordinated debt		137,748		132,145		137,744		122,261
Accrued interest payable		3,650		3,650		4,557		4,557
Derivative liabilities		1,877		1,877		1,833		1,833
Standby letters of credit		759		759		696		696

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Note 8 - Comprehensive Income

6 Months Ended

Jun. 30, 2011

Comprehensive Income (Loss) Note [Text Block]

8.  COMPREHENSIVE INCOME

Comprehensive income is the total of reported net income and all other revenues, expenses, gains, and losses that are not included in reported net income under GAAP. The Company includes the following items, net of tax, in other comprehensive income in the Consolidated Statements of Changes in Stockholders’ Equity: changes in unrealized gains or losses on securities available-for-sale, changes in the fair value of derivatives designated under cash flow hedges (when applicable), and changes in the funded status of the Company’s pension plan.

Components of Other Comprehensive Income

(Dollar amounts in thousands)

	Six Months Ended June 30, 2011						Six Months Ended June 30, 2010
	Before Tax		Tax Effect		Net of Tax		Before Tax		Tax Effect		Net of Tax
Securities available-for-sale:
Unrealized holding gains	$	22,386	$	8,762	$	13,624	$	13,763	$	5,351	$	8,412
Less: Reclassification of net gains included in net income		2,071		847		1,224		4,178		1,629		2,549
Net unrealized holding gains		20,315		7,915		12,400		9,585		3,722		5,863
Total other comprehensive income	$	20,315	$	7,915	$	12,400	$	9,585	$	3,722	$	5,863

Activity in Accumulated Other Comprehensive Loss

(Dollar amounts in thousands)

	Accumulated Unrealized Loss on Securities Available-for-Sale			Unrecognized Net Pension Costs			Total Accumulated Other Comprehensive Loss
Balance at January 1, 2010	$	(13,015	)	$	(5,651	)	$	(18,666	)
Other comprehensive income		5,863			-			5,863
Balance at June 30, 2010	$	(7,152	)	$	(5,651	)	$	(12,803	)
Balance at January 1, 2011	$	(19,806	)	$	(7,933	)	$	(27,739	)
Other comprehensive income		12,400			-			12,400
Balance at June 30, 2011	$	(7,406	)	$	(7,933	)	$	(15,339	)

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Note 3 - Securities (Detail) - Securities Portfolio (USD $) In Thousands	Jun. 30, 2011		Dec. 31, 2010
Securities available-for-sale	$ 1,009,873		$ 1,057,802
Municipal securities	76,142		81,320
Municipal securities	78,485		82,525
Trading Securities (1)	16,230	[1]	15,282	[1]
State And Municipals [Member]
Municipal securities	76,142		81,320
Municipal securities	2,343		1,205
Municipal securities	78,485		82,525
US Agency [Member]
Amortized Cost	8,122		18,000
Gross Unrealized Gains	23		7
Gross Unrealized Losses	(32)		(121)
Securities available-for-sale	8,113		17,886
Collateralized Residential Mortgage Obligations [Member]
Amortized Cost	373,600		377,692
Gross Unrealized Gains	3,824		4,261
Gross Unrealized Losses	(722)		(2,364)
Securities available-for-sale	376,702		379,589
Other Residential Mortgage Backed Securities [Member]
Amortized Cost	91,539		100,780
Gross Unrealized Gains	6,290		5,732
Gross Unrealized Losses	(24)		(61)
Securities available-for-sale	97,805		106,451
State And Municipal [Member]
Amortized Cost	471,617		512,063
Gross Unrealized Gains	10,487		4,728
Gross Unrealized Losses	(2,185)		(12,800)
Securities available-for-sale	479,919		503,991
Collateralized Debt Obligation [Member]
Amortized Cost	49,695		49,695
Gross Unrealized Losses	(33,208)		(34,837)
Securities available-for-sale	16,487		14,858
Corporate Debt [Member]
Amortized Cost	25,325		29,936
Gross Unrealized Gains	2,597		2,409
Securities available-for-sale	27,922		32,345
Hedge Fund Investment [Member]
Amortized Cost	1,231		1,245
Gross Unrealized Gains	651		438
Securities available-for-sale	1,882		1,683
Other Equity Securities [Member]
Amortized Cost	927		889
Gross Unrealized Gains	117		110
Gross Unrealized Losses	(1)
Securities available-for-sale	1,043		999
Total Equity Securities [Member]
Amortized Cost	2,158		2,134
Gross Unrealized Gains	768		548
Gross Unrealized Losses	(1)
Securities available-for-sale	2,925		2,682
Total [Member]
Amortized Cost	1,022,056		1,090,300
Gross Unrealized Gains	23,989		17,685
Gross Unrealized Losses	(36,172)		(50,183)
Securities available-for-sale	$ 1,009,873		$ 1,057,802

[1] Trading securities held by the Company represent diversified investment securities held in a grantor trust under deferred compensation arrangements in which plan participants may direct amounts earned to be invested in securities other than Company stock.

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Note 6 - Past Due Loans, Allowance For Credit Losses, and Impaired Loans

6 Months Ended

Jun. 30, 2011

Allowance for Credit Losses [Text Block]

6.  PAST DUE LOANS, ALLOWANCE FOR CREDIT LOSSES, AND IMPAIRED LOANS

The following table presents an aging analysis of the Company’s past due loans as of June 30, 2011 and December 31, 2010. The aging is determined without regard to accrual status. The table also presents non-performing loans, consisting of non-accrual loans (most of which are past due) and loans 90 days or more past due and still accruing interest, as of each balance sheet date.

Aging Analysis of Past Due Loans and Non-Performing Loans by Class

(Dollar amounts in thousands)

	Aging Analysis (Accruing and Non-accrual)										Non-performing Loans
	Current		30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Total Loans		Non-accrual Loans		90 Days Past Due Loans, Still Accruing Interest
June 30, 2011
Commercial and industrial	$	1,478,587	$	11,349	$	28,836	$	40,185	$	1,518,772	$	44,393	$	2,095
Agricultural		236,492		17		1,009		1,026		237,518		1,009		-
Commercial real estate:
Office, retail, and industrial		1,207,733		5,135		16,232		21,367		1,229,100		16,567		303
Multi-family		313,949		16,149		6,040		22,189		336,138		23,385		557
Residential construction		104,237		5,297		19,793		25,090		129,327		23,576		-
Commercial construction		125,230		-		21,449		21,449		146,679		21,449		-
Other commercial real estate		815,924		3,993		33,049		37,042		852,966		36,984		464
Total commercial real estate		2,567,073		30,574		96,563		127,137		2,694,210		121,961		1,324
Total corporate loans		4,282,152		41,940		126,408		168,348		4,450,500		167,363		3,419
Home equity		415,463		6,750		7,710		14,460		429,923		5,519		2,392
1-4 family mortgages		177,785		2,278		4,939		7,217		185,002		4,577		656
Installment loans		46,880		535		71		606		47,486		36		35
Total consumer loans		640,128		9,563		12,720		22,283		662,411		10,132		3,083
Total loans, excluding covered loans		4,922,280		51,503		139,128		190,631		5,112,911		177,495		6,502
Covered loans		217,069		26,180		71,693		97,873		314,942		3,588		68,324
Total loans	$	5,139,349	$	77,683	$	210,821	$	288,504	$	5,427,853	$	181,083	$	74,826
December 31, 2010
Commercial and industrial	$	1,428,841	$	7,706	$	29,356	$	37,062	$	1,465,903	$	50,088	$	1,552
Agricultural		225,007		65		2,684		2,749		227,756		2,497		187
Commercial real estate:
Office, retail, and industrial		1,183,952		4,009		15,652		19,661		1,203,613		19,573		-
Multi-family		345,018		2,811		2,033		4,844		349,862		6,203		-
Residential construction		139,499		1,320		33,871		35,191		174,690		52,122		200
Commercial construction		140,044		4,000		20,428		24,428		164,472		28,685		-
Other commercial real estate		813,333		9,091		33,933		43,024		856,357		40,605		345
Total commercial real estate		2,621,846		21,231		105,917		127,148		2,748,994		147,188		545
Total corporate loans		4,275,694		29,002		137,957		166,959		4,442,653		199,773		2,284
Home equity		431,446		4,715		9,082		13,797		445,243		7,948		1,870
1-4 family mortgages		154,999		2,523		3,368		5,891		160,890		3,902		4
Installment loans		50,899		742		133		875		51,774		159		86
Total consumer loans		637,344		7,980		12,583		20,563		657,907		12,009		1,960
Total loans, excluding covered loans		4,913,038		36,982		150,540		187,522		5,100,560		211,782		4,244
Covered loans		268,934		18,445		84,350		102,795		371,729		-		84,350
Total loans	$	5,181,972	$	55,427	$	234,890	$	290,317	$	5,472,289	$	211,782	$	88,594

The Company maintains an allowance for credit losses at a level believed adequate by management to absorb probable losses inherent in the loan portfolio.

Allowance for Credit Losses

(Dollar amounts in thousands)

	Quarters Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Balance at beginning of period	$	145,003		$	144,824		$	145,072		$	144,808
Loans charged-off		(27,748	)		(24,732	)		(49,317	)		(44,729	)
Recoveries of loans previously charged-off		3,813			3,859			5,821			5,522
Net loans charged-off		(23,935	)		(20,873	)		(43,496	)		(39,207	)
Provision for loan losses		18,763			21,526			38,255			39,876
Balance at end of period	$	139,831		$	145,477		$	139,831		$	145,477
Allowance for loan losses	$	137,331		$	145,027		$	137,331		$	145,027
Reserve for unfunded commitments		2,500			450			2,500			450
Total allowance for credit losses	$	139,831		$	145,477		$	139,831		$	145,477

Allowance for Credit Losses by Portfolio Segment

(Dollar amounts in thousands)

	Commercial, Industrial, and Agricultural			Office, Retail, and Industrial			Multi- Family			Residential Construction			Other Commercial Real Estate			Consumer			Covered Loans			Total Allowance
Six Months ended June 30, 2011
Balance at beginning of period	$	49,545		$	20,758		$	3,996		$	27,933		$	29,869		$	12,971		$	-		$	145,072
Loans charged-off		(11,877	)		(1,846	)		(7,201	)		(9,083	)		(8,331	)		(5,779	)		(5,200	)		(49,317	)
Recoveries of loans previously charged-off		2,356			54			-			2,766			472			173			-			5,821
Net loans charged-off		(9,521	)		(1,792	)		(7,201	)		(6,317	)		(7,859	)		(5,606	)		(5,200	)		(43,496	)
Provision for loan losses		8,510			(2,104	)		12,080			2,711			5,425			6,433			5,200			38,255
Balance at end of period	$	48,534		$	16,862		$	8,875		$	24,327		$	27,435		$	13,798		$	-		$	139,831
Six Months ended June 30, 2010
Balance at beginning of period	$	54,452		$	20,164		$	4,555		$	33,078		$	21,084		$	11,475		$	-		$	144,808
Loans charged-off		(11,919	)		(4,229	)		(1,359	)		(14,605	)		(6,483	)		(5,483	)		(651	)		(44,729	)
Recoveries of loans previously charged-off		4,090			232			362			159			142			537			-			5,522
Net loans charged-off		(7,829	)		(3,997	)		( 997	)		(14,446	)		(6,341	)		(4,946	)		( 651	)		(39,207	)
Provision for loan losses		11,526			7,838			2,106			3,883			7,634			6,238			651			39,876
Balance at end of period	$	58,149		$	24,005		$	5,664		$	22,515		$	22,377		$	12,767		$	-		$	145,477

A portion of the Company’s allowance for credit losses is allocated to loans deemed impaired. Impaired loans consist of corporate non-accrual loans and restructured loans. Smaller homogeneous loans such as home equity, installment, and 1-4 family mortgages are not individually assessed for impairment.

Impaired Loans

(Dollar amounts in thousands)

	June 30, 2011		December 31, 2010
Impaired loans individually evaluated for impairment:
Impaired loans with a related allowance for credit losses (1)	$	23,362	$	13,790
Impaired loans with no specific related allowance (2)		129,225		173,534
Total impaired loans individually evaluated for impairment		152,587		187,324
Corporate non-accrual loans not individually evaluated for impairment (3)		14,776		12,449
Total corporate non-accrual loans		167,363		199,773
Restructured loans, still accruing interest		14,529		22,371
Total impaired loans	$	181,892	$	222,144
Valuation allowance related to impaired loans	$	9,504	$	6,343

(1)	These impaired loans require a valuation allowance because the present value of expected future cash flows or the estimated value of the related collateral less estimated selling costs is less than the recorded investment in the loans.
(2)	No specific allowance for credit losses is allocated to these loans since they are deemed to be sufficiently collateralized or had charge-offs. However, while each component of the allowance for credit losses is determined separately, the entire balance is available for the entire loan portfolio.
(3)	These are loans with balances under a specified threshold.

The table below provides a break-down of loans and the related allowance for credit losses by portfolio segment. Loans individually evaluated for impairment include corporate non-accrual loans with the exception of certain loans with balances under a specified threshold.

The present value of any decreases in expected cash flows of covered loans after the purchase date is recognized by recording a charge-off through the allowance for credit losses. Since covered loans are accounted for as purchased impaired loans and the carrying values of those loans are periodically adjusted for any changes in expected future cash flows, the covered loans are not included in the calculation of the allowance for credit losses and are not displayed in this table.

Loans and Related Allowance for Credit Losses by Portfolio Segment

(Dollar amounts in thousands)

	Loans						Allowance For Credit Losses
	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total		Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
June 30, 2011
Commercial, industrial, and agricultural	$	36,529	$	1,719,761	$	1,756,290	$	4,265	$	44,269	$	48,534
Commercial real estate:
Office, retail, and industrial		15,316		1,213,784		1,229,100		-		16,862		16,862
Multi-family		22,572		313,566		336,138		-		8,875		8,875
Residential construction		22,510		106,817		129,327		251		24,076		24,327
Other commercial real estate		55,660		943,985		999,645		4,988		22,447		27,435
Total commercial real estate		116,058		2,578,152		2,694,210		5,239		72,260		77,499
Total corporate loans		152,587		4,297,913		4,450,500		9,504		116,529		126,033
Consumer		-		662,411		662,411		-		13,798		13,798
Total	$	152,587	$	4,960,324	$	5,112,911	$	9,504	$	130,327	$	139,831
December 31, 2010
Commercial, industrial, and agricultural	$	43,365	$	1,650,294	$	1,693,659	$	2,650	$	46,895	$	49,545
Commercial real estate:
Office, retail, and industrial		18,076		1,185,537		1,203,613		-		20,758		20,758
Multi-family		5,696		344,166		349,862		497		3,499		3,996
Residential construction		51,269		123,421		174,690		-		27,933		27,933
Other commercial real estate		68,918		951,911		1,020,829		3,196		26,673		29,869
Total commercial real estate		143,959		2,605,035		2,748,994		3,693		78,863		82,556
Total corporate loans		187,324		4,255,329		4,442,653		6,343		125,758		132,101
Consumer		-		657,907		657,907		-		12,971		12,971
Total	$	187,324	$	4,913,236	$	5,100,560	$	6,343	$	138,729	$	145,072

The following table presents loans individually evaluated for impairment by class of loan as of June 30, 2011 and December 31, 2010.

Impaired Loans Individually Evaluated by Class

(Dollar amounts in thousands)

	June 30, 2011								December 31, 2010
	Recorded Investment In								Recorded Investment In
	Loans with No Specific Related Allowance		Loans with a Related Allowance for Credit Losses		Unpaid Principal Balance		Allowance for Credit Losses Allocated		Loans with No Specific Related Allowance		Loans with a Related Allowance for Credit Losses		Unpaid Principal Balance		Allowance for Credit Losses Allocated
Commercial and industrial	$	25,326	$	10,807	$	44,016	$	4,265	$	40,715	$	2,650	$	53,353	$	2,650
Agricultural		396		-		469		-		2,447		-		2,982		-
Commercial real estate:
Office, retail, and industrial		15,316		-		23,505		-		18,076		-		26,193		-
Multi-family		22,572		-		31,922		-		4,565		1,131		7,322		497
Residential construction		19,358		3,152		63,081		251		51,269		-		129,698		-
Commercial construction		20,889		399		28,818		178		28,685		-		38,404		-
Other commercial real estate		25,368		9,004		55,627		4,810		27,777		10,009		60,465		3,196
Total commercial real estate		103,503		12,555		202,953		5,239		130,372		11,140		262,082		3,693
Total impaired loans individually evaluated for impairment	$	129,225	$	23,362	$	247,438	$	9,504	$	173,534	$	13,790	$	318,417	$	6,343

	Six Months Ended June 30, 2011				Six Months Ended June 30, 2010
	Average Recorded Investment Balance		Interest Income Recognized (1)		Average Recorded Investment Balance		Interest Income Recognized (1)
Commercial and industrial	$	51,863	$	10	$	31,934	$	83
Agricultural		1,796		-		1,862		-
Commercial real estate:
Office, retail, and industrial		18,989		21		20,987		7
Multi-family		4,736		2		9,172		-
Residential construction		41,455		27		100,110		75
Commercial construction		25,191		-		20,209		-
Other commercial real estate		37,968		18		25,967		-
Total commercial real estate		128,339		68		176,445		82
Total impaired loans individually evaluated for impairment	$	181,998	$	78	$	210,241	$	165

(1) Recorded using the cash basis of accounting.

Corporate loans and commitments are assessed for risk and assigned ratings based on various characteristics such as the borrower’s cash flow, leverage, collateral, management characteristics, and other factors. Ratings for commercial credits are reviewed periodically. Consumer loans are assessed for credit quality based on the aging status of the loan and payment activity. The assessment of consumer loans is completed at the end of each reporting period. Loans are analyzed on an individual basis when the internal credit rating is at or below a predetermined classification and the loan exceeds a fixed dollar amount.

Credit Quality Indicators by Class, Excluding Covered Loans

 (Dollar amounts in thousands)

	Pass		Special Mention (1)		Substandard / Accrual (2)		Substandard / Non-accrual (3)		Total
June 30, 2011
Commercial and industrial	$	1,337,553	$	77,305	$	59,521	$	44,393	$	1,518,772
Agricultural		223,260		13,249		-		1,009		237,518
Commercial real estate:
Office, retail, and industrial		1,058,059		113,657		40,817		16,567		1,229,100
Multi-family		290,077		7,213		15,463		23,385		336,138
Residential construction		48,344		27,305		30,102		23,576		129,327
Commercial construction		72,237		34,291		18,702		21,449		146,679
Other commercial real estate		712,785		82,614		20,583		36,984		852,966
Total commercial real estate		2,181,502		265,080		125,667		121,961		2,694,210
Total corporate loans	$	3,742,315	$	355,634	$	185,188	$	167,363	$	4,450,500
December 31, 2010
Commercial and industrial	$	1,303,142	$	83,259	$	29,414	$	50,088	$	1,465,903
Agricultural		209,317		15,667		275		2,497		227,756
Commercial real estate:
Office, retail, and industrial		1,026,124		123,800		34,116		19,573		1,203,613
Multi-family		307,845		20,643		15,171		6,203		349,862
Residential construction		57,209		35,950		29,409		52,122		174,690
Commercial construction		85,305		35,750		14,732		28,685		164,472
Other commercial real estate		697,971		89,247		28,534		40,605		856,357
Total commercial real estate		2,174,454		305,390		121,962		147,188		2,748,994
Total corporate loans	$	3,686,913	$	404,316	$	151,651	$	199,773	$	4,442,653

	Performing		Non-accrual		Total
June 30, 2011
Home equity	$	424,404	$	5,519	$	429,923
1-4 family mortgages		180,425		4,577		185,002
Installment loans		47,450		36		47,486
Total consumer loans	$	652,279	$	10,132	$	662,411
December 31, 2010
Home equity	$	437,295	$	7,948	$	445,243
1-4 family mortgages		156,988		3,902		160,890
Installment loans		51,615		159		51,774
Total consumer loans	$	645,898	$	12,009	$	657,907

(1)	Loans categorized as special mention have potential weaknesses that deserve the close attention of management. If left uncorrected, these potential weaknesses may result in the deterioration of repayment prospects or in the credit position of the Company at some future date.
(2)	Loans categorized as substandard/accrual continue to accrue interest, but exhibit a well-defined weakness or weaknesses that may jeopardize the liquidation of the debt. These loans continue to accrue interest because they are well secured and collection of principal and interest is expected within a reasonable time.
(3)	Loans categorized as substandard/non-accrual exhibit a well-defined weakness or weaknesses that may jeopardize the liquidation of the debt and are characterized by the distinct possibility that the Company could sustain some loss if the deficiencies are not corrected. These loans have been placed on non-accrual status.

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Note 7 - Earnings Per Common Share (Detail) - Basic and Diluted Earnings per Common Share (USD $) In Thousands, except Per Share data	3 Months Ended				6 Months Ended
	Jun. 30, 2011		Jun. 30, 2010		Jun. 30, 2011		Jun. 30, 2010
Net income	$ 10,828		$ 7,809		$ 21,046		$ 15,890
Preferred dividends	(2,412)		(2,412)		(4,825)		(4,825)
Accretion on preferred stock	(170)		(161)		(338)		(320)
Net income applicable to non-vested restricted shares	(102)		(65)		(242)		(146)
Net income applicable to common shares	$ 8,144		$ 5,171		$ 15,641		$ 10,599
Weighted-average common shares outstanding:
Weighted-average common shares outstanding (basic) (in Shares)	73,259		73,028		73,205		71,756
Weighted-average diluted common shares outstanding (in Shares)	73,259		73,028		73,205		71,756
Basic earnings per share (in Dollars per share)	$ 0.11		$ 0.07		$ 0.21		$ 0.15
Diluted earnings per share (in Dollars per share)	$ 0.11		$ 0.07		$ 0.21		$ 0.15
Anti-dilutive shares not included in the computation of diluted earnings per share (1) (in Shares)	3,619	[1]	3,810	[1]	3,676	[1]	3,848	[1]

[1] Represents outstanding stock options and common stock warrants for which the exercise price is greater than the average market price of the Company's common stock.

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Consolidated Statements Of Changes In Stockholders’ Equity (Parentheticals) (USD $)	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Common dividends declared per common share	$ 0.02	$ 0.02
Preferred dividends declared per preferred share	$ 25.00	$ 25.00

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Note 2 - Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2011

Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block]

2.  RECENT ACCOUNTING PRONOUNCEMENTS

Credit Quality and Allowance for Credit Losses Disclosures: In July 2010, the Financial Accounting Standards Board (“FASB”) issued guidance that requires companies to provide more information about the credit risks inherent in its loan and lease portfolios and how management considers those credit risks in determining the allowance for credit losses. A company is required to disclose its accounting policies, the methods it uses to determine the components of the allowance for credit losses, and qualitative and quantitative information about the credit quality of its loan portfolio, such as aging information and credit quality indicators. Both new and existing disclosures are required, either by portfolio segment or class, based on how a company develops its allowance for credit losses and how it manages its credit exposure. The guidance is effective for all financing receivables, including loans and trade accounts receivables. However, short-term trade accounts receivables, receivables measured at fair value or lower of cost or fair value, and debt securities are exempt from these disclosure requirements. For public companies, any period-end disclosure requirements were effective for periods ending on or after December 15, 2010. This disclosure is presented in Note 1, “Summary of Significant Accounting Policies,” and Note 6, “Past Due Loans, Allowance for Credit Losses, and Impaired Loans.” Any disclosures about activity that occurs during a reporting period, excluding disclosures related to troubled debt restructurings (“TDRs”), were effective for the Company beginning January 1, 2011 and included in Note 6, “Past Due Loans, Allowance for Credit Losses, and Impaired Loans.” Disclosures related to TDRs will be effective for the Company beginning with third quarter 2011. As this guidance affects only disclosures, the adoption of this guidance on December 31, 2010 for period-end disclosures, and on January 1, 2011 for intra-period activity did not impact the Company’s financial position, results of operations, or liquidity.

Clarification to Accounting for Troubled Debt Restructurings: In April 2011, the FASB issued guidance to clarify the accounting for TDRs. Given the recent economic downturn, many banks have seen an increase in the number of loan modifications. Diversity in practice exists in terms of identifying whether a loan modification qualifies as a TDR, such that the FASB was asked to provide guidance. This new guidance was developed to assist creditors in determining whether a loan modification meets the criteria to be considered a TDR, both for purposes of recording an impairment and for disclosure of TDRs. The guidance is effective for the Company beginning in third quarter 2011, and prior periods presented will be restated to apply this guidance to restructurings occurring on or after January 1, 2011. Since the new guidance applies primarily to disclosures, it is not expected to impact the Company’s financial position, results of operations, or liquidity.

Statement of Comprehensive Income: In April 2011, the FASB issued accounting guidance requiring companies to include a statement of comprehensive income as part of its interim and annual financial statements. The new guidance gives companies the option to present net income and comprehensive income either in one continuous statement or in two separate but consecutive statements. This approach represents a change from current GAAP, which allows companies to report other comprehensive income (“OCI”) and its components in the statement of shareholder’s equity. The guidance also allows companies to present OCI either net of tax with details in the notes or shown gross of tax (with tax effects shown parenthetically). The Company’s disclosure of OCI for the quarters ended June 30, 2011 and June 30, 2010 is presented in Note 8, “Comprehensive Income.” Under the new guidance, the information set forth in Note 8 would be shown in the new statement of comprehensive income. This guidance is effective for fiscal years beginning after December 15, 2011. Since the new guidance impacts disclosures only, it will not have an impact on the Company’s financial position, results of operations, or liquidity.

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Note 5 - Covered Assets (Detail) - Covered Assets (USD $) In Thousands	Jun. 30, 2011		Dec. 31, 2010
Home equity lines (1)	$ 47,488	[1]	$ 52,980	[1]
Covered impaired loans	226,286		281,893
Other covered loans (2)	41,168	[2]	36,856	[2]
Total covered loans	314,942		371,729
FDIC indemnification asset	95,752		95,899
Covered OREO	14,583		22,370
Total covered assets	425,277		489,998
Covered non-accrual loans	3,588
Covered loans past due 90 days or more and still accruing interest	$ 68,324		$ 84,350

[1] These loans are open-end consumer loans that are not categorized as impaired loans.

[2] These are loans that did not evidence impairment on the date of acquisition.

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Note 3 - Securities (Detail) (USD $)	6 Months Ended
	Jun. 30, 2011	Dec. 31, 2010
Discounted Projected Cash Flows Rate Range	("LIBOR") plus 125 basis points to LIBOR plus 160 basis points.
Fair Value Discounted Projected Cash Flows Rate Range	LIBOR plus 1,200 basis points to LIBOR plus 1,300 basis points.
CollateralizedMortgage Obligations And Other Mortgage Backed Securities	98.00%
Prepayment Rate For Banks With Assets Greater Than Fifteen BillionYear 3	15.00%
Prepayment Rate For Banks With Assets Greater Than Fifteen Billion Year 4 And After	1.00%
Deferring Collateral Recovery Rate For Banks Thrifts And Other Depository Institutions	10.00%
Deferring Collateral Recovery Rate For Insurance Companies	15.00%
(in Dollars)	$ 0
Available-for-sale Securities Pledged as Collateral (in Dollars)	$ 768,700,000	$ 808,300,000

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Note 11 - Commitments Guarantees, and Contingent Liabilities (Detail) - Repurchases and Charge-Offs of Recourse Loans (USD $) In Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2010	Jun. 30, 2010
Recourse loans repurchased during the period	$ 114	$ 114
Recourse loans charged-off during the period	$ 36	$ 36

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Note 12 - Fair Value (Detail) - Collateralized Residential Mortgage Obligations	Jun. 30, 2011
Weighted-average coupon rate	4.90%
Weighted-average coupon rate	5.30%
Weighted-average maturity (in years)	2.4
Weighted-average maturity (in years)	4.4
Information on underlying residential mortgages:
Origination dates	2000 to 2010
Origination dates	2000 to 2010
Weighted-average coupon rate	5.80%
Weighted-average coupon rate	5.80%
Weighted-average maturity (in years)	9.1
Weighted-average maturity (in years)	7.4

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Note 6 - Past Due Loans, Allowance For Credit Losses, and Impaired Loans (Detail) - Credit Quality Indicators by Class, Excluding Covered Loans (Continued) (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Home Equity [Member] | Performing [Member]
Credit Quality Indicators by Class	$ 424,404	$ 437,295
Home Equity [Member] | Non Accrual [Member]
Credit Quality Indicators by Class	5,519	7,948
Home Equity [Member] | Total [Member]
Credit Quality Indicators by Class	429,923	445,243
One ToFour Family Mortgages [Member] | Performing [Member]
Credit Quality Indicators by Class	180,425	156,988
One ToFour Family Mortgages [Member] | Non Accrual [Member]
Credit Quality Indicators by Class	4,577	3,902
One ToFour Family Mortgages [Member] | Total [Member]
Credit Quality Indicators by Class	185,002	160,890
Installment Loans [Member] | Performing [Member]
Credit Quality Indicators by Class	47,450	51,615
Installment Loans [Member] | Non Accrual [Member]
Credit Quality Indicators by Class	36	159
Installment Loans [Member] | Total [Member]
Credit Quality Indicators by Class	47,486	51,774
Total Consumer Loans [Member] | Performing [Member]
Credit Quality Indicators by Class	652,279	645,898
Total Consumer Loans [Member] | Non Accrual [Member]
Credit Quality Indicators by Class	10,132	12,009
Total Consumer Loans [Member] | Total [Member]
Credit Quality Indicators by Class	$ 662,411	$ 657,907

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Note 12 - Fair Value (Detail) - Fair Value Measurements Recorded for Assets Measured at Fair Value on a Non-Recurring Basis (USD $) In Thousands		3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2011	Jun. 30, 2011 Charged ToAllowance For Loan Losses [Member]	Jun. 30, 2011 Charged ToEarnings [Member]
Collateral-dependent impaired loans	$ 19,459		$ 36,269
OREO		1,523		2,635
Loans held-for-sale			200
Assets held-for-sale		$ 286		$ 596

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Note 3 - Securities

6 Months Ended

Jun. 30, 2011

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

3.  SECURITIES

Securities available-for-sale are carried at fair value with unrealized gains and losses, net of related deferred income taxes, recorded in stockholders’ equity as a separate component of other comprehensive loss. Securities classified as held-to-maturity are securities management has the positive intent and ability to hold to maturity and are stated at cost. Trading securities are reported at fair value. Trading gains, net, represents changes in the fair value of the trading securities portfolio and are included as a component of noninterest income in the Consolidated Statements of Income.

Securities Portfolio

(Dollar amounts in thousands)

	June 30, 2011												December 31, 2010
	Amortized		Gross Unrealized							Fair			Amortized			Gross Unrealized							Fair
	Cost		Gains			Losses				Value			Cost			Gains			Losses				Value
Securities Available-for-Sale
U.S. agency securities	$	8,122		$	23		$	(32	)		$	8,113		$	18,000		$	7		$	(121	)		$	17,886
Collateralized residential mortgage obligations (“CMOs”)		373,600			3,824			(722	)			376,702			377,692			4,261			(2,364	)			379,589
Other residential mortgage-backed securities		91,539			6,290			(24	)			97,805			100,780			5,732			(61	)			106,451
Municipal securities		471,617			10,487			(2,185	)			479,919			512,063			4,728			(12,800	)			503,991
Collateralized debt obligations (“CDOs”)		49,695			-			(33,208	)			16,487			49,695			-			(34,837	)			14,858
Corporate debt securities		25,325			2,597			-				27,922			29,936			2,409			-				32,345
Equity securities:
Hedge fund investment		1,231			651			-				1,882			1,245			438			-				1,683
Other equity securities		927			117			(1	)			1,043			889			110			-				999
Total equity securities		2,158			768			( 1	)			2,925			2,134			548			-				2,682
Total	$	1,022,056		$	23,989		$	(36,172	)		$	1,009,873		$	1,090,300		$	17,685		$	(50,183	)		$	1,057,802
Securities Held-to-Maturity
Municipal securities	$	76,142		$	2,343		$	-			$	78,485		$	81,320		$	1,205		$	-			$	82,525
Trading Securities (1)											$	16,230												$	15,282

(1) Trading securities held by the Company represent diversified investment securities held in a grantor trust under deferred compensation arrangements in which plan participants may direct amounts earned to be invested in securities other than Company stock.

Remaining Contractual Maturity of Securities

(Dollar amounts in thousands)

	June 30, 2011
	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
One year or less	$	8,301	$	7,967	$	7,010	$	7,226
One year to five years		201,321		193,222		15,137		15,603
Five years to ten years		115,597		110,947		21,468		22,129
After ten years		229,540		220,305		32,527		33,527
CMOs		373,600		376,702		-		-
Other residential mortgage-backed securities		91,539		97,805		-		-
Equity securities		2,158		2,925		-		-
Total	$	1,022,056	$	1,009,873	$	76,142	$	78,485

Purchases and sales of securities are recognized on a trade date basis. Realized securities gains or losses are reported in securities gains, net in the Consolidated Statements of Income. The cost of securities sold is based on the specific identification method.

Securities Gains (Losses)

(Dollar amounts in thousands)

	Quarters Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Proceeds from sales	$	53,118		$	66,618		$	97,330		$	147,601
Gains (losses) on sales of securities:
Gross realized gains	$	1,974		$	2,367		$	2,782		$	8,187
Gross realized losses		(443	)		(112	)		(711	)		(112	)
Net realized gains on securities sales		1,531			2,255			2,071			8,075
Non-cash impairment charges
Other-than-temporary securities impairment		-			(1,581	)		-			(4,344	)
Portion of other-than-temporary impairment recognized in other comprehensive income		-			447			-			447
Net non-cash impairment charges		-			(1,134	)		-			(3,897	)
Net realized gains	$	1,531		$	1,121		$	2,071		$	4,178
Income tax expense on net realized gains	$	636		$	437		$	847		$	1,629
Trading gains (losses), net (1)	$	(2	)	$	(1,022	)	$	742		$	(561	)

(1) All trading gains (losses) relate to trading securities still held as of June 30, 2011.

The non-cash impairment charges in the table above primarily relate to other-than-temporary (“OTTI”) charges on CDOs. Accounting guidance requires that only the credit portion of an OTTI charge be recognized through income. In deriving the credit component of the impairment on the CDOs, projected cash flows were discounted at the contractual rate ranging from the London Interbank Offered Rate (“LIBOR”) plus 125 basis points to LIBOR plus 160 basis points. Fair values are computed by discounting future projected cash flows at higher rates, ranging from LIBOR plus 1,200 basis points to LIBOR plus 1,300 basis points. The higher rates are used to account for other market factors such as liquidity. If a decline in fair value below carrying value is not attributable to credit loss and the Company does not intend to sell the security or believe it would not be more likely than not required to sell the security prior to recovery, the Company records the decline in fair value in other comprehensive loss.

Changes in the amount of credit losses recognized in earnings on CDOs and other securitiesare summarized in the following table.

Changes in Credit Losses Recognized in Earnings

(Dollar amounts in thousands)

	Quarter Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Cumulative amount recognized at beginning of period	$	35,589	$	33,709	$	35,589	$	30,946
Credit losses included in earnings (1)
Losses recognized on securities that previously had credit losses		-		1,048		-		3,568
Losses recognized on securities that did not previously have credit losses		-		86		-		329
Cumulative amount recognized at end of period	$	35,589	$	34,843	$	35,589	$	34,843

(1) Included in securities gains, net in the Consolidated Statements of Income.

Securities in an Unrealized Loss Position

(Dollar amounts in thousands)

			Less Than 12 Months				12 Months or Longer				Total
	Number of Securities		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
As of June 30, 2011
U.S. agency security		1	$	3,045	$	32	$	-	$	-	$	3,045	$	32
CMOs		10		50,412		323		9,698		399		60,110		722
Other residential mortgage-backed securities		2		317		18		159		6		476		24
Municipal securities		134		17,005		582		53,943		1,603		70,948		2,185
CDOs		6		-		-		16,487		33,208		16,487		33,208
Equity security		1		-		-		30		1		30		1
Total		154	$	70,779	$	955	$	80,317	$	35,217	$	151,096	$	36,172
As of December 31, 2010
U.S. agency securities		4	$	9,096	$	120	$	-	$	1	$	9,096	$	121
CMOs		19		131,056		1,727		7,843		637		138,899		2,364
Other residential mortgage-backed securities		5		6,084		51		159		10		6,243		61
Municipal securities		479		99,537		3,142		166,403		9,658		265,940		12,800
CDOs		6		-		-		14,858		34,837		14,858		34,837
Total		513	$	245,773	$	5,040	$	189,263	$	45,143	$	435,036	$	50,183

Approximately 98% of CMOs and other mortgage-backed securities are either backed by U.S. government-owned agencies or issued by U.S. government-sponsored enterprises. Municipal securities are issued by municipal authorities, and the majority is supported by third-party insurance or some other form of credit enhancement. Management does not believe any individual unrealized loss as of June 30, 2011 represents an other-than-temporary impairment. The unrealized losses associated with these securities are not believed to be attributed to credit quality, but rather to changes in interest rates and temporary market movements. In addition, the Company does not intend to sell the securities with unrealized losses, and it is not more likely than not that the Company will be required to sell them before recovery of their amortized cost basis, which may be at maturity.

The unrealized losses on CDOs as of June 30, 2011 reflect the market’s unfavorable view of structured investment vehicles given the current interest rate and liquidity environment. Management does not believe the unrealized losses on the CDOs represent an other-than-temporary impairment. In addition, the Company does not intend to sell the CDOs with unrealized losses, and the Company does not believe it is more likely than not that it will be required to sell them before recovery of their amortized cost basis, which may be at maturity.

Significant judgment is required to calculate the fair value of the CDOs, all of which are pooled. Generally, fair value determinations are based on several factors regarding current market and economic conditions relating to such securities and the underlying collateral. For these reasons and due to the illiquidity in the secondary market for these CDOs, the Company estimates the fair value of these securities using discounted cash flow analyses with the assistance of a structured credit valuation firm.

Prepayment assumptions are a key factor in estimating the cash flows. Prepayments may occur on the collateral underlying the Company’s CDOs based on call options or other factors. Most of the collateral underlying the CDOs have a 5-year call option (on the fifth anniversary of issuance, the issuer has the right to call the security at par). In addition, most underlying indentures trigger an issuer call right if a capital treatment event occurs, such as a regulatory change that affects its status as Tier 1 capital (as defined in federal regulations). The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) constituted such an event for certain holding companies. Specifically, companies with $15 billion or more in consolidated assets can no longer include hybrid capital instruments, such as trust-preferred securities, in Tier 1 capital beginning January 1, 2013. As of June 30, 2011, the Company has assumed a 15% prepayment rate for those banks with greater than $15 billion in assets in year 3 (the start of the phase out period for Tier 1 capital treatment), followed by an annual prepayment rate of 1%.

For additional discussion of the CDO valuation methodology, refer to Note 12, “Fair Value.”

Certain Characteristics and Metrics of the CDOs as of June 30, 2011

(Dollar amounts in thousands)

			Original		Amortized		Fair		Lowest Credit Rating Assigned to the Security				Number of Banks/		% of Banks/ Insurers Currently			Actual Deferrals and Defaults as a % of the Original			Expected Deferrals and Defaults as a % of the Remaining Performing			Excess Subordination as a % of the Remaining Performing
Number	Class		Par		Cost		Value		Moody’s		Fitch		Insurers		Performing			Collateral (1)			Collateral (1)			Collateral (2)
1		C-1	$	17,500	$	7,140	$	3,353	Ca			C		46		73.9	%		15.8	%		20.7	%		0.0	%
2		C-1		15,000		7,657		2,477	Ca			C		57		84.2	%		12.1	%		18.8	%		0.0	%
3		C-1		15,000		13,480		4,016	Ca			C		63		81.0	%		7.8	%		15.5	%		6.0	%
4		B1		15,000		13,922		4,344	Ca			C		64		59.4	%		35.0	%		23.5	%		0.0	%
5		C		10,000		1,317		212	C			C		56		60.7	%		44.6	%		28.1	%		0.0	%
6		C		6,500		6,179		2,085	Ca			C		77		68.8	%		23.1	%		12.8	%		10.5	%
7(3)		A-3L		6,750		-		-		N/A		N/A		N/A		N/A			N/A			N/A			N/A
			$	85,750	$	49,695	$	16,487

(1)	Deferrals and defaults are provided net of recoveries. No recovery is assumed for collateral that has already defaulted. For deferring collateral, the Company assumes a recovery rate of 10% of par for banks, thrifts, and other depository institutions and 15% of par for insurance companies.
(2)	Excess subordination represents additional defaults in excess of current defaults that the CDO can absorb before the security experiences any credit impairment. The excess subordination percentage is calculated by dividing the amount of potential additional loss that can be absorbed (before the receipt of all expected future principal and interest payments is affected) by the total balance of performing collateral. Even with excess subordination, the CDO could experience an OTTI charge if future deterioration of underlying collateral in excess of current excess subordination is anticipated.
(3)	Characteristics and metrics are not reported for this CDO since the security had an amortized cost and fair value of zero as of June 30, 2011.

Credit-Related CDO Impairment Losses

(Dollar amounts in thousands)

	Quarters Ended June 30,				Six Months Ended June 30,
Number	2011		2010		2011		2010		Life-to-Date
1	$	-	$	-	$	-	$	-	$	10,360
2		-		794		-		794		7,343
3		-		-		-		-		1,159
4		-		-		-		684		1,078
5		-		254		-		2,091		8,570
6		-		-		-		242		243
7		-		-		-		-		6,750
	$	-	$	1,048	$	-	$	3,811	$	35,503

For the equity security with an unrealized loss, the Company has evaluated the near-term prospects of the investment in relation to the severity and duration of the impairment and, based on that evaluation, believes it has the ability and intent to hold this investment until a recovery of fair value.

For additional details of the securities available-for-sale portfolio and the related impact of unrealized gains (losses) thereon, see Note 8, “Comprehensive Income.”

The carrying value of securities available-for-sale that were pledged to secure deposits and for other purposes as permitted or required by law totaled $768.7 million at June 30, 2011 and $808.3 million at December 31, 2010. No securities held-to-maturity were pledged as of June 30, 2011 or December 31, 2010.

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Note 5 - Covered Assets (Detail) - Changes in Accretable Yield (USD $) In Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Balance at beginning of period	$ 51,010	$ 7,795	$ 63,616	$ 9,298
Additions		2,591		2,591
Accretion	(12,104)	(4,142)	(20,528)	(5,645)
Reclassifications from non-accretable difference, net (1)	16,700	18,230	12,518	18,230
Balance at end of period	$ 55,606	$ 24,474	$ 55,606	$ 24,474

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Note 11 - Commitments Guarantees, and Contingent Liabilities (Tables)

6 Months Ended

Jun. 30, 2011

Contractual or Notional Amounts of Financial Instruments [Text Block]

	June 30, 2011		December 31, 2010
Commitments to extend credit:
Home equity lines	$	271,138	$	275,826
Credit card lines to businesses		28,129		26,376
1-4 family real estate construction		26,159		26,682
Commercial real estate		158,092		175,608
Commercial and industrial		568,553		553,168
Overdraft protection program (1)		177,344		169,824
All other commitments		132,096		97,299
Total commitments	$	1,361,511	$	1,324,783
Letters of credit:
1-4 family real estate construction	$	10,608	$	10,551
Commercial real estate		50,104		54,896
All other		74,194		74,594
Total letters of credit	$	134,906	$	140,041
Unamortized fees associated with letters of credit (2) (3)	$	759	$	696
Remaining weighted-average term (in months)		10.1		12.2
Remaining lives (in years)	0.1 to 4.5		0.1 to 9.5
Recourse on securitized assets:
Unpaid principal balance of assets securitized	$	7,301	$	7,424
Cap on recourse obligation	$	2,208	$	2,208
Carrying value of recourse obligation (2)	$	148	$	148

Recourse Loans Repurchased [Table Text Block]

	Quarters Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Recourse loans repurchased during the period	$	-	$	114	$	-	$	114
Recourse loans charged-off during the period	$	-	$	36	$	-	$	36

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Note 12 - Fair Value (Detail) - Carrying Value of Mortgage Servicing Rights (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2011		Jun. 30, 2010		Jun. 30, 2011		Jun. 30, 2010
Balance at beginning of period	$ 845		$ 1,197		$ 942		$ 1,238
Balance at end of period	840		1,133		840		1,133
Key economic assumptions used in measuring fair value, at end of period:
Weighted-average prepayment speed	18.70%		16.10%		18.70%		16.10%
Weighted-average discount rate	11.50%		11.40%		11.50%		11.40%
Weighted-average maturity, in months	198.5		205.8		198.5		205.8
Contractual servicing fees earned during the period (1)	60		74		123		158
Total (losses) gains included in earnings (1):
Due to changes in valuation inputs and assumptions (2)	28	[1]	(2)	[1]	(10)	[1]	23	[1]
Other changes in fair value (3)	$ (33)	[2]	$ (62)	[2]	$ (92)	[2]	$ (128)	[2]

[1] Principally reflects changes in prepayment speed assumptions.

[2] Primarily represents changes in expected cash flows over time due to payoffs and paydowns.

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Note 3 - Securities (Detail) - Remaining Contractual Maturity of Securities (USD $) In Thousands	Jun. 30, 2011
Total	$ 1,009,873
Total	76,142
Total	78,485
Amortized Cost [Member]
One year or less	8,301
One year to five years	201,321
Five years to ten years	115,597
After ten years	229,540
CMOs	373,600
Other residential mortgage-backed securities	91,539
Equity securities	2,158
Total	1,022,056
Amortized Cost [Member]
One year or less	7,010
One year to five years	15,137
Five years to ten years	21,468
After ten years	32,527
Total	76,142
Fair Value [Member]
One year or less	7,967
One year to five years	193,222
Five years to ten years	110,947
After ten years	220,305
CMOs	376,702
Other residential mortgage-backed securities	97,805
Equity securities	2,925
Total	1,009,873
Fair Value [Member]
One year or less	7,226
One year to five years	15,603
Five years to ten years	22,129
After ten years	33,527
Total	$ 78,485

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Note 5 - Covered Assets (Detail) - Changes in FDIC Indemnification Asset (USD $) In Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2011		Jun. 30, 2010		Jun. 30, 2011		Jun. 30, 2010
Balance at beginning of period	$ 85,386		$ 54,591		$ 95,899		$ 67,945
Additions			8,338				8,338
(Amortization) accretion	(2,255)		812		(4,497)		2,249
Expected reimbursements from the FDIC for changes in expected credit losses (1)	19,321	[1]	12,958	[1]	21,834	[1]	12,718	[1]
Payments received from the FDIC	(6,700)		(708)		(17,484)		(15,259)
Balance at end of period	$ 95,752		$ 75,991		$ 95,752		$ 75,991

[1] The increases in indemnification asset were a result of decreases in estimated cash flows on certain loans. The indemnification asset increased by the applicable loss share percentage for additional expected losses.

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Note 1 - Summary of Significant Accounting Policies (Detail) (USD $) In Millions	6 Months Ended
	Jun. 30, 2011	Sep. 30, 2010
Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block]	Basis of Presentation - The accompanying unaudited consolidated interim financial statements of First Midwest Bancorp, Inc. (the "Company"), a Delaware corporation, have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission for quarterly reports on Form 10-Q and do not include certain information and footnote disclosures required by U.S. generally accepted accounting principles ("GAAP") for complete annual financial statements. Accordingly, these financial statements should be read in conjunction with the Company's 2010 Annual Report on Form 10-K ("2010 10-K"). The accompanying unaudited consolidated interim financial statements have been prepared in accordance with GAAP and reflect all adjustments that are, in the opinion of management, necessary for the fair presentation of the financial position and results of operations for the periods presented. All such adjustments are of a normal recurring nature. The results of operations for the quarter and six-month periods ended June 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. Certain reclassifications have been made to prior periods to conform to the current period presentation. In third quarter 2010, the Company acquired approximately $297.0 in loans, $23.7 million in OREO, and $121.5 million in cash and securities and assumed $215.2 million in core deposits and $246.6 million in time deposits of a former bank in an FDIC-assisted transaction. The transaction resulted in the recognition of goodwill of $7.9 million. The fair values initially assigned to the assets acquired and liabilities assumed were preliminary and subject to refinement for up to one year after the closing date of the acquisition as new information relative to closing date fair values became available. Subsequent to the acquisition date, the Company obtained specific information (including the completion of appraisals or other valuations) relating to the acquisition-date value of certain assets and liabilities acquired, which required an adjustment to those assets and liabilities and to goodwill. In accordance with accounting guidance applicable to business combinations, such adjustments were recognized as if they had happened as of the acquisition date. After considering this additional information, the estimated fair value of covered loans decreased $2.9 million, covered OREO decreased $7.3 million, the FDIC indemnification asset increased $6.9 million; and accrued interest payable and other liabilities decreased $8.7 million from that originally reported in the quarter ended September 30, 2010. These revised estimates resulted in a $5.4 million decrease in goodwill and other intangible assets. As of June 30, 2011, the Company finalized its purchase price allocation. GAAP requires management to make certain estimates and assumptions. Although these and other estimates and assumptions are based on the best available information, actual results could be materially different from these estimates.
Loans Acquired In FDIC Assisted Transaction		$ 297.0
OREO Acquired In FDIC Assisted Transaction		23.7
CashAndSecuritiesAcquiredInFDICAssistedTransaction		121.5
Core Deposits Acquired In FDIC Assisted Transaction		215.2
Time Deposits Acquired In FDIC Assisted Transaction		246.6
Goodwill Acquired In FDIC Assisted Transaction		7.9
Covered Loan Adjustment		2.9
Covered Other Real Estate Owned Adjustment		7.3
FDIC Indemnification Asset Adjustment		6.9
Accrued Interest Payable And Other Liabilities Adjustment		8.7
Goodwill And Other Intangible Assets Adjustment		$ 5.4
Consolidation, Policy [Policy Text Block]	Principles of Consolidation - The consolidated financial statements include the accounts and results of operations of the Company and its subsidiaries after elimination of all significant intercompany accounts and transactions. The Company owns an interest in certain variable interest entities ("VIE"s) as described in Note 22, "Variable Interest Entities," contained in the Company's 2010 10-K. A VIE is a partnership, limited liability company, trust, or other legal entity that does not have sufficient equity to finance its activities without additional subordinated financial support from other parties, or whose investors lack certain characteristics associated with owning a controlling financial interest. The VIEs are not consolidated in the Company's financial statements since the Company is not the primary beneficiary of any of the VIEs. The accounting policies related to loans and the allowance for credit losses are presented below. For a summary of all other significant accounting policies, please refer to Note 1, "Summary of Significant Accounting Policies," contained in the Company's 2010 10-K
Loans and Leases Receivable, Valuation, Policy [Policy Text Block]	Loans - Loans are carried at the principal amount outstanding, including certain net deferred loan origination fees. Loans held-for-sale are carried at the lower of aggregate cost or fair value and included in other assets in the Consolidated Statements of Condition. Interest income on loans is accrued based on principal amounts outstanding. Loan and lease origination fees, fees for commitments that are expected to be exercised, and certain direct loan origination costs are deferred and the net amount amortized over the estimated life of the related loans or commitments as a yield adjustment. Fees related to standby letters of credit, whose ultimate exercise is remote, are amortized into fee income over the estimated life of the commitment. Other credit-related fees are recognized as fee income when earned
Certain Loans and Debt Securities Acquired in Transfer, Recognizing Interest Income on Impaired Loans, Policy [Policy Text Block]	Purchased Impaired Loans - Purchased impaired loans are recorded at their estimated fair values on the respective purchase dates and are accounted for prospectively based on expected cash flows in accordance with applicable authoritative accounting guidance. No allowance for credit losses is recorded on these loans at the acquisition date. In determining the acquisition date fair value of purchased impaired loans, and in subsequent accounting, the Company generally aggregates purchased consumer loans and certain smaller balance commercial loans into pools of loans with common risk characteristics such as delinquency status, credit score, and internal risk rating. Larger balance commercial loans are usually accounted for on an individual basis. Expected future cash flows in excess of the fair value of loans at the purchase date ("accretable yield") are recorded as interest income over the life of the loans if the timing and amount of the future cash flows can be reasonably estimated. The non-accretable yield represents estimated losses in the portfolio and is equal to the difference between contractually required payments and the cash flows expected to be collected at acquisition. Subsequent to the purchase date, increases in cash flows for purchased impaired loans over those expected at the purchase date are recognized as interest income prospectively. The present value of any decreases in expected cash flows after the purchase date is recognized by recording a charge-off through the allowance for loan losses
Loans and Leases Receivable, Nonaccrual Loan and Lease Status, Policy [Policy Text Block]	Non-accrual loans - Generally, commercial loans and loans secured by real estate are placed on non-accrual status: (a) when either principal or interest payments become 90 days or more past due based on contractual terms unless the loan is sufficiently collateralized such that full repayment of both principal and interest is expected and is in the process of collection within a reasonable period; or (b) when an individual analysis of a borrower's creditworthiness indicates a credit should be placed on non-accrual status whether or not the loan is 90 days or more past due. When a loan is placed on non-accrual status, unpaid interest credited to income in the current year is reversed, and unpaid interest accrued in prior years is charged against the allowance for loan losses. Both principal and interest payments are applied to the principal on the loan. Future interest income may only be recorded on a cash basis after recovery of principal is reasonably assured. Non-accrual loans are returned to accrual status when the financial position of the borrower and other relevant factors indicate there is no longer doubt that the Company will collect all principal and interest due. Commercial loans and loans secured by real estate are generally charged-off when deemed uncollectible. A loss is recorded at that time if the net realizable value can be quantified and it is less than the associated principal and interest outstanding. Consumer loans that are not secured by real estate are subject to mandatory charge-off at a specified delinquency date and are usually not classified as non-accrual prior to being charged-off. Closed-end consumer loans, which include installment, automobile, and single payment loans are generally charged-off in full no later than the end of the month in which the loan becomes 120 days past due. Generally, purchased impaired loans are considered accruing loans. However, the timing and amount of future cash flows for some loans may not be reasonably estimable. Those loans were classified as non-accrual loans as of June 30, 2011, and interest income will not be recognized until the timing and amount of the future cash flows can be reasonably estimated
Loans and Leases Receivable, Troubled Debt Restructuring Policy [Policy Text Block]	Restructured Loans - In cases where a borrower experiences financial difficulties and the Company makes certain concessions or modifications to contractual terms, the loan is classified as a restructured loan. Restructured loans are loans for which the original contractual terms have been modified, including forgiveness of principal or interest, due to deterioration in the borrower's financial condition. Loans granted concessions or modifications are classified as restructured loans unless the modification is short-term, or results in only an insignificant delay or shortfall in the payments to be received. The Company's restructured loans are determined on a case-by-case basis in connection with ongoing loan collection processes. The allowance for loan losses on restructured loans is determined by discounting the restructured cash flows at the original effective rate of the loan before modification or is based on the underlying collateral value. The Company does not accrue interest on any restructured loan unless and until it believes collection of all principal and interest under the modified terms is reasonably assured. Generally, six months of consecutive payment performance by the borrower under the restructured terms is required before a restructured loan is returned to accrual status assuming the loan is restructured at reasonable market terms (e.g., not at below market terms). However, the period could vary depending upon the individual facts and circumstances of the loan. For a restructured loan to begin accruing interest, the borrower must demonstrate both some level of performance and the capacity to perform under the modified terms. A history of timely payments and adherence to financial covenants generally serve as sufficient evidence of the borrower's performance. An evaluation of the borrower's current creditworthiness is used to assess whether the borrower has the capacity to repay the loan under the modified terms. This evaluation includes an estimate of expected cash flows, evidence of strong financial position, and estimates of the value of collateral, if applicable
Impaired Financing Receivable, Policy [Policy Text Block]	Impaired Loans - Impaired loans consist of corporate non-accrual loans and restructured loans in accordance with applicable authoritative accounting guidance. With the exception of loans that were restructured and still accruing interest, a loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all contractual principal and interest due according to the terms of the loan agreement. Loans deemed to be impaired are classified as non-accrual and are exclusive of smaller homogeneous loans, such as home equity, installment, and 1-4 family mortgages. When a loan is designated as impaired, any subsequent principal and interest payments received are applied to the principal on the loan. Future interest income may only be recorded on a cash basis after recovery of principal is reasonably assured. Certain impaired loans with balances under a specified threshold are not individually evaluated for impairment. For all other impaired loans, impairment is measured by estimating the value of the loan based on the present value of expected future cash flows discounted at the loan's initial effective interest rate or the fair value of the underlying collateral less costs to sell, if repayment of the loan is collateral-dependent. The Company evaluates the collectability of both principal and interest when assessing the need for loss accrual. All impaired loans are included in non-performing assets. Purchased credit impaired loans are not reported as impaired loans provided that they continue to perform in accordance with expected cash flows
Loans and Leases Receivable, Past Due Status, Policy [Policy Text Block]	90-Day Past Due Loans - 90 days or more past due loans are loans for which principal or interest payments become 90 days or more past due, but that still accrue interest. The Company continues to accrue interest if it determines these loans are well secured and in the process of collection.
Loans and Leases Receivable, Allowance for Loan Losses Policy [Policy Text Block]	Allowance for Credit Losses - The allowance for credit losses is comprised of the allowance for loan losses and the reserve for unfunded commitments and is maintained by management at a level believed adequate to absorb estimated losses inherent in the existing loan portfolio. Determination of the allowance for credit losses is inherently subjective, as it requires significant estimates, including the amounts and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience, consideration of current economic trends, and other factors, all of which may be susceptible to significant change. The allowance for loan losses takes into consideration such internal and external qualitative factors as changes in the nature, volume, size, and current risk characteristics of the loan portfolio; an assessment of individual problem loans; actual and anticipated loss experience; current economic conditions that affect the borrower's ability to pay; and other pertinent factors. Credit exposures deemed to be uncollectible are charged-off against the allowance for loan losses, while recoveries of amounts previously charged-off are credited to the allowance for loan losses. Additions to the allowance for loan losses are established through the provision for loan losses charged to expense. The amount charged to operating expense in any given period is dependent upon a number of factors including historic loan growth, changes in the composition of the loan portfolio, net charge-off levels, and the Company's assessment of the allowance for loan losses based on the methodology discussed below. The allowance for loan losses consists of (i) specific reserves established for probable losses on individual loans for which the recorded investment in the loan exceeds the value of the loan, (ii) an allowance based on historical credit loss experience for each loan category, and (iii) the impact of other internal and external qualitative factors. The specific reserves component of the allowance for loan losses is based on a periodic analysis of impaired loans exceeding a fixed dollar amount where the internal credit rating is at or below a predetermined classification, as well as other loans regardless of internal credit rating that management believes are subject to a higher risk of loss. The value of the loan is measured based on the present value of expected future cash flows, discounted at the loan's initial effective interest rate, or the fair value of the underlying collateral less costs to sell, if repayment of the loan is collateral-dependent. If the resulting amount is less than the recorded book value, the Company either establishes a valuation allowance (i.e., a specific reserve) as a component of the allowance for loan losses or charges-off the impaired balance if it determines that such amount is a confirmed loss. The component of the allowance for loan losses based on historical credit loss experience is determined using a loss migration analysis that examines actual loss experience over a rolling 8-quarter period and, for corporate loans, the related internal rating of loans charged-off. The loss migration analysis is performed quarterly and loss factors are updated regularly based on actual experience. The loss component based upon historical loss experience is then adjusted for management's estimate of those losses inherent in the loan portfolio that have yet to be manifested in historical charge-off experience. Management takes into consideration many internal and external qualitative factors when estimating this adjustment, including: Changes in the composition of the loan portfolio and trends in volume and terms of loans, as well as trends in delinquent and non-accrual loans that could indicate historical averages do not reflect current conditions; Changes in credit policies and procedures, including underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses; Changes in the experience, ability, and depth of credit management and other relevant staff; Changes in the quality of the Company's loan review system and Board oversight; The existence and effect of any concentration of credit, and changes in the level of concentrations, whether it is by market, loan type, or risk taking; Changes in the value of underlying collateral for collateral-dependent loans; Changes in the national and local economy that affect the collectability of the portfolio, including the condition of various market segments; and The effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the Company's existing portfolio. The Company also maintains a reserve for unfunded credit commitments, including letters of credit, to provide for the risk of loss inherent in these arrangements. The reserve for unfunded credit commitments is computed based on a loss migration analysis similar to that used to determine the allowance for loan losses, taking into consideration probabilities of future funding requirements. This reserve for unfunded commitments is included in other liabilities in the Consolidated Statements of Financial Condition. The establishment of the allowance for credit losses involves a high degree of judgment and includes a level of imprecision given the difficulty of identifying all of the factors impacting loan repayment and the timing of when losses actually occur. While management utilizes its best judgment and information available, the ultimate adequacy of the allowance for credit losses is dependent upon a variety of factors beyond the Company's control, including the performance of its loan portfolio, the economy, changes in interest rates and property values, and the interpretation by regulatory authorities of loan risk classifications. While each component of the allowance for credit losses is determined separately, the entire balance is available for the entire loan portfolio

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Note 11 - Commitments Guarantees, and Contingent Liabilities

6 Months Ended

Jun. 30, 2011

Commitments Contingencies and Guarantees [Text Block]

11.  COMMITMENTS, GUARANTEES, AND CONTINGENT LIABILITIES

Credit Commitments and Guarantees

In the normal course of business, the Company enters into a variety of financial instruments with off-balance sheet risk to meet the financing needs of its customers and to conduct lending activities. These instruments include commitments to extend credit and standby and commercial letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Statements of Financial Condition.

Contractual or Notional Amounts of Financial Instruments

(Dollar amounts in thousands)

	June 30, 2011		December 31, 2010
Commitments to extend credit:
Home equity lines	$	271,138	$	275,826
Credit card lines to businesses		28,129		26,376
1-4 family real estate construction		26,159		26,682
Commercial real estate		158,092		175,608
Commercial and industrial		568,553		553,168
Overdraft protection program (1)		177,344		169,824
All other commitments		132,096		97,299
Total commitments	$	1,361,511	$	1,324,783
Letters of credit:
1-4 family real estate construction	$	10,608	$	10,551
Commercial real estate		50,104		54,896
All other		74,194		74,594
Total letters of credit	$	134,906	$	140,041
Unamortized fees associated with letters of credit (2) (3)	$	759	$	696
Remaining weighted-average term (in months)		10.1		12.2
Remaining lives (in years)	0.1 to 4.5		0.1 to 9.5
Recourse on securitized assets:
Unpaid principal balance of assets securitized	$	7,301	$	7,424
Cap on recourse obligation	$	2,208	$	2,208
Carrying value of recourse obligation (2)	$	148	$	148

(1)	Federal regulation regarding electronic fund transfers require consumers to affirmatively consent to the institution’s overdraft service for automated teller machine and one-time debit card transactions before overdraft fees may be assessed on the account. Consumers are provided a specific line for the amount they may overdraw.
(2)	Included in other liabilities in the Consolidated Statements of Financial Condition.
(3)	The Company will amortize these amounts into income over the commitment period.

Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party and are most often issued in favor of a municipality where construction is taking place to ensure the borrower adequately completes the construction.

The maximum potential future payments guaranteed by the Company under standby letters of credit arrangements are equal to the contractual amount of the commitment. If a commitment is funded, the Company may seek recourse through the liquidation of the underlying collateral including real estate, production plants and property, marketable securities, or cash.

Pursuant to the securitization of certain 1-4 family mortgage loans in 2004, the Company is contractually obligated to repurchase at recorded value any non-performing loans, defined as loans past due greater than 90 days. According to the securitization agreement, the Company’s recourse obligation will end on November 30, 2011.

Repurchases and Charge-Offs of Recourse Loans

(Dollar amounts in thousands)

	Quarters Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Recourse loans repurchased during the period	$	-	$	114	$	-	$	114
Recourse loans charged-off during the period	$	-	$	36	$	-	$	36

Legal Proceedings

As of June 30, 2011, there were certain legal proceedings pending against the Company and its subsidiaries in the ordinary course of business. The Company does not believe that liabilities, individually or in the aggregate, arising from these proceedings, if any, would have a material adverse effect on the consolidated financial condition of the Company as of June 30, 2011.

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Note 9 - Income Taxes (Detail) - Income Tax (Benefit) Expense (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Income before income tax expense (benefit)	$ 13,669	$ 7,948	$ 23,917	$ 16,384
Income tax expense (benefit):
Federal income tax expense (benefit)	1,669	(244)	2,683	(282)
State income tax expense	1,172	383	188	776
Total income tax expense	$ 2,841	$ 139	$ 2,871	$ 494
Effective income tax rate	20.80%	1.70%	12.00%	3.00%

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Note 12 - Fair Value (Detail) - Carrying Value of Level 3 Securities Available-for-Sale (USD $) In Thousands	Jun. 30, 2011		Mar. 31, 2011	Jun. 30, 2010		Mar. 31, 2010	Jun. 30, 2011		Dec. 31, 2010	Jun. 30, 2010		Dec. 31, 2009
Balance at beginning of period			$ 16,193			$ 12,178			$ 14,858			$ 11,728
Total income (loss):
Included in earnings (1)		[1]		(1,049)	[1]			[1]		(3,812)	[1]
Included in earnings (1)		[1]		(1,049)	[1]			[1]		(3,812)	[1]
Included in earnings (1)		[1]		(1,049)	[1]			[1]		(3,812)	[1]
Included in other comprehensive income	294			2,535			1,629			5,748
Included in other comprehensive income	294			2,535			1,629			5,748
Included in other comprehensive income	294			2,535			1,629			5,748
Balance at end of period	16,487			13,664			16,487			13,664
Change in unrealized losses recognized in earnings relating to securities still held at end of period				$ (1,049)						$ (3,812)

[1] Included in Securities gains, net in the Consolidated Statements of Income.

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Note 4 - Loans

6 Months Ended

Jun. 30, 2011

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

4.  LOANS

Loan Portfolio

(Dollar amounts in thousands)

	June 30, 2011		December 31, 2010
Commercial and industrial	$	1,518,772	$	1,465,903
Agricultural		237,518		227,756
Commercial real estate:
Office, retail, and industrial		1,229,100		1,203,613
Multi-family		336,138		349,862
Residential construction		129,327		174,690
Commercial construction		146,679		164,472
Other commercial real estate		852,966		856,357
Total commercial real estate		2,694,210		2,748,994
Total corporate loans		4,450,500		4,442,653
Home equity		429,923		445,243
1-4 family mortgages		185,002		160,890
Installment loans		47,486		51,774
Total consumer loans		662,411		657,907
Total loans, excluding covered loans		5,112,911		5,100,560
Covered loans (1)		314,942		371,729
Total loans	$	5,427,853	$	5,472,289
Deferred loan fees included in total loans	$	7,965	$	8,042
Overdrawn demand deposits included in total loans	$	3,111	$	4,281

(1) For information on covered loans, refer to Note 5, “Covered Assets.”

The Company primarily lends to small and mid-sized businesses, commercial real estate customers, and consumers in the markets in which the Company operates. Within these areas, the Company diversifies its loan portfolio by loan type, industry, and borrower.

It is the Company’s policy to review each prospective credit in order to determine the appropriateness and the adequacy of security or collateral prior to making a loan. In the event of borrower default, the Company seeks recovery in compliance with state lending laws, the Company’s lending standards, and credit monitoring and remediation procedures.

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Note 3 - Securities (Tables)

6 Months Ended

Jun. 30, 2011

Marketable Securities [Text Block]

	June 30, 2011												December 31, 2010
	Amortized		Gross Unrealized							Fair			Amortized			Gross Unrealized							Fair
	Cost		Gains			Losses				Value			Cost			Gains			Losses				Value
Securities Available-for-Sale
U.S. agency securities	$	8,122		$	23		$	(32	)		$	8,113		$	18,000		$	7		$	(121	)		$	17,886
Collateralized residential mortgage obligations (“CMOs”)		373,600			3,824			(722	)			376,702			377,692			4,261			(2,364	)			379,589
Other residential mortgage-backed securities		91,539			6,290			(24	)			97,805			100,780			5,732			(61	)			106,451
Municipal securities		471,617			10,487			(2,185	)			479,919			512,063			4,728			(12,800	)			503,991
Collateralized debt obligations (“CDOs”)		49,695			-			(33,208	)			16,487			49,695			-			(34,837	)			14,858
Corporate debt securities		25,325			2,597			-				27,922			29,936			2,409			-				32,345
Equity securities:
Hedge fund investment		1,231			651			-				1,882			1,245			438			-				1,683
Other equity securities		927			117			(1	)			1,043			889			110			-				999
Total equity securities		2,158			768			( 1	)			2,925			2,134			548			-				2,682
Total	$	1,022,056		$	23,989		$	(36,172	)		$	1,009,873		$	1,090,300		$	17,685		$	(50,183	)		$	1,057,802
Securities Held-to-Maturity
Municipal securities	$	76,142		$	2,343		$	-			$	78,485		$	81,320		$	1,205		$	-			$	82,525
Trading Securities (1)											$	16,230												$	15,282

Investments Classified by Contractual Maturity Date [Table Text Block]

	June 30, 2011
	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
One year or less	$	8,301	$	7,967	$	7,010	$	7,226
One year to five years		201,321		193,222		15,137		15,603
Five years to ten years		115,597		110,947		21,468		22,129
After ten years		229,540		220,305		32,527		33,527
CMOs		373,600		376,702		-		-
Other residential mortgage-backed securities		91,539		97,805		-		-
Equity securities		2,158		2,925		-		-
Total	$	1,022,056	$	1,009,873	$	76,142	$	78,485

Realized Gain (Loss) on Investments [Table Text Block]

	Quarters Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Proceeds from sales	$	53,118		$	66,618		$	97,330		$	147,601
Gains (losses) on sales of securities:
Gross realized gains	$	1,974		$	2,367		$	2,782		$	8,187
Gross realized losses		(443	)		(112	)		(711	)		(112	)
Net realized gains on securities sales		1,531			2,255			2,071			8,075
Non-cash impairment charges
Other-than-temporary securities impairment		-			(1,581	)		-			(4,344	)
Portion of other-than-temporary impairment recognized in other comprehensive income		-			447			-			447
Net non-cash impairment charges		-			(1,134	)		-			(3,897	)
Net realized gains	$	1,531		$	1,121		$	2,071		$	4,178
Income tax expense on net realized gains	$	636		$	437		$	847		$	1,629
Trading gains (losses), net (1)	$	(2	)	$	(1,022	)	$	742		$	(561	)

Other than Temporary Impairment, Credit Losses Recognized in Earnings [Table Text Block]

	Quarter Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Cumulative amount recognized at beginning of period	$	35,589	$	33,709	$	35,589	$	30,946
Credit losses included in earnings (1)
Losses recognized on securities that previously had credit losses		-		1,048		-		3,568
Losses recognized on securities that did not previously have credit losses		-		86		-		329
Cumulative amount recognized at end of period	$	35,589	$	34,843	$	35,589	$	34,843

Unrealized Gain (Loss) on Investments [Table Text Block]

			Less Than 12 Months				12 Months or Longer				Total
	Number of Securities		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
As of June 30, 2011
U.S. agency security		1	$	3,045	$	32	$	-	$	-	$	3,045	$	32
CMOs		10		50,412		323		9,698		399		60,110		722
Other residential mortgage-backed securities		2		317		18		159		6		476		24
Municipal securities		134		17,005		582		53,943		1,603		70,948		2,185
CDOs		6		-		-		16,487		33,208		16,487		33,208
Equity security		1		-		-		30		1		30		1
Total		154	$	70,779	$	955	$	80,317	$	35,217	$	151,096	$	36,172
As of December 31, 2010
U.S. agency securities		4	$	9,096	$	120	$	-	$	1	$	9,096	$	121
CMOs		19		131,056		1,727		7,843		637		138,899		2,364
Other residential mortgage-backed securities		5		6,084		51		159		10		6,243		61
Municipal securities		479		99,537		3,142		166,403		9,658		265,940		12,800
CDOs		6		-		-		14,858		34,837		14,858		34,837
Total		513	$	245,773	$	5,040	$	189,263	$	45,143	$	435,036	$	50,183

Certain Characteristics And Metrics Of The CDOs [Text Block]

			Original		Amortized		Fair		Lowest Credit Rating Assigned to the Security				Number of Banks/		% of Banks/ Insurers Currently			Actual Deferrals and Defaults as a % of the Original			Expected Deferrals and Defaults as a % of the Remaining Performing			Excess Subordination as a % of the Remaining Performing
Number	Class		Par		Cost		Value		Moody’s		Fitch		Insurers		Performing			Collateral (1)			Collateral (1)			Collateral (2)
1		C-1	$	17,500	$	7,140	$	3,353	Ca			C		46		73.9	%		15.8	%		20.7	%		0.0	%
2		C-1		15,000		7,657		2,477	Ca			C		57		84.2	%		12.1	%		18.8	%		0.0	%
3		C-1		15,000		13,480		4,016	Ca			C		63		81.0	%		7.8	%		15.5	%		6.0	%
4		B1		15,000		13,922		4,344	Ca			C		64		59.4	%		35.0	%		23.5	%		0.0	%
5		C		10,000		1,317		212	C			C		56		60.7	%		44.6	%		28.1	%		0.0	%
6		C		6,500		6,179		2,085	Ca			C		77		68.8	%		23.1	%		12.8	%		10.5	%
7(3)		A-3L		6,750		-		-		N/A		N/A		N/A		N/A			N/A			N/A			N/A
			$	85,750	$	49,695	$	16,487

Credit Related Collateralized Debt Obligation Impairment Losses

	Quarters Ended June 30,				Six Months Ended June 30,
Number	2011		2010		2011		2010		Life-to-Date
1	$	-	$	-	$	-	$	-	$	10,360
2		-		794		-		794		7,343
3		-		-		-		-		1,159
4		-		-		-		684		1,078
5		-		254		-		2,091		8,570
6		-		-		-		242		243
7		-		-		-		-		6,750
	$	-	$	1,048	$	-	$	3,811	$	35,503

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Note 12 - Fair Value (Detail) - Financial Instruments (USD $) In Thousands	Jun. 30, 2011		Dec. 31, 2010
Financial Assets:
Cash and due from banks	$ 110,159		$ 102,495
Cash and due from banks	110,159		102,495
Interest-bearing deposits in other banks	601,310		483,281
Interest-bearing deposits in other banks	601,310		483,281
Loans held-for-sale	1,595		236
Loans held-for-sale	1,595		236
Trading securities	16,230	[1]	15,282	[1]
Securities available-for-sale	1,009,873		1,057,802
Securities held-to-maturity	76,142		81,320
Securities held-to-maturity	78,485		82,525
Loans, net of allowance for loan losses	5,290,522		5,329,717
Loans, net of allowance for loan losses	5,306,598		5,323,830
FDIC indemnification asset	95,752		95,899
FDIC indemnification asset	95,752		95,899
Accrued interest receivable	28,883		29,953
Accrued interest receivable	28,883		29,953
Investment in bank-owned life insurance	198,149		197,644
Financial Liabilities:
Deposits	6,495,549		6,511,476
Deposits	6,494,373		6,512,626
Borrowed funds	272,024		303,974
Borrowed funds	275,540		306,703
Subordinated debt	137,748		137,744
Subordinated debt	132,145		122,261
Accrued interest payable	3,650		4,557
Accrued interest payable	3,650		4,557
Derivative liabilities	1,877		1,833
Derivative liabilities	1,877		1,833
Standby letters of credit	759		696
Standby letters of credit	$ 759		$ 696

[1] Trading securities held by the Company represent diversified investment securities held in a grantor trust under deferred compensation arrangements in which plan participants may direct amounts earned to be invested in securities other than Company stock.

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Note 12 - Fair Value (Detail) - Total Amount of Loans Being Serviced for the Benefit of Others at end of Period (USD $) In Thousands	Jun. 30, 2011		Dec. 31, 2010
Total amount of loans being serviced for the benefit of others at end of period (4)	$ 88,091	[1]	$ 114,720	[1]

[1] These loans are serviced for and owned by third parties and are not included in the Consolidated Statements of Financial Condition.

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Note 4 - Loans (Detail) - Loan Portfolio (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Commercial and industrial	$ 1,518,772	$ 1,465,903
Agricultural	237,518	227,756
Commercial real estate:
Office, retail, and industrial	1,229,100	1,203,613
Multi-family	336,138	349,862
Residential construction	129,327	174,690
Commercial construction	146,679	164,472
Other commercial real estate	852,966	856,357
Total commercial real estate	2,694,210	2,748,994
Total corporate loans	4,450,500	4,442,653
Home equity	429,923	445,243
1-4 family mortgages	185,002	160,890
Installment loans	47,486	51,774
Total consumer loans	662,411	657,907
Total loans, excluding covered loans	5,112,911	5,100,560
Covered loans (1)	314,942	371,729
Total loans	5,427,853	5,472,289
Deferred loan fees included in total loans	7,965	8,042
Overdrawn demand deposits included in total loans	$ 3,111	$ 4,281

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Note 12 - Fair Value (Tables)

6 Months Ended

Jun. 30, 2011

Fair Value, Assets Measured on Recurring and Nonrecurring Basis [Table Text Block]

	June 30, 2011
	Level 1		Level 2		Level 3		Total
Assets and liabilities measured at fair value on a recurring basis
Assets:
Trading securities:
Money market funds	$	1,152	$	-	$	-	$	1,152
Mutual funds		15,078		-		-		15,078
Total trading securities		16,230		-		-		16,230
Securities available-for-sale:
U.S. agency securities		-		8,113		-		8,113
CMOs		-		376,702		-		376,702
Other residential mortgage-backed securities		-		97,805		-		97,805
Municipal securities		-		479,919		-		479,919
CDOs		-		-		16,487		16,487
Corporate debt securities		-		27,922		-		27,922
Hedge fund investment		-		1,882		-		1,882
Other equity securities		39		1,004		-		1,043
Total securities available-for-sale		39		993,347		16,487		1,009,873
Mortgage servicing rights (1)		-		-		840		840
Total assets	$	16,269	$	993,347	$	17,327	$	1,026,943
Liabilities:
Derivative liabilities (1)	$	-	$	1,877	$	-	$	1,877
Assets measured at fair value on a non-recurring basis
Collateral-dependent impaired loans (2)	$	-	$	-	$	85,101	$	85,101
OREO (3)		-		-		38,990		38,990
Loan held-for-sale (4)		-		-		1,595		1,595
Asset held-for-sale (5)		-		-		7,928		7,928
Total assets	$	-	$	-	$	133,614	$	133,614

	December 31, 2010
	Level 1		Level 2		Level 3		Total
Assets and liabilities measured at fair value on a recurring basis
Assets:
Trading securities:
Money market funds	$	1,196	$	-	$	-	$	1,196
Mutual funds		14,086		-		-		14,086
Total trading securities		15,282		-		-		15,282
Securities available-for-sale:
U.S. agency securities		-		17,886		-		17,886
CMOs		-		379,589		-		379,589
Other residential mortgage-backed securities		-		106,451		-		106,451
Municipal securities		-		503,991		-		503,991
CDOs		-		-		14,858		14,858
Corporate debt securities		-		32,345		-		32,345
Hedge fund investment		-		1,683		-		1,683
Other equity securities		38		961		-		999
Total securities available-for-sale		38		1,042,906		14,858		1,057,802
Mortgage servicing rights (1)		-		-		942		942
Total assets	$	15,320	$	1,042,906	$	15,800	$	1,074,026
Liabilities:
Derivative liabilities (1)	$	-	$	1,833	$	-	$	1,833
Assets measured at fair value on a non-recurring basis
Collateral-dependent impaired loans (2)	$	-	$	-	$	125,258	$	125,258
OREO (3)		-		-		53,439		53,439
Total assets	$	-	$	-	$	178,697	$	178,697

Collateralized Residential Mortgage Obligations [Text Block]

	Collateralized Mortgage Obligations			Other Mortgage- Backed Securities
Weighted-average coupon rate		4.9	%		5.3	%
Weighted-average maturity (in years)		2.4			4.4
Information on underlying residential mortgages:
Origination dates	2000 to 2010			2000 to 2010
Weighted-average coupon rate		5.8	%		5.8	%
Weighted-average maturity (in years)		9.1			7.4

Carrying Value of Level 3 Securities Available For Sale [Text Block]

	Quarters Ended June 30,					Six Months Ended June 30,
	2011		2010			2011		2010
Balance at beginning of period	$	16,193	$	12,178		$	14,858	$	11,728
Total income (loss):
Included in earnings (1)		-		(1,049	)		-		(3,812	)
Included in other comprehensive income		294		2,535			1,629		5,748
Balance at end of period	$	16,487	$	13,664		$	16,487	$	13,664
Change in unrealized losses recognized in earnings relating to securities still held at end of period	$	-	$	(1,049	)	$	-	$	(3,812	)

Carrying Value of Mortgage Servicing Rights [Text Block]

	Quarters Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Balance at beginning of period	$	845		$	1,197		$	942		$	1,238
Total (losses) gains included in earnings (1):
Due to changes in valuation inputs and assumptions (2)		28			(2	)		(10	)		23
Other changes in fair value (3)		(33	)		(62	)		(92	)		(128	)
Balance at end of period	$	840		$	1,133		$	840		$	1,133
Key economic assumptions used in measuring fair value, at end of period:
Weighted-average prepayment speed		18.7	%		16.1	%		18.7	%		16.1	%
Weighted-average discount rate		11.5	%		11.4	%		11.5	%		11.4	%
Weighted-average maturity, in months		198.5			205.8			198.5			205.8
Contractual servicing fees earned during the period (1)	$	60		$	74		$	123		$	158

Total Amount Of Loans Being Serviced For The Benefit Of Others At End Of Period [Text Block]

	June 30, 2011		December 31, 2010
Total amount of loans being serviced for the benefit of others at end of period (4)	$	88,091	$	114,720

Fair Value, Assets and Liabilities Measured on Nonrecurring Basis [Table Text Block]

	Quarter Ended  June 30, 2011				Six Months Ended June 30, 2011
	Charged to Allowance for Loan Losses		Charged to Earnings		Charged to Allowance for Loan Losses		Charged to Earnings
Collateral-dependent impaired loans	$	19,459	$	-	$	36,269	$	-
OREO		-		1,523		-		2,635
Loans held-for-sale		-		-		200		-
Assets held-for-sale		-		286		-		596

Fair Value, by Balance Sheet Grouping [Table Text Block]

	June 30, 2011				December 31, 2010
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial Assets:
Cash and due from banks	$	110,159	$	110,159	$	102,495	$	102,495
Interest-bearing deposits in other banks		601,310		601,310		483,281		483,281
Loans held-for-sale		1,595		1,595		236		236
Trading securities		16,230		16,230		15,282		15,282
Securities available-for-sale		1,009,873		1,009,873		1,057,802		1,057,802
Securities held-to-maturity		76,142		78,485		81,320		82,525
Loans, net of allowance for loan losses		5,290,522		5,306,598		5,329,717		5,323,830
FDIC indemnification asset		95,752		95,752		95,899		95,899
Accrued interest receivable		28,883		28,883		29,953		29,953
Investment in bank-owned life insurance		198,149		198,149		197,644		197,644
Financial Liabilities:
Deposits	$	6,495,549	$	6,494,373	$	6,511,476	$	6,512,626
Borrowed funds		272,024		275,540		303,974		306,703
Subordinated debt		137,748		132,145		137,744		122,261
Accrued interest payable		3,650		3,650		4,557		4,557
Derivative liabilities		1,877		1,877		1,833		1,833
Standby letters of credit		759		759		696		696

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Consolidated Statements Of Changes In Stockholders’ Equity (USD $) In Thousands, except Share data	Total	Common Stock [Member]	Preferred Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Treasury Stock [Member]
Balance Beginning at Dec. 31, 2009	$ 941,521	$ 670	$ 190,233	$ 252,322	$ 810,626	$ (18,666)	$ (293,664)
Balance Beginning (in Shares) at Dec. 31, 2009		54,793
Net income	15,890				15,890
Other comprehensive income (1):
Unrealized gains on securities	5,863					5,863
Total comprehensive income	21,753
Common dividends declared ($0.02 per common share)	(1,481)				(1,481)
Preferred dividends declared ($25.00 per preferred share)	(4,825)				(4,825)
Accretion on preferred stock			320		(320)
Issuance of common stock	196,045	188		195,857
Issuance of common stock (in Shares)		18,818
Share-based compensation expense	2,871			2,871
Restricted stock activity	(375)			(15,386)			15,011
Restricted stock activity (in Shares)		441
Treasury stock (purchased for) issued to benefit plans	3			(59)			62
Treasury stock (purchased for) issued to benefit plans (in Shares)		(3)
Balance Ending at Jun. 30, 2010	1,155,512	858	190,553	435,605	819,890	(12,803)	(278,591)
Balance Ending (in Shares) at Jun. 30, 2010		74,049
Balance Beginning at Dec. 31, 2010	1,112,045	858	190,882	437,550	787,678	(27,739)	(277,184)
Balance Beginning (in Shares) at Dec. 31, 2010	74,096,000	74,096
Net income	21,046				21,046
Other comprehensive income (1):
Unrealized gains on securities	12,400					12,400
Total comprehensive income	33,446
Common dividends declared ($0.02 per common share)	(1,489)				(1,489)
Preferred dividends declared ($25.00 per preferred share)	(4,825)				(4,825)
Accretion on preferred stock			338		(338)
Share-based compensation expense	3,354			3,354
Restricted stock activity	(932)			(15,977)			15,045
Restricted stock activity (in Shares)		381
Treasury stock (purchased for) issued to benefit plans	(8)			(50)			42
Treasury stock (purchased for) issued to benefit plans (in Shares)		(4)
Balance Ending at Jun. 30, 2011	$ 1,141,591	$ 858	$ 191,220	$ 424,877	$ 802,072	$ (15,339)	$ (262,097)
Balance Ending (in Shares) at Jun. 30, 2011	74,473,000	74,473

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Note 4 - Loans (Tables)

6 Months Ended

Jun. 30, 2011

Composition Of Loan Portfolio [Text Block]

	June 30, 2011		December 31, 2010
Commercial and industrial	$	1,518,772	$	1,465,903
Agricultural		237,518		227,756
Commercial real estate:
Office, retail, and industrial		1,229,100		1,203,613
Multi-family		336,138		349,862
Residential construction		129,327		174,690
Commercial construction		146,679		164,472
Other commercial real estate		852,966		856,357
Total commercial real estate		2,694,210		2,748,994
Total corporate loans		4,450,500		4,442,653
Home equity		429,923		445,243
1-4 family mortgages		185,002		160,890
Installment loans		47,486		51,774
Total consumer loans		662,411		657,907
Total loans, excluding covered loans		5,112,911		5,100,560
Covered loans (1)		314,942		371,729
Total loans	$	5,427,853	$	5,472,289
Deferred loan fees included in total loans	$	7,965	$	8,042
Overdrawn demand deposits included in total loans	$	3,111	$	4,281

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Note 6 - Past Due Loans, Allowance For Credit Losses, and Impaired Loans (Detail) - Allowance for Credit Losses (USD $) In Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Balance at beginning of period	$ 145,003	$ 144,824	$ 145,072	$ 144,808
Balance at end of period	139,831	145,477	139,831	145,477
Allowance for loan losses	137,331	145,027	137,331	145,027
Reserve for unfunded commitments	2,500	450	2,500	450
Total allowance for credit losses	139,831	145,477	139,831	145,477
Loans charged-off	(27,748)	(24,732)	(49,317)	(44,729)
Recoveries of loans previously charged-off	3,813	3,859	5,821	5,522
Net loans charged-off	(23,935)	(20,873)	(43,496)	(39,207)
Provision for loan losses	$ 18,763	$ 21,526	$ 38,255	$ 39,876

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Note 6 - Past Due Loans, Allowance For Credit Losses, and Impaired Loans (Tables)

6 Months Ended

Jun. 30, 2011

Past Due Financing Receivables [Table Text Block]

	Aging Analysis (Accruing and Non-accrual)										Non-performing Loans
	Current		30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Total Loans		Non-accrual Loans		90 Days Past Due Loans, Still Accruing Interest
June 30, 2011
Commercial and industrial	$	1,478,587	$	11,349	$	28,836	$	40,185	$	1,518,772	$	44,393	$	2,095
Agricultural		236,492		17		1,009		1,026		237,518		1,009		-
Commercial real estate:
Office, retail, and industrial		1,207,733		5,135		16,232		21,367		1,229,100		16,567		303
Multi-family		313,949		16,149		6,040		22,189		336,138		23,385		557
Residential construction		104,237		5,297		19,793		25,090		129,327		23,576		-
Commercial construction		125,230		-		21,449		21,449		146,679		21,449		-
Other commercial real estate		815,924		3,993		33,049		37,042		852,966		36,984		464
Total commercial real estate		2,567,073		30,574		96,563		127,137		2,694,210		121,961		1,324
Total corporate loans		4,282,152		41,940		126,408		168,348		4,450,500		167,363		3,419
Home equity		415,463		6,750		7,710		14,460		429,923		5,519		2,392
1-4 family mortgages		177,785		2,278		4,939		7,217		185,002		4,577		656
Installment loans		46,880		535		71		606		47,486		36		35
Total consumer loans		640,128		9,563		12,720		22,283		662,411		10,132		3,083
Total loans, excluding covered loans		4,922,280		51,503		139,128		190,631		5,112,911		177,495		6,502
Covered loans		217,069		26,180		71,693		97,873		314,942		3,588		68,324
Total loans	$	5,139,349	$	77,683	$	210,821	$	288,504	$	5,427,853	$	181,083	$	74,826
December 31, 2010
Commercial and industrial	$	1,428,841	$	7,706	$	29,356	$	37,062	$	1,465,903	$	50,088	$	1,552
Agricultural		225,007		65		2,684		2,749		227,756		2,497		187
Commercial real estate:
Office, retail, and industrial		1,183,952		4,009		15,652		19,661		1,203,613		19,573		-
Multi-family		345,018		2,811		2,033		4,844		349,862		6,203		-
Residential construction		139,499		1,320		33,871		35,191		174,690		52,122		200
Commercial construction		140,044		4,000		20,428		24,428		164,472		28,685		-
Other commercial real estate		813,333		9,091		33,933		43,024		856,357		40,605		345
Total commercial real estate		2,621,846		21,231		105,917		127,148		2,748,994		147,188		545
Total corporate loans		4,275,694		29,002		137,957		166,959		4,442,653		199,773		2,284
Home equity		431,446		4,715		9,082		13,797		445,243		7,948		1,870
1-4 family mortgages		154,999		2,523		3,368		5,891		160,890		3,902		4
Installment loans		50,899		742		133		875		51,774		159		86
Total consumer loans		637,344		7,980		12,583		20,563		657,907		12,009		1,960
Total loans, excluding covered loans		4,913,038		36,982		150,540		187,522		5,100,560		211,782		4,244
Covered loans		268,934		18,445		84,350		102,795		371,729		-		84,350
Total loans	$	5,181,972	$	55,427	$	234,890	$	290,317	$	5,472,289	$	211,782	$	88,594

Allowance for Credit Losses on Financing Receivables [Table Text Block]

	Quarters Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Balance at beginning of period	$	145,003		$	144,824		$	145,072		$	144,808
Loans charged-off		(27,748	)		(24,732	)		(49,317	)		(44,729	)
Recoveries of loans previously charged-off		3,813			3,859			5,821			5,522
Net loans charged-off		(23,935	)		(20,873	)		(43,496	)		(39,207	)
Provision for loan losses		18,763			21,526			38,255			39,876
Balance at end of period	$	139,831		$	145,477		$	139,831		$	145,477
Allowance for loan losses	$	137,331		$	145,027		$	137,331		$	145,027
Reserve for unfunded commitments		2,500			450			2,500			450
Total allowance for credit losses	$	139,831		$	145,477		$	139,831		$	145,477

Schedule of Credit Losses Related to Financing Receivables, Current and Noncurrent [Table Text Block]

	Commercial, Industrial, and Agricultural			Office, Retail, and Industrial			Multi- Family			Residential Construction			Other Commercial Real Estate			Consumer			Covered Loans			Total Allowance
Six Months ended June 30, 2011
Balance at beginning of period	$	49,545		$	20,758		$	3,996		$	27,933		$	29,869		$	12,971		$	-		$	145,072
Loans charged-off		(11,877	)		(1,846	)		(7,201	)		(9,083	)		(8,331	)		(5,779	)		(5,200	)		(49,317	)
Recoveries of loans previously charged-off		2,356			54			-			2,766			472			173			-			5,821
Net loans charged-off		(9,521	)		(1,792	)		(7,201	)		(6,317	)		(7,859	)		(5,606	)		(5,200	)		(43,496	)
Provision for loan losses		8,510			(2,104	)		12,080			2,711			5,425			6,433			5,200			38,255
Balance at end of period	$	48,534		$	16,862		$	8,875		$	24,327		$	27,435		$	13,798		$	-		$	139,831
Six Months ended June 30, 2010
Balance at beginning of period	$	54,452		$	20,164		$	4,555		$	33,078		$	21,084		$	11,475		$	-		$	144,808
Loans charged-off		(11,919	)		(4,229	)		(1,359	)		(14,605	)		(6,483	)		(5,483	)		(651	)		(44,729	)
Recoveries of loans previously charged-off		4,090			232			362			159			142			537			-			5,522
Net loans charged-off		(7,829	)		(3,997	)		( 997	)		(14,446	)		(6,341	)		(4,946	)		( 651	)		(39,207	)
Provision for loan losses		11,526			7,838			2,106			3,883			7,634			6,238			651			39,876
Balance at end of period	$	58,149		$	24,005		$	5,664		$	22,515		$	22,377		$	12,767		$	-		$	145,477

Impaired Loans [Text Block]

	June 30, 2011		December 31, 2010
Impaired loans individually evaluated for impairment:
Impaired loans with a related allowance for credit losses (1)	$	23,362	$	13,790
Impaired loans with no specific related allowance (2)		129,225		173,534
Total impaired loans individually evaluated for impairment		152,587		187,324
Corporate non-accrual loans not individually evaluated for impairment (3)		14,776		12,449
Total corporate non-accrual loans		167,363		199,773
Restructured loans, still accruing interest		14,529		22,371
Total impaired loans	$	181,892	$	222,144
Valuation allowance related to impaired loans	$	9,504	$	6,343

Loans and Related Allowance for Credit Losses by Portfolio Segment [Text Block]

	Loans						Allowance For Credit Losses
	Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total		Individually Evaluated For Impairment		Collectively Evaluated For Impairment		Total
June 30, 2011
Commercial, industrial, and agricultural	$	36,529	$	1,719,761	$	1,756,290	$	4,265	$	44,269	$	48,534
Commercial real estate:
Office, retail, and industrial		15,316		1,213,784		1,229,100		-		16,862		16,862
Multi-family		22,572		313,566		336,138		-		8,875		8,875
Residential construction		22,510		106,817		129,327		251		24,076		24,327
Other commercial real estate		55,660		943,985		999,645		4,988		22,447		27,435
Total commercial real estate		116,058		2,578,152		2,694,210		5,239		72,260		77,499
Total corporate loans		152,587		4,297,913		4,450,500		9,504		116,529		126,033
Consumer		-		662,411		662,411		-		13,798		13,798
Total	$	152,587	$	4,960,324	$	5,112,911	$	9,504	$	130,327	$	139,831
December 31, 2010
Commercial, industrial, and agricultural	$	43,365	$	1,650,294	$	1,693,659	$	2,650	$	46,895	$	49,545
Commercial real estate:
Office, retail, and industrial		18,076		1,185,537		1,203,613		-		20,758		20,758
Multi-family		5,696		344,166		349,862		497		3,499		3,996
Residential construction		51,269		123,421		174,690		-		27,933		27,933
Other commercial real estate		68,918		951,911		1,020,829		3,196		26,673		29,869
Total commercial real estate		143,959		2,605,035		2,748,994		3,693		78,863		82,556
Total corporate loans		187,324		4,255,329		4,442,653		6,343		125,758		132,101
Consumer		-		657,907		657,907		-		12,971		12,971
Total	$	187,324	$	4,913,236	$	5,100,560	$	6,343	$	138,729	$	145,072

Impaired Financing Receivables [Table Text Block]

	June 30, 2011								December 31, 2010
	Recorded Investment In								Recorded Investment In
	Loans with No Specific Related Allowance		Loans with a Related Allowance for Credit Losses		Unpaid Principal Balance		Allowance for Credit Losses Allocated		Loans with No Specific Related Allowance		Loans with a Related Allowance for Credit Losses		Unpaid Principal Balance		Allowance for Credit Losses Allocated
Commercial and industrial	$	25,326	$	10,807	$	44,016	$	4,265	$	40,715	$	2,650	$	53,353	$	2,650
Agricultural		396		-		469		-		2,447		-		2,982		-
Commercial real estate:
Office, retail, and industrial		15,316		-		23,505		-		18,076		-		26,193		-
Multi-family		22,572		-		31,922		-		4,565		1,131		7,322		497
Residential construction		19,358		3,152		63,081		251		51,269		-		129,698		-
Commercial construction		20,889		399		28,818		178		28,685		-		38,404		-
Other commercial real estate		25,368		9,004		55,627		4,810		27,777		10,009		60,465		3,196
Total commercial real estate		103,503		12,555		202,953		5,239		130,372		11,140		262,082		3,693
Total impaired loans individually evaluated for impairment	$	129,225	$	23,362	$	247,438	$	9,504	$	173,534	$	13,790	$	318,417	$	6,343

Impaired Financing Receivables Continued [Table Text Block]

	Six Months Ended June 30, 2011				Six Months Ended June 30, 2010
	Average Recorded Investment Balance		Interest Income Recognized (1)		Average Recorded Investment Balance		Interest Income Recognized (1)
Commercial and industrial	$	51,863	$	10	$	31,934	$	83
Agricultural		1,796		-		1,862		-
Commercial real estate:
Office, retail, and industrial		18,989		21		20,987		7
Multi-family		4,736		2		9,172		-
Residential construction		41,455		27		100,110		75
Commercial construction		25,191		-		20,209		-
Other commercial real estate		37,968		18		25,967		-
Total commercial real estate		128,339		68		176,445		82
Total impaired loans individually evaluated for impairment	$	181,998	$	78	$	210,241	$	165

Financing Receivable Credit Quality Indicators [Table Text Block]

	Pass		Special Mention (1)		Substandard / Accrual (2)		Substandard / Non-accrual (3)		Total
June 30, 2011
Commercial and industrial	$	1,337,553	$	77,305	$	59,521	$	44,393	$	1,518,772
Agricultural		223,260		13,249		-		1,009		237,518
Commercial real estate:
Office, retail, and industrial		1,058,059		113,657		40,817		16,567		1,229,100
Multi-family		290,077		7,213		15,463		23,385		336,138
Residential construction		48,344		27,305		30,102		23,576		129,327
Commercial construction		72,237		34,291		18,702		21,449		146,679
Other commercial real estate		712,785		82,614		20,583		36,984		852,966
Total commercial real estate		2,181,502		265,080		125,667		121,961		2,694,210
Total corporate loans	$	3,742,315	$	355,634	$	185,188	$	167,363	$	4,450,500
December 31, 2010
Commercial and industrial	$	1,303,142	$	83,259	$	29,414	$	50,088	$	1,465,903
Agricultural		209,317		15,667		275		2,497		227,756
Commercial real estate:
Office, retail, and industrial		1,026,124		123,800		34,116		19,573		1,203,613
Multi-family		307,845		20,643		15,171		6,203		349,862
Residential construction		57,209		35,950		29,409		52,122		174,690
Commercial construction		85,305		35,750		14,732		28,685		164,472
Other commercial real estate		697,971		89,247		28,534		40,605		856,357
Total commercial real estate		2,174,454		305,390		121,962		147,188		2,748,994
Total corporate loans	$	3,686,913	$	404,316	$	151,651	$	199,773	$	4,442,653

Financing Receivable Credit Quality Indicators (Continued) [Table Text Block]

	Performing		Non-accrual		Total
June 30, 2011
Home equity	$	424,404	$	5,519	$	429,923
1-4 family mortgages		180,425		4,577		185,002
Installment loans		47,450		36		47,486
Total consumer loans	$	652,279	$	10,132	$	662,411
December 31, 2010
Home equity	$	437,295	$	7,948	$	445,243
1-4 family mortgages		156,988		3,902		160,890
Installment loans		51,615		159		51,774
Total consumer loans	$	645,898	$	12,009	$	657,907

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Consolidated Statements Of Cash Flows (USD $) In Thousands	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Net cash provided by operating activities	$ 100,402	$ 101,048
Proceeds from maturities, repayments, and calls of securities available-for-sale	135,320	113,918
Proceeds from sales of securities available-for-sale	97,330	147,601
Purchases of securities available-for-sale	(167,174)	(64,352)
Proceeds from maturities, repayments, and calls of securities held-to-maturity	35,497	33,530
Purchases of securities held-to-maturity	(30,319)	(32,185)
Redemption (purchase) of Federal Reserve Bank stock	3,151	(3,000)
Net increase in loans	(17,785)	(76,222)
Proceeds from claims on BOLI	6	160
Proceeds from sales of OREO	21,435	30,800
Proceeds from sales of premises, furniture, and equipment	5,526	7
Purchases of premises, furniture, and equipment	(2,483)	(7,459)
Net cash proceeds received in an FDIC-assisted transaction		26,609
Net cash provided by investing activities	80,504	169,407
Net (decrease) increase in deposit accounts	(15,927)	153,987
Net decrease in borrowed funds	(31,950)	(367,474)
Proceeds from the issuance of common stock		196,045
Cash dividends paid	(6,310)	(6,114)
Restricted stock activity	(1,100)	(1,004)
Excess tax benefit (expense) related to share-based compensation	74	(194)
Net cash used in financing activities	(55,213)	(24,754)
Net increase in cash and cash equivalents	125,693	245,701
Cash and cash equivalents at beginning of period	585,776	127,379
Cash and cash equivalents at end of period	711,469	373,080
Non-cash transfers of loans to OREO	13,477	58,019
Non-cash transfer of loans held-for-investment to loans held-for-sale	5,395
Non-cash transfer of OREO to premises, furniture, and equipment	841	9,455
Dividends declared but unpaid	$ 746	$ 741

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Note 9 - Income Taxes

6 Months Ended

Jun. 30, 2011

Income Tax Disclosure [Text Block]

9.  INCOME TAXES

Income Tax Expense

(Dollar amounts in thousands)

	Quarters Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Income before income tax expense (benefit)	$	13,669		$	7,948		$	23,917		$	16,384
Income tax expense (benefit):
Federal income tax expense (benefit)	$	1,669		$	(244	)	$	2,683		$	(282	)
State income tax expense		1,172			383			188			776
Total income tax expense	$	2,841		$	139		$	2,871		$	494
Effective income tax rate		20.8	%		1.7	%		12.0	%		3.0	%

Federal income tax expense (benefit) and the related effective income tax rate are primarily influenced by the amount of tax-exempt income derived from investment securities and bank-owned life insurance in relation to pre-tax income. State income tax expense and the related effective tax rate are influenced by state tax rules relating to consolidated/combined reporting and sourcing of income and expense.

Income tax expense increased for both second quarter 2011 and the first six months of 2011 compared to the same periods in 2010. The increases resulted from an increase in pre-tax income in the 2011 periods over that of the prior periods, as well as decreases in tax-exempt income and the impacts of the Illinois tax law change described below.

Effective January 1, 2011, the Illinois corporate income tax rate increased from 7.3% to 9.5%. This rate increase resulted in additional state tax expense of $155,000 for second quarter 2011 and $263,000 for the six months ended June 30, 2011. Also, as a result of this rate change, the Company recorded a $1.6 million state tax benefit in first quarter 2011 related to the write-up of state deferred tax assets.

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Note 9 - Income Taxes (Detail) (USD $)	3 Months Ended		6 Months Ended	12 Months Ended
	Jun. 30, 2011	Mar. 31, 2011	Jun. 30, 2011	Dec. 31, 2010
State Corporate Income Tax Rate			9.50%	7.30%
Additional State Tax Expense	$ 155,000		$ 263,000
Other Tax Expense (Benefit)		$ 1,600,000

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Note 12 - Fair Value (Detail) - Fair Value Measurements (USD $) In Thousands	Jun. 30, 2011		Dec. 31, 2010
Trading securities:
Total trading securities	$ 16,230	[1]	$ 15,282	[1]
Securities available-for-sale:
Total securities available-for-sale	1,009,873		1,057,802
Liabilities:
Derivative liabilities	1,877		1,833
Level1 [Member]
Trading securities:
Money market funds	1,152		1,196
Mutual funds	15,078		14,086
Total trading securities	16,230		15,282
Securities available-for-sale:
Other equity securities	39		38
Total securities available-for-sale	39		38
Mortgage servicing rights		[2]		[2]
Total assets recurring	16,269		15,320
Liabilities:
Derivative liabilities		[2]		[2]
Assets measured at fair value on a non-recurring basis
Collateral-dependent impaired loans		[3]		[3]
Other real estate owned		[4]		[4]
Loan held-for-sale (4)		[5]
Asset held-for-sale (5)		[6]
Level2 [Member]
Securities available-for-sale:
U.S. agency securities	8,113		17,886
Collateralized residential mortgage obligations	376,702		379,589
Other residential mortgage-backed securities	97,805		106,451
State and municipal securities	479,919		503,991
Corporate debt securities	27,922		32,345
Hedge fund investment	1,882		1,683
Other equity securities	1,004		961
Total securities available-for-sale	993,347		1,042,906
Mortgage servicing rights		[2]		[2]
Total assets recurring	993,347		1,042,906
Liabilities:
Derivative liabilities	1,877	[2]	1,833	[2]
Assets measured at fair value on a non-recurring basis
Collateral-dependent impaired loans		[3]		[3]
Other real estate owned		[4]		[4]
Loan held-for-sale (4)		[5]
Asset held-for-sale (5)		[6]
Level3 [Member]
Securities available-for-sale:
Collateralized debt obligations	16,487		14,858
Total securities available-for-sale	16,487		14,858
Mortgage servicing rights	840	[2]	942	[2]
Total assets recurring	17,327		15,800
Liabilities:
Derivative liabilities		[2]		[2]
Assets measured at fair value on a non-recurring basis
Collateral-dependent impaired loans	85,101	[3]	125,258	[3]
Other real estate owned	38,990	[4]	53,439	[4]
Loan held-for-sale (4)	1,595	[5]
Asset held-for-sale (5)	7,928	[6]
Total assets non-recurring	133,614		178,697
Total [Member]
Trading securities:
Money market funds	1,152		1,196
Mutual funds	15,078		14,086
Total trading securities	16,230		15,282
Securities available-for-sale:
U.S. agency securities	8,113		17,886
Collateralized residential mortgage obligations	376,702		379,589
Other residential mortgage-backed securities	97,805		106,451
State and municipal securities	479,919		503,991
Collateralized debt obligations	16,487		14,858
Corporate debt securities	27,922		32,345
Hedge fund investment	1,882		1,683
Other equity securities	1,043		999
Total securities available-for-sale	1,009,873		1,057,802
Mortgage servicing rights	840	[2]	942	[2]
Total assets recurring	1,026,943		1,074,026
Liabilities:
Derivative liabilities	1,877	[2]	1,833	[2]
Assets measured at fair value on a non-recurring basis
Collateral-dependent impaired loans	85,101	[3]	125,258	[3]
Other real estate owned	38,990	[4]	53,439	[4]
Loan held-for-sale (4)	1,595	[5]
Asset held-for-sale (5)	7,928	[6]
Total assets non-recurring	$ 133,614		$ 178,697

[1] Trading securities held by the Company represent diversified investment securities held in a grantor trust under deferred compensation arrangements in which plan participants may direct amounts earned to be invested in securities other than Company stock.

[2] Mortgage servicing rights are included in other assets, and derivative liabilities are included in other liabilities in the Consolidated Statements of Financial Condition.

[3] Represents the carrying value of loans for which adjustments are based on the appraised or market-quoted value of the collateral, net of selling costs. Collateral-dependent loans for which no fair value adjustments were necessary during the six months ended June 30, 2011 are not included.

[4] Represents the estimated fair value, net of selling costs, based on appraised value and includes covered OREO.

[5] Included in other assets in the Consolidated Statements of Condition.

[6] Included in premises, furniture, and equipment in the Consolidated Statements of Condition.

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Note 3 - Securities (Detail) - Securities Gains (Losses) (USD $) In Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2011		Jun. 30, 2010		Jun. 30, 2011		Jun. 30, 2010
Proceeds from sales	$ 53,118		$ 66,618		$ 97,330		$ 147,601
Gains (losses) on sales of securities:
Gross realized gains	1,974		2,367		2,782		8,187
Gross realized losses	(443)		(112)		(711)		(112)
Net realized gains on securities sales	1,531		2,255		2,071		8,075
Non-cash impairment charges
Other-than-temporary securities impairment			(1,581)				(4,344)
Portion of other-than-temporary impairment recognized in other comprehensive income			447				447
Net non-cash impairment charges			(1,134)				(3,897)
Net realized gains	1,531		1,121		2,071		4,178
Income Tax Expense Benefit [Member]
Non-cash impairment charges
Income tax expense on net realized gains	636		437		847		1,629
Gains Losses [Member]
Non-cash impairment charges
Trading gains (losses), net (1)	$ (2)	[1]	$ (1,022)	[1]	$ 742	[1]	$ (561)	[1]

[1] All trading gains relate to trading securities still held as of June 30, 2011.

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Note 13 - Subsequent Events

6 Months Ended

Jun. 30, 2011

Schedule of Subsequent Events [Table Text Block]

13. SUBSEQUENT EVENTS

The Company has evaluated the impact of events that have occurred subsequent to June 30, 2011 through the date its consolidated financial statements were issued. Based on the evaluation, management does not believe any subsequent events have occurred that would require further disclosure or adjustment to the financial statements.

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Consolidated Statements of Financial Condition (USD $) In Thousands	Jun. 30, 2011		Dec. 31, 2010
Cash and due from banks	$ 110,159		$ 102,495
Interest-bearing deposits in other banks	601,310		483,281
Trading securities, at fair value	16,230	[1]	15,282	[1]
Securities available-for-sale, at fair value	1,009,873		1,057,802
Securities held-to-maturity, at amortized cost	76,142		81,320
Federal Home Loan Bank and Federal Reserve Bank stock, at cost	58,187		61,338
Loans, excluding covered loans	5,112,911		5,100,560
Covered loans	314,942		371,729
Allowance for loan losses	(137,331)		(142,572)
Net loans	5,290,522		5,329,717
Other real estate owned (“OREO”), excluding covered OREO	24,407		31,069
Covered OREO	14,583		22,370
Federal Deposit Insurance Corporation (“FDIC”) indemnification asset	95,752		95,899
Premises, furniture, and equipment	131,952		140,907
Accrued interest receivable	28,883		29,953
Investment in bank-owned life insurance (“BOLI”)	198,149		197,644
Goodwill and other intangible assets	284,120		286,033
Other assets	189,122		203,192
Total assets	8,129,391		8,138,302
Liabilities
Demand deposits	1,494,390		1,329,505
Savings deposits	937,839		871,166
NOW accounts	1,087,945		1,073,211
Money market deposits	1,211,155		1,245,610
Time deposits	1,764,220		1,991,984
Total deposits	6,495,549		6,511,476
Borrowed funds	272,024		303,974
Subordinated debt	137,748		137,744
Accrued interest payable and other liabilities	82,479		73,063
Total liabilities	6,987,800		7,026,257
Stockholders’ Equity
Preferred stock	191,220		190,882
Common stock	858		858
Additional paid-in capital	424,877		437,550
Retained earnings	802,072		787,678
Accumulated other comprehensive loss, net of tax	(15,339)		(27,739)
Treasury stock, at cost	(262,097)		(277,184)
Total stockholders’ equity	1,141,591		1,112,045
Total liabilities and stockholders’ equity	$ 8,129,391		$ 8,138,302

[1] Trading securities held by the Company represent diversified investment securities held in a grantor trust under deferred compensation arrangements in which plan participants may direct amounts earned to be invested in securities other than Company stock.

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Note 3 - Securities (Detail) - Securities in an Unrealized Loss Position (USD $) In Thousands, unless otherwise specified	Jun. 30, 2011	Dec. 31, 2010
US Agency [Member]
Number of Securities	1	4
Unrealized Losses	$ 32	$ 121
US Agency [Member] | Fair Value Less Than12 Months [Member]
Fair Value	3,045	9,096
US Agency [Member] | Unrealized Losses Less Than12 Months [Member]
Unrealized Losses	32	120
US Agency [Member] | Unrealized Losses12 Months OrLonger [Member]
Unrealized Losses		1
US Agency [Member] | Fair Value Total [Member]
Fair Value	3,045	9,096
Collateralized Mortgage Obligation [Member]
Number of Securities	10	19
Unrealized Losses	722	2,364
Collateralized Mortgage Obligation [Member] | Fair Value Less Than12 Months [Member]
Fair Value	50,412	131,056
Collateralized Mortgage Obligation [Member] | Unrealized Losses Less Than12 Months [Member]
Unrealized Losses	323	1,727
Collateralized Mortgage Obligation [Member] | Fair Value12 Months OrLonger [Member]
Fair Value	9,698	7,843
Collateralized Mortgage Obligation [Member] | Unrealized Losses12 Months OrLonger [Member]
Unrealized Losses	399	637
Collateralized Mortgage Obligation [Member] | Fair Value Total [Member]
Fair Value	60,110	138,899
Other Residential Mortgage Backed Securities [Member]
Number of Securities	2	5
Unrealized Losses	24	61
Other Residential Mortgage Backed Securities [Member] | Fair Value Less Than12 Months [Member]
Fair Value	317	6,084
Other Residential Mortgage Backed Securities [Member] | Unrealized Losses Less Than12 Months [Member]
Unrealized Losses	18	51
Other Residential Mortgage Backed Securities [Member] | Fair Value12 Months OrLonger [Member]
Fair Value	159	159
Other Residential Mortgage Backed Securities [Member] | Unrealized Losses12 Months OrLonger [Member]
Unrealized Losses	6	10
Other Residential Mortgage Backed Securities [Member] | Fair Value Total [Member]
Fair Value	476	6,243
State And Municipal [Member]
Number of Securities	134	479
Unrealized Losses	2,185	12,800
State And Municipal [Member] | Fair Value Less Than12 Months [Member]
Fair Value	17,005	99,537
State And Municipal [Member] | Unrealized Losses Less Than12 Months [Member]
Unrealized Losses	582	3,142
State And Municipal [Member] | Fair Value12 Months OrLonger [Member]
Fair Value	53,943	166,403
State And Municipal [Member] | Unrealized Losses12 Months OrLonger [Member]
Unrealized Losses	1,603	9,658
State And Municipal [Member] | Fair Value Total [Member]
Fair Value	70,948	265,940
Collateralized Debt Obligation [Member]
Number of Securities	6	6
Unrealized Losses	33,208	34,837
Collateralized Debt Obligation [Member] | Fair Value12 Months OrLonger [Member]
Fair Value	16,487	14,858
Collateralized Debt Obligation [Member] | Unrealized Losses12 Months OrLonger [Member]
Unrealized Losses	33,208	34,837
Collateralized Debt Obligation [Member] | Fair Value Total [Member]
Fair Value	16,487	14,858
Equity Securitie [Member]
Number of Securities	1
Unrealized Losses	1
Equity Securitie [Member] | Fair Value12 Months OrLonger [Member]
Fair Value	30
Equity Securitie [Member] | Unrealized Losses12 Months OrLonger [Member]
Unrealized Losses	1
Equity Securitie [Member] | Fair Value Total [Member]
Fair Value	30
Total [Member]
Number of Securities	154	513
Unrealized Losses	36,172	50,183
Total [Member] | Fair Value Less Than12 Months [Member]
Fair Value	70,779	245,773
Total [Member] | Unrealized Losses Less Than12 Months [Member]
Unrealized Losses	955	5,040
Total [Member] | Fair Value12 Months OrLonger [Member]
Fair Value	80,317	189,263
Total [Member] | Unrealized Losses12 Months OrLonger [Member]
Unrealized Losses	35,217	45,143
Total [Member] | Fair Value Total [Member]
Fair Value	$ 151,096	$ 435,036

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Note 6 - Past Due Loans, Allowance For Credit Losses, and Impaired Loans (Detail) - Impaired Loans Individually Evaluated by Class (Continued) (USD $) In Thousands	Jun. 30, 2011		Jun. 30, 2010
Average Recorded Investment Balance [Member] | Commercial And Industrial [Member]
Impaired Loans	$ 51,863		$ 31,934
Average Recorded Investment Balance [Member] | Agricultural [Member]
Impaired Loans	1,796		1,862
Average Recorded Investment Balance [Member] | Office Retail And Industrial [Member]
Impaired Loans	18,989		20,987
Average Recorded Investment Balance [Member] | Multi Family [Member]
Impaired Loans	4,736		9,172
Average Recorded Investment Balance [Member] | Residential Construction [Member]
Impaired Loans	41,455		100,110
Average Recorded Investment Balance [Member] | Commercial Construction [Member]
Impaired Loans	25,191		20,209
Average Recorded Investment Balance [Member] | Other Commerical Real Estate [Member]
Impaired Loans	37,968		25,967
Average Recorded Investment Balance [Member] | Total Commercial Real Estate [Member]
Impaired Loans	128,339		176,445
Average Recorded Investment Balance [Member] | Total Impaired Loans Individually Evaluated For Impairment [Member]
Impaired Loans	181,998		210,241
Interest Income [Member] | Commercial And Industrial [Member]
Impaired Loans	10	[1]	83	[1]
Interest Income [Member] | Agricultural [Member]
Impaired Loans		[1]		[1]
Interest Income [Member] | Office Retail And Industrial [Member]
Impaired Loans	21	[1]	7	[1]
Interest Income [Member] | Multi Family [Member]
Impaired Loans	2	[1]		[1]
Interest Income [Member] | Residential Construction [Member]
Impaired Loans	27	[1]	75	[1]
Interest Income [Member] | Commercial Construction [Member]
Impaired Loans		[1]		[1]
Interest Income [Member] | Other Commerical Real Estate [Member]
Impaired Loans	18	[1]		[1]
Interest Income [Member] | Total Commercial Real Estate [Member]
Impaired Loans	68	[1]	82	[1]
Interest Income [Member] | Total Impaired Loans Individually Evaluated For Impairment [Member]
Impaired Loans	$ 78	[1]	$ 165	[1]

[1] Recorded using the cash basis of accounting.

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Note 11 - Commitments Guarantees, and Contingent Liabilities (Detail) - Contractual or Notional Amounts of Financial Instruments (USD $) In Thousands	Jun. 30, 2011		Dec. 31, 2010
Commitments to extend credit:
Home equity lines	$ 271,138		$ 275,826
Credit card lines to businesses	28,129		26,376
1-4 family real estate construction	26,159		26,682
Commercial real estate	158,092		175,608
Commercial and industrial	568,553		553,168
Overdraft protection program (1)	177,344	[1]	169,824	[1]
All other commitments	132,096		97,299
Total commitments	1,361,511		1,324,783
Letters of credit:
1-4 family real estate construction	10,608		10,551
Commercial real estate	50,104		54,896
All other	74,194		74,594
Total letters of credit	134,906		140,041
Unamortized fees associated with letters of credit (2) (3)	759	[2],[3]	696	[2],[3]
Remaining weighted-average term (in months)	10.1		12.2
Remaining lives (in years)	0.1 to 4.5		0.1 to 9.5
Unpaid principal balance of assets securitized	7,301		7,424
Cap on recourse obligation	2,208		2,208
Carrying value of recourse obligation (2)	$ 148	[2]	$ 148	[2]

[1] Federal regulation regarding electronic fund transfers require consumers to affirmatively consent to the institution's overdraft service for automated teller machine and one-time debit card transactions before overdraft fees may be assessed on the account. Consumers are provided a specific line for the amount they may overdraw.

[2] Included in other liabilities in the Consolidated Statements of Financial Condition.

[3] The Company will amortize these amounts into income over the commitment period.

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Note 6 - Past Due Loans, Allowance For Credit Losses, and Impaired Loans (Detail) - Allowance for Credit Losses (Continued) (USD $) In Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Balance at beginning of period	$ 145,003	$ 144,824	$ 145,072	$ 144,808
Recoveries of loans previously charged-off	3,813	3,859	5,821	5,522
Net loans charged-off	(23,935)	(20,873)	(43,496)	(39,207)
Provision for loan losses	18,763	21,526	38,255	39,876
Balance at end of period	139,831	145,477	139,831	145,477
Loans charged-off	(27,748)	(24,732)	(49,317)	(44,729)
Commercial Industrial And Agricultural [Member]
Balance at beginning of period			49,545	54,452
Recoveries of loans previously charged-off			2,356	4,090
Net loans charged-off			(9,521)	(7,829)
Provision for loan losses			8,510	11,526
Balance at end of period	48,534	58,149	48,534	58,149
Loans charged-off			(11,877)	(11,919)
Office Retail And Industrial [Member]
Balance at beginning of period			20,758	20,164
Recoveries of loans previously charged-off			54	232
Net loans charged-off			(1,792)	(3,997)
Provision for loan losses			(2,104)	7,838
Balance at end of period	16,862	24,005	16,862	24,005
Loans charged-off			(1,846)	(4,229)
Multi Family [Member]
Balance at beginning of period			3,996	4,555
Recoveries of loans previously charged-off				362
Net loans charged-off			(7,201)	(997)
Provision for loan losses			12,080	2,106
Balance at end of period	8,875	5,664	8,875	5,664
Loans charged-off			(7,201)	(1,359)
Residential Construction [Member]
Balance at beginning of period			27,933	33,078
Recoveries of loans previously charged-off			2,766	159
Net loans charged-off			(6,317)	(14,446)
Provision for loan losses			2,711	3,883
Balance at end of period	24,327	22,515	24,327	22,515
Loans charged-off			(9,083)	(14,605)
Other Commerical Real Estate [Member]
Balance at beginning of period			29,869	21,084
Recoveries of loans previously charged-off			472	142
Net loans charged-off			(7,859)	(6,341)
Provision for loan losses			5,425	7,634
Balance at end of period	27,435	22,377	27,435	22,377
Loans charged-off			(8,331)	(6,483)
Consumer [Member]
Balance at beginning of period			12,971	11,475
Recoveries of loans previously charged-off			173	537
Net loans charged-off			(5,606)	(4,946)
Provision for loan losses			6,433	6,238
Balance at end of period	13,798	12,767	13,798	12,767
Loans charged-off			(5,779)	(5,483)
Covered Loans [Member]
Net loans charged-off			(5,200)	(651)
Provision for loan losses			5,200	651
Loans charged-off			(5,200)	(651)
Total Allowance [Member]
Balance at beginning of period			145,072	144,808
Recoveries of loans previously charged-off			5,821	5,522
Net loans charged-off			(43,496)	(39,207)
Provision for loan losses			38,255	39,876
Balance at end of period	139,831	145,477	139,831	145,477
Loans charged-off			$ (49,317)	$ (44,729)

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Note 6 - Past Due Loans, Allowance For Credit Losses, and Impaired Loans (Detail) - Impaired Loans (USD $) In Thousands	Jun. 30, 2011		Dec. 31, 2010
Impaired loans with a related allowance for credit losses (1)	$ 23,362	[1]	$ 13,790	[1]
Impaired loans with no specific related allowance (2)	129,225	[2]	173,534	[2]
Total impaired loans individually evaluated for impairment	152,587		187,324
Corporate non-accrual loans not individually evaluated for impairment (3)	14,776	[3]	12,449	[3]
Total corporate non-accrual loans	167,363		199,773
Restructured loans, still accruing interest	14,529		22,371
Total impaired loans	181,892		222,144
Valuation allowance related to impaired loans	$ 9,504		$ 6,343

[1] These impaired loans require a valuation allowance because the present value of expected future cash flows or related collateral less estimated selling costs is less than the recorded investment in the loans.

[2] No specific allowance for credit losses is allocated to these loans since they are deemed to be sufficiently collateralized or had charge-offs. However, while each component of the allowance for credit losses is determined separately, the entire balance is available for the entire loan portfolio.

[3] These are loans with balances under a specified threshold.

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Note 8 - Comprehensive Income (Detail) - Activity in Accumulated Other Comprehensive Loss (USD $) In Thousands	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Unrealized losses on securities available for sale	$ (19,806)	$ (13,015)
Unrecognized Net Pension Costs	(7,933)	(5,651)
Total accumulated other comprehensive loss	(27,739)	(18,666)
Unrealized losses on securities available for sale	(7,406)	(7,152)
Unrecognized Net Pension Costs	(7,933)	(5,651)
Total accumulated other comprehensive loss	(15,339)	(12,803)
Unrealized losses on securities available for sale	12,400	5,863
Total accumulated other comprehensive loss	$ 12,400	$ 5,863

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Note 3 - Securities (Detail) - Certain Characteristics and Metrics of the CDOs as of June 30, 2011 (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2011
No1 C1[Member]
Original Par	$ 17,500
Amortized Cost	7,140
Fair Value	3,353
Number of Banks/Insurers	46
Actual Defferals and Defaults as a Percentage of the Original Collateral	15.80%	[1]
Expected Deferrals and Defaults as a % of the Remaining Performing Collateral	20.70%	[1]
Excess Subordination as a Percent of the Remaining Performing Collateral	0.00%	[2]
No2 C1[Member]
Original Par	15,000
Amortized Cost	7,657
Fair Value	2,477
Number of Banks/Insurers	57
Actual Defferals and Defaults as a Percentage of the Original Collateral	12.10%	[1]
Expected Deferrals and Defaults as a % of the Remaining Performing Collateral	18.80%	[1]
Excess Subordination as a Percent of the Remaining Performing Collateral	0.00%	[2]
No3 C1[Member]
Original Par	15,000
Amortized Cost	13,480
Fair Value	4,016
Number of Banks/Insurers	63
Actual Defferals and Defaults as a Percentage of the Original Collateral	7.80%	[1]
Expected Deferrals and Defaults as a % of the Remaining Performing Collateral	15.50%	[1]
Excess Subordination as a Percent of the Remaining Performing Collateral	6.00%	[2]
No4 B1[Member]
Original Par	15,000
Amortized Cost	13,922
Fair Value	4,344
Number of Banks/Insurers	64
Actual Defferals and Defaults as a Percentage of the Original Collateral	35.00%	[1]
Expected Deferrals and Defaults as a % of the Remaining Performing Collateral	23.50%	[1]
Excess Subordination as a Percent of the Remaining Performing Collateral	0.00%	[2]
No5C [Member]
Original Par	10,000
Amortized Cost	1,317
Fair Value	212
Number of Banks/Insurers	56
Actual Defferals and Defaults as a Percentage of the Original Collateral	44.60%	[1]
Expected Deferrals and Defaults as a % of the Remaining Performing Collateral	28.10%	[1]
Excess Subordination as a Percent of the Remaining Performing Collateral	0.00%	[2]
No6C [Member]
Original Par	6,500
Amortized Cost	6,179
Fair Value	2,085
Number of Banks/Insurers	77
Actual Defferals and Defaults as a Percentage of the Original Collateral	23.10%	[1]
Expected Deferrals and Defaults as a % of the Remaining Performing Collateral	12.80%	[1]
Excess Subordination as a Percent of the Remaining Performing Collateral	10.50%	[2]
No7 A3L [Member]
Original Par	6,750	[3]
Total Class [Member]
Original Par	85,750
Amortized Cost	49,695
Fair Value	$ 16,487

[1] Deferrals and defaults are provided net of recoveries. No recovery is assumed for collateral that has already defaulted. For deferring collateral, the Company assumes a recovery rate of 10% of par for banks, thrifts, and other depository institutions and 15% of par for insurance companies.

[2] Excess subordination represents additional defaults in excess of current defaults that the CDO can absorb before the security experiences any credit impairment. The excess subordination percentage is calculated by dividing the amount of potential additional loss that can be absorbed (before the receipt of all expected future principal and interest payments is affected) by the total balance of performing collateral. Even with excess subordination, the CDO could experience an OTTI charge if future deterioration of underlying collateral in excess of current excess subordination is anticipated.

[3] Characteristics and metrics are not reported for this CDO since the security had an amortized cost and fair value of zero as of June 30, 2011.