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Note 10 - Commitments Guarantees, and Contingent Liabilities
9 Months Ended
Sep. 30, 2011
Commitments Contingencies and Guarantees [Text Block]
10.  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 Condensed Consolidated Statements of Financial Condition.

Contractual or Notional Amounts of Financial Instruments

(Dollar amounts in thousands)

   
September 30,
2011
   
December 31,
2010
 
Commitments to extend credit:
           
        Home equity lines
  $ 262,756     $ 275,826  
        Credit card lines to businesses
    18,908       26,376  
        1-4 family real estate construction
    26,411       26,682  
        Commercial real estate
    161,255       175,608  
        Commercial and industrial
    602,610       553,168  
        Overdraft protection program (1)
    176,754       169,824  
        All other commitments
    124,500       97,299  
            Total commitments
  $ 1,373,194     $ 1,324,783  
Letters of credit:
               
        1-4 family real estate construction
  $ 9,344     $ 10,551  
        Commercial real estate
    51,155       54,896  
        All other
    74,223       74,594  
            Total letters of credit
  $ 134,722     $ 140,041  
        Unamortized fees associated with letters of credit (2) (3)
  $ 835     $ 696  
        Remaining weighted-average term (in months)
    9.5       12.2  
        Remaining lives (in years)
 
0.1 to 12.8
   
0.1 to 9.5
 

   
September 30,
2011
   
December 31,
2010
 
Recourse on securitized assets:
           
          Unpaid principal balance of assets securitized
  $ 7,248     $ 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 Condensed 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 receipt of 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. For the nine months ended September 30, 2010, there were $114,000 of recourse loans repurchased and $36,000 in charge-offs of recourse loans. There were no repurchases or charge-offs of recourse loans for the nine months ended September 30, 2011.

Legal Proceedings

In August 2011, the Company’s wholly-owned banking subsidiary, First Midwest Bank (the “Bank”) was named in a purported class action lawsuit filed in the Circuit Court of Cook County, Illinois on behalf of certain of the Bank’s customers who incurred overdraft fees. The lawsuit is based on the Bank’s practices pursuant to debit card transactions, and alleges, among other things, that these practices have resulted in customers being unfairly assessed overdraft fees. The lawsuit seeks an unspecified amount of damages and other relief, including restitution. The Company believes that the complaint contains significant inaccuracies and factual misstatements and that the Bank has meritorious defenses. As a result, the Bank intends to vigorously defend itself against the allegations in the lawsuit.

As of September 30, 2011, there were certain other 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 legal proceedings, if any, would have a material adverse effect on the consolidated financial condition of the Company as of September 30, 2011.