10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year-ended December 31, 2009

or

[  ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                      to                     

Commission File Number 0-10967

FIRST MIDWEST BANCORP, INC.

(Exact name of registrant as specified in its charter)

Delaware	36-3161078
(State or other jurisdiction of incorporation or organization)	(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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $.01 Par Value	The Nasdaq Stock Market
Preferred Share Purchase Rights	The Nasdaq Stock Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [X] No [ ].

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X].

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ].

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 [ ] 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].

The aggregate market value of the registrant’s outstanding voting common stock held by non-affiliates on June 30, 2009, determined using a per share closing price on that date of $7.31, as quoted on The Nasdaq Stock Market, was $335,120,429.

As of March 1, 2010 there were 74,025,650 shares of common stock, $.01 par value, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Registrant’s Proxy Statement for the 2010 Annual Stockholders’ Meeting - Part III

FORM 10-K

TABLE OF CONTENTS

		Page
Part I.
ITEM 1.	Business	4
ITEM 1A.	Risk Factors	15
ITEM 1B.	Unresolved Staff Comments	30
ITEM 2.	Properties	30
ITEM 3.	Legal Proceedings	31
ITEM 4.	Reserved	31
Part II
ITEM 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	31
ITEM 6.	Selected Financial Data	34
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
ITEM 7A.	Quantitative and Qualitative Disclosures about Market Risk	78
ITEM 8.	Financial Statements and Supplementary Data	82
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	143
ITEM 9A.	Controls and Procedures	144
ITEM 9B.	Other Information	145
Part III
ITEM 10.	Directors, Executive Officers, and Corporate Governance	146
ITEM 11.	Executive Compensation	147
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	147
ITEM 13.	Certain Relationships and Related Transactions and Director Independence	147
ITEM 14.	Principal Accountant Fees and Services	147
Part IV
ITEM 15.	Exhibits and Financial Statement Schedules	148

2

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. 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 truly fulfill those financial needs.

AVAILABLE INFORMATION

We file annual, quarterly, and current reports; proxy statements; and other information with the 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 450 Fifth 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. 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.

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, as well as 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 Annual Report on Form 10-K, 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,” “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.

3

Forward-looking statements are subject to known and unknown risks, uncertainties, and assumptions and may include 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 Items 1A and 7 of this Annual Report on Form 10-K, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Results of Operations,” as well as our subsequent periodic and current reports filed with the SEC. However, 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 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 elsewhere in this report and consider them as it makes disclosures regarding forward-looking statements. Nevertheless, given the uncertain economic times, new risks and uncertainties may emerge very 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.

PART I

ITEM 1. BUSINESS

First Midwest Bancorp, Inc.

First Midwest Bancorp, Inc. (“First Midwest” or the “Company”) is a bank holding company incorporated in Delaware in 1982 for the purpose of becoming a holding company registered under the Bank Holding Company Act of 1956, as amended (the “Act”). The Company is one of Illinois’ largest publicly traded banking companies with assets of $7.7 billion as of December 31, 2009 and is headquartered in the Chicago suburb of Itasca, Illinois.

History

The Company is the product of the consolidation of over 26 affiliated banks in 1983, followed by several significant acquisitions, including the purchase of SparBank, Incorporated, a $449 million institution in 1997, Heritage Financial Services, Inc., a $1.4 billion institution in 1998, CoVest Bancshares, a $645.6 million institution in 2003, and Bank Calumet, Inc., a $1.4 billion institution in 2006. On October 23, 2009, the Company acquired substantially all the assets of the $260 million former First DuPage Bank in an FDIC-assisted transaction. For more information regarding the recent acquisition of First DuPage, please refer to Note 3 of “Notes to Financial Statements” in Item 8 of this Form 10-K.

In the normal course of business, the Company may, from time to time, explore potential opportunities to acquire banking institutions. As a matter of policy, the Company generally does not comment on any dialogue or possible acquisitions until a definitive acquisition agreement has been signed.

Subsidiaries

First Midwest conducts substantially all of its operations through its wholly-owned subsidiary: First Midwest Bank (the “Bank”). At December 31, 2009, the Bank had $7.7 billion in total assets, $5.9 billion in total deposits, and 96 banking offices primarily in suburban metropolitan Chicago. The Bank employed 1,722 full-time equivalent employees at December 31, 2009.

4

The Bank operates the following wholly-owned subsidiaries:

• FMB Investment Corporation is a Delaware corporation that manages investment securities, principally state and municipal obligations, and provides corporate management services to its wholly-owned subsidiary, FMB Investment Trust, a Maryland business trust. FMB Investment Trust manages many of the real estate loans originated by the Bank.

• Calumet Investment Corporation is a Delaware corporation that manages investment securities, principally state and municipal obligations, and provides corporate management services to its wholly-owned subsidiary, Calumet Investments Ltd., a Bermuda corporation. Calumet Investments Ltd. manages investment securities and is largely inactive.

• Six limited liability companies (Synergy Properties Holdings, LLC; FDB Berkshire, LLC; FDB Sheridan Terrace LLC; FDB Curtiss Street, LLC; Hamlin Wilson, LLC; and FDB Properties LLC), each of which holds OREO properties acquired by the former First DuPage Bank or the Bank.

• Bank Calumet Financial Services, Inc. is an Indiana corporation, which is largely inactive.

During 2009, the Company sold its former insurance subsidiary, First Midwest Insurance Company, which had operated as a reinsurer of credit life, accident, and health insurance sold through the Bank. On December 28, 2009, First Midwest Investments, Inc., a wholly owned subsidiary of the Bank, was dissolved under Illinois law.

The Company has responsibility for the overall conduct, direction, and performance of its subsidiaries. The Company provides various services to its subsidiaries, establishes Company-wide policies and procedures, and provides other resources as needed, including capital.

Market Area

First Midwest’s largest service area is the suburban metropolitan Chicago market, which includes the counties surrounding Cook County, Illinois. This area extends from the cities of Zion and Waukegan, Illinois down into northwest Indiana, including the cities of Crown Point and St. John, Indiana. The Company’s other service areas consist of a central Illinois market, which includes the cities of Champaign, Danville, and Galesburg, and an Iowa, or “Quad-Cities” market, which includes the cities of Davenport, Bettendorf, Moline, and East Moline. These service areas include a mixture of urban, suburban, and rural markets. First Midwest’s business of attracting deposits and making loans is primarily conducted within its service areas and may be affected by significant changes in their economies. These service areas contain a diversified mix of industry groups, including manufacturing, health care, pharmaceutical, higher education, wholesale and retail trade, service, and agricultural.

When comparing large national metropolitan areas, the Chicago metropolitan area currently ranks 3rd in the nation with respect to total businesses, 3rd in total population, 12th in average household income, and 12th in median income producing assets.

Competition

The banking and financial services industry in the Chicago metropolitan area is highly competitive, and the Company expects it to remain so in the future. Generally, the Bank competes for banking customers and deposits with other local, regional, and internet banks and savings and loan associations; personal loan and finance companies and credit unions; and mutual funds and investment brokers. The Company faces intense competition from local and out of state institutions within its service areas, and it expects to face increasing competition from on-line banking and financial institutions seeking to attract customers by providing access to services and products that mirror the services and products offered by traditional institutions.

5

Competition is based on a number of factors including interest rates charged on loans and paid on deposits; the ability to attract new deposits; the scope and type of banking and financial services offered; the hours during which business can be conducted; the location of bank branches and ATMs; the availability, ease of use, and range of banking services on the internet; the availability of related services; and a variety of additional services such as investment management, fiduciary, and brokerage services.

In providing investment advisory services, the Bank also competes with retail and discount stockbrokers, investment advisors, mutual funds, insurance companies, and other financial institutions for investment management clients. Competition is generally based on the variety of products and services offered to clients and the performance of funds under management and comes from financial service providers both within and outside of the geographic areas in which the Bank maintains offices.

The Company faces intense competition in attracting and retaining qualified employees. Its ability to continue to compete effectively will depend upon its ability to attract new employees and retain and motivate existing employees.

Our Business

First Midwest offers a variety of traditional financial products and services that are designed to meet the financial needs of the customers and communities it serves. For over 60 years, First Midwest has been in the basic business of community banking, namely attracting deposits and making loans, as well as providing wealth management, investment, and retirement plan services. The Company does not engage in any sub-prime or speculative lending, nor does it engage in non-commercial banking activities such as investment banking services or loan securitizations.

Deposit and Retail Services

First Midwest offers a full range of deposit services that are typically available in most commercial banks and financial institutions, including checking accounts, NOW accounts, money market accounts, savings accounts, and time deposits of various types, ranging from shorter-term to longer-term certificates of deposit. The transaction accounts and time deposits are tailored to our primary service area at competitive rates. The Company also offers certain retirement account services, including IRAs.

Lending Activities

First Midwest originates commercial and industrial, agricultural, commercial real estate, and consumer loans. Substantially all of the Company’s borrowers are residents of First Midwest’s service areas. The Company’s largest category of lending is commercial real estate (including residential construction loans), followed by commercial and industrial. Generally, real estate loans are secured by the land and any improvements to, or developments on, the land. Generally, loan-to-value ratios for unimproved and developed land at time of issuance are 50% and 65%, respectively. The Company’s consumer loans consist primarily of home equity loans and lines of credit. For detailed information regarding the Company’s loan portfolio, see the “Loan Portfolio and Credit Quality” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this Form 10-K.

First Midwest Sources of Funds

First Midwest’s ability to maintain affordable funding sources allows the Company to meet the credit needs of its customers and the communities it serves. Deposits are a relatively stable form of funding, and they are the primary source of the Company’s funds for lending and other investment purposes. Deposits funded 67.5% of the Company’s assets at the end of 2009, with a net loans to deposits ratio of 88.4%. Consumer and commercial deposits come from the Company’s primary service areas through a broad selection of deposit products. By maintaining core deposits, the Company both controls its funding costs and builds client relationships.

6

In addition to deposits, the Company obtains funds from the amortization, repayment, and prepayment of loans; the sale or maturity of investment securities; advances from the Federal Home Loan Bank, brokered repurchase agreements and certificates of deposits, federal funds purchased, and federal term auction facilities; cash flows generated by operations; and proceeds from sale of the Company’s common and preferred stock. For detailed information regarding the Company’s funding sources, see the “Funding and Liquidity Management” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this Form 10-K.

First Midwest Investment Activities

First Midwest maintains a sizeable securities portfolio in order to provide the Company with financial stability, asset diversification, income, and collateral for borrowing. The Company administers this securities portfolio in accordance with an investment policy that has been approved and adopted by the Board of Directors of the Bank. The Company’s Asset Liability Committee (“ALCO”) implements the investment policy based on the established guidelines within the written policy.

The basic objectives of First Midwest’s investment activities are, among other things, to enhance the profitability of the Company by keeping its investable funds fully employed, provide adequate regulatory and operational liquidity, minimize and/or adjust the interest rate risk position of the Company, minimize the Company’s exposure to credit risk, and provide collateral for pledging requirements. For detailed information regarding the Company’s securities portfolio, see the “Investment Portfolio Management” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this Form 10-K.

Participation in Temporary Government Economic Recovery Programs

In response to the financial market crisis and continuing economic uncertainty, the United States government, specifically the U.S. Department of the Treasury (“Treasury”), the Board of Governors of the Federal Reserve System (“Federal Reserve”), and the Federal Deposit Insurance Corporation (“FDIC”), working in cooperation with foreign governments and other central banks, took a variety of extraordinary measures designed to restore confidence in the financial markets and to strengthen financial institutions, including measures available under the Emergency Economic Stabilization Act of 2008 (“EESA”), as amended by the American Recovery and Reinvestment Act of 2009 (“AARA”), which included the Troubled Asset Relief Program (“TARP”). TARP consists of 12 announced programs, of which 10 have been implemented. Many of the programs were temporary in nature and designed to promote stability in the financial system. Below are summaries of certain recovery programs that are still in effect, including programs in which First Midwest participates:

• Increase in FDIC Deposit Insurance. The EESA increased the maximum deposit insurance amount up to $250,000 until December 31, 2013 and removed the statutory limits on the FDIC’s ability to borrow from the Treasury during this period.

• Capital Purchase Program. Under the EESA, the Treasury may take a range of actions to provide liquidity to the U.S. financial markets, including the direct purchase of equity of financial institutions through the Treasury’s Capital Purchase Plan (“CPP”). The Company elected to participate in the CPP, and on December 5, 2008, First Midwest issued to the Treasury, in exchange for aggregate consideration of $193.0 million, (1) 193,000 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series B, liquidation preference of $1,000 per share (“Preferred Shares”); and (2) a ten-year warrant (“Warrant”) to purchase up to 1,305,230 shares of the Company’s common stock, par value $0.01 per share (“Common Stock”) at an exercise price, subject to anti-dilution adjustments, of $22.18 per share. Cumulative dividends on the Preferred Shares will accrue on the liquidation preference at a rate of 5% per annum for the first five years and at a rate of 9% per annum thereafter. The securities were sold in a private placement exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended. The Preferred Shares generally are nonvoting and qualify as Tier 1 capital.

7

The letter agreement between the Treasury and the Company, dated December 5, 2008, including the securities purchase agreement concerning the issuance and sale of the Preferred Shares (the “Purchase Agreement”), grants the holders of the Preferred Shares, the Warrant, and First Midwest common stock to be issued under the Warrant certain registration rights and imposes restrictions on dividends and stock repurchases. In addition, in the event that the Company fails to declare and pay full dividends (or declare and set aside a sum sufficient for payment thereof) on the Preferred Shares, the Purchase Agreement will impose restrictions on the Company’s ability to declare or pay dividends or distributions on, or repurchase, redeem, or otherwise acquire for consideration, shares of its junior stock. For a detailed description of these restrictions, see Item 1A, “Risk Factors,” elsewhere in this report. In addition, the Purchase Agreement subjects the Company to the executive compensation limitations as set forth in Section 111(b) of the EESA.

• Temporary Liquidity Guarantee Program (“TLGP”). Under the Transaction Account Guarantee Program of the TLGP, the FDIC temporarily provides a 100% guarantee of the deposits in non-interest-bearing transaction deposit accounts in participating financial institutions. The Company participates in this program. Consequently, all funds held in non-interest-bearing transaction accounts (demand deposit accounts), Interest on Lawyers Trust Accounts (IOLTAs), and low-interest NOW accounts (defined as NOW accounts with interest rates no higher than 0.50%) with the Bank are covered under this program. This program has been extended through June 30, 2010.

• Financial Stability Plan. On February 10, 2009, the Treasury announced the Financial Stability Plan (“FSP”). The FSP is a comprehensive set of measures intended to shore up the financial system. The core elements of the plan include making bank capital injections, creating a public-private investment fund to buy troubled assets, establishing guidelines for loan modification programs, and expanding the Federal Reserve lending program.

Many of the temporary recovery programs are approaching their expiration date. However, the U.S. government is considering numerous legislative and administrative proposals sponsored by various members of Congress and the Presidential Administration relating to long-term regulatory reform of the financial markets. In some cases, the proposals include a radical overhaul of the regulation of financial institutions or limitations on the products they offer. Many of these proposals would impose stricter capital and prudential standards, reporting, disclosure, and operational requirements on banks and financial institutions. The regulations or regulatory policies that are applicable to the Company and eventually adopted by the U.S. government may be disruptive to the Company’s business and could have a material adverse effect on its business, financial condition, and results of operations.

Supervision and Regulation

The Company and its subsidiaries are subject to regulation and supervision by various governmental regulatory authorities including the Federal Reserve, the FDIC, and the Illinois Department of Financial and Professional Regulation (the “IDFPR”). Financial institutions and their holding companies are extensively regulated under federal and state law.

Federal and state laws and regulations generally applicable to financial institutions, such as the Company and its subsidiaries, regulate, among other things, the scope of business, investments, reserves against deposits, capital levels, the nature and amount of collateral for loans, the establishment of branches, mergers, consolidations, and dividends. This supervision and regulation is intended primarily for the protection of the FDIC’s deposit insurance fund (“DIF”) and the depositors, rather than the stockholders, of a financial institution.

The following references to material statutes and regulations affecting the Company and its subsidiaries are brief summaries thereof and are qualified in their entirety by reference to such statutes and regulations. Any change in applicable law or regulations may have a material effect on the business or operations of the Company and its subsidiaries. The operations of the Company may also be affected by changes in the policies of various

8

regulatory authorities. The Company cannot accurately predict the nature or the extent of the effects that any such changes would have on its business and earnings.

Bank Holding Company Act of 1956, As Amended (the “Act”)

Generally, the Act governs the acquisition and control of banks and non-banking companies by bank holding companies. A bank holding company is subject to regulation under the Act and is required to register with the Federal Reserve under the Act. The Act requires a bank holding company to file an annual report of its operations and such additional information as the Federal Reserve may require and is subject, along with its subsidiaries, to examination by the Federal Reserve. The Federal Reserve has jurisdiction to regulate the terms of certain debt issues of bank holding companies, including the authority to impose reserve requirements.

The acquisition of 5% or more of the voting shares of any bank or bank holding company generally requires the prior approval of the Federal Reserve and is subject to applicable federal and state law, including the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (“Riegle-Neal”) for interstate transactions. The Federal Reserve evaluates acquisition applications based on, among other things, competitive factors, supervisory factors, adequacy of financial and managerial resources, and banking and community needs considerations.

The Act also prohibits, with certain exceptions, a bank holding company from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any “non-banking” company unless the non-banking activities are found by the Federal Reserve to be “so closely related to banking as to be a proper incident thereto.” Under current regulations of the Federal Reserve, a bank holding company and its non-bank subsidiaries are permitted, among other activities, to engage in such banking-related business ventures as consumer finance, equipment leasing, data processing, mortgage banking, financial and investment advice, and securities brokerage services. The Act does not place territorial restrictions on the activities of a bank holding company or its non-bank subsidiaries.

Federal law prohibits acquisition of “control” of a bank or bank holding company without prior notice to certain federal bank regulators. “Control” is defined in certain cases as the acquisition of as little as 10% of the outstanding shares of any class of voting stock. Furthermore, under certain circumstances, a bank holding company may not be able to purchase its own stock, where the gross consideration will equal 10% or more of the company’s net worth, without obtaining approval of the Federal Reserve. Under the Federal Reserve Act, banks and their affiliates are subject to certain requirements and restrictions when dealing with each other (affiliate transactions including transactions with their bank holding company). The Company is also subject to the provisions of the Illinois Bank Holding Company Act.

Source of Strength Doctrine

Federal Reserve policy requires bank holding companies to act as a source of financial and managerial strength to their subsidiary banks. Under this policy, the holding company is expected to commit resources to support its bank subsidiary, including at times when the holding company may not be in a financial position to provide it. Any capital loans by a bank holding company to its subsidiary bank are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank. The Act provides that, in the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a bank subsidiary will be assumed by the bankruptcy trustee and entitled to priority of payment.

Interstate Banking

Bank holding companies are permitted to acquire banks and bank holding companies in any state and to be acquired, subject to the requirements of Riegle-Neal and, in some cases, applicable state law.

9

Under Riegle-Neal, adequately capitalized and managed bank holding companies may be permitted by the Federal Reserve to acquire control of a bank in any state. States, however, may prohibit acquisitions of banks that have not been in existence for at least five years. The Federal Reserve is prohibited from approving an application for acquisition if the applicant controls more than 10% of the total amount of deposits of insured depository institutions nationwide. In addition, interstate acquisitions may also be subject to statewide concentration limits.

The Federal Reserve would be prohibited from approving an application if, prior to consummation, the proposed acquirer controls any insured depository institution or branch in the home state of the target bank, and the applicant, following consummation of an acquisition, would control 30% or more of the total amount of deposits of insured depository institutions in that state. This legislation also provides that the provisions on concentration limits do not affect the authority of any state to limit or waive the percentage of the total amount of deposits in the state which would be held or controlled by any bank or bank holding company to the extent the application of this limitation does not discriminate against out-of-state institutions.

Interstate branching under Riegle-Neal permits banks to merge across state lines, thereby creating a bank headquartered in one state with branches in other states. Approval of interstate bank mergers is subject to certain conditions including adequate capitalization, adequate management, Community Reinvestment Act compliance, deposit concentration limits (as set forth above), compliance with federal and state antitrust laws, and compliance with applicable state consumer protection laws. An interstate merger transaction may involve the acquisition of a branch without the acquisition of the bank only if the law of the state in which the branch is located permits out-of-state banks to acquire a branch of a bank in that state without acquiring the bank. Following the consummation of an interstate transaction, the resulting bank may establish additional branches at any location where any bank involved in the transaction could have established a branch under applicable federal or state law, if such bank had not been a party to the merger transaction.

Riegle-Neal allowed each state the opportunity to “opt out,” thereby prohibiting interstate branching within that state. Of the three states in which the Bank is located (Illinois, Indiana, and Iowa), none of them has adopted legislation to “opt out” of the interstate merger provisions. Furthermore, pursuant to Riegle-Neal, a bank is able to add new branches in a state in which it does not already have banking operations if such state enacts a law permitting such de novo branching, or, if the state allows acquisition of branches, subject to applicable state requirements. Illinois law allows de novo banking with other states that allow Illinois banks to branch de novo in those states.

Illinois Banking Law

The Illinois Banking Act (“IBA”) governs the activities of the Bank, an Illinois banking corporation. The IBA defines the powers and permissible activities of an Illinois state-chartered bank, prescribes corporate governance standards, imposes approval requirements on mergers of state banks, prescribes lending limits, and provides for the examination of state banks by the IDFPR. The Banking on Illinois Act (“BIA”) became effective in mid-1999 and amended the IBA to provide a wide range of new activities allowed for Illinois state-chartered banks, including the Bank. The provisions of the BIA are to be construed liberally in order to create a favorable business climate for banks in Illinois. The main features of the BIA are to expand bank powers through a “wild card” provision that authorizes Illinois state-chartered banks to offer virtually any product or service that any bank or thrift may offer anywhere in the country, subject to restrictions imposed on those other banks and thrifts, certain safety and soundness considerations, and prior notification to the IDFPR and the FDIC.

Federal Reserve Act

The Bank is subject to Sections 23A and 23B of the Federal Reserve Act, which restrict or impose requirements on financial transactions between federally insured depository institutions and affiliated companies. The statute limits credit transactions between a bank and its affiliates, prescribes terms and conditions for bank affiliate

10

transactions deemed to be consistent with safe and sound banking practices, requires arms-length transactions between affiliates, and restricts the types of collateral security permitted in connection with a bank’s extension of credit to affiliates. Section 22(h) of the Federal Reserve Act limits how much and on what terms a bank may lend to its insiders and insiders of its affiliates, including executive officers and directors.

Community Reinvestment Act

The Community Reinvestment Act of 1977 (“CRA”) requires depository institutions to assist in meeting the credit needs of their market areas consistent with safe and sound banking practice. Under the CRA, each depository institution is required to help meet the credit needs of its market areas by, among other things, providing credit to low- and moderate-income individuals and communities. These factors are also considered in evaluating mergers, acquisitions and applications to open a branch or facility. The applicable federal regulators regularly conduct CRA examinations to assess the performance of financial institutions and assign one of four ratings to the institution’s records of meeting the credit needs of its community. During its last examination, the Bank received a rating of “outstanding,” the highest available.

Overdraft Regulation

The Federal Reserve has amended Regulation E (Electronic Fund Transfers) effective July 1, 2010 to require consumers to opt in, or affirmatively consent, to the institution’s overdraft service for ATM and one-time debit card transactions, before overdraft fees may be assessed on the account. Consumers will also be provided a clear disclosure of the fees and terms associated with the institution’s overdraft service.

Other Regulation

The Bank is subject to a variety of federal and state laws and regulations governing its operations. For example, deposit activities are subject to such acts as the Federal Truth in Savings Act and the Illinois Consumer Deposit Account Act. Electronic banking activities are subject to federal law, including the Electronic Funds Transfer Act, and state laws. Trust activities of the Bank are subject to the Illinois Corporate Fiduciaries Act. Loans made by the Bank are subject to applicable provisions of the Illinois Interest Act, the Federal Truth in Lending Act, and the Illinois Financial Services Development Act.

The Bank is also subject to a variety of other laws and regulations concerning equal credit opportunity, fair lending, customer privacy, identity theft, and fair credit reporting.

As an Illinois banking corporation controlled by a bank holding company, the Bank is subject to the rules regarding change of control in the Act and the Federal Deposit Insurance Act (“FDIA”) and is also subject to the rules regarding change in control of Illinois banks contained in the IBA and the Illinois Bank Holding Company Act.

Gramm-Leach-Bliley Act of 1999 (“GLB Act”)

The GLB Act allows for banks, other depository institutions, insurance companies, and securities firms to enter into combinations that permit a single financial services organization to offer customers a more comprehensive array of financial products and services. The GLB Act defines a financial holding company (“FHC”), which is regulated by the Federal Reserve. Functional regulation of the FHC’s subsidiaries is conducted by their primary functional regulators. Pursuant to the GLB Act, bank holding companies, foreign banks, and their subsidiary depository institutions electing to qualify as an FHC must be “well managed,” “well capitalized,” and rated at least satisfactory under the Community Reinvestment Act in order to engage in new financial activities.

An FHC may engage in securities and insurance activities and other activities that are deemed financial in nature or incidental to a financial activity under the GLB Act, such as merchant banking activities. While aware of the

11

flexibility of the FHC statute, the Company has, for the time being, decided not to become an FHC. The activities of bank holding companies that are not FHCs will continue to be regulated by, and limited to, activities permissible under the Act.

The GLB Act also prohibits a financial institution from disclosing non-public personal information about a consumer to unaffiliated third parties unless the institution satisfies various disclosure requirements and the consumer has not elected to opt out of the information sharing. Under the GLB Act, a financial institution must provide its customers with a notice of its privacy policies and practices. The Federal Reserve, the FDIC, and other financial regulatory agencies have issued regulations implementing notice requirements and restrictions on a financial institution’s ability to disclose non-public personal information about consumers to unaffiliated third parties.

The Bank is also subject to certain federal and state laws that limit the use and distribution of non-public personal information to subsidiaries, affiliates, and unaffiliated entities.

Bank Secrecy Act and USA PATRIOT Act

In 1970, Congress enacted the Currency and Foreign Transactions Reporting Act, commonly known as the Bank Secrecy Act (the “BSA”). The BSA requires financial institutions to maintain records of certain customers and currency transactions and to report certain domestic and foreign currency transactions, which may have a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings. Under this law, financial institutions are required to develop a BSA compliance program.

In 2001, the President signed into law comprehensive anti-terrorism legislation known as the USA PATRIOT Act. Title III of the USA PATRIOT Act requires financial institutions, including the Company and the Bank, to help prevent and detect international money laundering and the financing of terrorism and prosecute those involved in such activities. The Treasury has adopted additional requirements to further implement Title III.

Under these regulations, a mechanism has been established for law enforcement officials to communicate names of suspected terrorists and money launderers to financial institutions to enable financial institutions to promptly locate accounts and transactions involving those suspects. Financial institutions receiving names of suspects must search their account and transaction records for potential matches and report positive results to the Treasury Financial Crimes Enforcement Network (“FinCEN”). Each financial institution must designate a point of contact to receive information requests. These regulations outline how financial institutions can share information concerning suspected terrorist and money laundering activity with other financial institutions under the protection of a statutory safe harbor if each financial institution notifies FinCEN of its intent to share information.

The Treasury has also adopted regulations intended to prevent money laundering and terrorist financing through correspondent accounts maintained by U.S. financial institutions on behalf of foreign banks. Financial institutions are required to take reasonable steps to ensure that they are not providing banking services directly or indirectly to foreign shell banks.

In addition, banks must have procedures in place to verify the identity of the persons with whom they deal.

Capital Guidelines

The Federal Reserve and the other federal bank regulators have established risk-based capital guidelines to provide a framework for assessing the adequacy of the capital of national and state banks, thrifts, and their holding companies (collectively, “banking institutions”). These guidelines apply to all banking institutions, regardless of size, and are used in the examination and supervisory process as well as in the analysis of applications to be acted upon by the regulatory authorities. These guidelines require banking institutions to maintain capital based on the credit risk of their operations, both on- and off-balance sheet.

12

The minimum capital ratios established by the guidelines are based on both tier 1 and total capital to total risk-based assets (as defined in the regulations). In addition to the risk-based capital requirements, the Federal Reserve and the FDIC require banking institutions to maintain a minimum leveraged-capital ratio to supplement the risk-based capital guidelines. The Company and the Bank are “well capitalized” by these standards, the highest applicable ratings.

Dividends

The Company’s primary source of liquidity is dividend payments from the Bank. In addition to capital guidelines, the Bank is limited in the amount of dividends it can pay to the Company under the IBA. Under this law, the Bank is permitted to declare and pay dividends in amounts up to the amount of its accumulated net profits, provided that it retains in its surplus at least one-tenth of its net profits since the date of the declaration of its most recent dividend until those additions to surplus, in the aggregate, equal the paid-in capital of the Bank. The Bank may not, while it continues its banking business, pay dividends in excess of its net profits then on hand (after deductions for losses and bad debts). In addition, the Bank is limited in the amount of dividends it can pay under the Federal Reserve Act and Regulation H. For example, dividends cannot be paid that would constitute a withdrawal of capital; dividends cannot be declared or paid if they exceed a bank’s undivided profits; and a bank may not declare or pay a dividend greater than current year net income plus retained net income of the prior two years without Federal Reserve approval.

Since the Company is a legal entity, separate and distinct from the Bank, its dividends to stockholders are not subject to the bank dividend guidelines discussed above. The IDFPR is authorized to determine, under certain circumstances relating to the financial condition of a bank or bank holding company, that the payment of dividends by the Company would be an unsafe or unsound practice and to prohibit payment thereof. The Federal Reserve has taken the position that dividends that would create pressure or undermine the safety and soundness of the subsidiary bank are inappropriate.

FDIC Insurance Premiums

The Bank’s deposits are insured through the DIF, which is administered by the FDIC. As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of, and to require reporting by, FDIC-insured institutions. It also may prohibit any FDIC-insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious risk to the DIF.

The FDIC utilizes a risk-based assessment system that imposes insurance premiums based upon a risk matrix that takes into account a bank’s capital level and supervisory rating (“CAMELS rating”). The risk matrix utilizes four risk categories, which are distinguished by capital levels and supervisory ratings.

In December 2008, the FDIC issued a final rule that raised the then current assessment rates uniformly by 7 basis points for the first quarter of 2009 assessment, which resulted in annualized assessment rates for institutions in the highest risk category (“Risk Category 1 institutions”) ranging from 12 to 14 basis points (basis points representing cents per $100 of assessable deposits). In February 2009, the FDIC issued final rules to amend the DIF restoration plan, change the risk-based assessment system and set assessment rates for Risk Category 1 institutions beginning in the second quarter of 2009. The initial base assessment rates for Risk Category 1 institutions range from 12 to 16 basis points, on an annualized basis. After the effect of potential base-rate adjustments, total base assessment rates range from 7 to 24 basis points. The potential adjustments to a Risk Category 1 institution’s initial base assessment rate, include (i) a potential decrease of up to 5 basis points for long-term unsecured debt, including senior and subordinated debt and (ii) a potential increase of up to 8 basis points for secured liabilities in excess of 25% of domestic deposits.

In May 2009, the FDIC issued a final rule which levied a special assessment applicable to all insured depository institutions totaling 5 basis points of each institution’s total assets less Tier 1 capital as of June 30, 2009, not to

13

exceed 10 basis points of domestic deposits. The special assessment was part of the FDIC’s efforts to rebuild the DIF. Deposit insurance expense during 2009 included $3.5 million recognized in the second quarter related to the special assessment.

In November 2009, the FDIC issued a rule that required all insured depository institutions, with limited exceptions, to prepay their estimated quarterly risk-based assessments for the fourth quarter of 2009 and for all of 2010, 2011 and 2012. The FDIC also adopted a uniform three-basis point increase in assessment rates effective on January 1, 2011. In December 2009, the Company paid $34.7 million in prepaid risk-based assessments. This amount is shown as a separate line item on the Consolidated Statements of Financial Condition included in Item 8 of this Form 10-K. FDIC insurance expense totaled $13.7 million in 2009, $1.1 million in 2008, and $747,000 in 2007. FDIC insurance expense includes deposit insurance assessments and Financing Corporation (“FICO”) assessments related to outstanding FICO bonds. The FICO is a mixed-ownership government corporation established by the Competitive Equality Banking Act of 1987 whose sole purpose was to function as a financing vehicle for the now defunct Federal Savings & Loan Insurance Corporation.

Under the FDIA, the FDIC may terminate deposit insurance upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) implemented a broad range of corporate governance and accounting measures to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies, and to protect investors by improving the accuracy and reliability of disclosures under federal securities laws. The Company is subject to Sarbanes-Oxley because it is required to file periodic reports with the SEC under the Securities and Exchange Act of 1934. Among other things, Sarbanes-Oxley and/or its implementing regulations have established new membership requirements and additional responsibilities for the Company’s audit committee, imposed restrictions on the relationship between the Company and its outside auditors (including restrictions on the types of non-audit services our auditors may provide to us), imposed additional responsibilities for external financial statements on our chief executive officer and chief financial officer, expanded the disclosure requirements for corporate insiders, required management to evaluate the Company’s disclosure controls and procedures and our internal control over financial reporting, and required auditors to issue a report on the Company’s internal control over financial reporting.

Executive Compensation Limitations

Incident to its participation in the CPP, the Company is subject to the executive compensation limitations contained in the EESA and AARA. These limitations apply to certain of the Company’s senior and highly compensated officers and apply so long as the Company holds TARP funds. Currently the limitations include: (1) a prohibition on accruing or paying any bonus, retention award, or incentive compensation to the five most highly compensated officers; (2) a prohibition on making “golden parachute payments” (as defined by IRS Section 280(G)) to certain senior and highly compensated officers; (3) a prohibition on the payment of any “tax gross-up” to certain senior and highly compensated officers; (4) the recovery of any bonus or incentive compensation paid to certain senior and highly compensated officers if the financial criteria it was based on was later proven to be materially inaccurate; and (5) a prohibition on compensation that encourages employees to take unnecessary and excessive risks that could threaten the value of the Company.

The Company’s Compensation Committee must also certify that it has reviewed with the Company’s senior risk officers at least every six months: (1) the Company’s compensation plans for senior executive officers to ensure that the plans do not encourage unnecessary and excessive risks taking that may threaten the value of the Company; and (2) all employee compensation plans “in light of the risks posed to the Company.”

14

The ARRA also empowers the Treasury Secretary with the authority to review bonus, retention, and other compensation paid to senior executive officers that have received the TARP assistance to determine if the compensation was inconsistent with the purposes of the ARRA or TARP, or otherwise contrary to the public interest and, if so, seek to negotiate reimbursements. The provision of the ARRA will apply to the Company until it has redeemed the securities sold to the Treasury under the CPP. (See the section captioned “Participation in Temporary Government Economic Recovery Programs—Capital Purchase Program” in Part I, Item 1 of this Form 10-K.) Under the ARRA such redemption is now permitted without penalty and without the need to raise new capital (as was required under the terms of the original TARP CPP), subject to the Treasury’s consultation with the recipient’s appropriate regulatory agency.

Future Legislation

In addition to the specific legislation described above, various legislation is currently being considered by Congress. This legislation may change banking statutes and the Company’s operating environment in substantial and unpredictable ways and may increase reporting requirements and governance. If enacted, such legislation could increase or decrease the cost of doing business, limit or expand permissible activities, or affect the competitive balance among banks, savings associations, credit unions, and other financial institutions. The Company cannot predict whether any potential legislation will be enacted and, if enacted, the effect that it, or any implementing regulations, would have on its business, results of operations, or financial condition.

ITEM 1A. RISK FACTORS

The material risks and uncertainties that management believes affect the Company are described below. Before making an investment decision with respect to any of the Company’s securities, you should carefully consider the risks and uncertainties as described below together with all of the information included herein. The risks and uncertainties described below are not the only risks and uncertainties the Company faces. Additional risks and uncertainties not presently known or that are currently deemed immaterial also may have a material adverse effect on the Company’s results of operations and financial condition. If any of the following risks actually occur, the Company’s results of operations and financial condition could suffer, possibly materially. In that event, the trading price of the Company’s common stock or other securities could decline. The risks discussed below also include forward-looking statements, and actual results may differ substantially from those discussed or implied in these forward-looking statements.

Risks Related to the Company’s Business

The Company’s Business May Be Adversely Affected by Conditions in the Financial Markets and Economic Conditions Generally

The Company’s financial performance generally is dependent upon the business environment in the suburban metropolitan Chicago market and the United States as a whole. In particular, the current environment impacts the ability of borrowers to pay interest on and repay principal of outstanding loans and the value of collateral securing those loans. A favorable business environment is generally characterized by economic growth, efficient capital markets, low inflation, high business and investor confidence, strong business earnings, and other factors. Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity, or investor or business confidence; limitations on the availability or increases in the cost of credit and capital; increases in inflation or interest rates; natural disasters; or a combination of these or other factors.

15

The suburban metropolitan Chicago market and the United States as a whole has gone through a prolonged downward economic cycle from 2007 through 2009. Significant weakness in market conditions adversely impacted all aspects of the economy including the Company’s business. In particular, dramatic declines in the housing market, with decreasing home prices and increasing delinquencies and foreclosures, negatively impacted the credit performance of construction loans, which resulted in significant write-downs of assets by many financial institutions. Business activity across a wide range of industries and regions was greatly reduced, and local governments and many businesses experienced serious difficulty due to the lack of consumer spending and the lack of liquidity in the credit markets. In addition, unemployment increased significantly during that period. The business environment was adverse for many households and businesses in the suburban metropolitan Chicago market, United States, and worldwide.

Overall, during the past two years, the general business environment has had an adverse effect on the Company’s business, and there can be no assurance that the environment will improve in the near term. However, during the first quarter of fiscal year 2010, the economy began to show signs of recovery, as evidenced by an increase in consumer spending and stabilization of the labor market, the housing sector, and financial markets. However, unemployment levels remained elevated, housing prices remained depressed, and demand for housing was weak due to distressed sales and tightened lending standards. Consequently, notwithstanding preliminary signs of recovery, there can be no assurance that the economic conditions in the suburban metropolitan Chicago market and the United States will improve in the near term. Furthermore, a worsening of economic conditions would likely exacerbate the adverse effects of these difficult market conditions on the Company and others in the financial institutions industry. Continued market stress could have a material adverse effect on the credit quality of the Company’s loans, and therefore, its financial condition and results of operations.

The Company Is Subject To Interest Rate Risk

The Company’s earnings and cash flows are largely dependent upon its net interest income. Net interest income is the difference between interest income earned on interest-earning assets such as loans and securities and interest expense paid on interest-bearing liabilities such as deposits and borrowed funds. Interest rates are highly sensitive to many factors that are beyond the Company’s control, including general economic conditions and policies of various governmental and regulatory agencies, in particular, the Board of Governors of the Federal Reserve System. Changes in monetary policy, including changes in interest rates, could influence the amount of interest the Company receives on loans and securities and the amount of interest it pays on deposits and borrowings. Such changes could also affect (i) the Company’s ability to originate loans and obtain deposits, (ii) the fair value of the Company’s financial assets and liabilities, and (iii) the average duration of the Company’s securities portfolio. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, the Company’s net interest income, and therefore earnings, could be adversely affected. Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings.

Although management believes it has implemented effective asset and liability management strategies to reduce the potential effects of changes in interest rates on the Company’s results of operations, any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on the Company’s financial condition and results of operations. See the section captioned “Net Interest Income” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” located elsewhere in this report for further discussion related to the Company’s management of interest rate risk.

16

The Company Is Subject To Lending Risk

There are inherent risks associated with the Company’s lending activities. These risks include the impact of changes in interest rates and changes in the economic conditions in the markets where the Company operates as well as those across the United States. Increases in interest rates and/or continuing weakening economic conditions could adversely impact the ability of borrowers to repay outstanding loans or the value of the collateral securing those loans. Continuing economic weakness on real estate and related markets could further increase the Company’s lending risk as it relates to its commercial real estate loan portfolio and the value of the underlying collateral. The Company is also subject to various laws and regulations that affect its lending activities. Failure to comply with applicable laws and regulations could subject the Company to regulatory enforcement action that could result in the assessment of significant civil monetary penalties against the Company.

As of December 31, 2009, 83.2% of the Company’s loan portfolio consisted of commercial and industrial and commercial real estate loans. These types of loans are typically larger loans. Because the Company’s loan portfolio contains a significant number of commercial and industrial and commercial real estate loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase in non-performing loans. An increase in non-performing loans could result in a net loss of earnings from these loans, an increase in the provision for loan losses, and an increase in loan charge-offs, all of which could have a material adverse effect on the Company’s financial condition and results of operations. See the section captioned “Loans” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” located elsewhere in this report for further discussion related to commercial and industrial and commercial real estate loans.

The Company’s Reserve For Loan Losses May Be Insufficient

The Company maintains a reserve for loan losses, which is a reserve established through a provision for loan losses charged to expense that represents management’s best estimate of probable losses that have been incurred within the existing portfolio of loans. The reserve, in the judgment of management, is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio. The level of the reserve reflects management’s continuing evaluation of industry concentrations; specific credit risks; loan loss experience; current loan portfolio quality; present economic, political, and regulatory conditions; and unidentified losses inherent in the current loan portfolio. The determination of the appropriate level of the reserve for loan losses inherently involves a high degree of subjectivity and requires the Company to make estimates of significant credit risks and future trends, all of which may undergo material changes. Continuing deterioration in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans, and other factors, both within and outside of the Company’s control, may require an increase in the reserve for loan losses. In addition, bank regulatory agencies periodically review the Company’s reserve for loan losses and may require an increase in the provision for loan losses or the recognition of further loan charge-offs, based on judgments different from those of management. In addition, if charge-offs in future periods exceed the reserve for loan losses, the Company will need additional provisions to increase the reserve for loan losses. Any increases in the reserve for loan losses will result in a decrease in net income and capital and may have a material adverse effect on the Company’s financial condition and results of operations. See the section captioned “Reserve for Loan Losses” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” located elsewhere in this report for further discussion related to the Company’s process for determining the appropriate level of the reserve for loan losses.

Real Estate Market Volatility and Future Changes in Disposition Strategies Could Result in Net Proceeds that Differ Significantly from Other Real Estate Owned (“OREO”) Fair Value Appraisals

The Company’s OREO portfolio consists of properties that it obtained through foreclosure in satisfaction of loans. OREO properties are recorded at the lower of the recorded investment in the loans for which the properties served as collateral or estimated fair value, less estimated selling costs. Generally, in determining fair value an

17

orderly disposition of the property is assumed, except where a different disposition strategy is expected. Significant judgment is required in estimating the fair value of OREO property, and the period of time within which such estimates can be considered current is significantly shortened during periods of market volatility, as experienced during 2008 and 2009.

In response to market conditions and other economic factors, the Company may utilize alternative sale strategies other than orderly dispositions as part of its OREO disposition strategy, such as immediate liquidation sales. In this event, as a result of the significant judgments required in estimating fair value and the variables involved in different methods of disposition, the net proceeds realized from such sales transactions could differ significantly from estimates used to determine the fair value of the Company’s OREO properties.

The Company’s Estimate of Fair Values for Its Investments May Not Be Realizable If It Were to Sell These Securities Today

As of December 31, 2009, 99.8% of the Company’s available-for-sale securities were carried at fair value. Accounting standards require the Company to categorize these according to fair value valuation hierarchy. Ninety-nine percent of these were categorized in level 2 of the valuation hierarchy (meaning that their fair value was determined by quoted prices for similar assets or other observable inputs). The remaining were categorized as level 3 (meaning that their fair value was determined by inputs that are unobservable in the market and therefore require a greater degree of management judgment). The determination of fair value for securities categorized in level 3 involves significant judgment due to the complexity of factors contributing to the valuation, many of which are not readily observable in the market. The current market disruptions make valuation even more difficult and subjective.

The Company has historically placed a high level of reliance on information obtained from third-party sources to measure fair values. For certain of its securities, the Company uses a structured credit valuation firm to perform cash flow projections using various historical and market inputs. For other securities, third-party sources also use assumptions, judgments, and estimates in determining securities values, and different third parties use different methodologies or provide different prices for similar securities. In addition, the nature of the business of the third party source that is valuing the securities at any given time could impact the valuation of the securities. Consequently, the ultimate sales price for any of these securities could vary significantly from the recorded fair value at December 31, 2009, especially if the security is sold during a period of illiquidity or market disruption or as part of a large block of securities under a forced transaction.

Turmoil in the Financial Markets Could Result in Lower Fair Values for the Company’s Investment Securities

Major disruptions in the capital markets experienced in the past year have adversely affected investor demand for all classes of securities and resulted in volatility in the fair values of the Company’s investment securities. Significant prolonged reduced investor demand could manifest itself in lower fair values for these securities and may result in recognition of an other-than-temporary impairment. Such impairment could have a material adverse effect on the Company’s financial condition and results of operations.

The Company Is Subject To Environmental Liability Risk Associated With Lending Activities

A significant portion of the Company’s loan portfolio is secured by real property. During the ordinary course of business, the Company may foreclose on and take title to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous or toxic substances are found, the Company may be liable for remediation costs, as well as for personal injury and property damage. Environmental laws may require the Company to incur substantial expenses and could materially reduce the affected property’s value or limit the Company’s ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase the

18

Company’s exposure to environmental liability. Although the Company has policies and procedures to perform an environmental review before initiating any foreclosure action on real property, these reviews may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on the Company’s financial condition and results of operations.

The Company’s Investment in Bank Owned Life Insurance May Decline in Value

The Company currently has bank owned life insurance contracts with a cash surrender value (“CSV”) of $198.0 million. A majority of these contracts are separate account contracts. Such contracts are supported by underlying investments whose fair values are subject to volatility in the market. The Company has limited its risk of loss in value of the securities by putting in place stable value contracts that provide protection from a decline in fair value down to 80% of the CSV of the insurance policies. To the extent fair values on individual contracts fall below 80% of book value, the CSV of specific contracts may be reduced or the underlying assets transferred to short-duration investments, resulting in lower earnings. Given the decline in the market during 2008, the Company transferred certain assets underlying specific separate contracts to money market accounts. However, the Company may, in order to increase future returns on investment, redeploy underlying assets into investments subject to higher volatility. Currently, the fair value for all contracts exceeds 80% of book value, but continued turmoil in the market could result in declines that could have a material adverse effect on the Company’s financial condition and results of operations.

The Company May Be Adversely Affected By the Soundness Of Other Financial Institutions

Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. The Company has exposure to many different industries and counterparties and routinely executes transactions with counterparties in the financial services industry, including commercial banks, brokers and dealers, investment banks, and other institutional clients. Many of these transactions expose the Company to credit risk in the event of a default by a counterparty or client. In addition, the Company’s credit risk may be exacerbated when the collateral held by the Company cannot be realized upon liquidation or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to the Company. Any such losses could have a material adverse effect on the Company’s financial condition and results of operations.

The Company Operates In A Highly Competitive Industry and Market Area

The Company faces substantial competition in all areas of its operations from a variety of different competitors, many of which are larger and may have more financial resources. Such competitors primarily include national, regional, and community banks within the markets where the Company operates. The Company also faces competition from many other types of financial institutions, including, without limitation, savings and loans, credit unions, finance companies, brokerage firms, insurance companies, factoring companies, and other financial intermediaries. The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes, further illiquidity in the credit markets, and continued consolidation. Banks, securities firms, and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance, and merchant banking. Also, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic funds transfer and automatic payment systems. Many of the Company’s competitors have fewer regulatory constraints and may have lower cost structures. Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than the Company can.

The Company’s ability to compete successfully depends on a number of factors, including:

• Developing, maintaining, and building long-term customer relationships;

19

• Expanding the Company’s market position;

• Offering products and services at prices and with the features that meet customers’ needs and demands;

• Introducing new products and services;

• Maintaining a satisfactory level of customer service; and

• Anticipating and adjusting to changes in industry and general economic trends.

Failure to perform in any of these areas could significantly weaken the Company’s competitive position, which could adversely affect the Company’s growth and profitability. This, in turn, could have a material adverse effect on the Company’s financial condition and results of operations.

New Lines of Business or New Products and Services May Subject the Company to Additional Risks

From time to time, the Company may implement new lines of business or offer new products or services within existing lines of business. There can be substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products or services, the Company may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved, and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. Furthermore, any new line of business and/or new product or service could have a significant impact on the effectiveness of the Company’s system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on the Company’s business, financial condition, and results of operations.

The Company Is Subject To Extensive Government Regulation and Supervision

The Company and the Bank are subject to extensive federal and state regulations and supervision. Banking regulations are primarily intended to protect depositors’ funds, FDIC funds, and the banking system as a whole, not security holders. These regulations affect the Company’s lending practices, capital structure, investment practices, dividend policy, and growth, among other things. Congress and federal regulatory agencies continually review banking laws, regulations, and policies for possible changes.

In response to the recent financial crisis, the U.S. government is considering numerous legislative and administrative proposals sponsored by various members of Congress and the Presidential Administration relating to long-term regulatory reform of the financial markets. In some cases the proposals include a radical overhaul of the regulation of financial institutions or limitations on the products they offer. Many of these proposals would impose stricter capital and prudential standards, reporting, disclosure and business operation requirements on banks and financial institutions. Accordingly, it is likely that there will be significant changes to the banking and financial institutions regulatory regimes in the near future. The regulations or regulatory policies that are eventually adopted and applicable to the Company may be disruptive to the Company’s business and could have a material adverse effect on its business, financial condition, and results of operations.

Changes to statutes, regulations, or regulatory policies, including changes in the interpretation or implementation of those policies, could affect the Company in substantial and unpredictable ways. Such changes could subject the Company to additional costs, limit the types of financial services and products the Company may offer, and/or increase the ability of non-banks to offer competing financial services and products, among other things. Failure to comply with laws, regulations, or policies could result in sanctions by regulatory agencies, civil monetary penalties, and/or damage to the Company’s reputation, which could have a material adverse effect on the Company’s business, financial condition, and results of operations. While the Company has policies and procedures designed to prevent any such violations, there can be no assurance that such violations will not occur.

20

See the section captioned “Supervision and Regulation” in Item 1, “Business,” and Note 20 of “Notes to Consolidated Financial Statements” included in Item 8, “Financial Statements and Supplementary Data,” of this Form 10-K.

Overdraft Regulation Could Have an Adverse Effect on the Company

The Federal Reserve has amended Regulation E (Electronic Fund Transfers) effective July 1, 2010 to require consumers to opt in, or affirmatively consent, to the institution’s overdraft service for ATM and one-time debit card transactions, before overdraft fees may be assessed on the account. Consumers will also be provided a clear disclosure of the fees and terms associated with the institution’s overdraft service. Such change could adversely affect the level of the Company’s overdraft fees.

Rapidly Implemented Legislative and Regulatory Actions Could Have an Unanticipated and Adverse Effect on the Company

In response to the recent financial market crisis, the United States government, specifically the Treasury, Federal Reserve, and FDIC, working in cooperation with foreign governments and other central banks, has taken a variety of extraordinary measures designed to restore confidence in the financial markets and to strengthen financial institutions. The rulemaking relating to these measures was accomplished on a rapid emergency basis in order to address immediate concerns about the stability and continued existence of the global financial system. Recovery programs were rapidly proposed, adopted, and sometimes quickly abandoned in response to changing market conditions and other concerns. The speed of market developments required the government to abandon its traditional pattern and timeline of legislative and regulatory rulemaking, and issue rules on an interim basis without prior notice and comment. Rulemaking in this manner rather than through the traditional legislative practice does not allow for input by regulated financial institutions, such as the Company, and could lead to uncertainty in the financial markets, disruption to the Company’s business, increased costs, and material adverse effects on the Company’s financial condition and results of operations.

The Short-Term and Long-Term Impact of the New Basel II Capital Standards and the Forthcoming New Capital Rules to be Proposed for Non-Basel II U.S. Banks is Uncertain

Basel II refers to the results/pronouncements issued by an international committee formed to create an international standard that banking regulators can use when creating regulations about how much capital banks need to put aside to guard against financial and operational risks. The name comes from Basel, Switzerland, the city in which the main international organization, The Bank for International Settlements, is located. Basel II was issued in 2004 and is an update of an earlier accord, Basel I. The concept is to address minimum capital requirements, supervisory review, and market discipline.

As a result of the recent deterioration in the global credit markets and the potential impact of increased liquidity risk and interest rate risk, it is unclear what the short-term impact of the implementation of Basel II may be or what impact a pending alternative approach for non-Basel II U.S. banks may have on the cost and availability of different types of credit and the potential compliance costs of implementing the new capital standards.

The Level of the Commercial Real Estate Loan Portfolio May Subject the Company to Additional Regulatory Scrutiny

The FDIC, the Federal Reserve, and the Office of the Comptroller of the Currency have promulgated joint guidance on sound risk management practices for financial institutions with concentrations in commercial real estate lending. Under the guidance, a financial institution that is actively involved in commercial real estate lending should perform a risk assessment to identify concentrations. A financial institution may have a concentration in commercial real estate lending if, among other factors, (i) total reported loans for construction, land development, and other land represent 100% or more of total capital or (ii) total reported loans secured by

21

multifamily and non-farm residential properties, loans for construction, land development, and other land loans otherwise sensitive to the general commercial real estate market, including loans to commercial real estate related entities, represent 300% or more of total capital. The joint guidance requires heightened risk management practices including board and management oversight and strategic planning, development of underwriting standards, risk assessment, and monitoring through market analysis and stress testing.

The Company’s Information Systems May Experience an Interruption or Breach in Security

The Company relies heavily on communications and information systems to conduct its business. Any failure, interruption, or breach in security of these systems could result in failures or disruptions in the Company’s customer relationship management, general ledger, deposit, loan, or other systems. The Company has policies and procedures expressly designed to prevent or limit the effect of a failure, interruption, or security breach of its systems. However, there can be no assurance that any such failures, interruptions, or security breaches will not occur or, if they do occur, that the impact will not be substantial. The occurrence of any failures, interruptions, or security breaches of the Company’s systems could damage the Company’s reputation, result in a loss of customer business, subject the Company to additional regulatory scrutiny, or expose the Company to civil litigation and possible financial liability, any of which could have a material adverse effect on the Company’s financial condition and results of operations.

The Company Is Dependent Upon Outside Third Parties for Processing and Handling of Company Records and Data

The Company relies on software developed by third party vendors to process various Company transactions. In some cases, the Company has contracted with third parties to run its proprietary software on behalf of the Company. These systems include, but are not limited to, general ledger, payroll, employee benefits, trust record keeping, loan and deposit processing, merchant processing, and securities portfolio management. While the Company performs a review of controls instituted by the vendor over these programs in accordance with industry standards and performs its own testing of user controls, the Company must rely on the continued maintenance of these controls by the outside party, including safeguards over the security of customer data. In addition, the Company maintains backups of key processing output daily in the event of a failure on the part of any of these systems. Nonetheless, the Company may incur a temporary disruption in its ability to conduct its business or process its transactions, or incur damage to its reputation if the third party vendor fails to adequately maintain internal controls or institute necessary changes to systems. Such disruption or breach of security may have a material adverse effect on the Company’s financial condition and results of operations.

The Company Continually Encounters Technological Change

The banking and financial services industry continually undergoes technological changes, with frequent introductions of new technology-driven products and services. In addition to serving customers better, the effective use of technology increases efficiency and enables financial institutions to reduce costs. The Company’s future success will depend, in part, on its ability to address the needs of its customers by using technology to provide products and services that enhance customer convenience and that create additional efficiencies in the Company’s operations. Many of the Company’s competitors have greater resources to invest in technological improvements, and the Company may not effectively implement new technology-driven products and services or do so as quickly, which could reduce its ability to effectively compete. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse effect on the Company’s business and, in turn, its financial condition and results of operations.

The Company Is Subject To Claims and Litigation Pertaining to Fiduciary Responsibility

From time to time, customers make claims and take legal action pertaining to the Company’s performance of its fiduciary responsibilities. Whether customer claims and legal action related to the Company’s performance of its

22

fiduciary responsibilities are founded or unfounded, if such claims and legal action are not resolved in a manner favorable to the Company, they may result in significant financial liability and/or adversely affect the market perception of the Company and its products and services as well as impact customer demand for those products and services. Any financial liability or reputational damage could have a material adverse effect on the Company’s business, which, in turn, could have a material adverse effect on its financial condition and results of operations.

Consumers and Businesses May Decide Not to Use Banks to Complete Their Financial Transactions

Technology and other changes are allowing parties to complete financial transactions that historically have involved banks at one or both ends of the transaction. For example, consumers can now pay bills and transfer funds directly without banks. This could result in the loss of fee income as well as the loss of customer deposits and income generated from those deposits and could have a material adverse effect on the Company’s financial condition and results of operations.

The Company’s Controls and Procedures May Fail or Be Circumvented

Management regularly reviews and updates the Company’s loan underwriting and monitoring process, internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of the Company’s controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on the Company’s business, financial condition, and results of operations.

Financial Services Companies Depend Upon the Accuracy and Completeness of Information About Customers and Counterparties

In deciding whether to extend credit or enter into other transactions, the Company may rely on information furnished by or on behalf of customers and counterparties, including financial statements, credit reports and other financial information. The Company may also rely on representations of those customers, counterparties or other third parties, such as independent auditors, as to the accuracy and completeness of that information. Reliance on inaccurate or misleading financial statements, credit reports or other financial information could have a material adverse effect on the Company’s business and, in turn, the Company’s financial condition and results of operations.

The Company and Its Subsidiaries Are Subject To Examinations and Challenges by Taxing Authorities

In the normal course of business, the Company and its subsidiaries are routinely subjected to examinations and challenges from federal and state taxing authorities regarding tax positions taken by the Company and the determination of the amount of tax due. These examinations may relate to income, franchise, gross receipts, payroll, property, sales and use, or other tax returns filed, or not filed, by the Company. The challenges made by taxing authorities may result in adjustments to the amount of taxes due, and may result in the imposition of penalties and interest. If any such challenges are not resolved in the Company’s favor, they could have a material adverse effect on the Company’s financial condition and results of operations.

The Company and Its Subsidiaries May Not Be Able To Realize the Benefit of Deferred Tax Assets

The Company records deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. The deferred tax assets can be recognized in future periods dependent upon a number of factors, including the ability to realize the asset through

23

carryback or carryforward to taxable income in prior or future years, the future reversal of existing taxable temporary differences, future taxable income, and the possible application of future tax planning strategies. If the Company is not able to recognize deferred tax assets in future periods, it could have a material adverse effect on the Company’s financial condition and results of operations.

The Company and Its Subsidiaries Are Subject To Changes in Federal and State Tax Laws and Changes in Interpretation of Existing Laws

The Company’s financial performance is impacted by federal and state tax laws. Given the current economic and political environment, and ongoing state budgetary pressures, the enactment of new federal or state tax legislation may occur. The enactment of such legislation, or changes in the interpretation of existing law, including provisions impacting tax rates, apportionment, consolidation or combination, income, expenses, and credits, may have a material adverse effect on the Company’s financial condition and results of operations.

The Company and Its Subsidiaries Are Subject To Changes in Accounting Principles, Policies, or Guidelines

The Company’s financial performance is impacted by accounting principles, policies, and guidelines. Changes in these are continuously occurring, and given the current economic environment, more drastic changes may occur. The implementation of such changes could have a material adverse effect on the Company’s financial condition and results of operations.

The Company May Not Be Able to Attract and Retain Skilled People

The Company’s success depends, in large part, on its ability to attract and retain skilled people. Competition for the best people in most activities the Company engages in can be intense, and the Company may not be able to hire people or retain them.

Participation in the CPP could also affect the Company’s ability to attract and retain skilled people. Due to the Company’s participation in the CPP, the Company is subject to executive compensation limitations, which may not apply to other financial institutions.

The unexpected loss of services of certain of the Company’s skilled personnel could have a material adverse impact on the Company’s business because of their skills, knowledge of the Company’s market, years of industry experience, and the difficulty of promptly finding qualified replacement personnel.

The Company Is a Bank Holding Company and Its Sources of Funds Are Limited

The Company is a bank holding company, and its operations are primarily conducted by the Bank, which is subject to significant federal and state regulation. Cash available to pay dividends to stockholders of the Company is derived primarily from dividends received from the Bank. The Company’s ability to receive dividends or loans from its subsidiaries is restricted. Dividend payments by the Bank to the Company in the future will require generation of future earnings by the Bank and could require regulatory approval if the proposed dividend is in excess of prescribed guidelines. Further, the Company’s right to participate in the assets of the Bank upon its liquidation, reorganization, or otherwise will be subject to the claims of the Bank’s creditors, including depositors, which will take priority except to the extent the Company may be a creditor with a recognized claim. As of December 31, 2009, the Company’s subsidiaries had deposits and other liabilities of $6.8 billion.

The Company Could Experience an Unexpected Inability to Obtain Needed Liquidity

Liquidity measures the ability to meet current and future cash flow needs as they become due. The liquidity of a financial institution reflects its ability to meet loan requests, to accommodate possible outflows in deposits, and to take advantage of interest rate market opportunities. The ability of a financial institution to meet its current

24

financial obligations is a function of its balance sheet structure, its ability to liquidate assets, and its access to alternative sources of funds. The Company seeks to ensure its funding needs are met by maintaining a level of liquidity through asset and liability management. If the Company becomes unable to obtain funds when needed, it could have a material adverse effect on the Company’s business and, in turn, the Company’s financial condition and results of operations.

Severe Weather, Natural Disasters, Acts of War or Terrorism and Other External Events Could Significantly Impact the Company’s Business

Severe weather, natural disasters, acts of war or terrorism and other adverse external events could have a significant impact on the Company’s ability to conduct business. Such events could affect the stability of the Company’s deposit base, impair the ability of borrowers to repay outstanding loans, reduce the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause the Company to incur additional expenses. Although management has established disaster recovery policies and procedures, the occurrence of any such event could have a material adverse effect on the Company’s business, which, in turn, could have a material adverse effect on its financial condition and results of operations.

Managing Reputational Risk Is Important To Attracting and Maintaining Customers, Investors, and Employees

Threats to the Company’s reputation can come from many sources, including adverse sentiment about financial institutions generally, unethical practices, employee misconduct, failure to deliver minimum standards of service or quality, compliance deficiencies, and questionable or fraudulent activities of our customers. The Company has policies and procedures in place that seek to protect our reputation and promote ethical conduct. Nonetheless, negative publicity may arise regarding the Company’s business, employees, or customers, with or without merit, and could result in the loss of customers, investors, and employees; costly litigation; a decline in revenues; and increased governmental regulation.

Future Acquisitions May Disrupt the Company’s Business and Dilute Stockholder Value

In addition to generating internal growth, in the past the Company has strategically acquired banks or branches of other banks. The Company may consider future acquisitions to supplement internal growth opportunities. Acquiring other banks or branches involves potential risks, including:

• Exposure to unknown or contingent liabilities of acquired banks;

• Exposure to asset quality issues of acquired banks;

• Disruption of the Company’s business;

• Loss of key employees and customers of acquired banks;

• Short-term decrease in profitability;

• Diversion of management’s time and attention;

• Issues arising during transition and integration; and

• Dilution in the ownership percentage of holdings of the Company’s common stock.

The Company from time to time may evaluate merger and acquisition opportunities and conduct due diligence activities related to possible transactions with other financial institutions and financial services companies. As a result, merger or acquisition discussions and, in some cases, negotiations may take place and future mergers or acquisitions involving cash, debt, or equity securities may occur at any time. Acquisitions typically involve the payment of a premium over book and market values, and therefore, some dilution of the Company’s tangible book value and net income per common share may occur in connection with any future transaction. Furthermore, failure to realize the expected revenue increases, cost savings, increases in geographic or product presence, and/or other projected benefits from an acquisition could have a material adverse effect on the Company’s financial condition and results of operations.

25

Competition for Acquisition Candidates Is Intense

Competition for acquisitions is intense. Numerous potential acquirors compete with the Company for acquisition candidates. The Company may not be able to successfully identify and acquire suitable targets, which could slow the Company’s growth rate.

The Company May Engage in FDIC-Assisted Transactions, Which Could Present Additional Risks To Its Business

In the current economic environment, the Company may be presented with opportunities to acquire the assets and liabilities of failed banks in FDIC-assisted transactions. These acquisitions involve risks similar to acquiring existing banks even though the FDIC might provide assistance to mitigate certain risks such as sharing in exposure to loan losses and providing indemnification against certain liabilities of the failed institution. However, because these acquisitions are for failing banks and structured in a manner that would not allow the Company the time normally associated with preparing for and evaluating an acquisition (including preparing for integration of an acquired institution), the Company may face additional risks if it engages in FDIC-assisted transactions. The assets the Company would acquire would be more troubled than in a typical acquisition. The deposits the Company would assume would generally be higher priced than in a typical acquisition and therefore subject to higher attrition. Integration could be more difficult in this type of acquisition than in a typical acquisition since key staff would have departed. Any inability to overcome these risks could have an adverse effect on the Company’s ability to achieve its business strategy and maintain its market value and profitability.

Moreover, even if the Company is inclined to participate in an FDIC-assisted transaction, the Company can only participate in the bid process if it receives approval of bank regulators. There can be no assurance that the Company will be allowed to participate in the bid process, or what the terms of such transaction might be or whether the Company would be successful in acquiring the bank or targeted assets. The Company may be required to raise additional capital as a condition to, or as a result of, participation in an FDIC-assisted transaction. Any such transactions and related issuances of stock may have a dilutive effect on earnings per share and share ownership.

Furthermore, to the extent the Company is allowed to, and chooses to, participate in FDIC-assisted transactions, the Company may face competition from other financial institutions with respect to proposed FDIC-assisted transactions. To the extent that our competitors are selected to participate in FDIC-assisted transactions, our ability to identify and attract acquisition candidates and/or make acquisitions on favorable terms may be adversely affected.

Failure to Comply with the Terms of Loss Sharing Arrangements with the FDIC May Result in Significant Losses, and the Company May Become Dependant Upon Third Party Vendors in Connection with FDIC-Assisted Transactions

On October 23, 2009, the Bank entered into a Purchase and Assumption Agreement and Loss Share Agreement with the FDIC, under which the Bank assumed all deposits and certain identified assets and liabilities of the former First DuPage Bank. Under the Loss Share Agreement, the FDIC will reimburse the Bank for a portion of losses arising from loan assets of the former First DuPage, specifically 80% of losses of up to $65.0 million with respect to the entire $146.3 million acquired loan portfolio, and 95% of losses in excess of $65.0 million.

The Purchase and Assumption Agreement and the Loss Share agreement have specific and detailed compliance, servicing, notification and reporting requirements. The Company has engaged a third party loan servicing vendor to administer the assets subject to this loss share arrangement, and may engage this or another vendor to provide similar services in the future if the Company engages in future FDIC-assisted transactions. As a result, the Company is, and may increasingly be dependant upon this vendor to provide key services to the Bank. While the Company carefully selected this or another vendor, the Company may not control its actions. Any failure by the vendor to comply with the terms of any loss share arrangement the Bank has with the FDIC, or to properly

26

service the loans and OREO covered by any loss share arrangement, may cause individual loans or large pools of loans to lose eligibility for reimbursement to the Bank from the FDIC. This could result in material losses that are currently not anticipated and could adversely affect the Company’s business or financial condition.

Furthermore, in the event the Bank engages in additional FDIC-assisted transactions with loss sharing arrangements, the Company’s dependence on this vender could increase. The services provided by this vendor are unique and not provided by many vendors either locally or nationwide. As a result, the Company’s ability to replace this vendor if it so chooses could entail significant delay, expense, and risk to the Company, its business operations, and financial condition.

Decline In the Company’s Stock Price Could Require a Write-down of Some Portion or All of the Company’s Goodwill

If the Company’s stock price declines and remains low for an extended period of time, the Company could be required to write off all or a portion of its goodwill, which represents the value in excess of the Company’s tangible book value. Such write off would reduce earnings in the period in which it is recorded. The Company’s stock price is subject to market conditions that can be impacted by forces outside of the control of management, such as a perceived weakness in financial institutions in general, and may not be a direct result of the Company’s performance. A write-down of goodwill could have a material adverse effect on the Company’s results of operations.

Future Growth or Operating Results May Require the Company to Raise Additional Capital But that Capital May Not Be Available or It May Be Dilutive

The Company is required by federal and state regulatory authorities to maintain adequate levels of capital to support its operations. To the extent the Company’s future operating results erode capital or the Company elects to expand through loan growth or acquisition it may be required to raise capital.

The Company’s ability to raise capital will depend on conditions in the capital markets, which are outside of its control, and on the Company’s financial performance. Accordingly, the Company cannot be assured of its ability to raise capital when needed or on favorable terms. If the Company cannot raise additional capital when needed, it will be subject to increased regulatory supervision and the imposition of restrictions on its growth and business. These could negatively impact the Company’s ability to operate or further expand its operations through acquisitions or the establishment of additional branches and may result in increases in operating expenses and reductions in revenues that could have a material adverse effect on its financial condition and results of operations.

Any Reduction in the Company’s Credit Ratings Could Increase Its Financing Costs

Various rating agencies publish credit ratings for the Company’s debt obligations, based on their evaluations of a number of factors, some of which relate to Company performance and some of which relate to general industry conditions. Management routinely communicates with each rating agency and anticipates the rating agencies will closely monitor the Company’s performance and update their ratings from time to time during the year.

The Company cannot give any assurance that its current credit ratings will remain in effect for any given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency if, in its judgment, circumstances in the future so warrant. Downgrades in the Company’s credit ratings may adversely affect its borrowing costs and its ability to borrow or raise capital, and may adversely affect the Company’s reputation. The Company currently is rated “BBB-” by Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies, Inc., “Baa1” by Moody’s Investors Service, Inc., and “BBB” by Fitch, Inc.

27

Risks Associated With the Company’s Common Stock

The Company’s Stock Price Can Be Volatile

Stock price volatility may make it more difficult for you to resell your common stock when you want and at prices you find attractive. The Company’s stock price can fluctuate significantly in response to a variety of factors including:

• Actual or anticipated variations in quarterly results of operations;

• Recommendations by securities analysts;

• Operating and stock price performance of other companies that investors deem comparable to the Company;

• News reports relating to trends, concerns, and other issues in the financial services industry;

• Perceptions in the marketplace regarding the Company and/or its competitors;

• New technology used or services offered by competitors;

• Significant acquisitions or business combinations, strategic partnerships, joint venture, or capital commitments by or involving the Company or its competitors;

• Failure to integrate acquisitions or realize anticipated benefits from acquisitions;

• Changes in government regulations; and

• Geopolitical conditions such as acts or threats of terrorism or military conflicts.

General market fluctuations, industry factors, and general economic and political conditions and events, such as economic slowdowns or recessions, interest rate changes, or credit loss trends, could also cause the Company’s stock price to decrease regardless of operating results.

The Trading Volume In the Company’s Common Stock Is Less Than That Of Other Larger Financial Services Institutions

Although the Company’s common stock is listed for trading on the Nasdaq Stock Market Exchange, the trading volume in its common stock is less than that of other, larger financial services companies. A public trading market having the desired characteristics of depth, liquidity, and orderliness depends on the presence in the marketplace of willing buyers and sellers of the Company’s common stock at any given time. This presence depends on the individual decisions of investors and general economic and market conditions over which the Company has no control. Given the lower trading volume of the Company’s common stock, significant sales of the Company’s common stock, or the expectation of these sales could cause the Company’s common stock price to fall.

An Investment In the Company’s Common Stock Is Not An Insured Deposit

The Company’s common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, any other deposit insurance fund, or by any other public or private entity. Investment in the Company’s common stock is inherently risky for the reasons described in this “Risk Factors” section and elsewhere in this report and is subject to the same market forces that affect the price of common stock in any company. As a result, if you acquire the Company’s common stock, you could lose some or all of your investment.

The Company’s Restated Certificate of Incorporation, Amended and Restated By-Laws, and Amended and Restated Rights Agreement As Well As Certain Banking Laws May Have An Anti-Takeover Effect

Provisions of the Company’s Restated Certificate of Incorporation and Amended and Restated By-laws, federal banking laws, including regulatory approval requirements, and the Company’s Amended and Restated Rights Plan could make it more difficult for a third party to acquire the Company, even if doing so would be perceived to be beneficial by the Company’s stockholders. The combination of these provisions effectively inhibits a non-negotiated merger or other business combination, which, in turn, could adversely affect the market price of the Company’s common stock.

28

The Company May Issue Additional Securities, Which Could Dilute the Ownership Percentage of Holders of the Company’s Common Stock

The Company may issue additional securities to raise additional capital or finance acquisitions or upon the exercise or conversion of outstanding options, and, if it does, the ownership percentage of holders of the Company’s common stock could be diluted.

The Company’s Participation in the CPP May Adversely Affect the Value of Its Common Stock and the Rights of Its Common Stockholders

The rights of the holders of the Company’s common stock may be adversely affected by the Company’s participation in the CPP. For example:

• Prior to the earlier of December 5, 2011 and the date on which all of the Preferred Shares have been redeemed by the Company or transferred by Treasury to third parties, the Company may not, without the consent of Treasury, subject to limited exceptions, redeem, repurchase, or otherwise acquire shares of the Company’s common stock or preferred stock.

• The Company may not pay dividends on its common stock unless it has fully paid all required dividends on the Preferred Shares. Although the Company fully expects to be able to pay all required dividends on the Preferred Shares, there is no guarantee that it will be able to do so.

• As long as the Treasury owns the securities purchased from the Company under the CPP, the Company may not, without the prior consent of the Treasury, increase the quarterly dividends it pays on its common stock above $0.31 per share.

• The Preferred Shares will receive preferential treatment in the event of liquidation, dissolution, or winding up of the Company.

• The ownership interest of the existing holders of the Company’s common stock will be diluted to the extent the warrant the Company issued to Treasury in conjunction with the sale to Treasury of the Preferred Shares is exercised.

In addition, terms of the Preferred Shares require that quarterly dividends be paid on the Preferred Shares at the rate of 5% per annum for the first five years and 9% per annum thereafter until the stock is redeemed by First Midwest. The payments of these dividends will decrease the excess cash the Company otherwise has available to pay dividends on its common stock and to use for general corporate purposes, including working capital.

The Company Has Not Established a Minimum Dividend Payment Level, and It Cannot Assure You of Its Ability to Pay Dividends in the Future

On March 16, 2009, the Company’s Board of Directors announced a reduction in the Company’s quarterly common stock dividend from $0.225 per share to $0.01 per share. The Company does not have any plans to increase its quarterly dividend in the near future, and any increase may require regulatory approval. In addition, the Company may not pay dividends on its common stock unless it has paid dividends on the CPP Preferred Stock. The Company has not established a minimum dividend payment level, and the amount of its dividend may fluctuate. All dividends will be made at the discretion of the Company’s Board of Directors and will depend upon the Company’s earnings, financial condition, and such other factors as the Board of Directors may deem relevant from time to time. The Company’s Board of Directors may, in its discretion, further reduce or eliminate dividends or change its dividend policy in the future.

In addition, the Federal Reserve has issued Federal Reserve Supervision and Regulation Letter SR-09-4, which requires bank holding companies to inform and consult with Federal Reserve supervisory staff prior to declaring

29

and paying a dividend that exceeds earnings for the period for which the dividend is being paid. Under this regulation, if the Company experiences losses in a series of consecutive quarters, it may be required to inform and consult with the Federal Reserve supervisory staff prior to declaring or paying any dividends. In this event, there can be no assurance that the Company’s regulators will approve the payment of such dividends.

All of the Company’s Debt Obligations and Senior Equity Securities will have Priority over the Company’s Common Stock with Respect to Payment in the Event of Liquidation, Dissolution, or Winding-Up and with Respect to the Payment of Dividends

In any liquidation, dissolution, or winding up of First Midwest, the Company’s common stock would rank below all debt claims against First Midwest and claims of all of the Company’s outstanding shares of preferred stock (including the CPP Preferred Stock) and other senior equity securities. As a result, holders of the Company’s common stock will not be entitled to receive any payment or other distribution of assets upon the liquidation, dissolution, or winding-up of First Midwest until after all of the Company’s obligations to the Company’s debt holders have been satisfied and holders of senior equity securities have received any payment or distribution due to them.

Offerings of Debt, Which Would be Senior to the Company’s Common Stock upon Liquidation, and/or Preferred Equity Securities, Which may be Senior to the Company’s Common Stock for Purposes of Dividend Distributions or upon Liquidation, may Adversely Affect the Market Price of the Company’s Common Stock

The Company may attempt to increase the Company’s capital or, if the capital ratio of the Bank falls below the required minimums, the Company or the Bank could be forced to raise additional capital by making additional offerings of debt or preferred equity securities, including trust preferred securities, senior or subordinated notes, and preferred stock. The Company may also decide to raise additional capital by issuing debt or preferred equity securities for other reasons. Upon liquidation, holders of the Company’s debt securities and shares of preferred stock and lenders with respect to other borrowings will receive distributions of the Company’s available assets prior to the holders of the Company’s common stock. Additional equity offerings may dilute the holdings of the Company’s existing stockholders or reduce the market price of the Company’s common stock, or both. Holders of the Company’s common stock are not entitled to preemptive rights or other protections against dilution.

The Company’s Board of Directors is authorized to issue one or more classes or series of preferred stock from time to time without any action on the part of the Company’s stockholders. The Company’s Board of Directors also has the power, without stockholder approval, to set the terms of any such classes or series of preferred stock that may be issued, including voting rights, dividend rights and preferences over the Company’s common stock with respect to dividends or upon the Company’s dissolution, winding-up, and liquidation and other terms. If the Company issues preferred stock in the future that has a preference over the Company’s common stock with respect to the payment of dividends or upon liquidation, or if the Company issues preferred stock with voting rights that dilute the voting power of the Company’s common stock, the rights of holders of the Company’s common stock or the market price of the Company’s common stock could be adversely affected.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

The executive offices of the Company, the Bank, and certain subsidiary operational facilities are located in a 16-story office building in Itasca, Illinois. The Company and the Bank currently occupy 60,933 square feet of that building, which is leased from an unaffiliated third party.

As of December 31, 2009, the Bank operated through 95 bank branches, one operational facility, and one dedicated lending office. Of these, 24 are leased and the remaining 73 are owned and not subject to any material

30

liens. The banking offices are largely located in various communities throughout northern and central Illinois and northwestern Indiana, primarily the Chicago metropolitan suburban area. At certain Bank locations, excess space is leased to third parties. The Bank also owns 127 automated teller machines (“ATMs”), some of which are housed at banking locations and some of which are independently located. In addition, the Company owns other real property that, when considered individually or in the aggregate, is not material to the Company’s financial position.

The Company believes its facilities in the aggregate are suitable and adequate to operate its banking business. Additional information with respect to premises and equipment is presented in Note 8 of “Notes to Consolidated Financial Statements” in Item 8 of this Form 10-K.

ITEM 3. LEGAL PROCEEDINGS

There are certain legal proceedings pending against the Company and its subsidiaries in the ordinary course of business at December 31, 2009. 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 condition of the Company.

ITEM 4. RESERVED

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY,

RELATED STOCKHOLDER MATTERS, AND

ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s common stock is traded under the symbol “FMBI” in the Nasdaq Global Select market tier of The Nasdaq Stock Market. As of December 31, 2009, there were approximately 11,000 stockholders. The following table sets forth the closing common stock price, dividends declared per common share, and book value per common share during each quarter of 2009 and 2008.

	2009								2008
	Fourth		Third		Second		First		Fourth		Third		Second		First
Market price of common stock
High	$	11.50	$	11.64	$	12.00	$	20.25	$	28.97	$	40.09	$	29.36	$	31.98
Low	$	9.09	$	6.19	$	5.94	$	5.96	$	13.65	$	13.56	$	18.65	$	24.38
Quarter-end	$	10.89	$	11.27	$	7.31	$	8.59	$	19.97	$	24.24	$	18.65	$	27.77
Cash dividends declared per common share	$	0.010	$	0.010	$	0.010	$	0.010	$	0.225	$	0.310	$	0.310	$	0.310
Dividend yield at quarter-end (1)		0.37%		0.35%		0.55%		0.47%		4.51%		5.12%		6.65%		4.47%
Book value per common share at quarter-end	$	13.66	$	14.43	$	14.22	$	14.61	$	14.72	$	14.80	$	14.90	$	15.20

⁽¹⁾ Ratios are presented on an annualized basis.

A discussion regarding the regulatory restrictions applicable to the Bank’s ability to pay dividends to the Company is included in the “Supervision and Regulation - Dividends” and “Risk Factors—Risks Associated with the Company’s Common Stock” sections under Items 1 and 1A of this Form 10-K. A discussion of the Company’s philosophy regarding the payment of dividends is included in the “Management of Capital” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this Form 10-K.

31

Equity Compensation Plans

The following table sets forth information, as of December 31, 2009, relating to equity compensation plans of the Company pursuant to which options, restricted stock, restricted stock units, or other rights to acquire shares may be granted from time to time.

	Equity Compensation Plan Information
Equity Compensation Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants, and rights (a)	Weighted-average exercise price of outstanding options, warrants, and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Approved by security holders (1)	2,633,929	$	31.77	1,438,280
Not approved by security holders (2)	5,153		17.77	-
Total	2,639,082	$	31.74	1,438,280

⁽¹⁾ Includes all outstanding options and awards under the Company’s Omnibus Stock and Incentive Plan and the Non-Employee Directors’ Stock Plan (the “Plans”). Additional information and details about the Plans are also disclosed in Notes 1 and 18 of “Notes to Consolidated Financial Statements” in Item 8 of this Form 10-K.

⁽²⁾ Represents shares underlying deferred stock units credited under the Company’s Nonqualified Retirement Plan, payable on a one-for-one basis in shares of the Company’s common stock.

The Nonqualified Retirement Plan (the “Plan”) is a defined contribution deferred compensation plan under which participants are credited with deferred compensation equal to contributions and benefits that would have accrued to the participant under the Company’s tax-qualified plans, but for limitations under the Internal Revenue Code, and to amounts of salary and annual bonus that the participant has elected to defer. Participant accounts are deemed to be invested in separate investment accounts under the plan, with similar investment alternatives as those available under the Company’s tax-qualified savings and profit sharing plan, including an investment account deemed invested in shares of Company common stock. The accounts are adjusted to reflect the investment return related to such deemed investments. Except for the 5,153 shares set forth in the table above, all amounts credited under the Plan are paid in cash.

Stock Performance Graph

The graph below illustrates, over a five-year period, the cumulative total return (defined as stock price appreciation or depreciation and dividends) to stockholders from the common stock against a broad-market total return equity index and a published industry total return equity index. The broad-market total return equity index used in this comparison is the Standard & Poor’s 500 Stock Index (the “S&P 500”), and the published industry total return equity index used in this comparison is the Standard & Poor’s SmallCap 600 Banks Index (“S&P SmallCap 600 Banks”).

32

Comparison of Five-Year Cumulative Total Return Among

First Midwest, the S&P 500, and the S&P SmallCap 600 Banks ⁽¹⁾

	2004	2005	2006	2007	2008	2009
First Midwest	100.00	99.42	113.04	92.61	63.50	34.79
S&P 500	100.00	104.91	121.48	128.16	80.74	102.11
S&P SmallCap 600 Banks	100.00	93.50	102.25	79.20	76.41	57.44

⁽¹⁾ Assumes $100 invested on December 31, 2004 in First Midwest’s Common Stock, the S&P 500, and the S&P SmallCap 600 Banks with the reinvestment of all related dividends.

To the extent this Form 10-K is incorporated by reference into any other filing by the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, the foregoing “Stock Performance Graph” will not be deemed incorporated, unless specifically provided otherwise in such filing and shall not otherwise be deemed filed under such Acts.

Issuer Purchases of Equity Securities

No purchases were made by the Company or on its behalf, or by any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of its common stock pursuant to a repurchase program approved by the Company’s Board of Directors 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 2,497,747 shares as of December 31, 2009. The repurchase program has no set expiration or termination date. Any repurchases are subject to limitations imposed as part of the CPP under the EESA described elsewhere in this report.

On September 25, 2009, in two separate transactions each of which was designed to be exempt from registration under Section 3(a)(9) of the Securities Act of 1933, the Company issued a total of 5,643,105 shares of newly issued common stock at a price of $10.272 per share in exchange for approximately $39.3 million of the outstanding principal balance of the Company’s 5.85% subordinated debt and approximately $29.5 million of the outstanding principal balance of the 6.95% trust preferred debt issued by First Midwest Capital Trust I. The proceeds from these transactions were used for general corporate purposes and no underwriter was engaged for either transaction. For additional information, see Notes 12 and 13 of “Notes to Consolidated Financial Statements” in Item 8 of this Form 10-K.

33

For further details regarding the Company’s stock repurchase programs, refer to the section titled “Management of Capital” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Form 10-K.

ITEM 6. SELECTED FINANCIAL DATA

Consolidated financial information reflecting a summary of the operating results and financial condition of the Company for each of the five years in the period ended December 31, 2009 is presented in the following table. This summary should be read in conjunction with the consolidated financial statements and accompanying notes included elsewhere in this Form 10-K. A more detailed discussion and analysis of the factors affecting the Company’s financial condition and operating results is presented in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Form 10-K.

	Years ended December 31,
	2009			2008			2007			2006			2005
Operating Results (Amounts in thousands)
Interest income	$	341,751		$	409,207		$	476,961		$	476,409		$	366,700
Interest expense		(90,219	)		(162,610	)		(236,832	)		(224,550	)		(130,850	)
Net interest income		251,532			246,597			240,129			251,859			235,850
Provision for loan losses		(215,672	)		(70,254	)		(7,233	)		(10,229	)		(8,930	)
Noninterest income		92,563			89,618			111,054			99,014			77,927
Gains (losses) on securities sales, net		26,726			8,903			(746	)		4,269			(3,315	)
Securities impairment losses		(24,616	)		(44,514	)		(50,055	)		-			-
Gain on FDIC-assisted transaction		13,071			-			-			-			-
Gains on early extinguishment of debt		15,258			-			-			-			-
Noninterest expense		(234,788	)		(194,305	)		(199,137	)		(192,615	)		(165,703	)
Income (loss) before income tax benefit (expense)		(75,926	)		36,045			94,012			152,298			135,829
Income tax benefit (expense)		50,176			13,291			(13,853	)		(35,052	)		(34,452	)
Net (loss) income		(25,750	)		49,336			80,159			117,246			101,377
Preferred dividends		(10,265	)		(712	)		-			-			-
Net loss (income) applicable to non-vested restricted shares		464			(142	)		(65	)		(57	)		-
Net (loss) income applicable to common shares	$	(35,551	)	$	48,482		$	80,094		$	117,189		$	101,377
Weighted-average common shares outstanding		50,034			48,462			49,295			49,102			45,567
Weighted-average diluted common shares outstanding		50,034			48,515			49,586			49,463			45,893
Per Common Share Data
Basic (loss) earnings per common share	$	(0.71	)	$	1.00		$	1.62		$	2.39		$	2.22
Diluted (loss) earnings per common share		(0.71	)		1.00			1.62			2.37			2.21
Common dividends declared		0.040			1.155			1.195			1.120			1.015
Book value at year end		13.66			14.72			14.94			15.01			11.99
Market price at year end		10.89			19.97			30.60			38.68			35.06
Performance Ratios
Return on average common equity		(4.84%	)		6.46%			10.68%			16.86%			18.83%
Return on average assets		(0.32%	)		0.60%			0.99%			1.42%			1.44%
Net interest margin - tax-equivalent		3.72%			3.61%			3.58%			3.67%			3.87%
Dividend payout ratio		(5.63%	)		115.50%			73.77%			47.26%			45.93%
Average equity to average assets ratio		11.50%			9.30%			9.27%			8.42%			7.65%

34

	As of December 31,
	2009		2008		2007		2006		2005
Balance Sheet Highlights (Amounts in thousands)
Total assets	$	7,710,672	$	8,528,341	$	8,091,518	$	8,441,526	$	7,210,151
Loans		5,203,246		5,360,063		4,963,672		5,008,944		4,306,191
Deposits		5,885,279		5,585,754		5,778,861		6,167,216		5,147,832
Subordinated debt		137,735		232,409		230,082		228,674		130,092
Long-term portion of Federal Home Loan Bank advances		147,418		736		136,064		14,660		13,519
Stockholders’ equity		941,521		908,279		723,975		751,014		544,068
Financial Ratios
Reserve for loan losses as a percent of loans		2.78%		1.75%		1.25%		1.25%		1.31%
Tier 1 capital to risk-weighted assets		12.18%		11.60%		9.03%		9.56%		10.72%
Total capital to risk-weighted assets		14.25%		14.36%		11.58%		12.16%		11.76%
Tier 1 leverage to average assets		10.18%		9.41%		7.46%		7.29%		8.16%
Tangible common equity to tangible assets		6.29%		5.23%		5.58%		5.62%		6.30%

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

The following discussion and analysis is intended to address the significant factors affecting our Consolidated Statements of Income for the years 2007 through 2009 and Consolidated Statements of Financial Condition as of December 31, 2008 and 2009. 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 the “Bank,” we are referring to our wholly-owned banking subsidiary, First Midwest Bank. The discussion is designed to provide stockholders with a comprehensive review of the operating results and financial condition and should be read in conjunction with the consolidated financial statements, accompanying notes thereto, and other financial information presented in this Form 10-K.

A condensed review of operations for the fourth quarter of 2009 is included herein in the section titled “Fourth Quarter 2009 vs. 2008.” The review provides an analysis of the quarterly earnings performance for the fourth quarter of 2009 compared to the same period in 2008.

Unless otherwise stated, all earnings per share data included in this section and through 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 and provides a full range of business and retail banking and trust and advisory services through 95 banking branches, one operational facility, and one dedicated lending office. The primary sources of our revenue are net interest income and fees from financial services provided to customers. Business volumes tend to be influenced by overall economic factors including market interest rates, business spending, consumer confidence, and competitive conditions within the marketplace.

35

Table 1

Selected Financial Data

(Dollar amounts in thousands, except per share data)

	Years ended December 31,									% Change
	2009			2008			2007			2009-2008		2008-2007
Operating Results
Interest income	$	341,751		$	409,207		$	476,961		(16.5	)	(14.2	)
Interest expense		90,219			162,610			236,832		(44.5	)	(31.3	)
Net interest income		251,532			246,597			240,129		2.0		2.7
Fee-based revenues		85,168			95,106			98,824		(10.4	)	(3.8	)
Other noninterest income		7,395			(5,488	)		12,230		234.7		(144.9	)
Write-down of bank-owned life insurance (“BOLI”) included in noninterest income (1)		-			10,360			-		(100.0	)	-
Noninterest expense excluding losses realized on other real estate owned (“OREO”) and Federal Deposit Insurance Corporation (“FDIC”) special deposit insurance assessment (2)		(212,734	)		(192,739	)		(198,952	)	10.4		(3.1	)
Pre-tax, pre-provision core operating earnings (3)		131,361			153,836			152,231		(14.6	)	1.1
Provision for loan losses		(215,672	)		(70,254	)		(7,233	)	207.0		871.3
Gains (losses) on securities sales, net		26,726			8,903			(746	)	200.2		1,293.4
Securities impairment losses		(24,616	)		(44,514	)		(50,055	)	44.7		11.1
Gain on FDIC-assisted transaction		13,071			-			-		100.0		-
Gains on early extinguishment of debt		15,258			-			-		100.0		-
Write-down of BOLI (1)		-			(10,360	)		-		100.0		(100.0	)
Write-downs of OREO (2)		(12,584	)		(1,261	)		(699	)	(897.9	)	(80.4	)
(Losses) gains on sales of OREO, net (2)		(5,970	)		(305	)		514		(1,857.4	)	(159.3	)
FDIC special deposit insurance assessment (2)		(3,500	)		-			-		(100.0	)	-
(Loss) income before income tax benefit (expense)		(75,926	)		36,045			94,012		(310.6	)	(61.7	)
Income tax benefit (expense)		50,176			13,291			(13,853	)	277.5		195.9
Net (loss) income		(25,750	)		49,336			80,159		(152.2	)	(38.5	)
Preferred dividends		(10,265	)		(712	)		-		(1,341.7	)	(100.0	)
Net loss (income) applicable to non-vested restricted shares		464			(142	)		(65	)	426.8		(118.5	)
Net (loss) income applicable to common shares	$	(35,551	)	$	48,482		$	80,094		(173.3	)	(39.5	)
Diluted (loss) earnings per common share	$	(0.71	)	$	1.00		$	1.62		(171.0	)	(38.3	)
Performance Ratios
Return on average common equity		(4.84%	)		6.46%			10.68%
Return on average assets		(0.32%	)		0.60%			0.99%
Net interest margin – tax equivalent		3.72%			3.61%			3.58%
Efficiency ratio		57.86%			53.49%			52.50%

⁽¹⁾ For a further discussion of this write-down and the Company’s investment in bank owned life insurance, see the section titled “Investment in Bank Owned Life Insurance” and Note 1 of “Notes to Consolidated Financial Statements” in Item 8 of this Form 10-K.

⁽²⁾ For a further discussion of losses realized on OREO and this industry-wide special deposit assessment, see the section titled “Noninterest Expense.”

⁽³⁾ The Company’s accounting and reporting policies conform to U.S. generally accepted accounting principles (“U. S. GAAP”) and general practice within the banking industry. As a supplement to GAAP, the Company has provided this non-GAAP performance result. The Company believes that this non-GAAP financial measure is useful because it allows investors to assess the Company’s operating performance. Although this non-GAAP financial measure is intended to enhance investors’ understanding of the Company’s business and performance, this non-GAAP financial measure should not be considered an alternative to GAAP.

36

	December 31, 2009		December 31, 2008		Dollar Change			Percent Change
Balance Sheet Highlights
Total assets	$	7,710,672	$	8,528,341	$	(817,669	)	(9.6	)
Total loans		5,203,246		5,360,063		(156,817	)	(2.9	)
Total deposits		5,885,279		5,585,754		299,525		5.4
Transactional deposits		3,885,885		3,457,954		427,931		12.4
Loans to deposits ratio		88.4%		96.0%
Transactional deposits to total deposits		66.0%		61.9%
Asset Quality Highlights
Non-accrual loans	$	244,215	$	127,768	$	116,447		91.1
90 days or more past due loans (still accruing interest)		4,079		36,999		(32,920	)	(89.0	)
Total non-performing loans	$	248,294	$	164,767	$	83,527		50.7
Restructured loans (still accruing interest)	$	30,553	$	7,344	$	23,209		316.0
30-89 days past due loans	$	37,912	$	116,206	$	(78,294	)	(67.4	)
Reserve for loan losses as a percent of loans		2.78%		1.75%

2009 Compared with 2008

Net loss was $25.8 million, before adjustment for preferred dividends and non-vested restricted shares, with a $35.6 million loss, or $(0.71) per share, available to common shareholders after such adjustments. This compares to net income of $49.3 million, before adjustment for preferred dividends and non-vested restricted shares for 2008 and net available to common shareholders of $48.5 million, or $1.00 per share, for 2008. The difference was largely due to higher provision for loan losses, FDIC insurance premiums, and loan remediation expenses. The higher losses and expenses were partially offset by an increase in net gains on securities, debt extinguishment, and an FDIC-assisted transaction.

Pre-tax, pre-provision core operating earnings for 2009 were $131.4 million, a decrease of 14.6% from 2008. Improved net interest income was more than offset by lower fee-based revenue and higher remediation costs and FDIC premiums.

Performance for 2009 reflects balanced management of our core business, credit, and capital in what has been an extremely difficult environment. Our core business benefited from solid sales, improved margins, and controlled spending. At the same time we better positioned ourselves to remediate non-performing assets and strengthened our capital position.

In the face of lower property values and resulting rising non-performing assets, we recorded higher charge-offs and significantly increased our reserve for loan losses as we worked to align our problem asset carrying values with our planned disposition strategies. During 2009, we increased our reserve for loan losses to $144.8 million, up $50.9 million from December 31, 2008. The reserve for loan losses represented 2.78% of total loans outstanding at December 31, 2009 compared to 1.75% at December 31, 2008. The reserve for loan losses as a percentage of non-performing loans was 58% at December 31, 2009, up from 57% at December 31, 2008.

37

The provision for loan losses for 2009 was $215.7 million compared to $70.3 million for 2008. Net charge-offs for 2009 totaled $164.7 million, or 3.08% of average loans, as compared to $38.2 million, or 0.74% of average loans, for 2008. Charge-offs and provisioning during 2009 were largely influenced by the credit performance of our residential construction and land loan portfolio. This portfolio currently represents only 6.0% of total loans but accounted for 45.5% of total non-performing loans as of December 31, 2009 and 38.0% of total 2009 net charge-offs.

We believe such actions taken in 2009 better position us to work out problem loans in the future in the most expedient and economically responsible manner.

During the year, we also notably improved the quality of our capital composition by increasing our level of tangible common equity. We did so primarily through the successful exchange of approximately one-third of our 5.85% subordinated and 6.95% trust preferred debt for common stock at a discount and the delevering of our investment portfolio at a gain. Our tangible common equity ratio stands at 6.29%, which is 106 basis points higher than at December 31, 2008.

Outstanding loans totaled $5.2 billion as of December 31, 2009, a decrease of 2.9% from December 31, 2008. During 2009, extensions of new credits were more than offset by paydowns, charge-offs, conversion of loans to OREO, and the securitization of $25.7 million of real estate 1-4 family loans, which are now included in the securities available-for-sale portfolio. For a discussion of our loan portfolio and credit quality, see the section titled “Loan Portfolio and Credit Quality” elsewhere in this report.

Average core transactional deposits for 2009 were $3.7 billion, an increase of 4.9% from $3.6 billion for 2008. The increase from 2008 primarily reflected customers’ desires to maintain more liquid, short-term deposits.

Our $1.3 billion available-for-sale securities portfolio remains highly liquid with approximately 95% comprised of municipals, collateralized mortgage obligations, and agency pass-through securities. During 2009, we took advantage of the market to sell $855.4 million in securities at a gain of $26.7 million and used these sales proceeds along with cash from maturing investments to reduce our higher cost wholesale funds and improve our net interest margin. Such delevering also contributed to our improved tangible capital ratio.

Tax-equivalent net interest margin was 3.72% for 2009, an 11 basis point increase from 3.61% for 2008. The improvement in margin reflected the combination of improved loan yields, the exchange of a significant portion of our subordinated debt and trust-preferred securities for common shares of the Company, and the reduction of other wholesale borrowings made possible from the delevering of the investment portfolio.

Fee-based revenues, which comprise the majority of noninterest income, decreased for 2009 from 2008 and reflected the impact of lower transaction volumes caused by reduced consumer spending.

Noninterest expense increased $40.5 million for 2009 compared to 2008. The increases from 2008 to 2009 are due primarily to higher loan remediation costs, including costs associated with maintaining OREO, and higher FDIC insurance premiums.

On October 23, 2009, we acquired substantially all the assets of the $260 million former First DuPage Bank (“First DuPage”) in an FDIC-assisted transaction generating a gain of $13.1 million. Loans comprise the majority of the assets acquired and are subject to a loss sharing arrangement with the FDIC whereby we are indemnified against the majority of any losses incurred related to these loans. The loans acquired from the former First DuPage Bank, including the FDIC indemnification, total $223.2 million at December 31, 2009 and are classified and presented as Covered Assets in the Consolidated Statements of Financial Condition. These assets are excluded from the asset quality presentation and any credit-related amounts or ratios presented throughout this document, given the loss share indemnification from the FDIC. The acquisition of First DuPage enables us to expand into DuPage County and fits within our strategic growth plans.

38

2008 Compared with 2007

Our net income was $49.3 million for 2008 compared to $80.2 million for 2007 and earnings of $1.00 per diluted common share for 2008, as compared to $1.62 per diluted common share for 2007. Return on average assets was 0.60% for 2008 compared to 0.99% for 2007. Return on average common equity was 6.46% for 2008 compared to 10.68% for 2007.

Performance for 2008 was adversely impacted by higher loan loss provisions and securities-related losses, stemming from continued economic weakness, which were partially offset by the recognition of certain nonrecurring tax benefits. Income before taxes totaled $36.0 million for 2008, as compared to $94.0 million for 2007, with the difference largely due to higher provision for loan losses. Provision for loan losses for 2008 was $70.3 million as contrasted to $7.2 million in 2007, with the increase primarily due to deterioration in our residential construction portfolio. In addition, we recognized net securities impairment losses of $44.5 million in 2008 compared to $50.1 million in 2007.

Average core transactional deposits for 2008 were $3.6 billion, relatively unchanged from 2007. Our ability to fund lending activity predominantly with core customer deposits provides a long-term competitive advantage given the volatility in the cost and availability of wholesale funds.

Outstanding loans totaled $5.4 billion as of December 31, 2008, an increase of 8.0% from December 31, 2007, with the increase due primarily to growth in the commercial real estate and commercial and industrial loan categories.

Non-accrual loans at December 31, 2008 were $127.8 million, or 2.38% of total loans, compared to $18.5 million, or 0.37% of total loans, at December 31, 2007, with residential construction loans accounting for $97.1 million of the total. Loans 90 days or more past due and still accruing totaled $37.0 million, an increase of $15.9 million from the prior year, and other real estate owned totaled $24.4 million, an increase of $18.3 million from the prior year.

In 2008, in response to the impact of continuing economic weakness on real estate and related markets, we increased our reserve for loan losses to $93.9 million as of December 31, 2008, up $32.1 million from December 31, 2007. The reserve for loan losses represented 1.75% of total loans outstanding at December 31, 2008 compared to 1.25% at December 31, 2007. Provision for losses for 2008 totaled $70.3 million and exceeded net charge-offs by $32.1 million.

Net interest margin for 2008 was 3.61% compared to 3.58% for 2007 as we were able to more than offset declines in asset yields with reductions in our cost of funds.

Fee-based revenues were $95.1 million for full year 2008, down 3.8% from 2007. Excluding certain services we discontinued in late 2007 from both years, fee-based revenues declined 1% from 2007, due primarily to lower trust revenue and lower retail sales of investment products.

Noninterest expense for 2008 declined 2.4% from 2007 due primarily to a reduction in salary and benefit costs. From 2006 to 2008, the Company reduced its staffing by 4.4%, or 83 full-time equivalents.

We recognized significant federal and state tax benefits due to favorable court rulings and results of examinations related to prior years. These benefits, coupled with the increase in tax-exempt income as a percent of total income in 2008, resulted in a net tax benefit for 2008 of $13.3 million.

Management’s Outlook

As we enter 2010, signs of economic recovery are emerging but remain tenuous. Furthermore, actions taken by the federal government through legislation and regulation continue to evolve.

39

In what promises to again be a challenging credit environment, it is our belief that our strong core operating performance, coupled with an expanded capital base, positions us to better navigate the uncertainty of the times, meet the needs of our clients and communities, and benefit from future recovery in the market place.

EARNINGS PERFORMANCE

Net Interest Income

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” in Item 8 of this Form 10-K.

Our accounting and reporting policies conform to U.S. generally accepted accounting principles (“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 effect of such adjustment is presented in the following table.

Table 2

Effect of Tax-Equivalent Adjustment

(Dollar amounts in thousands)

	Years Ended December 31,						% Change
	2009		2008		2007		2009-2008		2008-2007
Net interest income (GAAP)	$	251,532	$	246,597	$	240,129	2.0		2.7
Tax-equivalent adjustment		19,658		22,225		20,906	(11.6	)	6.3
Tax-equivalent net interest income	$	271,190	$	268,822	$	261,035	0.9		3.0

Table 3 summarizes changes in our average interest-earning assets and interest-bearing liabilities over the last three years as well as interest income and interest expense related to each category of assets and funding sources and the average interest rates earned and paid on each. The table also shows the trend in net interest margin on a quarterly basis for 2009 and 2008, including the tax-equivalent yields on interest-earning assets and rates paid on interest-bearing liabilities. Table 4 details increases in income and expense for each of the major categories of interest-earning assets and analyzes the extent to which such variances are attributable to volume and rate changes. Interest income and yields are presented on a tax-equivalent basis assuming a federal income tax rate of 35%, which includes the tax-equivalent adjustment as presented in Table 2 above.

Tax-equivalent net interest margin was 3.72% for 2009, up 11 basis points from 3.61% for 2008. The yield on interest-earning assets for 2009 declined 84 basis points compared to 2008, while our cost of funds declined 106 basis points compared to 2008. As of December 31, 2009, our loan-to-deposit ratio was 88.4%, with two-thirds of our customer deposits consisting of demand, NOW, money market, and savings transactional accounts.

2009 net interest margin reflects our solid core deposit base and our ability to effectively manage our cost of funds. During the last half of 2009, we delevered our balance sheet by using proceeds from securities sales of $855.4 million and maturities to reduce our level of borrowed funds and time deposits. Interest rates began declining in September 2007 and continued through fourth quarter 2008, resulting in a reduction in interest rates

40

for both fixed and floating interest rates on our loan portfolio in 2009. During 2009 we instituted interest rate floors on a portion of our loan portfolio that moderated the overall decline in loan yields and contributed to improved margins. The decline in interest-earning asset yields was more than compensated for by a shift in funding toward less expensive transactional deposits.

During 2009, we placed loans on non-accrual status and accordingly reversed interest accrued of $5.7 million. Excluding this adjustment, full year 2009 net interest margin would have been approximately 4.04%.

We continue to 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 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of this Form 10-K.

41

Table 3

Net Interest Income and Margin Analysis

(Dollar amounts in thousands)

	2009						2008						2007
	Average Balance			Interest		Yield/ Rate (%)	Average Balance			Interest		Yield/ Rate (%)	Average Balance			Interest		Yield/ Rate (%)
Assets:
Interest-bearing deposits with banks	$	6,080		$	13	0.21	$	3,399		$	52	1.53	$	7,550		$	383	5.07
Federal funds sold and securities purchased under agreements to resell		84,451			186	0.22		14,672			166	1.13		3,011			173	5.75
Mortgages held for sale		-			-	-		37			3	8.11		2,940			171	5.82
Securities:
Trading - taxable		12,270			227	1.85		17,202			289	1.68		17,006			360	2.12
Available-for-sale - taxable		890,848			41,932	4.71		1,171,264			61,844	5.28		1,268,389			66,788	5.27
Available-for-sale - nontaxable (1)		770,380			47,895	6.22		936,933			57,344	6.12		906,905			54,755	6.04
Held-to-maturity - taxable		8,520			460	5.40		7,670			341	4.45		9,450			422	4.47
Held-to-maturity - nontaxable (1)		77,464			5,444	7.03		84,718			5,879	6.94		88,099			6,159	6.99
Total securities		1,759,482			95,958	5.45		2,217,787			125,697	5.67		2,289,849			128,484	5.61
Federal Home Loan Bank and Federal Reserve Bank stock		55,081			1,199	2.18		54,767			1,318	2.41		54,774			2,034	3.71
Loans (1)(2):
Commercial and industrial		1,481,501			71,509	4.83		1,435,525			85,319	5.94		1,379,007			104,968	7.61
Agricultural		129,773			5,318	4.10		176,378			8,822	5.00		166,647			11,721	7.03
Commercial real estate		3,034,192			150,753	4.97		2,775,847			165,121	5.95		2,592,170			192,003	7.41
Consumer		536,788			25,371	4.73		547,965			31,771	5.80		596,885			44,978	7.54
Real estate – 1-4 family		166,725			9,683	5.81		214,164			13,163	6.15		208,770			12,952	6.20
Total loans		5,348,979			262,634	4.91		5,149,879			304,196	5.91		4,943,479			366,622	7.42
Covered assets (3)		28,049			1,419	5.06		-			-	-		-			-	-
Total interest-earning assets (1)(2)		7,282,122			361,409	4.96		7,440,541			431,432	5.80		7,301,603			497,867	6.82
Cash and due from banks		119,469						136,547						152,057
Reserve for loan losses		(127,037	)					(66,378	)					(62,227	)
Other assets		789,555						714,730						699,900
Total assets	$	8,064,109					$	8,225,440					$	8,091,333
Liabilities and Stockholders’ Equity:
Savings deposits	$	751,386			3,024	0.40	$	792,524			7,148	0.90	$	754,009			11,844	1.57
NOW accounts		984,529			3,102	0.32		935,429			9,637	1.03		900,956			14,536	1.61
Money market deposits		937,766			9,213	0.98		787,218			13,220	1.68		859,864			28,469	3.31
Total interest-bearing transactional deposits		2,673,681			15,339	0.57		2,515,171			30,005	1.19		2,514,829			54,849	2.18
Time deposits		2,001,207			48,838	2.44		2,172,379			80,617	3.71		2,319,902			111,418	4.80
Total interest-bearing deposits		4,674,888			64,177	1.37		4,687,550			110,622	2.36		4,834,731			166,267	3.44
Borrowed funds		1,118,792			12,569	1.12		1,438,908			37,192	2.58		1,131,700			55,540	4.91
Subordinated debt		208,621			13,473	6.46		231,961			14,796	6.38		227,756			15,025	6.60
Total interest-bearing liabilities		6,002,301			90,219	1.50		6,358,419			162,610	2.56		6,194,187			236,832	3.82
Demand deposits		1,061,208						1,043,972						1,055,251
Other liabilities		72,927						58,318						91,784
Stockholders’ equity – common		734,673						750,497						750,111
Stockholders’ equity – preferred		193,000						14,234						-
Total liabilities and stockholders’ equity	$	8,064,109					$	8,225,440					$	8,091,333
Net interest income/margin (1)				$	271,190	3.72				$	268,822	3.61				$	261,035	3.58

⁽¹⁾ Interest income and yields are presented on a tax-equivalent basis, assuming a federal income tax rate of 35%.

⁽²⁾ Loans on a non-accrual basis for the recognition of interest income totaled $244.2 million as of December 31, 2009, $127.8 million as of December 31, 2008, and $18.4 million as of December 31, 2007 and are included in loans for purposes of this analysis.

⁽³⁾ Covered interest-earning assets consist of loans acquired through an FDIC-assisted transaction. For additional discussion, please refer to the section titled “Covered Assets.”

42

Table 4

Changes in Net Interest Income Applicable to Volumes and Interest Rates ⁽¹⁾

(Dollar amounts in thousands)

	2009 compared to 2008									2008 compared to 2007
	Volume			Rate			Total			Volume			Rate			Total
Interest-bearing deposits with banks	$	400		$	(439	)	$	(39	)	$	(146	)	$	(185	)	$	(331	)
Federal funds sold and securities purchased under agreements to resell		24			(4	)		20			(9	)		2			(7	)
Mortgages held for sale		(2	)		(1	)		(3	)		(278	)		110			(168	)
Securities:
Trading – taxable		(95	)		33			(62	)		4			(75	)		(71	)
Available-for-sale – taxable		(13,700	)		(6,212	)		(19,912	)		(5,129	)		185			(4,944	)
Available-for-sale – nontaxable (2)		(10,371	)		922			(9,449	)		1,831			758			2,589
Held-to-maturity – taxable		41			78			119			(79	)		(2	)		(81	)
Held-to-maturity – nontaxable (2)		(511	)		76			(435	)		(235	)		(45	)		(280	)
Total securities		(24,636	)		(5,103	)		(29,739	)		(3,608	)		821			(2,787	)
Federal Home Loan Bank and Federal Reserve Bank stock		8			(127	)		(119	)		-			(716	)		(716	)
Loans (2):
Commercial and industrial		2,839			(16,649	)		(13,810	)		4,519			(24,168	)		(19,649	)
Agricultural		(2,081	)		(1,423	)		(3,504	)		734			(3,633	)		(2,899	)
Commercial real estate		18,656			(33,024	)		(14,368	)		15,111			(41,993	)		(26,882	)
Consumer		(636	)		(5,764	)		(6,400	)		(3,463	)		(9,744	)		(13,207	)
Real estate – 1-4 family		(2,787	)		(693	)		(3,480	)		330			(119	)		211
Total loans		15,991			(57,553	)		(41,562	)		17,231			(79,657	)		(62,426	)
Covered assets		1,419			-			1,419			-			-			-
Total interest income (2)		(6,796	)		(63,227	)		(70,023	)		13,190			(79,625	)		(66,435	)
Savings deposits		(353	)		(3,771	)		(4,124	)		640			(5,336	)		(4,696	)
NOW accounts		535			(7,070	)		(6,535	)		580			(5,479	)		(4,899	)
Money market deposits		3,425			(7,432	)		(4,007	)		(2,232	)		(13,017	)		(15,249	)
Total interest-bearing transactional deposits		3,607			(18,273	)		(14,666	)		(1,012	)		(23,832	)		(24,844	)
Time deposits		(5,945	)		(25,834	)		(31,779	)		(6,733	)		(24,068	)		(30,801	)
Total interest-bearing deposits		(2,338	)		(44,107	)		(46,445	)		(7,745	)		(47,900	)		(55,645	)
Borrowed funds		(6,953	)		(17,670	)		(24,623	)		24,673			(43,021	)		(18,348	)
Subordinated debt		(1,510	)		187			(1,323	)		288			(517	)		(229	)
Total interest expense		(10,801	)		(61,590	)		(72,391	)		17,216			(91,438	)		(74,222	)
Net interest income (2)	$	4,005		$	(1,637	)	$	2,368		$	(4,026	)	$	11,813		$	7,787

⁽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 is presented on a tax-equivalent basis, assuming a federal income tax rate of 35%.

43

As shown in Table 4, 2009 tax-equivalent net interest income increased $2.4 million compared to 2008 following an increase of $7.8 million from 2007 to 2008. This was the result of a decrease in interest expense more than offsetting a decrease in interest income.

As shown in Table 4, tax equivalent interest income declined $70.0 million for 2009 compared to 2008. The decrease in interest-earning assets reduced interest income by $6.8 million, while a decline in the average rate earned on interest-earning assets reduced interest income by $63.2 million. Interest expense for 2009 declined $72.4 million compared to 2008. The decrease in interest-bearing liabilities reduced interest expense by $10.8 million, but the shift from time deposits to less expensive wholesale borrowing, coupled with an overall decrease in the average rate paid on interest-bearing liabilities reduced interest expense by $61.6 million.

Tax equivalent interest income declined $66.4 million for 2008 compared to 2007. The increase in interest-earning assets increased interest income by $13.2 million, while a decline in the average rate earned on interest-earning assets reduced interest income by $79.6 million. Interest expense for 2008 declined $74.2 million compared to 2007. The increase in interest-bearing liabilities increased interest expense by $17.2 million, but the shift from time deposits to less expensive wholesale borrowing, coupled with an overall decrease in the average rate paid on interest-bearing liabilities reduced interest expense by $91.4 million.

Our net interest margin performance in 2010 will depend, to a large extent, on stability of interest rates and our ability to maintain transactional deposits at our current cost of funds and may be adversely impacted by the level of loans placed on non-accrual.

44

Noninterest Income

Table 5

Noninterest Income Analysis

(Dollar amounts in thousands)

	Years ended December 31,									% Change
	2009			2008			2007			2009-2008		2008-2007
Service charges on deposit accounts	$	38,754		$	44,987		$	45,015		(13.9	)	(0.1	)
Trust and investment advisory fees		14,059			15,130			15,701		(7.1	)	(3.6	)
Other service charges, commissions, and fees		16,529			18,846			22,183		(12.3	)	(15.0	)
Card-based fees (1)		15,826			16,143			15,925		(2.0	)	1.4
Subtotal fee-based revenues		85,168			95,106			98,824		(10.4	)	(3.8	)
Bank owned life insurance (“BOLI”) (2)		2,263			(2,369	)		8,033		(195.5	)	(129.5	)
Other income (3)		2,590			2,819			3,078		(8.1	)	(8.4	)
Subtotal recurring noninterest income		90,021			95,556			109,935		(5.8	)	(13.1	)
Trading gains (losses), net (4)		2,542			(5,938	)		1,119		(142.8	)	(630.7	)
Gains (losses) on securities sales, net		26,726			8,903			(746	)	200.2		(1,293.4	)
Securities impairment losses		(24,616	)		(44,514	)		(50,055	)	(44.7	)	(11.1	)
Gain on FDIC-assisted transaction		13,071			-			-		100.0		-
Gains on early extinguishment of debt		15,258			-			-		100.0		-
Total noninterest income	$	123,002		$	54,007		$	60,253		127.8		(10.4	)

⁽¹⁾ Card-based fees consist of debit and credit card interchange fees charged for processing signature-based 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 any premiums paid. The change in CSV is attributable 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 the section “Investment in Bank Owned Life Insurance” and Note 1 of “Notes to Consolidated Financial Statements” in Item 8 of this Form 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 (losses) gains 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. Such change is substantially offset by an adjustment to salaries and benefits expense.

Our total noninterest income increased $69.0 million for 2009 compared to 2008. The increase was driven largely by significantly higher net gains on securities, debt extinguishment, and an FDIC-assisted transaction, which offset declines in fee-based revenues.

Fee-based revenues, which comprise the majority of noninterest income, decreased 10.4% for 2009 from 2008. This decrease reflects the impact of lower transaction volumes caused by reduced consumer spending. All major fee categories decreased from 2008.

Service charges on deposit accounts declined 13.9% for 2009 compared to 2008 due to lower transaction volumes caused by reduced consumer spending.

Other service charges, commissions, and fees declined 12.3% for 2009 compared to 2008. The decline was due to reduced merchant fees generated from processing consumer transactions and lower sales of third-party annuity and investment products.

45

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 attributable to earnings or losses credited to policies, based on investments made by the insurer. In 2009, BOLI income was $2.3 million compared to a BOLI loss of $2.4 million for 2008. In fourth quarter 2008, management elected to accept lower market returns in order to reduce its risk to market volatility through investment in shorter-duration, lower-yielding money market instruments. See the section titled “Investment in Bank Owned Life Insurance” for a discussion of our investment in BOLI.

Fee-based revenues were $95.1 million for 2008, down 3.8% from 2007. In fourth quarter 2007, we ceased originating traditional residential mortgages, and in first quarter 2008, we began to maintain cashier check balances in-house rather than outsource the service in exchange for a fee. If both were excluded from the 2007 amount, fee-based revenues for 2008 would have declined 1.0% from 2007, primarily due to lower trust revenue and retail sales of investment products.

Other service charges, commissions, and fees declined 15.0% for 2008 compared to 2007 due to ceasing origination of traditional residential mortgages and formerly outsourced cashier check balances. Further contributing to the decrease were declines in commissions received from the sale of third-party annuity and investment products of $517,000 from 2007 to 2008. Card-based fees increased 1.4% for 2008 from 2007, with most of the increase related to higher usage.

2008 was the first year in which we reported a loss on BOLI. In 2008, we received $2.7 million of death benefit payments compared to $877,000 in 2007. However, this was more than offset by a decrease in the CSV of the underlying policies. During fourth quarter 2008, the fair value of investments underlying a separate account with a CSV of $114.8 million declined below 80% of book value. We transferred the underlying investments to a short-duration, lower yielding money market account and recognized a charge against income for $2.9 million. In order to obtain the flexibility to invest these assets in the future into higher yielding investments, we reduced the cash surrender value by an additional $7.5 million at December 31, 2008, so that the fair value of the investments was 86.6% of book value.

We recognized net securities gains and securities impairment losses for each period presented. For a discussion of these items, see the section titled “Investment Portfolio Management.”

For a discussion of the gain on FDIC-assisted transaction of $13.1 million, refer to the section titled “Covered Assets.” For a discussion of gains on early extinguishment of debt of $15.3 million for 2009, see the section titled, “Funding and Liquidity Management.”

46

Noninterest Expense

Table 6

Noninterest Expense Analysis

(Dollar amounts in thousands)

	Years ended December 31,							% Change
	2009		2008		2007			2009-2008		2008-2007
Compensation expense:
Salaries and wages	$	82,640	$	77,074	$	85,707		7.2		(10.1	)
Retirement and other employee benefits		23,908		22,836		25,891		4.7		(11.8	)
Total compensation expense		106,548		99,910		111,598		6.6		(10.5	)
Other real estate owned (“OREO”) expense:
Write-downs of OREO properties		12,584		1,261		699		897.9		80.4
Losses (gains) on the sales of OREO, net		5,970		305		(514	)	1,857.4		(159.3	)
OREO operating expense, net (1)		4,905		1,843		787		166.1		134.2
Total OREO expense		23,459		3,409		972		588.1		250.7
FDIC insurance premiums		13,673		1,065		747		1,183.8		42.6
Net occupancy expense		22,762		23,378		22,054		(2.6	)	6.0
Loan remediation costs		4,685		888		843		427.6		5.3
Other professional services		11,111		10,010		8,191		11.0		22.2
Equipment expense		8,962		9,956		10,540		(10.0	)	(5.5	)
Technology and related costs		8,987		7,429		7,084		21.0		4.9
Advertising and promotions		7,313		6,491		6,293		12.7		3.1
Merchant card expense		6,453		6,985		6,830		(7.6	)	2.3
Other expenses		20,835		24,784		23,985		(15.9	)	3.3
Total noninterest expense	$	234,788	$	194,305	$	199,137		20.8		(2.4	)
Average full-time equivalent (“FTE”) employees		1,766		1,824		1,881
Efficiency ratio (2)		57.86%		53.49%		52.50%

⁽¹⁾ OREO operating expense, net, consists of real estate taxes, insurance, and maintenance, net of any rental income.

⁽²⁾ The efficiency ratio expresses noninterest expense as a percentage of tax-equivalent net interest income plus total fees and other income.

Noninterest expense increased 20.8% for 2009 compared to 2008. The increase from 2008 to 2009 was due to higher loan remediation costs, including costs associated with maintaining OREO, higher FDIC insurance premiums (including a special deposit premium assessed by the FDIC during second quarter 2009 of $3.5 million) and higher compensation expense primarily related to the market adjustment for the Company’s non-qualified deferred compensation plan.

In May 2009, the FDIC issued a final rule which levied a special assessment applicable to all insured depository institutions totaling 5 basis points of each institution’s total assets less Tier 1 capital as of June 30, 2009, not to exceed 10 basis points of domestic deposits. The special assessment was part of the FDIC’s efforts to rebuild the Deposit Insurance Fund (“DIF”). During fourth quarter 2009, the FDIC required all financial institutions to prepay their next three years’ deposit premiums. As of December 31, 2009, we had $34.7 million in prepaid FDIC assessments. This prepayment will be expensed as we incur FDIC insurance premiums in future periods.

47

Salaries and wages increased in 2009 compared to 2008 due to an increase in the obligation to participants under deferred compensation plans resulting from changes in the fair value of trading securities held on behalf of plan participants. Such increases were partially offset by declines in incentive compensation and share-based compensation expense. The 4.7% increase in retirement and other employee benefits for 2009 compared to 2008 resulted from an increase in pension plan expense.

The 21.0% increase in technology and related costs from 2008 to 2009 was due to an upgrade of technology for the delivery of voice communications over networks such as the Internet. This investment in technology, which we expect will be more than offset by future savings, positions us for the future by providing us with a much more cost-effective means of communicating and transferring data. This cost also provides a savings in telephone expense, which is included in other expenses. The remaining variance in technology and related costs resulted from standard contractual increases.

The decline in other expenses for 2009 compared to 2008 was spread over various noninterest expense categories including freight and courier expense, telephone, supplies, and amortization expense.

Noninterest expense was $194.3 million for 2008, down 2.4% from 2007. The decline was primarily due to reductions in salaries and benefits costs.

Salaries and wages decreased in 2008 compared to 2007. In late 2007 and continuing into 2008, we initiated targeted staff reductions, primarily in the support and administrative areas. Full time employees have declined over this period by 4.4%, or 83 full-time equivalents. These reductions, coupled with a $7.3 million decline in the obligation due to participants under deferred compensation plans, more than offset annual general merit increases and an increase in share-based compensation expense.

The increase in occupancy expense from 2007 to 2008 resulted from typical increases in real estate taxes, repairs and maintenance, utilities, and depreciation. The $345,000 increase in technology expense from 2007 to 2008 was due to standard contractual increases.

The increase in professional services was due primarily to a short-term contract with an outside consultant for revenue and process enhancement services.

Income Taxes

Our provision for income taxes includes both federal and state income tax expense. An analysis of the provision for income taxes and the effective income tax rates for the periods 2007 through 2009 are detailed in the following table.

Table 7

Income Tax Expense Analysis

(Dollar amounts in thousands)

	Years ended December 31,
	2009			2008			2007
(Loss) income before income tax (benefit) expense	$	(75,926	)	$	36,045		$	94,012
Income tax (benefit) expense:
Federal income tax (benefit) expense	$	(39,106	)	$	(2,349	)	$	15,979
State income tax (benefit) expense		(11,070	)		(10,942	)		(2,126	)
Income tax (benefit) expense	$	(50,176	)	$	(13,291	)	$	13,853
Effective income tax rate		N/M			(36.9%	)		14.7%
Federal effective income tax rate		N/M			(6.5%	)		16.2%
State effective income tax rate, net of federal tax effect		N/M			(30.4%	)		(1.5%	)

    N/M    Not meaningful.

48

Federal income tax expense 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 (“BOLI”) 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 benefits totaled $50.2 million in 2009 and $13.3 million in 2008. We recorded $13.9 million in tax expense in 2007. The increase in income tax benefits from 2008 to 2009 was primarily attributable to a decrease in pre-tax income in 2009, coupled with an increase in tax-exempt interest as a percent of total pre-tax income. This effect was offset in part by a decrease in state tax-exempt income attributable to changes in Illinois tax law effective in 2009.

The decrease in income tax expense from 2007 to 2008 was primarily attributable to a decrease in pre-tax income in 2008, and to a lesser extent, to the recording of state tax benefits relating uncertain tax positions. This was offset in part by a decrease in BOLI income in 2008.

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 in Item 8 of this Form 10-K. Income tax expense and benefits recorded due to changes in uncertain tax positions are also described in Note 16.

FINANCIAL CONDITION

INVESTMENT PORTFOLIO MANAGEMENT

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 provides a valuation summary of our investment portfolio.

Table 8

Investment Portfolio Valuation Summary

(Dollar amounts in thousands)

	As of December 31, 2009					As of December 31, 2008					As of December 31, 2007
	Fair Value		Amortized Cost		% of Total	Fair Value		Amortized Cost		% of Total	Fair Value		Amortized Cost		% of Total
Available-for-Sale
U.S. Treasury securities	$	-	$	-	-	$	1,041	$	1,039	0.1	$	1,028	$	1,027	-
U.S. Agency securities		756		756	-		-		-	-		42,492		41,895	1.9
Collateralized mortgage obligations		307,921		299,920	21.8		698,839		694,285	30.1		534,800		534,688	24.5
Other mortgage-backed securities		249,282		239,567	17.5		518,265		504,918	21.9		420,320		417,532	19.1
State and municipal securities		651,680		649,269	47.3		906,747		907,036	39.4		966,835		961,638	44.0
Collateralized debt obligations		11,728		54,359	4.0		42,086		60,406	2.6		81,630		95,584	4.4
Corporate debt securities		37,551		36,571	2.7		33,325		35,731	1.5		7,688		10,000	0.5
Equity securities		7,842		7,667	0.6		15,883		16,089	0.7		25,253		25,295	1.1
Total available-for-sale		1,266,760		1,288,109	93.9		2,216,186		2,219,504	96.3		2,080,046		2,087,659	95.5
Held-to-Maturity
State and municipal securities		84,496		84,182	6.1		84,592		84,306	3.7		97,931		97,671	4.5
Total securities	$	1,351,256	$	1,372,291	100.0	$	2,300,778	$	2,303,810	100.0	$	2,177,977	$	2,185,330	100.0

49

	As of December 31, 2009			As of December 31, 2008
	Effective Duration (1)	Average Life (2)	Yield to Maturity	Effective Duration (1)	Average Life (2)	Yield to Maturity
Available-for-Sale
U.S. Treasury securities	-	-	-	1.35%	1.50	0.89%
U.S. Agency securities	1.29%	1.40	0.78%	-	-	-
Collateralized mortgage obligations	1.96%	2.44	5.02%	1.25%	1.80	5.25%
Other mortgage-backed securities	2.64%	3.69	4.95%	1.75%	1.95	5.52%
State and municipal securities	5.43%	7.12	6.17%	5.26%	7.61	6.15%
Collateralized debt obligations	0.25%	8.27	0.00%	0.25%	5.84	3.26%
Other securities	5.80%	11.94	5.28%	6.03%	12.61	5.06%
Total available-for-sale	3.88%	5.57	5.38%	3.07%	4.51	5.62%
Held-to-Maturity
State and municipal securities	6.28%	8.51	6.88%	7.00%	9.26	7.10%
Total securities	4.03%	5.75	5.47%	3.21%	4.69	5.67%

⁽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 paydowns, as the weighting factor.

Held-to-maturity securities, which we have the positive intent and ability to hold until maturity, are accounted for using historical cost, adjusted for amortization of premium and accretion of discount. Trading securities are carried at fair value, with unrealized gains and losses recorded in other noninterest income. All other securities are classified as securities available-for-sale and are carried at fair value. During third quarter 2009, we securitized $25.7 million of real estate 1-4 family loans, which are now included in the securities available-for-sale portfolio.

Unrealized gains and losses on the 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 income. This balance sheet component will fluctuate as current market interest rates and conditions change, thereby affecting the aggregate fair value of the portfolio.

As of December 31, 2009, our securities portfolio totaled $1.4 billion, decreasing 41.3% from December 31, 2008, as we took advantage of opportunities in the market to sell securities at a net gain. During 2009, we sold $855.4 million of mortgage-backed, municipal, and other securities that generated $26.7 million of gains. These gains were partly offset by other-than-temporary impairment charges of $24.6 million primarily related to our trust preferred collateralized debt obligations (“CDOs”).

After recognizing these impairments, our remaining CDOs consist of seven trust-preferred pooled debt securities with an amortized cost of $54.3 million and a fair value of $11.7 million as of December 31, 2009. The unrealized loss on these securities as of December 31, 2009 of $42.6 million reflects the difference between amortized cost and fair value that we determined did not relate to credit, and reflects the market’s temporary bias towards these investments. Our investments in trust preferred CDOs are supported by the credit of the underlying banks and insurance companies. The $5.8 million increase in unrealized loss on these securities since December 31, 2008 reflects the market’s perception of the overall deterioration in the strength of the financial sector and its negative bias toward structured investment vehicles given the current interest rate and liquidity environment.

50

Based on our cash flow modeling of these investments, we currently project no further change in our net cash flows from these seven CDOs, and we have both the intent and ability to hold them until maturity or recovery and more than likely will not be forced to sell them before recovering our cost basis. Our estimation of cash flows for these investments and resulting fair values were based upon cash flow modeling as described in Note 24 of “Notes to Consolidated Financial Statements” in Item 8 of this Form 10-K.

Investments in state and local municipalities comprised 47.3% of the total available-for-sale securities portfolio. This type of security has historically experienced very low default rates and provided a predictable cash flow since it generally is not subject to significant prepayment. Almost our entire portfolio in this category carries third-party bond insurance or other credit enhancement. The majority are general obligations of state and local municipalities.

As of December 31, 2009 gross unrealized gains in the state and municipal securities portfolio totaled $8.5 million, and gross unrealized losses totaled $6.1 million, resulting in a net unrealized gain of $2.4 million at December 31, 2009 compared to an unrealized loss of $289,000 at December 31, 2008. The change in fair value of municipal securities reflects a decline in market interest rates and a tightening of spreads, which drove the increase in fair values of these fixed-rate investments. The $6.1 million in unrealized loss in the portfolio relates to securities that 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.

Collateralized mortgage obligations 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 December 31, 2009 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.

Other securities include corporate bonds and other miscellaneous equity securities. We do not believe the unrealized loss on any of these securities is other-than-temporary.

We recognized non-cash impairment charges totaling $44.5 million in 2008. Of these impairment charges, $10.1 million related to six asset-backed CDOs. We had previously recognized a $50.1 million impairment during 2007 regarding these assets. The fair value of these specific asset-backed CDOs was zero at December 31, 2008 and 2009. Of the remaining 2008 non-cash impairment charge of $34.5 million, $24.8 million related to three trust-preferred CDOs with an aggregate cost of $38.9 million.

Effective January 1, 2009, we adopted new accounting guidance related to the recognition of other-than-temporary impairment. The effect of the adoption was to reverse $18.5 million of the $24.8 million in 2008 impairment charges on the trust-preferred CDOs on January 1, 2009 as an adjustment to retained earnings. As a result of the guidance, we only recognized the credit portion of unrealized losses on other-than-temporarily impaired securities in earnings and the remaining portion in other comprehensive income. In 2009, this resulted in $42.6 million in unrealized losses being reported in other comprehensive income, which would have been required to be recorded in earnings under prior guidance. For additional information regarding this new accounting guidance, please refer to Notes 2 and 4 of “Notes to Consolidated Financial Statements” in Item 8 of this Form 10-K.

In 2008, we also recorded a $9.7 million non-cash impairment charge related to two whole loan mortgage-backed securities with a combined par value of $16.6 million and a single Sallie Mae debt issuance with a par value of $10.0 million. The two whole loan mortgage-backed securities are included with “Collateralized mortgage obligations” in the table above and the Sallie Mae debt issuance is included in “corporate debt securities.”

The effective duration of the available-for-sale portfolio increased to 3.88% as of December 31, 2009 from 3.07% as of December 31, 2008. The rise in effective duration from December 31, 2008 to December 31, 2009 was the result of rising interest rates during 2009.

51

Table 9

Repricing Distribution and Portfolio Yields

(Dollar amounts in thousands)

	As of December 31, 2009
	One Year or Less			One Year to Five Years			Five Years to Ten Years			After 10 years
	Amortized Cost		Yield to Maturity (1)	Amortized Cost		Yield to Maturity (1)	Amortized Cost		Yield to Maturity (1)	Amortized Cost		Yield to Maturity (1)
Available-for-Sale
U.S. Agency securities	$	-	-	$	756	0.78%	$	-	-	$	-	-
Collateralized mortgage obligations (2)		83,676	5.09%		174,887	4.97%		38,169	5.03%		3,188	5.94%
Other mortgage-backed securities (2)		88,854	4.56%		91,962	5.11%		39,271	5.20%		19,480	5.46%
State and municipal securities (3)		14,809	6.79%		85,159	6.24%		233,998	6.14%		315,303	6.14%
Collateralized debt obligations		-	-		-	-		-	-		54,359	3.26%
Other securities (4)		5,955	1.20%		2,220	6.36%		22,792	6.36%		13,271	5.10%
Total available-for-sale		193,294	4.86%		354,984	5.31%		334,230	5.92%		405,601	5.69%
Held-to-Maturity
State and municipal securities (3)		17,617	7.41%		21,174	6.36%		14,935	6.74%		30,456	6.99%
Total securities	$	210,911	5.07%	$	376,158	5.37%	$	349,165	5.95%	$	436,057	5.78%

⁽¹⁾ Based on amortized cost.

⁽² The repricing distributions and yields to maturity of mortgage-backed securities are based on estimated future cash flows and prepayments. Actual repricings and yields of the securities may differ from those reflected in the table depending upon actual interest rates and prepayment speeds.

⁽³⁾ Yields on state and municipal securities are reflected on a tax-equivalent basis, assuming a federal income tax rate of 35%. The maturity date of state and municipal bonds is based on contractual maturity, unless the bond, based on current market prices, is deemed to have a high probability that the call will be exercised, in which case the call date is used as the maturity date.

⁽⁴⁾ Yields on other securities are reflected on a tax-equivalent basis, assuming a federal income tax rate of 35%. The maturity of FHLB and FRB stocks is based on management’s judgment of repricing characteristics or final maturity. The maturity date of other securities is based on contractual maturity or repricing characteristics.

COVERED ASSETS

On October 23, 2009, we acquired substantially all the assets of the $260 million former First DuPage Bank (“First DuPage”) in an FDIC-assisted transaction generating a bargain-purchase gain of $13.1 million. Loans comprise the majority of the assets acquired and are subject to a loss sharing arrangement with the FDIC whereby we are indemnified against the majority of any losses incurred related to these loans. The loans acquired from the former First DuPage Bank, including the FDIC indemnification, total $223.2 million at December 31, 2009 and are classified and presented as covered assets in the Consolidated Statements of Financial Condition. These assets are excluded from the asset quality presentation, given the loss share indemnification from the FDIC. A break down of the covered assets is as follows.

Table 10

Covered Assets

(Dollar amounts in thousands)

	December 31, 2009
Loans	$	146,319
Other real estate owned		8,981
FDIC loss share receivable		67,945
	$	223,245

52

LOAN PORTFOLIO AND CREDIT QUALITY

Our principal source of revenue arises from lending activities, primarily composed of interest income and, to a lesser extent, from loan origination and commitment fees (net of related costs). The accounting policies underlying the recording of loans in the Consolidated Statements of Financial Condition and the recognition and/or deferral of interest income and fees (net of costs) arising from lending activities are included in Note 1 of “Notes to Consolidated Financial Statements” in Item 8 of this Form 10-K.

Portfolio Composition

Our loan portfolio is comprised of both corporate and consumer loans, with corporate loans representing 87.2% of total loans outstanding. The corporate loan component represents commercial and industrial, agricultural, commercial real estate, and real estate construction lending categories. Approximately $241.3 million, or 5.3% of corporate loans, consist of loans to small businesses. Consistent with our emphasis on relationship banking, the majority of our loans are made to our core, multi-relationship customers. The customers usually maintain deposit relationships and utilize other Company banking services, such as cash management or trust services.

We seek to balance our corporate loan portfolio among loan categories as well as by industry segment, subject to internal policy limits and as influenced by market and economic conditions and maintain a diversified portfolio of both corporate and consumer loans to minimize our exposure to any particular industry or any segment of the economy. We do not offer any sub-prime products, and we seek to limit our exposure to any single borrower. Although our legal lending limit is $209.1 million, the largest loan balance to a single borrower at December 31, 2009 was $33.1 million, and only 49 borrowers had aggregate outstanding loan balances in excess of $10 million.

In terms of overall commitments to extend credit, our largest aggregate exposure to a single borrower as of December 31, 2009 was $33.1 million. We also have exposure of $47.8 million to a group of related companies comprising a single relationship. We had only 28 credits in the portfolio where total commitments to a single borrower relationship exceeded $20.0 million as of December 31, 2009.

53

Table 11

Loan Portfolio ⁽¹⁾

(Dollar amounts in thousands)

	As of December 31,
	2009			% of Total	2008		% of Total	2007			% of Total	2006		% of Total	2005		% of Total
Commercial and industrial	$	1,438,063		27.6	$	1,490,101	27.8	$	1,347,481		27.1	$	1,413,263	28.2	$	1,161,660	27.0
Agricultural		209,945		4.0		216,814	4.1		235,498		4.8		213,730	4.3		192,560	4.5
Commercial real estate:
Office		394,228		7.6		339,912	6.3		256,211		5.2		232,941	4.7		239,886	5.6
Retail		331,803		6.4		265,568	5.0		193,581		3.9		192,247	3.8		165,611	3.8
Industrial		486,934		9.3		419,761	7.8		374,286		7.5		364,020	7.3		288,871	6.7
Total office, retail, and industrial		1,212,965		23.3		1,025,241	19.1		824,078		16.6		789,208	15.8		694,368	16.1
Residential construction		313,919		6.0		509,059	9.5		505,194		10.2		451,186	9.0		319,842	7.4
Commercial construction		134,680		2.6		258,253	4.8		244,904		4.9		218,027	4.3		93,443	2.2
Commercial land		96,838		1.9		98,322	1.8		143,289		2.9		144,146	2.9		209,859	4.9
Total construction		545,437		10.5		865,634	16.1		893,387		18.0		813,359	16.2		623,144	14.5
Multi-family		333,961		6.4		286,963	5.4		217,266		4.4		303,720	6.1		330,189	7.7
Investor-owned rental property		119,132		2.3		131,635	2.4		128,739		2.6		106,949	2.1		90,436	2.1
Other commercial real estate		679,851		13.1		597,694	11.2		532,741		10.7		501,475	10.0		343,287	7.9
Total commercial real estate		2,891,346		55.6		2,907,167	54.2		2,596,211		52.3		2,514,711	50.2		2,081,424	48.3
Subtotal – corporate loans		4,539,354		87.2		4,614,082	86.1		4,179,190		84.2		4,141,704	82.7		3,435,644	79.8
Direct installment		47,782		0.9		58,135	1.1		65,660		1.3		78,049	1.5		65,449	1.5
Home equity		470,523		9.1		477,105	8.9		464,981		9.4		495,079	9.9		504,593	11.7
Indirect installment		5,604		0.1		12,544	0.2		33,100		0.7		78,648	1.6		157,219	3.7
Real estate – 1-4 family		139,983		2.7		198,197	3.7		220,741		4.4		215,464	4.3		143,286	3.3
Subtotal – consumer loans		663,892		12.8		745,981	13.9		784,482		15.8		867,240	17.3		870,547	20.2
Total	$	5,203,246		100.0	$	5,360,063	100.0	$	4,963,672		100.0	$	5,008,944	100.0	$	4,306,191	100.0
Growth vs. prior year–end		(2.9%	)			8.0%			(0.9%	)			16.3%			4.1%

⁽¹⁾ Excludes $146.3 million in covered loans. For a discussion of these covered loans, refer to Note 3 of “Notes to Consolidated Financial Statements” in Item 8 of this Form 10-K.

Outstanding loans totaled $5.2 billion as of December 31, 2009, a decrease of 2.9% from December 31, 2008. During 2009, extensions of new credit was more than offset by paydowns, net charge-offs, conversion of loans to OREO, and the securitization of $25.7 million of 1-4 family real estate loans, which are now included in the securities available-for-sale portfolio.

Outstanding loans increased 8.0% from December 31, 2007 to December 31, 2008. The increase was led by growth in commercial real estate, specifically office, retail, and industrial, and commercial and industrial lending. The decline in consumer loans was primarily due to continued run-off of indirect loans and the paydown in traditional home mortgages.

The decline in our total loans outstanding from December 31, 2006 to December 31, 2007 reflected the combined impact of the payoff of loan participations, rapid prepayment of multi-family loan portfolios, which occurred primarily in the first half of 2007, and the continued paydown of our indirect auto loan portfolio. As of the same dates, corporate loans remained relatively unchanged at $4.2 billion.

54

The $702.8 million increase in total loans outstanding from December 31, 2005 to December 31, 2006 was largely due to the acquisition of Bank Calumet during 2006.

Loan Origination/Risk Management

We have certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. Management reviews and modifies these policies and procedures on a regular basis. A reporting system supplements the review process by providing management with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies, and non-performing and potential problem loans. Diversification in the loan portfolio is a means of managing risk associated with fluctuations in economic conditions.

Commercial and industrial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and prudently expand its business. Underwriting standards are designed to promote relationship banking rather than transactional banking. As part of the underwriting process, we examine current and projected cash flows to determine the ability of the borrower to repay his obligation as agreed. Commercial and industrial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of the borrower, however, may not be as expected, and the collateral securing these loans may fluctuate in value. Most commercial and industrial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and usually incorporate a personal guarantee. However, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent upon the ability of the borrower to collect amounts due from its customers.

Commercial real estate loans are subject to underwriting standards and processes similar to commercial and industrial loans, in addition to those standards and processes specific to real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts, and the repayment of these loans is generally largely dependent upon the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. As detailed in the discussion of real estate loans below, the properties securing our commercial real estate portfolio are diverse in terms of type and geographic location within the greater suburban metropolitan Chicago market and contiguous markets. Management monitors and evaluates commercial real estate loans based on collateral, geography, and risk grade criteria. We also utilize third-party experts to provide insight and guidance about economic conditions and trends affecting the residential real estate market within the greater suburban metropolitan Chicago area and contiguous markets. In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loans. Owner-occupied loans are generally considered to have less risk.

With respect to loans to developers and builders that are secured by non-owner occupied properties, we require the borrower to have had a proven record of success. Construction loans are underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analysis of absorption and lease rates, and financial analysis of the developers and property owners. Construction loans are generally based upon estimates of costs and value associated with the completed project. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent upon the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property, or an interim loan commitment until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, demand and supply of alternative real estate, the availability of long-term financing, and changes in general economic conditions.

55

We originate consumer loans utilizing a computer-based credit scoring analysis to supplement the underwriting process. To monitor and manage consumer loan risk, policies and procedures are developed and modified, as needed. This activity, coupled with relatively small loan amounts that are spread across many individual borrowers, minimizes risk. Underwriting standards for home equity loans are heavily influenced by statutory requirements, which include, but are not limited to strict loan-to-value management, key affordability ratios, risk-based pricing strategies, risk-based collection remedies, and documentation requirements.

Commercial and Industrial Loans

Commercial and industrial loans represent 27.6% of all loans and decreased $52.0 million, or 3.5%, from $1.49 billion at December 31, 2008 to $1.44 billion at December 31, 2009. Our commercial and industrial loans are a diverse group of loans to small, medium, and large businesses. The purpose of these loans varies from supporting seasonal working capital needs to term financing of equipment. While some short-term loans may be made on an unsecured basis, most are secured by the assets being financed with collateral margins that are consistent with our loan policy guidelines and have guarantees.

Commercial Real Estate Loans

Commercial real estate loans represent 55.6% of all loans and totaled $2.89 billion at December 31, 2009, a decrease of $15.8 million, or 0.5%, from December 31, 2008. Commercial real estate loans consist of (i) loans for industrial buildings, office buildings, and retail shopping centers; (ii) residential construction loans primarily for single-family and multi-family residential projects that are substantially all located in the suburban metropolitan Chicago market and contiguous area; and (iii) loans for various types of other commercial properties, such as land for future commercial development, multi-unit residential mortgages, and hotels.

Other commercial real estate totaled $679.9 million as of December 31, 2009. The following table summarizes this line item by product type and presents the diversity within the portfolio.

Table 12

Other Commercial Real Estate Loan Detail by Product Type

(Dollar amounts in thousands)

	As of December 31,
	2009			2008			2007
	Amount		% of Total	Amount		% of Total	Amount		% of Total
Service stations and truck stops	$	146,887	21.6	$	137,448	23.0	$	81,382	15.3
Warehouses and storage		108,039	15.9		82,860	13.9		57,404	10.8
Hotels		76,815	11.3		74,611	12.5		49,850	9.3
Restaurants		55,262	8.1		47,755	8.0		42,675	8.0
Medical		39,158	5.8		34,359	5.7		6,221	1.2
Automobile dealers		39,846	5.9		37,883	6.3		27,318	5.1
Mobile home parks		19,367	2.8		36,790	6.2		22,106	4.1
Recreational		13,344	2.0		14,515	2.4		14,787	2.8
Religious		14,652	2.1		11,224	1.9		9,924	1.9
Other (1)		166,481	24.5		120,249	20.1		221,074	41.5
Total other commercial real estate	$	679,851	100.0	$	597,694	100.0	$	532,741	100.0

⁽¹⁾ Certain loans presented here as of December 31, 2007 were subsequently redistributed to more appropriate categories as of December 31, 2008.

56

Consumer Loans

As of December 31, 2009, consumer loans represented 12.8% of total outstanding loans compared to 13.9% as of December 31, 2008 and 15.8% as of December 31, 2007.

The home equity category, consisting mainly of revolving lines of credit secured by junior liens on owner-occupied real estate, totaled $470.5 million and represented 70.9% of the consumer portfolio. Consumer mortgages totaled $140.0 million and represented 21.1% of the consumer portfolio. Loan-to-value ratios based on the collateral value at origination for these credits generally range from 50% to 80%.

Consumer loans are centrally underwritten utilizing the Fair Isaac Corporation (“FICO”) credit scoring. This is a credit score developed by Fair Isaac Corporation that is used by many mortgage lenders. It uses a risk-based system to determine the probability that a borrower may default on financial obligations to the mortgage lender. FICO scores range from 300 to 850. Home equity and real estate 1-4 family loans were rescored during fourth quarter 2009. Home equity loans carry an average FICO credit score of 749 and a median score of 776, with approximately 90% carrying a score of 650 or above. Real estate 1-4 family loans carry an average FICO credit score of 727 and a median score of 743, with approximately 87% carrying a score of 650 or above.

Maturity and Interest Rate Sensitivity of Corporate Loans

The following table summarizes the maturity distribution of our corporate loan portfolio as of December 31, 2009 as well as the interest rate sensitivity of loans in these categories that have maturities in excess of one year.

Table 13

Maturities and Sensitivities of Corporate Loans to Changes in Interest Rates

(Dollar amounts in thousands)

	As of December 31, 2009
	Due in 1 year or less		Due after 1 year through 5 years		Due after 5 years		Total
Commercial, industrial, and agricultural	$	974,172	$	572,353	$	101,483	$	1,648,008
Commercial real estate		1,046,101		1,695,993		149,252		2,891,346
Total	$	2,020,273	$	2,268,346	$	250,735	$	4,539,354
Loans maturing after one year:
Predetermined (fixed) interest rates			$	2,022,346	$	195,405
Floating interest rates				246,000		55,330
Total			$	2,268,346	$	250,735

In early 2009, we implemented interest rate floors on approximately $1.6 billion in floating rate loans. The floors effectively increased the rate earned on the floating rate loans despite flat to declining prime and Libor market rates. As market rates rise in future periods, the loans will reprice, and the effect will narrow over time. The result is an increase in sensitivity to rising interest rates. For additional discussion of interest rate sensitivity, refer to Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” of this Form 10-K.

Non-Performing Assets and Potential Problem Loans

Generally, loans are placed on non-accrual status if principal or interest payments become 90 days or more past due and management deems the collectability of the principal and 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.

57

Once interest accruals are discontinued, accrued but uncollected interest is charged to current year operations. 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 such loans are well secured and collection of principal and interest is expected within a reasonable period.

Restructured loans are loans on which, due to deterioration in the borrower’s financial condition, the original terms have been modified in favor of the borrower or either principal or interest has been forgiven. Restructured loans generally result in lower payments than originally required and therefore, have a lower risk of loss due to nonperformance than loans classified as non-accrual. We do not accrue interest on any restructured loan until such time as we believe all principal and interest under its modified terms are reasonably assured. Until such time, these loans continue to be reported as non-accrual loans.

Once the borrower demonstrates the ability to meet the modified terms of the restructured loan, we once again accrue interest. However, such restructured loans continue to be separately reported as restructured until after the calendar year in which the restructuring occurred, providing the loan was restructured at market rate and terms.

OREO represents property acquired as the result of borrower defaults on loans. OREO properties are recorded at the lower of the recorded investment in the loans for which the properties served as collateral or estimated fair value, less estimated selling costs. Write-downs occurring at foreclosure are charged against the reserve for loan losses. On an ongoing basis, the carrying values of these properties may be reduced based upon new appraisals and/or market indications. Write-downs are recorded for subsequent declines in value and are included in other noninterest expense along with other expenses related to maintaining the properties.

58

The following table breaks down our loan portfolio between performing and non-performing status.

Table 14

Loan Portfolio by Performing/Non-Performing Status

(Dollar amounts in thousands)

					Past Due
	Total Loans		Current		30-89 Days Past Due		90 Days Past Due		Non-accrual		Restructured
As of December 31, 2009
Commercial and industrial	$	1,438,063	$	1,392,555	$	11,915	$	1,964	$	28,193	$	3,436
Agricultural		209,945		207,272		-		-		2,673		-
Commercial real estate:
Office		394,228		385,851		2,327		-		6,050		-
Retail		331,803		318,368		96		330		12,918		91
Industrial		486,934		482,903		1,603		-		2,428		-
Total office, retail, and industrial		1,212,965		1,187,122		4,026		330		21,396		91
Residential land and development		313,919		200,061		974		86		112,798		-
Commercial construction		134,680		134,680		-		-		-		-
Commercial land		96,838		75,974		-		-		20,864		-
Multi-family		333,961		313,306		2,152		55		12,486		5,962
Investor-owned rental property		119,132		110,234		3,967		225		4,351		355
Other commercial real estate		679,851		634,561		5,132		130		28,006		12,022
Total commercial real estate		2,891,346		2,655,938		16,251		826		199,901		18,430
Total corporate loans		4,539,354		4,255,765		28,166		2,790		230,767		21,886
Direct installment		47,782		46,291		1,271		165		55		-
Home equity		470,523		455,214		5,192		1,032		7,549		1,536
Indirect installment		5,604		5,100		458		21		25		-
Real estate – 1-4 family		139,983		124,117		2,825		71		5,819		7,151
Total consumer loans		663,892		630,722		9,746		1,289		13,448		8,687
Total loans	$	5,203,426	$	4,886,487	$	37,912	$	4,079	$	244,215	$	30,553

59

					Past Due
	Total Loans		Current		30-89 Days Past Due		90 Days Past Due		Non-accrual		Restructured
As of December 31, 2008
Commercial and industrial	$	1,490,101	$	1,428,778	$	36,820	$	6,818	$	15,586	$	2,099
Agricultural		216,814		212,503		2,548		1,751		12		-
Commercial real estate:
Office		339,912		317,117		22,106		689		-		-
Retail		265,568		260,922		770		1,912		1,964		-
Industrial		419,761		417,664		543		613		569		372
Total office, retail, and industrial		1,025,241		995,703		23,419		3,214		2,533		372
Residential land and development		509,059		384,006		19,504		8,489		97,060		-
Commercial construction		258,253		250,392		7,861		-		-		-
Commercial land		98,322		91,339		2,811		2,092		2,080		-
Multi-family		286,963		277,817		4,406		1,881		1,387		1,472
Investor-owned rental property		131,635		130,077		747		541		270		-
Other commercial real estate		597,694		582,101		3,933		3,953		4,564		3,143
Total commercial real estate		2,907,167		2,711,435		62,681		20,170		107,894		4,987
Total corporate loans		4,614,082		4,352,716		102,049		28,739		123,492		7,086
Direct installment		58,135		54,412		2,700		956		67		-
Home equity		477,105		463,317		6,471		3,944		3,254		119
Indirect installment		12,544		11,792		577		77		98		-
Real estate – 1-4 family		198,197		189,509		4,409		3,283		857		139
Total consumer loans		745,981		719,030		14,157		8,260		4,276		258
Total loans	$	5,360,063	$	5,071,746	$	116,206	$	36,999	$	127,768	$	7,344

The following table provides a comparison of our non-performing assets and past due loans for the past five years.

Table 15

Non-performing Assets and Past Due Loans

(Dollar amounts in thousands)

	As of December 31,
	2009		2008		2007		2006		2005
Non-accrual loans	$	244,215	$	127,768	$	18,447	$	16,209	$	11,990
90 days or more past due loans		4,079		36,999		21,149		12,810		8,958
Total non-performing loans	$	248,294	$	164,767	$	39,596	$	29,019	$	20,948
Restructured loans (still accruing interest)	$	30,553	$	7,344	$	7,391	$	-	$	-
Other real estate owned (“OREO”)	$	57,137	$	24,368	$	6,053	$	2,727	$	2,878
30-89 days past due loans	$	37,912	$	116,206	$	100,820	$	88,568	$	50,414
Non-accrual loans to total loans		4.69%		2.38%		0.37%		0.32%		0.28%
Non-performing loans to total loans		4.77%		3.07%		0.80%		0.58%		0.49%

60

	Amount
The effect of non-accrual loans on interest income for 2009 is presented below:
Interest which would have been included at the normal contract rates	$	16,961
Less: Interest included in income during the year		6,798
Interest income not recognized in the financial statements	$	10,163

Non-performing loans were $248.3 million as of December 31, 2009 compared to $164.8 million as of December 31, 2008, with residential construction loans comprising 45.5% of the total. During the past year, we employed certain strategies to reduce the level of non-performing assets, such as restructuring loans, remediating early stage delinquencies, and accelerating efforts to control and facilitate sales of OREO properties. Liquidation strategies could include bulk sales, partnering with outside investors, and selected short sales.

Non-accrual loans increased from $127.8 million at December 31, 2008 to $244.2 million at December 31, 2009. This increase was largely due to higher residential construction non-accrual loans and reflects the adverse impact on borrowers of the weakening economy, market illiquidity, and, in particular, declining real estate values and rising unemployment.

Loans 90 days or more past due and still accruing interest declined from $37.0 million as of December 31, 2008 to $4.1 million as of December 31, 2009.

Loans 30-89 days past due totaled $37.9 million as of December 31, 2009, down from $116.2 million as of December 31, 2008.

Potential problem loans consist of loans that are performing in accordance with contractual terms but for which management has concerns about the ability of an obligor to continue to comply with repayment terms because of the obligor’s potential operating or financial difficulties. Management monitors these loans closely and reviews their performance on a regular basis.

Our disclosure with respect to impaired loans is contained in Note 7 of “Notes to Consolidated Financial Statements” in Item 8 of this Form 10-K.

At December 31, 2009, we had restructured loans totaling $40.6 million, an increase of $33.2 million from December 31, 2008. Included in this total at December 31, 2009 were loans totaling $30.6 million that were restructured at market terms and continued to accrue interest. To the extent these loans continue to perform, they will no longer be classified as non-performing subsequent to December 31, 2009. In January 2010, $27.9 million of these loans were returned to performing status.

Table 16

Restructured Loans by Type

(Dollar amounts in thousands)

	December 31, 2009			December 31, 2008			December 31, 2007
	Number of Loans	Amount		Number of Loans	Amount		Number of Loans	Amount
Commercial loans	28	$	4,062	2	$	2,099	-	$	-
Commercial real estate loans	13		15,366	3		3,515	1		281
Multi-family loans	10		11,462	1		1,472	3		7,110
Consumer loans	85		9,677	2		258	-		-
Total restructured loans	136	$	40,567	8	$	7,344	4	$	7,391

61

OREO totaled $57.1 million as of December 31, 2009 compared to $24.4 million at December 31, 2008, and is comprised of 112 properties segregated into the following categories:

Table 17

OREO Properties by Type

(Dollar amounts in thousands)

	December 31, 2009			December 31, 2008			December 31, 2007
	Number of Properties	Amount		Number of Properties	Amount		Number of Properties	Amount
Single family homes	50	$	9,245	34	$	6,967	17	$	1,847
Land parcels	35		38,157	7		10,672	2		90
Multi-family units	12		2,450	11		3,682	10		3,037
Commercial properties	15		7,285	8		3,047	5		1,079
Total OREO properties	112	$	57,137	60	$	24,368	34	$	6,053

During 2009, we sold 82 OREO properties, primarily single-family homes, with a net book value of $25.3 million. We received proceeds of $19.3 million, resulting in a net loss on sales of $6.0 million. Our remaining properties are recorded at estimated fair values consistent with current disposition strategies.

As we look 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, instability in the real estate market, higher levels of real estate coming into the market, and planned liquidation strategies. Accordingly, the future carrying value of these assets may be influenced by these same factors.

Construction Portfolio

Total construction loans of $545.4 million consist of residential construction, commercial construction, and commercial land. Our residential construction portfolio accounts for 45.5% of the total non-performing loans at December 31, 2009. This $313.9 million portfolio represents loans to developers of residential properties and, as such, is particularly susceptible to declining real estate values.

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

Table 18

Construction Loans by Type

(Dollar amounts in thousands)

	Residential Construction			Commercial Construction			Commercial Land			Combined			Non-accrual Plus 90 Days Past Due Loans
	Amount		Percent of Total	Amount		Percent of Total	Amount		Percent of Total	Amount		Percent of Total
As of December 31, 2009
Raw land	$	66,715	21.2	$	10	-	$	43,331	44.7	$	110,056	20.2	$	51,457
Developed land		133,604	42.6		24,942	18.5		53,265	55.0		211,811	38.8		43,525
Construction		14,227	4.5		18,580	13.8		-	-		32,807	6.0		2,735
Substantially completed structures		82,852	26.4		90,858	67.5		157	0.2		173,867	31.9		19,694
Mixed and other		16,521	5.3		290	0.2		85	0.1		16,896	3.1		16,337
Total	$	313,919	100.0	$	134,680	100.0	$	96,838	100.0	$	545,437	100.0	$	133,748
Non-accrual loans	$	112,798		$	-		$	20,864		$	133,662
90-days past due loans		86			-			-			86
Total non-performing loans	$	112,884		$	-		$	20,864		$	133,748
Non-performing loans as a percent of total loans		36.0%			-			21.5%			24.5%

62

Of the total residential construction portfolio of $313.9 million, 36.0% is classified as non-performing. Management continues to align the carrying value of these assets with the value of underlying collateral based upon planned disposition strategies and recognizing falling property values.

Reserve for Loan Losses

The reserve for loan losses is a reserve established through a provision for probable loan losses charged to expense, which represents management’s best estimate of probable losses that have been incurred within the existing portfolio of loans. The reserve consists of specific reserves established for expected losses on individual loans for which the recorded investment in the loan exceeds the value of the loan and reserves based on historical loan loss experience for each loan category.

The specific reserves component of the reserve for loan losses is based on a regular 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 which management believes are subject to higher risk of impairment (e.g., residential construction loans). A loan is considered impaired when it is probable that we 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 residential loans. Impairment is measured by estimating the fair 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. If the estimated fair value of the loan is less than the recorded book value, a valuation reserve is established as a component of the reserve for loan losses.

The component of the reserve for loan losses based on historical loan loss experience is determined statistically using a loss migration analysis that examines loss experience over the most recent 2-year period and the related internal grading of loans charged-off, giving more weight to losses in the most current year. In prior years, we used a 3-year weighted historical loss period. However, it is management’s judgment that losses from 3 years ago do not adequately reflect losses inherent in the portfolio at December 31, 2009 given the current economic trends. This shortening of the historical loss period had the effect of increasing the reserve for loan losses at December 31, 2009. 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 adjusted for management’s estimate of those losses incurred within the loan portfolio that have yet to be manifested in historical charge-off experience. Management takes into consideration many factors when estimating when an event triggering a loss occurs and when it manifests itself in a charge-off. These include, among other factors, the trend in business earnings, debt covenant violations, and other sources of cash flow, as well as the impact of general economic conditions in our marketplace.

Portions of the reserve may be allocated for specific credits. However, the entire reserve is available for any credit that, in management’s judgment, should be charged off.

The establishment of the reserve for loan 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 reserve 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 classifications.

The accounting policies underlying the establishment and maintenance of the reserve for loan losses through provisions charged to operating expense are discussed in Note 1 of “Notes to Consolidated Financial Statements” in Item 8 of this Form 10-K.

63

During 2009, we increased our reserve for loan losses to $144.8 million, up $50.9 million, or 54.3%, from December 31, 2008. The reserve for loan losses represented 2.78% of total loans outstanding at December 31, 2009 compared to 1.75% at December 31, 2008. The reserve for loan losses as a percentage of non-accrual plus 90-day past due loans was 58% at December 31, 2009, up slightly from 57% at December 31, 2008. Management believes that the reserve for loan losses of $144.8 million is an appropriate estimate of credit losses inherent in the loan portfolio as of December 31, 2009.

Table 19

Reserve for Loan Losses and

Summary of Loan Loss Experience

(Dollar amounts in thousands)

	Years ended December 31,
	2009			2008			2007			2006			2005
Change in reserve for loan losses:
Balance at beginning of year	$	93,869		$	61,800		$	62,370		$	56,393		$	56,718
Loans charged-off:
Commercial and industrial		(56,903	)		(14,557	)		(6,424	)		(6,939	)		(4,762	)
Agricultural		(180	)		(42	)		(15	)		-			-
Office, retail, and industrial		(7,869	)		(852	)		-			-			(543	)
Residential construction		(63,045	)		(15,780	)		(231	)		-			-
Commercial construction		-			-			-			-			-
Commercial land		(3,620	)		-			-			-			(604	)
Multi-family		(3,485	)		(1,801	)		(491	)		(1,069	)		-
Investor-owned rental property		(1,984	)		(223	)		(61	)		(32	)		(1	)
Other commercial real estate		(16,429	)		(1,030	)		(100	)		(316	)		(24	)
Consumer		(13,589	)		(5,476	)		(2,599	)		(3,791	)		(4,931	)
Real estate – 1-4 family		(934	)		(576	)		(145	)		(156	)		(96	)
Total loans charged-off		(168,038	)		(40,337	)		(10,066	)		(12,303	)		(10,961	)
Recoveries on loans previously charged-off:
Commercial and industrial		1,899			1,531			1,499			1,147			569
Agricultural		-			4			5			9			-
Office, retail, and industrial		13			120			-			-			-
Residential construction		403			-			-			-			-
Commercial construction		-			-			-			-			-
Commercial land		400			-			-			2			-
Multi-family		2			5			1			19			-
Investor-owned rental property		1			-			-			2			5
Other commercial real estate		115			5			195			-			-
Consumer		468			487			563			919			1,132
Real estate – 1-4 family		4			-			-			18			-
Total recoveries on loans previously charged-off		3,305			2,152			2,263			2,116			1,706
Net loans charged-off, excluding covered assets		(164,733	)		(38,185	)		(7,803	)		(10,187	)		(9,255	)
Net charge-offs on covered assets		-			-			-			-			-
Net loans charged-off		(164,733	)		(38,185	)		(7,803	)		(10,187	)		(9,255	)
Provisions charged to operating expense		215,672			70,254			7,233			10,229			8,930
Reserve of acquired bank		-			-			-			5,935			-
Balance at end of year	$	144,808		$	93,869		$	61,800		$	62,370		$	56,393
Average loans	$	5,348,979		$	5,149,879		$	4,943,479		$	4,869,360		$	4,214,750
Ratio of net loans charged-off to average loans outstanding for the period		3.08%			0.74%			0.16%			0.21%			0.22%

64

The provision for loan losses for 2009 was $215.7 million compared to $70.3 million for 2008. Net charge-offs for 2009 totaled $164.7 million, or 3.08%, of average loans, as compared to $38.2 million, or 0.74%, of average loans for 2008. Charge-offs and provisioning during 2009 were largely influenced by the credit performance of our residential construction loan portfolio. This portfolio currently represents only 6.0% of total loans but accounted for 45.5% of total non-performing loans as of December 31, 2009 and 38.0% of total 2009 charge-offs.

These charge-offs reflect management’s continuing efforts to align the carrying value of these assets with the value of underlying collateral based upon planned disposition strategies and recognizing falling property values.

Gross charge-offs were $40.3 million in 2008, increasing from 2007. The 2008 increase was across all categories, with the largest increase in the residential construction category. The 2007 decrease included decreases in consumer, commercial and industrial, and commercial real estate charge-offs partially offset by an increase in real estate construction charge-offs. In 2006, increases in commercial and industrial and commercial real estate charge-offs were partially offset by a decline in consumer charge-offs.

Table 20

Allocation of Reserve for Loan Losses

(Dollar amounts in thousands)

	As of December 31,
	2009		2008		2007			2006			2005
Allocation of reserve for loan losses by loan category at December 31:
Commercial, industrial, and agricultural	$	54,452	$	22,189	$	27,380		$	28,932		$	22,694
Commercial real estate:
Office, retail, and industrial		20,164		22,048		(1	)		(1	)		(1	)
Residential construction		33,078		32,910		(1	)		(1	)		(1	)
Multi-family		4,555		2,680		(1	)		(1	)		(1	)
Other commercial real estate (2)		21,084		7,927		(1	)		(1	)		(1	)
Total commercial real estate		78,881		65,565		29,404			26,489			24,340
Consumer		11,475		6,115		5,016			6,949			9,359
Total	$	144,808	$	93,869	$	61,800		$	62,370		$	56,393
Total loans	$	5,203,246	$	5,360,063	$	4,963,672		$	5,008,944		$	4,306,191
Reserve for loan losses to loans		2.78%		1.75%		1.25%			1.25%			1.31%
Reserve for loan losses to non-accrual loans		59%		73%		335%			385%			470%
Reserve for loan losses to non-performing loans		58%		57%		156%			215%			269%

⁽¹⁾ Prior to 2008, we allocated our reserve for commercial real estate losses to the general category of commercial real estate.

⁽²⁾ Includes commercial construction and commercial land.

We increased our reserve for loan losses by $50.9 million from December 31, 2008, based in large part on higher current year charge-offs across each loan category. Historical charge-offs and individual loan impairment analyses are the primary drivers of the reserve for loan losses.

While the reserve for loan losses to total loans at December 31, 2009 was 2.78%, the reserve allocated to residential construction represented 10.54% of total residential construction loans as compared to 6.46% at December 31, 2008. The year-over-year increase and overall level of reserve for this portfolio reflects the continued weakness in the real estate markets and its systemic impact on the portfolio.

65

The reserve allocated to commercial, industrial, and agriculture loans was 3.30% of loans, as compared to 1.30% at December 31, 2008 and reflects the impact of general economic conditions on business cash flows. The reserves allocated for all other loan categories as a percent of loans ranged from 1.36% to 2.05% at December 31, 2009.

In 2008, we more than doubled the reserve for loan losses allocated to commercial real estate loans, increasing it from $29.4 million as of December 31, 2007 to $65.6 million as of December 31, 2008. The 2008 increase was the direct result of the impact of continuing economic weakness on real estate and related markets, which were reflected in lower collateral values.

In 2007, we reduced the reserve for loan losses allocated to commercial and industrial loans compared to December 31, 2006 due to the decline in commercial and industrial loans outstanding and lower current year charge-offs. In addition, we decreased the reserve for loan losses allocated to consumer loans as a result of lower consumer charge-offs and a decline in consumer loans outstanding and increased the reserve for loan losses allocated to commercial real estate loans due to an increase in the portfolio and recognition of lower collateral values underlying these loans.

The accounting policies underlying the establishment and maintenance of the reserve for loan losses are discussed in Notes 1 and 7 of “Notes to Consolidated Financial Statements” in Item 8 of this Form 10-K.

INVESTMENT IN BANK OWNED LIFE INSURANCE

We purchase life insurance policies on the lives of certain directors and officers and are the sole owner and beneficiary of the policies. We invest in these policies, known as BOLI, to provide an efficient form of funding for long-term retirement and other employee benefit costs. Therefore, our BOLI policies are intended to be long-term investments to provide funding for long-term liabilities. We record these BOLI policies as a separate line item in the Consolidated Statements of Financial Condition at each policy’s respective CSV, with changes recorded in noninterest income in the Consolidated Statements of Income. As of December 31, 2009, the CSV of BOLI assets totaled $198.0 million, compared to $198.5 million as of December 31, 2008.

Of our total BOLI portfolio as of December 31, 2009, 24.4% is in general account life insurance distributed between 10 insurance carriers, all of which carry investment grade ratings. This general account life insurance typically includes a feature guaranteeing minimum returns. The remaining 75.6% is in separate account life insurance, which is managed by third party investment advisors under pre-determined investment guidelines. Stable value protection is a feature available with respect to separate account life insurance policies that is designed to protect, within limits, a policy’s CSV from market fluctuations on underlying investments. Our entire separate account portfolio has stable value protection, purchased from a highly rated financial institution. To the extent fair values on individual contracts fall below 80% of book value, the CSV of the specific contracts may be reduced or the underlying assets transferred to short-duration investments, resulting in lower earnings.

BOLI income for 2009 was $2.3 million compared to a BOLI loss of $2.4 million for 2008. Since fourth quarter 2008, management has elected to accept lower market returns in order to improve our regulatory capital ratios by reducing risk-weighted assets and reducing our risk to market volatility through investment in shorter-duration, lower yielding money market instruments.

GOODWILL

We record goodwill as a separate line item in the Consolidated Statements of Financial Condition. The carrying value of goodwill was $262.9 million as of both December 31, 2009 and December 31, 2008. As described in Note 9 of “Notes to the Consolidated Financial Statements” in Item 8 of this Form 10-K, goodwill is tested at least annually for impairment or more often if events or circumstances between annual tests indicate that there may be impairment. The testing was performed by comparing the carrying value of goodwill with the anticipated

66

future cash flows. During 2009, we performed an analysis of goodwill in the first quarter and again at our normal annual date of October 1, 2009. At neither time did we determine that goodwill had been impaired.

DEFFERED TAX ASSETS

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. A valuation allowance is established for any deferred tax asset for which recovery or settlement is unlikely. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date.

Net deferred tax assets as of December 31, 2009 totaled $92.5 million compared to $57.6 million as of December 31, 2008 and $40.3 million as of December 31, 2007. The increase in 2009 and 2008 was primarily attributable to the increase in the reserve for loan losses, which was not currently deductible for income tax purposes. The increase in 2009 was also due, in part, to the increase in unrealized securities losses, deferred state tax benefits, and certain tax credit carryforwards.

We must also assess the likelihood that any deferred tax assets will be realized through the reduction or refund of taxes in future periods and establish a valuation allowance for those assets for which recovery is unlikely. In making this assessment, management must make judgments and estimates regarding the ability to realize the asset through carryback or carryforward to taxable income in prior or future years, the future reversal of existing taxable temporary differences, future taxable income, and the possible application of future tax planning strategies. We have established a valuation allowance of $2.5 million for certain state net operating loss and credit carryforwards that are not expected to be fully realized. Management believes that it is more likely than not that the other deferred tax assets included in the accompanying Consolidated Statements of Financial Condition will be fully realized. We have determined that no valuation allowance is required for any other deferred tax assets as of December 31, 2009, although there is no guarantee that those assets will be recognizable in future periods. For additional discussion of income taxes, see Notes 1 and 16 of “Notes to Consolidated Financial Statements” in Item 8 of this Form 10-K.

FUNDING AND LIQUIDITY MANAGEMENT

Our approach to liquidity management is to obtain funding sources at a minimum cost to meet fluctuating deposit, withdrawal, and loan demand needs. Our liquidity policy establishes parameters as to how liquidity should be managed to maintain flexibility in responding to changes in liquidity needs over a 12-month forward period, including the requirement to formulate a quarterly liquidity compliance plan for review by the Bank’s Board of Directors. The compliance plan includes an analysis that measures projected needs to purchase and sell funds. The analysis incorporates a set of projected balance sheet assumptions that are updated at least quarterly. Based on these assumptions, we determine our total cash liquidity on hand and excess collateral capacity from pledging, unused federal funds purchased lines, and other unused borrowing capacity such as FHLB advances, resulting in a calculation of our total liquidity capacity. Our total policy-directed liquidity requirement is to have funding sources available to cover 66.7% of non-collateralized, non-FDIC insured, non-maturity deposits. Based on our projections as of December 31, 2009, we expect to have liquidity capacity in excess of policy guidelines for the forward twelve-month period.

The liquidity needs of First Midwest Bancorp, Inc. on an unconsolidated basis (“Parent Company”) consist primarily of operating expenses and dividend payments to our stockholders. The primary source of liquidity for the Parent Company is dividends from subsidiaries. The Parent Company had $87.3 million in junior subordinated debentures related to trust preferred securities and $50.5 million in other subordinated debt outstanding. At December 31, 2009, the Parent Company did not have any unused short-term credit facilities

67

available to fund cash flows. As of December 31, 2009, the Parent Company also had the ability to enhance its liquidity position by raising capital or incurring debt. The Parent Company had cash and equivalent short-term investments of $141.9 million as of such date.

Total deposits and borrowed funds as of December 31, 2009 are summarized in Notes 10 and 11 of the “Notes to Consolidated Financial Statements” in Item 8 of this Form 10-K. The following table provides a comparison of average funding sources over the last three years. 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 21

Funding Sources – Average Balances

(Dollar amounts in thousands)

	Years Ended December 31,									% Change
	2009		% of Total	2008		% of Total	2007		% of Total	2009-2008		2008-2007
Demand deposits	$	1,061,208	15.0	$	1,043,972	14.1	$	1,055,251	14.6	1.7		(1.1	)
Savings deposits		751,386	10.7		792,524	10.7		754,009	10.4	(5.2	)	5.1
NOW accounts		984,529	13.9		935,429	12.7		900,956	12.4	5.2		3.8
Money market accounts		937,766	13.3		787,218	10.6		859,864	11.9	19.1		(8.4	)
Transactional deposits		3,734,889	52.9		3,559,143	48.1		3,570,080	49.3	4.9		(0.3	)
Time deposits		1,961,244	27.8		2,095,088	28.3		2,161,664	29.8	(6.4	)	(3.1	)
Brokered deposits		39,963	0.5		77,291	1.0		158,238	2.2	(48.3	)	(51.2	)
Total time deposits		2,001,207	28.3		2,172,379	29.3		2,319,902	32.0	(7.9	)	(6.4	)
Total deposits		5,736,096	81.2		5,731,522	77.4		5,889,982	81.3	0.1		(2.7	)
Securities sold under agreements to repurchase		398,062	5.6		430,074	5.8		420,903	5.8	(7.4	)	2.2
Federal funds purchased and other borrowed funds		720,730	10.2		1,008,834	13.7		710,797	9.8	(28.6	)	41.9
Total borrowed funds		1,118,792	15.8		1,438,908	19.5		1,131,700	15.6	(22.2	)	27.1
Subordinated debt		208,621	3.0		231,961	3.1		227,756	3.1	(10.1	)	1.8
Total funding sources	$	7,063,509	100.0	$	7,402,391	100.0	$	7,249,438	100.0	(4.6	)	2.1

Total average funding sources for 2009 decreased 4.6%, or $338.9 million. Total average deposits for 2009 increased 0.1% from 2008, with a decline in time deposits being offset by increases in transactional deposits.

Average transactional deposits for 2009 were $3.7 billion, an increase of $175.7 million from 2008. The increase from 2008 was due primarily to growth in money market account balances and reflects our customers’ desire to maintain more liquid, short-term deposits.

Total average deposits declined 2.7% for 2008 compared to 2007. Most of the decline in deposits was in time deposits, including brokered time deposits. Transactional deposits were down 0.3% from 2007 due to slightly lower retail deposits stemming from competitive pricing in our market and general economic conditions.

Securities sold under agreements to repurchase and federal funds purchased generally mature within 1 to 90 days from the transaction date. Other borrowed funds consist of term auction facilities issued by the Federal Reserve that mature within 90 days. A discussion of borrowed funds is presented in the following table.

Average subordinated debt declined 10.1% in 2009 compared to 2008. In September 2009, we completed an offer to exchange approximately one-third of our subordinated notes and trust preferred subordinated debt for newly issued shares of common stock of the Company. The exchanges strengthened the composition of our capital base by increasing our Tier 1 common and tangible common equity ratios, while also reducing the interest expense associated with the debt securities.

68

As a result of the exchange offers, $39.3 million of 6.95% trust-preferred subordinated debt was retired at a discount of 20% in exchange for 3,058,410 shares of common stock of the Company, and $29.5 million of 5.85% subordinated debt was retired at a discount of 10% in exchange for 2,584,695 shares of common stock of the Company.

Subsequent to the exchanges, we retired an additional $1.0 million of trust-preferred subordinated debt at a discount of 20% for cash and $20.0 million of subordinated notes at a discount of 7% for cash.

In the aggregate, the exchange offers and the subsequent retirement of debt for cash resulted in the recognition of $15.3 million in pre-tax gains.

Table 22

Borrowed Funds

(Dollar amounts in thousands)

	2009			2008			2007
	Amount		Rate (%)	Amount		Rate (%)	Amount		Rate (%)
At year-end:
Securities sold under agreements to repurchase	$	238,390	0.38	$	457,598	1.86	$	364,164	4.03
Federal funds purchased		-	-		280,000	0.12		301,000	3.62
Federal Home Loan Bank (“FHLB”) advances		152,786	2.03		310,736	2.68		599,064	4.69
Federal term auction facilities		300,000	0.25		650,000	0.44		-	-
Total borrowed funds	$	691,176	0.69	$	1,698,334	1.18	$	1,264,228	4.25
Average for the year:
Securities sold under agreements to repurchase	$	398,062	1.40	$	430,074	2.34	$	420,903	4.55
Federal funds purchased		164,627	0.22		289,439	1.97		141,663	5.16
Federal Home Loan Bank advances		174,643	3.21		563,984	3.31		569,134	5.11
Federal term auction facilities		381,460	0.27		155,411	1.78		-	-
Total borrowed funds	$	1,118,792	1.12	$	1,438,908	2.58	$	1,131,700	4.91
Maximum month-end balance:
Securities sold under agreements to repurchase	$	806,813		$	643,015		$	567,174
Federal funds purchased		420,000			535,000			301,000
Federal Home Loan Bank advances		460,736			647,737			639,647
Federal term auction facilities		700,000			650,000			-
Weighted-average maturity of FHLB advances		37.5 months			5.4 months			7.4 months

Average borrowed funds totaled $1.1 billion, decreasing $320.1 million, or 22.2%, from 2008 to 2009 following a 27.1% increase from 2007 to 2008. As discussed earlier, during the last half of 2009, we delevered our balance sheet by using the proceeds from securities sales and maturities to reduce our level of borrowed funds and time deposits thereby increasing our net interest margins.

We make extensive, interchangeable use of repurchase agreements, FHLB advances, federal funds purchased, and federal term auction facilities to supplement deposits and leverage the interest yields produced through our securities portfolio. For example, during 2008, more costly FHLB advances and brokered time deposits were replaced by increases in cheaper federal funds purchased and federal term auction facilities.

69

CONTRACTUAL OBLIGATIONS, COMMITMENTS, OFF-BALANCE SHEET RISK, AND CONTINGENT LIABILITIES

Through our normal course of operations, we have entered into certain contractual obligations and other commitments. Such obligations generally relate to the funding of operations through deposits or debt issuances, as well as leases for premises and equipment. As a financial services provider, we routinely enter into commitments to extend credit. While contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process as all comparable loans we make.

The following table presents our significant fixed and determinable contractual obligations and significant commitments as of December 31, 2009. Further discussion of the nature of each obligation is included in the referenced note of “Notes to the Consolidated Financial Statements” in Item 8 of this Form 10-K.

Table 23

Contractual Obligations, Commitments, Contingencies, and Off-Balance Sheet Items

(Dollar amounts in thousands)

	Note Reference	Payments Due In								Total
		Less Than One Year		One to Three Years		Three to Five Years		Over Five Years
Deposits without a stated maturity	10	$	3,885,885	$	-	$	-	$	-	$	3,885,885
Time deposits	10		1,689,277		271,327		38,155		635		1,999,394
Borrowed funds	11		429,385		103,967		157,824		-		691,176
Subordinated debt	12		-		-		-		137,735		137,735
Operating leases	8		3,852		7,468		5,967		4,090		21,377
Pension liability	17		2,469		4,560		5,856		18,793		31,678
Uncertain tax positions liability	16										342
Commitments to extend credit:
Home equity lines	22										276,024
All other commitments	22										905,001
Letters of credit:
Standby	22										142,284
Commercial	22										140

MANAGEMENT OF CAPITAL

Capital Measurements

A strong capital structure is crucial in maintaining investor confidence, accessing capital markets, and enabling us to take advantage of future profitable growth opportunities. Our Capital Policy requires that the Company and the Bank maintain capital ratios in excess of the minimum regulatory guidelines. It serves as an internal discipline in analyzing business risks and internal growth opportunities and sets targeted levels of return on equity. Under regulatory capital adequacy guidelines, the Company and the Bank are subject to various capital requirements set and administered by the federal banking agencies. These requirements specify minimum capital ratios, defined as Tier 1 and total capital as a percentage of assets and off-balance sheet items that have been weighted according to broad risk categories and a leverage ratio calculated as Tier 1 capital as a percentage of adjusted average assets. We have managed our capital ratios for both the Company and the Bank to consistently maintain such measurements in excess of the Federal Reserve Board (“FRB”) minimum levels considered to be “well capitalized,” which is the highest capital category established.

70

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 equals 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 categorized as “well capitalized.” All regulatory mandated ratios for characterization as “well capitalized” were significantly exceeded as of December 31, 2009.

Table 24

Capital Measurements

	December 31,		Regulatory Minimum For “Well Capitalized”		Excess Over Required Minimums at December 31, 2009
	2009	2008
					(Dollar amounts in millions)
Regulatory capital ratios:
Total capital to risk-weighted assets	14.25%	14.36%	10.00%		42%		$	266
Tier 1 capital to risk-weighted assets	12.18%	11.60%	6.00%		103%		$	387
Tier 1 leverage to average assets	10.18%	9.41%	5.00%		104%		$	389
Regulatory capital ratios, excluding preferred stock (1):
Total capital to risk-weighted assets	11.17%	11.44%	10.00%		12%		$	73
Tier 1 capital to risk-weighted assets	9.10%	8.68%	6.00%		52%		$	194
Tier 1 leverage to average assets	7.61%	7.04%	5.00%		52%		$	196
Tier 1 common capital to risk-weighted assets (2)(3)	7.75%	6.79%	N/A	(3)	N/A	(3)		N/A	(3)
Tangible common equity ratios:
Tangible common equity to tangible assets	6.29%	5.23%	N/A	(3)	N/A	(3)		N/A	(3)
Tangible common equity, excluding other comprehensive loss, to tangible assets	6.54%	5.45%	N/A	(3)	N/A	(3)		N/A	(3)
Tangible common equity to risk-weighted assets	7.45%	6.53%	N/A	(3)	N/A	(3)		N/A	(3)

⁽¹⁾ These ratios exclude the impact of $193.0 million in preferred shares issued to the U.S. Treasury in December 2008 as part of its Capital Purchase Plan (“CPP”). For additional discussion of the preferred share issuance and the CPP, refer to Note 13 to the Consolidated Financial Statements in Item 8 of this Form 10-K.

⁽²⁾ Excludes the impact of preferred shares and trust-preferred securities.

⁽³⁾ Ratio is not subject to formal FRB regulatory guidance.

Regulatory and tangible common equity ratios were improved in comparison to December 31, 2008.

During the year, we notably improved the quality of our capital composition. The improvements in the Tier 1 and tangible capital ratios primarily reflect the exchange of trust preferred debt and subordinated debt classified as Tier 1 and Tier 2 debt, respectively, for common stock as well as the impact of delevering the investment portfolio. This also increased our level of tangible common equity. Our tangible common equity stands at 6.29%, which is 106 basis points higher than at December 31, 2008.

Common Shares Issued

As referred to in the section titled “Funding and Liquidity Management,” in September 2009, we issued a total of 5,643,105 shares of common stock at a price of $10.272 per share in exchange for subordinated and trust-preferred debt, resulting in a $56.6 million increase in stockholders’ equity, net of related expenses.

71

We had 66,969,171 shares issued and 54,793,343 shares outstanding as of December 31, 2009 and 61,326,066 shares issued and 48,629,541 shares outstanding as of December 31, 2008.

Common Shares Issued Subsequent to December 31, 2009

On January 13, 2010, we sold 18,818,183 shares of Common Stock in an underwritten public offering. The price to the public was $11.00 per share, and our proceeds, net of the underwriters’ discount, were $10.45 per share, resulting in aggregate proceeds of $196.7 million. The proceeds will be used to further improve the quality of our capital composition. This additional capital improved our total capital and Tier 1 capital regulatory ratios by approximately 300 basis points.

Issuance of Preferred Shares

On December 5, 2008, we received $193.0 million from the sale of preferred shares to the U.S. Treasury as part of its Capital Purchase Plan (“CPP”). In connection with the CPP, we issued to the U.S. Treasury a total of 193,000 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series B, at an initial fixed dividend rate of 5% with a $1,000 per share liquidation preference, and a warrant to purchase up to 1,305,230 shares of the Company’s common stock at an exercise price of $22.18 per share. Both the preferred shares and the warrant were accounted for as components of our regulatory Tier 1 capital as of December 31, 2008.

For further details of the regulatory capital requirements and ratios as of December 31, 2009 and 2008, for the Company and the Bank, see Note 20 of “Notes to Consolidated Financial Statements” in Item 8 of this Form 10-K.

Stock Repurchase Programs

In order to participate in the CPP, we agreed to restrictions imposed by the U.S. Treasury limiting the repurchase of the Company’s common stock. For a detailed description of these restrictions, see Item 1A. “Risk Factors” elsewhere in this report.

Prior to participation in the CPP, we purchased 4,756 shares of our common stock at a weighted average cost of $28.87 per share during 2008.

Shares repurchased are held as treasury stock and are available for issuance in conjunction with our Dividend Reinvestment Plan, qualified and nonqualified retirement plans, share-based compensation plans, and other general corporate purposes. We reissued 534,440 treasury shares in 2009 and 183,168 treasury shares in 2008 to fund such plans.

Dividends

Our Board of Directors periodically reviews our dividend payout ratio to ensure that it is consistent with internal capital guidelines, industry standards, and peer group practices.

As part of a larger commitment to grow the tangible common equity component of total capital, on March 16, 2009, our Board of Directors announced a reduction in our quarterly dividend from $0.225 per share to $0.01 per share.

On May 27, 2009, August 31, 2009, and December 2, 2009, the Company’s Board of Directors announced additional quarterly common stock dividends of $0.010 per share.

Since we elected to participate in the U.S. Treasury’s CPP in fourth quarter 2008, our ability to increase quarterly common stock dividends above $0.310 per share will be subject to the applicable restrictions of this program for three years following the sale of the preferred stock.

72

Given current conditions, the Board of Directors continues to evaluate all aspects of our capital plan each quarter.

QUARTERLY REVIEW

Table 25

Quarterly Earnings Performance ⁽¹⁾

(Dollar amounts in thousands, except per share data)

	2009												2008
	Fourth			Third			Second			First			Fourth			Third			Second			First
Interest income	$	82,370		$	82,762		$	85,139		$	91,480		$	97,933		$	101,486		$	101,313			108,475
Interest expense		16,429			21,781			24,748			27,261			32,920			38,728			40,987			49,975
Net interest income		65,941			60,981			60,391			64,219			65,013			62,758			60,326			58,500
Provision for loan losses		93,000			38,000			36,262			48,410			42,385			13,029			5,780			9,060
Noninterest income		23,181			24,074			24,759			20,549			12,086			25,440			27,041			25,051
Gains (losses) on securities sales, net		273			4,525			10,768			11,160			262			48			1,344			7,249
Securities impairment losses		(6,045	)		(11,500	)		(4,133	)		(2,938	)		(34,477	)		(1,794	)		(5,962	)		(2,281	)
Gain on FDIC-assisted transaction		13,071			-			-			-			-			-			-			-
Gains on early extinguishment of debt		1,267			13,991			-			-			-			-			-			-
Noninterest expense		70,521			56,640			59,233			48,394			46,581			48,436			49,945			49,343
(Loss) income before income tax (benefit) expense		(65,833	)		(2,569	)		(3,710	)		(3,814	)		(46,082	)		24,987			27,024			30,116
Income tax (benefit) expense		(28,342	)		(5,920	)		(6,373	)		(9,541	)		(19,192	)		796			27			5,078
Net (loss) income		(37,491	)		3,351			2,663			5,727			(26,890	)		24,191			26,997			25,038
Preferred dividends		(2,569	)		(2,567	)		(2,566	)		(2,563	)		(712	)		-			-			-
Net loss (income) applicable to non-vested restricted shares		518			(11	)		(34	)		(9	)		34			(42	)		(75	)		(59	)
Net (loss) income applicable to common shares	$	(39,542	)	$	773		$	63		$	3,155		$	(27,568	)	$	24,149		$	26,922		$	24,979
Basic (loss) earnings per common share	$	(0.73	)	$	0.02		$	-		$	0.07		$	(0.57	)	$	0.50		$	0.56		$	0.52
Diluted earnings (loss) per common share	$	(0.73	)	$	0.02		$	-		$	0.07		$	(0.57	)	$	0.50		$	0.55		$	0.51
Return on average common equity		(19.84%	)		0.43%			0.04%			1.78%			(13.90%	)		13.07%			14.53%			13.72%
Return on average assets		(1.92%	)		0.17%			0.13%			0.28%			(1.28%	)		1.16%			1.33%			1.25%
Net interest margin – tax- equivalent		4.04%			3.66%			3.53%			3.67%			3.71%			3.63%			3.58%			3.53%

⁽¹⁾ All ratios are presented on an annualized basis.

FOURTH QUARTER 2009 vs. 2008

Our net loss was $37.5 million for fourth quarter 2009. This compares to a net loss of $26.9 million for fourth quarter 2008. We reported a loss of $0.73 per diluted common share for fourth quarter 2009 compared to a loss of $0.57 per diluted common share for fourth quarter 2008. Return on average assets was a negative 1.92% for fourth quarter 2009 compared to a negative 1.28% for fourth quarter 2008. Return on average common equity was a negative 19.84% for fourth quarter 2009 compared to a negative 13.90% for fourth quarter 2008. Performance for the quarter was adversely impacted by higher loan loss provisions and securities-related losses, stemming from continued economic weakness.

73

Table 26

Quarterly Core Operating Earnings ⁽¹⁾

(Dollar amounts in thousands)

	2009												2008
	Fourth			Third			Second			First			Fourth			Third			Second			First
(Loss) income before taxes	$	(65,833	)	$	(2,569	)	$	(3,710	)	$	(3,814	)	$	(46,082	)	$	24,987		$	27,024		$	30,116
Provision for loan losses		93,000			38,000			36,262			48,410			42,385			13,029			5,780			9,060
Pre-tax, pre-provsion earnings (loss)		27,167			35,431			32,552			44,596			(3,697	)		38,016			32,804			39,176
Non-operating items
Securities gains (losses), net		(5,772	)		(6,975	)		6,635			8,222			(34,215	)		(1,746	)		(4,618	)		4,968
Gain on FDIC-assisted transaction		13,071			-			-			-			-			-			-			-
Gains on early extinguishment of debt		1,267			13,991			-			-			-			-			-			-
Write-down of BOLI included in noninterest income		-			-			-			-			(10,360	)		-			-			-
Losses realized on OREO		(14,051	)		(1,801	)		(2,387	)		(315	)		(576	)		(249	)		(731	)		(10	)
FDIC special deposit insurance assessment		-			-			(3,500	)		-			-			-			-			-
Total non-operating items		(5,485	)		5,215			748			7,907			(45,151	)		(1,995	)		(5,349	)		4,958
Pre-tax, pre-provision core operating earnings	$	32,652		$	30,216		$	31,804		$	36,689		$	41,454		$	40,011		$	38,153		$	34,218

⁽¹⁾ The Company’s accounting and reporting policies conform to U.S. generally accepted accounting principles (“U. S. GAAP”) and general practice within the banking industry. As a supplement to GAAP, the Company has provided this non-GAAP performance result. The Company believes that this non-GAAP financial measure is useful because it allows investors to assess the Company’s operating performance. Although this non-GAAP financial measure is intended to enhance investors’ understanding of the Company’s business and performance, this non-GAAP financial measure should not be considered an alternative to GAAP.

Pre-tax, pre-provision core operating earnings totaled $32.7 million for fourth quarter 2009 up 8.1% from third quarter 2009 and down 21.2% from fourth quarter 2008. The increase from third quarter 2009 was due primarily to improved net interest income, while the decline from fourth quarter 2008 primarily reflects the impact of higher compensation-related expenses, loan remediation costs, and FDIC premiums on deposits.

Total loans as of December 31, 2009 were $5.2 billion, a decrease of $102.8 million and $156.8 million from September 30, 2009 and December 31, 2008, respectively.

Average core transactional deposits for fourth quarter 2009 were $3.9 billion, an increase of $29.7 million from third quarter 2009 and $440.7 million, or 12.8%, from fourth quarter 2008 due in large part to customers’ desire to maintain more liquid, short-term deposits.

Tax-equivalent net interest margin was 4.04% for fourth quarter 2009, an increase from 3.66% for third quarter 2009 and 3.71% for fourth quarter 2008. The yield on average interest-earning assets for fourth quarter 2009 improved 10 basis points compared to third quarter 2009, while the cost of funds declined 31 basis points compared to third quarter 2009. The yield on average interest-earning assets for fourth quarter 2009 declined 45 basis points compared to fourth quarter 2008 and the cost of funds declined 86 basis points compared to the same period in 2008.

Fee-based revenues were $22.0 million for fourth quarter, a decrease of 4.7% from fourth quarter 2008 largely due to the impact of reduced consumer spending. For the third consecutive quarter, fee-based revenues improved, reflecting increases in trust, card-based, and other service charge revenues.

Bank-owned life insurance income for fourth quarter 2009 increased $9.1 million from fourth quarter 2008, reflecting a $10.4 million charge in fourth quarter 2008 related to a reduction in the cash surrender value of bank-owned life insurance.

74

For fourth quarter 2009, noninterest expense increased $13.9 million compared to third quarter 2009 and $23.9 million from fourth quarter 2008. The increase from third quarter 2009 was due primarily to losses related to other real estate owned. The increase from fourth quarter 2008 was also due to losses related to other real estate owned in addition to higher FDIC premiums, higher pension and profit-sharing expense, and higher compensation expense associated with the market adjustment referred to above.

Non-performing loans as of December 31, 2009 were $248.3 million, down 5.5% compared to September 30, 2009, with residential construction loans comprising 45.5% of the total. Loans 30-89 days past due totaled $37.9 million at December 31, 2009, down 14.5% from September 30, 2009.

During fourth quarter 2009, the Company increased its reserve for loan losses to $144.8 million, up $10.5 million from September 30, 2009. The reserve for loan losses represented 2.78% of total loans outstanding at December 31, 2009, compared to 2.53% at September 30, 2009 and 1.75% at December 31, 2008. The reserve for loan losses as a percentage of non-performing loans was 58% at December 31, 2009, up from 51% and 57% at September 30, 2009 and December 31, 2008, respectively.

The provision for loan losses for fourth quarter 2009 was $93.0 million compared to $42.4 million for fourth quarter 2008. Net charge-offs totaled $82.5 million during fourth quarter 2009, compared to $18.3 million in fourth quarter 2008.

Other real estate owned (OREO) was $57.1 million as of December 31, 2009 compared to $57.9 million as of September 30, 2009 and $24.4 million at December 31, 2008. During fourth quarter the Company reduced the carrying value of OREO properties by $9.2 million reflective of existing market conditions and more aggressive disposition strategies and sold OREO with a carrying value of $13.7 million at a net loss of $4.9 million, bringing full year sales to $25.3 million and losses of $6.0 million.

Net securities losses were $5.8 million for fourth quarter 2009 and included an other-than-temporary impairment of $6.0 million associated with the Company’s CDOs.

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 of “Notes to Consolidated Financial Statements” in Item 8 of this Form 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 reserve for loan losses, evaluation of impairment of securities, and income taxes are the accounting areas requiring subjective or complex judgments that are most important to our financial position and results of operations, and, as such, are considered to be critical accounting policies, as discussed below.

75

Reserve for Loan Losses

Determination of the reserve 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 homogeneous loans based on historical loss experience, and consideration of current economic trends, all of which may be susceptible to significant change. Credit exposures deemed to be uncollectible are charged-off against the reserve, while recoveries of amounts previously charged-off are credited to the reserve. Additions to the reserve for loan losses are charged to operating expense through the provision for loan losses. The amount charged to operating expense in any given year is dependent upon a number of factors including historic loan growth and changes in the composition of the loan portfolio, net charge-off levels, and our assessment of the reserve for loan losses. For a full discussion of our methodology of assessing the adequacy of the reserve for loan losses, see Note 1 of “Notes to Consolidated Financial Statements” in Item 8 of this Form 10-K.

Evaluation of Securities for Impairment

Held-to-maturity securities, which we have the ability and intent to hold until maturity, are accounted for using historical cost, adjusted for amortization of premium and accretion of discount. Trading securities are carried at fair value, with unrealized gains and losses recorded in other noninterest income. All other securities are classified as securities available-for-sale and are carried at fair value.

The fair values of securities are based on quoted prices obtained from third party pricing services or dealer market participants where a ready market for such securities exists. Where such a market does not exist, as for our collateralized trust-preferred debt obligations (“CDOs”), we have estimated fair value using a cash flow model developed by an independent valuation firm. The valuation for each of the CDOs relies on independently verifiable historical financial data. The valuation firm performs a credit analysis of each of the entities comprising the collateral underlying each CDO in order to estimate the likelihood of default by any of these entities on their trust-preferred obligation. Cash flows are modeled based upon the contractual terms of the CDO, discounted to their present values, and used to derive the estimated fair value of the individual CDO, as well as any credit loss or impairment. We believe the model uses reasonable assumptions to estimate fair values where no market exists for these investments. Unrealized gains and losses on securities available-for-sale are reported, on an after-tax basis, as a separate component of stockholders’ equity in accumulated other comprehensive income. Interest income is reported net of amortization of premium and accretion of discount.

Realized securities gains or losses are reported in securities gains (losses), net in the Consolidated Statements of Income. The cost of securities sold is based on the specific identification method. On a quarterly basis, we make an assessment to determine whether there have been any events or circumstances to indicate that a security for which there is an unrealized loss is impaired on an other-than-temporary basis. In evaluating other-than-temporary impairment, the Company considers many factors including the severity and duration of the impairment; the financial condition and near-term prospects of the issuer, which for debt securities considers external credit ratings and recent downgrades; and the intent and ability of the Company to hold the security for a period of time sufficient for a recovery in value. The term other-than-temporary is not intended to indicate that the decline is permanent. It indicates that the prospects for near-term recovery are not necessarily favorable or that there is a lack of evidence to support fair values greater than or equal to the carrying value of the investment. Securities for which there is an unrealized loss that is deemed to be other-than-temporary are written down to fair value with the write-down recorded as a realized loss and included in securities gains (losses), net, but only to the extent the impairment is related to credit losses. The amount of the impairment related to other factors is recognized in other comprehensive income unless management intends to sell the security or believes it is more likely than not that it will be required to sell the security prior to full recovery. For additional discussion on securities, see Notes 1 and 3 of “Notes to Consolidated Financial Statements” in Item 8 of this Form 10-K.

76

Income Taxes

We determine our income tax expense based on management’s judgments and estimates regarding permanent differences in the treatment of specific items of income and expense for financial statement and income tax purposes. These permanent differences result in an effective tax rate, which differs from the federal statutory rate. In addition, we recognize deferred tax assets and liabilities, recorded in the Consolidated Statements of Financial Condition, based on management’s judgments and estimates regarding timing differences in the recognition of income and expenses for financial statement and income tax purposes.

We must also assess the likelihood that any deferred tax assets will be realized through the reduction or refund of taxes in future periods and establish a valuation allowance for those assets for which recovery is unlikely. In making this assessment, management must make judgments and estimates regarding the ability to realize the asset through carryback or carryforward to taxable income in prior or future years, the future reversal of existing taxable temporary differences, future taxable income, and the possible application of future tax planning strategies. We have established a valuation allowance of $2.5 million for certain state net operating loss and credit carryforwards that are not expected to be fully realized. Management believes that it is more likely than not that the other deferred tax assets included in the accompanying Consolidated Statements of Financial Condition will be fully realized. We have determined that no valuation allowance is required for any other deferred tax assets as of December 31, 2009, although there is no guarantee that those assets will be recognizable in future periods. For additional discussion of income taxes, see Notes 1 and 16 of “Notes to Consolidated Financial Statements” in Item 8 of this Form 10-K.

FORWARD-LOOKING STATEMENTS

The following is a statement under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 (the “PSLRA”): We and our representatives may, from time to time, make written or oral statements that are intended to qualify as “forward-looking” statements under the PSLRA and provide information other than historical information, including statements contained in this Form 10-K, our other filings with the Securities and Exchange Commission, or in communications to our stockholders. These statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to be materially different from any results, levels of activity, performance, or achievements expressed or implied by any forward-looking statement. These factors include, among other things, the factors listed below.

In some cases, we have identified forward-looking statements by such words or phrases as “will likely result,” “is confident that,” “remains optimistic about,” “expects,” “should,” “could,” “seeks,” “may,” “will continue to,” “believes,” “anticipates,” “predicts,” “forecasts,” “estimates,” “projects,” “potential,” “intends,” or similar expressions identifying forward-looking statements within the meaning of the PSLRA, including the negative of those words and phrases. These forward-looking statements are based on management’s current views and assumptions regarding future events, future business conditions, and our outlook for the Company based on currently available information. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only at the date made.

In connection with the safe harbor provisions of the PSLRA, we are hereby identifying important factors that could affect our financial performance and could cause our actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any forward-looking statements.

Among the factors that could have an impact on our ability to achieve operating results, growth plan goals, and the beliefs expressed or implied in forward-looking statements are:

• Management’s ability to reduce and effectively manage interest rate risk and the impact of interest rates in general on the volatility of our net interest income;

• Asset and liability matching risks and liquidity risks;

77

• Fluctuations in the value of our investment securities;

• The ability to attract and retain senior management experienced in banking and financial services;

• The sufficiency of the reserve for loan losses to absorb the amount of actual losses inherent in the existing portfolio of loans;

• The failure of assumptions underlying the establishment of the reserve for loan losses and estimation of values of collateral and various financial assets and liabilities;

• Credit risks and risks from concentrations (by geographic area and by industry) within our loan portfolio;

• The effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds, and other financial institutions operating in our markets or elsewhere providing similar services;

• Changes in the economic environment, competition, or other factors that may influence the anticipated growth rate of loans and deposits, the quality of the loan portfolio, and loan and deposit pricing;

• Changes in general economic or industry conditions, nationally or in the communities in which we conduct business;

• Volatility of rate sensitive deposits;

• Our ability to adapt successfully to technological changes to compete effectively in the marketplace;

• Operational risks, including data processing system failures or fraud;

• Our ability to successfully pursue acquisition and expansion strategies and integrate any acquired companies;

• The impact of liabilities arising from legal or administrative proceedings, enforcement of bank regulations, and enactment or application of securities regulations;

• Governmental monetary and fiscal policies and legislative and regulatory changes that may result in the imposition of costs and constraints through higher FDIC insurance premiums, significant fluctuations in market interest rates, increases in capital requirements, or operational limitations;

• Changes in federal and state tax laws or interpretations, including changes affecting tax rates, income not subject to tax under existing law and interpretations, income sourcing, or consolidation/combination rules;

• Changes in accounting principles, policies, or guidelines affecting the businesses we conduct;

• Acts of war or terrorism; and

• Other economic, competitive, governmental, regulatory, and technological factors affecting our operations, products, services, and prices.

The foregoing list of important factors may not be all-inclusive, and we specifically decline to undertake any obligation to publicly revise any forward-looking statements that have been made to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

With respect to forward-looking statements set forth in the notes to consolidated financial statements, including those relating to contingent liabilities and legal proceedings, some of the factors that could affect the ultimate disposition of those contingencies are changes in applicable laws, the development of facts in individual cases, settlement opportunities, and the actions of plaintiffs, judges, and juries.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The disclosures set forth in this item are qualified by Item 1A. Risk Factors and the section captioned “Forward-Looking Statements” included in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this report, and other cautionary statements set forth elsewhere in this report.

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

78

result of repricing, basis, and option risk. Repricing risk represents timing mismatches in our ability to alter contractual rates earned on interest-earning assets or paid on interest-bearing liabilities in response to changes in market interest rates. Basis risk refers to the potential for changes in the underlying relationship between market rates or indices, which subsequently result in a narrowing of the spread between the rate earned on a loan or investment and the rate paid to fund that investment. Option risk arises from the “embedded options” present in many financial instruments such as loan prepayment options or deposit early withdrawal options. These provide customers opportunities to take advantage of directional changes in interest rates and could have an adverse impact on our margin performance.

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 Management 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. As of December 31, 2009, the percent change expected assuming a gradual decrease in interest rates was outside of policy by 2.1%, which was an improvement from December 31, 2008. Given the current market conditions as of December 31, 2009 and 2008, the Bank’s Board of Directors temporarily authorized operations outside of policy limits.

79

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
December 31, 2009:
Dollar change	$	(27,122	)	$	(2,540	)	$	(36,934	)	$	(1,312	)	$	N/M	$	4,246
Percent change		-10.1%			-1.0%			-13.8%			-0.5%			N/M		+1.6%
December 31, 2008:
Dollar change	$	(28,797	)	$	(21,942	)	$	(43,001	)	$	(24,416	)		N/M	$	(30,604	)
Percent change		-10.4%			-7.9%			-15.5%			-8.8%			N/M		-11.0%

⁽¹⁾ 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 December 31, 2009 and 2008, in management’s judgment, an assumed 300 basis point drop in interest rates was deemed not meaningful in the existent interest rate environment.

While overall the change in interest rate risk volatility from December 31, 2008 to December 31, 2009 under both rising and declining interest rate assumptions is less negative, there has been significant improvement in interest rate volatility under rising interest rates. Driving this improvement were securities sales of $855.4 million during 2009, which reduced the volume of longer dated assets, and allowed for a reduction in shorter-term liabilities, thus improving the interest rate risk volatility under rising interest rates. In addition, during 2009, we placed interest rate floors on certain loans, which will decrease the earnings at risk volatility under declining rates on those loans by keeping loan yields from declining as significantly.

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- 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
December 31, 2009:
Dollar change	$	(100,940	)	$	10,857
Percent change		-6.5%			+0.7%
December 31, 2008:
Dollar change	$	(89,123	)	$	(54,136	)
Percent change		-6.8%			-4.1%

While the estimated sensitivity of the economic value of equity to changes in interest rates as of December 31, 2009 reflected more negative exposure to lower interest rates compared to that existing at December 31, 2008, there was a reduction in exposure to rising interest rates as it moved from a negative 4.1% to a positive 0.7%. The changes from year-end 2008 are driven by the sale of securities during 2009. In addition, while the

80

retirement of $68.8 in subordinated debt in exchange for common shares of the Company reduced the positive impact longer-term debt has on equity volatility under rising interest rates, that reduction was partially offset by the extension of borrowed funds.

Interest Rate Derivatives

As part of our approach to controlling the interest rate risk within our balance sheet, we have used derivative instruments (specifically interest rate swaps with third parties) in order to limit volatility in net interest income. The advantages of using such interest rate derivatives include minimization of balance sheet leverage resulting in lower capital requirements compared to cash instruments, the ability to maintain or increase liquidity, and the opportunity to customize the interest rate swap to meet desired risk parameters. The accounting policies underlying the treatment of derivative financial instruments in the Consolidated Statements of Financial Condition and Income of the Company are described in Notes 1 and 21 of “Notes to Consolidated Financial Statements” in Item 8 of this Form 10-K.

We had total interest rate swaps in place with an aggregate notional amount of $19.0 million at December 31, 2009 and $20.0 million at December 31, 2008, hedging various balance sheet categories. The specific terms of the interest rate swaps outstanding as of December 31, 2009 and 2008 are discussed in Note 21 of “Notes to Consolidated Financial Statements” in Item 8 of this Form 10-K.

81

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Management’s Responsibility for Financial Statements

To Our Stockholders:

The accompanying consolidated financial statements were prepared by management, which is responsible for the integrity and objectivity of the data presented. In the opinion of management, the financial statements, which necessarily include amounts based on management’s estimates and judgments, have been prepared in conformity with U.S. generally accepted accounting principles.

Ernst & Young LLP, an independent registered public accounting firm, has audited these consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and has expressed its unqualified opinion on these financial statements.

The Audit Committee of the Board of Directors, which oversees the Company’s financial reporting process on behalf of the Board of Directors, is composed entirely of independent directors (as defined by the listing standards of Nasdaq). The Audit Committee meets periodically with management, the independent accountants, and the internal auditors to review matters relating to the Company’s financial statements, compliance with legal and regulatory requirements relating to financial reporting and disclosure, annual financial statement audit, engagement of independent accountants, internal audit function, and system of internal controls. The internal auditors and the independent accountants periodically meet alone with the Audit Committee and have access to the Audit Committee at any time.

/s/ MICHAEL L. SCUDDER	/s/ PAUL F. CLEMENS
Michael L. Scudder President and Chief Executive Officer	Paul F. Clemens Executive Vice President and Chief Financial Officer

March 1, 2010

82

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

First Midwest Bancorp, Inc.:

We have audited the accompanying consolidated statements of financial condition of First Midwest Bancorp, Inc., and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of First Midwest Bancorp, Inc. and subsidiaries at December 31, 2009 and 2008, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 2, “Recent Accounting Pronouncements”, the Company changed its method of accounting for the recognition of other-than-temporary impairment.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), First Midwest Bancorp, Inc.’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2010 expressed an unqualified opinion thereon.

/S/ ERNST & YOUNG LLP

Chicago, Illinois

March 1, 2010

83

FIRST MIDWEST BANCORP, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Amounts in thousands)

	December 31,
	2009			2008
Assets
Cash and due from banks	$	101,177		$	106,082
Federal funds sold and other short-term investments		26,202			8,226
Trading account securities		14,236			12,358
Securities available-for-sale, at fair value		1,266,760			2,216,186
Securities held-to-maturity, at amortized cost (fair value 2009 – $84,496; 2008 – $84,592)		84,182			84,306
Federal Home Loan Bank and Federal Reserve Bank stock, at cost		56,428			54,767
Loans		5,203,246			5,360,063
Reserve for loan losses		(144,808	)		(93,869	)
Net loans		5,058,438			5,266,194
Other real estate owned		57,137			24,368
Covered assets:
Loans		146,319			-
Other real estate owned		8,981			-
Federal Deposit Insurance Corporation (“FDIC”) loss share receivable		67,945			-
Premises, furniture, and equipment		120,642			120,035
Accrued interest receivable		32,600			43,247
Investment in bank owned life insurance		197,962			198,533
Goodwill		262,886			262,886
Other intangible assets		18,593			21,662
Prepaid FDIC assessments		34,687			-
Other assets		155,497			109,491
Total assets	$	7,710,672		$	8,528,341
Liabilities
Demand deposits	$	1,133,756		$	1,040,763
Savings deposits		749,279			747,079
NOW accounts		913,140			915,691
Money market deposits		1,089,710			754,421
Time deposits		1,999,394			2,127,800
Total deposits		5,885,279			5,585,754
Borrowed funds		691,176			1,698,334
Subordinated debt		137,735			232,409
Accrued interest payable		5,108			10,550
Payable for securities purchased		-			17,537
Other liabilities		49,853			75,478
Total liabilities		6,769,151			7,620,062
Stockholders’ Equity
Preferred stock, no par value; authorized 1,000 shares; issued and outstanding: 193 shares		190,233			189,617
Common stock, $0.01 par value; authorized 100,000 shares; issued 2009 – 66,969 shares, 2008 – 61,326 shares; outstanding: 2009 – 54,793 shares, 2008 – 48,630 shares		670			613
Additional paid-in capital		252,322			210,698
Retained earnings		810,626			837,390
Accumulated other comprehensive loss, net of tax		(18,666	)		(18,042	)
Treasury stock, at cost: 2009 – 12,176 shares; 2008 – 12,696 shares		(293,664	)		(311,997	)
Total stockholders’ equity		941,521			908,279
Total liabilities and stockholders’ equity	$	7,710,672		$	8,528,341

See accompanying notes to consolidated financial statements.

84

FIRST MIDWEST BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except per share data)

	Years ended December 31,
	2009			2008			2007
Interest Income
Loans	$	261,221		$	302,931		$	365,370
Securities:
Available-for-sale – taxable		41,932			61,844			66,788
Available-for-sale – nontaxable		31,491			38,250			36,972
Held-to-maturity – taxable		460			341			422
Held-to-maturity – nontaxable		3,603			4,013			4,288
Total interest on securities		77,486			104,448			108,470
Covered assets		1,419			-			-
Federal Home Loan Bank and Federal Reserve Bank stock		1,199			1,318			2,034
Federal funds sold and other short-term investments		426			510			1,087
Total interest income		341,751			409,207			476,961
Interest Expense
Deposits		64,177			110,622			166,267
Borrowed funds		12,569			37,192			55,540
Subordinated debt		13,473			14,796			15,025
Total interest expense		90,219			162,610			236,832
Net interest income		251,532			246,597			240,129
Provision for loan losses		215,672			70,254			7,233
Net interest income after provision for loan losses		35,860			176,343			232,896
Noninterest Income
Service charges on deposit accounts		38,754			44,987			45,015
Trust and investment advisory fees		14,059			15,130			15,701
Other service charges, commissions, and fees		16,529			18,846			22,183
Card-based fees		15,826			16,143			15,925
Bank owned life insurance income (loss)		2,263			(2,369	)		8,033
Trading gains (losses), net		2,542			(5,938	)		1,119
Net realized gains (losses) on securities sales		26,726			8,903			(746	)
Other-than-temporary securities impairment		(48,928	)		(44,514	)		(50,055	)
Portion of other-than-temporary impairment recognized in other comprehensive income		24,312			-			-
Total securities gains (losses), net		2,110			(35,611	)		(50,801	)
Gain on FDIC-assisted transaction		13,071			-			-
Gains on early extinguishment of debt		15,258			-			-
Other income		2,590			2,819			3,078
Total noninterest income		123,002			54,007			60,253
Noninterest Expense
Salaries and wages		82,640			77,074			85,707
Retirement and other employee benefits		23,908			22,836			25,891
Other real estate expense, net		23,459			3,409			972
Federal Deposit Insurance Corporation (“FDIC”) premiums		13,673			1,065			747
Net occupancy expense		22,762			23,378			22,054
Equipment expense		8,962			9,956			10,540
Technology and related costs		8,987			7,429			7,084
Professional services		15,796			10,898			9,034
Advertising and promotions		7,313			6,491			6,293
Merchant card expense		6,453			6,985			6,830
Other expenses		20,835			24,784			23,985
Total noninterest expense		234,788			194,305			199,137
(Loss) income before income tax expense		(75,926	)		36,045			94,012
Income tax (benefit) expense		(50,176	)		(13,291	)		13,853
Net (loss) income		(25,750	)		49,336			80,159
Preferred dividends		(10,265	)		(712	)		-
Net loss (income) applicable to non-vested restricted shares		464			(142	)		(65	)
Net (loss) income applicable to common shares	$	(35,551	)	$	48,482		$	80,094
Per Common Share Data
Basic (loss) earnings per common share	$	(0.71	)	$	1.00		$	1.62
Diluted (loss) earnings per common share	$	(0.71	)	$	1.00		$	1.62
Weighted-average common shares outstanding		50,034			48,462			49,295
Weighted-average diluted common shares outstanding		50,034			48,515			49,586

See accompanying notes to consolidated financial statements.

85

FIRST MIDWEST BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Amounts in thousands, except per share data)

	Common Shares Out- Standing		Preferred Stock		Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Treasury Stock			Total
Balance at January 1, 2007	50,025		$	-	$	613	$	205,044		$	823,787		$	(15,288	)	$	(263,142	)	$	751,014
Cumulative effect for change in accounting for purchase of life insurance policies	-			-		-		-			(209	)								(209	)
Adjusted beginning balance	50,025			-		613		205,044			823,578			(15,288	)		(263,142	)		750,805
Comprehensive Income:
Net income	-			-		-		-			80,159			-			-			80,159
Other comprehensive income	-			-		-		-			-			3,561			-			3,561
Total comprehensive income																				83,720
Common dividends declared ($1.195 per common share)	-			-		-		-			(58,765	)		-			-			(58,765	)
Purchase of treasury stock	(1,767	)		-		-		-			-			-			(61,733	)		(61,733	)
Share-based compensation expense	-			-		-		3,803			-			-			-			3,803
Exercise of stock options and restricted stock activity	199			-		-		(1,001	)		-			-			7,284			6,283
Treasury stock (purchased for) issued to benefit plans	(4	)		-		-		5			-			-			(143	)		(138	)
Balance at December 31, 2007	48,453			-		613		207,851			844,972			(11,727	)		(317,734	)		723,975
Comprehensive Income:
Net income	-			-		-		-			49,336			-			-			49,336
Other comprehensive loss	-			-		-		-			-			(6,315	)		-			(6,315	)
Total comprehensive income																				43,021
Common dividends declared ($1.155 per common share)	-			-		-		-			(56,206	)		-			-			(56,206	)
Preferred dividends declared ($3.472 per preferred share)	-			42		-		-			(712	)		-			-			(670	)
Issuance of preferred stock	-			189,575		-		3,425			-			-			-			193,000
Purchase of treasury stock	(4	)		-		-		-			-			-			(138	)		(138	)
Share-based compensation expense	-			-		-		3,771			-			-			-			3,771
Exercise of stock options and restricted stock activity	184			-		-		(4,217	)		-			-			5,795			1,578
Treasury stock (purchased for) issued to benefit plans	(3	)		-		-		(132	)		-			-			80			(52	)
Balance at December 31, 2008	48,630		$	189,617	$	613	$	210,698		$	837,390		$	(18,042	)	$	(311,997	)	$	908,279
Cumulative effect of change in accounting for other-than- temporary impairment (1)	-			-		-		-			11,271			(11,271	)		-			-
Adjusted beginning balance	48,630			189,617		613		210,698			848,661			(29,313	)		(311,997	)		908,279
Comprehensive Income:
Net loss	-			-		-		-			(25,750	)		-			-			(25,750	)
Other comprehensive income	-			-		-		-			-			10,647			-			10,647
Total comprehensive loss																				(15,103	)
Common dividends declared ($0.04 per common share)	-			-		-		-			(2,019	)		-			-			(2,019	)
Preferred dividends declared ($50.00 per preferred share)	-			-		-		-			(9,650	)		-			-			(9,650	)
Accretion on preferred stock	-			616		-		-			(616	)		-			-			-
Issuance of common stock	5,643			-		57		56,560			-			-			-			56,617
Share-based compensation expense	-			-		-		3,516			-			-			-			3,516
Restricted stock activity	539			-		-		(18,341	)		-			-			18,366			25
Treasury stock purchased for benefit plans	(19	)		-		-		(111	)		-			-			(33	)		(144	)
Balance at December 31, 2009	54,793		$	190,233	$	670	$	252,322		$	810,626		$	(18,666	)	$	(293,664	)	$	941,521

⁽¹⁾ For additional details of this adjustment, refer to Note 2, “Recent Accounting Pronouncements,” and Note 4, “Securities.”

See accompanying notes to consolidated financial statements.

86

FIRST MIDWEST BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollar amounts in thousands)

	Years ended December 31,
	2009			2008			2007
Operating Activities
Net (loss) income	$	(25,750	)	$	49,336		$	80,159
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Provision for loan losses		215,672			70,254			7,233
Depreciation of premises, furniture, and equipment		10,917			11,445			11,741
Net amortization (accretion) of premium (discount) on securities		1,527			(1,436	)		(1,520	)
Net (gains) losses on securities		(2,110	)		35,611			50,801
Gain on FDIC-assisted transaction		(13,071	)		-			-
Gains on early extinguishment of debt		(15,258	)		-			-
Net losses (gains) on sales of other real estate owned		5,970			305			(514	)
Net gains on sales of premises, furniture, and equipment		(6	)		(125	)		(340	)
Bank owned life insurance (income) loss		(2,263	)		2,369			(8,033	)
Net pension cost		4,076			2,402			3,814
Share-based compensation expense		3,516			4,545			4,271
Tax benefit related to share-based compensation		581			1,370			1,201
Net increase in deferred income taxes		(34,458	)		(13,248	)		(28,221	)
Net amortization of other intangibles		3,929			4,377			4,423
Originations and purchases of mortgage loans held for sale		-			(850	)		(99,219	)
Proceeds from sales of mortgage loans held for sale		-			1,244			103,585
Net (increase) decrease in trading account securities		(1,878	)		5,994			(2,474	)
Net decrease in accrued interest receivable		10,728			5,724			5,044
Net decrease in accrued interest payable		(6,047	)		(6,293	)		(3,586	)
Net (increase) decrease in other assets		(22,945	)		(35,310	)		10,772
Net (decrease) increase in other liabilities		(48,589	)		18,007			(17,674	)
Net cash provided by operating activities		84,541			155,721			121,463
Investing Activities
Proceeds from maturities, repayments, and calls of securities available-for-sale		314,601			291,048			287,426
Proceeds from sales of securities available-for-sale		855,405			226,575			334,892
Purchases of securities available-for-sale		(187,412	)		(683,729	)		(360,434	)
Proceeds from maturities, repayments, and calls of securities held-to-maturity		80,511			43,497			49,177
Purchases of securities held-to-maturity		(80,335	)		(30,046	)		(55,341	)
Net (increase) decrease in loans		(113,088	)		(461,918	)		28,538
Proceeds from claims on bank owned life insurance		2,834			2,633			887
Proceeds from sales of other real estate owned		19,331			7,446			5,420
Proceeds from sales of premises, furniture, and equipment		24			718			1,036
Purchases of premises, furniture, and equipment		(4,682	)		(6,245	)		(11,588	)
Net cash proceeds received in FDIC-assisted transaction		28,585			-			-
Net cash provided by (used in) investing activities		915,774			(610,021	)		280,013
Financing Activities
Net increase (decrease) in deposit accounts		67,164			(193,107	)		(388,355	)
Net (decrease) increase in borrowed funds		(1,022,029	)		434,106			81,960
Payments for the retirement of subordinated debt		(19,400	)		-			-
Proceeds from the issuance of preferred stock		-			193,000			-
Purchases of treasury stock		-			(138	)		(61,733	)
Cash dividends paid		(12,423	)		(60,298	)		(58,499	)
Exercise of stock options and restricted stock activity		(379	)		245			4,721
Excess tax (expense) benefit related to share-based compensation		(177	)		(37	)		361
Net cash (used in) provided by financing activities		(987,244	)		373,771			(421,545	)
Net increase (decrease) in cash and cash equivalents		13,071			(80,529	)		(20,069	)
Cash and cash equivalents at beginning of year		114,308			194,837			214,906
Cash and cash equivalents at end of year	$	127,379		$	114,308		$	194,837

See accompanying notes to consolidated financial statements.

87

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations - First Midwest Bancorp, Inc. (the “Company”) is a Delaware corporation and bank holding company that was incorporated in 1982, began operations on March 31, 1983, and was formed through an exchange of common stock. The Company is headquartered in Itasca, Illinois and has operations primarily located in Northern Illinois, principally in the suburban metropolitan Chicago area. The Company operates one wholly-owned subsidiary: First Midwest Bank (the “Bank”). The Company is engaged in commercial and retail banking and offers a comprehensive selection of financial products and services including lending, depository, trust, investment management, insurance, and other related financial services tailored to the needs of its individual, business, institutional, and governmental customers.

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. Assets held in a fiduciary or agency capacity are not assets of the subsidiaries and, accordingly, are not included in the consolidated financial statements.

Basis of Presentation - Certain reclassifications have been made to prior year amounts to conform to the current year presentation. For purposes of the Consolidated Statements of Cash Flows, management has defined cash and cash equivalents to include cash and due from banks, federal funds sold, and other short-term investments. The Company uses the accrual basis of accounting for financial reporting purposes.

Use of Estimates - The accounting and reporting policies of the Company and its subsidiaries conform to U.S. generally accepted accounting principles (“GAAP”) and general practice within the banking industry. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The following is a summary of the significant accounting policies adhered to in the preparation of the consolidated financial statements.

Business Combinations - Business combinations are accounted for under the purchase method of accounting. Under the purchase method, net assets of the business acquired are recorded at their estimated fair value as of the date of acquisition, with any excess of the cost of the acquisition over the fair value of the net tangible and identifiable intangible assets acquired recorded as goodwill. Results of operations of the acquired business are included in the Consolidated Statements of Income from the effective date of acquisition.

Securities - Securities are classified as held-to-maturity, available-for-sale, or trading at the time of purchase. Securities classified as held-to-maturity, which management has the positive intent and ability to hold to maturity, are stated at cost and adjusted for amortization of premiums and accretion of discounts.

Trading securities held by the Company represent diversified investment securities held in a grantor trust (“rabbi trust”) under deferred compensation arrangements in which plan participants may direct amounts earned to be invested in securities other than Company stock. Current accounting guidance requires the accounts of the rabbi trust to be consolidated with the accounts of the Company in its financial statements. Trading securities are reported at fair value, with unrealized gains and losses included in noninterest income. The corresponding deferred compensation obligation is also reported at fair value, with unrealized gains and losses recognized as a component of compensation expense. Other than the securities held in the rabbi trust, the Company does not carry any securities for trading purposes.

All other securities are classified as available-for-sale. Available-for-sale securities 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 income.

88

The historical cost of debt securities is adjusted for amortization of premiums and accretion of discounts over the estimated life of the security, using the effective interest method. In determining the estimated life of a mortgage- backed security, certain judgments are required as to the timing and amount of future principal prepayments. These judgments are made based on the actual performance of the underlying security and the general market consensus regarding changes in mortgage interest rates and underlying prepayment estimates. Amortization of premium and accretion of discount are included in interest income from the related security.

Purchases and sales of securities are recognized on a trade date basis. Realized securities gains or losses are reported in securities gains (losses), net in the Consolidated Statements of Income. The cost of securities sold is based on the specific identification method. On a quarterly basis, the Company makes an assessment to determine whether there have been any events or circumstances to indicate that a security for which there is an unrealized loss is impaired on an other-than-temporary basis. In evaluating other-than-temporary impairment, the Company considers many factors including the severity and duration of the impairment; the financial condition and near-term prospects of the issuer, which for debt securities considers external credit ratings and recent downgrades; and the intent and ability of the Company to hold the security for a period of time sufficient for a recovery in value. Securities for which there is an unrealized loss that is deemed to be other-than-temporary are written down to fair value with the write-down recorded as a realized loss and included in securities gains (losses), net, but only to the extent the impairment is related to credit losses. The amount of the impairment related to other factors is recognized in other comprehensive income unless management intends to sell the security or believes it is more likely than not that it will be required to sell the security prior to full recovery.

Loans - Loans are carried at the principal amount outstanding, including certain net deferred loan origination fees. Residential real estate mortgage loans held for sale are carried at the lower of aggregate cost or fair value. 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.

Non-accrual loans - Generally, commercial loans and loans secured by real estate (including impaired loans) are designated as non-accrual: (a) when either principal or interest payments are 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; or (b) when an individual analysis of a borrower’s creditworthiness indicates a credit should be placed on non-accrual status. 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 reserve for loan losses. 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 as to such collectability.

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. 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.

Impaired Loans - 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. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or the value of the underlying collateral. The Company evaluates the collectibility of both principal and interest when assessing the need for loss accrual. All loans subject to evaluation and considered to be impaired are included in non-performing assets.

89

Restructured Loans - In cases where a borrower experiences financial difficulties and the Company makes certain concessionary modifications to contractual terms, the loan is classified as a restructured loan. Loans restructured at a rate equal to or greater than that of a new loan with comparable risk at the time the contract is modified may be excluded from restructured loans in the calendar years subsequent to the restructuring if they are in compliance with modified terms. Generally, a non-accrual loan that is restructured remains on non-accrual until such time that repayment of the remaining principal and interest is not in doubt, and the borrower has a period of satisfactory repayment performance.

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 since they are loans that are well secured and in the process of collection.

Reserve for Loan Losses - The reserve for loan losses is maintained at a level believed adequate by management to absorb probable losses inherent in the loan portfolio. The reserve takes into consideration such 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. Determination of the reserve 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, and consideration of current economic trends, all of which may be susceptible to significant change. Credit exposures deemed to be uncollectible are charged-off against the reserve, while recoveries of amounts previously charged-off are credited to the reserve. Additions to the reserve for loan losses are charged to operating expense through the provision for loan losses. The amount charged to operating expense in any given year is dependent upon a number of factors including historic loan growth and changes in the composition of the loan portfolio, net charge-off levels, and the Company’s assessment of the reserve for loan losses based on the methodology discussed below.

The reserve for loan losses consists of estimations performed pursuant to GAAP requirements. The reserve for loan losses consists of specific reserves established for expected losses on individual loans for which the recorded investment in the loan exceeds the value of the loan and reserves based on historical loan loss experience for each loan category.

The specific reserves component of the reserve for loan losses is based on a regular analysis of impaired loans exceeding a fixed dollar amount where the internal credit rating is at or below a predetermined classification. A loan is considered impaired when 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 subject to impairment valuation are defined as non-accrual and restructured loans exclusive of smaller homogeneous loans such as home equity, installment, and 1-4 family residential loans. Impairment is measured by estimating the fair 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. If the estimated fair value of the loan is less than the recorded book value, a valuation reserve is established as a component of the reserve for loan losses.

The component of the reserve for loan losses based on historical loan loss experience is determined statistically using a loss migration analysis that examines loss experience over the most recent 2-year period and the related internal grading 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 adjusted for management’s estimate of those losses incurred within the loan portfolio, but have yet to be manifested in historical charge-off experience. Management takes into consideration many factors when estimating this adjustment such as the time that elapses from the point management downgrades a loan to charge-off, underwriting policies, and more general factors such as trends in delinquencies, charge-offs, and general economic conditions in the Company’s marketplace.

90

The establishment of the reserve for loan 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.

Other Real Estate Owned - Other real estate owned includes properties acquired in partial or total satisfaction of certain loans. 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 estimated sales price of the properties on the date acquired less estimated selling costs. Any write-downs in the carrying value of a property at the time of acquisition are charged against the reserve for loan losses. Management periodically reviews the carrying value of other real estate owned. Any write-downs of the properties subsequent to acquisition, as well as gains or losses on disposition and income or expense from the operations of other real estate owned, are recognized in operating results in the period they are realized.

Depreciable Assets - Premises, furniture and equipment, and leasehold improvements are stated at cost less accumulated depreciation. Depreciation expense is determined by the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized on a straight-line basis over the shorter of the life of the asset or the lease term. Rates of depreciation are generally based on the following useful lives: buildings, 25 to 40 years; building improvements, typically 3 to 15 years but longer under limited circumstances; and furniture and equipment, 3 to 10 years. Gains on dispositions are included in other income, and losses on dispositions are included in other expense on the Consolidated Statements of Income. Maintenance and repairs are charged to operating expenses as incurred, while improvements that extend the useful life of assets are capitalized and depreciated over the estimated remaining life.

Long-lived depreciable assets are evaluated periodically for impairment when events or changes in circumstances indicate the carrying amount may not be recoverable. Impairment exists when the expected undiscounted future cash flows of a long-lived asset are less than its carrying value. In that event, the Company recognizes a loss for the difference between the carrying amount and the estimated fair value of the asset based on a quoted market price, if applicable, or a discounted cash flow analysis. Impairment losses are recorded in other noninterest expense on the Consolidated Statements of Income.

Bank Owned Life Insurance (“BOLI”) - BOLI represents life insurance policies on the lives of certain Company officers and directors for which the Company is the sole beneficiary. These policies are recorded as an asset on the Consolidated Statements of Financial Condition at their cash surrender value, or the amount that could be realized currently. The change in cash surrender value and insurance proceeds received are recorded as BOLI (loss) income on the Consolidated Statements of Income in noninterest income.

Goodwill and Other Intangibles - Goodwill represents the excess of purchase price over the fair value of net assets acquired using the purchase method of accounting. Other intangible assets represent purchased assets that also lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset, or liability. Goodwill is tested at least annually for impairment, or more often if events or circumstances indicate that there may be impairment. Identified intangible assets that have a finite useful life are amortized over that life in a manner that reflects the estimated decline in the economic value of the identified intangible asset. Identified intangible assets that have a finite useful life are periodically reviewed to determine whether there have been any events or circumstances to indicate that the recorded amount is not recoverable from projected undiscounted net operating cash flows. If the projected undiscounted net operating cash flows are less than the carrying amount, a loss is recognized to reduce the carrying amount to fair value, and, when appropriate, the amortization period is also reduced. Unamortized intangible assets associated with disposed assets are included in the determination of gain or loss on the sale of the disposed assets. All of the Company’s other intangible assets have finite lives and are amortized over varying periods not exceeding 11.8 years.

91

Trust Assets and Assets Under Management - Assets held in fiduciary or agency capacity for customers are not included in the consolidated financial statements as they are not assets of the Company or its subsidiaries. Fee income is recognized on an accrual basis for financial reporting purposes and is included as a component of noninterest income.

Advertising Costs - All advertising costs incurred by the Company are expensed in the period in which they are incurred.

Derivative Financial Instruments - 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. All derivative instruments are recorded at fair value as either other assets or other liabilities. Subsequent changes in a derivative’s fair value are recognized in earnings unless specific hedge accounting criteria are met.

On the date the Company enters into a derivative contract, it designates the derivative instrument as either a fair value hedge, cash flow hedge, or as a freestanding derivative instrument. Derivative instruments designated in a hedge relationship to mitigate exposure to changes in the fair value of an asset or liability attributable to a particular risk, such as interest rate risk, are considered to be fair value hedges. Derivative instruments designated in a hedge relationship to mitigate exposure to variability in expected future cash flows to be received or paid related to an asset or liability or other types of forecasted transactions are considered to be cash flow hedges. The Company formally documents all relationships between hedging instruments and hedged items as well as its risk management objective and strategy for undertaking each hedge transaction.

For effective derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized in current earnings during the period of the change in fair values. For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income. The unrealized gain or loss is reclassified into earnings in the same period or periods during which the hedged transaction affects earnings (for example, when a hedged item is terminated or redesignated). For all hedge relationships, derivative gains and losses not effective in hedging the change in fair value or expected cash flows of the hedged item are recognized immediately in current earnings during the period of change.

At the hedge’s inception and at least quarterly thereafter, a formal assessment is performed to determine whether changes in the fair values or cash flows of the derivative instruments have been highly effective in offsetting changes in the fair values or cash flows of the hedged item and whether they are expected to be highly effective in the future. If a derivative instrument designated as a hedge is terminated or ceases to be highly effective, hedge accounting is discontinued prospectively and the gain or loss is amortized to earnings. For fair value hedges, the gain or loss is amortized over the remaining life of the hedged asset or liability. For cash flow hedges, the gain or loss is amortized over the same period(s) that the forecasted hedged transactions impact earnings. If the hedged item is disposed of, or the forecasted transaction is no longer probable, any fair value adjustments are included in the gain or loss from the disposition of the hedged item. In the case of a forecasted transaction that is no longer probable, the gain or loss is included in earnings immediately.

Income Taxes - The Company files income tax returns in the U.S. federal jurisdiction and in Illinois, Indiana, and Iowa. The provision for income taxes is based on income in the financial statements, rather than amounts reported on the Company’s income tax return.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. A valuation allowance is

92

established for any deferred tax asset for which recovery or settlement is unlikely. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date.

Earnings Per Common Share (“EPS”) - Basic EPS is computed by dividing net income applicable to common shares by the weighted-average number of common shares outstanding for the period. The basic EPS computation excludes the dilutive effect of all common stock equivalents. Diluted EPS is computed by dividing net income applicable to common shares by the weighted-average number of common shares outstanding plus all potential common shares. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The Company’s potential common shares represent shares issuable under its long-term incentive compensation plans. Such common stock equivalents are computed based on the treasury stock method using the average market price for the period.

Treasury Stock - Treasury stock acquired is recorded at cost and is carried as a reduction of stockholders’ equity in the Consolidated Statements of Financial Condition. Treasury stock issued is valued based on the “last in, first out” inventory method. The difference between the consideration received upon issuance and the carrying value is charged or credited to additional paid-in capital.

Share-Based Compensation - The Company accounts for share-based compensation using the modified prospective transition method. Under this transition method, compensation cost is recognized in the financial statements beginning January 1, 2006 for all share-based payments granted after that date and based on prior accounting guidance for all unvested awards granted prior to 2006. Share-based compensation expense is included in “salaries and wages” in the Consolidated Statements of Income.

For additional details on the Company’s share-based compensation plans, refer to Note 18, “Share-Based Compensation.”

Comprehensive Income - Comprehensive income is the total of reported net income and all other revenues, expenses, gains, and losses that bypass 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, and changes in the funded status of the Company’s pension plan.

Segment Disclosures - Operating segments are components of a business that (i) engages in business activities from which it may earn revenues and incur expenses; (ii) has operating results that are reviewed regularly by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance; and (iii) for which discrete financial information is available. The Company’s chief operating decision maker evaluates the operations of the Company as one operating segment, commercial banking. Due to the materiality of the commercial banking operation to the Company’s financial condition and results of operations, taken as a whole, separate segment disclosures are not required. The Company offers the following products and services to external customers: deposits, loans, and trust services. Revenues for each of these products and services are disclosed separately in the Consolidated Statements of Income.

2.    RECENT ACCOUNTING PRONOUNCEMENTS

Improving Disclosures about Fair Value Measurements: In January 2010, the FASB issued accounting guidance that requires new disclosures and clarifies certain existing disclosure requirements about fair value measurements. The guidance requires disclosure of fair value measurements by class (rather than by major category) of assets; disclosure of transfers in or out of levels 1, 2, and 3; disclosure of activity in level 3 fair value measurements on a gross, rather than net, basis; and other disclosures about inputs and valuation techniques. This guidance is effective for annual and interim reporting periods beginning after December 15, 2009, except for the disclosure of level 3 activity for purchases, sales, issuances, and settlements on a gross basis, which is effective

93

for fiscal years and interim periods beginning after December 15, 2010. As this guidance affects only disclosures, it did not impact the Company’s financial position, results of operations, or liquidity upon adoption.

Measuring Liabilities at Fair Value: In August 2009, the FASB issued accounting guidance, which the Company adopted effective September 30, 2009, to address how to measure the fair value of a liability when there is (1) a lack of observable market information available to measure the liability, (2) a contractual restriction that may prevent the liability from being transferred, or (3) the possibility that nonperformance risk changes after a liability is transferred. In the last case, an existing liability may be transferred to a new obligor, but the transferee may not have the same nonperformance risk as the transferor. The guidance indicates that if a quoted price in an active market for the identical liability is available, the price represents a Level 1 measurement. In all other circumstances, fair value would be measured using one of the following techniques:

a. A valuation technique that uses:

1. The quoted price of the identical liability when traded as an asset

2. Quoted prices for similar liabilities or similar liabilities when traded as assets

b. Another valuation technique that is consistent with the fair value measurement principles, such as an income approach (e.g., present value technique), or a market approach, such as a technique based on the amount at the measurement date that the entity would pay to transfer the identical liability or would receive to enter into the identical liability.

The adoption of this guidance on September 30, 2009 did not result in a change to the Company’s valuation techniques nor did it have a material impact on the Company’s financial position, results of operations, or liquidity.

GAAP Codification: Effective July 1, 2009, the FASB Accounting Standards Codification and its related accounting guidance were released. The FASB Accounting Standards Codification (“FASB ASC”) reorganizes GAAP pronouncements into approximately 90 accounting topics, includes relevant guidance from the SEC, and displays all topics in a consistent format. FASB ASC is now the single official source of non-governmental GAAP, superseding existing literature from the FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force (“EITF”) and related sources. All other non-grandfathered non-SEC accounting literature not included in the FASB ASC is considered non-authoritative.

The FASB will no longer issue new standards in the form of Statements, FASB Staff Positions (“FSPs”), or EITF abstracts. Instead, it will issue Accounting Standards Updates and will consider them authoritative in their own right. Since the FASB ASC does not change GAAP, the release of the FASB ASC and its related accounting guidance did not impact the Company’s financial position, results of operations, or liquidity. However, it has changed how users research accounting issues and how the Company references accounting literature within its quarterly and annual SEC filings.

Consolidation of Variable Interest Entities: In June 2009, the FASB issued accounting guidance that changes how a company determines when a variable interest entity (“VIE”) – an entity that is insufficiently capitalized or is not controlled through voting or similar rights – should be consolidated. This guidance replaces the quantitative approach for determining which company, if any, has a controlling financial interest in a VIE with a more qualitative approach focused on identifying which company has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance. Prior to issuance of this standard, a troubled debt restructuring was not an event that required reconsideration of whether an entity is a VIE and whether the company is the primary beneficiary of the VIE. This guidance eliminates that exception and requires ongoing reassessment of troubled debt restructurings and whether a company is the primary beneficiary of a VIE. In addition, it requires a company to disclose how its involvement with a VIE affects the company’s financial statements. This guidance is effective for annual and interim periods beginning after November 15, 2009 (or January 1, 2010 for calendar-year companies) and is applicable to VIEs formed before and after the effective date. The Company does not expect adopting this standard to have a material impact on its financial position, results of operations, or liquidity.

94

Transfers of Financial Assets: In June 2009, the FASB issued accounting guidance that requires a company to disclose more information about transfers of financial assets, including securitization transactions. It eliminates the concept of a “qualifying special-purpose entity” (“QSPE”) from GAAP, changes the criteria for removing transferred assets from the balance sheet, and requires additional disclosures about a transferor’s continuing involvement in transferred assets. This guidance is effective for financial asset transfers occurring after January 1, 2010 for calendar-year companies. The effect of these new requirements on the Company’s financial position, results of operations, and liquidity will depend on the types and terms of financial asset transfers (including securitizations) executed by the Company in 2010 and beyond.

Fair Value Measurements: Effective January 1, 2008, the Company adopted FASB accounting guidance that provides a single definition of fair value, establishes a framework for measuring fair value, and requires additional disclosures about fair value measurements. This guidance applies whenever an entity is measuring fair value under other accounting standards that require or permit fair value measurements. On October 10, 2008, the FASB issued additional guidance that addressed the use of broker quotes and pricing services and how an entity’s own input assumptions (such as discount rates used in cash flow projections) should be considered when measuring fair value when relevant observable market data does not exist. On April 9, 2009, the FASB provided further fair value measurement guidance that concludes that if there has been a significant decrease in the volume and level of activity in relation to the normal market activity, transactions or quoted prices may not be the best indicator of fair value. Further analysis of the transactions or quoted prices may be needed, and a significant adjustment to the transactions or quoted prices may be necessary to estimate fair value. This guidance also expands disclosures by requiring entities to disclose its inputs and valuation assumptions for both interim and annual periods. In addition, the disclosures must be presented by major security type (such as mortgage-backed securities or collateralized debt obligations), rather than disclosure by major category (such as trading securities and available-for-sale securities).

The fair value guidance was effective for financial assets and liabilities on January 1, 2008 and for non-financial assets and liabilities on January 1, 2009. The guidance that addresses estimating fair value when the volume and level of activity in the market have decreased significantly was effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company elected to early adopt effective for first quarter 2009. The adoption of these standards did not have a material impact on the Company’s financial position, results of operations, or liquidity. Refer to Note 24, “Estimated Fair Value of Financial Instruments,” for the Company’s fair value measurement disclosures.

Subsequent Events: Effective July 1, 2009, the Company adopted FASB accounting guidance that establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued. This guidance defines (i) the period after the balance sheet date during which a reporting entity’s management should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and (iii) the disclosures an entity should make about events or transactions that occurred after the balance sheet date. The adoption of this standard did not have a material impact on the Company’s financial position, results of operations, or liquidity. Refer to Note 28, “Subsequent Events,” for the Company’s subsequent events disclosures.

Interim Period Fair Value Disclosures: Effective April 1, 2009, the Company adopted FASB accounting guidance that requires disclosures about fair value of financial instruments for interim reporting periods as well as in annual financial statements. Since this guidance affects only disclosures, it did not impact the Company’s financial position, results of operations, or liquidity upon adoption.

Other-Than-Temporary Impairment: Effective January 1, 2009, the Company adopted FASB accounting guidance related to the presentation and disclosure of other-than-temporary impairments on debt securities in its financial statements. Under the prior impairment guidance, an entity was required to assess whether it has the

95

intent and ability to hold a security to recovery when determining whether the impairment is other-than-temporary. This guidance amends prior guidance, and, once an impairment has been determined, requires an entity to recognize only the credit portion of the other-than-temporary impairment in earnings for those debt securities where there is no intent to sell or it is more likely than not the entity would not be required to sell the security prior to expected recovery. The remaining portion of the other-than-temporary impairment is to be included in other comprehensive income.

This guidance was effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company elected to early adopt during first quarter 2009. Refer to Note 4, “Securities,” for the impact of adopting this guidance and Note 24, “Estimated Fair Value of Financial Instruments,” for the Company’s fair value measurement disclosures.

Business Combinations: Effective January 1, 2009, the Company adopted FASB accounting guidance that significantly changes how entities apply the acquisition method to business combinations. The guidance requires assets acquired, liabilities assumed, and noncontrolling interests in the acquiree to be measured at fair value on the acquisition date. This guidance requires the value of consideration paid, including any future contingent consideration, to be measured at fair value at the closing date of the transaction. Transaction costs and acquisition-related restructuring costs that do not meet certain criteria will be expensed as incurred rather than included in the cost of the acquisition. The acquirer also is not permitted to recognize at the acquisition date a reserve for loan losses. In addition, this guidance requires new and modified disclosures about subsequent changes to acquisition-related contingencies, contingent consideration, noncontrolling interests, acquisition-related transaction costs, fair values, cash flows not expected to be collected for acquired loans, and an enhanced goodwill rollforward. The effect of these new requirements on the Company’s financial position, results of operations, or liquidity will depend on the volume and terms of acquisitions in 2009 and beyond, but will likely increase the amount and change the timing of recognizing expenses related to acquisition activities.

Derivative Disclosures: Effective January 1, 2009, the Company adopted FASB accounting guidance that requires an entity to provide greater transparency about how its derivative and hedging activities affect its financial statements. This guidance requires enhanced disclosures about: (i) how and why an entity uses derivative instruments; (ii) how derivative instruments and related hedged items are accounted for; and (iii) how derivative instruments and related hedged items affect an entity’s financial position, results of operations, and cash flows. Since this guidance affects only disclosures, it did not impact the Company’s financial position, results of operations, or liquidity upon adoption. Refer to Note 21, “Derivative Instruments and Hedging Activities,” for the Company’s derivative disclosures.

Disclosures about Pension Plan Assets: Effective for the year ended December 31, 2009, the Company adopted FASB accounting guidance that requires additional disclosures about plan assets of a defined benefit pension or other postretirement plan. The guidance has two main objectives. First, it requires additional disclosures about major categories of plan assets and concentrations of risk within plan assets. Second, it applies to defined benefit plans by requiring disclosure of the inputs and valuation techniques used to measure the fair value of plan assets and the effect of fair value measurements using unobservable inputs on changes in plan assets for the period. Adoption of this guidance affects disclosures only and therefore had no impact on the Company’s financial position, results of operations, or liquidity. Refer to Note 24, “Estimated Fair Value of Financial Instruments,” for the Company’s fair value disclosures for its defined benefit pension plan assets.

Earnings Per Share Under Two-Class Method: Effective January 1, 2009, the Company adopted FASB accounting guidance that requires an entity to include participating share-based payment transactions, prior to vesting, in the earnings allocation in computing earnings per common share. Participating share-based payment awards are those that contain nonforfeitable rights to dividends, even if granted prior to when an award vests. For the Company, participating share-based payment awards include restricted stock awards that have a right to receive dividends prior to vesting. The adoption of this guidance did not have a material impact on the Company’s earnings per common share computations. Refer to Note 14, “Earnings Per Common Share,” for the Company’s earnings per common share disclosures.

96

3.    ACQUISITION

On October 23, 2009, the Company acquired substantially all the assets of the $260 million former First DuPage Bank (“First DuPage”) in an FDIC-assisted transaction generating a gain of $13.1 million. Loans comprise the majority of the assets acquired and are subject to a loss sharing arrangement with the FDIC whereby the Company is indemnified against the majority of any losses incurred related to these loans. The loans acquired from the former First DuPage Bank, including the FDIC indemnification, total $223.2 million at December 31, 2009 and are classified and presented as covered assets in the Consolidated Statements of Financial Condition. A break-down of the covered assets is as follows:

	December 31, 2009
Loans	$	146,319
Other real estate owned		8,981
FDIC loss share receivable		67,945
	$	223,245

The Company will share in the losses on assets covered under the agreement (referred to as “covered assets”). On losses up to $65.0 million, the FDIC has agreed to reimburse the Bank for 80% of losses. On losses exceeding $65.0 million, the FDIC has agreed to reimburse the Company for 95% of losses. The loss sharing agreement requires that the Company follow certain servicing procedures as specified in the agreement or risk losing FDIC reimbursement of covered loan losses. The Company accounts for its loss sharing agreement with the FDIC as an indemnification asset. The transaction did not generate any goodwill and resulted in a bargain-purchase gain of $13.1 million.

Purchased loans acquired in a business combination, including loans purchased in the First DuPage acquisition, are recorded at estimated fair value on their purchase date and prohibit the carryover of the related allowance for loan losses. Purchased loans are accounted for in accordance with FASB accounting guidance for certain loans or debt securities acquired in a transfer, when the loans have evidence of credit deterioration since origination and it is probable at the date of acquisition that the Company will not collect all contractually required principal and interest payments. Evidence of credit quality deterioration as of the purchase date may include factors such as past due and non-accrual status. The difference between contractually required payments and the cash flows expected to be collected at acquisition is referred to as the non-accretable difference. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges and an adjustment in accretable yield, which will have a positive impact on interest income. The accretable yield as of December 31, 2009 totaled $9.3 million.

97

4.    SECURITIES

As discussed in Note 2, “Recent Accounting Pronouncements,” effective January 1, 2009, the Company adopted accounting guidance related to the recognition of other-than-temporary impairment. The effect of the adoption as of January 1, 2009 is presented in the table below.

Incremental Effect on Individual Line Items

in the Consolidated Statements of Financial Condition

(Dollar amounts in thousands)

	Before Application of New Guidance			Adjustments			After Application of New Guidance
Securities available-for-sale, at amortized cost	$	2,219,504		$	18,477		$	2,237,981
Unrealized (losses) on securities		(3,318	)		(18,477	)		(21,795	)
Securities available-for-sale, at fair value		2,216,186			-			2,216,186
Prepaid income taxes (included in other assets)		-			(7,206	)		(7,206	)
Deferred income taxes (included in other assets)		1,290			7,206			8,496
Total assets		8,528,341			-			8,528,341
Retained earnings		837,390			11,271			848,661
Accumulated other comprehensive (loss)		(18,042	)		(11,271	)		(29,313	)
Total stockholders’ equity		908,279			-			908,279

Securities Portfolio

(Dollar amounts in thousands)

	December 31,
	2009									2008
	Amortized Cost		Gross Unrealized					Fair Value		Amortized Cost		Gross Unrealized					Fair Value
			Gains		Losses							Gains		Losses
Securities Available- for-Sale
U.S. Treasury	$	-	$	-	$	-		$	-	$	1,039	$	2	$	-		$	1,041
U.S. Agency		756		-		-			756		-		-		-			-
Collateralized mortgage obligations (1)		299,920		10,060		(2,059	)		307,921		694,285		7,668		(3,114	)		698,839
Other mortgage- backed (1)		239,567		9,897		(182	)		249,282		504,918		13,421		(74	)		518,265
State and municipal		649,269		8,462		(6,051	)		651,680		907,036		12,606		(12,895	)		906,747
Collateralized debt obligations		54,359		-		(42,631	)		11,728		60,406		-		(18,320	)		42,086
Corporate debt		36,571		2,093		(1,113	)		37,551		35,731		180		(2,586	)		33,325
Equity		7,667		283		(108	)		7,842		16,089		33		(239	)		15,883
Total	$	1,288,109	$	30,795	$	(52,144	)	$	1,266,760	$	2,219,504	$	33,910	$	(37,228	)	$	2,216,186
Securities Held- to-Maturity
State and municipal	$	84,182	$	314	$	-		$	84,496	$	84,306	$	286	$	-		$	84,592
Trading Securities								$	14,236								$	12,358

⁽¹⁾ These securities are all backed by residential mortgages.

98

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. Net trading (losses) gains, representing changes in the fair value of the portfolio, are included as a separate line items in the Consolidated Statements of Income.

Remaining Contractual Maturity of Securities

(Dollar amounts in thousands)

	December 31, 2009
	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
One year or less	$	20,754	$	19,655	$	17,617	$	17,683
One year to five years		87,937		83,280		21,174		21,253
Five years to ten years		253,447		240,025		14,935		14,991
After ten years		378,817		358,755		30,456		30,569
Collateralized mortgage obligations		299,920		307,921		-		-
Other mortgage-backed securities		239,567		249,282		-		-
Equity securities		7,667		7,842		-		-
Total	$	1,288,109	$	1,266,760	$	84,182	$	84,496

Securities Gains (Losses)

(Dollar amounts in thousands)

	Years ended December 31,
	2009			2008			2007
Proceeds from sales	$	855,405		$	226,575		$	334,892
Gains (losses) on sales of securities:
Gross realized gains	$	26,735		$	8,906		$	4,619
Gross realized losses		(9	)		(3	)		(5,365	)
Net realized gains (losses) on securities sales		26,726			8,903			(746	)
Non-cash impairment charges		(24,616	)		(44,514	)		(50,055	)
Net realized gains (losses)	$	2,110		$	(35,611	)	$	(50,801	)
Income tax expense (benefit) on net realized (losses) gains	$	823		$	(13,888	)	$	(19,812	)
Trading gains (losses), net	$	2,542		$	(5,938	)	$	1,119

In fourth quarter 2007, the Company recorded an other-than-temporary (“OTTI”) impairment of $50.1 million related to six asset-backed CDOs with a book value of $60.2 million and a fair value of $10.1 million. During 2008, the Company recorded an additional OTTI charge of the remaining $10.1 million carrying value.

Of the remaining 2008 non-cash impairment charge of $34.5 million, $24.8 million related to three trust-preferred CDOs with an aggregate cost of $38.9 million. The Company also recorded a $9.7 million non-cash impairment charge related to two whole loan mortgage-backed securities with a combined par value of $16.6 million and a single Sallie Mae debt issuance with a par value of $10.0 million. The two whole loan mortgage-backed securities are included with collateralized mortgage obligations and the Sallie Mae debt issuance is included in corporate debt securities.

In 2009, the Company recorded $24.5 million in impairments charges relating to six trust-preferred CDOs and a $107,000 impairment related to an equity security.

99

Accounting guidance requires that only the credit portion of an OTTI be recognized through income beginning first quarter 2009. In deriving the credit component of the impairment on the six CDOs, future projected cash flows were discounted at the contractual rate ranging from 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 1,300 basis points to LIBOR plus 1,400 basis points. If a decline in fair value below carrying value was not attributable to credit loss and the Company did not intend to sell the security or believe it would be more likely than not required to sell the security prior to recovery, the Company recorded the decline in fair value in other comprehensive income.

Changes in the amount of credit losses recognized in earnings on trust preferred CDOs are summarized in the following table.

Changes in Credit Losses Recognized in Earnings

(Dollar amounts in thousands)

	Year Ended December 31, 2009
Balance at beginning of year	$	6,330
Credit losses included in earnings (1)
Losses recognized on securities that previously had credit losses		11,796
Losses recognized on securities that did not previously have credit losses		12,820
Balance at end of year	$	30,946

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

100

The following table presents the aggregate amount of unrealized losses and the aggregate related fair values of securities with unrealized losses as of December 31, 2009 and 2008.

Securities In an Unrealized Loss Position

(Dollar amounts in thousands)

	Less Than 12 Months				12 Months or Longer				Total
	Fair     Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
As of December 31, 2009
U.S. Agency	$	756	$	-	$	-	$	-	$	756	$	-
Collateralized mortgage obligations		4,113		367		13,075		1,692		17,188		2,059
Other mortgage-backed securities		21,227		176		598		6		21,825		182
State and municipal		34,157		763		160,788		5,288		194,945		6,051
Collateralized debt obligations		3,941		16,822		7,787		25,809		11,728		42,631
Corporate debt securities		1,824		257		13,153		856		14,977		1,113
Equity securities		-		-		92		108		92		108
Total	$	66,018	$	18,385	$	195,493	$	33,759	$	261,511	$	52,144
As of December 31, 2008
Collateralized mortgage obligations	$	27,142	$	49	$	39,923	$	3,065	$	67,065	$	3,114
Other mortgage-backed securities		113		1		6,246		73		6,359		74
State and municipal		144,997		5,783		174,141		7,112		319,138		12,895
Collateralized debt obligations		-		-		28,004		18,320		28,004		18,320
Corporate debt securities		23,092		2,586		-		-		23,092		2,586
Equity securities		-		-		1,065		239		1,065		239
Total	$	195,344	$	8,419	$	249,379	$	28,809	$	444,723	$	37,228

Collateralized mortgage obligations and other mortgage-backed securities are either backed by U.S. government-owned agencies or issued by U.S. government-sponsored enterprises. State and municipal securities are issuances by state and municipal authorities, all of which carry investment grade ratings, with the majority supported by third-party insurance. Management does not believe any individual unrealized loss as of December 31, 2009 represents an other-than-temporary impairment. 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. In addition, the Company has both the intent and ability to hold the securities with unrealized losses for a period of time necessary to recover the amortized cost, or to maturity and more than likely will not be forced to sell them before recovering its cost basis.

The unrealized loss on CDOs as of December 31, 2009 of $42.6 million reflects the market’s negative bias toward structured investment vehicles given the current interest rate and liquidity environment. The Company does not believe this loss is an other-than-temporary impairment. The Company has both the intent and ability to hold them until maturity, and it is more likely than not that the Company will not be forced to sell them prior to recovery. The Company’s estimates of cash flows for these investments and resulting fair values were based upon cash flow modeling, as described in Note 24, “Estimated Fair Value of Financial Instruments.”

The unrealized losses in the Company’s investment in other securities consist of unrealized losses on corporate bonds and equity securities and relate to temporary movements in the financial markets. Management does not believe any individual unrealized loss as of December 31, 2009 represents an other-than-temporary impairment.

101

For additional details of the securities available-for-sale portfolio and the related impact of unrealized gains (losses) thereon, see Note 15, “Comprehensive Income.”

The carrying value of securities available-for-sale, securities held-to-maturity, and securities purchased under agreements to resell that were pledged to secure deposits and for other purposes as permitted or required by law totaled $1.0 billion at December 31, 2009 and $1.7 billion at December 31, 2008.

Excluding securities issued or backed by the U.S. government and its agencies and U.S. government-sponsored enterprises, there were no investments in securities from one issuer that exceeded 10% of consolidated stockholders’ equity on December 31, 2009 or 2008.

5.    LOANS

Loan Portfolio ⁽¹⁾

(Dollar amounts in thousands)

	December 31,
	2009		2008
Commercial and industrial	$	1,438,063	$	1,490,101
Agricultural		209,945		216,814
Commercial real estate:
Office, retail, and industrial		1,212,965		1,025,241
Residential construction		313,919		509,059
Commercial construction		134,680		258,253
Commercial land		96,838		98,322
Multi-family		333,961		286,963
Investor-owned rental property		119,132		131,635
Other commercial real estate		679,851		597,694
Total commercial real estate		2,891,346		2,907,167
Consumer		523,909		547,784
Real estate – 1-4 family		139,983		198,197
Total loans	$	5,203,246	$	5,360,063
Deferred loan fees included in total loans	$	8,104	$	8,503
Overdrawn demand deposits included in total loans	$	4,837	$	7,702

⁽¹⁾ Excludes $146.3 million in covered loans. For a discussion of these covered loans, refer to Note 3, “Acquisition.”

The Company primarily lends to small to mid-sized businesses, commercial real estate customers, and consumers in the market areas 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, when required, the adequacy of security or collateral to obtain prior to making a loan. In the event of borrower default, the Company seeks recovery in compliance with state lending laws and the Company’s lending standards and credit monitoring procedures.

102

Book Value of Loans Pledged

(Dollar amounts in thousands)

	December 31,
	2009		2008
Loans pledged to secure:
Deposits	$	-	$	5,910
Federal Home Loan Bank advances		644,540		619,183
Federal term auction facilities		1,831,835		1,155,626
Total	$	2,476,375	$	1,780,719

6.    SECURITIZATIONS AND MORTGAGE SERVICING RIGHTS

In 2009, the Company securitized $25.7 million of real estate 1-4 family loans, converting the loans into mortgage-backed securities issued through the Federal National Mortgage Association. The Company retained servicing responsibilities for the mortgages supporting these securities and collects servicing fees equal to a percentage of the outstanding principal balance of the loans being serviced. The Company also services loans from prior securitizations and services loans for which the servicing was acquired as part of a 2006 bank acquisition. Mortgage loans serviced for and owned by third parties are not included in the Consolidated Statements of Financial Condition. The unpaid principal balance of these loans totaled $123.8 million as of December 31, 2009 and $130.7 million as of December 31, 2008. The Company has no recourse for credit losses on the loans securitized in 2009 or the loans previously serviced by the acquired bank, but retains limited recourse for credit losses on $8.1 million of loans securitized during 2004. For a discussion of the recourse obligation, refer to Note 22, “Commitments, Guarantees, and Contingent Liabilities.”

Carrying Value of Mortgage Servicing Rights

(Dollar amounts in thousands)

	Years Ended December 31,
	2009			2008			2007
Balance at beginning of period	$	1,461		$	1,877		$	2,613
New servicing assets		237			-			-
Total losses included in earnings (1):
Due to changes in valuation inputs and assumptions (2)		(145	)		(90	)		(345	)
Other changes in fair value (3)		(315	)		(326	)		(391	)
Balance at end of period	$	1,238		$	1,461		$	1,877
Contractual servicing fees earned during the period (1)	$	324		$	388		$	475

⁽¹⁾ Included in other service charges, commissions, and fees in the Consolidated Statements of Income.

⁽²⁾ Principally reflects changes in prepayment speed assumptions.

⁽³⁾ Primarily represents changes in expected cash flows over time due to payoffs and paydowns.

The Company records its mortgage servicing rights at fair value. Under the fair value method, the Company initially records any mortgage servicing rights at their estimated fair value in other assets in the Consolidated Statements of Financial Condition. Fair value is subsequently determined by estimating the present value of the future cash flows associated with the mortgage loans serviced. Key economic assumptions used in measuring the fair value of mortgage servicing rights at December 31, 2009 included a weighted-average prepayment speed of 20.1% and a weighted-average discount rate of 11.4%. The Company uses market-based data for assumptions related to the valuation of mortgage servicing rights.

103

7.    RESERVE FOR LOAN LOSSES AND IMPAIRED LOANS

Reserve For Loan Losses

(Dollar amounts in thousands)

	Years Ended December 31,
	2009			2008			2007
Balance at beginning of year	$	93,869		$	61,800		$	62,370
Loans charged-off		(168,038	)		(40,337	)		(10,066	)
Recoveries of loans previously charged-off		3,305			2,152			2,263
Net loans charged-off, excluding covered assets		(164,733	)		(38,185	)		(7,803	)
Net charge-offs on covered assets		-			-			-
Net loans charged-off		(164,733	)		(38,185	)		(7,803	)
Provision for loan losses		215,672			70,254			7,233
Balance at end of year	$	144,808		$	93,869		$	61,800

A portion of the Company’s reserve for loan losses is allocated to loans deemed impaired.

Impaired, Non-accrual, and Past Due Loans

(Dollar amounts in thousands)

	December 31,
	2009		2008
Impaired loans:
Impaired loans with valuation reserve required (1)	$	45,246	$	58,439
Impaired loans with no valuation reserve required		216,074		72,397
Total impaired loans	$	261,320	$	130,836
Non-accrual loans:
Impaired loans on non-accrual	$	230,767	$	123,492
Other non-accrual loans (2)		13,448		4,276
Total non-accrual loans	$	244,215	$	127,768
Restructured loans	$	30,553	$	7,344
Loans past due 90 days and still accruing interest	$	4,079	$	36,999

⁽¹⁾ These impaired loans require a valuation reserve because the estimated value of the loans or related collateral less selling costs is less than the recorded investment in the loans.

⁽²⁾ These loans are not considered for impairment since they are part of a small balance, homogeneous portfolio.

Impaired Loans

(Dollar amounts in thousands)

	Years Ended December 31,
	2009		2008		2007
Valuation reserve related to impaired loans	$	20,170	$	10,177	$	1,757
Average impaired loans	$	217,872	$	48,171	$	14,184
Interest income recognized on impaired loans (1)	$	157	$	97	$	313

⁽¹⁾ Interest income recognized on impaired loans is recorded using the cash basis of accounting.

104

As of December 31, 2009, the Company had $46.6 million of additional funds committed to be advanced in connection with impaired loans.

8.    PREMISES, FURNITURE, AND EQUIPMENT

Premises, Furniture, and Equipment

(Dollar amounts in thousands)

	December 31,
	2009			2008
Land	$	42,957		$	42,818
Premises		140,366			131,630
Furniture and equipment		72,417			80,770
Total cost		255,740			255,218
Accumulated depreciation		(135,098	)		(135,183	)
Net book value	$	120,642		$	120,035

Depreciation expense on premises, furniture, and equipment totaled $10.9 million in 2009, $11.4 million in 2008, and $11.7 million in 2007.

Assets Held for Sale

During first quarter 2009, the Company classified ten parcels of vacant land as held for sale. During third quarter 2009, the Company reclassified these lots as held for use since the Company no longer expects that it will be able to sell the properties within one year due to a declining real estate market. The total carrying value of $1.6 million as of December 31, 2009 is included in premises, furniture, and equipment in the Consolidated Statements of Financial Condition. The listing price of these parcels is greater than the book value as of December 31, 2009. Therefore, no impairment loss was required to be recognized related to these properties. The Company had no assets classified as held for sale as of December 31, 2009 or 2008.

Operating Leases

At December 31, 2009, the Company was obligated under certain noncancelable operating leases for premises and equipment, which expire at various dates through the year 2019. Many of these leases contain renewal options, and certain leases provide options to purchase the leased property during or at the expiration of the lease period at specific prices. Some leases contain escalation clauses calling for rentals to be adjusted for increased real estate taxes and other operating expenses, or proportionately adjusted for increases in the consumer or other price indices. The following summary reflects the future minimum rental payments, by year, required under operating leases that, as of December 31, 2009, have initial or remaining noncancelable lease terms in excess of one year.

105

Operating Leases

(Dollar amounts in thousands)

	Total
Year ending December 31,
2010	$	3,852
2011		3,779
2012		3,689
2013		3,643
2014		2,324
2015 and thereafter		4,090
Total minimum lease payments	$	21,377

Rental expense charged to operations amounted to $3.3 million in 2009 and 2008, and $3.4 million in 2007, including amounts paid under short-term cancelable leases. Occupancy expense has been reduced by rental income from premises leased to others in the amount of $533,000 in 2009, $479,000 in 2008, and $511,000 in 2007.

9.    GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in the Carrying Amount of Goodwill

(Dollar amounts in thousands)

	Years Ended December 31,
	2009		2008
Balance at beginning of year	$	262,886	$	262,195
Purchase accounting adjustments		-		691
Balance at end of year	$	262,886	$	262,886

Goodwill is not amortized but is subject to impairment tests on at least an annual basis. The Company’s annual goodwill impairment test was performed as of October 1, 2009, and it was determined no impairment existed as of that date.

Purchase accounting adjustments are the adjustments to the initial goodwill recorded at the time an acquisition is completed. Such adjustments generally consist of adjustments to the assigned fair value of assets acquired and liabilities assumed resulting from the completion of appraisals or other valuations and adjustments to initial estimates recorded for transaction costs or exit liabilities.

The Company has other intangible assets capitalized on its Consolidated Statements of Financial Condition in the form of core deposit premiums. These intangible assets are being amortized over their estimated useful lives, which range from 5.5 years to 11.8 years. The Company reviews intangible assets at least annually for possible impairment or more often if events or changes in circumstances between tests indicate that carrying amounts may not be recoverable. The testing is performed by comparing the carrying value of intangibles with the anticipated future cash flows.

106

Other Intangible Assets

(Dollar amounts in thousands)

	December 31,
	2009			2008
Core deposit intangibles, gross	$	36,591		$	35,731
Accumulated amortization		(17,998	)		(14,069	)
Core deposit intangibles, net	$	18,593		$	21,662
Weighted-average remaining life (in years)		7.0			6.7

Amortization expense totaled $3.9 million in 2009 and $4.4 million in both 2008 and 2007.

Scheduled Amortization of Other Intangible Assets

(Dollar amounts in thousands)

	Total
Year ending December 31,
2010	$	4,010
2011		3,242
2012		2,630
2013		2,483
2014		1,891
2015 and thereafter		4,337
Total	$	18,593

10.    DEPOSITS

Summary of Deposits

(Dollar amounts in thousands)

	December 31,
	2009		2008
Demand deposits	$	1,133,756	$	1,040,763
Savings deposits		749,279		747,079
NOW accounts		913,140		915,691
Money market deposits		1,089,710		754,421
Time deposits less than $100,000		1,293,543		1,436,692
Time deposits of $100,000 or more		705,851		691,108
Total deposits	$	5,885,279	$	5,585,754

107

Scheduled Maturities of Time Deposits

(Dollar amounts in thousands)

	Total
Year ending December 31,
2010	$	1,689,277
2011		228,262
2012		43,065
2013		22,856
2014		15,299
2015 and thereafter		635
Total	$	1,999,394

Maturities of Time Deposits of $100,000 or More (Dollar amounts in thousands)

	Total
Maturing within 3 months	$	223,056
After 3 but within 6 months		171,928
After 6 but within 12 months		222,020
After 12 months		88,847
Total	$	705,851

11.    BORROWED FUNDS

Summary of Borrowed Funds

(Dollar amounts in thousands)

	December 31,
	2009		2008
Securities sold under agreements to repurchase	$	238,390	$	457,598
Federal funds purchased		—		280,000
Federal Home Loan Bank advances		152,786		310,736
Federal term auction facilities		300,000		650,000
Total borrowed funds	$	691,176	$	1,698,334

Securities sold under agreements to repurchase, federal funds purchased, and federal term auction facilities generally mature within 1 to 90 days from the transaction date. Securities sold under agreements to repurchase are treated as financings, and the obligations to repurchase securities sold are included as a liability in the Consolidated Statements of Financial Condition. Repurchase agreements are secured by U.S. Treasury and U.S. Agency securities and, if required, are held in third party pledge accounts. The securities underlying the agreements remain in the respective asset accounts. As of December 31, 2009, the Company did not have amounts at risk under repurchase agreements with any individual counterparty or group of counterparties that exceeded 10% of stockholders’ equity.

The Bank is a member of the Federal Home Loan Bank (“FHLB”) and has access to term financing from the FHLB. These advances are secured by qualifying residential and multi-family mortgages, home equity loans, and state and municipal and mortgage-related securities. At December 31, 2009, all advances from the FHLB are fixed rate with interest payable monthly.

108

Maturity and Rate Schedule for FHLB Advances

(Dollar amounts in thousands)

	December 31, 2009			December 31, 2008
Maturity	Advance Amount		Rate (%)	Advance Amount		Rate (%)
January 5, 2009	$	-	-	$	100,000	0.35
February 17, 2009		-	-		35,000	4.73
July 23, 2009		-	-		50,000	3.26
September 8, 2009		-	-		25,000	2.42
November 5, 2009		-	-		50,000	4.30
December 4, 2009		-	-		50,000	3.79
February 1, 2010		4,986	2.95		-	-
June 15, 2010		382	6.05		736	6.05
December 1, 2011		25,000	1.15		-	-
May 4, 2012		4,959	2.51		-	-
May 4, 2012		4,959	2.51		-	-
December 4, 2012		37,500	1.70		-	-
December 4, 2013		25,000	2.28		-	-
December 18, 2013		50,000	2.37		-	-
	$	152,786	2.03	$	310,736	2.68

None of the Company’s borrowings have any related compensating balance requirements that restrict the use of Company assets.

The Company had unused short-term credit lines available for use of $700.0 million as of December 31, 2009 and $1.4 billion as of December 31, 2008. Unused lines as of December 31, 2009 and 2008 consist of available federal funds lines. The availability of the federal funds lines is subject to the liquidity position of other banks. As of December 31, 2009, the Company also had $598.9 million in funding available through the Federal Reserve Bank Discount Window’s primary credit program, which includes federal term auction facilities.

12.    SUBORDINATED DEBT

Subordinated Debt

(Dollar amounts in thousands)

	December 31, 2009			December 31, 2008
6.95% junior subordinated debentures due in 2033
Principal amount	$	87,351		$	128,866
Discount		(81	)		(125	)
Basis adjustment related to fair value hedges (1)		-			3,749
Total junior subordinated debentures		87,270			132,490
5.85% subordinated notes due in 2016
Principal amount		50,500			100,000
Discount		(35	)		(81	)
Total subordinated notes due in 2016		50,465			99,919
Total subordinated debt	$	137,735		$	232,409

⁽¹⁾ For additional discussion regarding the fair value hedges, refer to Note 21, “Derivative Instruments and Hedging Activities.”

109

In 2006, the Company issued $99.9 million of 10-year subordinated notes. The notes were issued at a discount and have a fixed coupon interest rate of 5.85%, per annum, payable semi-annually. The notes are redeemable prior to maturity only at the Company’s option and are junior and subordinate to the Company’s senior indebtedness. For regulatory capital purposes, the notes qualify as Tier 2 Capital.

In 2003, the Company formed First Midwest Capital Trust I (“FMCT I”), a statutory business trust, organized for the sole purpose of issuing trust securities and investing the proceeds thereof in junior subordinated debentures of the Company, the sole assets of the trust. The trust preferred securities of the trust represent preferred beneficial interests in the assets of the trust and are subject to mandatory redemption, in whole or in part, upon payment of the junior subordinated debentures held by the trust. The common securities of the trust are wholly-owned by the Company. The trust’s ability to pay amounts due on the trust preferred securities is solely dependent upon the Company making payment on the related junior subordinated debentures. The Company’s obligations under the junior subordinated debentures and other relevant trust agreements, in aggregate, constitute a full and unconditional guarantee by the Company of the trust’s obligations under the trust securities issued by the trust. The guarantee covers the distributions and payments on liquidation or redemption of the trust preferred securities, but only to the extent of funds held by the trust.

In accordance with GAAP, FMCT I qualifies as a variable interest entity for which the Company is not the primary beneficiary and therefore ineligible for consolidation. Accordingly, the trust is not consolidated in the Company’s financial statements. The subordinated debentures issued by the Company to the trust are included in the Company’s Consolidated Statements of Financial Condition as “subordinated debt” with the corresponding interest distributions recorded as interest expense. The common shares issued by the trust are included in other assets in the Company’s Consolidated Statements of Financial Condition.

In September 2009, the Company completed an offer to exchange a portion of the notes and a separate offer to exchange a portion of the subordinated debentures for newly issued shares of common stock of the Company. The exchanges strengthened the composition of First Midwest’s capital base by increasing its Tier 1 common and tangible common equity ratios, while also reducing the interest expense associated with the debt securities.

As a result of the exchange offers, $39.3 million of subordinated debentures were retired at a discount of 20% in exchange for 3,058,410 shares of common stock of the Company, and $29.5 million of notes were retired at a discount of 10% in exchange for 2,584,695 shares of common stock of the Company.

Subsequent to the exchanges, the Company retired an additional $1.0 million of subordinated debentures at a discount of 20% for cash and $20.0 million of notes at a discount of 7% for cash.

In the aggregate, the exchange offers and the subsequent retirement of debt for cash resulted in the recognition of $15.3 million in pre-tax gains by the Company. These gains are shown as a separate component of noninterest income in the Consolidated Statements of Income.

110

Common Stock, Preferred Securities, and Related Debentures

(Dollar amounts and number of shares in thousands)

Issuance trust	First Midwest Capital Trust I
Issuance date	November 18, 2003
Common shares issued	3,866
Trust preferred securities issued (1)	125,000
Coupon rate (2)	6.95%
Maturity	December 1, 2033
Principal amount of debentures (3):
As of December 31, 2009	$  87,270
As of December 31, 2008	$  132,490

⁽¹⁾ The trust preferred securities accrue distributions at a rate equal to the interest rate and maturity identical to that of the related debentures. The trust preferred securities will be redeemed upon maturity of the related debentures.

⁽²⁾ The coupon rate is fixed with distributions payable semi-annually. The Company has the right to defer payment of interest on the debentures at any time or from time to time for a period not exceeding five years provided no extension period may extend beyond the stated maturity of the debentures. During such extension period, distributions on the trust preferred securities will also be deferred, and the Company’s ability to pay dividends on its common stock will be restricted.

⁽³⁾ The company has the right to redeem its debentures: (i) in whole or in part at any time and (ii) in whole at any time within 90 days after the occurrence of a “Tax Event,” an “Investment Company Act Event,” or a “Regulatory Capital Event” (as defined in the indenture pursuant to which the debentures were issued), subject to regulatory approval. If the debentures are redeemed before they mature, the redemption price will be the greater of: (a) the principal amount plus any accrued but unpaid interest or (b) the sum of the present values of principal and interest payments from the redemption date to the maturity date discounted at the Adjusted Treasury Rate (as defined in the indenture), plus any accrued but unpaid interest.

13.    MATERIAL TRANSACTION AFFECTING STOCKHOLDERS’ EQUITY

Common Shares Issued

As referred to above, in September 2009, the Company issued a total of 5,643,105 shares of common stock at a price of $10.272 per share, a $56.6 million increase in stockholders’ equity, net of related expenses.

The Company had 66,969,171 shares issued and 54,793,343 shares outstanding as of December 31, 2009 and 61,326,066 shares issued and 48,629,541 shares outstanding as of December 31, 2008.

Issuance of Preferred Shares

In response to the financial crises affecting the financial markets and the banking system, on October 3, 2008, the President signed into law the Emergency Economic Stabilization Act of 2008 (“EESA”). Among other things, the EESA establishes a $700 billion Troubled Asset Relief Program (“TARP”). Under the TARP, the United States Department of the Treasury (“Treasury”) has authority, among other things, to purchase mortgages, mortgage-backed securities, capital stock, and other financial instruments from financial institutions for the purpose of stabilizing and providing liquidity to the U.S. financial markets.

On October 14, 2008, the Treasury announced several initiatives under the TARP intended to help stabilize the banking industry, including a voluntary Capital Purchase Program (“CPP”) designed to encourage qualifying financial institutions to build capital. Under the CPP, the Treasury may purchase up to $250 billion of senior preferred shares from eligible financial institutions on standardized terms with attached warrants to purchase common stock.

On November 6, 2008, the Treasury notified the Company that it had received preliminary approval as of November 2, 2008 to participate in the CPP. Pursuant to the receipt of preliminary approval and execution of the related agreements, on December 5, 2008, the Company received $193.0 million from the sale of preferred shares to the Treasury as part of the CPP.

111

In exchange for the $193.0 million, the Company issued to the Treasury a total of 193,000 shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series B, at an initial fixed dividend rate of 5% with a $1,000 per share liquidation preference and a warrant to purchase up to 1,305,230 shares of the Company’s common stock at an exercise price of $22.18 per share. Both the preferred shares and the warrants are accounted for as components of the Company’s regulatory Tier 1 capital.

Quarterly Dividend on Common Shares

Responsive to the environment at the time, on December 10, 2008, the Company’s Board of Directors announced a reduction in its quarterly common stock dividend from $0.310 per share to $0.225 per share. Since the Company elected to participate in the CPP, its ability to increase quarterly common stock dividends above $0.310 per share will be subject to the applicable restrictions of this program for three years following the sale of the preferred stock.

On March 16, 2009, the Company’s Board of Directors announced a reduction in its quarterly common stock dividend from $0.225 per share to $0.010 per share.

On May 27, 2009, August 31, 2009, and December 2, 2009, the Company’s Board of Directors announced additional quarterly common stock dividends of $0.010 per share each.

14.    EARNINGS PER COMMON SHARE

Basic and Diluted Earnings Per Common Share

(Amounts in thousands, except per share data)

	Years Ended December 31,
	2009			2008			2007
Net (loss) income	$	(25,750	)	$	49,336		$	80,159
Preferred dividends		(9,650	)		(670	)		-
Accretion on preferred stock		(615	)		(42	)		-
Net loss (income) applicable to non-vested restricted shares		464			(142	)		(65	)
Net (loss) income applicable to common shares	$	(35,551	)	$	48,482		$	80,094
Weighted-average common shares outstanding:
Weighted-average common shares outstanding (basic)		50,034			48,462			49,295
Dilutive effect of stock options		-			53			291
Weighted-average diluted common shares outstanding		50,034			48,515			49,586
Basic (loss) earnings per common share	$	(0.71	)	$	1.00		$	1.62
Diluted (loss) earnings per common share	$	(0.71	)	$	1.00		$	1.62
Anti-dilutive shares not included in the computation of diluted earnings per common share (1)		3,993			2,631			824

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

112

15.    COMPREHENSIVE INCOME

Comprehensive income is the total of reported net income and all other revenues, expenses, gains, and losses that bypass 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 and changes in the funded status of the Company’s pension plan.

Components of Other Comprehensive Income

(Dollar amounts in thousands)

	Years Ended December 31,
	2009						2008									2007
	Before Tax		Tax Effect		Net of Tax		Before Tax			Tax Effect			Net of Tax			Before Tax			Tax Effect			Net of Tax
Securities available-for-sale:
Unrealized holding gains (losses)	$	2,556	$	986	$	1,570	$	(31,316	)	$	(12,210	)	$	(19,106	)	$	(47,370	)	$	(18,469	)	$	(28,901	)
Less: Reclassification of net gains (losses) included in net income		2,110		824		1,286		(35,611	)		(13,888	)		(21,723	)		(50,801	)		(19,812	)		(30,989	)
Net unrealized holding gains (losses)		446		162		284		4,295			1,678			2,617			3,431			1,343			2,088
Funded status of pension plan:
Unrealized holding gains (losses)		16,988		6,625		10,363		(14,658	)		(5,726	)		(8,932	)		2,408			935			1,473
Total other comprehensive income (loss)	$	17,434	$	6,787	$	10,647	$	(10,363	)	$	(4,048	)	$	(6,315	)	$	5,839		$	2,278		$	3,561

Activity in Accumulated Other Comprehensive (Loss) Income

(Dollar amounts in thousands)

	Years Ended December 31,
	Accumulated Unrealized (Losses) Gains on Securities Available-for- Sale			Accumulated Unrealized (Losses) Gains on Under-funded Pension Obligation			Total Accumulated Other Comprehensive (Loss) Income
Balance at December 31, 2006	$	(6,733	)	$	(8,555	)	$	(15,288	)
2007 other comprehensive income		2,088			1,473			3,561
Balance at December 31, 2007		(4,645	)		(7,082	)		(11,727	)
2008 other comprehensive income (loss)		2,617			(8,932	)		(6,315	)
Balance at December 31, 2008		(2,028	)		(16,014	)		(18,042	)
Cumulative effect of change in accounting for other-than-temporary impairment		(11,271	)		-			(11,271	)
Adjusted balance at January 1, 2009		(13,299	)		(16,014	)		(29,313	)
2009 other comprehensive income		284			10,363			10,647
Balance at December 31, 2009	$	(13,015	)	$	(5,651	)	$	(18,666	)

113

16.    INCOME TAXES

Components of Income Taxes

(Dollar amounts in thousands)

	Years Ended December 31,
	2009			2008			2007
Current tax (benefit) expense:
Federal	$	(10,298	)	$	3,429		$	33,771
State		(5,420	)		(3,472	)		8,303
Total		(15,718	)		(43	)		42,074
Deferred tax (benefit) expense:
Federal		(28,808	)		(5,778	)		(17,792	)
State		(5,650	)		(7,470	)		(10,429	)
Total		(34,458	)		(13,248	)		(28,221	)
Total income tax (benefit) expense	$	(50,176	)	$	(13,291	)	$	13,853

Federal income tax expense 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 (“BOLI”) 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 benefits totaled $50.2 million in 2009 and $13.3 million in 2008. The Company recorded $13.9 million in tax expense in 2007. The increase in income tax benefits from 2008 to 2009 was primarily attributable to a decrease in pre-tax income in 2009, coupled with an increase in tax-exempt interest as a percent of the total pre-tax amount. This effect was offset in part by a decrease in state tax-exempt income attributable to changes in Illinois tax law effective in 2009.

The decrease in income tax expense from 2007 to 2008 was primarily attributable to a decrease in pre-tax income in 2008, and to a lesser extent, to the recording of state tax benefits relating to uncertain tax positions. This was offset in part by a decrease in BOLI income in 2008.

114

Differences between the amounts reported in the consolidated financial statements and the tax bases of assets and liabilities result in temporary differences for which deferred tax assets and liabilities have been recorded.

Deferred Tax Assets and Liabilities

(Dollar amounts in thousands)

	December 31,
	2009			2008
Deferred tax assets:
Alternative minimum tax (“AMT”) and other credit carryforwards	$	2,286		$	-
Reserve for loan losses		50,683			32,854
Unrealized losses		24,466			21,639
Equity compensation expense		2,889			3,296
Other real estate owned		4,072			649
State net operating loss (“NOL”) carryforwards		8,448			8,782
Other state tax benefits		10,016			5,251
Other		7,752			4,324
Total deferred tax assets		110,612			76,795
Deferred tax liabilities:
Purchase accounting adjustments and intangibles		(8,201	)		(8,757	)
Dividends receivable		(3,285	)		(3,294	)
Deferred loan fees		(3,113	)		(3,696	)
Bond discount accretion		(2,593	)		(3,745	)
Accrued retirement benefits		(2,512	)		(3,953	)
Depreciation		(1,346	)		(2,263	)
Deferred gain on FDIC-assisted transaction		(4,036	)		-
Other		(2,490	)		(3,268	)
Total deferred tax liabilities		(27,576	)		(28,976	)
Deferred tax valuation allowance		(2,503	)		(1,744	)
Net deferred tax assets		80,533			46,075
Tax effect of adjustments related to other comprehensive income		11,946			11,528
Net deferred tax assets including adjustments	$	92,479		$	57,603

Net deferred tax assets are included in other assets in the accompanying Consolidated Statements of Financial Condition.

At December 31, 2009, the Company had Illinois gross net operating loss carryforwards of $178.0 million, which are available to offset future taxable income. These net operating loss carryforwards will begin to expire in 2015. The Company also had Indiana gross net operating loss carryforwards of $27.5 million, which will begin to expire in 2026. AMT Credits and other credits have an indefinite life and twenty year life respectively. Approximately $1.5 million of other credits will begin to expire in 2028. The Company expects to fully utilize the credits carried forward.

On December 31, 2009, the Company recorded a valuation allowance of $2.5 million, an increase of $759,000 from December 31, 2008, with respect to Indiana net operating loss carryforwards and net deferred tax assets that are not expected to be fully realized. Management believes that it is more likely than not that the other deferred tax assets included in the accompanying Consolidated Statements of Financial Condition will be fully realized.

115

Components of Effective Tax Rate

	Years Ended December 31,
	2009	2008	2007
Statutory federal income tax rate	35.0%	35.0%	35.0%
Tax-exempt income, net of interest expense disallowance	16.5%	(39.9%)	(14.2%)
State income tax, net of federal income tax effect	12.1%	(30.4%)	(1.5%)
Other, net	2.5%	(1.6%)	(4.6%)
Effective tax rate	66.1%	(36.9%)	14.7%

The change in effective income tax rate from 2008 to 2009 was primarily attributable to a decrease in pre-tax income in 2009. This effect was offset in part by a decrease in tax-exempt income from investment securities and a decrease in state tax-exempt income attributable to changes in Illinois tax law effective in 2009.

The decrease in effective income tax rate from 2007 to 2008 was primarily attributable to a decrease in pre-tax income in 2008, and to a lesser extent, to the recording of state tax benefits relating to uncertain tax positions. This was offset in part by a decrease in BOLI income in 2008.

As of December 31, 2009, 2008, and 2007, the Company’s retained earnings included an appropriation for an acquired thrift’s tax bad debt reserves of approximately $2.5 million for which no provision for federal or state income taxes has been made. If, in the future, this portion of retained earnings were distributed as a result of the liquidation of the Company or its subsidiaries, federal and state income taxes would be imposed at the then applicable rates.

Uncertainty in Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and in Illinois, Indiana, and Iowa. The Company is no longer subject to examinations by U.S. federal, Indiana, or Iowa tax authorities for years prior to 2006 or by Illinois tax authorities for years prior to 2002.

Audits of the Company’s 2002-2005 Illinois income tax returns are currently pending. The Company believes it is reasonably possible that these audits will be resolved without significant changes to the returns as filed.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Rollforward of Unrecognized Tax Benefits

(Dollar amounts in thousands)

	Years Ended December 31,
	2009			2008			2007
Balance at beginning of year	$	5,751		$	9,888		$	7,734
Additions for tax positions relating to the current year		9			1,187			2,253
Reductions for tax positions relating to prior years		(5,446	)		(5,324	)		-
Lapse in statute of limitations		-			-			(99	)
Balance at end of year	$	314		$	5,751		$	9,888

The reductions in uncertain tax positions in 2008 and 2009 are a result of the resolution of certain tax authority examinations.

The Company does not anticipate that the amount of uncertain tax positions will significantly increase or decrease in the next 12 months.

116

Included in the balance at December 31, 2009 are tax positions totaling $314,000 that would favorably affect the Company’s effective tax rate if recognized in future periods. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense in the Consolidated Statements of Income. The Company recognized interest expense (benefit), net of tax effect, and penalties of $(556,000) in 2009, $(303,000) in 2008, and $497,000 in 2007. The Company had accrued interest and penalties, net of tax effect, of $29,000 as of December 31, 2009 and $585,000 as of December 31, 2008. These amounts are not included in the unrecognized tax benefits rollforward presented above.

17.    EMPLOYEE BENEFIT PLANS

Savings and Profit Sharing Plan - The Company has a defined contribution retirement savings plan (the “Plan”), which allows qualified employees, at their option, to make contributions up to 45% of pre-tax base salary (15% for certain highly compensated employees) through salary deductions under Section 401(k) of the Internal Revenue Code. At the employees’ direction, employee contributions are invested among a variety of investment alternatives. For employees who make voluntary contributions to the Plan, the Company contributes an amount equal to 2% of the employee’s compensation. The Plan also permits the Company to distribute a discretionary profit-sharing component up to 15% of the employee’s compensation. The Company’s matching contribution vests immediately, while the discretionary component gradually vests over a period of six years based on the employee’s years of service. The cost of providing this plan was $2.5 million in 2009, $2.8 million in 2008, and $4.8 million in 2007. The number of shares of the Company common stock held by the Plan was 2,916,152 at December 31, 2009 and 1,721,707 at December 31, 2008. The fair value of Company shares held by the Plan was $31.8 million at December 31, 2009 and $34.4 million at December 31, 2008. The Plan received dividends from the Company of $452,000 during 2009 and $2.1 million during 2008.

117

Pension Plan - The Company sponsors a noncontributory defined benefit retirement plan (the “Pension Plan”) covering a majority of full-time employees that provides for retirement benefits based on years of service and compensation levels of the participants. Effective April 1, 2007, the Pension Plan was amended to eliminate new enrollment of employees. Actuarially determined pension costs are charged to current operations. The Company’s funding policy is to contribute amounts to its plan sufficient to meet the minimum funding requirements of the Employee Retirement Income Security Act of 1974, plus such additional amounts as the Company determines to be appropriate.

Pension Plan’s Cost and Obligations

(Dollar amounts in thousands)

	December 31,
	2009			2008
Accumulated benefit obligation	$	35,921		$	35,121
Change in benefit obligation:
Projected benefit obligation at beginning of year	$	52,259		$	48,530
Service cost		3,404			3,123
Interest cost		3,337			3,103
Actuarial (gains) losses		(13,444	)		1,986
Benefits paid		(1,885	)		(4,483	)
Projected benefit obligation at end of year	$	43,671		$	52,259
Change in plan assets:
Fair value of plan assets at beginning of year	$	38,710		$	44,541
Actual return on plan assets		6,208			(8,848	)
Benefits paid		(1,885	)		(4,483	)
Employer contributions		8,000			7,500
Fair value of plan assets at end of year	$	51,033		$	38,710
Funded Status	$	7,362		$	(13,549	)
Amounts recognized in the consolidated statements of financial condition consist of:
Noncurrent prepaid pension	$	7,362		$	-
Noncurrent pension liability	$	-		$	(13,549	)
Amounts recognized in accumulated other comprehensive income:
Prior service cost	$	11		$	15
Net loss		9,253			26,237
Net amount recognized	$	9,264		$	26,252
Amounts expected to be amortized from other comprehensive income into net periodic benefit cost in the next fiscal year:
Prior service cost	$	3		$	3
Net loss		-			2,023
Net amount expected to be recognized	$	3		$	2,026
Weighted-average assumptions at the end of the year used to determine the actuarial present value of the projected benefit obligation:
Discount rate		6.00	%		6.25	%
Rate of compensation increase		3.00	%		4.50	%

118

Net Periodic Benefit Pension Expense

(Dollar amounts in thousands)

	Years Ended December 31,
	2009			2008			2007
Components of net periodic benefit cost:
Service cost	$	3,404		$	3,123		$	3,707
Interest cost		3,337			3,103			2,927
Expected return on plan assets		(4,558	)		(4,329	)		(3,660	)
Recognized net actuarial loss		1,153			501			837
Amortization of prior service cost		3			4			3
Other		737			-			-
Net periodic cost		4,076			2,402			3,814
Other changes in plan assets and benefit obligations recognized as a charge to other comprehensive income:
Net (gain) loss for the period		(15,830	)		15,163			(1,567	)
Amortization of prior service cost		(4	)		(4	)		(4	)
Amortization of net loss		(1,154	)		(501	)		(837	)
Total		(16,988	)		14,658			(2,408	)
Total recognized in net periodic pension cost and other comprehensive income	$	(12,912	)	$	17,060		$	1,406
Weighted-average assumptions used to determine the net periodic cost:
Discount rate		6.25	%		6.50	%		6.00	%
Expected return on plan assets		8.50	%		8.50	%		8.50	%
Rate of compensation increase		4.50	%		4.50	%		4.50	%

Pension Plan Asset Allocation

(Dollar amounts in thousands)

	Target Allocation 2010	Fair Value of Plan Assets (1)		Percentage of Plan Assets
				2009	2008
Asset Category:
Equity securities	50 - 60%	$	28,485	56%	58%
Fixed income	30 - 48%		20,002	39%	35%
Cash equivalents	2 - 10%		2,546	5%	7%
Total		$	51,033	100%	100%

⁽¹⁾ Additional information regarding the fair value of plan assets can be found in Note 24, “Estimated Fair Value of Financial Instruments.”

Expected amortization of net actuarial losses - To the extent the cumulative actuarial losses included in accumulated other comprehensive income exceed 10% of the greater of the accumulated benefit obligation or the market-related value of the Pension Plan assets, the Company’s policy for amortizing the Pension Plan’s net actuarial losses into income is to amortize the actuarial losses over the future working life of the Pension Plan participants. Actuarial losses included in other comprehensive income as of December 31, 2009 totaled $9.3 million and represented 25.8% of the accumulated benefit obligation and 18.2% of the fair value of plan assets. The amortization of the net actuarial loss is a component of the net periodic benefit cost. Amortization of the net actuarial losses and prior service cost included in other comprehensive income is not expected to have a material impact on the Company’s future results of operations, financial position, or liquidity.

119

Determination of expected long-term rate of return - The expected long-term rate of return for the Pension Plan’s total assets is based on the expected return of each of the above categories, weighted based on the median of the target allocation for each class. Equity securities are expected to return 10% to 11% over the long-term, while cash and fixed income is expected to return between 4% and 6%. Based on historical experience, the Company’s Retirement Plans Committee (the “Committee”) expects that the Plan’s asset managers will provide a modest (0.5% - 1% per annum) premium to their respective market benchmark indices.

Investment policy and strategy - The investment objective of the Plan is to maximize the return on Plan assets over a long time horizon, while meeting the Plan obligations. In establishing its investment policies and asset allocation strategies, the Company considers expected returns and the volatility associated with different strategies. The policy, as established by the Committee, is to provide for growth of capital with a moderate level of volatility by investing assets per the target allocations stated above. The Committee decided to invest in traditional publicly traded securities and not alternative asset classes such as private equity, hedge funds, and real estate. The assets are reallocated as needed by the fund manager to meet the above target allocations, and the investment policy is reviewed on a quarterly basis, under the advisement of a certified investment advisor, to determine if the policy should be changed.

Based on the actuarial assumptions, the Company does not anticipate making a contribution to the Pension Plan in 2010. Estimated future pension benefit payments, which reflect expected future service, for fiscal years 2010 through 2019, are as follows.

Estimated Future Pension Benefit Payments

(Dollar amounts in thousands)

	Total
Year ending December 31,
2010	$	2,469
2011		2,084
2012		2,476
2013		2,888
2014		2,968
2015-2019		18,793

18.    SHARE-BASED COMPENSATION

Share-Based Plans

Omnibus Stock and Incentive Plan (the “Omnibus Plan”) - In 1989, the Board of Directors of the Company adopted the Omnibus Plan, which allows for the granting of both incentive and non-statutory (“nonqualified”) stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance units, and performance shares to certain key employees. The total number of shares of the Company’s common stock authorized for awards under the Omnibus Plan, as amended, is 7,431,641. As of December 31, 2009, 1,278,843 stock options and/or restricted stock/unit awards remain available for grant.

Since the inception of the Omnibus Plan, in February of each year, certain key employees have been granted nonqualified stock options. The option exercise price is set at the fair value of the Company’s common stock on the date the options are granted. The fair value is defined as the average of the high and low stock price on the date of grant. All options have a term of ten years from the date of grant, include reload features, and are non-transferable except to family members, family trusts, or partnerships. Options vest over three years (subject to accelerated vesting in the event of death, disability, or a change-in-control, as defined in the Omnibus Plan), with 50% exercisable after two years from the date of grant and the remaining 50% exercisable three years after the date of grant.

120

In August 2006, as an enhancement to the current compensation program, the Company’s Board of Directors approved the granting of restricted stock awards and restricted stock units to certain key officers. These awards are restricted to transfer, but are not restricted to dividend payment and voting rights. The awards vest in 50% increments on each of the first two anniversaries of the date of grant provided the officer remains employed by the Company during such period (subject to accelerated vesting in the event of change-in-control or upon termination of employment, as set forth in the applicable stock/unit award agreement).

In December 2008, the Company’s Board of Directors approved the granting of a performance-based restricted stock award to one of its key officers. Unlike all other restricted stock awards, this award vests assuming certain performance criteria are met and provided the officer remains employed by the Company during such period.

Nonemployee Directors Stock Plan (the “Directors Plan”) - In 1997, the Board of Directors of the Company adopted the Directors Plan, which provides for the granting of equity awards to nonmanagement Board members of the Company. A maximum of 481,250 shares of common stock are authorized for grant under the Directors Plan with 159,437 shares remaining available for grant as of December 31, 2009. Until 2008 only non-qualified stock options were issued under the Directors Plan. The exercise price of the options is equal to the fair value of the common stock on the date of grant. All options have a term of ten years from the date of grant and become exercisable one year from the date of grant subject to accelerated vesting in the event of retirement, death, disability, or change-in-control, as defined in the Directors Plan.

In 2008, the Company amended the Directors Plan to allow for the granting of restricted stock awards, which were first issued under the Directors Plan in May 2008. The awards are restricted to transfer but are not restricted to dividend payment and voting rights. These awards vest one year from the date of grant subject to accelerated vesting in the event of retirement, death, disability, or change-of-control, as defined in the Directors Plan.

Options or restricted stock awards are granted annually at the first regularly scheduled Board meeting in each calendar year (generally in February). Directors elected during the service year are granted equity awards on a pro-rata basis to those granted to the directors at the start of the service year.

Both the Omnibus Plan and the Directors Plan have been submitted to and approved by the stockholders of the Company.

Accounting Treatment

The Company accounts for share-based compensation using the modified prospective transition method. Under this transition method, compensation cost is recognized in the financial statements beginning January 1, 2006, based on the accounting guidance for all share-based payments granted after that date and based on the previous accounting guidance for all unvested awards granted prior to 2006. Share-based compensation expense is included in “salaries and wages” in the Consolidated Statements of Income.

Effect of Recording Share-Based Compensation Expense

(Dollar amounts in thousands, except per share data)

	Years ended December 31,
	2009			2008			2007
Stock option expense	$	785		$	2,210		$	2,804
Restricted stock/unit award expense		2,731			2,335			1,467
Total share-based compensation expense		3,516			4,545			4,271
Income tax benefit		1,371			1,591			1,495
Share-based compensation expense, net of tax	$	2,145		$	2,954		$	2,776
Basic earnings per common share	$	0.04		$	0.06		$	0.06
Diluted earnings per common share	$	0.04		$	0.06		$	0.06
Cash flows provided by (used in) operating activities	$	177		$	37		$	(361	)
Cash flows (used in) provided by financing activities	$	(177	)	$	(37	)	$	361

121

The preceding table includes the cash flow effects of excess tax benefits on operating and financing cash flows. GAAP requires that cash flows resulting from the tax benefits of tax deductions in excess of recognized compensation expense be reported as financing cash flows, rather than as operating cash flows as required under prior accounting rules.

Stock Options

Nonqualified Stock Option Transactions

(Amounts in thousands, except per share data)

	Year Ended December 31, 2009
	Options		Average Exercise Price		Weighted Average Remaining Contractual Term (1)	Aggregate Intrinsic Value (2)
Outstanding at beginning of year	2,816		$	31.53
Granted	-			-
Exercised	-			-
Forfeited	(3	)		38.62
Expired	(179	)		27.84
Outstanding at end of period	2,634		$	31.77	4.53	$	-
Ending vested and expected to vest	2,634		$	31.77	4.53	$	-
Exercisable at end of period	2,189		$	31.66	3.88	$	-

⁽¹⁾ Represents the average contractual life remaining in years.

⁽²⁾ Aggregate intrinsic value represents the total pretax intrinsic value (i.e., the difference between the Company’s average of the high and low stock price on the last trading day of the year and the option exercise price, multiplied by the number of shares) that would have been received by the option holders if they had exercised their options on December 31, 2009. This amount will fluctuate with changes in the fair value of the Company’s common stock.

Stock Option Valuation Assumptions - The Company estimates the fair value of stock options at the date of grant using a Black-Scholes option-pricing model that utilizes the assumptions outlined in the following table. No stock options were granted in 2009.

Stock Option Valuation Assumptions

	Years Ended December 31,
	2009		2008		2007
Expected life of the option (in years)		-		5.9		5.8
Expected stock volatility		-		18%		16%
Risk-free interest rate		-		3.30%		4.63%
Expected dividend yield		-		3.72%		3.08%
Weighted-average fair value of options at their grant date	$	-	$	3.57	$	6.03

Expected life is based on historical exercise and termination behavior. Expected stock price volatility is based on historical volatility of the Company’s common stock and correlates with the expected life of the options. The risk-free interest rate is based on the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life of the option. The expected dividend yield represents the three-year historical average of the annual dividend yield as of the date of grant. Management reviews and adjusts the assumptions used to calculate the fair value of an option on a periodic basis to better reflect expected trends.

122

Other Stock Option Information

(Dollar amounts in thousands)

	Years Ended December 31,
	2009		2008		2007
Share-based compensation expense	$	785	$	2,210	$	2,804
Unrecognized compensation expense	$	283	$	1,281	$	2,714
Weighted-average amortization period remaining (in years)		0.4		0.8		0.9
Total intrinsic value of stock options exercised	$	-	$	442	$	2,219
Cash received from stock options exercised	$	-	$	1,088	$	4,139
Income tax benefit realized from stock options exercised	$	-	$	558	$	1,330

In 2008, the Company recognized $105,000 in additional compensation costs as a result of accelerated vesting on 101,149 options held by one grantee. No stock option award modifications were made during 2007 or 2009.

The Company issues treasury shares to satisfy stock option exercises and restricted stock award releases.

Restricted Stock and Restricted Stock Unit Awards

Restricted Stock/Unit Award Transactions

(Amounts in thousands, except per share data)

	Years Ended December 31,
	2009				2008
	Number of Shares/Units		Weighted Average Grant Date Fair Value		Number of Shares/Units		Weighted Average Grant Date Fair Value
Restricted Stock Awards
Nonvested restricted stock awards at beginning of year	142		$	26.39	39		$	36.42
Granted	547			9.27	134			25.41
Vested	(31	)		29.91	(25	)		36.44
Forfeited	(5	)		18.30	(6	)		28.10
Nonvested restricted stock awards at end of year	653		$	11.94	142		$	26.39
Restricted Stock Units
Nonvested restricted stock units at beginning of year	-		$	-	25		$	36.42
Granted	-			-	35			27.16
Vested	-			-	(60	)		24.93
Nonvested restricted stock units at end of year	-		$	-	-		$	-

The fair value of restricted stock/unit awards is determined based on the average of the high and low stock price on the date of grant and is recognized as compensation expense over the vesting period.

123

Other Restricted Stock Unit/Award Information

(Dollar amounts in thousands)

	Years Ended December 31,
	2009		2008		2007
Share-based compensation expense	$	2,731	$	2,335	$	1,467
Unrecognized compensation expense	$	4,489	$	2,397	$	684
Weighted-average amortization period remaining (in years)		1.6		1.7		0.8
Total fair value of vested restricted stock unit/awards, at end of period	$	7,205	$	4,277	$	664
Cash paid to settle restricted stock unit/awards	$	—	$	1,268	$	238
Income tax benefit realized from vesting/release of restricted stock/unit awards	$	258	$	739	$	232

In 2008, the Company recognized $683,000 in additional compensation costs as a result of accelerated vesting on restricted stock units held by one grantee. No restricted stock units award modifications were made during 2007 or 2009.

19.    STOCKHOLDER RIGHTS PLAN

On February 15, 1989, the Board of Directors of the Company adopted a Stockholder Rights Plan. Pursuant to that Plan, the Company declared a dividend, paid March 1, 1989, of one right (“Right”) for each outstanding share of the Company common stock held on record on March 1, 1989 pursuant to a Rights Agreement dated February 15, 1989. The Rights Agreement was amended and restated on November 15, 1995 and again on June 18, 1997 to exclude an acquisition. The Rights Agreement was further amended on December 9, 2008 to clarify certain items. As amended, each right entitles the registered holder to purchase from the Company 1/100 of a share of Series A Preferred Stock for a price of $150, subject to adjustment. The Rights will be exercisable only if a person or group has acquired, or announces the intention to acquire, 10% or more of the Company’s outstanding shares of common stock. The Company is entitled to redeem each Right for $0.01, subject to adjustment, at any time prior to the earlier of the tenth business day following the acquisition by any person or group of 10% or more of the outstanding shares of the Company common stock or the expiration date of the Rights. The rights agreement was amended on November 14, 2005 to extend the expiration date to November 15, 2015.

As a result of the Rights distribution, 600,000 of the 1,000,000 shares of authorized preferred stock were reserved for issuance as Series A Preferred Stock.

20.    REGULATORY AND CAPITAL MATTERS

The Company and its subsidiaries are subject to various regulatory requirements that impose restrictions on cash, loans or advances, and dividends. The Bank is required to maintain reserves against deposits. Reserves are held either in the form of vault cash or non-interest-bearing balances maintained with the Federal Reserve Bank and are based on the average daily balances and statutory reserve ratios prescribed by the type of deposit account. Reserve balances totaling $4.8 million at December 31, 2009 and $46.1 million at December 31, 2008 were maintained in fulfillment of these requirements.

Under current Federal Reserve regulations, the Bank is limited in the amount it may loan or advance to the Parent Company and its non-bank subsidiaries. Loans or advances to a single subsidiary may not exceed 10% and loans to all subsidiaries may not exceed 20% of the bank’s capital stock and surplus, as defined. Loans from subsidiary banks to non-bank subsidiaries, including the Parent Company, are also required to be collateralized.

The principal source of cash flow for the Company is dividends from the Bank. Various federal and state banking regulations and capital guidelines limit the amount of dividends that may be paid to the Company by the Bank. Future payment of dividends by the subsidiaries is dependent upon individual regulatory capital requirements and levels of profitability. Without prior regulatory approval, the Bank can initiate aggregate dividend payments in

124

2009 of $43.9 million plus an additional amount equal to its net profits for 2010, as defined by statute, up to the date of any such dividend declaration. Future payment of dividends by the Bank is dependent upon individual regulatory capital requirements and levels of profitability. Since the Company is a legal entity, separate and distinct from its subsidiaries, the dividends of the Company are not subject to such bank regulatory guidelines.

The Company and the Bank are also subject to various capital requirements set up and administered by the federal banking agencies. Under capital adequacy guidelines, the Company and the Bank must meet specific guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators regarding components of capital and assets, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital to adjusted average assets (as defined). Failure to meet minimum capital requirements could result in actions by regulators that, if undertaken, could have a material effect on the Company’s financial statements. As of December 31, 2009, the Company and the Bank met all capital adequacy requirements to which they are subject.

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. As of December 31, 2009, the most recent regulatory notification classified the Bank as “well capitalized” under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes would change the Bank’s classification.

The following table presents the Company’s and the Bank’s measures of capital as of the dates presented and the capital guidelines established by the FRB to be categorized as adequately capitalized and as “well capitalized.”

Summary of Capital Ratios

(Dollar amounts in thousands)

	First Midwest Actual			Adequately Capitalized			“Well Capitalized” for FDICIA
	Capital		Ratio	Capital		Ratio	Capital		Ratio
As of December 31, 2009:
Total capital (to risk-weighted assets):
First Midwest Bancorp, Inc	$	893,085	14.25%	$	501,481	8.00%	$	626,851	10.00%
First Midwest Bank		735,117	11.80		498,288	8.00		622,860	10.00
Tier 1 capital (to risk-weighted assets):
First Midwest Bancorp, Inc		763,443	12.18		250,740	4.00		376,110	6.00
First Midwest Bank		656,433	10.54		249,144	4.00		373,716	6.00
Tier 1 leverage (to average assets):
First Midwest Bancorp, Inc		763,443	10.18		224,894	3.00		374,824	5.00
First Midwest Bank		656,433	8.80		223,866	3.00		373,111	5.00
As of December 31, 2008:
Total capital (to risk-weighted assets):
First Midwest Bancorp, Inc	$	949,433	14.36%	$	528,749	8.00%	$	660,936	10.00%
First Midwest Bank		746,265	11.34		526,308	8.00		657,885	10.00
Tier 1 capital (to risk-weighted assets):
First Midwest Bancorp, Inc		766,758	11.60		264,374	4.00		396,562	6.00
First Midwest Bank		663,886	10.09		263,154	4.00		394,731	6.00
Tier 1 leverage (to average assets):
First Midwest Bancorp, Inc		766,758	9.41		244,400	3.00		407,333	5.00
First Midwest Bank		663,886	8.19		243,302	3.00		405,503	5.00

125

21.    DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Accounting Policy for Derivative Financial Instruments

The Company maintains an overall interest rate risk management strategy that incorporates the use of derivative instruments to minimize significant unplanned fluctuations in earnings and cash flows caused by interest rate volatility. For a detailed discussion of the Company’s accounting policies related to derivative instruments, refer to Note 1, “Summary of Significant Accounting Policies.” The Company usually designates derivative instruments used to manage interest rate risk into hedge relationships with the specific assets, liabilities, or cash flows being hedged. Some derivative instruments used for interest rate risk management may not be designated as part of a hedge relationship if the derivative instrument has been moved out of a hedge relationship because the hedge was deemed not effective or if operational or cost constraints make it prohibitive to apply hedge accounting.

Management uses derivative instruments to protect against the risk of interest rate movements on the value of certain assets and liabilities and on future cash flows. The derivative instruments the Company primarily uses are 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 on the Consolidated Statements of Financial Condition and the risk management strategies for the current and anticipated interest rate environment.

As with any financial instrument, derivative instruments have inherent risks, primarily market and credit risk. Market risk is the adverse effect a change in interest rates, currency, equity prices, or implied volatility has on the value of a financial instrument. Market risk associated with changes in interest rates is managed by establishing and monitoring limits as to the degree of risk that may be undertaken as part of the Company’s overall market risk monitoring process, which includes the use of net interest income and economic value of equity simulation methodologies. This process is carried out by the Company’s Asset Liability Management Committee. See further discussion of this process in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of this Form 10-K.

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. All derivative instruments are recorded at fair value as either other assets or other liabilities. Subsequent changes in a derivative’s fair value are recognized in earnings unless specific hedge accounting criteria are met.

On the date the Company enters into a derivative contract, it designates the derivative instrument as either a fair value hedge, cash flow hedge, or as a non-hedge derivative instrument. Derivative instruments designated in a hedge relationship to mitigate exposure to changes in the fair value of an asset or liability attributable to a particular risk, such as interest rate risk, are considered to be fair value hedges. Derivative instruments designated in a hedge relationship to mitigate exposure to variability in expected future cash flows to be received or paid related to an asset or liability or other types of forecasted transactions are considered to be cash flow hedges. The Company formally documents all relationships between hedging instruments and hedged items as well as its risk management objective and strategy for undertaking each hedge transaction.

For effective derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative instrument, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized in current earnings during the period of the change in fair values. For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income. The unrealized gain or loss is reclassified into earnings in the same period or periods during which the hedged transaction affects earnings (for example, when a hedged item is terminated or redesignated). For all hedge relationships, derivative gains and losses not effective in hedging the change in fair value or expected cash flows of the hedged item are recognized immediately in current earnings during the period of change.

126

At the hedge’s inception and at least quarterly thereafter, a formal assessment is performed to determine whether changes in the fair values or cash flows of the derivative instruments have been highly effective in offsetting changes in the fair values or cash flows of the hedged item and whether they are expected to be highly effective in the future. If a derivative instrument designated as a hedge is terminated or ceases to be highly effective, hedge accounting is discontinued prospectively and the gain or loss is amortized to earnings. For fair value hedges, the gain or loss is amortized over the remaining life of the hedged asset or liability. For cash flow hedges, the gain or loss is amortized over the same period(s) that the forecasted hedged transactions impact earnings. If the hedged item is disposed of, or the forecasted transaction is no longer probable, any fair value adjustments are included in the gain or loss from the disposition of the hedged item. In the case of a forecasted transaction that is no longer probable, the gain or loss is included in earnings immediately.

Hedging Strategy

The Company maintains an overall interest rate risk management strategy that incorporates the use of derivative instruments to minimize significant unplanned fluctuations in earnings and cash flows caused by interest rate volatility. The Company usually designates derivative instruments used to manage interest rate risk into hedge relationships with the specific assets, liabilities, or cash flows being hedged. Some derivative instruments used for interest rate risk management may not be designated as part of a hedge relationship if the derivative instrument has been moved out of a hedge relationship because the hedge was deemed not effective or if operational or cost constraints make it prohibitive to apply hedge accounting.

Management uses derivative instruments to protect against the risk of interest rate movements on the value of certain assets and liabilities and on future cash flows. The derivative instruments the Company primarily uses are 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.

As with any financial instrument, derivative instruments have inherent risks, primarily market and credit risk. Market risk is the adverse effect a change in interest rates, currency, equity prices, or implied volatility has on the value of a financial instrument. Market risk associated with changes in interest rates is managed by establishing and monitoring limits as to the degree of risk that may be undertaken as part of the Company’s overall market risk monitoring process, which includes the use of net interest income and economic value of equity simulation methodologies. This process is carried out by the Company’s Asset Liability Management Committee. See further discussion of this process in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of this Form 10-K.

Fair Value Hedges - During 2008 and 2009, the Company hedged the fair value of fixed rate commercial real estate loans through the use of pay fixed, receive variable interest rate swaps. In 2008, the Company also hedged the fair value of fixed rate, junior subordinated debentures through the use of pay variable, receive fixed interest rate swaps, but these were terminated before the end of 2008.

Derivative contracts are valued using observable market prices, if available, or cash flow projection models acquired from third parties. Pricing models used for valuing derivative instruments are regularly validated by testing through comparison with other third parties. The valuations and expected lives presented in the following table are based on yield curves, forward yield curves, and implied volatilities that were observable in the cash and derivatives markets on December 31, 2009 and 2008.

127

Other Derivative Activities - The Company had no other derivative instruments as of December 31, 2009 or 2008. The Company does not enter into derivative transactions for purely speculative purposes.

Interest Rate Derivatives Portfolio

(Dollar amounts in thousands)

	December 31,
	2009			2008
Fair Value Hedges
Related to fixed rate commercial loans
Notional amount outstanding	$	19,005		$	19,982
Weighted-average interest rate received		2.14%			3.16%
Weighted-average interest rate paid		6.40%			6.39%
Weighted-average maturity (in years)		7.76			8.76
Derivative liability fair value	$	(1,208	)	$	(2,628	)
Method used to assess hedge effectiveness		Dollar offset or Shortcut	(1)		Dollar offset or Shortcut	(1)
Method used to calculate ineffectiveness		Change in fair value	(2)		Change in fair value	(2)

⁽¹⁾ The Company uses the shortcut method for one of its derivatives and uses the dollar-offset method for all other derivatives.

⁽²⁾ The Company calculated ineffectiveness based on the change in fair value of the hedged item compared with the change in fair value of the hedging instrument.

	Years ended December 31,
	2009			2008			2007
Gains (losses) on hedged items recognized in noninterest income:
Gains (losses) on swaps	$	1,383		$	(2,227	)	$	(561	)
(Losses) gains on loans		(1,389	)		2,230			573
Net hedge ineffectiveness (1)(2)	$	(6	)	$	3		$	12
Gains recognized in net interest income (3)	$	120		$	125		$	—

⁽¹⁾ Included in other noninterest income in the Consolidated Statements of Income.

⁽²⁾ No gains or losses were recognized related to components of derivative instruments that were excluded from the assessment of hedge ineffectiveness during 2009, 2008, or 2007.

⁽³⁾ The gain represents the fair value on discontinued fair value hedges in connection with our subordinated fixed rate debt that are being amortized through earnings over the remaining life of the hedged item (debt). In addition to these amounts, interest accruals on fair value hedges are also reported in net interest income.

Credit Risk

Credit risk occurs when the counterparty to a derivative contract with an unrealized gain fails to perform according to the terms of the agreement. Credit risk is managed by limiting the aggregate amount of net unrealized gains in agreements outstanding, monitoring the size and the maturity structure of the derivatives, applying uniform credit standards maintained for all activities with credit risk, and collateralizing gains. The Company maintains a policy limiting credit exposure to any one counterparty to not more than 2.5% of stockholders’ equity. In addition, the Company has established bilateral collateral agreements with its major derivative dealer counterparties that provide for exchanges of marketable securities or cash to collateralize either party’s net gains above an agreed-upon minimum threshold. On December 31, 2009, these collateral agreements covered 100% of the fair value of the Company’s interest rate swaps outstanding. Net losses with counterparties must be collateralized with either cash or U.S. government and U.S. government-sponsored agency securities. The Company pledged cash of $1.8 million as of December 31, 2009 and $2.7 million as of December 31, 2008 to collateralize net losses with counterparties. No other collateral was required to be pledged as of December 31, 2008 or 2009.

128

As of December 31, 2008 and 2009, all of the Company’s derivative instruments contained provisions that require the Company’s debt to remain above a certain credit rating by each of the major credit rating agencies. If the Company’s debt were to fall below that credit rating, it would be in violation of those provisions, and the counterparties to the derivative instruments could terminate the swap transaction and demand cash settlement of the derivative instrument.

22.    COMMITMENTS, GUARANTEES, AND CONTINGENT LIABILITIES

Credit Extension 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, to reduce its exposure to fluctuations in interest rates, and to conduct lending activities. These instruments principally include commitments to extend credit, standby letters of credit, 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)

	December 31,
	2009		2008
Commitments to extend credit:
Home equity lines	$	276,024	$	293,221
Credit card lines		12,443		12,417
1-4 family real estate construction		47,531		87,050
Commercial real estate		192,896		286,368
All other commitments		652,131		844,226
Letters of credit:
Standby:
1-4 family real estate construction		17,152		21,301
Commercial real estate		53,534		35,536
All other		71,738		89,175
Recourse on assets securitized		8,132		9,344

Commitments to extend credit are agreements to lend funds to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and variable interest rates tied to prime rate and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash-flow requirements.

Standby and commercial 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. Commercial letters of credit are issued specifically to facilitate commerce and typically result in the commitment being drawn on when the underlying transaction is consummated between the customer and the third party. This type of letter of credit is issued through a correspondent bank on behalf of a customer who is involved in an international business activity such as the importing of goods.

In the event of a customer’s nonperformance, the Company’s credit loss exposure is equal to the contractual amount of those commitments. The credit risk is essentially the same as that involved in extending loans to customers and is subject to normal credit policies. The Company uses the same credit policies in making credit commitments as it does for on-balance sheet instruments, with such exposure to credit loss minimized due to various collateral requirements in place.

129

The maximum potential future payments guaranteed by the Company under standby letters of credit arrangements are equal to the contractual amount of the commitment. The unamortized fees associated with the Company’s standby letters of credit, which is included in other liabilities in the Consolidated Statements of Financial Condition, totaled $755,000 as of December 31, 2009 and $700,000 as of December 31, 2008. The Company will amortize these amounts into income over the commitment period. As of December 31, 2009, standby letters of credit had a remaining weighted-average term of approximately 14.7 months, with remaining actual lives ranging from less than 1 year to 5.5 years. If a commitment is funded, the Company may seek recourse through the liquidation of the underlying collateral provided including real estate, physical plant and property, marketable securities, or cash.

Pursuant to the securitization of certain 1-4 family mortgage loans in fourth quarter 2004, the Company is obligated by agreement to repurchase at recorded value any non-performing loans, defined as loans past due greater than 90 days. The Company repurchased $767,000 of non-performing loans in 2009 and $992,000 of non-performing loans in 2008. During 2009, the Company received $185,000 in satisfaction for loans repurchased in 2008 and 2009 and charged-off $73,000 related to loans repurchased in 2008 and 2009. During 2008, the Company charged-off $41,000 related to three loans repurchased in 2008. The aggregate outstanding balance of securitized loans subject to this recourse obligation was $8.1 million as of December 31, 2009 and $9.3 million as of December 31, 2008. Per its agreement, the Company’s recourse obligations will end on November 30, 2011. The carrying value of the Company’s recourse liability, which is included in other liabilities in the Consolidated Statements of Financial Condition, totaled approximately $150,000 as of December 31, 2009 and 2008.

Visa Litigation

In 2007, Visa completed a restructuring and issued shares of Visa common stock to its member banks in contemplation of its initial public offering (“IPO”) completed in 2008. As part of that Visa reorganization, the Company received its proportionate share of Class U.S.A. shares. In addition, Visa was named as a defendant in several antitrust lawsuits (“Visa litigation”). The terms of the Visa reorganization stipulated that the Visa member banks (including the Company) have a contingent obligation to indemnify Visa for potential losses arising from the Visa litigation.

In 2008, Visa completed its IPO, redeemed a portion of the Class U.S.A. shares, converted the remaining Class U.S.A. shares to Class B shares, and set aside $4.1 billion of the proceeds of the IPO in an escrow account to fund the expenses of the Visa litigation, as well as the members’ proportionate share of any judgments or settlements that may arise out of the Visa litigation. The Class B shares are not transferable (other than to another member bank) until the later of the third anniversary of the IPO closing, or the date in which the Visa litigation is resolved; therefore, the Company’s Class B shares were accounted for at their carryover basis of zero. The Company’s proportionate share of the Visa escrow account is accounted for as a receivable and is classified in other assets as an offset to the related Visa litigation liability, which is classified in other liabilities in the Consolidated Statements of Financial Condition. Both the Company’s receivable and liability balances related to the Visa litigation totaled $552,000 at December 31, 2009 and will decline as amounts are paid out of the escrow account.

In September 2009, the Company sold its 35,605 Class B shares to another financial institution (“the Counterparty”) for $1.2 million and recognized a gain of $1.2 million. In addition, the Company executed a derivative agreement with the Counterparty that allows the Counterparty to pass back the impact of changes in the conversion ratio used to convert Class B shares to Class A shares to the Company. Accordingly, the Company continues to bear the risk of a reduction in the conversion ratio due to the outcome of the Visa litigation.

130

Legal Proceedings

As of December 31, 2009, 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 December 31, 2009.

23.    VARIABLE INTEREST ENTITIES

A variable interest entity (“VIE”) is a partnership, limited liability company, trust, or other legal entity that does not have sufficient equity to permit it to finance its activities without additional subordinated financial support from other parties, or whose investors lack one of three characteristics associated with owning a controlling financial interest. Those characteristics are: (i) the direct or indirect ability to make decisions about an entity’s activities through voting rights or similar rights; (ii) the obligation to absorb the expected losses of an entity if they occur; and (iii) the right to receive the expected residual returns of the entity, if they occur.

GAAP requires VIEs to be consolidated by the party who is exposed to a majority of the VIE’s expected losses and/or residual returns (i.e., the primary beneficiary). The following summarizes the VIEs in which the Company has a significant interest and discusses the accounting treatment applied for the consolidation of VIEs.

The Company owns 100% of the common stock of a business trust that was formed in November 2003 to issue trust preferred securities to third party investors. The trust’s only assets as of December 31, 2009 were the $87.3 million principal balance of the debentures issued by the Company and the related interest receivable of $506,000 that were acquired by the trust using proceeds from the issuance of preferred securities and common stock. The trust meets the definition of a VIE, but the Company is not the primary beneficiary of the trust. Accordingly, the trust is not consolidated in the Company’s financial statements. The subordinated debentures issued by the Company to the trust are included in the Company’s Consolidated Statements of Financial Condition as “Subordinated debt.”

The Company holds interests in three trust preferred capital security issuances. Although these investments may meet the definition of a VIE, the Company is not the primary beneficiary. The Company accounts for its interest in these investments as available-for-sale securities. The Company’s maximum exposure to loss is limited to its investment in these VIEs, which at December 31, 2009 had a total book value of $198,000 and fair value of $95,000.

The Company has a significant limited partner interest in 12 low-income housing tax credit partnerships and limited liability corporations, which were acquired at various times from 1997 to 2004. These entities meet the definition of a VIE. Since the Company is not the primary beneficiary of the entities, it will continue to account for its interest in these partnerships using the cost method. Exposure to loss as a result of its involvement with these entities is limited to the approximately $5.2 million book basis of the Company’s investment, less $395,000 that the Company is obligated to pay but has not yet funded.

24.    ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company measures, monitors, and discloses certain of its assets and liabilities on a fair value basis. 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 and to annually disclose the fair value of pension plan assets. In addition, fair value is used on a non-recurring basis to apply lower-of-cost-or-market accounting to other real estate owned (“OREO”); and evaluate assets or liabilities for impairment, including collateral-dependent impaired loans, goodwill, and other intangibles. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

131

The Company measures fair value in accordance with accounting guidance that was effective for the Company on January 1, 2008 for financial assets and liabilities and on January 1, 2009 for non-financial assets and liabilities. Depending upon the nature of the asset or liability, the Company uses various valuation techniques and input assumptions when estimating fair value.

The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The new fair value guidance establishes a fair value hierarchy that prioritizes the inputs used to measure fair value into three broad levels based on the reliability of the input assumptions. The hierarchy gives the highest priority to level 1 measurements and the lowest priority to level 3 measurements. The three levels of the fair value hierarchy are defined as follows:

• Level 1 – Unadjusted quoted prices for identical assets or liabilities traded in active markets.

• 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 where an asset or liability falls within the hierarchy is based on the lowest level of input that is significant to the fair value measurement.

132

Assets and Liabilities Measured at Fair Value

The following table provides the hierarchy level and fair value for each major category of assets and liabilities measured at fair value at December 31, 2009.

Fair Value Measurements ⁽¹⁾

(Dollar amounts in thousands)

	December 31, 2009
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
As of December 31, 2009
Assets and liabilities measured at fair value on a recurring basis
Assets:
Trading securities	$	14,236	$	-	$	-	$	14,236
Securities available-for-sale:
U.S. Agency securities		-		756		-		756
Collateralized mortgage obligations (2)		-		307,921		-		307,921
Other mortgage-backed securities (2)		-		249,282		-		249,282
State and municipal securities		-		651,680		-		651,680
Collateralized debt obligations		-		-		11,728		11,728
Corporate debt securities		-		37,551		-		37,551
Equity securities		2,646		5,196		-		7,842
Total securities available-for-sale		2,646		1,252,386		11,728		1,266,760
Mortgage servicing rights (3)		-		-		1,238		1,238
Total assets	$	16,882	$	1,252,386	$	12,966	$	1,282,234
Liabilities:
Derivative liabilities (3)	$	-	$	1,208	$	-	$	1,208
Assets measured at fair value on a non-recurring basis
Collateral-dependent impaired loans (4)	$	-	$	-	$	120,549	$	120,549
Other real estate owned (5)		-		-		57,137		57,137
Total assets	$	-	$	-	$	177,686	$	177,686

Refer to the following page for footnotes.

133

	December 31, 2009
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
As of December 31, 2008
Assets and liabilities measured at fair value on a recurring basis
Assets:
Trading securities	$	12,358	$	-	$	-	$	12,358
Securities available-for-sale:
U.S. Treasury securities		-		1,041		-		1,041
Collateralized mortgage obligations (2)		-		698,839		-		698,839
Other mortgage-backed securities (2)		-		501,633		16,632		518,265
State and municipal securities		-		906,747		-		906,747
Collateralized debt obligations		-		-		42,086		42,086
Corporate debt securities		-		33,325		-		33,325
Equity securities		-		15,883		-		15,883
Total securities available-for-sale		-		2,157,468		58,718		2,216,186
Mortgage servicing rights (3)		-		-		1,461		1,461
Total assets	$	12,358	$	2,157,468	$	60,179	$	2,230,005
Liabilities:
Derivative liabilities (3)	$	-	$	2,628	$	-	$	2,628
Assets measured at fair value on a non-recurring basis
Collateral-dependent impaired loans (4)	$	-	$	-	$	26,642	$	26,642
Other real estate owned (5)		-		-		24,368		24,368
Total assets	$	-	$	-	$	51,010	$	51,010

⁽¹⁾ Excludes the fair value disclosures for the Company’s defined benefit pension plan assets, which are presented separately in the tables that follow.

⁽²⁾ These securities are backed by residential mortgages.

⁽³⁾ Mortgage servicing rights are included in other assets, and derivative liabilities are included in other liabilities in the Consolidated Statements of Financial Condition.

⁽⁴⁾ Represents the carrying value of loans for which adjustments are based on the appraised or market-quoted value of the collateral.

⁽⁵⁾ Represents the estimated fair value, net of selling costs, based on appraised value.

Valuation Methodology

The following describes the valuation methodologies used by the Company for assets and liabilities measured at fair value, including the general classification of the assets and liabilities pursuant to the valuation hierarchy.

Trading Securities – 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 common stock. Trading securities are reported at fair value, with unrealized gains and losses included in noninterest income. The fair value of trading securities is based on quoted market prices in active exchange markets and, therefore, is classified in level 1 of the valuation hierarchy.

Securities Available-for-Sale – Substantially all available-for-sale securities are 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

134

quoted market prices obtained from external pricing services or dealer market participants where trading in an active market exists. In obtaining such data from external pricing services, the Company has evaluated the methodologies used to develop the fair values in order to determine whether such valuations are representative of an exit price in the Company’s principal markets. The Company’s principal markets for its securities portfolio are the secondary institutional markets, with an exit price that is based on bid level pricing in those markets. Examples of such securities measured at fair value are U.S. Treasury and Agency securities, municipal bonds, collateralized mortgage obligations, and other mortgage-backed securities. These securities are generally classified in level 2 of the valuation hierarchy. In certain cases where there is limited activity or less transparency for inputs to the valuation, securities are classified in level 3 of the valuation hierarchy. For instance, in the valuation of certain collateralized mortgage and debt obligations and high-yield debt securities, the determination of fair value may require benchmarking to similar instruments or analyzing default and recovery rates.

Due to the illiquidity in the secondary market for the Company’s seven trust-preferred CDOs, especially since the disruption in the credit markets, the Company determined that dealer quotes did not reflect the best estimate of fair value. Therefore, the Company, with the assistance of a structured credit valuation firm, estimated the value of these securities using discounted cash flows and has classified these investments in level 3 of the valuation hierarchy.

The valuation for each of the seven CDOs relies on independently verifiable historical financial data. The valuation firm performs a credit analysis of each of the entities comprising the collateral underlying each CDO in order to estimate the likelihood of default by any of these entities on their trust-preferred obligation. Cash flows are modeled based upon the contractual terms of the CDO, discounted to their present values, and used to derive the estimated fair value of the individual CDO, as well as any credit loss or impairment.

The component of loss for any CDO that is deemed to be credit-related, if any, is determined by comparing the current amortized cost to the discounted cash flows for each CDO using each CDO’s specific contractual yield. The contractual yields for these CDOs range from the London Interbank Offered Rate (“LIBOR”) plus 125 to 160 basis points.

The fair value for each CDO is determined by discounting the estimated cash flows by a rate ranging from LIBOR plus 1,000 to 1,500 basis points, depending upon the specific CDO. The discount rate used is intended to reflect the higher risk inherent in these securities given the current market. Currently, five of these CDOs are deferring interest payments. The Company has ceased accruing interest on these securities.

135

Carrying Value of Level 3 Securities Available-for-Sale

(Dollar amounts in thousands)

	Year Ended December 31,
	2009									2008
	Other Mortgage- Backed Securities			Collateralized Debt Obligations			Total			Mortgage- Backed Securities			Collateralized Debt Obligations			Total
Balance at beginning of period	$	16,632		$	42,086		$	58,718		$	28,866		$	81,630		$	110,496
Total income (losses):
Included in earnings (1)		-			(24,508	)		(24,508	)		-			(33,337	)		(33,337	)
Included in other comprehensive income (loss)		566			(5,835	)		(5,269	)		132			(4,366	)		(4,234	)
Purchases, sales, issuances, and settlements		(1,592	)		(15	)		(1,607	)		(1,716	)		(1,841	)		(3,557	)
Transfers out of Level 3 (2)		(15,606	)		-			(15,606	)		(10,650	)		-			(10,650	)
Balance at end of period	$	-		$	11,728		$	11,728		$	16,632		$	42,086		$	58,718
Change in unrealized losses recognized in earnings relating to securities still held at end of period	$	-		$	(24,508	)	$	(24,508	)	$	-		$	34,844		$	34,844

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

⁽²⁾ The transfers out of level 3 represent securities that were manually priced using broker quotes (a level 3 input) at the beginning of the period, but valued by an external pricing service (a level 2 input) at the end of the period.

In the table above, the net losses recognized in earnings for securities available-for-sale represent non-cash impairment charges recognized during 2009 on certain CDOs that were deemed to have a credit impairment, net of the gain realized on the sale of an asset-backed CDO previously written down.

Mortgage Servicing Rights – The Company records its mortgage servicing rights at fair value. 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. Mortgage servicing rights are included in other assets in the Consolidated Statements of Financial Condition. Key economic assumptions used in measuring the fair value of mortgage servicing rights include weighted-average prepayment speeds and weighted-average discount rates. While market-based data is used to determine the input assumptions, the Company incorporates its own estimates of assumptions market participants would use in determining the fair value of mortgage servicing rights and classifies them in level 3 of the valuation hierarchy.

A rollforward of the carrying value of mortgage servicing rights was provided in Note 6, “Securitizations and Mortgage Servicing Rights.”

Derivative Assets and Derivative Liabilities – The interest rate swaps entered into by the Company are executed in the dealer market and priced 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. As the fair value estimates for interest rate swaps are primarily based on LIBOR, which is a market observable input, derivatives are classified in level 2 of the valuation 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

136

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. The likelihood of the Company’s default is considered remote. For this reason, non-performance risk is considered extremely low, and accordingly, any such credit risk adjustments to the Company’s derivative assets and liabilities would be immaterial.

Collateral-Dependent Impaired Loans - The carrying value of impaired loans is disclosed in Note 7, “Reserve for Loan 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 on these loans to reflect (1) partial write-downs that are based on the current appraised or market-quoted value of the underlying collateral or (2) the full charge-off of the loan carrying value. In some cases, the properties for which market quotes or appraised values have been obtained are located in areas where comparable sales data is limited, outdated, or unavailable. Accordingly, fair value estimates, including those obtained from real estate brokers or other third-party consultants, for collateral-dependent impaired loans are classified in level 3 of the valuation hierarchy.

During 2009, collateral-dependent impaired loans with a carrying value of $307.3 million, less transfers to OREO of $61.0 million, were written down to their fair value of $120.5 million, resulting in a charge to the reserve for loan losses of $125.8 million, which was included in earnings.

Other Real Estate Owned - OREO includes properties acquired in partial or total satisfaction of certain loans. 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 estimated sales price of the properties on the date acquired less estimated selling costs. Fair value assumes an orderly disposition except where a specific disposition strategy is expected. Any write-downs in the carrying value of a property at the time of acquisition are charged against the reserve for loan losses. Management periodically reviews the carrying value of OREO properties. Any write-downs of the properties subsequent to acquisition, 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 they occur. Fair value is generally based on third party appraisals and internal estimates and is therefore considered a Level 3 valuation.

During 2009, OREO properties with a carrying value of $71.4 million were written down to their fair value of $56.9 million, resulting in a charge to earnings of $12.6 million and a charge to the reserve for loan losses of $1.9 million.

Goodwill and Other Intangible Assets - Goodwill represents the excess of purchase price over the fair value of net assets acquired using the purchase method of accounting. Other intangible assets represent purchased assets that also lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset, or liability.

Goodwill and other intangible assets are subject to impairment testing, which requires a significant degree of management judgment. Goodwill is tested at least annually for impairment or more often if events or circumstances between annual tests indicate that there may be impairment. The testing was performed by comparing the carrying value of goodwill with the anticipated future cash flows.

Identified intangible assets that have a finite useful life are amortized over that life in a manner that reflects the estimated decline in the economic value of the identified intangible asset. Identified intangible assets that have a finite useful life are reviewed annually to determine whether there have been any events or circumstances to indicate that the recorded amount is not recoverable from projected undiscounted net operating cash flows.

The annual test of goodwill and identified intangible assets performed as of October 1, 2009 for goodwill and November 30, 2009 for intangible assets did not indicate that an impairment charge was required. Additional

137

goodwill impairment testing was conducted in first quarter 2009, when general economic conditions deteriorated significantly and the Company experienced a substantial decline in market capitalization. The additional testing did not indicate that an impairment charge was required.

If the testing had resulted in impairment, the Company would have classified goodwill and other intangible assets subjected to nonrecurring fair value adjustments as Level 3. Additional information regarding goodwill, other intangible assets, and impairment policies can be found in Note 9 of “Goodwill and Other Intangible Assets.”

Fair Value of Pension Plan Assets

The following describes the valuation methodologies used for pension plan assets measured at fair value on an annual basis, including the general classification of the assets pursuant to the fair value hierarchy.

• Mutual funds are valued at the published net asset value of shares held by the Plan at year end and are classified as level 1 in the valuation hierarchy.

• Money market funds are valued at cost, which approximates fair value, and are classified as level 1 in the valuation hierarchy.

• U.S. Treasury securities are valued at the closing price reported on the active market on which the individual securities are traded and, therefore, are classified as level 1 in the valuation hierarchy.

• Corporate bonds and U.S. government agency securities are valued at quoted prices from independent sources which are based on observable market trades or observable prices for similar bonds where a price for the identical bond is not observable and, therefore, are classified as level 2 in the valuation hierarchy.

• Common stocks are valued at the closing price reported on the active market on which the individual securities are traded and, therefore, are classified as level 1 in the valuation hierarchy.

• Common trust funds are valued at quoted redemption values on the last business day of the Plan’s year end and are classified as level 2 in the valuation hierarchy.

The following table sets forth by level, within the fair value hierarchy, the pension plan assets at fair value as of December 31, 2009.

	Pension Plan Assets at Fair Value as of December 31, 2009
	Level 1		Level 2		Level 3		Total
Mutual funds (1)	$	4,737	$	-	$	-	$	4,737
U.S. government and government agency securities		3,726		5,446		-		9,172
Corporate bonds		-		10,830		-		10,830
Common stocks		14,006		-		-		14,006
Common trust funds		-		12,288		-		12,288
Total assets at fair value	$	22,469	$	28,564	$	-	$	51,033

⁽¹⁾ Includes mutual funds, money market funds, cash, cash equivalents, and accrued interest.

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. Because 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

138

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 property, plant, 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. Because 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, funds sold and other short-term investments, mortgages held for sale, bank owned life insurance, 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 - The fair value of loans was estimated using present value techniques by discounting the future cash flows of the remaining maturities of the loans, and, when applicable, 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 present value of the loan portfolio, however, was accommodated through the use of the reserve for loan losses, which is believed to represent the current fair value of probable incurred losses for purposes of the fair value calculation.

Covered Assets - Covered assets represent the loans and OREO acquired from the former First DuPage Bank, including the FDIC indemnification asset. The fair value for the loan portfolio was determined by discounting the expected cash flows at a market interest rate based on certain input assumptions. The market interest rate (discount rate) was derived from LIBOR swap rates over the expected weighted average life of the asset. The expected cash flows were determined based on contractual terms and default timing assumptions. The Company also estimated the fair value of OREO and the FDIC indemnification asset, which covers both the loans and OREO acquired, based on a similar discounted cash flow approach.

Investment in Bank Owned Life Insurance - The fair value of investments in bank owned life insurance is based on quoted market prices of the underlying assets.

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.

139

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 represents 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 general 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)

	December 31,
	2009				2008
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial Assets:
Cash and due from banks	$	101,177	$	101,177	$	106,082	$	106,082
Funds sold and other short-term investments		26,202		26,202		8,226		8,226
Trading account securities		14,236		14,236		12,358		12,358
Securities available-for-sale		1,266,760		1,266,760		2,216,186		2,216,186
Securities held-to-maturity		84,182		84,496		84,306		84,592
Loans, net of reserve for loan losses		5,058,438		5,041,598		5,266,194		5,231,925
Covered assets		223,245		223,245		-		-
Accrued interest receivable		32,600		32,600		43,247		43,247
Investment in bank owned life insurance		197,962		197,962		198,533		198,533
Financial Liabilities:
Deposits	$	5,885,279	$	5,884,345	$	5,585,754	$	5,583,943
Borrowed funds		691,176		697,088		1,698,334		1,703,940
Subordinated debt		137,735		116,845		232,409		171,307
Accrued interest payable		5,108		5,108		10,550		10,550
Derivative liabilities		1,208		1,208		2,628		2,628
Standby letters of credit		755		755		700		700

25.    SUPPLEMENTARY CASH FLOW INFORMATION

Supplemental Disclosures to the Consolidated Statements of Cash Flows

(Dollar amounts in thousands)

	Years Ended December 31,
	2009			2008		2007
Income taxes (refunded) paid	$	(1,378	)	$	20,800	$	40,133
Interest paid to depositors and creditors		95,661			168,903		240,418
Non-cash transfers of loans to other real estate owned		79,430			27,342		8,931
Dividends declared but unpaid		549			10,953		15,045
Non-cash transfer of loans to securities available-for-sale		25,742			-		-
Non-cash transfers of other real estate owned to premises, furniture, and equipment t		6,860			-		-
Issuance of common stock in exchange for the extinguishment of subordinated debt		57,966			-		-

140

26.    RELATED PARTY TRANSACTIONS

The Company, through the Bank, has made loans and had transactions with certain of its directors and executive officers. However, all such loans and transactions were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than the normal risk of collectability or present other unfavorable features. The Securities and Exchange Commission has determined that, with respect to the Company and its significant subsidiaries, disclosure of borrowings by directors and executive officers and certain of their related interests should be made if the loans are greater than 5% of stockholders’ equity, in the aggregate. These loans aggregating $1.0 million at December 31, 2009 and $2.4 million at December 31, 2008 were not greater than 5% of stockholders’ equity at December 31, 2009 or 2008, respectively.

27. CONDENSED PARENT COMPANY FINANCIAL STATEMENTS

The following represents the condensed financial statements of First Midwest Bancorp, Inc., the Parent Company.

Statements of Financial Condition

(Parent Company only)

(Dollar amounts in thousands)

	December 31,
	2009		2008
Assets
Cash and interest-bearing deposits	$	141,941	$	209,195
Investment in and advances to subsidiaries		908,836		921,548
Goodwill		10,358		10,358
Other assets		39,598		30,079
Total assets	$	1,100,733	$	1,171,180
Liabilities and Stockholders’ Equity
Subordinated debt	$	137,735	$	232,409
Accrued expenses and other liabilities		21,477		30,492
Stockholders’ equity – common		751,288		718,662
Stockholders’ equity – preferred		190,233		189,617
Total liabilities and stockholders’ equity	$	1,100,733	$	1,171,180

141

Statements of Income

(Parent Company only)

(Dollar amounts in thousands)

	Years ended December 31,
	2009			2008			2007
Income
Dividends from subsidiaries	$	750		$	-		$	123,520
Interest income		1,596			1,330			3,624
Gains on early extinguishment of debt		15,258			-			-
Securities transactions and other		3,157			(5,155	)		1,443
Total income		20,761			(3,825	)		128,587
Expenses
Interest expense		13,592			14,969			14,969
Salaries and employee benefits		8,308			1,732			9,122
Other expenses		4,715			4,688			3,900
Total expenses		26,615			21,389			27,991
(Loss) income before income tax benefit and equity in undistributed income of subsidiaries		(5,854	)		(25,214	)		100,596
Income tax benefit		2,617			8,916			9,009
(Loss) income before undistributed (loss) income of subsidiaries		(3,237	)		(16,298	)		109,605
Equity in undistributed (loss) income of subsidiaries		(22,513	)		65,634			(29,446	)
Net (loss) income		(25,750	)		49,336			80,159
Preferred dividends		(10,265	)		(712	)		-
Net loss (income) applicable to non-vested restricted shares		464			(142	)		(65	)
Net (loss) income applicable to common shares	$	(35,551	)	$	48,482		$	80,094

142

Statements of Cash Flows

(Parent Company only)

(Dollar amounts in thousands)

	Years ended December 31,
	2009			2008			2007
Operating Activities
Net (loss) income	$	(25,750	)	$	49,336		$	80,159
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Loss (equity) in undistributed loss (income) from subsidiaries		22,513			(65,634	)		29,446
Depreciation of premises, furniture, and equipment		8			8			10
Gains on early extinguishment of debt		(15,258	)		-			-
Net losses on sales of fixed assets		-			2			23
Tax benefit related to share-based compensation		581			1,370			1,201
Net (increase) decrease in other assets		(10,370	)		17,618			(4,353	)
Net (decrease) increase in other liabilities		(6,334	)		(5,961	)		1,935
Net cash (used in) provided by operating activities		(34,610	)		(3,261	)		108,421
Investing Activities
Purchases of securities available-for-sale		(1,050	)		-			(2,200	)
Proceeds from sales of securities available-for-sale		800			-			-
Purchase of premises, furniture, and equipment, net of sales		(15	)		(15	)		25
Net cash used in investing activities		(265	)		(15	)		(2,175	)
Financing Activities
Payments for the retirement of subordinated debt		(19,400	)		-			-
Proceeds from the issuance of preferred stock		-			193,000			-
Net purchases of treasury stock		-			(138	)		(61,733	)
Cash dividends paid		(12,423	)		(60,298	)		(58,499	)
Exercise of stock options and restricted stock activity		(379	)		245			4,721
Excess tax (expense) benefit related to share-based compensation		(177	)		(37	)		361
Net cash provided by (used in) financing activities		(32,379	)		132,772			(115,150	)
Net (decrease) increase in cash and cash equivalents		(67,254	)		129,496			(8,904	)
Cash and cash equivalents at beginning of year		209,195			79,699			88,603
Cash and cash equivalents at end of year	$	141,941		$	209,195		$	79,699

28.    SUBSEQUENT EVENTS

On January 13, 2009, the Company sold 18,818,183 shares of Common Stock in an underwritten public offering. The price to the public was $11.00 per share, and the proceeds to the Company, net of the underwriters’ discount, were $10.45 per share, resulting in aggregate net proceeds of $196.7 million, net of related expenses. The net proceeds will be used to improve the quality of the Company’s capital composition.

The Company does not believe any additional subsequent events have occurred that would require further disclosure or adjustment to the financial statements.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

143

ITEM 9A. CONTROLS AND PROCEDURES

As of 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 the Company’s disclosure controls and procedures pursuant to Rule 13a-15 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 quarter ended December 31, 2009 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management’s Report On Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Accordingly, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009. In making this assessment, management used the criteria set forth in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has determined that the Company’s internal control over financial reporting as of December 31, 2009 is effective based on the specified criteria.

Ernst & Young LLP, the independent registered public accounting firm that audited the Company’s consolidated financial statements included in this Annual Report on Form 10-K, has issued an attestation report on the Company’s internal control over financial reporting as of December 31, 2009. The report, which expresses an unqualified opinion on the Company’s internal control over financial reporting as of December 31, 2009, is included in this Item under the heading “Attestation Report of Independent Registered Public Accounting Firm.”

Attestation Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

First Midwest Bancorp, Inc.:

We have audited First Midwest Bancorp, Inc.’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). First Midwest Bancorp, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

144

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, First Midwest Bancorp, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of financial condition of First Midwest Bancorp, Inc. as of December 31, 2009 and 2008, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2009 of First Midwest Bancorp, Inc. and our report dated March 1, 2010 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Chicago, Illinois

March 1, 2010

ITEM 9B. OTHER INFORMATION

None.

145

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

The Company’s executive officers are elected annually by the Company’s Board of Directors, and the Bank’s executive officers are elected annually by the Bank’s Board of Directors. Certain information regarding the Company’s and the Bank’s executive officers is set forth below.

Name (Age)	Position or Employment for Past Five Years	Executive Officer Since
Michael L. Scudder (49)	President and Chief Executive Officer of the Company since 2008. Previously, since 2007, Mr. Scudder served as the Company’s President and Chief Operating Officer as well as Group Executive Vice President of the Bank, before which he served as the Company’s Executive Vice President and Chief Financial Officer of the Company and Group Executive Vice President and Chief Financial Officer of the Bank.	2002
Kent S. Belasco (58)	Executive Vice President and Chief Information Officer of the Bank.	2004
Victor P. Carapella (60)	Executive Vice President and Commercial Banking Group Manager of the Bank since 2008; prior thereto, Sales Manager since 2001.	2008
Paul F. Clemens (57)	Executive Vice President and Chief Financial Officer of the Company; prior thereto, Senior Vice President, Chief Accounting Officer, and Principal Accounting Officer of the Company since 2006; prior thereto, Chief Financial Officer of the western Michigan market of Fifth Third Bank.	2006
James P. Hotchkiss (53)	Executive Vice President and Treasurer of the Bank since 2004; prior thereto, Senior Vice President and Treasurer of the Bank since 2000; prior thereto, Director of International Money Markets of Bank of Montreal.	2004
Michael J. Kozak (58)	Executive Vice President and Chief Credit Officer of the Bank since 2004; prior thereto, Senior Vice President, Regional Credit Officer of the Bank.	2004
Cynthia A. Lance (41)	Executive Vice President and Corporate Secretary since 2007; prior thereto, Assistant General Counsel of CBOT Holdings, Inc. since 2006, and Assistant General Counsel of NYSE Group, Inc. (formerly Archipelago Holdings, Inc.) from 2004 to 2006; and prior thereto, corporate attorney for the Chicago law office of Sonnenschein, Nath and Rosenthal.	2007
Kevin L. Moffitt (50)	Executive Vice President and Audit Services Director of the Company since 2009; prior thereto, Vice President and Head of Internal Audit at Nuveen Investments, Inc. since 2007; and prior thereto, Group Senior Vice President and Compliance Regional Chief Operating Officer of ABN AMRO North America, Inc.	2009

146

Name (Age)	Position or Employment for Past Five Years	Executive Officer Since
Thomas J. Schwartz (60)	Executive Vice President of the Company since 2007; also, President and Chief Executive Officer of the Bank since 2008; prior thereto, President and Chief Operating Officer of the Bank since 2007; prior thereto, Group President, Commercial Banking of the Bank.	2002
Janet M. Viano (54)	Group President, Retail Banking of the Bank.	2002
Stephanie R. Wise (42)	Executive Vice President, Business and Institutional Services since 2003; prior thereto, Executive Vice President, E-Commerce Division Manager of the Bank.	2004

Information relating to our directors, including our audit committee and audit committee financial experts and the procedures by which stockholders can recommend director nominees, will be in our definitive Proxy Statement for our 2010 Annual Meeting of Stockholders to be held on May 19, 2010, which will be filed within 120 days of the end of our fiscal year ended December 31, 2009 (the “2010 Proxy Statement”) and is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

Information relating to our executive officer and director compensation will be in the 2010 Proxy Statement and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information relating to security ownership of certain beneficial owners of our common stock and information relating to the security ownership of our management will be in the 2010 Proxy Statement and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Information regarding certain relationships and related transactions and director independence will be in the 2010 Proxy Statement and is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information regarding principal accountant fees and services will be in the 2010 Proxy Statement and is incorporated herein by reference.

147

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) (1)	Financial Statements
	The following consolidated financial statements of the Registrant and its subsidiaries are filed as a part of this document under Item 8, “FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.”
	Report of Independent Registered Public Accounting Firm.	83
	Consolidated Statements of Financial Condition as of December 31, 2009 and 2008.	84
	Consolidated Statements of Income for the years ended December 31, 2009, 2008, and 2007.	85
	Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2009, 2008, and 2007.	86
	Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008, and 2007.	87
	Notes to Consolidated Financial Statements.	88
(a) (2)	Financial Statement Schedules
	The schedules for the Registrant and its subsidiaries are omitted because of the absence of conditions under which they are required, or because the information is set forth in the consolidated financial statements or the notes thereto.
(a) (3)	Exhibits
	See Exhibit Index beginning on the following page.

148

EXHIBIT INDEX

Exhibit Number	Description of Documents
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.
4.1	Amended and Restated Rights Agreement dated November 15, 1995, is incorporated herein by reference to Exhibits (1) through (3) of the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on November 21, 1995.
4.2	First Amendment to Rights Agreements dated June 18, 1997, is incorporated herein by reference to Exhibit 4 of the Company’s Amendment No. 2 to the Registration Statement on Form 8-A filed with the Securities and Exchange Commission on June 30, 1997.
4.3	Amendment No. 2 to Rights Agreements dated November 14, 2005, is incorporated herein by reference to Exhibit 4.1 of the Company’s Amendment No. 3 to the Registration Statement on Form 8-A filed with the Securities and Exchange Commission on November 16, 2005.
4.4	Amendment No. 3 to Rights Agreements dated December 8, 2008, is incorporated herein by reference to Exhibit 4.4 of the Company’s Amendment No. 4 to the Registration Statement on Form 8-A filed with the Securities and Exchange Commission on December 9, 2008.
4.5	Certificate of Designation for Fixed Rate Cumulative Perpetual Preferred Stock Series B dated December 5, 2008, is incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 9, 2008.
4.6	Form of Warrant for Purchase of Shares of Common Stock, dated December 5, 2008, is incorporated herein by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 9, 2008.
4.7	Declaration of Trust of First Midwest Capital Trust I dated August 21, 2009 is incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 27, 2009.
4.8	Indenture dated August 21, 2009 is incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 27, 2009.
4.9	Series A Capital Securities Guarantee Agreement dated November 18, 2003 is incorporated herein by reference to Exhibit 4.6 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 9, 2004.
10.1	Letter Agreement by and between First Midwest Bancorp, Inc. and the United States Department of the Treasury dated December 5, 2008, is incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 9, 2008.
10.2	Senior Executive Letter Agreement under the TARP Capital Purchase Program by and between First Midwest Bancorp, Inc. and the United States Department of the Treasury dated December 5, 2008, is incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 9, 2008.

149

10.3	First Midwest Savings and Profit Sharing Plan as Amended and Restated effective January 1, 2008 is herein incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2009.
10.4	Short-term Incentive Compensation Plan is incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 4, 2006.
10.5	First Midwest Bancorp, Inc. Omnibus Stock and Incentive Plan is incorporated herein by reference to Addendum A to the Company’s proxy Statement filed with the Securities and Exchange Commission on April 8, 2009.
10.6	Amendment to the First Midwest Bancorp, Inc. Omnibus Stock and Incentive Plan is incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly report on Form 10-Q filed with the Securities and Exchange Commission on August 4, 2006.
10.7	First Midwest Bancorp, Inc. Amended and Restated Non-Employee Directors Stock Plan dated May 21, 2008 is herein incorporated by reference to Exhibit 10.7 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2009.
10.8	Restated First Midwest Bancorp, Inc. Nonqualified Stock Option-Gain Deferral Plan effective January 1, 2008 is incorporated herein by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2008.
10.9	Restated First Midwest Bancorp, Inc. Deferred Compensation Plan for Non-employee Directors effective January 1, 2008 is incorporated herein by reference to Exhibit 10.13 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2008.
10.10	Restated First Midwest Bancorp, Inc. Nonqualified Retirement Plan effective January 1, 2008 is incorporated herein by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2008.
10.11	Form of Non-Employee Director Restricted Stock grant between the Company and directors of the Company pursuant to the First Midwest Bancorp, Inc. Amended and Restated Non-Employee Directors Stock Plan is incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities Exchange Commission on May 28, 2008.
10.12	Form of Nonqualified Stock Option grant between the Company and directors of the Company pursuant to the First Midwest Bancorp, Inc. Non-Employee Directors Stock Option Plan is incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with the Securities Exchange Commission on May 12, 2008.
10.13	Form of Nonqualified Stock Option grant between the Company and certain officers of the Company pursuant to the First Midwest Bancorp, Inc. Omnibus Stock and Incentive Plan is incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 12, 2008.
10.14	Form of Restricted Stock Unit grant between the Company and certain officers of the Company pursuant to the First Midwest Bancorp, Inc. Omnibus Stock and Incentive Plan is incorporated herein by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2008.
10.15	Form of Restricted Stock grant between the Company and certain officers of the Company pursuant to the First Midwest Bancorp, Inc. Omnibus Stock and Incentive Plan is incorporated herein by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2008.

150

10.16	Form of CEO Promotion Restricted Stock grant dated December 22, 2008 between the Company and Michael L. Scudder pursuant to the First Midwest Bancorp, Inc. Omnibus Stock and Incentive Plan is herein incorporated by reference to Exhibit 10.16 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2009.
10.17	Form of TARP Compliant Restricted Share Agreement between the Company and its highly compensated executives.
10.18	Form of Indemnification Agreement executed between the Company and certain officers and directors of the Company is incorporated herein by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 9, 2007.
10.19	Form of Class IA Employment Agreement.
10.20	Form of Class II Employment Agreement.
10.21	Form of Class III Agreement.
10.22	Retirement and Consulting Agreement and Continuing Participant Agreement to the First Midwest Bancorp, Inc. Omnibus Stock and Incentive Plan executed between the Company and a former executive of the Company is incorporated herein by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 7, 2003.
10.23	Retirement and Consulting Agreements executed between the Company and a former executive of the Company is incorporated herein by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 9, 2007.
10.24	Outsourcing Agreement by and Between the Company and Metavante Corporation dated July 1, 1999.
10.25	Amendment to the Outsourcing Agreement by and Between the Company and Metavante Corporation dated April 28, 2004.
10.26	Amendment to the Outsourcing Agreement by and Between the Company and Metavante Corporation dated July 1, 2006.
10.27	Omnibus Asset Servicing Agreement between the Company and Bayview Loan Servicing LLC dated November 23, 2009.
10.28	Summary of Executive Compensation
10.29	Summary of Director Compensation
11	Statement re: Computation of Per Share Earnings - The computation of basic and diluted earnings per share is included in Note 14 of the Company’s Notes to Consolidated Financial Statements included in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” on Form 10-K for the year ended December 31, 2009.
12	Statement re: Computation of Ratio of Earnings to Fixed Charges.
14.1	Code of Ethics and Standards of Conduct is incorporated herein by reference to Exhibit 14.1 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2008.
14.2	Code of Ethics for Senior Financial Officers is incorporated herein by reference to Exhibit 14.2 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2008.
21	Subsidiaries of the Registrant.
23	Consent of Independent Registered Public Accounting Firm.

151

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 for the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.
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 for the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.
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 for the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.
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 for the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.
99.1	Certification of Chief Executive Officer pursuant to Section 111(b)(4) of the Emergency Economic Stabilization Act of 2008.
99.2	Certification of Chief Financial Officer pursuant to Section 111(b)(4) of the Emergency Economic Stabilization Act of 2008.

⁽¹⁾ Furnished, not filed.

152

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Registrant

By	/S/ MICHAEL L. SCUDDER
	Michael L. Scudder
	President, Chief Executive Officer, and Director

March 1, 2010

Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in their capacities indicated on March 1, 2010.

Signatures
/S/ ROBERT P. O’MEARA Robert P. O’Meara	Chairman of the Board
/S/ MICHAEL L. SCUDDER Michael L. Scudder	President, Chief Executive Officer, and Director
/S/ PAUL F. CLEMENS Paul F. Clemens	Executive Vice President, Chief Financial Officer, and Principal Accounting Officer
/S/ BARBARA A. BOIGEGRAIN Barbara A. Boigegrain	Director
/S/ BRUCE S. CHELBERG Bruce S. Chelberg	Director
/S/ JOHN F. CHLEBOWSKI, JR. John F. Chlebowski, Jr.	Director
/S/ JOSEPH W. ENGLAND Joseph W. England	Director
/S/ BROTHER JAMES GAFFNEY, FSC Brother James Gaffney, FSC	Director
/S/ THOMAS M. GARVIN Thomas M. Garvin	Director
/S/ PATRICK J. MCDONNELL Patrick J. McDonnell	Director

153

Signatures
/S/ JOHN E. ROONEY John E. Rooney	Director
/S/ ELLEN A. RUDNICK Ellen A. Rudnick	Director
/S/ THOMAS J. SCHWARTZ Thomas J. Schwartz	Executive Vice President and Director
/S/ JOHN L. STERLING John L. Sterling	Director
/S/ J. STEPHEN VANDERWOUDE J. Stephen Vanderwoude	Director

154

EX-10.17

Exhibit 10.17

First Midwest Bancorp, Inc Form of TARP Compliant Restricted Share Agreement

{Date}

{Name}

RE: Letter Agreement dated                 , Restricted Stock Number                     

Grant of Restricted Stock (the “Agreement”)

Dear                     :

I am pleased to advise you that on                      (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 _____ 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, and to the attached TARP Addendum, both of 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 paragraphs (3) and (4) below, 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 dates. The Restricted Shares will vest and become transferable in as follows: (a) 50% will vest on                     ; and (b) the remaining 50% of the Award will vest                     .

(3) Termination of Employment

If your employment with the Company or any of its subsidiaries terminates due to your death, Disability or Retirement at or after your Normal Retirement Date, 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 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 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) Conformity with TARP Requirements.

The provisions of this Letter Agreement and your rights hereunder are subject to the TARP Addendum attached hereto and incorporated herein by reference.

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-              .

Very truly yours,

First Midwest Bancorp, Inc.

FIRST MIDWEST BANCORP, INC.

TARP ADDENDUM TO LETTER AGREEMENT

Additional Terms and Conditions Applicable to                      Restricted Shares Award

1.	Purpose; Compliance with     TARP Requirements:	The purpose of this TARP Addendum to Restricted Stock Letter Agreement (“TARP Addendum”) is to incorporate into the terms of the Letter Agreement, provisions necessary to ensure compliance by the Company and the Grantee with TARP Requirements. Accordingly, as a condition of receiving the Award of Restricted Shares, Grantee acknowledges and agrees that: A. the Award is and shall remain subject to any applicable TARP Requirements; B. the Award is subject to modification in order to comply with applicable TARP Requirements; and C. Grantee agrees to immediately repay any amounts that may have been received by Grantee under the Award that are later determined to be in conflict with any applicable TARP Requirements. In furtherance of and without limiting the foregoing, the Restricted Shares awarded under the Letter Agreement shall be subject to the provisions set forth below in this TARP Addendum.
2.	Applicability:	This TARP Addendum and the TARP Requirements are only applicable to the Award if: A. Grantee is or becomes a MCE, prior to the date the Restricted Shares become vested and transferable under the terms of the Letter Agreement (such limitations the “Bonus Limitations”); B. Grantee is a SEO or MCE subject to the Golden Parachute Prohibition; or C. TARP Requirements otherwise apply to this award to Grantee. To the extent the TARP Requirements are not and do not become applicable to Grantee for the reasons described above, then this TARP Addendum and the TARP Requirements shall not apply to the Award and Grantee’s rights to the Restricted Shares shall be governed solely by the terms of the Letter Agreement without regard to this TARP Addendum.
3.	Long-Term Restricted Stock     Award; Effect on     Transferability:	To the extent the granting of this Award or Grantee’s rights to the accrual or payment (within the meaning of the TARP Requirements) of all or any portion of the Restricted Shares covered by the Award are subject to the Bonus Limitations, the Award shall be an award of Long-Term Restricted Stock described in Q-1 which is intended to satisfy the TARP Requirements. To the extent required to comply with the TARP Requirements, the Restricted Shares covered by the Award shall, to the extent applicable: A. be subject to reduction, as more particularly described below, to such number of Shares as is necessary so that the value of the Restricted Shares granted to Grantee hereunder does not exceed the limitations set forth in Q-10(e); B. not become vested to the extent such vesting is not permitted by the TARP Requirements; C. be subject to a restricted period restricted period of not less than two years (except for death, disability or a change in control event (under Treas. Reg. Section 1.409A-3(i)(5)(i)); and D. to the extent otherwise vested, not become transferable earlier than permitted under the schedule set forth in Q-1 (under the definition of Long-Term Restricted Stock) pertaining to redemption by the Company of all or a certain portions of the preferred stock issued to the U.S. Treasury under EESA (or for certain merger or acquisition transactions). The reduction described in clause (A), above, shall be equal to the excess, if any, by which the aggregate value of the Restricted Shares (determined as of the date of grant) exceeds one-third of Grantee’s total annual compensation for the fiscal year of the grant. If such excess occurs, then, except as provided below, without any further action by the Company or Grantee, the number of Restricted Shares covered by the Award shall be reduced by the number of Restricted Shares (rounded up to the nearest whole Share) determined by dividing the amount by which such aggregate value exceeded one-third of Grantee’s total annual compensation by the value of one Share as of the date of grant. Such reduction shall be effective and such excess Restricted Shares shall be cancelled as of December 31 of the fiscal year of the date of grant. The foregoing determinations shall be made in accordance with the provisions of Q-10(e). In the event Grantee received other grants of restricted stock during the year, then the determinations described above shall be made on a cumulative basis and the reduction, if any, shall be applied pro rata across all such awards.

		The reduction described above shall only occur if Grantee was subject to the Bonus Limitations on the date of grant. In the event Grantee is not subject to the Bonus Limitations on the date of grant, but becomes subject to the Bonus Limitations prior to becoming vested in the Restricted Shares pursuant to the terms of the Letter Agreement, then i. that portion of the Award, if any, that would have been reduced if Grantee had been subject to the Bonus Limitations on the date of grant respecting the portion of the restricted period ending on the date prior to the date Grantee becomes subject to the Bonus Limitations shall not be considered a Long-Term Restricted Stock award; and ii. the remaining portion of the Award shall be treated as a Long-Term Restricted Stock award with respect to the remaining portion of the restricted period on and after the date Grantee becomes subject to the Bonus Limitations.
4.	Effect of TARP     Requirements on Vesting:	The Restricted Shares shall vest in accordance with the provisions of the Letter Agreement; provided, however, that in the event Grantee is subject to the Golden Parachute Prohibitions at the time of Grantee’s termination of employment or a change in control (as provided under Q-1 and Q-9), then provisions of the Letter Agreement relating to the vesting of the Shares in such circumstances shall apply only to the extent permitted by the TARP Requirements. In the event Grantee was not subject to the Bonus Limitations on the date of grant of the Award but becomes subject to the Bonus Limitations prior to becoming vested in the Restricted Shares pursuant to the terms of the Letter Agreement, then the vesting of that portion (if any) of the Shares that is not a Long-Term Restricted Stock award shall be limited to the extent necessary to comply with the Bonus Limitations as described in Q-10 and the above provisions of this TARP Addendum.
5.	Tax Treatment:	Grantee understands and acknowledges that the Restricted Shares covered by the Award may become taxable to Grantee prior to the date transfer of such Shares is permitted under the TARP Requirements. In such event and as permitted by TARP Requirements, Restricted Shares having a fair market value equal to the minimum required statutory tax withholding shall be withheld from the Award in satisfaction of such tax withholding. Grantee acknowledges that such withholding shall not be permitted if Grantee is subject to the Bonus Limitations on the date of grant and Grantee makes a Section 83(b) election to be taxed on the value of the Shares on that date.
6.	Interpretation:	In the event all or any portion of the provisions of the Letter Agreement is found to be in conflict with any applicable TARP Requirements, then in such event this award and the provisions of the Letter Agreement shall be subject to and automatically modified by this TARP Addendum to reflect such TARP Requirements and Award and the Letter Agreement shall be interpreted and administered accordingly.
7.	Definitions and References:	To the extent not otherwise defined in the Letter Agreement or this TARP Addendum, capitalized terms shall have the meaning ascribed to such term in the IFR. “ARRA” means the American Recovery and Reinvestment Act of 2009. “Bonus Limitations” has the meaning set forth above in Section 2 Applicability. “EESA” means the Emergency Economic Stabilization Act of 2008. “Golden Parachute Prohibition” means an individual with respect to whom the Company is prohibited from making any golden parachute payment described in Section 111(3)(C) of EESA, as amended by ARRA, and Q-1 and Q-9 (Sec. 30.9). “Grantee” means                      and his or her successors and assigns. “IFR” means the rules, regulations or other guidance issued by the U.S. Department of Treasury from time to time relating to the ARRA and EESA, including, but not limited to, the Interim Final Rule published June 15, 2009. “Letter Agreement” means that Letter Agreement dated                      by and between the Company and the Grantee, Restricted Stock Number                      Grant of Restricted Stock. “MCE” means a Most Highly Compensated Employee of the Company whose compensation is subject to the limitations on paying or accruing any bonus, retention award and incentive compensation, described in Section 111(3)(D) of EESA, as amended by ARRA, and Q-1 (Sec. 30.1) and Q-10 (Sec. 30.10). “SEOs” has the meaning set forth in the EESA. “TARP Addendum” shall have the meaning set forth above in Section 1. Purpose; Compliance with TARP Requirements. “TARP Requirements” means the applicable requirements of Section 111 of the EESA, as amended by the ARRA, as such requirements are implemented by the “IFR”, together with such amendments or modifications thereto and any other rules, regulations or guidance relating thereto as may be published from time to time. References to “Q-xx” are references to the corresponding question and answer section in the IFR as may be amended.

EX-10.19

Exhibit 10.19

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made by and between FIRST MIDWEST BANCORP, INC. (“Company”) and the undersigned executive (“Executive”), effective as of ____________, 200_ (“Effective Date”).

W I T N E S S E T H :

WHEREAS, Company is desirous of employing Executive or continuing Executive’s employment as an executive of Company or its wholly owned subsidiary, FIRST MIDWEST BANK (the “Bank”) or such another such subsidiary on the terms and conditions, and for the consideration, hereinafter set forth and Executive is desirous of continuing 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 the , of [__________], and the Executive shall so serve, for the term set forth in Paragraph 1(b).

(b)Term.  The term of the Executive’s employment under this Agreement shall commence on the Effective Date and end on __________, 2___, subject to the extension of such term as hereinafter provided and subject to earlier termination as provided in Paragraph 7 (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 Company or 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 15, 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 7), 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 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 are and shall continue to 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 shall include all those currently delegated to Executive, together with the performance of such other duties and responsibilities as from time to time may be assigned to Executive from time to time consistent with position(s), including, but not limited to those of the 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, Executive agrees to serve without additional compensation as a director on the board of directors of the Employer, to which Executive may be elected or appointed.

(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.Salary.

(a)Base Salary.  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 thousand dollars ($,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.  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”), with an annual target bonus amount, in accordance with the terms of such Plan, as adopted and administered by the Board of Directors for First Midwest Bancorp for senior executives of the Employer, as such plan may be amended from time to time by the Board in its discretion.

5.Long-Term and Equity Incentive Compensation.  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.

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, perquisites 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.  Executive shall be reimbursed for reasonable professional fees incurred for financial and tax planning services, provided such reimbursements shall not exceed $20,000 per calendar year.

(b)Vacation.  The Executive shall be entitled to such number of days of vacation 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.

7.Termination.  Unless earlier terminated in accordance with the following provisions of this Paragraph 7, 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 8 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 7 and in Paragraph 8 hereof are defined in Paragraph 7(d), below.

(a)Death or Disability.  Except to the extent otherwise provided in Paragraph 8 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 8 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 15 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 15 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 15 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 which constitutes “Good Reason.”  Except to the extent otherwise provided in Paragraph 8 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:

(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 under the terms of 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 premium for such coverage.  For the purpose of this Paragraph 7(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 crime 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 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 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 7(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 not remedied by the Employer promptly after receipt of written notice thereof given by the Executive in accordance with Paragraph 15, or (B) 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 15; or (C) 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 (D) 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.

8.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 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 7(a) by reason of the death or disability of the Executive, or pursuant to Paragraph 7(b) by reason of the termination of the Executive by the Employer for Cause, or pursuant to Paragraph 7(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 .  In the event the Executive’s employment and this Agreement terminate pursuant to Paragraph 7(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, 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 elapsed during the Termination Year through the Date of Termination (“Service Days”).  The amount of the pro-rated bonus shall be calculated by dividing the Executive’s target annual bonus (“Severance Target”) for the completed fiscal year immediately preceding the Termination Year, divided by the Service Days.

(iii)Continuation for a period of nine (9) months (the “Severance Period”) of his then current annual base salary, payable in substantially equal installments in accordance with the Employer’s regular payroll practices;

(iv)Continuation for 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 extend the Severance Period for up to an additional six (6) months (the “Extended Severance Period”).  The payments to Executive described in subparagraph (iii) above and the reduced COBRA continuation premium described in subparagraph (iv) above shall continue during the Extended Severance Period, subject to earlier termination effective as of the first day of the month following the date the 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 payments and benefits provided by this  Paragraph 8(b).

(c)Effect of Change in Control.  In the event that a Change in Control occurs and this Agreement thereafter terminates pursuant to Paragraph 7(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 Termination Year. The amount of the pro-rated bonus shall be calculated by dividing the Executive’s Severance Target, divided by the Service Days.

(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; plus

(B)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 of the date of the Change in Control; 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.

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 date of the Change in Control, or if the value so determined would be greater, during the calendar year immediately preceding 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.

Executive shall also be entitled to outplacement counseling from a firm selected by 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.

Notwithstanding the foregoing, if a Change in Control occurs and this Agreement is terminated prior to the Change in Control pursuant to Paragraph 7(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 8(c) to have so terminated pursuant to Paragraph 7(c) immediately following the date the Change in Control occurs if it is reasonably demonstrated by Executive that such earlier termination was (i) 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.

(d)Effect on Other Amounts.  The payments provided for in this Paragraph 8 shall be in addition to all other sums then payable and owing to Executive 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.  Upon such termination of this Agreement, Employer shall have no rights or obligations under this Agreement, other than its obligations under this Paragraph 8, and Executive shall have no rights and obligations under this Agreement, other than Executive’s obligations under Paragraphs 12 and 13 hereof (to the extent applicable).

(e)Conditions.  Any payments of benefits made or provided pursuant to this Paragraph 8 are subject to the Executive’s:

(i)compliance with the provisions of Paragraphs 12 and 13 hereof (to the extent applicable);

(ii)delivery  to the Employer of an executed Release and Severance Agreement, which shall be substantially in the form attached hereto as Exhibit A, 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 8 shall not be due until after the expiration of any revocation period applicable to the Release and Severance Agreement.

9.TARP Compliance.  Notwithstanding anything in this Agreement or in any compensation plan, program, agreement or arrangement maintained by the Employer which covers Executive or to which Executive is a party or in which Executive participates whether as of the date hereof, or which may become applicable to Executive hereinafter (each such plan, program or arrangement a “Compensation Plan”), to the extent any payment or award granted pursuant to this Agreement or any Compensation Plan is or becomes subject to Section 111 of the Emergency Economic Stabilization Act of 2008, as amended by the American Recovery and Reinvestment Act of 2009 (“ARRA”) or any (“ARRA”) or any subsequent or similar legislation, and any regulations or interpretations that have been or may from time to time be promulgated thereunder, including, but not limited to the Interim Final Rule issued by the U.S. Treasury Department on June 15, 2009 (all such legislation, regulations and interpretations, and any amendments or modifications thereof, collectively (“EESA”), then (a) any such payment or award shall comply with EESA, and (b) this Agreement and any such Compensation Plan shall be deemed amended to the extent necessary and shall be and interpreted to comply with EESA.  In addition, the terms set forth in this Agreement and each Compensation Plan are subject to any applicable conditions, limitations or restrictions that may be imposed by any governmental or regulatory authority, including but not limited to the FDIC or other federal or state regulator (any such provisions, “Regulatory Restrictions”).  If the making of any payment or award pursuant to this Agreement or any Compensation Plan would violate EESA or any Regulatory Restrictions, or if the making of such payment or award may in the judgment of the Employer limit or adversely impact the ability of the Company, Bank or any subsidiary to participate in, or the terms of the Company’s Bank’s or any such subsidiary’s participation in, the Troubled Asset Relief Program or the Capital Purchase Program, or to qualify for or participate in any other relief under EESA, Executive shall be deemed to have waived Executive’s right to such payment or award and this Agreement and each such affected Compensation Plan shall be deemed to be amended to effectuate such waiver such that no obligation on the part of the Employer to pay or provide the waived compensation shall occur.  Notwithstanding any provision of this Agreement or any Compensation Plan to the contrary, to the extent required by EESA, any payment or award provided for herein or any such Compensation Plan is subject to forfeiture or repayment if such payment or award is based on performance metrics that are materially inaccurate or would violate any other provisions of EESA, and Executive agrees to such forfeiture and to repay such amounts within 15 days of receipt of notice from the Employer that such forfeiture or repayment is required.

10.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 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) the lump sum amount payable under Paragraph 8(c)(ii) and (iii) above shall be paid no later than the 15th day of the third month following the calendar year in which the Executive’s termination of employment giving rise to such payment occurs (or such earlier date as may apply to cause the lump sum payment to qualify as a “short-term deferral” under Section 409A of the Code), (b) if, due to the circumstances giving rise to such lump sum payment or to payments under Paragraph 8(b), 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 (c) 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.

11.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.

12.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 proprietary information or data of the Employer or any of its subsidiaries or affiliates, that the Employer may reasonably regard as confidential and 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 their 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.

13.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 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 a 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 12 and this Paragraph 13, (i) ”Employer” means the Company and all of its subsidiaries, (ii) ”customer” means any business, entity or person which is or was a customer of the Employer at any time during the period of Executive’s employment, 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 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.

14.Remedies.

(a)Executive acknowledges that the restrictions and agreements herein provided are fair and reasonable, that enforcement of the provisions of Paragraphs 12 and 13 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 12 or 13 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 12 and 13 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 12 and 13, 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 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 12 and 13 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 12 or 13 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.

15.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.

16.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 16 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.

17.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.

18.Payment in the Event of Death.  In the event payment is due and owing by the Employer to Executive under this Agreement upon the death of Executive, payment shall be make to such beneficiary as Executive may designate in writing, or failing 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.

19.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.

20.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.

21.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.

22.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.

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

24.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.

25.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.

26.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.

27.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 8 relating to post-Date of Termination obligations, and the provisions and obligations set forth in Paragraphs 9 through 29 shall survive termination of the Agreement pursuant to Paragraph 7.

28.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.

29.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.

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

ATTEST:	First Midwest Bancorp, Inc.
	By:
	Title:
	EXECUTIVE:

Exhibit A to Employment Agreement

RELEASE AND SEVERANCE AGREEMENT

THIS RELEASE AND SEVERANCE AGREEMENT is made and entered into this ____ day of _______________, _____ by and between First Midwest Bancorp, Inc., its subsidiaries and affiliates (collectively “FMBI”) and (hereinafter “EXECUTIVE”).

EXECUTIVE’S employment with FMBI terminated on ______________, ______; and EXECUTIVE has voluntarily agreed to the terms of this RELEASE AND SEVERANCE AGREEMENT in exchange for severance benefits under the Employment Agreement (“Employment Agreement”) to which EXECUTIVE otherwise would not be entitled.

NOW THEREFORE, in consideration for severance benefits provided under the Employment Agreement, EXECUTIVE on behalf of himself and his spouse, heirs, executors, administrators, children, and assigns does hereby fully release and discharge FMBI, its officers, directors, employees, agents, subsidiaries and divisions, benefit plans and their administrators, fiduciaries and insurers, successors, and assigns from any and all claims or demands for wages, back pay, front pay, attorney’s fees and other sums of money, insurance, benefits, contracts, controversies, agreements, promises, damages, costs, actions or causes of action and liabilities of any kind or character whatsoever, whether known or unknown, from the beginning of time to the date of these presents, relating to his employment or termination of employment from FMBI, including but not limited to any claims, actions or causes of action arising under the statutory, common law or other rules, orders or regulations of the United States or any State or political subdivision thereof including the Age Discrimination in Employment Act and the Older Workers Benefit Protection Act.

EXECUTIVE acknowledges that EXECUTIVE’S obligations pursuant to Paragraphs 12 and 13, to the extent applicable, of the Employment Agreement relating to the use or disclosure of confidential information shall continue to apply to EXECUTIVE.

This Release and Settlement Agreement supersedes any and all other agreements between EXECUTIVE and FMBI except agreements relating to proprietary or confidential information belonging to FMBI, and any other agreements, promises or representations relating to severance pay or other terms and conditions of employment are null and void.

This release does not affect EXECUTIVE’S right to any benefits to which EXECUTIVE may be entitled under any employee benefit plan, program or arrangement sponsored or provided by FMBI, including but not limited to the Employment Agreement and the plans, programs and arrangements referred to therein.

EXECUTIVE and FMBI acknowledge that it is their mutual intent that the Age Discrimination in Employment Act waiver contained herein fully comply with the Older Workers Benefit Protection Act.  Accordingly, EXECUTIVE acknowledges and agrees that:

(a)The Severance benefits exceed the nature and scope of that to which he would otherwise have been legally entitled to receive.

(b)Execution of this Agreement and the Age Discrimination in Employment Act waiver herein is his knowing and voluntary act;

(c)He has been advised by FMBI to consult with his personal attorney regarding the terms of this Agreement, including the aforementioned waiver;

(d)He has had at least twenty-one (21)  calendar days within which to consider this Agreement;

(e)He has the right to revoke this Agreement in full within seven (7) calendar days of execution and that none of the terms and provisions of this Agreement shall become effective or be enforceable until such revocation period has expired;

(f)He has read and fully understands the terms of this agreement; and

(g)Nothing contained in this Agreement purports to release any of EXECUTIVE’s rights or claims under the Age Discrimination in Employment Act that may arise after the date of execution.

IN WITNESS WHEREOF, the parties have executed this Agreement on the date indicated above.

FIRST MIDWEST BANCORP, INC., for itself and its Subsidiaries	EXECUTIVE
By:
Its:

EX-10.20

Exhibit 10.20

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made by and between FIRST MIDWEST BANCORP, INC. (“Company”) and the undersigned executive (“Executive”), effective as of «Effective» (“Effective Date”).

W I T N E S S E T H:

WHEREAS, Company is desirous of employing Executive or continuing Executive’s employment as an executive of Company or its wholly owned subsidiary, FIRST MIDWEST BANK (the “Bank”) or another such subsidiary on the terms and conditions, and for the consideration, hereinafter set forth and Executive is desirous of continuing 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 the «Bank_Title», «Job_Title» of «Company», and the Executive shall so serve, for the term set forth in Paragraph 1(b).

(b)Term.  The term of the Executive’s employment under this Agreement shall commence on the Effective Date and end on «Expiration», subject to the extension of such term as hereinafter provided and subject to earlier termination as provided in Paragraph 7 (the “period of employment”).  The term of this Agreement shall be extended automatically for one (1) additional year as of the second anniversary of the Effective Date and each anniversary date thereof unless, no later than ninety (90) days prior to any such renewal date (i) the Company or Employer gives written notice to the Executive, or (ii) the Executive gives written notice to the Employer, in accordance with Paragraph 15, 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 7), the term of this Agreement shall automatically extend to a date which is two (2) years from the date of the Change in Control (and shall be further extended pursuant to the 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 are and shall continue to 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 shall include all those currently delegated to Executive, together with the performance of such other duties and responsibilities as from time to time may be assigned to Executive from time to time consistent with Executive’s position(s). 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, Executive agrees to serve without additional compensation as a director on the board of directors of the Employer, to which Executive may be elected or appointed.

(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.Salary.

(a)Base Salary.  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 «Salary_2» («Salary») 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 in its discretion, may authorize or determine.

4.Annual Bonuses.  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”), with an annual target bonus amount, in accordance with the terms of such Plan, as adopted and administered by the Board of Directors of First Midwest Bancorp, Inc. (“Board”) for senior executives of the Employer, as such plan may be amended from time to time by the Board in its discretion.

5.Long-Term and Equity Incentive Compensation.  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.

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, perquisites 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.

(b)Vacation.  The Executive shall be entitled to such number of days of vacation 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.

7.Termination.  Unless earlier terminated in accordance with the following provisions of this Paragraph 7, 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 8 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 7 and in Paragraph 8 hereof are defined in Paragraph 7(d), below.

(a)Death or Disability.  Except to the extent otherwise provided in Paragraph 8 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 Employer, 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 Employer shall promptly provide the Executive with written notice of the results of any such determination of disability and of any decision of the Employer 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 8 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 15 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 15 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 15 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 which constitutes “Good Reason.”  Except to the extent otherwise provided in Paragraph 8 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:

(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 under the terms of 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.  For the purpose of this Paragraph 7(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 crime 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 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 Employer 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 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 7(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 (provided, however, for purposes of this clause (A) in circumstances not involving or following a Change in Control, so long as the Executive remains an officer of the Employer at or above the salary grade level in effect prior to such action than no diminution or other change in status, duties, authority or responsibilities shall be deemed to occur), other than a significant change not occurring in bad faith and which is not remedied by the Employer promptly after receipt of written notice thereof given by the Executive in accordance with Paragraph 15, or (B) 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 15; or (C) 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 (D) 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.

8.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 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 7(a) by reason of the death or disability of the Executive, or pursuant to Paragraph 7(b) by reason of the termination of the Executive by the Employer for Cause, or pursuant to Paragraph 7(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 .  In the event the Executive’s employment and this Agreement terminate pursuant to Paragraph 7(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, 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 elapsed during the Termination Year through the Date of Termination (“Service Days”).  The amount of the pro-rated bonus shall be calculated by dividing the Executive’s target annual bonus (“Severance Target”) for the completed fiscal year immediately preceding the Termination Year, divided by the Service Days.

(iii)Continuation for a period of  six (6) months (the “Severance Period”) of his then current annual base salary, payable in substantially equal installments in accordance with the Employer’s regular payroll practices;

(iv)Continuation for 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 extend the Severance Period for up to an additional six (6) months (the “Extended Severance Period”).  The payments to Executive described in subparagraph (iii) above and the reduced COBRA continuation premium described in subparagraph (iv) above shall continue during the Extended Severance Period, subject to earlier termination effective as of the first day of the month following the date the 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 payments and benefits provided by this  Paragraph 8(b).

(c)Effect of Change in Control.  In the event that a Change in Control occurs and this Agreement thereafter terminates pursuant to Paragraph 7(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 Termination Year. The amount of the pro-rated bonus shall be calculated by dividing the Executive’s Severance Target, divided by the Service Days;

(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 (2) 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; plus

(B)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 of the date of the Change in Control; 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.

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 date of the Change in Control, or if the value so determined would be greater, during the calendar year immediately preceding 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.

Executive shall also be entitled to outplacement counseling from a firm selected by 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.

Notwithstanding the foregoing, if a Change in Control occurs and this Agreement is terminated prior to the Change in Control pursuant to Paragraph 7(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 8(c) to have so terminated pursuant to Paragraph 7(c) immediately following the date the Change in Control occurs if it is reasonably demonstrated by Executive that such earlier termination was (i) 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.

(d)Effect on Other Amounts.  The payments provided for in this Paragraph 8 shall be in addition to all other sums then payable and owing to Executive 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.  Upon such termination of this Agreement, Employer shall have no rights or obligations under this Agreement, other than its obligations under this Paragraph 8, and Executive shall have no rights and obligations under this Agreement, other than Executive’s obligations under Paragraphs 12 and 13 hereof (to the extent applicable).

(e)Conditions.  Any payments of benefits made or provided pursuant to this Paragraph 8 are subject to the Executive’s:

(i)compliance with the provisions of Paragraphs 12 and 13 hereof (to the extent applicable);

(ii)delivery  to the Employer of an executed Release and Severance Agreement, which shall be substantially in the form attached hereto as Exhibit A, 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 8 shall not be due until after the expiration of any revocation period applicable to the Release and Severance Agreement.

9.TARP Compliance.  Notwithstanding anything in this Agreement or in any compensation plan, program, agreement or arrangement maintained by the Employer which covers Executive or to which Executive is a party or in which Executive participates whether as of the date hereof, or which may become applicable to Executive hereinafter (each such plan, program or arrangement a “Compensation Plan”), to the extent any payment or award granted pursuant to this Agreement or any Compensation Plan is or becomes subject to Section 111 of the Emergency Economic Stabilization Act of 2008, as amended by the American Recovery and Reinvestment Act of 2009 (“ARRA”) or any (“ARRA”) or any subsequent or similar legislation, and any regulations or interpretations that have been or may from time to time be promulgated thereunder, including, but not limited to the Interim Final Rule issued by the U.S. Treasury Department on June 15, 2009 (all such legislation, regulations and interpretations, and any amendments or modifications thereof, collectively (“EESA”), then (a) any such payment or award shall comply with EESA, and (b) this Agreement and any such Compensation Plan shall be deemed amended to the extent necessary and shall be and interpreted to comply with EESA.  In addition, the terms set forth in this Agreement and each Compensation Plan are subject to any applicable conditions, limitations or restrictions that may be imposed by any governmental or regulatory authority, including but not limited to the FDIC or other federal or state regulator (any such provisions, “Regulatory Restrictions”).  If the making of any payment or award pursuant to this Agreement or any Compensation Plan would violate EESA or any Regulatory Restrictions, or if the making of such payment or award may in the judgment of the Employer limit or adversely impact the ability of the Company, Bank or any subsidiary to participate in, or the terms of the Company’s Bank’s or any such subsidiary’s participation in, the Troubled Asset Relief Program or the Capital Purchase Program, or to qualify for or participate in any other relief under EESA, Executive shall be deemed to have waived Executive’s right to such payment or award and this Agreement and each such affected Compensation Plan shall be deemed to be amended to effectuate such waiver such that no obligation on the part of the Employer to pay or provide the waived compensation shall occur.  Notwithstanding any provision of this Agreement or any Compensation Plan to the contrary, to the extent required by EESA, any payment or award provided for herein or any such Compensation Plan is subject to forfeiture or repayment if such payment or award is based on performance metrics that are materially inaccurate or would violate any other provisions of EESA, and Executive agrees to such forfeiture and to repay such amounts within 15 days of receipt of notice from the Employer that such forfeiture or repayment is required.

10.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 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) the lump sum amount payable under Paragraph 8(c)(ii) and (iii) above shall be paid no later than the 15th day of the third month following the calendar year in which the Executive’s termination of employment giving rise to such payment occurs (or such earlier date as may apply to cause the lump sum payment to qualify as a “short-term deferral” under Section 409A of the Code), (b) if, due to the circumstances giving rise to such lump sum payment or to payments under Paragraph 8(b), 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 (c) 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.

11.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.

12.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 proprietary information or data of the Employer or any of its subsidiaries or affiliates, that the Employer may reasonably regard as confidential and 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 their 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.

13.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 one (1) year after termination of employment for any reason (other than termination of employment by resignation for Good Reason 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 a 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 12 and this Paragraph 13, (i) ”Employer” means the Company and all of its subsidiaries, (ii) ”customer” means any business, entity or person which is or was a customer of the Employer at any time during the period of Executive’s employment, 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 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.

14.Remedies.

(a)Executive acknowledges that the restrictions and agreements herein provided are fair and reasonable, that enforcement of the provisions of Paragraphs 12 and 13 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 12 or 13 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 12 and 13 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 12 and 13, 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 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 12 and 13 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 12 or 13 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.

15.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) 875-7585

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

16.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 16 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.

17.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.

18.Payment in the Event of Death.  In the event payment is due and owing by the Employer to Executive under this Agreement upon the death of Executive, payment shall be make to such beneficiary as Executive may designate in writing, or failing 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.

19.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.

20.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.

21.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.

22.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.

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

24.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.

25.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.

26.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.

27.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 8 relating to post-Date of Termination obligations, and the provisions and obligations set forth in Paragraphs 9 through 29 shall survive termination of the Agreement pursuant to Paragraph 7.

28.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.

29.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.

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

ATTEST:	First Midwest Bancorp, Inc.
	By:
	Title: President and Chief Operating Officer
	EXECUTIVE:
	«First_Name» «Last_Name»

Exhibit A to Employment Agreement

RELEASE AND SEVERANCE AGREEMENT

THIS RELEASE AND SEVERANCE AGREEMENT is made and entered into this ____ day of _______________, _____ by and between First Midwest Bancorp, Inc., its subsidiaries and affiliates (collectively “FMBI”) and (hereinafter “EXECUTIVE”).

EXECUTIVE’S employment with FMBI terminated on ______________, ______; and EXECUTIVE has voluntarily agreed to the terms of this RELEASE AND SEVERANCE AGREEMENT in exchange for severance benefits under the Employment Agreement (“Employment Agreement”) to which EXECUTIVE otherwise would not be entitled.

NOW THEREFORE, in consideration for severance benefits provided under the Employment Agreement, EXECUTIVE on behalf of himself and his spouse, heirs, executors, administrators, children, and assigns does hereby fully release and discharge FMBI, its officers, directors, employees, agents, subsidiaries and divisions, benefit plans and their administrators, fiduciaries and insurers, successors, and assigns from any and all claims or demands for wages, back pay, front pay, attorney’s fees and other sums of money, insurance, benefits, contracts, controversies, agreements, promises, damages, costs, actions or causes of action and liabilities of any kind or character whatsoever, whether known or unknown, from the beginning of time to the date of these presents, relating to his employment or termination of employment from FMBI, including but not limited to any claims, actions or causes of action arising under the statutory, common law or other rules, orders or regulations of the United States or any State or political subdivision thereof including the Age Discrimination in Employment Act and the Older Workers Benefit Protection Act.

EXECUTIVE acknowledges that EXECUTIVE’S obligations pursuant to Paragraphs 12 and 13, to the extent applicable, of the Employment Agreement relating to the use or disclosure of confidential information shall continue to apply to EXECUTIVE.

This Release and Settlement Agreement supersedes any and all other agreements between EXECUTIVE and FMBI except agreements relating to proprietary or confidential information belonging to FMBI, and any other agreements, promises or representations relating to severance pay or other terms and conditions of employment are null and void.

This release does not affect EXECUTIVE’S right to any benefits to which EXECUTIVE may be entitled under any employee benefit plan, program or arrangement sponsored or provided by FMBI, including but not limited to the Employment Agreement and the plans, programs and arrangements referred to therein.

EXECUTIVE and FMBI acknowledge that it is their mutual intent that the Age Discrimination in Employment Act waiver contained herein fully comply with the Older Workers Benefit Protection Act.  Accordingly, EXECUTIVE acknowledges and agrees that:

(a)The Severance benefits exceed the nature and scope of that to which he would otherwise have been legally entitled to receive.

(b)Execution of this Agreement and the Age Discrimination in Employment Act waiver herein is his knowing and voluntary act;

(c)He has been advised by FMBI to consult with his personal attorney regarding the terms of this Agreement, including the aforementioned waiver;

(d)He has had at least twenty-one (21)  calendar days within which to consider this Agreement;

(e)He has the right to revoke this Agreement in full within seven (7) calendar days of execution and that none of the terms and provisions of this Agreement shall become effective or be enforceable until such revocation period has expired;

(f)He has read and fully understands the terms of this agreement; and

(g)Nothing contained in this Agreement purports to release any of EXECUTIVE’s rights or claims under the Age Discrimination in Employment Act that may arise after the date of execution.

IN WITNESS WHEREOF, the parties have executed this Agreement on the date indicated above.

FIRST MIDWEST BANCORP, INC., for itself and its Subsidiaries	EXECUTIVE
By:
Its:

EX-10.21

Exhibit 10.21

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made by and between FIRST MIDWEST BANCORP, INC. (“Company”) and the undersigned executive (“Executive”), effective as of «Effective» (“Effective Date”).

W I T N E S S E T H :

WHEREAS, Company is desirous of employing Executive or continuing Executive’s employment as an executive of Company or its wholly owned subsidiary, FIRST MIDWEST BANK (the “Bank”) or another such subsidiary on the terms and conditions, and for the consideration, hereinafter set forth and Executive is desirous of continuing 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 the «Bank_Title», «Job_Title» of «Company», and the Executive shall so serve, for the term set forth in Paragraph 1(b).

(b)Term.  The term of the Executive’s employment under this Agreement shall commence on the Effective Date and end on «Expiration» subject to the extension of such term as hereinafter provided and subject to earlier termination as provided in Paragraph 7 (the “period of employment”).  The term of this Agreement shall be extended automatically for one (1) additional year as of the anniversary of the Effective Date and each anniversary date thereof unless, no later than ninety (90) days prior to any such renewal date (i) the Company or Employer gives written notice to the Executive, or (ii) the Executive gives written notice to the Employer, in accordance with Paragraph 15, 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 7), the term of this Agreement shall automatically extend to a date which is one (1) year from the date of the Change in Control (and shall be further extended pursuant to the 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 are and shall continue to 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 shall include all those currently delegated to Executive, together with the performance of such other duties and responsibilities as from time to time may be assigned to Executive from time to time consistent with Executive’s position(s). 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, Executive agrees to serve without additional compensation as a director on the board of directors of the Employer, to which Executive may be elected or appointed.

(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.Salary.

(a)Base Salary.  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 «Salary_2» («Salary») 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 in its discretion, may authorize or determine.

4.Annual Bonuses.  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”), with an annual target bonus amount, in accordance with the terms of such Plan, as adopted and administered by the Board of Directors of First Midwest Bancorp, Inc. (“Board”) for senior executives of the Employer, as such plan may be amended from time to time by the Board in its discretion.

5.Long-Term and Equity Incentive Compensation.  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.

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, perquisites 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.

(b)Vacation.  The Executive shall be entitled to such number of days of vacation 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.

7.Termination.  Unless earlier terminated in accordance with the following provisions of this Paragraph 7, 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 8 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 7 and in Paragraph 8 hereof are defined in Paragraph 7(d), below.

(a)Death or Disability.  Except to the extent otherwise provided in Paragraph 8 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 Employer, 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 Employer shall promptly provide the Executive with written notice of the results of any such determination of disability and of any decision of the Employer 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 8 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 15 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 15 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 15 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 which constitutes “Good Reason.”  Except to the extent otherwise provided in Paragraph 8 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:

(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 under the terms of 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. For the purpose of this Paragraph 7(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 crime 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 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 Employer 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 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 7(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 (provided, however, for purposes of this clause (A) in circumstances not involving or following a Change in Control, so long as the Executive remains an officer of the Employer at or above the salary grade level in effect prior to such action than no diminution or other change in status, duties, authority or responsibilities shall be deemed to occur), other than a significant change not occurring in bad faith and which is not remedied by the Employer promptly after receipt of written notice thereof given by the Executive in accordance with Paragraph 15, or (B) 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 15; or (C) 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 (D) 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.

8.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 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 7(a) by reason of the death or disability of the Executive, or pursuant to Paragraph 7(b) by reason of the termination of the Executive by the Employer for Cause, or pursuant to Paragraph 7(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 .  In the event the Executive’s employment and this Agreement terminate pursuant to Paragraph 7(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, the Employer shall pay to the Executive a pro-rated bonus for the year during which Executive’s employment terminated (“Termination Year”) based on the number of days elapsed during the Termination Year through the Date of Termination (“Service Days”). The amount of the pro-rated bonus shall be calculated by dividing the Executive’s target annual bonus (“Severance Target”) for the completed fiscal year immediately preceding the Termination Year, divided by the Service Days.

(iii)Continuation for a period of six (6) months (the “Severance Period”) of his then current annual base salary, payable in substantially equal installments in accordance with the Employer’s regular payroll practices;

(iv)Continuation for 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 extend the Severance Period for up to an additional three (3) months (the “Extended Severance Period”).  The payments to Executive described in subparagraph (iii) above and the reduced COBRA continuation premium described in subparagraph (iv) above shall continue during the Extended Severance Period, subject to earlier termination effective as of the first day of the month following the date the 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 payments and benefits provided by this  Paragraph 8(b).

(c)Effect of Change in Control.  In the event that a Change in Control occurs and this Agreement thereafter terminates pursuant to Paragraph 7(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 Termination Year. The amount of the  pro-rated bonus shall be calculated by dividing the Executive’s Severance Target, divided by the Service Days.

(iii)The Employer shall pay the Executive a lump sum payment within thirty (30) days after such termination of employment in the amount of one (1) 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; plus

(B)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 of the date of the Change in Control; 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.

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 date of the Change in Control, or if the value so determined would be greater, during the calendar year immediately preceding 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.

Executive shall also be entitled to outplacement counseling from a firm selected by 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.

Notwithstanding the foregoing, if a Change in Control occurs and this Agreement is terminated prior to the Change in Control pursuant to Paragraph 7(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 8(c) to have so terminated pursuant to Paragraph 7(c) immediately following the date the Change in Control occurs if it is reasonably demonstrated by Executive that such earlier termination was (i) 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.

(d)Effect on Other Amounts.  The payments provided for in this Paragraph 8 shall be in addition to all other sums then payable and owing to Executive 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.  Upon such termination of this Agreement, Employer shall have no rights or obligations under this Agreement, other than its obligations under this Paragraph 8, and Executive shall have no rights and obligations under this Agreement, other than Executive’s obligations under Paragraphs 12 and 13 hereof (to the extent applicable).

(e)Conditions.  Any payments of benefits made or provided pursuant to this Paragraph 8 are subject to the Executive’s:

(i)compliance with the provisions of Paragraphs 12 and 13 hereof (to the extent applicable);

(ii)delivery  to the Employer of an executed Release and Severance Agreement, which shall be substantially in the form attached hereto as Exhibit A, 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 8 shall not be due until after the expiration of any revocation period applicable to the Release and Severance Agreement.

9.TARP Compliance.  Notwithstanding anything in this Agreement or in any compensation plan, program, agreement or arrangement maintained by the Employer which covers Executive or to which Executive is a party or in which Executive participates whether as of the date hereof, or which may become applicable to Executive hereinafter (each such plan, program or arrangement a “Compensation Plan”), to the extent any payment or award granted pursuant to this Agreement or any Compensation Plan is or becomes subject to Section 111 of the Emergency Economic Stabilization Act of 2008, as amended by the American Recovery and Reinvestment Act of 2009 (“ARRA”) or any (“ARRA”) or any subsequent or similar legislation, and any regulations or interpretations that have been or may from time to time be promulgated thereunder, including, but not limited to the Interim Final Rule issued by the U.S. Treasury Department on June 15, 2009 (all such legislation, regulations and interpretations, and any amendments or modifications thereof, collectively (“EESA”), then (a) any such payment or award shall comply with EESA, and (b) this Agreement and any such Compensation Plan shall be deemed amended to the extent necessary and shall be and interpreted to comply with EESA.  In addition, the terms set forth in this Agreement and each Compensation Plan are subject to any applicable conditions, limitations or restrictions that may be imposed by any governmental or regulatory authority, including but not limited to the FDIC or other federal or state regulator (any such provisions, “Regulatory Restrictions”).  If the making of any payment or award pursuant to this Agreement or any Compensation Plan would violate EESA or any Regulatory Restrictions, or if the making of such payment or award may in the judgment of the Employer limit or adversely impact the ability of the Company, Bank or any subsidiary to participate in, or the terms of the Company’s Bank’s or any such subsidiary’s participation in, the Troubled Asset Relief Program or the Capital Purchase Program, or to qualify for or participate in any other relief under EESA, Executive shall be deemed to have waived Executive’s right to such payment or award and this Agreement and each such affected Compensation Plan shall be deemed to be amended to effectuate such waiver such that no obligation on the part of the Employer to pay or provide the waived compensation shall occur.  Notwithstanding any provision of this Agreement or any Compensation Plan to the contrary, to the extent required by EESA, any payment or award provided for herein or any such Compensation Plan is subject to forfeiture or repayment if such payment or award is based on performance metrics that are materially inaccurate or would violate any other provisions of EESA, and Executive agrees to such forfeiture and to repay such amounts within 15 days of receipt of notice from the Employer that such forfeiture or repayment is required.

10.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 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) the lump sum amount payable under Paragraph 8(c)(ii) and (iii) above shall be paid no later than the 15th day of the third month following the calendar year in which the Executive’s termination of employment giving rise to such payment occurs (or such earlier date as may apply to cause the lump sum payment to qualify as a “short-term deferral” under Section 409A of the Code), (b) if, due to the circumstances giving rise to such lump sum payment or to payments under Paragraph 8(b), 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 (c) 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.

11.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.

12.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 proprietary information or data of the Employer or any of its subsidiaries or affiliates, that the Employer may reasonably regard as confidential and 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 their 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.

13.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 one (1) year after termination of employment for any reason (other than termination of employment by resignation for Good Reason 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 a 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 12 and this Paragraph 13, (i) ”Employer” means the Company and all of its subsidiaries, (ii) ”customer” means any business, entity or person which is or was a customer of the Employer at any time during the period of Executive’s employment, 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 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.

14.Remedies.

(a)Executive acknowledges that the restrictions and agreements herein provided are fair and reasonable, that enforcement of the provisions of Paragraphs 12 and 13 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 12 or 13 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 12 and 13 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 12 and 13, 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 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 12 and 13 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 12 or 13 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.

15.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) 875-7585

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

16.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 16 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.

17.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.

18.Payment in the Event of Death.  In the event payment is due and owing by the Employer to Executive under this Agreement upon the death of Executive, payment shall be make to such beneficiary as Executive may designate in writing, or failing 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.

19.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.

20.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.

21.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.

22.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.

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

24.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.

25.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.

26.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.

27.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 8 relating to post-Date of Termination obligations, and the provisions and obligations set forth in Paragraphs 9 through 29 shall survive termination of the Agreement pursuant to Paragraph 7.

28.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.

29.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.

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

ATTEST:	First Midwest Bancorp, Inc.
	By:
	Title: President and Chief Operating Officer
	EXECUTIVE:
	«First_Name» «Last_Name»

Exhibit A to Employment Agreement

RELEASE AND SEVERANCE AGREEMENT

THIS RELEASE AND SEVERANCE AGREEMENT is made and entered into this ____ day of _______________, _____ by and between First Midwest Bancorp, Inc., its subsidiaries and affiliates (collectively “FMBI”) and (hereinafter “EXECUTIVE”).

EXECUTIVE’S employment with FMBI terminated on ______________, ______; and EXECUTIVE has voluntarily agreed to the terms of this RELEASE AND SEVERANCE AGREEMENT in exchange for severance benefits under the Employment Agreement (“Employment Agreement”) to which EXECUTIVE otherwise would not be entitled.

NOW THEREFORE, in consideration for severance benefits provided under the Employment Agreement, EXECUTIVE on behalf of himself and his spouse, heirs, executors, administrators, children, and assigns does hereby fully release and discharge FMBI, its officers, directors, employees, agents, subsidiaries and divisions, benefit plans and their administrators, fiduciaries and insurers, successors, and assigns from any and all claims or demands for wages, back pay, front pay, attorney’s fees and other sums of money, insurance, benefits, contracts, controversies, agreements, promises, damages, costs, actions or causes of action and liabilities of any kind or character whatsoever, whether known or unknown, from the beginning of time to the date of these presents, relating to his employment or termination of employment from FMBI, including but not limited to any claims, actions or causes of action arising under the statutory, common law or other rules, orders or regulations of the United States or any State or political subdivision thereof including the Age Discrimination in Employment Act and the Older Workers Benefit Protection Act.

EXECUTIVE acknowledges that EXECUTIVE’S obligations pursuant to Paragraphs 12 and 13, to the extent applicable, of the Employment Agreement relating to the use or disclosure of confidential information shall continue to apply to EXECUTIVE.

This Release and Settlement Agreement supersedes any and all other agreements between EXECUTIVE and FMBI except agreements relating to proprietary or confidential information belonging to FMBI, and any other agreements, promises or representations relating to severance pay or other terms and conditions of employment are null and void.

This release does not affect EXECUTIVE’S right to any benefits to which EXECUTIVE may be entitled under any employee benefit plan, program or arrangement sponsored or provided by FMBI, including but not limited to the Employment Agreement and the plans, programs and arrangements referred to therein.

EXECUTIVE and FMBI acknowledge that it is their mutual intent that the Age Discrimination in Employment Act waiver contained herein fully comply with the Older Workers Benefit Protection Act.  Accordingly, EXECUTIVE acknowledges and agrees that:

(a)The Severance benefits exceed the nature and scope of that to which he would otherwise have been legally entitled to receive.

(b)Execution of this Agreement and the Age Discrimination in Employment Act waiver herein is his knowing and voluntary act;

(c)He has been advised by FMBI to consult with his personal attorney regarding the terms of this Agreement, including the aforementioned waiver;

(d)He has had at least twenty-one (21)  calendar days within which to consider this Agreement;

(e)He has the right to revoke this Agreement in full within seven (7) calendar days of execution and that none of the terms and provisions of this Agreement shall become effective or be enforceable until such revocation period has expired;

(f)He has read and fully understands the terms of this agreement; and

(g)Nothing contained in this Agreement purports to release any of EXECUTIVE’s rights or claims under the Age Discrimination in Employment Act that may arise after the date of execution.

IN WITNESS WHEREOF, the parties have executed this Agreement on the date indicated above.

FIRST MIDWEST BANCORP, INC., for itself and its Subsidiaries	EXECUTIVE
By:
Its:

EX-10.24

Exhibit 10.24

OUTSOURCING AGREEMENT

BY AND BETWEEN

FIRST MIDWEST BANCORP, INC.

and

MARSHALL & ILSLEY CORPORATION

acting through its division

M&I DATA SERVICES

DATED AS OF

JULY 1, 1999

First Midwest Renew 10

TABLE OF CONTENTS

		Page
1.	DEFINITIONS	1
1.1	Background	1
1.2	Definitions	1
1.3	References	6
1.4	Interpretation	6
2.	TERM	6
2.1	Initial Term	6
2.2	Extensions	6
3.	APPOINTMENT	7
3.1	Performance by M&I Affiliates or Subcontractors	7
3.2	Third Party Products/Services	7
3.3	Proper Instructions	7
4.	CONVERSION	7
5.	BANKING APPLICATION SERVICES	7
5.1	ADP Services	7
5.2	New Services	7
5.3	Automated Clearing House Services	8
5.4	Trust Services	8
6.	RETAIL DELIVERY SYSTEMS AND SERVICES	8
6.1	Branch Automation Systems	8
7.	EFD PROCESSING SERVICES	8
7.1	EFD Services	8
8.	FEES	8
8.1	Fee Structure	8
8.2	EFD Services	9
8.3	Training and Education	9
8.4	Excluded Costs	9
8.5	Disputed Amounts	9
8.6	Terms of Payment	10
8.7	Modification of Terms and Pricing	10
9.	PERFORMANCE WARRANTY/EXCLUSIVE REMEDY/DISCLAIMER OF ALL OTHER WARRANTIES	10
9.1	Performance Warranty	10
9.2	Performance Warranty Exclusions	10
9.3	Notice of and Correction of Defects	10
9.4	DISCLAIMER OF ALL OTHER WARRANTIES	11
10.	MODIFICATION OR PARTIAL TERMINATION	11
10.1	Modifications to Services	11
10.2	Partial Termination by M&I	11
10.3	Partial Termination by Customer	12
10.4	Ownership and Proprietary Rights	12
10.5	Millennium Modifications	12
11.	TERMINATION	13
11.1	Early Termination	13
11.2	For Cause	13
11.3	For Insolvency	13
11.4	For Force Majeure	13
12.	SERVICES FOLLOWING TERMINATION	14
12.1	Termination Assistance	14
12.2	Continuation of Services	14

First Midwest Renew 10 i

13.	LIMITATION OF LIABILITY/MAXIMUM DAMAGES ALLOWED	14
13.1	Equitable Relief	14
13.2	Exclusion of Incidental and Consequential Damages	14
13.3	Maximum Damages Allowed	15
13.4	Statute of Limitations	15
13.5	Economic Loss Waiver	15
13.6	Liquidated Damages	15
13.7	Essential Elements	16
14.	INSURANCE AND INDEMNITY	16
14.1	Insurance	16
14.2	Indemnity	16
14.3	Indemnification Procedures	17
15.	DISPUTE RESOLUTION	17
15.1	Representatives of Parties	17
15.2	Continuity of Performance	18
16.	REPRESENTATIONS AND WARRANTIES	18
16.1	By M&I	18
16.2	By Customer	18
17.	CONFIDENTIALITY AND OWNERSHIP	19
17.1	Customer Data	19
17.2	M&I Systems	19
17.3	Confidential Information	19
17.4	Obligations of the Parties	20
17.5	Security	20
18.	MANAGEMENT OF PROJECT	20
18.1	Account Representatives	20
18.2	Reporting and Meetings	20
18.3	Development Projects and Technical Support	21
19.	REGULATORY COMPLIANCE	22
20.	DISASTER RECOVERY	23
20.1	Services Continuity Plan	23
20.2	Relocation	23
20.3	Resumption of Services	23
20.4	Annual Test	23
21.	GENERAL TERMS AND CONDITIONS	23
21.1	Transmission of Data	23
21.2	Equipment and Network	24
21.3	Reliance on Data	24
21.4	Data Backup	24
21.5	Balancing and Controls	24
21.6	Use of Services	24
21.7	Regulatory Assurances	25
21.8	IRS Filing	26
21.9	Affiliates	26
21.10	Future Acquisitions	26
22.	MISCELLANEOUS PROVISIONS	27
22.1	Governing Law	27
22.2	Entire Agreement; Amendments	27
22.3	Assignment	27
22.4	Relationship of Parties	28
22.5	Notices	28
22.6	Headings	28
22.7	Counterparts	29
22.8	Waiver	29
22.9	Severability	29
22.10	Attorneys’ Fees and Costs	29
22.11	Financial Statements	29
22.12	Publicity	29
22.13	Solicitation	29
22.14	No Third Party Beneficiaries	29
22.15	Force Majeure	30
22.16	Construction	30

First Midwest Renew 10 ii

22.17	Waiver of Jury Trial	30
22.18	Showcase	30
22.19	Finder’s Fee	31
22.20	IBS Software Purchase	31

First Midwest Renew 10 iii

Schedules

5.1	ADP Services Schedule
5.3	ACH Services Terms and Conditions
5.4	Trust Services
7.1	EFD Services
8.1	Fee Schedule
9.1	ADP Performance Standards
11.1	Termination Fee
18.1	Account Representatives

Exhibits

A	Attorney-in-Fact Appointment
B	Affidavit

First Midwest Renew 10 iv

OUTSOURCING AGREEMENT

This Outsourcing Agreement (“Agreement”) is made as of the 1st day of July, 1999, by and between First Midwest Bancorp, Inc., a Delaware corporation (“Customer”) and Marshall & Ilsley Corporation, a Wisconsin corporation, acting through its division, M&I Data Services (“M&I”).

In consideration of the payments to be made and services to be performed hereunder, the parties agree as follows:

1. DEFINITIONS

1.1 Background.

This Agreement is being made and entered into with reference to the following facts:

A. Customer provides systems development and operations, data processing, telecommunications and other information technology services for itself, and on behalf of its customers.

B. M&I is a provider of data processing, systems development and operations, corporate support and item processing, home banking, internet banking, retail delivery services, trust data processing, and other services. M&I desires to perform for Customer the outsourcing services described in this Agreement.

C. M&I currently provides data processing services to Customer under a prior agreement and the parties desire to continue the relationship under this Agreement. This Agreement documents the terms and conditions under which Customer agrees to purchase and M&I agrees to provide the Services.

1.2 Definitions.

The following terms shall have the meaning ascribed to them in this Section 1.2:

A. “Account Representative” shall have the meaning set forth in Section 18.1.

B. “ADP Services” shall mean the Accounts Data Processing Services set forth in attached Schedule 5.1.

First Midwest Renew 10 1

C. “Affiliate” shall mean, with respect to a party, any Entity at any time Controlling, Controlled by or under common Control with, such party.

D. “Branch Automation Agreement” shall mean the PCTeller License between M&I and Customer relating to the license and implementation of M&I’s proprietary branch automation software.

E. “Change in Control” shall mean any event or series of events by which (i) any person or entity or group of persons or entities shall acquire Control of another person or entity or (ii) in the case of a corporation, during any period of 12 consecutive months commencing before or after the date hereof, individuals who at the beginning of such 12-month period were directors of such corporation shall cease for any reason to constitute a majority of the board of directors of such corporation.

F. “Confidential Information” shall have the meaning set forth in Section 17.3 of this Agreement.

G. “Contract Year” shall mean successive periods of twelve months, the first of which shall commence on the Effective Date.

H. “Control” shall mean the direct or indirect ownership of over 50% of the capital stock (or other ownership interest, if not a corporation) of any Entity or the possession, directly or indirectly, of the power to direct the management and policies of such Entity by ownership of voting securities, by contract or otherwise. “Controlling” shall mean having Control of any Entity and “Controlled” shall mean being the subject of Control by another Entity.

I. “Core Services” shall mean services provided by M&I’s Deposit System, Loan System and Customer Information System.

J. “Customer” shall mean Customer and all Affiliates of Customer for whom M&I agrees to provide Services under this Agreement.

K. “Customer Data” shall have the meaning set forth in Section 17.1 of this Agreement.

L. “Damages” shall mean all direct, actual and verifiable losses, liabilities, damages and claims and related costs and expenses (including reasonable attorneys’ fees and court costs, costs of investigation, litigation,

First Midwest Renew 10 2

settlement, judgment, interest and penalties). M&I understands and agrees that Damages recoverable by Customer shall include (a) Customer’s reasonable costs and expenses of conversion to another provider; and (b) the unearned portion of any license fee paid by Customer to M&I to license any M&I owned software, provided that Customer returns to M&I all copies of the software and deletes the software from Customer’s systems. Customer understands and agrees that, for purposes of the foregoing, software license fees will be earned by M&I on a straight line basis from the date of the applicable license agreement through the later of (i) the last day of the Initial Term of the Agreement, or (ii) the date falling four (4) years after the date of the applicable license agreement.    (

M. “Effective Date” shall mean the date first set forth above.

N. “Effective Date of Termination” shall mean the last day on which M&I provides the Services to Customer (including any Termination Assistance).

0. “Eligible Provider” shall have the meaning as set forth in Section 3.1 of this Agreement.

P. “Entity” means an individual or a corporation, partnership, sole proprietorship, limited liability company, joint venture or other form of organization, and includes the parties hereto.

Q. “Estimated Remaining Value” shall mean the number of calendar months remaining between the Effective Date of Termination and the last day of the contracted-for Term, multiplied by the average of the monthly Fees (but in any event no less than the Monthly Base Fee) payable by Customer during the twelve (12) month period prior to the event giving rise to termination rights under this Agreement. In the event the Effective Date of Termination occurs prior to expiration of the First Contract Year, the estimated monthly fees set forth in the Fee Schedule shall be substituted for the average monthly fees described in the preceding sentence.

R. “Expenses” shall mean any and all reasonable and direct expenses incurred by M&I for any postage, supplies, materials, travel and lodging provided to or on behalf of Customer under this Agreement.

S. “Federal Regulator” shall have the meaning set forth in Section 21.7.

First Midwest Renew 10 3

T. “Fee Schedule” shall have the meaning set forth in Section 8.1 of this Agreement.

U. “Initial Services” shall mean those Services requested by Customer from M&I under this Agreement prior to the Commencement Date. The Initial Services requested as of the Effective Date are set forth in the schedules attached hereto, which shall be modified to include any additional services requested by Customer during the Conversion Period.

V. “Initial Term” shall have the meaning set forth in Section 2.1 of this Agreement.

W. “Legal Requirements” shall have the meaning set forth in Section 19(A) of this Agreement.

X. “LU” shall have the meaning as set forth in Section 8.4 of this Agreement.

Y. “M&I Proprietary Materials and Information” shall mean the M&I Software and all source code, object code, documentation (whether electronic, printed, written or otherwise), working papers, non-customer data, programs, diagrams, models, drawings, flow charts and research (whether in tangible or intangible form or in written or machine readable form), and all techniques, processes, inventions, knowledge, know-how, trade secrets (whether in tangible or intangible form or in written or machine readable form), developed by M&I prior to or during the Term of this Agreement, and such other information relating to M&I or the M&I Software that M&I identifies to Customer as proprietary or confidential at the time of disclosure.

Z. “M&I Software” shall mean the software owned by M&I and used to provide the Services.

AA. “Millennium Ready” shall mean the ability of the M&I Software to accurately process date/time data (including calculating, compare and sequence) from, into and between the years 1999 and 2000, including leap year calculations, to the extent that other information technology, used in combination therewith, properly exchanges date/time data with the M&I Software.

BB. “New Services” shall mean any services which are not included in the Initial Services. Upon mutual agreement of the parties, New Services shall be included in the term “Services.”

First Midwest Renew 10 4

CC. “Operations Center” shall mean the datacenter used by M&I to provide the ADP Services under this Agreement.

DD. “Performance Standards” shall mean those service levels set forth in attached Schedule 9.1 for the provision of ADP Services.

EE. “Performance Warranty” shall have the meaning, including the exclusions and exclusive remedy, set forth Article 9 of this Agreement.

FF. “Plan” shall have the meaning set forth in Section 20.1 of this Agreement.

GG. “Proper Instructions” shall mean those instructions sent to M&I in accordance with Section 3.3 of this Agreement.

HH. “Services” shall mean the services, functions and responsibilities described in this Agreement to be performed by M&I during the Term and shall include New Services which are agreed to by the parties in writing.

II. “Taxes” shall mean any manufacturers, sales, use, gross receipts, excise, personal property or similar tax or duty assessed by any governmental or quasi-governmental authority upon or as a result of the execution or performance of any service pursuant to this Agreement or materials furnished with respect to this Agreement, except any income, franchise, privilege or like tax on or measured by M&I’s net income, capital stock or net worth.

JJ. “Term” shall mean the Initial Term and any extension thereof, unless this Agreement is earlier terminated in accordance with its provisions.

KK. “Termination Assistance” shall have the meaning set forth in Section 12.1 of this Agreement.

LL. “Termination Fee” shall have the meaning set forth on attached Schedule 11.1.

MM. “Third Party” shall mean any Entity other than the parties or any Affiliates of the parties.

NN. “User Manuals” shall mean the documentation provided by M&I to Customer which describes the features and functionalities of each of the ADP Services as modified and updated by the customer bulletins distributed by M&I from time to time.

First Midwest Renew 10 5

1.3 References. In this Agreement and the schedules and exhibits attached hereto, which are hereby incorporated and deemed a part of this Agreement, references and mention of the word “include” and “including” shall mean “includes, without limitation” and “including, without limitation”, as applicable.

1.4 Interpretation. In the event of a conflict between this Agreement and the terms of any exhibits and schedules attached hereto, the terms of the schedules and exhibits shall prevail and control the interpretation of the Agreement. The exhibits and schedules together with the Agreement shall be interpreted as a single document.

2. TERM

2.1 Initial Term. This Agreement shall commence on the Effective Date and continue for a period of sixty-six (66) months (“Initial Term”).

2.2 Extensions. Unless this Agreement has been earlier terminated, at least one (1) year prior to the expiration of the Initial Term, M&I shall submit to Customer a written proposal for renewal of this Agreement. Customer will respond to such proposal within three (3) months following receipt and inform M&I in writing whether or not Customer desires to renew this Agreement. If Customer informed M&I in writing that Customer does not desire to renew this Agreement, this Agreement shall terminate on the last day of the Initial Term. If Customer does not inform M&I in writing that Customer does not desire to renew this Agreement and if M&I and Customer are unable to agree upon the terms for renewal of this Agreement at least six (6) months prior to the expiration of the Initial Term, then this Agreement shall be automatically renewed for one (1) twelve-month period at M&I’s then-current standard prices. Thereafter, this Agreement shall expire unless further renewed in writing by the parties.

First Midwest Renew 10 6

3. APPOINTMENT

3.1 Performance by M&I Affiliates or Subcontractors. Customer understands and agrees that Marshall & Ilsley Corporation is a bank holding company and that the actual performance of the Services may be made by the divisions or subsidiaries of Marshall & Ilsley Corporation, Affiliates Controlled by Marshall & Ilsley Corporation, or subcontractors of any of the foregoing Entities (collectively, the “Eligible Providers”). For purposes of this Agreement, performance of the Services by any Eligible Provider shall be deemed performance by Marshall & Ilsley Corporation itself. M&I shall remain fully responsible for the performance or non-performance of each Eligible Provider under this Agreement, to the same extent if M&I itself performed or failed to perform such services.

3.2 Third Party Products/Services. The parties acknowledge that certain services and products necessary for the performance of the Services are being, and in the future may be, provided by Third Parties who will contract directly with Customer. M&I shall have no liability to Customer for information and products supplied by, or services performed by, such Third Parties in conjunction with the Services.

3.3 Proper Instructions. “Proper Instructions” shall mean those instructions sent to M&I by letter, memorandum, telegram, cable, telex, telecopy facsimile, computer terminal, e-mail or other “on line” system or similar means of communication or given orally over the telephone or given in person by the person executing this Agreement or his designee. Proper Instructions shall specify the action requested to be taken or omitted.

4. CONVERSION INTENTIONALLY OMITTED, APPLIES TO NEW CUSTOMERS ONLY

5. BANKING APPLICATION SERVICES

5.1 ADP Services. M&I agrees to provide Customer with the ADP Services in accordance with the applicable User Manuals and this Agreement.

5.2 New Services. If Customer wishes to receive any New Service Customer shall notify M&I and the parties shall implement the same in accordance with a mutually acceptable schedule. If the New Service is not identified on M&I’s then-current standard price list, Customer shall submit a

First Midwest Renew 10 7

written request to M&I in accordance with Section 18.3 of this Agreement. Nothing contained herein shall obligate M&I to develop a New Service for Customer.

5.3 Automated Clearing House Services. The automated clearing house services (“ACH Services”) to be provided by M&I shall be subject to the terms and conditions set forth on attached Schedule 5.3.

5.4 Trust Services. The trust processing services (“Trust Services”) to be provided by M&I shall be subject to the terms and conditions set forth on attached Schedule 5.4.

6. RETAIL DELIVERY SYSTEMS AND SERVICES

6.1 Branch Automation Systems. M&I agrees to provide the licenses, products, interfaces and network management associated with the automation of Customer’s branch offices, in accordance with the PCTeller license Agreement.

7. EFD PROCESSING SERVICES

7.1 EFD Services. The electronic funds delivery services (“EFD Services”) to be provided by M&I shall be subject to the terms and conditions set forth on attached Schedule 7.1.

8. FEES

8.1 Fee Structure. Schedule 8.1 attached hereto (the “Fee Schedule”) sets forth the costs and charges for the Services and Customer agrees to pay M&I the fees specified in the Fee Schedule for the Services rendered by M&I. These costs and charges are included in one or more of the following categories:

(i) one-time fees associated with any conversion;

(ii) a minimum monthly fee for certain recurring, aggregated data processing services based on stated volumes (the “Monthly Base Fee”);

(iii) an hourly or daily fee for programming, training and related Services requested by Customer; and

(iv) fees for New Services not included in the foregoing categories.

First Midwest Renew 10 8

8.2 EFD Services. In addition to the charges specified on the Fee Schedule, Customer shall be responsible for all interchange and network provider fees and all dues, fees and assessments established by and owed to Visa and/or MasterCard for the processing of Customer’s transactions, and for all costs and fees associated with changes to ATM (as defined in Schedule 7.1) protocol caused by Customer’s use of the EFD Services.

8.3 Training and Education.

A. M&I shall provide training as requested by Customer and agreed to by M&I. The sessions shall be held at a location mutually agreed upon by the parties. Customer shall be responsible for all Expenses incurred by the participants and M&I’s trainers in connection with such education and training. If Customer requests that training be conducted at a non-M&I facility, Customer shall be responsible for additional fees as quoted by M&I.

B. M&I will provide to Customer, at no charge, one set of each of the User Manuals. When the User Manuals are updated, M&I will provide the updates to Customer at no additional charge. Additional sets of the User Manuals may be purchased by Customer.

8.4 Excluded Costs. The fees set forth in the Fee Schedule do not include shipping and courier costs, telecommunication charges, Expenses, Third Party pass-through charges, workshop fees, training fees, late fees or charges and Taxes.

8.5 Disputed Amounts. If Customer disputes any charge or amount on any invoice and such dispute cannot be resolved promptly through good faith discussions between the parties, Customer shall pay the amounts due under this Agreement less the disputed amount, and the parties shall diligently proceed to resolve such disputed amount. An amount will be considered disputed in good faith if (i) Customer delivers a written statement to M&I on or before the due date of the invoice, describing in detail the basis of the dispute and the amount being withheld by Customer, (ii) such written statement represents that the amount in dispute has been determined after due investigation of the facts and that such disputed amount has been determined in good faith, and (iii) all other amounts due from Customer that are not in dispute have been paid in accordance with the terms of this Agreement.

First Midwest Renew 10 9

8.6 Terms of Payment. All amounts due hereunder shall be paid within thirty (30) days of invoice. Undisputed charges not paid by the due date shall be subject to annual interest at the rate of 12% or the highest rate permitted by law, whichever is lower. Customer shall also pay any collection fees and Damages incurred by M&I in collecting payment of the charges and any other amounts for which Customer is liable under the terms and conditions of this Agreement.

8.7 Modification of Terms and Pricing. All charges for Services shall be subject to annual adjustment as set forth in the Fee Schedule.

9. PERFORMANCE WARRANTY/EXCLUSIVE REMEDY/DISCLAIMER OF ALL OTHER WARRANTIES

9.1 Performance Warranty. M&I warrants that it will provide the ADP Services covered by this Agreement in accordance with the Performance Standards and that it will provide reports to the Customer that are in substantial conformity with the User Manuals, as amended from time to time. THIS PERFORMANCE WARRANTY IS SUBJECT TO THE WARRANTY EXCLUSIONS SET FORTH BELOW IN ARTICLE 9.2 AND THE REMEDY LIMITATIONS SET FORTH BELOW IN ARTICLE 9.3.

9.2 Performance Warranty Exclusions. Except as may be expressly agreed in writing by M&I, M&I’s Performance Warranty does not apply to:

(a) defects, problems, or failures caused by the Customer’s nonperformance of obligations essential to M&I’s performance of its obligations; and/or

(b) defects, problems, or failures caused by an event of force majeure.

9.3 Notice of and Correction of Defects. Customer shall notify M&I in writing of any alleged breach of this Performance Warranty. Upon receipt of such notice, M&I shall have ninety (90) days to correct the alleged breach. During this time period, M&I shall make every reasonable effort, at its own expense, to correct any material defect. Customer shall be responsible for making whatever appropriate adjustments may be necessary to mitigate adverse effects on Customer until M&I corrects the defect. If requested by Customer, M&I will, at M&I’s expense, assist Customer in making such corrections through the most cost-effective means, whether manual, by system reruns or program modifications.

First Midwest Renew 10 10

9.4 DISCLAIMER OF ALL OTHER WARRANTIES. THIS PERFORMANCE WARRANTY, AND THE REPRESENTATIONS IN SECTION 16.1, ARE IN LIEU OF, AND M&I DISCLAIMS ANY AND ALL OTHER WARRANTIES, CONDITIONS, OR REPRESENTATIONS (EXPRESS OR IMPLIED, ORAL OR WRITTEN) WITH RESPECT TO THE SERVICES PROVIDED UNDER THIS CONTRACT, INCLUDING, WITHOUT LIMITATION, ANY AND ALL IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS OR SUITABILITY FOR ANY PURPOSE (WHETHER OR NOT M&I KNOWS, HAS REASON TO KNOW, HAS BEEN ADVISED, OR IS OTHERWISE IN FACT AWARE OF ANY SUCH PURPOSE), WHETHER ALLEGED TO ARISE BY LAW, BY REASON OF CUSTOM OR USAGE IN THE TRADE, OR BY COURSE OF DEALING.

9.5 Backup Remedy. If M&I fails to remedy the breach in the time periods specified in Section 9.3 above, Customer may file a claim for Damages pursuant to the dispute resolution procedure set forth in Section 15.1 below and, in addition, terminate the Agreement for cause pursuant to Section 11.2 below.

10. MODIFICATION OR PARTIAL TERMINATION

10.1 Modifications to Services. M&I may modify, amend, enhance, update, or provide an appropriate replacement for the software used to provide the Services, or any element of its systems or processes at any time to: (i) improve the Services or (ii) facilitate the continued economic provision of the Services to Customer or M&I, provided that neither the functionality of the Services nor any applicable Performance Standards are materially adversely affected.

10.2 Partial Termination by M&I. M&I may, at any time, withdraw any of the Services (other than the Services identified on Schedule 5.1 attached hereto) upon providing one hundred eighty (180) days’ prior written notice to Customer. M&I may also terminate any of the Services immediately upon any final regulatory, legislative, or judicial determination that providing such Services is inconsistent with applicable law or regulation. If M&I terminates any Service, M&I agrees to assist Customer, without additional charge, in identifying an alternate provider of such terminated Service. In such event, M&I agrees to provide deconversion data in M&I’s standard format at no charge. In the event that Customer shall, at any time after the Effective Date, license M&I owned software and M&I shall thereafter terminate a Service integral to the utility of such software pursuant to this Section 10.2, then M&I agrees to refund to Customer the unearned portion of the license fee paid by Customer for such software. Customer

First Midwest Renew 10 11

understands and agrees that, for purposes of the foregoing, software license fees will be earned by M&I on a straight line basis from the date of the applicable license agreement through the later of (i) the last day of the Initial Term of this Agreement or (ii) the date falling four (4) years after the date of the applicable license agreement.

10.3 Partial Termination by Customer.

A. Customer agrees that, during the Term, Customer shall obtain exclusively from M&I all of its requirements covered by the Initial Services. If Customer breaches the foregoing covenant, Customer shall pay M&I a Termination Fee for the discontinued Service, as liquidated damages and not as a penalty except that Customer may terminate the receipt of the services specified with an asterisk on Schedule 5.1 without payment of any such fee after providing M&I at least ninety (90) days’ prior notice.

B. Unless otherwise agreed to by the parties in writing, Customer may terminate any New Service upon one hundred eighty (180) days prior written notice to M&I. Termination of New Services shall not be subject to any Termination Fee, unless the entire Agreement is terminated in a manner which would entitle M&I to receive a Termination Fee.

10.4 Ownership and Proprietary Rights. M&I reserves the right to determine the hardware, software and tools to be used by M&I in fulfilling its duties under this Agreement. M&I and Customer intend and agree that M&I shall retain title and all other ownership and proprietary rights in and to the M&I Proprietary Materials and information. Such ownership and proprietary rights shall include any and all rights in and to patents, trademarks, copyrights, and trade secret rights. M&I and Customer agree that M&I Proprietary Materials and Information are not “work made for hire” within the meaning of U.S. Copyright Act 17 U.S.C. Section 101.

10.5 Millennium Modifications. The M&I Software has been modified to be Millennium Ready. Any additional modification to the M&I Software to make it Millennium Ready shall be made by M&I at no additional charge to Customer, provided, however, that any testing requirements imposed on Customer by any Federal Regulator shall be performed by M&I at Customer’s sole cost and expense at M&I’s then-current standard rates. M&I shall provide to Customer, at no charge, the results of proxy testing conducted as of the Effective Date on non-custom M&I Software used to provide the Initial Services.

First Midwest Renew 10 12

11. TERMINATION

11.1 Early Termination. The terms and conditions set forth in attached Schedule 11.1 shall govern the early termination of this Agreement (or any Service which is part of the Initial Services).

11.2 For Cause. If either party fails to perform any of its material obligations under this Agreement and does not cure such failure within thirty (30) days after being given notice specifying the nature of the failure, then the non-defaulting party may, by giving notice to the other party, terminate this Agreement as of the date specified in such notice of termination, or such later date agreed to by the parties, without prejudice to the non-defaulting party’s right to collect Damages (if the non-defaulting party is the Customer) or the Termination Fee (if the non-defaulting party is M&I).

11.3 For Insolvency. In addition to the termination rights set forth in Sections 11.1 and 11.2, subject to the provisions of Title 11, United States Code, if either party becomes or is declared insolvent or bankrupt, is the subject to any proceedings relating to its liquidation, insolvency or for the appointment of a receiver or similar officer for it, makes an assignment for the benefit of all or substantially all of its creditors, or enters into an agreement for the composition, extension, or readjustment of all or substantially all of its obligations, or is subject to regulatory sanction by any Federal Regulator, then the other party may, by giving written notice to such party, terminate this Agreement as of a date specified in such notice of termination; provided that the foregoing shall not apply with respect to any involuntary petition in bankruptcy filed against a party unless such petition is not dismissed within sixty (60) days of such filing.

11.4 For Force Majeure. In the event that M&I fails to provide the Services in accordance with this Agreement for a continuous, uninterrupted period of at least five (5) consecutive days due to an event of force majeure (as described in Section 22.15 hereof), Customer may immediately terminate this Agreement upon written notice provided to M&I at any time following the expiration of the fifth (5th) day of the period described above and prior to the expiration of such period, without payment of any Termination Fee.

First Midwest Renew 10 13

12. SERVICES FOLLOWING TERMINATION

12.1 Termination Assistance. Following the expiration or early termination of this Agreement, M&I shall provide Customer, at Customer’s expense, all necessary assistance to facilitate the orderly transition of Services to Customer or its designee (“Termination Assistance”). As part of the Termination Assistance, M&I shall assist Customer to develop a plan for the transition of all Services then being performed by M&I under this Agreement, from M&I to Customer or its designee, on a reasonable schedule developed jointly by M&I and Customer. Prior to providing any Termination Assistance, M&I shall deliver to Customer a good faith estimate of all such Expenses and charges including charges for custom programming services. Nothing contained herein shall obligate Customer to receive Termination Assistance from M&I. No termination of this Agreement pursuant to Section 11 above or otherwise shall affect the provisions of this Section 12.1.

12.2 Continuation of Services. Unless M&I terminates this Agreement pursuant to Section 11.2 above, upon at least sixty (60) days’ prior written request by Customer, M&I shall continue to provide Customer all Services and the Effective Date of Termination shall be extended for a maximum period of twelve (12) months. If Customer elects to receive the Services for such period, M&I’s then-current standard pricing shall apply to the provision and receipt of such Services.

13. LIMITATION OF LIABILITY/MAXIMUM DAMAGES ALLOWED

13.1 Equitable Relief/Customer Damages.

A. Customer Damages To the extent such may be established and proven, Customer shall be entitled to Damages in the event Customer terminates this Agreement pursuant to Section 11.2, Section 11.3, or Section 11.4 of this Agreement.

B. Equitable Relief. Either party may seek equitable remedies, including injunctive relief, for a breach of the other party’s obligations under Section 17 of this Agreement, prior to commencing the dispute resolution procedures set forth in Section 15.1 below.

13.2 Exclusion of Incidental and Consequential Damages. Independent of, severable from, and to be enforced independently of any other provision of this Agreement, NEITHER PARTY WILL BE LIABLE TO THE OTHER PARTY (NOR TO ANY PERSON CLAIMING RIGHTS DERIVED FROM THE OTHER PARTY’S

First Midwest Renew 10 14

RIGHTS) IN CONTRACT, TORT, OR OTHERWISE, FOR INCIDENTAL, CONSEQUENTIAL, SPECIAL, PUNITIVE, OR EXEMPLARY DAMAGES OF ANY KIND—including lost profits, loss of business, or other economic damage, and further including injury to property, but specifically excluding the damages set forth in Article 13.3, below or any consequential damages caused directly by M&I’s willful misconduct—AS A RESULT OF BREACH OF ANY WARRANTY OR OTHER TERM OF THIS AGREEMENT, INCLUDING ANY FAILURE OF PERFORMANCE, REGARDLESS OF WHETHER THE PARTY LIABLE OR ALLEGEDLY LIABLE WAS ADVISED, HAD OTHER REASON TO KNOW, OR IN FACT KNEW OF THE POSSIBILITY THEREOF.

13.3 Maximum Damages Allowed. Notwithstanding any other provision of this Agreement, and for any reason, including breach of any duty imposed by this contract or independent of this contract, and regardless of any claim in contract, tort, or otherwise, but specifically excluding liability for damages directly caused by M&I’s willful misconduct, M&I’s total, aggregate liability under this Agreement shall in no circumstance exceed payments made to M&I by Customer under this Agreement during the six (6) months prior to the act or event giving rise to such claim.

13.4 Statute of Limitations. No lawsuit or other action may be brought by either party hereto, or on any claim or controversy based upon or arising in any way out of this Agreement, after one (1) year from the date on which the cause of action arose regardless of the nature of the claim or form of action, whether in contract, tort, or otherwise; provided, however, the foregoing limitation shall not apply to the collection of any amounts due under this Agreement.

13.5 Economic Loss Waiver. In addition to and not in limitation of any other provision of this Article 13, each party hereby knowingly, voluntarily, and intentionally waives any right to recover from the other party any economic losses or damages in any action brought under tort theories, including, misrepresentation, negligence and/or strict liability, or relating to the quality or performance of any products or services provided by M&I. For purposes of this waiver, economic losses and damages include monetary losses or damages caused by a defective product or service except personal injury or damage to other property. Even if remedies provided under this Agreement shall be deemed to have failed of their essential purpose, neither party shall have any liability to the other party under tort theories for economic losses or damages.

13.6 Liquidated Damages. Customer acknowledges that (a) the Termination Fee has been the subject of active

First Midwest Renew 10 15

negotiation and agreement between the parties; (b) the Termination Fee shall be deemed liquidated damages and not a penalty; and (c) M&I shall suffer a material adverse impact on its business if this Agreement is terminated prior to expiration of its Term.

13.7 Essential Elements. Customer and M&I acknowledge and agree that the limitations contained in this Article 13 are essential to this Agreement, and that M&I has expressly relied upon the inclusion of each and every provision of this Article 13 as a condition to executing this Agreement.

14. INSURANCE AND INDEMNITY

14.1 Insurance. M&I shall maintain for its own protection fidelity bond coverage for the Operations Center personnel; insurance coverage for loss from fire, disaster or the causes contributing to interruption of normal services, including replacement of data processing equipment; reconstruction of data file media and related processing costs; additional expenses incurred to continue operations; and business interruption to reimburse M&I for losses resulting from suspension of the Operation Center’s activities due to physical loss of equipment.

14.2 Indemnity.

A. By Customer. Customer shall indemnify M&I from, defend M&I against, and pay any final judgments awarded against M&I, resulting from: (i) any breach of this Agreement by Customer (ii) Customer’s violation of Federal, state, or other laws or regulations; (iii) work-related injury or death caused by Customer or its employees or agents; (iv) tangible personal or real property damage or financial or monetary loss incurred by M&I resulting from Customer’s acts or omissions; and (v) the data, information and/or instructions furnished by Customer and any inaccuracy or inadequacy therein.

B. By M&I. M&I shall indemnify Customer from, defend Customer against, and pay any final judgment awarded against Customer, resulting from: (i) any claim by a Third Party that the Services or the M&I Software infringe upon any patent, copyright or trademark of a Third Party under the laws of the United States; (ii) any breach of this Agreement by M&I; (iii) M&I’s violation of Federal, state, or other laws or regulations; (iv) work-related injury or death caused by M&I, its employees, or agents; and (v) tangible personal or real property damage resulting from M&I’s acts or omissions.

First Midwest Renew 10 16

14.3 Indemnification Procedures. If any Third Party makes a claim covered by this Section against an indemnitee with respect to which such indemnitee intends to seek indemnification under this Section, such indemnitee shall give notice of such claim to the indemnifying party, including a brief description of the amount and basis therefor, if known. Upon giving such notice, the indemnifying party shall be obligated to defend such indemnitee against such claim, and shall be entitled to assume control of the defense of the claim with counsel chosen by the indemnifying party, reasonably satisfactory to the indemnitee. Indemnitee shall cooperate fully with, and assist, the indemnifying party in its defense against such claim in all reasonable respects. The indemnifying party shall keep the indemnitee fully apprised at all times as to the status of the defense. Notwithstanding the foregoing, the indemnitee shall have the right to employ its own separate counsel in any such action, but the fees and expenses of such counsel shall be at the expense of such indemnitee. Neither the indemnifying party nor any indemnitee shall be liable for any settlement of action or claim effected without its consent. Notwithstanding the foregoing, the indemnitee shall retain, assume, or reassume sole control over all expenses relating to every aspect of the defense that it believes is not the subject of the indemnification provided for in this section. Until both (a) the indemnitee receives notice from indemnifying party that it will defend, and (b) the indemnifying party assumes such defense, the indemnitee may, at any time after ten (10) days from the date notice of claim is given to the indemnifying party by the indemnitee, resist or otherwise defend the claim or, after consultation with and consent of the indemnifying party, settle or otherwise compromise or pay the claim. The indemnifying party shall pay all costs of indemnity arising out of or relating to that defense and any such settlement, compromise, or payment. The indemnitee shall keep the indemnifying party fully apprised at all times as to the status of the defense. Following indemnification as provided in this Section, the indemnifying party shall be subrogated to all rights of the indemnitee with respect to the matters for which indemnification has been made.

15. DISPUTE RESOLUTION

15.1 Representatives of Parties. All disputes arising under or in connection with this Agreement shall initially be referred to the Account Representatives. If the Account Representatives are unable to resolve the dispute within

First Midwest Renew 10 17

five (5) business days after referral of the matter to them, the managers of the Account Representatives shall attempt to resolve the dispute. If, after five (5) days they are unable to resolve the dispute, senior executives of the parties shall attempt to resolve the dispute. If, after five (5) days they are unable to resolve the dispute, the parties shall submit the dispute to the chief executive officers of the parties for resolution. Neither party shall commence legal proceedings with regard to a dispute until completion of the dispute resolution procedures set forth in this Section 15.1, except to the extent necessary to preserve its rights or maintain a superior position.

15.2 Continuity of Performance. During the pendency of the dispute resolution proceedings described in this Article 15, M&I shall continue to provide the Services so long as Customer shall continue to pay all undisputed amounts to M&I in a timely manner.

16. REPRESENTATIONS AND WARRANTIES

16.1 By M&I. M&I represents and warrants that:

A. Rights. M&I has the right to provide the Services hereunder, using all computer software required for that purpose.

B. Organization and Approvals. M&I is a corporation validly existing and in active status under the laws of the State of Wisconsin. It has all the requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement has been duly authorized by M&I and this Agreement is enforceable in accordance with its terms against M&I. No approval, authorization or consent of any governmental or regulatory authorities is required to be obtained or made by M&I in order for M&I to enter into and perform its obligations under this Agreement.

16.2 By Customer. Customer represents and warrants that:

A. Organization. It is a corporation validly existing and in good standing under the laws of the state of its incorporation.

B. Authority. It has all the requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement has been duly authorized by Customer and this Agreement is enforceable in accordance with its terms against Customer.

First Midwest Renew 10 18

C. Approvals. No approval, authorization or consent of any governmental or regulatory authorities required to be obtained or made by Customer in order for Customer to enter into and perform its obligations under this Agreement.

17. CONFIDENTIALITY AND OWNERSHIP

17.1 Customer Data. Customer shall remain the sole and exclusive owner of all Customer Data and other Confidential Information (as hereinafter defined), regardless of whether such data is maintained on magnetic tape, magnetic disk, or any other storage or processing device. All such Customer Data and other Confidential Information shall, however, be subject to regulation and examination by the appropriate auditors and regulatory agencies to the same extent as if such information were on Customer’s premises. “Customer Data” means any and all data and information of any kind or nature submitted to M&I by Customer, or received by M&I on behalf of Customer, in connection with the Services.

17.2 M&I Systems. Customer acknowledges that it has no rights in any software, systems, documentation, guidelines, procedures and similar related materials or any modifications thereof provided by M&I, except with respect to Customer’s use of the same during the Term to process its data.

17.3 Confidential Information. “Confidential Information” of a party shall mean all confidential or proprietary information and documentation of such party, whether or not marked as such, including without limitation with respect to Customer, all Customer Data. Confidential Information shall not include: (i) information which is or becomes publicly available (other than by the person or entity having the obligation of confidentiality) without breach of this Agreement; (ii) information independently developed by the receiving party; (iii) information received from a third party not under a confidentiality obligation to the disclosing party; or (iv) information already in the possession of the receiving party without obligation of confidence at the time first disclosed by the disclosing party. The parties acknowledge and agree that the substance of the negotiations of this Agreement, and the terms of this Agreement are considered Confidential Information subject to the restrictions contained herein. Neither party shall use, copy, sell, transfer, publish, disclose, display, or

First Midwest Renew 10 19

otherwise make any of the other party’s Confidential Information available to any Third Party without the prior written consent of the other.

17.4 Obligations of the Parties. M&I and Customer shall hold the Confidential Information of the other party in confidence and shall not disclose or use such Confidential Information other than for the purposes contemplated by this Agreement, and shall instruct their employees, agents, and contractors to use the same care and discretion with respect to the Confidential Information of the other party or of any Third Party utilized hereunder that M&I and Customer each require with respect to their own most confidential information, but in no event less than a reasonable standard of care, including but not limited to, the utilization of security devices or procedures designed to prevent unauthorized access to such materials. Each party shall instruct its employees, agents, and contractors of its confidentiality obligations hereunder and not to attempt to circumvent any such security procedures and devices. Each party’s obligation under the preceding sentence may be satisfied by the use of its standard form of confidentiality agreement, if the same reasonably accomplishes the purposes here intended. All such Confidential Information shall be distributed only to persons having a need to know such information to perform their duties in conjunction with this Agreement.

17.5 Security. M&I shall be responsible for, and shall establish and maintain safeguards against, any disaster, loss or alteration of the Customer Data in the possession of M&I. Such safeguards shall be no less rigorous than that M&I uses to protect its own data of a similar nature.

18. MANAGEMENT OF PROJECT

18.1 Account Representatives. M&I shall assign a team of qualified individuals to be assigned (“Account Representatives”) to devote time and effort to management of the Services under this Agreement, consisting of a managing director, client relationship manager, client solutions manager, administrative accounting support, as more fully described in Schedule 18.1 attached hereto and others as necessary. Following March 1, 2000, this arrangement will be reviewed with Customer, and at Customer’s option, Customer may request that this team be replaced with a dedicated account manager to Customer.

18.2 Reporting and Meetings. The parties shall mutually agree upon (a) an appropriate set of periodic

First Midwest Renew 10 20

reports to be issued by M&I to Customer during the Term; and (b) an appropriate set of periodic meetings to be held between selected Account Representatives during the Term. Meetings shall be held to review performance, changes, resource utilization and such other matter as appropriate.

18.3 Development Projects and Technical Support.

A. Upon Customer’s written request, M&I will develop and provide to Customer a good faith estimate of any additional charges which Customer may incur in connection with the operation of any new software, major modification or enhancements developed by M&I or the acquisition of Third Party software. Customer agrees that M&I will have the opportunity to bid on and be considered for all software development, maintenance and other technology projects related to the Services that Customer wishes to implement. Nothing contained herein shall obligate: (a) M&I to develop enhancements requested by Customer; or (b) for Customer to obtain such services from M&I.

B. For Customer requested enhancements requiring a programming effort in excess of eighty (80) hours, M&I agrees to provide Customer ballpark programming estimates within fifteen (15) business days following receipt of all information necessary to process such request. Detailed programming estimate will be made available to Customer within an additional twenty (20) business days. After Customer’s approval of any such detailed estimate, M&I agrees to schedule the development of such enhancement within thirty (30) business days.

C. M&I agrees to disclose to Customer its plans for new product development prior to general release of such information. Customer shall have the opportunity to participate in the development of any such product. Upon completion of such development, Customer may utilize any such new product on a trial basis under mutually agreeable terms. The fees for any such new product utilized by Customer shall be waived for a period up to ninety (90) days.

First Midwest Renew 10 21

19. REGULATORY COMPLIANCE

A. Customer shall be solely responsible for monitoring and interpreting (and for complying with, to the extent such compliance requires no action by M&I) the federal and state laws, rules and regulations pertaining to Customer’s business (the “Legal Requirements”). Based on Customer’s Proper Instructions, M&I shall select the processing parameter settings, features and options (collectively, the “Parameters”) within M&I’s system that will apply to Customer. Customer shall be responsible for determining that such selections are consistent with the Legal Requirements and with the terms and conditions of any agreements between Customer and its clients. In making such determinations, Customer may rely upon the written descriptions of such Parameters contained in the User Manuals. M&I shall perform system processing in accordance with the Parameters.

B. Subject to the foregoing, M&I shall perform an ongoing review of federal laws, rules and regulations. M&I shall maintain the features and functions set forth in the User Manuals for each of the Services in accordance with all changes in federal laws, rules and regulations applicable to such features and functions, in a non-custom environment. For any new federal laws, rules and regulations, M&I will perform a business review, with input from M&I’s customers and user groups. If M&I elects to support a new federal law, rule or regulation through changes to the M&I Software, M&I shall develop and implement modifications to the Services to enable Customer to comply with such new federal laws, rules and regulations. In all other circumstances relating to regulatory compliance of the Services, including state laws, rules and regulations, the provisions of Section 5.2 above (New Services) shall apply.

C. In any event, M&I shall work with Customer in developing and implementing a suitable procedure or direction to enable Customer to comply with federal and state laws, rules and regulations applicable to the Services being provided by M&I to Customer, including in those instances when M&I has elected to, but it is not commercially practicable to, modify the M&I Software prior to the regulatory deadline for compliance.

First Midwest Renew 10 22

20. DISASTER RECOVERY

20.1 Services Continuity Plan. M&I shall maintain throughout the Term of the Agreement a Services Continuity Plan (the “Plan”) in compliance with applicable regulatory requirements. “Disaster” shall have the meaning set forth in the Plan. Review and acceptance of the Plan as may be required by any applicable regulatory agency shall be the responsibility of Customer. M&I shall cooperate with Customer in conducting such reviews as such regulatory agency may from time to time reasonably request. A detailed Executive Summary of the Plan has been provided to Customer. Updates to the Plan shall be provided to Customer without charge.

20.2 Relocation. If appropriate, M&I shall relocate all affected Services to an alternate disaster recovery site as expeditiously as possible after declaration of a Disaster, and shall coordinate with Customer all requisite telecommunications modifications necessary to achieve full connectivity to the disaster recovery site, in material compliance with all regulatory requirements.

20.3 Resumption of Services. The Plan provides that, in the event of a Disaster, M&I will be able to resume the Services in accordance therewith within the time periods specified in the Plan. In the event M&I is unable to resume the Services to Customer within the time periods specified in the Plan, Customer shall have the right to terminate this Agreement without payment of the Termination Fee upon written notice to M&I delivered within forty-five (45) days after declaration of such Disaster.

20.4 Annual Test. M&I shall test its Plan by conducting one (1) test annually and shall provide Customer with a description of the test results in accordance with applicable laws and regulations. Customer may request to participate in such testing.

21. GENERAL TERMS AND CONDITIONS

21.1 Transmission of Data. The responsibility and expense for transportation and transmission of, and the risk of loss for, data and media transmitted between M&I and Customer shall be borne by Customer. Data lost by M&I following processing, including loss of data transmission, shall either be restored by M&I from its backup media or shall be reprocessed from Customer’s backup media at no additional charge to Customer.

First Midwest Renew 10 23

21.2 Equipment and Network. Customer shall obtain and maintain at its own expense its own data processing and communications equipment as may be necessary or appropriate to facilitate the proper use and receipt of the Services. Customer shall pay all installation, monthly, and other charges relating to the installation and use of communications lines between Customer’s datacenter and the Operations Center. M&I maintains and will continue to maintain a network control center with diagnostic capability to monitor reliability and availability of the communication lines described in the Network Schedule, but M&I shall not be responsible for the continued availability or reliability of such communications lines.

21.3 Reliance on Data. M&I will perform the Services described in this Agreement on the basis of information furnished by Customer. M&I shall be entitled to rely upon any such data, information, or instructions as provided by Customer. If any error results from incorrect input supplied by Customer, Customer shall be responsible for discovering and reporting such error and supplying the data necessary to correct such error to M&I for processing at the earliest possible time.

21.4 Data Backup. Customer shall maintain adequate records including (i) microfilm images of items being transported to M&I or (ii) backup on magnetic tape or other electronic media where transactions are being transmitted to M&I, from which reconstruction of lost or damaged items or data can be made. Customer assumes all responsibility and liability for any loss or damage resulting from failure to maintain such records.

21.5 Balancing and Controls. Customer shall (a) on a daily basis, review all input and output, controls, reports, and documentation, to ensure the integrity of data processed by M&I; and (b) on a daily basis, check exception reports to verify that all file maintenance entries and nondollar transactions were correctly entered. Customer shall be responsible for initiating timely remedial action to correct any improperly processed data which these reviews disclose.

21.6 Use of Services. Customer assumes exclusive responsibility for the consequences of any Proper Instructions Customer may give M&I, for Customer’s failure to properly access the Services in the manner prescribed by M&I, and for Customer’s failure to supply accurate input information. Customer agrees that, except as otherwise permitted in this Agreement or in writing by M&I, Customer will use the Services only for its own internal business purposes to service its banking customers and clients and

First Midwest Renew 10 24

will not sell or otherwise provide, directly or indirectly, any of the Services or any portion thereof to any Third Party.

21.7 Regulatory Assurances. M&I and Customer acknowledge and agree that the performance of these Services will be subject to regulation and examination by Customer’s regulatory agencies to the same extent as if such Services were being performed by Customer. Upon request, M&I agrees to provide any appropriate assurances to such agency and agrees to subject itself to any required examination or regulation. Customer agrees to reimburse M&I for reasonable costs actually incurred due to any such examination or regulation that is performed primarily for the purpose of examining Services used by Customer.

A. Notice Requirements. Customer shall be responsible for complying with all regulatory notice provisions to any applicable governmental agency, which shall include providing timely and adequate notice to the Chief Examiner of the Federal Home Loan Bank Board, the Office of Thrift Supervision, the Office of the Comptroller of the Currency, The Federal Deposit Insurance Corporation, the Federal Reserve Board, or their successors, as applicable (collectively, the “Federal Regulators”), as of the Effective Date of this Agreement, identifying those records to which this Agreement shall apply and the location at which such Services are to be performed.

B. Examination of Records. The parties agree that the records maintained and produced under this Agreement shall, at all times, be available at the Operations Center for examination and audit by governmental agencies having jurisdiction over the Customer’s business, including any Federal Regulator. The Director of Examinations of any Federal Regulator or his or her designated representative shall have the right to ask for and to receive directly from M&I any reports, summaries, or information contained in or derived from data in the possession of M&I related to the Customer. M&I shall notify Customer as soon as reasonably possible of any formal request by any authorized governmental agency to examine Customer’s records maintained by M&I, if M&I is permitted to make such a disclosure to Customer under applicable law or regulations. Customer agrees that M&I is authorized to provide all such described records when formally required to do so by a Federal Regulator.

C. Audits. M&I shall cause a Third Party review of the Operations Center and related internal controls, to be conducted annually by its independent auditors. M&I

First Midwest Renew 10 25

shall provide to Customer, upon written request, one copy of the audit report resulting from such review. Remote datacenters used by M&I in providing some of the Services shall be reviewed by M&I’s internal auditors in accordance with procedures and on a schedule satisfactory to the Federal Regulator responsible for supervision of M&I.

21.8 IRS Filing. Customer represents it has complied with all laws, regulations, procedures, and requirements in attempting to secure correct tax identification numbers (TINs) for Customer’s payees and customers and agrees to attest to this compliance by an affidavit provided annually. Customer authorizes M&I to act as Customer’s agent and sign on Customer’s behalf the Affidavit required by the Internal Revenue Service on Form 4804, or any successor form. Exhibit A (Attorney-in-Fact Appointment) and Exhibit B (Affidavit) shall be executed by Customer contemporaneously with the execution of this Agreement. Customer acknowledges that M&I’s execution of the Form 4804 Affidavit on Customer’s behalf does not relieve Customer of responsibility to provide accurate TINs or liability for any penalties which may be assessed for failure to comply with TIN requirements.

21.9 Affiliates. Customer agrees that it is responsible for assuring compliance with this Agreement by those Affiliates receiving Services under this Agreement. Customer agrees to be responsible for the submission of its Affiliates’ data to M&I for processing and for the transmission to Customer’s Affiliates of such data processed by and received from M&I. Customer agrees to pay any and all fees owed under this Agreement for Services rendered to its Affiliates.

21.10 Future Acquisitions. Customer acknowledges that M&I has established the Fee Schedule and enters into this Agreement on the basis of M&I’s understanding of the Customer’s current need for Services and Customer’s anticipated future need for Services as a result of internally generated expansion of its customer base. If the Customer expands its operations by acquiring Control of additional financial institutions or the Customer experiences a Change in Control (as hereinafter defined), the following provisions shall apply:

A. Acquisition of Additional Entities. If Customer acquires Control after the date hereof of one or more bank holding companies, banks, savings and loan associations or other financial institutions that are not currently Affiliates, M&I agrees to provide Services for such new Affiliates and such Affiliates shall automatically

First Midwest Renew 10 26

be included in the definition of “Customer”; provided that (a) the conversion of each new Affiliate must be scheduled at a mutually agreeable time, but in any event, M&I will make good faith efforts to effect the conversion of new affiliates to M&I’s systems within one hundred twenty (120) days after regulatory approval, (taking into account, among other things, the availability of qualified M&I conversion resources familiar with Customer’s operations) and must be completed before M&I has any obligation to provide Services to such new Affiliate; (b) the Customer will be liable for any and all Expenses in connection with the conversion of such new Affiliate; and (c) Customer shall pay conversion fees in an amount to be mutually agreed upon with respect to each new Affiliate.

B. Change in Control of Customer. If a Change in Control occurs with respect to Customer, M&I agrees to continue to provide Services under this Agreement; provided that (a) M&I’s obligation to provide Services shall be limited to the entities comprising the Customer prior to such Change in Control and (b) M&I’s obligation to provide Services shall be limited in any and all circumstances to the number of accounts and items processed in the 3-month period prior to such Change in Control occurring plus 25%.

22. MISCELLANEOUS PROVISIONS

22.1 Governing Law. The validity, construction and interpretation of this Agreement and the rights and duties of the parties hereto shall be governed by the internal laws of the State of Wisconsin, excluding its principles of conflict of laws.

22.2 Entire Agreement; Amendments. This Agreement, together with the exhibits and schedules hereto, constitutes the entire agreement between M&I and the Customer with respect to the subject matter hereof. There are no restrictions, promises, warranties, covenants or undertakings other than those expressly set forth herein and therein. This Agreement supersedes all prior negotiations, agreements, and undertakings between the parties with respect to such matter. This Agreement, including the exhibits and schedules hereto, may be amended only by an instrument in writing executed by the parties or their permitted assignees.

22.3 Assignment. This Agreement may not be assigned by either party, by operation of law or otherwise, without the prior written consent of the other party, which consent shall not be unreasonably withheld, provided that (a) M&I’s

First Midwest Renew 10 27

consent need not be obtained in connection with the assignment of this Agreement pursuant to a merger in which Customer is a party and as a result of which the surviving Entity becomes an Affiliate of another bank holding company, bank, savings and loan association or other financial institution, so long as the provisions of Section 21.10 are complied with; and (b) M&I may freely assign this Agreement (i) in connection with a merger, corporate reorganization or sale of all or substantially all of its assets, stock or securities, or (ii) to any Entity which is a successor to the assets or the business of the M&I Data Services division of M&I.

22.4 Relationship of Parties. The performance by M&I of its duties and obligations under this Agreement shall be that of an independent contractor and nothing contained in this Agreement shall create or imply an agency’s relationship between Customer and M&I, nor shall this Agreement be deemed to constitute a joint venture or partnership between Customer and M&I.

22.5 Notices. Except as otherwise specified in the Agreement, all notices, requests, approvals, consents and other communications required or permitted under this Agreement shall be in writing and shall be personally delivered or sent by (i) first class U.S. mail, registered or certified, return receipt requested, postage pre-paid; or (ii) U.S. express mail, or other, similar overnight courier service to the address specified below. Notices shall be deemed given on the day actually received by the party to whom the notice is addressed.

In the case of Customer:	First Midwest Bancorp, Inc.
	300 Park Blvd., Suite 405 Itasca IL 60143
	Attn:	Kent Belasco
		Chief Information Officer and Executive Vice President
In the case of M&I:	M&I Data Services
	4900 West Brown Deer Road Brown Deer WI 53223
	Attn:	Thomas McBride
		Vice President
		Norrie J. Daroga
		Vice President and General Counsel

22.6 Headings. Headings in this Agreement are for reference purposes only and shall not effect the interpretation or meaning of this Agreement.

First Midwest Renew 10 28

22.7 Counterparts. This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which together constitute one and the same agreement.

22.8 Waiver. No delay or omission by either party to exercise any right or power it has under this Agreement shall impair or be construed as a waiver of such right or power. A waiver by any party of any breach or covenant shall not be construed to be a waiver of any succeeding breach or any other covenant. All waivers must be in writing and signed by the party waiving its rights.

22.9 Severability. If any provision of this Agreement is held by court or arbitrator of competent jurisdiction to be contrary to law, then the remaining provisions of this Agreement will remain in full force and effect. Articles 11, 13 and 17 and Sections 22.1 and 22.17 shall survive the expiration or earlier termination of this Agreement for any reason.

22.10 Attorneys’ Fees and Costs. If any legal action is commenced in connection with the enforcement of this Agreement or any instrument or agreement required under this Agreement, the prevailing party shall be entitled to costs, attorneys’ fees actually incurred, and necessary disbursements incurred in connection with such action, as determined by the court.

22.11 Financial Statements. M&I agrees to furnish to the Customer copies of the then-current annual report for the Marshall & Ilsley Corporation, within 45 days after such document is made publicly available.

22.12 Publicity. Neither party shall use the other parties’ name or trademark or refer to the other party directly or indirectly in any media release, public announcement or public disclosure relating to this Agreement or its subject matter, in any promotional or marketing materials, lists or business presentations, without consent from the other party for each such use or release. Customer agrees that neither it, its directors, officers, employees or agents shall disclose this Agreement or any of the terms or provisions of this Agreement to any other party.

22.13 Solicitation. Neither party shall solicit the employees of the other party during the Term of this Agreement, for any reason.

22.14 No Third Party Beneficiaries. Each party intends that this Agreement shall not benefit, or create any right or cause of action in or on behalf of, any person or entity other than the Customer and M&I.

First Midwest Renew 10 29

22.15 Force Majeure. Notwithstanding any provision contained in this Agreement, neither party shall be liable to the other to the extent fulfillment or performance if any terms or provisions of this Agreement is delayed or prevented by revolution or other civil disorders; wars; acts of enemies; strikes; lack of available resources from persons other than parties to this Agreement; labor disputes; electrical equipment or availability failure; fires; floods; acts of God; federal, state or municipal action; statute; ordinance or regulation; or, without limiting the foregoing, any other causes not within its control, and which by the exercise of reasonable diligence it is unable to prevent, whether of the class of causes hereinbefore enumerated or not. This clause shall not apply to the payment of any sums due under this Agreement by either party to the other.

22.16 Construction. M&I and Customer each acknowledge that the limitations and exclusions contained in this Agreement have been the subject of active and complete negotiation between the parties and represent the parties’ voluntary agreement based upon the level of risk to Customer and M&I associated with their respective obligations under this Agreement and the payments to be made to M&I and the charges to be incurred by M&I pursuant to this Agreement. The parties agree that the terms and conditions of this Agreement shall not be construed in favor of or against any party by reason of the extent to which any party or its professional advisors participated in the preparation of this document.

22.17 Waiver of Jury Trial. Each of Customer and M&I hereby knowingly, voluntarily and intentionally waives any and all rights it may have to a trial by jury in respect of any litigation based on, or arising out of, under, or in connection with, this Agreement or any course of conduct, course of dealing, statements (whether verbal or written), or actions of M&I or Customer, regardless of the nature of the claim or form of action, written contract or tort, including negligence.

22.18 Showcase. Customer agrees to reasonably make its facilities and personnel available to M&I for the purpose of assisting M&I in the solicitation of M&I’s prospective new customers. M&I agrees to provide Customer a credit against data processing charges of two thousand five hundred dollars ($2,500) for each such prospect.

First Midwest Renew 10 30

22.19 Finder’s Fee. M&I will provide Customer with a credit which may be used to offset data processing fees for services (excluding telecommunication charges and other pass through charges) in an amount equal to the first month’s processing fees for: (i) each of Customer’s new affiliates, whose data was not being processing by M&I, but will be processed by M&I under this Agreement; and (ii) for Customer’s correspondent or non-affiliated institutions whose data was not being processed by M&I, but will be processed by M&I utilizing remote input processing sites owned by Customer. The Finder’s Fee will be payable where initial contact to a financial institution is made by Customer, or a lead generated and developed by Customer, followed by Customer assistance and involvement in the selling process (not limited to Customer site visits, referrals, presentations, etc.) for the purpose of selling M&I Services, and the financial institution signs a processing agreement with M&I. The finder’s fee, as described above, shall be based upon and payable after the first month’s use of the ordinary services following the completion of all conversion of the new financial institution as proposed.

22.20 IBS Software Purchase. At any time, Customer has the option of licensing the M&I Software used to process data hereunder from M&I. The license will be provided to Customer at seventy percent (70%) of the single-license market price and on the terms and subject to the conditions, other than price, of M&I’s then-current standard license agreement, plus an amount equal to seventy percent (70%) of the single-license market price for any software components not set forth below. The “market price” of the Software is defined as the price at which the software is made generally available for licensing, assuming no changes are made in the form of the Standard Licensing Agreement or in the software licensed. The software components included in the above-stated fees are: Deposits, Loans, Customer Information System, Teller Terminal, and any specially created enhancements undertaken at Customer’s request during the term of this Agreement and for which M&I consents at the time of creating such enhancements to, including the enhancement, as part of the licensed software system.

First Midwest Renew 10 31

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed in their names as of the date first above written.

MARSHALL & ILSLEY CORPORATION (“M&I”) acting through its division, M&I DATA SERVICES
By:
Name:	Owen J. Sullivan
Title:	President Outsourcing Business Group
By:
Name:	Thomas McBride
Title:	Vice President
FIRST MIDWEST BANCORP, INC. (“Customer”)
By:
Name :	Kent Belasco
Title:	Chief Information Officer and Executive Vice President

First Midwest Renew 10 32

EXHIBIT A

ATTORNEY-IN-FACT APPOINTMENT

Customer hereby appoints M&I Data Services, a division of the Marshall & Ilsley Corporation (“M&I”) as: (1) customer’s attorney-in-fact and empowers M&I to authorize the Internal Revenue Service (IRS) to release information return documents supplied to the IRS by M&I to states which participate in the “Combined Federal/State Program”; and (2) Customer’s agent to sign on Customer’s behalf the Affidavit required by the Internal Revenue Service on Form 4804, or any successor form.

FIRST MIDWEST BANCORP, INC.
(“Customer”)
By:
Name:	Kent Belasco
Title:	Chief Information Officer and Executive Vice President

First Midwest Renew 10 33

EXHIBIT B

AFFIDAVIT

STATE OF	)
	)	SS.
COUNTY OF	)

I, Kent Belasco, being first duly sworn, on oath, depose and say:

1. I am an employee of First Midwest Bancorp, Inc. I have personal knowledge of my employer’s practices with regard to procuring and reporting tax identification numbers (TINs) and authority to execute this Affidavit on my employer’s behalf.

2. First Midwest Bancorp, Inc. has complied with all laws, regulations, procedures, and requirements in attempting to secure correct TINs for its payees. This compliance has been pursued with due diligence, and any failure to secure correct TINs is due to reasonable cause.

FIRST MIDWEST BANCORP, INC.
(“Customer”)
By:
Name:	Kent Belasco
Title:	Chief Information Officer and Executive Vice President

Subscribed and sworn to before me this 8th day of October, 1999.
Nicole Renee Maier
My Commission expires: 02/10/03

First Midwest Renew 10 34

SCHEDULE 5.1

ADP SERVICES

Deposits

All Basic Services

• Demand Accounts

• Money Market Accounts

• NOW Accounts

• Savings (Passbook, Statement)

• Time Deposits (Level 1-4)

• Line of Credit Accounts

• Retirement Accounts

Exception Processing

Employee Security Processing

Overdraft Checking

Transaction Retention (90 days)

Integrated Funds Management (Sweep)

Relationship Service Charging

Kiting Suspect Detection

Statement Processing

IRS Reporting

Standard Reports

(Number and frequency, as further defined in Appendix A to the M&I Standard Published Price List) Safebox

Loans System

All Basic Services

• Commercial Loans

• Installment Loans

• Purchased Loans

• Student Loans

• Floor Plan

• Revolving Credit

• Commitments

• Participations

• Reserves (Dealer, Insurance)

Fee Processing

Credit Bureau Tapes (4 per month)

Insurance Tapes (2 per month)

Charge-Offs

Note Pad

Tickler System

First Midwest Renew 10 35

Letter Writer

Standard Reports

(Number and frequency, as further defined in Appendix A to the M&I Standard Published Price List) On-line Collections

CIS

• Customers

• Accounts

Financial Control

AAS

Teller

ACH

WAN (“LUs” or Logical Units) *RAMIS

Trust, Cash Manager

Money Talks

EFT Switch

EFD—Authorizations

EFD—VISA

Data Warehouse

*EASE

STAR View

*Account Recon

*Treasury Connection, Balance Reporting

*EDI, MIL, MIS, Control Disb

*SalesPartner

Transmissions

*Card Production

*Internet Services

*Master File Unload

*RPS

*Microfiche¹

*Printback¹

* Services which may be discontinued during the Term of this Agreement without payment of a partial termination fee as defined in Section 10.3(A).

¹ Cost Reduction Opportunities

First Midwest Renew 10 36

SCHEDULE 5.3

ACH SERVICES

A. Definitions. The following terms, as referenced from the NACHA Rules, shall have the following meanings for the purposes of the Agreement:

1. “Applicable Law” means the NACHA Rules, the rules of local ACH Associations, the rules of any and all ACH Operators, and other applicable law.

2. “Automated Clearing House Operator” or “ACH Operator” means the central clearing facility, operated by a Federal Reserve Bank (“FRB”) or a private organization, which receives entries from the ODFI or the Third Party processor acting as an agent for the ODFI, and distributes entries to the appropriate RDFI or the Third Party processor acting as an agent for the RDFI, and performs the settlement functions for the affected financial institutions.

3. “Originating Depository Financial Institution” or “ODFI” means the institution that receives the payment instructions from the Originators and forwards the entries to the ACH Operator.

4. “Originator” means a person that has authorized an ODFI to transmit a credit or debit entry to the deposit account of an RDFI.

5. “Receiving Depository Financial Institution” or “RDFI” means the institution that receives ACH entries from the ACH Operator and posts them to the accounts of its depositors.

B. General. Customer hereby authorizes M&I to initiate and receive automated clearing house debit and credit entries, adjustments to debit entries and credit entries to Customer’s account to credit and/or debit the same to such account, and to provide various ACH services, as described below, to Customer pursuant to the terms and conditions specified in this Schedule 5.3. The ACH entries covered shall hereinafter be referred to as the “ACH Entries.” Except as otherwise provided herein, the terms used in this Schedule 5.3 shall have the same meanings as ascribed to such terms in the Operating Rules of the National Automated Clearing House Association, as in effect from time to time (the “NACHA Rules”).

First Midwest Renew 10 37

C. ACH Services.

1. M&I shall act as Customer’s agent for initiating and transmitting ACH Entries to the appropriate ACH Operator. In addition, M&I shall act as Customer’s agent for receiving ACH Entries from an ACH Operator. For all ACH Entries initiated by M&I pursuant to this Agreement, Customer, and not M&I, shall be the ODFI when M&I receives payment instructions directed to Customer’s routing number from an Originator, or the RDFI when M&I receives ACH Entries directed to Customer’s routing number from an ACH Operator.

2. M&I shall transmit ACH Entries in accordance with the format requirements of the NACHA Rules to an ACH Operator using Customer’s Routing Number. M&I shall receive ACH Entries on behalf of Customer that are transmitted to M&I by an ACH Operator. M&I shall provide reports to Customer, as described in the ACH User Manual. If agreed to between Customer and M&I, M&I shall provide for the posting of ACH Entries to Customer deposit accounts.

3. All warranties of an ODFI or RDFI prescribed under Applicable Law shall be in effect and applicable to Customer, and not M&I, with respect to all ACH Entries.

4. M&I may provide additional ACH Services as requested by Customer and agreed to by M&I in writing.

D. M&I PC ACH Services. Customer may provide its business depositors with personal computer access to M&I’s ACH Services in accordance with the ACH User Manual (the “PC ACH Service”). Customer shall be responsible for informing M&I prior to permitting a new depositor to begin using the PC ACH Service. Customer also shall inform M&I whether any credit limit shall apply to the ACH Entries of a depositor utilizing the PC ACH Service.

E. Customer Depositor Inquiries; Erroneous or Rejected ACH Entries.

1. Customer shall be responsible for handling all inquiries of its depositors regarding ACH Entries, including inquiries regarding credits or debits to a depositor’s account resulting from an ACH Entry. M&I agrees to reasonably assist Customer in responding to such inquiries by providing information to Customer concerning ACH Entries.

First Midwest Renew 10 38

2. As described in the ACH User Manual, M&I shall provide reports to Customer showing errors and rejections resulting from ACH Entries transmitted on behalf of Customer during a particular day. It shall be Customer’s responsibility to research and correct such ACH Entries.

F. Credit Limits.

1. Customer may from time to time establish one or more credit limits applicable to ACH Entries involving a particular depositor or all depositors of Customer. Such credit limits shall be established by written notice from Customer and shall be implemented by M&I as soon as reasonably practicable.

2. In the event that an ACH Entry exceeds a credit limit communicated to M&I by Customer, M&I shall promptly give oral or written notice to Customer. Customer may either approve the ACH Entry as an exception to the credit limit, request that it be held over to the next day, or reject such ACH Entry provided, however, that any exception to the credit limit must be approved in writing by Customer.

G. User Manuals.

1. M&I shall provide Customer with a copy of the ACH User Manual and any updates to such manual. Customer agrees to comply with the requirements of such manual.

2. It shall be Customer’s responsibility, and Customer is authorized, to forward a copy of the applicable portion of the ACH User Manual, and any updates thereto, to Customer’s depositors that utilize the PC ACH Service.

H. NACHA Rules. Prior to providing ACH origination services, Customer shall enter into an agreement with the Originator in compliance with the NACHA Rules, including but not limited to the requirement of the NACHA Rules that such agreement include a provision whereby the Originator agrees to be bound by the NACHA Rules. M&I shall have no responsibility for ensuring that the Originators have entered into such agreements.

First Midwest Renew 10 39

1. M&I is acting solely in its capacity as agent for Customer in connection with the initiation, transmission and receipt of ACH Entries on behalf of Customer. As agent, M&I shall be under no obligation to provide funds to any party to settle for any ACH Entry received or initiated by M&I. Upon notification from Customer of the occurrence of an error or omission with respect to an ACH Entry, M&I shall promptly furnish corrected ACH Entry (ies) to an ACH Operator, unless the NACHA Rules prohibit the processing of the correct ACH Entry(ies). Notwithstanding any provision in the Agreement to the contrary, M&I’s liability to Customer for claims arising out of the ACH Services performed by M&I pursuant to this Schedule 5.3 shall be limited to the extent of errors and omissions which are caused by M&I’s gross negligence or willful misconduct and which cannot be remedied through the processing of appropriate corrected ACH Entry(ies).

2. M&I shall make reasonable efforts to deliver ACH Entries to Customer or to an ACH Operator, as appropriate, prior to any applicable deadline for such delivery. M&I does not guarantee timely delivery. M&I shall have no liability to Customer as a result of any late delivery, except to the extent such late delivery is (i) caused by the gross negligence or willful misconduct of M&I and (ii) made more than 24 hours after its scheduled deadline.

First Midwest Renew 10 40

SCHEDULE 5.4

TRUST SERVICES

A. Trust Services

The services described herein refer only to the processing and reporting services for Estates, Trust Under Will, Court Accounts, Trusts Under Agreement, Insurance Trusts, Agencies, Custodian/Safekeeping, Corporate Trusts, Pension/Profit Sharing accounts and Internal accounts including Common Trust Funds (CTF) and Collective Investment Funds (CIF).

The banks and/or branches included in this services proposal are:

First Midwest Trust Company, Joliet, Illinois and all First Midwest Trust Service Offices

1. M&I shall provide complete processing services for the Customer as more fully described in the Trust System Documentation manuals as of the Customer’s Conversion Date.

a. User Manual Volume 1

b. User Manual Volume 2

c. User Manual Volume 3

d. User Manual Volume 4

e. Reports Usage Manual 1

f. Reports Usage Manual 2

g. Special Processing Volume 1

h. Special Processing Volume 2

i. Special Processing Volume 3

J. Special Processing Volume 4

Customer will have the option of initially receiving two sets of the user documentation at no charge in either paper and/or CD format.

2. The on-line system will be available for use Monday through Sunday, 7 a.m.-5 p.m., CDT, CST. M&I reserves the right to use Sunday as a maintenance day in addition to normal processing.

Extension of on-line availability can be accomplished by notification to Customer’s product support representative no later than 3 p.m. on the date service extension is required. Saturday and Sunday extension notice would be required by 3 p.m. on the preceding Friday.

3. M&I shall maintain a customer support center as part of their services to the Customer. The support center will maintain a toll free (800) number and be staffed from 8 a.m. to 5 p.m., CST, CDT, Monday through Friday excluding national holidays.

4. M&I shall perform a conversion from the Customer’s current system as defined in the M&I Conversion Manual, and training will be completed at the Customer’s site as further outlined in said manual.

First Midwest Renew 10 41

Included in the trust conversion process will be M&I’s assistance in balancing conversion related activity only. Once in balance, the Customer assumes responsibility for daily balancing.

5. The number of authorized copies of TrustDesk™ software included in this Agreement is set by the Customer through written notification to their designated M&I product support representative. Customer may substitute personal computers (workstations) on which TrustDesk™ software is used.

M&I shall provide Customer with up to 16 hours of phone support in the installation of TrustDesk™ software on Customer’s workstations and up to sixteen (16) hours of Gateway consulting support. Any additional time requested by the Customer will be billed at M&I’s then-current programming rates plus travel and living expenses if any, for on-site support.

6. Customer will have access to M&I’s CSF formatted statements. Any modifications to these statements would require custom programming and result in additional charges. Any technical assistance required from M&I in obtaining , modifying, or configuring printers would be billed at standard programming rates (Exhibit B). The following statement types are available to the Customer:

•	Employee Benefit	•	Income & Principal Cash
•	Graphical Asset	•	Landscape Single Cash
•	Graphical Income & Principal	•	Single Cash
•	Investment Model

Any additional CSF statements would be available at additional cost. Printing of CSF statements at Customer site is per M&I print specifications. Printing by M&I is available at an additional cost.

7. Customer will provide the following resources during the conversion process:

Customer will maintain required staffing levels during the conversion process to achieve all conversion objectives and timelines as stated in the conversion project plan and appropriately balanced cash and asset files for the initial and final conversions.

Customer will identify and assign an existing staff manager as their conversion project manager. Customer understands the duties and responsibilities of their project manager are critical to the overall conversion effort and will provide the time required to successfully address the stated duties and responsibilities. Customer will use its best efforts to ensure the project manager assignment does not change during the conversion process.

Customer’s conversion project manager is expected to develop an internal procedures manual available to Customers’ staff no later than two weeks prior to conversion date. M&I will assist customer by providing a procedures manual template.

First Midwest Renew 10 42

SCHEDULE 7.1

EFD SERVICES

A. Definitions. The following terms shall have the following meanings for the purposes of the Agreement:

1. “Account” shall mean any account maintained by Customer’s depositors and includes a checking, savings, NOW, money market or other asset account or credit card account or any one of the various loan accounts or lease accounts.

2. “ATM” shall mean the cash disbursement automated teller machines and/or script dispenser or other similar device which conforms to M&I’s standards.

3. “Card” shall mean a plastic card issued by or on behalf of Customer to Customer’s Cardholders for use in effecting Transactions at Terminals.

4. “Cardholder” shall mean any person who has, or is authorized to use, an Account with Customer and to whom a Card and/or PIN is issued for use in originating Transactions.

5. “Credit Card” means any Card that primarily accesses an account which is an asset of the Customer or a Third Party for whom Customer is an agent and who issues the Card.

6. “Debit Card” shall mean any Card that primarily accesses an Account which is a liability of the Customer.

7. “EFD Services” shall mean the electronic funds delivery Services set forth in this Schedule.

8. “Item” means any electronic message which communicates and effects a Transaction between Customer and its depositors through a Terminal and which includes the date, type and amount of such Transaction, identification of the depositor, the Customer, the Terminal, the location of the Terminal, the PIN and authorization codes.

9. “MasterCard” shall mean MasterCard International, Inc.

10. “Network” shall mean a shared electronic funds transfer system operating under a common name whereby financial institutions are available to route, process and settle certain financial Transactions.

First Midwest Renew 10 44

11. “PIN” shall mean a Cardholder’s personal identification number which is used by the Cardholder at the Terminals as one means of identification of such Cardholder.

12. “POS” means point of sale.

13. “Terminal” means an ATM, a POS device, or any other device which directly or indirectly is supported by M&I and meets the specifications of M&I.

14. “Transaction” shall mean any function supported by M&I and attempted by Cardholders or others at a Terminal and includes: (a) cash withdrawals from an Account; (b) deposit to an Account; (c) balance inquiries regarding an Account; (d) transfer from one Account to another Account; (e) payment enclosed for Credit Cards and loans; and (f) POS authorizations and settlement.

15. “Visa” shall mean VISA U.S.A., Inc.

B. Customer shall execute applications for membership in Visa and/or MasterCard. M&I agrees to assist Customer in obtaining sponsorship by an appropriate financial institution, if necessary. Customer shall provide M&I with copies of its fully executed Visa and/or MasterCard membership agreements promptly after receipt by Customer.

C. Customer shall comply with the articles, bylaws, operating regulations, rules, procedures and policies of Visa and/or MasterCard and shall be solely responsible, as between Customer and M&I, for any claims, liabilities, lawsuits and expenses arising out of or caused by Customer’s failure to comply with the same. Customer agrees to maintain an account with a financial institution approved by M&I and Customer hereby authorizes M&I to charge any amounts due to M&I, for EFD Services, against any credits due to Customer to Customer’s account whether or not such charges create overdrafts.

D. Customer understands and agrees that M&I may terminate EFD services immediately in the event M&I’s access to any Network is terminated by the Network provider.

First Midwest Renew 10 45

SCHEDULE 8.1

FEE SCHEDULE

I. “Cost-Plus Pricing”

Customer shall pay for Services received based on M&I’s cost of providing the Services plus thirteen and one-half percent (13.5%). M&I will review its costs with Customer on an annual basis to determine the increase (if any) in Fees for the successive year. Adjustments to the pricing will take effect on each annual anniversary of the Effective Date in no event shall any individual adjustment increase or decrease more than five percent (5%) from one year to the succeeding years. The initial pricing shall be based on M&I’s 1998 costs.

II. Minimum Fee

In no event will the total monthly charges paid by Customer to M&I for Services received be less than three hundred fifty thousand dollars ($350,000). Notwithstanding the foregoing, in the event circumstances arise that affect Customer’s business such that actual monthly processing fees decline below three hundred fifty thousand dollars ($350,000) for three consecutive months, M&I and Customer agree to review the pricing structure of this Agreement.

III. Allowances

A. M&I agrees to provide Customer a monthly allowance of sixty (60) programming hours. Hours utilized in excess of sixty (60) shall be discounted twenty-five percent (25%).

B. M&I agrees to provide Customer a credit of up to three thousand dollars ($3,000) in each month of the Agreement to be applied against “general services” (such as training and workshops) rather than monthly processing fees. A twenty-five percent (25%) discount shall be applied to the fees for such general services prior to the application of such credit. Pass-through or third party charges shall not be subject to any discount or credit.

First Midwest Renew 10 46

IV. Conversion Expenses

Customer is paying for expenses related to the conversion of certain mergers and acquisitions which have occurred in prior years. Such expenses shall be paid in equal monthly installments according to the table which follows:

	Monthly Expense	Expiration
Trust Conversion	$1,000	2/28/2001
5/95 Merger	$5,050	5/31/2000
6/96 Acquisition	$4,750	2/28/2001

M&I agrees that future conversion expenses will not be amortized.

V. Account Management

Customer shall pay M&I a monthly fee of thirteen thousand dollars ($13,000) for the services of the team of M&I employees assigned to manage the relationsip with Customer. Should Customer exercise its option to replace this team with a dedicated account manager as provided in Section 18.1, the monthly fee shall be twelve thousand dollars ($12,000).

VI. Conversion Discounts

M&I agrees to provide Customer a discount against M&I’s standard charges for future conversion programming/product support services according to the following schedule:

If Conversion Occurs:	Discount:
During months 1 through 12 of the Agreement	75%
During months 13 through 24 of the Agreement	60%
During months 25 through 36 of the Agreement	45%
During months 37 through 48 of the Agreement	30%
During months 49 through 60 of the Agreement	15%

51

Schedule 9.1

Performance Standards

A. Batch Processing. M&I will initiate batch processing and have operations reports¹ available for transmission to Customer or Customer’s printing vendor within five (5) hours on all processing days in a calendar month [fifteen (15) hours at year-end] provided M&I receives all input data from Customer by 1:00 a.m. CT. This batch window is based on 367,518 plus account growth not to exceed 20%. Batch windows shall be adjusted by M&I in consultation with Customer should account volumes exceed this level. Performance Standard: M&I shall not miss deliverable identified above more than twice in any calendar month.

B. On-line Availability. M&I will ensure that its on-line computing facilities for Teller transactions, CRT transactions, Deposit, Loan and CIS Systems, and ATM transactions are available for the processing of Customer’s on-line transactions at a minimum of ninety nine percent (99.0%) of the time, as prescribed by Customer, measured over a calendar month at the point of departure from M&I’s communications controller. The time prescribed by Customer for each processing day for which on-line computing facilities shall be made available for each product or service is set forth below. Processing day shall mean any weekday which is not declared a holiday by the Federal Reserve Bank of Chicago. “Availability” for purposes of this paragraph shall be expressed as a percentage for each calendar month and shall be the number 100 less the ratio of (i) time period of unscheduled outages over (ii) total time prescribed less the time period of scheduled outages.

¹ Operations reports are defined as standard system reports as listed in Appendix A of the M&I Data Services Product Price List excluding New Retirement System Reports.

First Midwest Renew 10 48

Service Availability
Product/Service	Central Time
ATM (Base24 Availability)2
Monday—Thursday	12:01 a.m. - 12:00 midnight
Friday	12:01 a.m. - 12:00 midnight
Saturday	12:01 a.m. - 12:00 midnight
Sunday	12:01 a.m. -12:00 midnight
Cardbase Management System
Monday—Thursday	7:00 a.m.-6:45 p.m.
Friday	7:00 a.m.-9:30 p.m.
Saturday	7:00 a.m.-4:30 p.m.
Sunday (nonstandard)	7:00 a.m.-2:00 p.m.
CIS & Deposit System
Monday—Thursday	7:00 a.m. -6:45 p.m.
Friday	7:00 a.m. - 9:30 p.m.
Saturday	7:00 a.m. -4:30 p.m.
Sunday (nonstandard)	7:00 a.m.-2:00 p.m.
General Ledger
Monday—Thursday	7:00 a.m. - 8:00 p.m.
Friday	7:00 a.m. - 8:00 p.m.
Saturday	7:00 a.m.-4:30 p.m.
Loan System
Monday—Thursday	7:00 a.m. - 6:45 p.m.
Friday	7:00 a.m. - 9:30 p.m.
Saturday	7:00 a.m.-4:30 p.m.
Sunday (nonstandard)	7:00 a.m. - 2:00 p.m.
Teller System
Monday—Thursday	7:00 a.m. - 6:45 p.m.
Friday	7:00 a.m. - 9:30 p.m.
Saturday	7:00 a.m.-4:30 p.m.
Account Analysis
Monday—Thursday	7:00 a.m. - 6:45 p.m.
Friday	7:00 a.m. - 9:30 p.m.
Saturday	7:00 a.m.-4:30 p.m.

First Midwest Renew 10 49

Bank Control
Monday—Thursday	7:00 a.m. - 6:45 p.m.
Friday	7:00 a.m. - 9:30 p.m.
Saturday	7:00 a.m. - 4:30 p.m.
Account Reconciliation
Monday—Thursday	7:00 a.m. - 6:45 p.m.
Friday	7:00 a.m. - 9:30 p.m.
Saturday	7:00 a.m. - 4:30 p.m.

² M&I’s objective is to provide 24 X 7 hour availability for these systems. M&I does, however, need to perform, regular technical maintenance (e.g., NCP maintenance), CPU IPLs, DASD installs, HIS gens, etc.) This type of maintenance is performed between 2:00 a.m. and 6:00 a.m., CST/CDT. These activities may result in system downtime during this window.

C. Processing Time. M&I will process transactions in an average of four (4) seconds for teller transactions and in an average of four (4) seconds for CRT transactions as measured over a calendar month, from the time the transaction is sent by the Customer’s controller or gateway to the time the processed data is returned to the Customer’s controller or gateway and seven (7) seconds for ATM transactions. Should M&I not be able to perform in accordance with the Performance Standards because Customer failed to acquire network or equipment recommended by M&I, or such additional network or equipment as may be reasonably necessary based on the circumstances, M&I shall notify Customer in writing, M&I will review such additional network or equipment requirements with Customer, and Customer shall either acquire such network and/or equipment or accept the response time that is achieved. Customer and M&I may agree to new Performance Standards based upon this review.

D. STAR View. Available on-line within five (5) hours after M&I’s receipt of release to post transmission if received by 2:00 a.m. CT.

E. Trust Services. Subject to the nonoccurrence of a force majeure and the performance of Customer’s obligations described in this Agreement, M&I agrees that the Trust Services provided under this Agreement will be provided in accordance with the following Performance Standard:

M&I will initiate batch processing and have bank operations reports available for transmission to Customer or make the processed item and reports within six (6) hours (fifteen (15) hours at year end) after receiving all input data from Customer, and with such performance being missed not more than two (2) processing days per calendar month. M&I will ensure that its on-line

First Midwest Renew 10 50

computing facilities are available for the processing of Customer’s on-line transactions at a minimum of ninety-five percent (95%) of the time, as prescribed by Customer, measured over a calendar month at the point of departure from M&I’s communications controller. M&I will process CRT synchronous transactions in an average of 2.5 seconds as measured over a calendar month using IBM System Monitoring Facility (SMF) or similar product. Should M&I not be able to achieve this objective, M&I will review such additional network or equipment requirements with Customer, and Customer shall either acquire such network and/or equipment or accept the response time that is achieved. Customer and M&I may agree to new Performance Standards based upon this review.

Database Recovery

A. Application downtime standards will apply if the database is not available.

B. Compliance with the standards will be reported in a monthly management report which will be provided to each of Customer’s affiliates as well as a complete set of each affiliate’s reports to the Chief Information Officer of Customer. For each Customer affiliate, performance will be measured over a calendar month with response time measured from the point of departure of the M&I controller.

C. If M&I is deficient in any standard:

M&I will pay a credit of five percent (5%) of the affected applications for the first month following receipt of notice of the deficiency.

If the deficiency continues for sixty (60) days, a credit of ten percent (10%) will be paid for the next month’s applicable invoice.

If the deficiency remains for ninety (90) days or more, a credit of twenty percent (20%) will be paid for the third and each of the subsequent months of continued deficient performance thereafter.

The discounts in 1, 2 and 3 above exclude communication costs, pass-through charges or charges properly billed as miscellaneous on Customer’s invoice.

D. If the deficient service continues for ninety (90) days, it shall constitute an Event of Default on the part of M&I at which time Customer may terminate this Agreement without further notice and without further liability.

E. M&I will not be subject to penalties under the following circumstances:

Problems which are determined to be multivendor in nature and not caused by M&I. Work that is subcontracted out by M&I shall be not considered multivendor in nature.

First Midwest Renew 10 51

Problems which stem from operational errors by Customer. M&I will have the obligation to report such problems to the Customer’s Chief Information Officer for resolution.

M&I shall reserve the right to postpone the installation of enhancements or postpone mergers or conversions where testing has not been successfully completed, or where issues remain outstanding due to system changes requested by or problems created by Customer which would cause M&I’s performance to fail only with the agreement and concurrence of the Customer’s Chief Information Officer.

F. If M&I maintains or exceeds standards for each individual item for ten (10) consecutive months after a deficiency, the initial thirty (30) day credit of five percent (5%) will be repaid. Upon achievement of another consecutive month of performance meeting or exceeding standards, the credit applied for the next thirty (30) day period shall be repaid. This will continue on a rolling ten (10) month period of time allowing for the possibility of an earnback of all credits paid in the sequence in which they were paid.

G. M&I assumes no other liability, expressed or implied, with respect to its obligations and the standards set forth in this Schedule 9.1 except as expressly provided herein.

First Midwest Renew 10 52

SCHEDULE 11.1

TERMINATION FEE

A. Termination for Convenience. Except as set forth in Paragraph C below, if Customer elects to terminate this Agreement for any reason, Customer shall pay M&I the Termination Fee computed in accordance with this Schedule 11.1. The Termination Fee shall be paid at least sixty (60) days prior to the Effective Date of Termination. In addition to the foregoing, Customer shall pay to M&I any amortized but unpaid Conversion fees and all reasonable costs in connection with the disposition of equipment, facilities and contracts specifically related to M&I’s performance of the Services under this Agreement.

B. Termination for Cause by M&I. If M&I terminates this Agreement in accordance with Sections 11.2 or 11.3 of the Agreement, Customer shall pay M&I the Termination Fee as set forth in this Schedule 11.1. The Termination Fee shall be paid at least sixty (60) days prior the Effective Date of Termination. In addition to the foregoing, Customer shall pay to M&I any amortized but unpaid Conversion fees and all reasonable costs in connection with the disposition of equipment, facilities and contracts specifically related to M&I’s performance of the Services under this Agreement.

C. Termination for Cause by Customer. If Customer terminates this Agreement in accordance with Sections 11.2, 11.3 or 11.4, then Customer shall not be obligated to pay M&I the Termination Fee.

D. Termination Fee. The Termination Fee shall be an amount equal to forty percent (40%) of the Estimated Remaining Value.

First Midwest Renew 10 53

SCHEDULE 18.1

ACCOUNT REPRESENTATIVES

First Midwest Renew 10 58

Managing Director	Client Relationship Manager	Client Solutions Manager
Tom Behr	Carroll Parchert	Lisa Collins
724-443-2524	4-4956	4-4873
•M&I owner of the relationship •Interfaces with executive levels •Monthly customer visits (minimum) •Annual or bi-annual business reviews •Executive briefings •Strategic planning with the customer •Strategic contract administration •Contract renewals •Key escalation point •Customer satisfaction •Quarterly Customer Satisfaction Review •Annual Executive Interchange	•Overall project coordinator (conversion phase) •On-site regularly •Escalation for day-to-day issues •Attends status meetings as needed •Tactical planning/enhancements •Ensures estimates are completed •Tactical contract administration •Sell additional products and services •Billing errors, AR, reconciliation •Assist with revenue projections •Works with department heads and senior management (from time-to-time with executive level) •Customer satisfaction	•Primarily in-house, occasional customer site visits •Day-to-day operations/production •Conducts status calls on weekly basis •Tactical customer communication •Attends all status meetings •First level escalation •Account administration (forms) •Manages the issues list •Administrates the enhancement list •Non-development project management •Works mainly with front line managers/employees of both organizations. From time-to-time interfaces with division head level at the customer •Customer satisfaction
First Midwest Bancorp Relationship
President	CIO	User management
Key executive	Key user management	Bank operations
CIO	General management

2

Principal Member Agreement - Adaptive Control Software and Scorecards

AMENDMENT to Associate Member Agreement - Credit Card

AMENDMENT to Master Services Agreement

THIS AMENDMENT (The “Amendment”) is made as of December 6, 1999 to the Master Services Agreement dated July 1, 1999 (the “Agreement”) by and between First Midwest Bank (“Customer”) and M&I Data Services, a division of Marshall & Ilsley Corporation, a Wisconsin corporation (“M&I”).

WHEREAS, Customer desires to amend the Agreement to obtain the TRIAD Adaptive Control Software and Scorecard services for itself and its subsidiary users, and M&I desires to provide these service through information and materials received from Total System Services, Inc. (“TSYS”) and Fair, Isaac and Company, Incorporated (“Fair, Isaac”). TSYS and Fair, Isaac have approved and consented to the form of this Amendment and its terms.

NOW THEREFORE, in consideration of their mutual promises, the parties agree as follows:

1. Additional Services. In addition to the services described in the Agreement and any other amendment, M&l shall provide the TRIAD Adaptive Control Software and Scorecard services described in the attached Exhibit A (which is incorporated by reference into Exhibit A of the Agreement) on the terms contained in this Amendment.

2. Pricing. Customer agrees to pay for the services received under this Amendment in accordance with the pricing attached as Exhibit B (which is incorporated by reference into Exhibit B of the Agreement). These charges will not be subject to any price adjustment or discount provision contained in the Agreement or any other amendment. The pricing described on Exhibit B may be modified by M&I from time to time. M&I will provide Customer with written notice of any pricing change at least 30 days prior to the effective date of the change.

3. Covered Accounts. Customer will only use the services provided under this Amendment with respect to Customer’s own and controlled accounts.

4. Confidentiality. Customer will keep confidential and not disclose the scorecards, software or scores and related information provided under this Amendment. The confidentiality and non disclosure obligation will not apply to the extent a disclosure is made pursuant to: (1) any law of the United States or any state; (2) the order of any court or governmental agency; or (3) the rules and regulations of any governmental agency.

5. Warranties. Fair, Isaac and TSYS do not give any warranties with respect to the specific risk prediction for any individual or the accuracy or completeness of the information scored or delivered. M&I disclaims all warranties, whether express or implied, with respect to the services provided under this Amendment. Customer will rely solely on the warranties provided by TSYS, and Fair, Isaac with respect to the services provided under this Amendment. THE WARRANTIES AND REMEDIES STATED IN THIS AMENDMENT ARE IN LIEU OF ALL OTHERS, WHETHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

6. Release from Liability. Customer releases M&I, TSYS and Fair, Isaac from liability for any direct or indirect damages, losses, costs or expenses incurred by Customer which are the result of actions Customer takes with respect to its customers and which are the result of any failure of the software, scorecards or scores to accurately predict the creditworthiness of any customer.

7. Limitation on Liability. M&I, TSYS and Fair, Isaac, and their respective officers, directors and affiliated companies, will in no event be liable for any indirect incidental, special or consequential damages, including loss of profits, revenue or data, incurred by Customer or any third party, regardless of how such damages arise and whether or not either was advised such damages might arise. In no event will M&I, TSYS and Fair, Isaac collectively be liable to Customer for any loss, cost, damage or expense arising out of or in any way related to the services provided under this Amendment that exceeds an amount equal to the fees paid by Customer to M&I for the six-month period immediately preceding the date of Customer’s claim.

8. Indemnification. Customer agrees to indemnify and hold harmless M&I, TSYS, and Fair, Isaac, their respective officers, directors and affiliated companies, from and against any and all liabilities, damages, losses, claims, costs and expenses (including attorney fees) arising out of or related to Customer’s use of the software, scorecards or scores.

9. Miscellaneous. The terms of this Amendment supersede any conflicting provisions contained in the Agreement. All nonconflicting terms and conditions contained in the Agreement will remain in full force and effect and will apply to the additional services provided under this Amendment. This Amendment applies only to the parties hereto and their successors and assigns, and is not intended to create any third party beneficiaries.

10. Y2K. M&I represents that, during the term of this Agreement, the Software is and will remain capable of correctly performing any of its functions, calculations, comparisons, sequencing, displays and other processing of calendar dates and date related data, including leap years, both before and after the year 2000, without error or degradation of performance.

11. Termination. This agreement may be terminated by either M&I or Customer with a written notice of termination at least 60 days prior to the effective date of the termination.

IN WITNESS WHEREOF, the parties have executed this Amendment by their duly authorized representative as of the date first set forth above.

M&I Data Services, a division of Marshall & Ilsley Corporation
4900 West Brown Deer Road
Brown Deer, WI 53223
By:
Name:	Frank D’Angelo
Title:	Senior Vice President
First Midwest Bank
300 Park Boulevard
Itasca, IL 60143
By:
Name:	Kent Belasco
Title:	Executive Vice President

EXHIBIT A

TRIAD ADAPTIVE CONTROL SOFTWARE AND ADDITIONAL SERVICES

The following is a listing of services provided by BankCard Services in support of the TRIAD product:

• Strategy and Scenario Design. BankCard Services will maintain full management of all strategies

• and scenarios. Any bank requests will be reviewed for potential implementation as a Challenger strategy.

• System Matrix maintenance.

• Results and Outcomes Analysis.

• Problem Resolution.

• On-line letter design and maintenance.

• Champion and Challenger Strategy Testing,

• Installation of System Upgrades.

• Liaison between Client, Fair Isaac Inc., and Total System Services, Inc.

• Distribution of monthly reporting package.

• Validation and Alignment.

EXHIBIT B

TRIAD ADAPTIVE CONTROL SOFTWARE AND SERVICE PRICING

First Midwest Bank

Start Up Fees:	$2,500.00
Monthly Reporting Fee:	$250.00 for Full Reporting Package and Analysis $0.00 for TSYS TRIAD Standard Reports
Scorenet Fee:	Pass through - amount depend on options chosen
On-going Usage Fees:	Cost plus 13.5% pricing $0.0631 / Account Treated / Month (Cost = $0.0556)

Unique Fees:

Custom Reporting / Analysis	per quote ($150.00 per hour to be discounted per the contract)
Training	per quote

DIRECTNET AMENDMENT TO OUTSOURCING AGREEMENT

THIS DIRECTNET AMENDMENT to the Outsourcing Agreement dated                              (the “Agreement”) is made as of this 7 day of January, 2000 by and between First Midwest Bank (“Customer”) and M&I Data Services, a division of Marshall & Ilsley Corporation (“M&I”).

WHEREAS, Customer desires to amend the Agreement to obtain certain DirectNet Services; and

WHEREAS, M&I desires to provide said services.

NOW, THEREFORE, in consideration of the recitals and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. DEFINITIONS. As used in this Schedule, the following terms shall have the respective meanings set forth on Schedule 6.2(A).

2. BUSINESS RELATIONSHIP.

2.1. General. Customer has developed a web site on the Internet, or has contracted with M&I or a Third Party to develop such web site. As part of providing the M&I DirectNet services to its Depositors, Customer shall link its web site to the M&I Home Banking System such that Users are able to receive the M&I DirectNet Services.

2.2. M&I’s Responsibilities. M&I shall provide to Customer the M&I DirectNet Services in accordance with the Implementation Guide. The M&I DirectNet Services shall be implemented by Customer in accordance with the implementation schedule (the “Implementation Schedule”) set forth in the Implementation Guide. As to any individual User, such services shall be commenced pursuant to the User Set-Up and Withdrawal Procedures set forth in the Implementation Guide.

2.3. Customer Responsibilities.

A. The parties agree that the Commencement Date shall be March 27, 2000 . Customer shall pay for the M&I DirectNet Services in accordance with Schedule Error Reference source not found. (“Fee Schedule”) commencing on the Commencement Date. Notwithstanding Schedule 8.1 to the Agreement, Customer agrees that the fees and charges set forth in the Fee Schedule shall apply to Customer through July 1, 2000. Thereafter, fees and charges for the M&I DirectNet Services shall be determined in the manner set forth in Schedule 8.1 of the Agreement. If Customer fails to implement the M&I DirectNet Services on or prior to the Commencement Date, Customer shall nevertheless pay M&I the minimum monthly fees commencing on the Commencement Date. Customer will provide Users with all disclosures required under all applicable federal, state and local laws, rules and regulations (“Applicable Law”) necessary to have access to the M&I DirectNet Services.

B. Enrollment of Users. Customer will obtain from each Depositor who desires to access the Bill Payment Services, or any portion thereof, an agreement or authorization, in such form as is developed by Customer, to access the Bill Payment Services (the “User Agreement”). The User Agreement will include, without limitation, the User’s authorization to allow Customer to provide the Bill Payment Services to Users and, if Customer has requested that User Fees be debited by M&I from each User’s DDA Account, authorization to initiate ACH debits from the User’s DDA Account for User Fees. Customer will review the User Agreement to determine that the User Agreement is complete and perform any and all validation procedures it determines, in its sole discretion, are necessary to ensure the financial integrity of a particular User. Customer agrees to cooperate with M&I and provide M&I with all necessary information and assistance required for M&I to successfully make the Bill Payment Services operational and available to Customer. Customer agrees that M&I is under no obligation to provide any User with access to the Bill Payment Services unless and until Customer has provided M&I with all information and documentation required by M&I for User set-up.

C. Disclosures. Customer will provide Users with all disclosures required under all Applicable Law necessary to have access to the Bill Payment Services, specifically including, without limitation, the initial disclosures required under Regulation E of the Federal Reserve Board (the “Initial Disclosures”). Customer shall include in the Initial Disclosures the appropriate telephone number (which may be a telephone number maintained by Customer or a telephone number maintained by M&I) for Users to contact with questions about the Bill Payment Services, and a statement that Customer may require written confirmation of any oral notice of billing errors.

D. Internal Use. Customer agrees that, except as otherwise permitted in writing by M&I, it will use the Bill Payment Services only for its own internal and proper business purposes, and will not resell, directly or indirectly, any of the Bill Payment Services or any portion thereof to any Third Party.

E. No Warranties. Customer is expressly prohibited from extending any warranty or warranties on behalf of M&I or its subcontractors to any person or entity.

F. Responsibility. Customer is and shall remain solely and exclusively responsible for the entire amount of any and all Failed Payments and Reversed Payments (as those terms are defined below). For purposes of this Section 2.3F., a “Failed Payment” is any bill payment processed through the Bill Payment System for and on behalf of Customer which fails to be completed due to insufficient funds in the User’s Billable Account or for any other reason outside M&I’s control. A “Reversed Payment” is any bill payment processed through the Bill Payment System for and on behalf of Customer which is reversed for any reason and cannot be charged back to the User’s Billable Account due to insufficient funds or any other reason outside M&I’s control.

© 1999, M&I Data Services 1    First Midwest DirectNet Amendment to Outsourcing Agreement (7 20 99)

3. GRANT OF LICENSES.

3.1. Service Marks and Trademarks. While this Agreement is in effect, Customer grants to M&l a non-exclusive, non-transferable license to use mutually agreed upon service marks and trademarks of Customer in connection with private labeling the M&l DirectNet Services to Depositors.

3.2. M&l Software. While this Agreement is in effect, M&l grants to Customer a non-assignable, non-transferable license to permit the Users to use the M&l Software solely to receive the M&l DirectNet Services.

3.3. Marketing Rights. While this Agreement is in effect, M&l grants to Customer a non-assignable, non-transferable right to market the M&i DirectNet Services to Depositors.

3.4. Domain Names. As between M&l and Customer, Customer shall own all rights to the domain name assigned to its web site. If M&l is selected to develop the web site, M&l agrees to assist Customer in registering the domain name, at Customer’s sole cost and expense.

4. AUTHORITY.

4.1. M&l represents and warrants to Customer as follows:

A. Customer Service Marks and Trademarks. M&l shall not use any of Customer’s service marks and trademarks except for the purpose of identifying the M&l DirectNet Service to Users.

B. Ownership. M&l has the right to offer the M&l DirectNet Services to Customer as provided herein; the M&l Software does not violate any patent, copyright, trademark or other proprietary right or interest of any Third Party under United States law.

C. Performance. The M&l DirectNet Services shall be performed in a professional and competent manner in accordance with the Performance Standards and otherwise in accordance with the provisions of this Agreement.

D. Year 2000. The M&l Software shall be Millennium Ready.

E. Disclaimer. THE FOREGOING WARRANTIES ARE IN LIEU OF, AND M&l DISCLAIMS ANY AND ALL OTHER WARRANTIES, CONDITIONS, OR REPRESENTATIONS (EXPRESS OR IMPLIED, ORAL OR WRITTEN) WITH RESPECT TO THE SERVICES PROVIDED UNDER THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY AND ALL IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS OR SUITABILITY FOR ANY PURPOSE (WHETHER OR NOT M&l KNOWS, HAS REASON TO KNOW, HAS BEEN ADVISED, OR IS OTHERWISE IN FACT AWARE OF ANY SUCH PURPOSE), WHETHER ALLEGED TO ARISE BY LAW, BY REASON OF CUSTOM OR USAGE IN THE TRADE, OR BY COURSE OF DEALING. IN ADDITION, M&l DISCLAIMS ANY WARRANTY OR REPRESENTATION TO ANY PERSON OTHER THAN THE CUSTOMER WITH RESPECT TO THE SERVICES PROVIDED UNDER THIS AGREEMENT.

4.2. Customer represents and warrants to M&l as follows: It is a corporation validly existing and in good standing under the laws of the state of its incorporation. It has all the requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement, the execution, delivery and performance of this Agreement has been duly authorized by Customer and this Agreement is enforceable in accordance with its terms against Customer. No approval, authorization or consent of any governmental or regulatory authorities is required to be obtained or made by Customer in order for Customer to enter into and perform its obligations under this Agreement. It has the right to use the domain name and the domain name does not violate any trademark or trade name owned by a Third Party.

5. COMPLIANCE WITH LAWS. Customer shall be responsible for compliance with all Applicable Law including, without limitation, compliance with error and dispute resolution procedures specified under the Electronic Funds Transfer Act of 1978 and the regulations and interpretations promulgated thereunder (including, without limitation, Regulation E of the Federal Reserve Board). While M&l shall not have any responsibility for compliance with such procedures or otherwise resolving disputes between Customer and its Users, M&l agrees to follow the procedures and to provide Customer Service and Research services described in Schedule 6.2(C) hereto in accordance with the Performance Standards. In addition, M&l has instituted and will use commercially reasonable efforts to maintain procedures to log, monitor, and investigate User inquiries which are classified by M&l, in its reasonable discretion, as “billing error notices” under Federal Regulation E, and to report results to Customer within time limits established under Federal Regulation E. M&l’s current Statement of Procedures Regarding Billing Error Notices is attached as Schedule 6.2(F) hereto, and is subject to change from time to time.

6. INDEMNIFICATION. In addition to the obligations set forth in the Agreement, the parties agree as follows:

6.1. M&I. M&l shall indemnify Customer from, defend Customer against, and pay any final judgment awarded against Customer in favor of a Third Party, resulting from any claim by a Third Party that the M&l Software or Bill Payment System infringes any patent, copyright, trademark or other third party intellectual property right under United States law.

6.2. Customer. Customer shall indemnify M&l from, defend M&l against, and pay any final judgment awarded against M&l resulting from: (a) any action or omission in breach of this Agreement by Customer, and/or any action or omission by any User, including, without limitation, (i) failure of Customer or any User to comply with Applicable Law; (ii) the inaccuracy or inadequacy of information, instructions or data provided by Customer or any User to M&l; (iii) any transactions initiated by Users; (iv) transactions effected with a lost, stolen, counterfeit or misused PIN issued to any User; (v) any Failed Payments or Reversed Payments initiated by a User; (b) content or information prepared or distributed by Customer regarding or relating to the Bill Payment Services (including, without limitation, information included in Customer’s web site, if any, or any changes thereto); (c) tortious acts or omissions by any User; (d) economic loss or damage to any User arising from the Bill Payment System’s performance or failure to perform (including, without limitation, late charges), (e) any breach of the firewall, or unauthorized access through Customer’s web site, assuming that M&l complies with its Security obligation provisions; and (f) insufficient funds in any Users DDA Account to cover bill payments initiated by such User.

© 1999, M&I Data Services 2    First Midwest DirectNet Amendment to Outsourcing Agreement (7 20 99)

7. THIRD-PARTIES.

7.1. Subcontracting. Customer acknowledges that M&I may subcontract a portion of the M&I DirectNet Services to be provided hereunder. All M&I DirectNet Services performed by any Third-Party subcontractor of M&I shall be deemed to have been performed by M&I, and M&I shall be fully responsible to Customer for all such services performed by any Third-Party subcontractor of M&I, in accordance with the provisions of this Agreement.

7.2. Settlement of Funds. Customer understands that it is fully responsible for the availability of good funds necessary to settle the bill payment activities of its Users initiated through the use of the M&I DirectNet Services. M&I shall initiate debit ACH entries against each User’s DDA Account for bill payment activities initiated by the User.

Third-Party Products. Customer understands and agrees that M&I may use Third Party products in connection with the M&I DirectNet Services offered hereunder. These products may include firewall security, web server software and encryption software. The Third Party software used by M&I as of the Effective Date is set forth on Schedule 6.2(G) attached hereto. Customer agrees that M&I shall not have financial responsibility or legal liability to Customer in connection with the performance or non-performance or such Third Party products. The foregoing limitations shall not affect M&I’s obligation to meet the Performance Standards set forth on this Agreement.

© 1999, M&I Data Services 3    First Midwest DirectNet Amendment to Outsourcing Agreement (7 20 99)

IN WITNESS WHEREOF, the undersigned parties have duly executed this Amendment in a manner appropriate to each.

M&I DATA SERVICES, a division of Marshall & Ilsley Corporation (“M&I”)
4900 West Brown Deer Road
Brown Deer, WI 5223-0528
By:
Name:	Nancy Langer
Title:	SVP/General Manager Electronic Commerce
		(“Customer”)
By:
Name:
Title:	EVP/CIO

© 1999, M&I Data Services 4    First Midwest DirectNet Amendment to Outsourcing Agreement (7 20 99)

SCHEDULE 6.2(A)

DEFINITIONS

A. “ACH” shall mean automated clearing house services.

B. “Affiliate” shall mean, with respect to a party, any entity at any time Controlling, Controlled by or under common Control with, such party.

C. “Agreement” shall mean this Agreement and all Schedules attached hereto.

D. “Bill Payment System” shall mean the procedures, systems, and software M&I has developed to provide the Bill Payment Services, as set forth in the Implementation Guide.

E. “Bill Payment Services” shall mean services which enable consumers and small business customers of financial institutions to initiate bill payments from a telephone, personal computer, internet enabled television, or other access device.

F. “Billable Account” shall mean a User’s DDA account which is active and able to pay bills on the Bill Payment System. A User’s account that does not pay bills during any one month, but is still enabled to pay bills on the Bill Payment System, is considered a ‘Billable Account’.

G. “Business Day” shall mean Monday through Friday, excluding Federal banking holidays.

H. “Commencement Date” shall mean the date on which Customer shall commence implementation of the M&I DirectNet Services.

I. “CPI” shall mean the Consumer Price Index—All Items Urban less food and energy as promulgated by the United States Department of Labor (or any successor index).

J. “Customer” shall mean Customer and all Affiliates of Customer for whom M&I agrees to provide Services under this Agreement; Schedule 6.2(B) attached hereto identifies such Affiliates as of the Effective Date.

K. “Depositor” shall mean any individual or small business depositor maintaining a DDA account with Customer.

L. “Depositor Services” shall mean the services provided to Users which are the responsibility of Customer to provide, as summarized in the Implementation Guide.

M. “Depositor Services System” shall mean the procedures, systems, and software M&I has developed to coordinate the enrollment of Depositors on, and their use of, the M&I Home Banking System, as set forth in the Implementation Guide.

N. “DDA Account” shall mean a demand deposit account.

0. “Implementation Guide” shall be the documentation provided by M&I to Customer relating to the M&I DirectNet Services, as well as any updates and revisions thereto.

P. “Initial Term” shall have the meaning set forth in Section 2.1 of this Agreement.

Q. “M&I DirectNet Services” shall mean the combination of account accessibility, fund transfers, account balance inquiry and transaction summary services, as well as Bill Payment Services, all of which are identified in Schedule 6.2(C) attached hereto and described in greater detail in the Implementation Guide.

R. “M&I Home Banking System” shall mean the electronic banking and information system which enables the Customer to provide, via the Internet through Customer’s web site, the M&I DirectNet Services to its Depositors.

S. “M&I Software” shall mean the M&I proprietary software residing and operating on M&I’s computers which are part of the M&I Home Banking System.

T. “PIN” shall mean the personal identification number assigned to each User to enable such User to access and receive the M&I DirectNet Services, if such option is selected by Customer.

U. “Performance Standards” shall mean the standards set forth in Schedule 6.2( C) attached hereto.

V. “Term” shall mean the period commencing on the Effective Date and expiring on the last day of the calendar month in which the          anniversary of the Commencement Date occurs, and any extensions or renewals thereof agreed to in writing by the parties.

W. “Third Party” shall mean any person or entity other than the parties or any Affiliates of the parties.

X. “Trial” shall mean the one-month period following the Commencement Date during which the Customer fully tests the M&I DirectNet Services and finalizes the processes, procedures, employee training, and marketing programs. During the Trial, the minimum monthly fees shall be as set forth in the Fee Schedule.

Y. “User” shall mean a Depositor who is authorized by Customer to access the M&I DirectNet Services via the Internet through Customer’s web site and uses his or her assigned PIN to access and utilize the M&I Home Banking System.

Z. “User Fees” shall mean those fees and charges listed in the Fee Schedule which are assessed based on the activation and maintenance of a User and/or the User’s use of the Bill Payment Services.

AA. “User Data” means any and all data and information of any kind or nature relating to any Depositor or User submitted to or learned by M&I in connection with the M&I DirectNet Services including, but not limited to, bill payment data.

© 1999, M&I Data Services 5    First Midwest DirectNet Amendment to Outsourcing Agreement (7 20 99)

SCHEDULE 6.2(B)

AFFILIATES

© 1999, M&I Data Services 6    First Midwest DirectNet Amendment to Outsourcing Agreement (7 20 99)

SCHEDULE 6.2(C)

DESCRIPTION OF M&I DIRECTNET SERVICES

A Account Accessibility

Users will be able to retrieve information regarding all deposit accounts that are linked to the Customer’s primary CIS numbers. Users can access their accounts via the Internet.

B Bill Payments

• M&I Bill Payment Services

i) Payees. M&I will provide the Bill Payment Services on behalf of Customer to Users who enroll for the Bill Payment Services. Depending upon the Bill Payment Services selected by Customer, Users will be able to initiate payments, subject to any maximum payment limit established by M&I, by telephone or through a personal computer or other access device to any payee in the United States except for government or court directed payments.

ii) Users shall be able to schedule payments up to 364 days in the future.

iii) Users shall be able to schedule bill payments to occur on a regular basis: weekly, bi-weekly, monthly, bi-monthly, semimonthly, quarterly, semi-annually or annually.

iv) Users shall be able to review, change, and cancel scheduled future or recurring payments

• Back-End Processing. Each business day, M&I will consolidate all of the payments made throughout the Bill Payment System. Several editing functions check that payment information is correct before remittance is made to the appropriate payees on behalf of the Users. M&I then remits the proper funds (“Credits”) to all appropriate payees either electronically or by check if the payee is not able to accept electronic remittances. All checks will be mailed using the U. S. Postal Service, first class mail.

• Stop Payments. Stops and reissues for check payments will be accepted by M&I beginning 5 business days after the date the User’s payment processing began on the system to the payee. In situations where it is apparent that the payment is going or has gone to the wrong address, wrong payee, etc., M&I will accept stops and reissues immediately. All requests made by Customers or Users to stop payments will incur the standard stop payment charge. All payments stopped due to M&I error’s will be at the expense of M&I. Electronic payments cannot be stopped.

• Rejected Payments. If a payment is rejected for any reason, M&I will attempt to contact the User for resolution if necessary. If information is not provided from the User within five (5) business days, M&I will issue a credit to the User for the amount of the payment.

• File Transfers. M&I will initiate transaction polling at least once per Business Day, or in the case of a holiday, the evening of the holiday if the holiday falls before a Business Day, to the designated sites specified by Customer or its subcontractor. M&I will notify Customer or its subcontractor of a problem with a file transfer via the method agreed upon by the parties (i.e. via page, e-mail, or telephone call).

C Customer Service.

• M&I will answer 95% of all bill payment service calls within one minute.

• The customer service abandoned call rate will not exceed 5% on 80% of all incoming calls.

• M&I Customer service will be provided as follows:

i) Standard Customer Service: Will be available from 7:00 A.M. to 9:00 P.M. CT Monday through Friday and 8:00 A.M. to 5:00 P.M. CT Saturdays.

ii) Premium Customer Service: Will be available twenty four hours per day, seven days per week.

• Remote Customer Service Up Time. M&I shall provide for Remote Customer Service Database Up Time 7 Days per week, 52 weeks per year. Up time will be the 20 hours between 6:00 A.M. and 2:00 A.M. CT. This standard will be met 95% of the time.

D Research.

• Payment research investigations will be accepted as early as four (4) business days from the payment processing date for electronic payments and ten (10) business days from the payment processing date for payments by check. Policy is flexible depending on consumer situation, and inquiries may be taken to resolve late payment situations.

• Standard Research Inquiries- User initiated research will be handled within three (3) business days, 90% of the time, after the initial contact to M&I Customer Service by the User. By definition, “handled” includes items brought to resolution and items that require more information from the User or Payee before they can be brought to resolution. After initial research, all payment inquiries will be entered into continuous five business day follow up in order to monitor and determine the status of the payment research. Pending status inquiries will be tracked by or on the next action date and follow up will continue until the problem is resolved. The follow-up with Users and Payees will occur on the date of next follow-up 80% of the time.

© 1999, M&I Data Services 7    First Midwest DirectNet Amendment to Outsourcing Agreement (7 20 99)

• Priority Research Inquiries. Service cut-off inquiries, mortgage payments and insurance payments will be handled within one business day after the initial consumer contact 90% of the time. Other research inquiries deemed priority by the financial institution’s senior management and the Customer Service management may also fall under this service schedule.

• Resolving payment inquiries frequently requires that research be performed by the Payee involved. M&I will work with the Payee to resolve the inquiry promptly before it would refer a User back to the Payee. Proactive follow up will consist of the following:

i) Providing the Payee with check copies, ACH or RPS transmittal confirmations, etc. as necessary for the Payee to complete their research and post the payment correctly.

ii) Notifying Customer or the User regarding the status of the inquiry.

• M&I must hear from the User no later than 60 days after the User receives the FIRST statement on which the problem or error is reported for the foregoing procedures to apply.

• Payment Inquiry Rate. The ratio of inquiries requiring Payee contact initiated by Customer and/or User’s to the total number of payment transactions originated by Users shall not exceed 1.25% on a rolling three-month basis. M&I will use its best efforts to consistently keep its bill payment inquiries under 1% on a rolling three month basis.

• Billing Timeline. M&I begins the monthly billing cycle on the third business day of the month. By the 6th (sixth) business day, advices are sent by regular mail to arrive in advance of the actual ACH debit or credit which takes place on the 15th (fifteenth) business day.

E Funds Transfer

• Users shall be able to designate accounts on which they may perform transfers.

• Users shall be able to transfer funds between any of Customer’s accounts which have been set up on M&I’s Integrated Funds Management System (IFMS).

F Transactions Summary

Users shall be able to obtain an interim statement that shall include all deposit account activity to date (up to 12 months), provided Customer or Customer’s data processing provider, provides M&I with statement information.

G Implementation and Project Management

• M&I will assign an Account Manager who will be responsible for deploying M&I personnel for systems implementation.

• Implementation shall be conducted by the parties pursuant to the terms of the Implementation Guide and the Implementation Schedule together which describe and establish milestone dates for all of the steps involved in setting up, testing, and launching the agreed-upon services at Customer. It provides guidelines to help Customer establish the M&I DirectNet Service features that Customer will offer, provides points of contact at M&I, and such other information as necessary for Customer to start the implementation process, and provides a vehicle for Customer to provide to M&I the information M&I requires to implement and support the M&I DirectNet Services.

H Account Management Services

The Account Manager will be responsible for overseeing the systems implementation process, Customer’s pilot test, launch, and ongoing service offering as set forth in the Implementation Guide and the Implementation Schedule. The Account Manager will also be responsible for M&I’s ongoing relationship with Customer and serve as the primary point of contact for Customer’s product and senior management.

I Training Services

M&I shall provide such training services for Customer employees at M&I’s facilities in Milwaukee, Wisconsin sufficient to enable such trainees to administer for Customer the services provided by M&I and its approved subcontractor hereunder, as well as to enable such trainees to train other Customer employees in such administration. Customer shall reimburse M&I for all reasonable travel and living expenses associated with such training, pursuant to a mutually agreed to budget.

J MIS Reports

M&I shall provide usage reports monthly to Customer to assist Customer in monitoring product performance and Performance Standards.

K Fulfillment Services

M&I shall perform fulfillment services for Customer for such fees as are set forth in Schedule Error! Reference source not found. These services shall include at a minimum:

• Maintaining inventory of each of Customer’s User Kit fulfillment materials (including welcome letters, User terms and conditions, and Customer branded manuals), which materials shall be updated by Customer from time to time pursuant to the terms of the Implementation Guide.

• Collating and packaging all User Kit materials

© 1999, M&I Data Services 8    First Midwest DirectNet Amendment to Outsourcing Agreement (7 20 99)

• Mailing User Kit packages (postage paid for by M&I and reimbursed by Customer)

• Creating and mailing secure passwords

• Mailing additional material deemed appropriate by Customer, or by M&I with Customer’s reasonable approval.

© 1999, M&I Data Services 9    First Midwest DirectNet Amendment to Outsourcing Agreement (7 20 99)

SCHEDULE 6.2(D)

DIRECTNET

FEE SCHEDULE

Implementation Fees

• $45,000 Implementation Fee

Monthly Fees

	With Bill Payment		Without Bill Payment
Number of Users	Per user Fee		Per user Fee
1 - 5,000	$	5.00	$	4.00
5,001 - 10,000	$	4.75	$	3.75
10,001 - 25,000	$	4.50	$	3.50
Over 25,000	$	4.25	$	3.25

Includes 24X7 Customer Service Support

Bill Payment Fees

• $    .35 Per bill payment (bill payments are not included in Monthly Minimums)

Monthly Minimum Fee

• $ 2,500

DirectNet Demo (optional)

• Demo run on Customer’s Web Site Server                        - $200 one-time set up fee

• Demo run on M&I provided Web Site Server                   - $200 one-time set up fee plus $30 per month

Check Image Fee (optional)

• $    .07 Per check image stored per month (fee is not included in Monthly Minimums)

Miscellaneous Fees (not included in Monthly Minimums)

• $ 15.00 Return Item Fee – per occurrence (bill payment)

• $ 15.00 Stop Payment Fee – per stop payment request (bill payment)

• $ 2.00 Per User Kit - User kit fulfillment (optional)

• $ 600.00 Implementation training – 2 days per student (1 required per bank implementation)

Customization and Branding (optional)

• Customization and branding beyond standard implementation provided on a time and materials basis ($150.00 per hour).

Notes:

• Telecommunications fees are the responsibility of the Financial Institution.

• Prices are subject to change on an annual basis per the terms stated in the Outsourcing Agreement.

SCHEDULE 6.2(D) pricing is for the Customer identified on the signature page of this Amendment. Pricing for any additional banks added by Customer, by acquisition or through merger will be negotiated between Customer and M&I and based on the then current M&I pricing

© 1999, M&I Data Services 10    First Midwest DirectNet Amendment to Outsourcing Agreement (7 20 99)

SCHEDULE 6.2(E)

PERFORMANCE STANDARDS

1 Debit to User Account

a. Current Payment: M&I will debit the Settlement Account within 2 Business Days after the User submits the request for payment, or otherwise as required under the rules of the National Automated Clearing House Association.

b. Future and Recurring Payments: M&I will debit the Settlement Account within 2 Business Days after the payment date entered.

2 M&I will remit credit to vendor (payee) the next Business Day after the User submits request for payment (as stated above for current, future and recurring). Average length of time from User payment request and posting of credit by payee is as follows:

a. Check:                    10 Business Days (subject to U.S. Postal Service)

b. Electronic:              4 Business Days (subject to rules and performance of the electronic transmission service provider).

3 If M&I is providing Fulfillment Services for Customer, M&I will send User Kits no later than 5 Business Days after M&I receives User authorization information. Customer’s Server will be updated with User information by the day the User Kit is mailed.

4 M&I agrees that the Bill Payment System will be available for Bill Payment Services at least 98% of the time based on a system-wide average for a calendar month, excluding periods of unavailability due to a systems or applications conversion, upgrade or repair; a communications failure (communications lines) not resulting from M&I’s negligence or misconduct; or scheduled maintenance.

5 Customer Service.

a. M&I will answer 95% of all bill payment service calls within one minute.

b. The customer service abandoned call rate will not exceed 5% on 80% of all incoming calls.

c. M&I customer service will be provided as follows:

Standard Customer Service: Will be available from 7:00 A.M. to 9:00 P.M. CT Monday through Friday and 8:00 A.M. to 5:00 P.M. CT Saturdays.

Premium Customer Service: Will be available twenty four hours per day, seven days per week.

d. Remote Customer Service Up Time. M&I shall provide for Remote Customer Service Database Up Time 7 Days per week, 52 weeks per year. Up time will be the 20 hours between 6:00 A.M. and 2:00 A.M. CT. This standard will be met 95% of the time.

6 Research.

a. Payment research investigations will be accepted as early as four (4) business days from the payment processing date for electronic payments and ten (10) business days from the payment processing date for payments by check. Policy is flexible depending on consumer situation, and inquiries may be taken to resolve late payment situations.

b. Standard Research Inquiries– User initiated research will be handled within three (3) business days, 90% of the time, after the initial contact to M&I Customer Service by the User. By definition, “handled” includes items brought to resolution and items that require more information from the User or Payee before they can be brought to resolution. After initial research, all payment inquiries will be entered into continuous five business day follow up in order to monitor and determine the status of the payment research. Pending status inquiries will be tracked by or on the next action date and follow up will continue until the problem is resolved. The follow-up with Users and Payees will occur on the date of next follow-up 80% of the time.

c. Priority Research Inquiries. Service cut-off inquiries, mortgage payments and insurance payments will be handled within one business day after the initial consumer contact 90% of the time. Other research inquiries deemed priority by the financial institution’s senior management and the Customer Service management may also fall under this service schedule.

d. Resolving payment inquiries frequently requires that research be performed by the Payee involved. M&I will work with the Payee to resolve the inquiry promptly before it would refer a User back to the Payee. Proactive follow up will consist of the following:

i) Providing the Payee with check copies, ACH or RPS transmittal confirmations, etc. as necessary for the Payee to complete their research and post the payment correctly.

ii) Notifying Customer or the User regarding the status of the inquiry.

e. M&I must hear from the User no later than 60 days after the User receives the FIRST statement on which the problem or error is reported for the foregoing procedures to apply.

f. Payment Inquiry Rate. The ratio of inquiries requiring Payee contact initiated by Customer and/or User’s to the total number of payment transactions originated by Users shall not exceed 1.25% on a rolling three-month basis. M&I will use its best efforts to consistently keep its bill payment inquiries under 1% on a rolling three month basis.

g. Billing Timeline. M&I begins the monthly billing cycle on the third business day of the month. By the 6th (sixth) business day, advices are sent by regular mail to arrive in advance of the actual ACH debit or credit which takes place on the 15th (fifteenth) business day.

© 1999, M&I Data Services 11    First Midwest DirectNet Amendment to Outsourcing Agreement (7 20 99)

SCHEDULE 6.2(F)

M&I Statement of Procedures Regarding Billing Error Notices

Research Items and Regulation E

Federal Regulation E establishes the basic rights, liabilities and responsibilities of consumers who use electronic funds transfer services and those of “financial institutions.” It is designed to protect consumers from liability for unauthorized transfers and other billing errors by requiring “financial institutions” to follow specific procedures whenever they receive a billing error notice from a consumer.

In the context of automated bill payment services, a Regulation E billing error occurs, for example, when a payment is not, in fact, authorized by the consumer or is processed incorrectly. When a “financial institution” receives a notice of such a billing error, it must research and resolve the matter within the time periods established by Regulation E. A “financial institution” must also research and respond within specific time periods when a consumer requests documentation of a bill payment transaction.

It is recommended that financial institutions review Regulation E for a complete understanding of their responsibilities under the regulation. Regulation E applies to “financial institutions,” which is defined under the Regulation as a “bank, savings association, credit union, or any other person that directly or indirectly holds an account belonging to a consumer, or that issues an access device and agrees with a consumer to provide electronic funds transfer services” (12 CFR 202.2(i), as effective 1/1/99). Since M&I Bill Payment Services does not directly or indirectly hold accounts, or enter into agreements with consumers to provide them electronic funds transfer services, it is M&I Bill Payment Services position that it is not a “financial institution” as that term is defined under Regulation E. Therefore, although M&I Bill Payment Services will follow procedures and provide services to handle customer inquiries related to automated bill payments in a timely manner pursuant to M&I Bill Payment Services agreement with its customer, ultimate responsibility for Regulation E compliance remains with M&I Bill Payment Services customer, the financial institution.

M&I Bill payment Services does not and will not provide legal advice or opinions to financial institutions regarding Regulation E matters. However, the following is M&I Bill Payment Services internal summary of Regulation E requirements, which is used by M&I Bill Payment Services as a guide in developing procedures for responding to customer inquiries that constitute billing error notices under Regulation E, and the procedures that M&I Bill Payment Services has developed based on the Regulation E requirements. The following is provided for informational purposes only. M&I Bill Payment Services makes no warranties or representations about the accuracy or completeness of this information, and M&I Bill Payment Services will not be responsible for any actions or decisions by any financial institution based on this information.

1. REGULATION E SUMMARY

a. Types of Billing Error Notices

Generally, a billing error notice is any written or oral notice from a consumer that an automated payment is unauthorized, incorrect or erroneous and which notice (i) enables the financial institution to identify the consumer’s name and account number, (ii) indicates why the financial institution believes that an error exists, and (iii) includes, to the extent possible, the date, type, and amount of the error. A billing error notice also includes a request for documentation for a payment transaction.

Notwithstanding whether or not an inquiry would satisfy the Regulation E definition of a billing error notice, it need not be handled in accordance with Regulation E billing error resolution procedures unless the notice is received by the financial institution within 60 days of sending the first statement on which the billing error is reflected.

The Official Staff Commentary to Regulation E (as of 1/1/99) provides that “a financial institution may require the consumer to give notice only at the telephone number or address provided by the institution, provided the institution maintains reasonable procedures to refer the consumer to the specified telephone number and address if the consumer attempts to give notice to the financial institution in a different manner.”

b. Procedures and Timeframes for Resolving Regulation E Inquiries:

Regulation E provides the following time frames for responding to billing error notices.

Ten (10) business days from receipt of the billing error notice to investigate and resolve the matter;

One (1) business day after determining that an actual error occurred to resolve the error by crediting the consumer’s account;

Three (3) business days after making a determination to communicate the results back to the user.

c. Extensions:

If a billing error cannot be completely investigated and resolved to conclusion within ten business days, a financial institution may obtain additional time to investigate the matter under Regulation E under two circumstances:

Written Confirmation

A financial institution has up to forty five (45) calendar days from the date of receiving an oral billing error notice if the institution has requested that the consumer confirm the notice in writing and the consumer has failed to do so.

© 1999, M&I Data Services 12    First Midwest DirectNet Amendment to Outsourcing Agreement (7 20 99)

Provisional Credit

If the financial institution provisionally credits the disputed funds to the consumer’s account within ten (10) business days of receiving the billing error notice, Regulation E allows the financial institution until the end of forty-five calendar days from the original receipt of the billing error notice to research and resolve the problem. The financial institution must inform the consumer of the amount and date of the provisional credit within two business days of provisionally crediting the consumer’s account and allow the consumer to have full use of the provisionally credited funds throughout the investigation period.

d. Resolution/Response

If the financial institution determines that no error occurred, the financial institution must, within the three business day time period required under Regulation E, report the results of its investigation to the consumer in a writing explaining its findings and noting the consumer’s right to receive copies of documentation relied upon by the institution in making its determination. The financial institution may reverse any provisional credit previously made to the consumer’s account, provided that the financial institution must notify the consumer of the reversal and notify the consumer that the financial institution will honor checks, drafts, similar items, and preauthorized transfers for 5 business days following the notice as if the provisional credit had not been reversed.

If a billing error is found to have occurred or cannot be resolved within the time allowed by Regulation E, the error must be corrected within the one business day period required under Regulation E, and the results must be communicated within the three business day period - including, if applicable, notice to the consumer that the provisional credit to the consumer’s account has been made final.

2. M&I BILL PAYMENT SERVICES PROCEDURES FOR THE HANDLING OF ELECTRONIC BILL PAYMENT RESEARCH REQUESTS THAT FALL WITHIN THE FRAMEWORK OF REGULATION E.

In recognition of the requirements of Regulation summarized above, M&I Bill Payment Services has instituted the following procedures for handling research requests.

The following are examples of the research requests that M&I Bill Payment Services will handle as billing error notices under Regulation E, provided the request meets the timing and content requirements of Regulation E:

1) a user states that he/she did not schedule an electronic payment that was debited to his/her account;

2) a user states that an electronic payment was remitted to a payee other than the payee designated by the user;

3) a user states that an electronic payment was debited on a date that was not on or about the date designated by the user;

4) a user states that an electronic payment was debited for an amount that was not the amount authorized by the user;

5) a user states that an electronic payment was debited more times than the user instructed;

6) a user states that an electronic payment was debited after the user successfully canceled the payment in accordance with the applicable terms and conditions;

7) a user states that a fixed recurring payment was electronically debited after the ending date of the payment series instructed by the user; or,

8) the user specifically alleges that the payment has been processed incorrectly, even if everything appears to be correct.

M&I Bill Payment Services will process these payment research requests in accordance with its normal procedures and timeframes. The majority of research request will fall into this category. Only a small percentage will fall within the scope of Regulation E.

M&I Bill Payment Services receives each such research request and logs the item on-line. It is important for financial institutions to recognize that M&I Bill Payment Services will log the request and begin to monitor response times only when the request is received by M&I Bill Payment Services, not when it is received by the financial institution. In order to ensure that M&I Bill Payment Services will process the item within Regulation E timeframes, a financial institution should, as permitted under the Official Staff Commentary to Regulation E, identify the telephone number and address specified by M&I Bill Payment Services for billing error notices in the initial disclosure statement the financial institution provides to customers. The financial institution should also maintain procedures to refer customers to this M&I Bill Payment Services number or address if the customer contacts the financial institution directly in order to ensure that the item will be processed in a manner that will enable the financial institution to satisfy Regulation E requirements.

M&I Bill Payment Services Research team will evaluate every payment research request it receives to determine if the payment was processed in error (unauthorized or processed incorrectly), or the user is specifically alleging that the payment was processed in error (incorrectly).

© 1999, M&I Data Services 13    First Midwest DirectNet Amendment to Outsourcing Agreement (7 20 99)

If M&I Bill Payment Services determines that the research item is a billing error notice under Regulation E:

We will attempt to resolve the issue as quickly as possible. If we cannot resolve the error within eight business days of the original notification date and we have received written confirmation of the consumer’s error notice (if requested), the financial institution will be notified via telephone by the research team, of the pending research inquiry and advised that a provisional credit should be made to the user’s account. By notifying the financial institution within the eight business days we are allowing for sufficient time for the F.I. to provisionally credit the account prior to the expiration of ten business days, as required under Regulation E.

The financial institution will be responsible for provisionally crediting the consumer’s account and notifying the consumer that a provisional credit has been made to the consumer’s account in accordance with Regulation E requirements.

M&I Bill Payment Services will continue to work the research request to resolve it as quickly as possible. When the item has been resolved, whether during the initial ten business days or the extended 45 calendar day period, research will notify the financial institution of the disposition. Where the alleged billing error is an unauthorized payment, M&I Bill Payment Services will report to the financial institution its findings, but it will be the responsibility of the financial institution to decide whether or not the payment was, in fact, unauthorized based on these findings. A log will be maintained of M&I Bill Payment Services notification to the financial institution.

The financial institution will be responsible for crediting the consumer’s account for errors, and notifying the customer in accordance with Regulation E requirements of the final conclusions of the investigation. In the event M&I Bill Payment Services findings indicate that no error occurred, the financial institution will be responsible for notifying the consumer of the results of the investigation, reversing the provisional credit (if any), and notifying the consumer of the reversal, all in accordance with Regulation E requirements.

© 1999, M&I Data Services 14    First Midwest DirectNet Amendment to Outsourcing Agreement (7 20 99)

SCHEDULE 6.2(G)

THIRD PARTY SOFTWARE

Sun Microsystems Solaris OS

Netscape Enterprise Server

Check Point FireWall-1

© 1999, M&I Data Services 15    First Midwest DirectNet Amendment to Outsourcing Agreement (7 20 99)

BANKCARD PROCESSING AMENDMENT TO OUTSOURCING AGREEMENT

THIS BANKCARD PROCESSING AMENDMENT to the Outsourcing Agreement dated July 1, 1999 (the “Agreement”) is made as of this 15th day of Jan, 2000 by and between First Midwest Bancorp, Inc. (“Customer”) and M&I Data Services, a division of Marshall & Ilsley Corporation (“M&I”).

WHEREAS, effective as of July 1, 1999, Customer desires to amend the Agreement to obtain certain Merchant BankCard Services, and effective as of July 1, 2000, Customer desires to obtain certain Cardholder Bankcard Services; and

WHEREAS, M&I desires to provide said services.

NOW, THEREFORE, in consideration of the recitals and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. DEFINITIONS

1.1. Definitions. Additional defined terms of the Agreement shall have the meaning ascribed to them below:

A. “Cardholder” shall mean any person or entity for whom a Visa and/or MasterCard account is established by Customer.

B. “MasterCard” shall mean MasterCard International, Inc.

C. “Merchant” shall mean any person or entity for whom a Visa and/or MasterCard merchant account is established by Customer.

D. “Transaction” means any one of the following transactions which are initiated at a point of sale terminal location and which transaction is routed to Visa or MasterCard for authorization: sale, credit, reversal or authorization.

E. “TSYS” shall mean Total Systems Services, Inc., a Third Party provider of some of the Services hereunder.

F. “Visa” shall mean VISA U.S.A., Inc.

2. BANKCARD PROCESSING APPLICATIONS

2.1. Bankcard Services to be Rendered. M&I agrees to provide Customer with the Cardholder and/or Merchant account services set forth on Schedule 7.1(A), attached hereto (“Bankcard Processing Services”) in accordance with the applicable User Manuals.

A. If Customer is not a duly licensed card issuing member of Visa or MasterCard, Customer shall execute applications for membership in Visa and/or MasterCard. M&I agrees to assist Customer in obtaining sponsorship by an appropriate bank, if necessary. Customer shall provide M&I with copies of its fully executed Visa and/or MasterCard membership agreements promptly after receipt by Customer.

B. Customer shall comply with the articles, bylaws, operating regulations, rules, procedures and policies of Visa and/or MasterCard, as applicable, and shall be solely responsible, as between Customer and M&I, for any claims, liabilities, lawsuits and expenses arising out of or caused by Customer’s failure to comply with the same. Customer also agrees to abide by all federal, state and local laws required for providing card services. Customer agrees to be responsible for informing M&I, by reasonable advance written notice, of any federal, state or local legal or regulatory changes that require procedural or data processing compliance.

2.2. Customer’s Ownership of Accounts; Benefits and Risks from Cardholder and Merchant Accounts. It is understood and agreed that all Cardholder and/or Merchant accounts of Customer now in existence and those added during the Term shall be the property of Customer; however, Customer shall not sell, assign, transfer or convey any of such accounts, or any rights, proceeds, claims or collateral thereunder, to any other licensee of Visa or MasterCard without either a termination of this Agreement or the prior written consent of M&I. Customer, as owner of the Cardholder and/or Merchant accounts, is entitled to all of the privileges of ownership, including all revenues generated, such as finance charges, periodic fees, interchange income, merchant service fees, and insurance and promotion commissions. Similarly, Customer is responsible for all expenses and risks of ownership. The Customer is responsible for supplying all funds required for the operation of the program, including those borrowed by Cardholders and/or Merchants and for all operating expenses and charges, whether itemized in this Agreement or not, and Customer assumes all of the risks of ownership, including, but not limited to, all credit and fraud losses and all fees, fines and costs of compliance with all federal, state and local laws and regulations. M&I shall have no liability for any losses resulting from the operation of Customer’s card program and/or merchant program; M&I’s function is that of an agent and contractor for the administration and operation of Customer’s card program.

2.3. Additional Third Party Services. Customer may desire services which are not provided by M&I, and M&I may arrange with Third Party providers to provide Customer with such services. M&I will make such arrangements between Customer and such providers merely as a courtesy and shall bear no responsibility for their performance or lack thereof.

2.4. Subcontracted Services. Certain Services are provided by M&I through subcontracts with one or more Third Party providers. Notwithstanding the disclosure to Customer that some of the Services to be provided under this Agreement are to be provided pursuant to agreements with such Third Party providers, one of which is an agreement between M&I and Total Systems, Inc. (“TSYS”) (the “TSYS

© 1999, M&I Data Services 1 First Midwest Amend 121099

Agreement”), Customer acknowledges that it has no rights under the TSYS Agreement or any other Third Party agreement as a Third Party beneficiary or otherwise and that all rights and obligations of Customer shall be governed solely by the provisions of this Agreement. Customer hereby waives any right which it may have to bring any action against any such Third Party provider of such services, or against TSYS, pursuant to the TSYS Agreement. M&I agrees that during the term of this Agreement, it will, at the request of Customer, as long as any related direct expenses are borne by Customer, pursue against such Third Parties any reasonable request specified in writing.

2.5. Customer Responsibilities.

A. Customer agrees that it is fully responsible for all acts of any of its employees and agents (other than M&I) and the conformance by such employees and agents to the requirements of this Agreement as well as the laws, rules and regulations of any governing body, including Visa and MasterCard.

B. Customer agrees to involve M&I in designing any marketing programs and materials for solicitation of prospective Cardholders or Merchants, and to do so sufficiently in advance that M&I can evaluate and prepare for any system and procedural requirements. Customer warrants to M&I that all such program material will conform to all data processing, legal and regulatory requirements.

C. As owner of all Cardholder and/or Merchant accounts, Customer shall be responsible for establishing and applying credit and other approval criteria in accordance with all governing laws, rules and regulations. Such criteria may be applied by Customer through use of computer scoring systems, manually applied guidelines or a combination of both whereby M&I or M&I’s data processing systems are utilized, in addition, M&I may assist Customer in establishing such criteria as Customer may request. However, Customer understands that it bears all responsibility for such criteria and their implementation, application, and results.

D. Customer shall settle, before the time deadlines required on a daily basis, by deposit of funds due other financial institutions for processed sales drafts, cash advance drafts and other related transactions through a settlement bank as specified by M&I from time to time. Such “Net Settlement” shall be made in accordance with Visa and/or MasterCard Operating Regulations. From the daily settlement and accounting information sent to Customer from M&I, Customer agrees that Customer is responsible for the daily maintenance and reconciliation of all accounting entries.

E. Even though M&I may provide sample forms, documents, and procedures, Customer agrees to furnish and pay for all Merchant and Cardholder forms and documents used by Customer, and Customer shall be fully responsible for the compliance of such forms, documents, and procedures with the operating requirements of M&I, Visa and MasterCard rules and operating regulations, applicable federal, state and local laws and regulations, and disclosure requirements of those or any other providers of services relative to such forms, documents, or procedures. As a part of this requirement, Customer warrants to M&I that Customer has reviewed and approved and shall continue to review and approve the form and content of documents, monthly statements, the calculation and placement of data contained thereon, and any other matter communicated to its customers as a result of the services provided in this Agreement. As a result of Customer’s regulatory responsibilities for documentation, Customer will be the repository of the originals of all such documentation for its Cardholders, Merchants, and any other requirements for whatever record retention regulations require. As part of the services provided in this Agreement, M&I may from time to time in correspondence or in manuals provided to or available to Customer provide samples of forms, documents, procedures, data processing system features and other information to assist Customer in determining some internal procedures, including certain internal and system controls, or to assist Customer in designing some forms of documentation; however, these are for example only, and M&I cannot be held responsible for their content since M&I is not legal counsel and cannot represent what forms, documents and procedures meet legal, regulatory, and procedural requirements. Customer shall be responsible for ensuring that its forms, documents or procedures and the content and use thereof meet legal, regulatory and procedural requirements.

F. All charges to Cardholders and/or Merchants will be solely determined by, and be the responsibility of, the Customer.

G. Customer shall be responsible and liable for the validity of Merchant transactions and of cash advance drafts originated through or by Customer or through or by Customer’s Merchants and/or Cardholders. Customer shall bear all losses and liabilities incurred through the fraudulent act or negligent act or financial circumstances of any Merchant or Cardholder or through any other means involving any Merchant or Cardholder of Customer.

H. Customer shall be responsible for adequately and properly training all of the Customer’s personnel with regard to procedures to be observed and the use of all system features, reports, equipment, function, and services. If Customer utilizes on-line system access features, Customer shall be responsible for delegating and controlling personnel access to the system and its data, including the proper segregation of duties and password access to system data, functions, and processes.

I. Customer understands and agrees that the card business, by its nature, carries certain risks, such as credit losses, fraud losses, counterfeit losses, and fees or fines for noncompliance with Visa, MasterCard, state, or federal regulations and that Customer is solely responsible for all such risks, losses, fees and fines. M&I will provide Customer with certain reports (some in paper form, some in microfiche form, and/or some available on-line or through some other electronic media), including management reports, that Customer must review, monitor, and act upon if Customer desires to minimize and control such risks, losses, fees and fines. Review procedures for such reports utilizing sound internal control procedures is also the responsibility of Customer, including verification of complete, proper, and duly authorized data entry of monetary and non-monetary transactions, files, and masterfiles in a timely manner. Consequently, Customer agrees to notify M&I of any data entry errors, including but no limited to any unauthorized transactions, new accounts, new files, or unauthorized amounts appearing on such reports, within thirty days of the date of each report; following such thirty day period, Customer agrees that Customer has reviewed and approved the content of each such report using proper internal control review procedures. Customer understands and agrees that since M&I retains data entry records for a limited period of time, M&I’s ability to assist Customer with research to verify any item of data entry is subject to the record retention period of M&I records as stated elsewhere in this Agreement. Customer understands and agrees that certain other functions or procedures requested by Customer must be performed by M&I on a manual or exception basis and are therefor subject to human error. Customer understands and agrees that, as the owner of its card business, it must

© 1999, M&I Data Services 2 First Midwest Amend 121099

bear all such risk of loss and liability and error as if it were providing all the services itself that are being provided by M&I. M&I does not guarantee that the work performed by it and its contractors will be one hundred percent error free or that the variables and options selected and approved by Customer with regard to data processing services will produce a result which is problem free and otherwise meets the expectations of Customer. The only responsibility M&I shall have with regard to (i) data entry errors and other similar human errors which occur in the usual course of business and (ii) unsatisfactory data processing results caused by options and variables selected or presented or approved by Customer is, respectively, to correct such error as they are discovered and to assist Customer in revising data processing options and variables to achieve a satisfactory result. The occurrence of (i) such errors in the usual course of business or (ii) unsatisfactory data processing results caused by options and variables selected or presented or approved by Customer shall not constitute a breach of contract under this Agreement and shall not otherwise expose M&I to any liability to Customer.

J. Customer agrees to provide M&I with such financial information for Customer and/or the Banks as M&I may reasonably request.

2.6. Customer Checking Account. Customer shall maintain and fund a demand deposit checking account, not requiring signature, at its location or at its designated bank on which M&I may draft for the Fees and the Expenses for which Customer is responsible pursuant to this Agreement. Customer shall provide M&I with the Transit Routing (“TR”) number and Demand Deposit Account (“DDA”) number of such Checking Account, so that M&I can submit such draft electronically through the Automated Clearing House (“ACH”) system. M&I will provide Customer with data processing system reports and/or periodic statements itemizing the basis for charges for each such draft.

2.7. M&I User Manuals. Customer may reproduce and distribute any or all of the User Manuals solely for its own internal use. Customer recognizes, however, that the User Manuals may be copyrighted, trademarked, patented, or otherwise protected by M&I. Customer will not undertake to reproduce for distribution or distribute the User Manuals to any other Third Party. Any modification made to the User Manuals by Customer for the purpose of customization is acknowledged to be solely at the risk of Customer, and M&I shall not be liable to Customer for any inaccuracies arising therefrom. The distribution of modified User Manuals is subject to the same restrictions and shall further contain an acknowledgment of M&I’s copyright and other protected proprietary interests in such User Manuals.

2.8. Payable-Through. If Customer makes available balance transfer checks and classic checks to its bankcard customers, M&I Mayville Bank (“M&I Mayville”) will be the payable-through bank for the checks. Except for liability relating to M&I’s or M&I Mayville’s gross negligence or intentional acts, Customer assumes all liability relating to acts or omissions of M&I and M&I Mayville in connection with the checks, including, without limitation, all liability relating to the duties of paying or payor banks under Regulation CC or the Uniform Commercial Code. Neither M&I nor M&I Mayville have any duty to verify the signature of any maker of such a check or to follow any other procedure with respect to the checks except to determine if sufficient funds are available to pay the checks in accordance with M&I’s usual practice for paying a cash advance. Customer agrees to indemnify and hold harmless M&I Mayville and M&I from and against any and all expenses and liability (including reasonable attorney’s fees) incurred in connection with any claim relating to the checks, liability for which is assumed by Customer, including without limitation, any claim relating to the identification of Customer as the bank by which the checks are payable, or relating to liability of a paying or payor bank or relating to M&I Mayville acting in the capacity of or being named as the pass-through bank on the checks.

3. FEES

3.1. Fee Structure. Schedule 7.1(B) attached hereto (the “Fee Schedule”) sets forth the costs and charges to be paid by Customer for the Services. Customer agrees to pay M&I the fees specified in the Fee Schedule for the Services rendered by M&I.

4. SERVICES FOLLOWING TERMINATION

4.1. BIN Transfer. Prior to the transfer of the Services to Customer or its designee upon the expiration of the Term of this Agreement, Customer shall inform Visa and/or MasterCard in writing (with a copy to M&I) (1) of the transfer of its Bank Identification Number (BIN) to the new processor, and (2) of the new ACH account number for billing purposes.

4.2. Confidentiality of Termination. Any form of termination notwithstanding, to protect the reputations of Customer and/or M&I, reasons for termination shall remain absolutely confidential outside of the Customer’s and/or M&l’s internal personnel except for reporting that may be required by federal law.

4.3. Direct Deposit Account. Customer shall maintain with M&I, for at least 120 days after the Effective Date of Termination, Customer’s Direct Deposit Account with M&I so as to permit M&I to settle any trailing activity which occurs prior to the Effective Date of Termination, but which is not known to M&I until some time thereafter.

4.4. Interbank Card Association Number. Prior to the transfer of the Services to Customer or its designee upon expiration or earlier termination of the Term of this Agreement, Customer shall inform MasterCard in writing (with a copy to M&I) of the transfer of its Interbank Card Association Number to the new processor following the Effective Date of Termination, as well as the new ACH account number for billing purposes.

© 1999, M&I Data Services 3 First Midwest Amend 121099

IN WITNESS WHEREOF, the undersigned parties have duly executed this Amendment in a manner appropriate to each.

M&I DATA SERVICES, a division of Marshall & Ilsley Corporation (“M&I”)
4900 West Brown Deer Road Brown Deer, WI 53223-05
By:
Name:	Frank D’Angelo
Title:	SVP & GM
FIRST MIDWEST BANCORP, INC. (“Customer”)
By:
Name:	Kent Belasco
Title:	EVP/CIO

© 1999, M&I Data Services 4 First Midwest Amend 121099

Schedule 7.1(A)

BANKCARD PROCESSING SERVICES

CARDHOLDER SERVICES

CUSTOMER SERVICE

FIRST MIDWEST BANCORP, INC.

• Forward all written correspondence to BankCard Services for processing.

• Direct all telephone inquires to BankCard Services using the “800” phone number.

• Option to retrieve basic account information via on-line inquiry access (custom file set up only).

• Direct all reports of lost or stolen cards and fraudulent activity to BankCard Services via the “800” phone number (available 24 hours per day, 7 days per week).

BANKCARD SERVICES

• Respond to customer inquiries via mail or phone (service available in English language).

• Balance inquiries

• Statement questions

• Disputes

• Finance charge calculations

• Request copies of statements/payments

• Closing accounts

• Address changes

• Card requests

• Fee and finance charge questions

• Provide name and address verification for merchants

• Process Lost/Stolen reports:

• Take lost and stolen card reports

• Block accounts

• Reissue card(s) when appropriate

• List on Warning bulletin and exception/authorization file when appropriate.

• Provide automated voice response unit for customer inquiries 24 hours per day, 7 days per week.

• Balance inquiries

• Available credit line

• Last payment posted

• Next payment/date/amount

• Transaction history (5 last transactions)

• Credit Balance Refund Requests

• Duplicate Statement Requests

• VRU Access PIN Changes

• Monetary adjustments.

• Nonmonetary account maintenance.

• Handle authorization requests.

• Card and PIN mailer requests.

• Review credit balances.

• Research payment problems.

© 1999, M&I Data Services 5 First Midwest Amend 121099

ADDITIONAL SERVICES

• Process insurance claim forms.

• On-line credit limit increases.

• Foreign language calls (AT&T assistance, Bi-lingual Spanish speaking CSR’s).

• Support of Bank specific card enhancement programs.

• Keying new PIN for self-select PIN.

© 1999, M&I Data Services 6 First Midwest Amend 121099

FRAUD, LOST AND/OR STOLEN CARDS

FIRST MIDWEST BANCORP, INC.

• Direct all reports of lost or stolen cards and fraudulent activity to BankCard Services via the “800” phone number (available 24 hours per day, 7 days per week).

BANKCARD SERVICES

• Process lost/stolen cards.

• Take lost and stolen card reports.

• Block accounts.

• Reissue card(s) when appropriate.

• List on warning bulletin and exception/authorization file when appropriate.

• Monitor for suspicious transactions as defined by Risk Management.

• Fraudulent activity.

• Process account transfers.

• Handle monetary transfers and adjustments.

• Review daily transfer transactions.

• Request copies of potential fraud items from other bankcard processors.

• Process chargebacks when applicable.

• Report and monitor fraud as required by Visa and MasterCard.

• Process fraudulent charges.

© 1999, M&I Data Services 7 First Midwest Amend 121099

COLLECTIONS

BANKCARD SERVICES

• Monitor collection reports daily, weekly, and monthly.

• Handle all accounts in Collection System.

• Process deceased and divorce accounts.

• Conduct skip tracing when necessary.

• Initiate charge-off accounts.

• Generate letters and notices as needed to customers.

• Assign accounts to proper queues and maintain as needed.

• Input all monetary entries.

• Provide reports generated by Collection System.

© 1999, M&I Data Services 8 First Midwest Amend 121099

CARDHOLDER PAYMENTS

FIRST MIDWEST BANCORP, INC.

• Forward all walk-in cardholder payments to lockbox for processing.

BANKCARD SERVICES

• Post payments to cardholder accounts.

• Maintain lockbox for payment remittance.

© 1999, M&I Data Services 9 First Midwest Amend 121099

OPERATIONS

FIRST MIDWEST BANCORP, INC.

• Forward all maintenance and VISA Business card documentation on BCS approved forms to Operations area (follow the BCS established process).

• Review provided cardholder maintenance reports on a regular basis and notify BCS Client Support of any issues.

BANKCARD SERVICES

• Input maintenance for accounts

Examples:

Account Record Maintenance

Name and address changes

Close accounts

Add/delete cardholders, users, credit ratings, insurance

Risk Management/Collections

Restrict accounts, ATM access

List accounts on exception file

Stop interest/late charges

Set up fixed payment

Stop statements

Monetary Changes

Limit increase/decrease

Reverse finance charges/fees

Card/PIN Issuance

Order new card

Order PIN reminder

Override reissue

• Maintain a film, storage, and retrieval system for documentation.

• Generate and distribute bank reporting daily, weekly, and monthly.

© 1999, M&I Data Services 10 First Midwest Amend 121099

PRODUCT DEVELOPMENT

FIRST MIDWEST BANCORP, INC.

• Initiate design and develop all card products.

• Contract with other vendors and incur all expenses for program-related enhancements not included in BankCard Services’ enhancements package (see Enhancement section).

• All state and federal compliance issues.

BANKCARD SERVICES

• Assist bank with the development of regulations and applications.

• Oversee all MasterCard and Visa compliance-related issues.

© 1999, M&I Data Services 11 First Midwest Amend 121099

PRODUCT ENHANCEMENTS

BANKCARD SERVICES

• Travel, accident, credit life, and disability insurance. A complete list of product enhancements is available upon request.

• Compliance and consulting with the MasterCard International and Visa U.S.A. operating regulations and federal legal issues.

• Provide bankcard-processing software.

• Provide documentation, materials, forms, and manuals for system use.

• Provide balance transfer checks to new cardholders.

• Provide convenience checks for cardholder use.

• Provide “no-card” cash advance capability.

• Provide access to national/regional ATM networks for cash advance and/or checking and savings access.

• Provide automated payment deduction.

• Provide automated overdraft protection advance.

© 1999, M&I Data Services 12 First Midwest Amend 121099

BANKCARD SERVICES

MERCHANT SERVICES

FIRST MIDWEST BANCORP, INC.

• Responsible for the growth of merchant portfolio.

• Approve or reject all applications.

• Comply with Visa and MasterCard procedures for signing new business.

• Process nonmonetary account maintenance.

• Determine discount and any fees to be charges.

• Conduct initial training and provide ongoing support for merchants.

• Work with merchant base to automate processing.

• Book monetary entries as appropriate.

• Manage portfolio to maximize profitability.

• Option to monitor and review merchant deposit reporting via on-line inquiry.

• Call BankCard Services “800” phone number for merchant inquiries/troubleshooting and general program questions.

BANKCARD SERVICES

• Assist bank in answering merchant inquiries.

• Statement questions

• Discount calculations

• Plate/Plastic requests

• Electronic processing

• Process monetary adjustments.

• Open new accounts on system and interface with Combined Terminated Merchant File (CTMF).

• Generate monthly statement/charge advice.

• ACH monthly merchant discount.

• Distribute daily, weekly, and monthly merchant reports.

• Provide updated merchant pricing disks: pro forma”.

• Review and distribute potential fraud reports.

• Monitor merchant qualification reporting.

• Monitor merchant fraud reporting.

• Send out merchant supplies and equipment.

• Program VeriFone terminals if requested.

• Coordinate electronic processing with third-party authorization vendors including:

• Vital

• Global Payment Systems

• Provide monthly profitability summary on portfolio and individual merchant levels.

• Conduct merchant processing seminars as well as provide system manuals.

© 1999, M&I Data Services 13 First Midwest Amend 121099

• Provide PC software to support merchant processing.

• PC Hub (lodging/retail)

• PC Batch (mail/phone order)

• PC Server

• PC Link

• Maintain both terminal-based and host-based electronic draft capture systems.

• Provide merchant terminal and PC help desk (available 24 hours per day, 7 days a week via “800” phone number).

• Provide the authorization and settlement for additional card types including:

• American Express

• Discover

• Diners Club

• Carte Blanche

• JCB

• En Route

• Support checks guarantee authorizations through electronic terminals and PC’s.

• Provide expertise in establishing Electronic Cash Register (ECR) processing for bankcards.

• Support on-line debit processing for select regional ATM networks.

• Provide inserting and statement messaging capabilities.

© 1999, M&I Data Services 14 First Midwest Amend 121099

Schedule 7.1(B)

FEE SCHEDULE

First Midwest Bancorp

M&I agrees to provide Customer with Merchant Services listed below at M&I’s Unit Cost plus a markup of thirteen and one-half percent (13.5%). The fees listed below are current as of the date of the signing of this Amendment and are subject to periodic adjustments. Costs may be effected by such factors as market conditions and inflation, among others.

Merchant Services	Unit Cost		Rate (13.5% Markup)
Account Support Fee	$	4.8018	$	5.4500
Transaction Processing	$	0.1744	$	0.1979
Authorization Fee	$	0.0678	$	0.0770

M&I is currently providing Customer with Cardholder Services under the terms and pricing of a Data Processing Services Agreement between the financial institution acquired by Customer, McHenry State Bank, and M&I Data Services dated January 1,1994. As of July 1, 2000, Customer shall obtain Cardholder Services at M&I’s Unit Cost plus a markup of thirteen and one-half percent (13.5%) under the terms and conditions of the July 1, 1999, agreement between First Midwest Bancorp, Inc. and M&I.

© 1999, M&I Data Services 15 First Midwest Amend 121099

AMENDMENT TO OUTSOURCING AGREEMENT

THIS AMENDMENT, to the Outsourcing Agreement dated July 1, 1999 (the “Agreement”) is made as of this      day of February, 2000, by and between First Midwest Bancorp, Inc. (“Customer”) and M&I Data Services, a division of Marshall & Ilsley Corporation (“M&I”).

FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, the undersigned parties agree as follows:

Customer desires to add M&I’s Web-based Business Express product to its Agreement with M&I. The terms, conditions and pricing of this product are described in the attached Exhibit A. The attached Exhibit A also includes language regarding M&l’s Business Express for Windows, which Customer will not be utilizing at this time. However, if at some time in the future Customer desires to add the Windows-based portion of Business Express, that portion will be added by way of an additional amendment addressing new fees only.

Any Services requested by Customer which are not specifically priced as of the date of this Amendment shall be considered New Services, and will be charged in keeping with the current discount arrangement between the undersigned parties.

Except as expressly modified herein, all other terms and conditions contained in the Agreement remain in full force and effect.

IN WITNESS WHEREOF, the undersigned parties have duly executed this Amendment in a manner appropriate to each.

M&I SERVICES, a division of Marshall & Ilsley Corporation
By:
Name:	Michael E. Touhey
Title:	President, Electronic Commerce Group
By:
Name:	Todd C. Hutto
Title:	Vice President and General Manager
	Electronic Banking Services
FIRST MIDWEST BANCORP, INC.
By:
Name:	Kent Belasco
Title:	Chief Information Officer and Executive Vice President

© 1999, M&I Data Services 1 First Midwest BE Amend 6

EXHIBIT A

BUSINESS E-BANKING SERVICES

1. Definitions

Capitalized terms not defined herein shall have the same meanings ascribed thereto in the Agreement. Paragraph citations herein shall refer to paragraphs within this Schedule unless otherwise noted.

Application Software Vendor (“ASV”) means a developer of software designed for use by business customers for accounting or other general business purposes which has been authorized by M&I to develop and promote versions of its software that may be used by licensees to subscribe to and access the Business E-Banking Services made available by M&I.

ASV Software means the software product developed and promoted by the ASV which may be used by end users to access the Business E-Banking Services made available by M&I.

Internet Browser shall mean software designed to locate and access Web Sites when properly installed and run on a computer with Internet access.

Internet Browser Banking Option shall mean the method of accessing the Business E-Banking Services using an Internet Browser and a computer with Internet access.

Windows Banking Option Software shall mean the M&I proprietary programs, data bases and other microcomputer-based (PC) software for Windows which, when properly installed on an End User’s personal computer, provide End User with access to the Business E-Banking Services. The Windows Banking Option Software is considered M&I Software as defined in the Agreement. The various modules of the Windows Banking Option Software are set forth in Attachment 1 hereto.

Administrative Workstation (hereinafter referred to as “Workstation”) shall mean the M&I proprietary programs, data bases and other microcomputer-based (PC) software for Windows ^® which, when properly installed at the Customer’s location, enable Customer to electronically administer End User account activities (including implementation, setup, changes, electronic mail, and various reporting functions). The Workstation is considered M&I Software as defined in the Agreement.

Business E-Banking Services shall mean those services made available by M&I and described in Attachment 1 below which allow End Users to obtain access to information with respect to their accounts at the Customer and to perform certain electronic banking transactions to such accounts.

Business Hours shall have the meaning set forth in Paragraph 10.

End User shall mean a business customer of Customer which has been authorized by Customer to receive the Business E- Banking Services through Customer.

Internet is a network of interconnected computers and computer networks, each of which is administered and maintained by individual organizations and institutions.

ISP is an acronym for Internet Service Provider, which is an entity that provides access to the Internet to personal computer users.

Materials shall mean the M&I on-line and printed reference manuals and such other documentation or materials related to the Windows Banking Option Software and Business E-Banking Services as may be provided by M&I to Customer and/or End Users for use in connection with the Windows Banking Option Software and the Business E-Banking Services.

Monthly Unit Sales Minimum shall have the meaning set forth in Attachment 1.

Multi-Customer Installation shall mean a Banking entity with any one of the following conditions: (i) more than one physical location that originates (e.g., transmits) balance files to M&I; (ii) more than one physical location that is the destination for ACH files transmitted by M&I; and/or (iii) a relationship with a non-affiliated Banking entity for the re-marketing of the Windows Banking Option Software and Business E-Banking Services.

Pricing Schedule shall mean Attachment 1 hereto.

Single-Customer Installation shall mean a Banking entity with (i) one physical location that originates (e.g. transmits) balance files (containing account and detail data) to M&I and (ii) one physical location that is the destination for ACH files transmitted by M&I to a Banking entity or its designee.

© 1999, M&I Data Services 2 First Midwest BE Amend 6

System shall mean the computer hardware owned and operated by M&I at an M&I data center, which is installed there for the purpose of making the Business E-Banking Services available for Customer’s and End User’s use under this Business E-Banking Agreement.

Web Site shall mean a unique location on the World Wide Web containing web pages that can be accessed by a personal computer user through use of an Internet Browser.

World Wide Web shall mean a system of Internet servers that support documents (web pages) formatted in a language called HTML (HyperText Markup Language) that supports links to other documents as well as graphics, audio, and visual files.

2. Business E-Banking Services

Subject to the terms and conditions set forth in the Agreement, this Schedule, and the Attachments hereto, M&I agrees to provide to Customer those Business E-Banking Services described in the Attachments hereto.

3. Grant of License; Title; Customer’s Right to Sublicense Software; Private Labeling

A. Subject to the terms and conditions set forth in the Agreement, this Schedule and the Attachments hereto, which are incorporated herein by reference, M&I hereby grants to Customer the following non-exclusive and non-transferable rights:

i) The right to use the Workstation pursuant to the rules that are established by M&I as set forth in the Materials. The Workstation shall be used by Customer only in connection with the Business E-Banking Services.

ii) The right to market the Windows Banking Option Software and Business E-Banking Services to End Users.

iii) The right to sublicense the Windows Banking Option Software under the Customer’s name and private label to End Users who agree to the terms and conditions of the licensing agreement set forth in Attachment 2 hereto.

B. Except for the rights granted to Customer under this Schedule, Customer shall not have any interest in the Windows Banking Option Software, the Workstation, the Business E-Banking Services or any related materials provided to Customer by M&I, which shall at all times remain the sole and absolute property of M&I. M&I shall retain all right, title and interest in and to all copyrights, trademarks, service marks, trade secrets, other proprietary rights in applicable logos, product names relating to the Windows Banking Option Software, the Workstation, the Business E-Banking Services or any related materials provided to Customer by M&I. Customer may not obscure, alter or remove any such copyright, trademark, service mark, trade secret or other proprietary notices. Except as expressly set forth in this Schedule, Customer may not assign, loan, sublicense or otherwise transfer the Windows Banking Option Software or the Administrative Workstation or any component thereof or alter, modify or adapt (or cause to be altered, modified or adapted) these computer programs; provided Customer may make copies as needed of such computer programs solely for its own backup purposes in support of its use of such computer programs.

C. CUSTOMER MAY NOT DECOMPILE, DISASSEMBLE, REVERSE ENGINEER, OR MAKE OR DISTRIBUTE ANY OTHER FORM OF, OR ANY DERIVATIVE WORK FROM, THE WINDOWS BANKING OPTION SOFTWARE OR THE WORKSTATION.

D. Customer may not export the Windows Banking Option Software or Administrative Workstation outside the United States of America, either directly or indirectly.

E. M&I reserves the right to require the Customer to sign additional documents prior to providing Customer any additional services, including, but not limited to, M&I’s marketing services and the use of any of the optional modules of the Business E-Banking Services.

4. Pricing; Invoicing; Termination for Failure to Pay

A. Customer shall be assessed and shall pay fees for the Business E-Banking Services as set forth in this Paragraph 4. Such fees and charges shall be subject to change on an annual basis as provided under the Agreement.

B. The initial implementation fee for Windows Banking Option Software is applicable to Single-Customer Installations only and includes the capability for the Windows Banking Option Software and demonstration diskettes to display one image/Customer logo. At Customer’s option, the right to market the Business E-Banking Services and license the Windows Banking Option Software may be extended to Multi-Customer Installations that may exist or develop as a result of mergers and/or acquisitions or Customer operational requirements. In addition to the fees set forth in Attachment 1, a Multi-Customer implementation fee will be mutually agreed to in writing between M&I and Customer.

© 1999, M&I Data Services 3 First Midwest BE Amend 6

C. The Windows Banking Option Software per copy price set forth in Attachment 1 hereto includes the software media, documentation, packaging, PIN and password mailing, warehousing and shipment of copies of the Windows Banking Option Software by M&I to End Users at Customer’s written or electronic direction.

D. The Web-based Option set forth in Attachment 1 hereto includes packaging, PIN and password mailing, warehousing and shipment of copies of the Starter Kits by M&I to the End Users related to the Business E-Banking Services.

5. Equipment

Customer is responsible for providing its own equipment for the Workstation. The minimum configuration requirements of the PC equipment that Customer will need to use the Workstation and that End Users will need to use the Windows Banking Option Software is set forth in the Materials. M&I shall not be responsible for supplying any equipment to Customer or End Users related to the Business E-Banking Services.

6. Access to Business E-Banking Services Utilizing Third-Party Accounting Software

A. Customer agrees to participate in the promotion of the Business E-Banking Services to its business customers which are users of ASV Software as follows:

(i) Customer will (a) work with M&I to promptly complete the implementation efforts necessary to permit End Users to access the Business E-Banking Services using the ASV Software, (b) work with M&I to promptly process enrollments by End Users who subscribe to the Business E-Banking Services using the ASV Software, and (c) communicate with and train its branch or other authorized personnel to be knowledgeable with respect to the Business E-Banking Services offered by Customer which may be accessed by End Users using the ASV Software without having to provide the End User with a copy of M&I’s proprietary Business Express software.

(ii) Customer will not receive any compensation from the sale or licensing of the ASV Software. End Users will obtain the ASV Software through the software distribution channel(s) used by the ASV in its sole discretion.

(iii) Upon completion of the implementation effort referenced in Paragraph (i)(a) above, Customer shall pay M&I an ASV Implementation Fee in the amount of $5,000, which is waived as part of the implementation of the interface with Intuit.

(iv) Customer will set the retail price for the Business E-Banking Services used by its End Users, and such pricing shall apply to End Users using the Business E-Banking Services, regardless of whether they access such services through the ASV Software or other means. Usage of the Business E-Banking Services by End Users through the ASV Software shall be credited toward Customer’s attainment of any minimum monthly commitment required under the Agreement.

(v) Customer shall pay a fulfillment kit/security letter fee to M&I in the amount of $5.00 for each End User who subscribes to receive Business E-Banking Services through the ASV Software. If the End User is also provided the Windows or Internet product options, then the fees listed in the Agreement for such product options shall also apply.

(vi) All monthly, per transaction, and other usage fees which Customer is obligated to pay to M&I under the Agreement will be assessed for usage by End Users who access the Business E-Banking Services through the ASV Software.

B. M&I and/or the ASV may promote the ASV Software through miscellaneous marketing channels, which may include in-box promotions, mailers, web sites, and VAR networks. Customer authorizes M&I and the ASVs to include the Customer’s name on a list of financial institutions offering Business E-Banking Services which may be accessed by use of the ASV Software (provided that the ASV Software licensee has a Banking relationship with Customer), and to promote Customer’s participation in this distribution channel for the Business E-Banking Services. Customer also authorizes each ASV to add Customer’s logo, in the form of an icon, to the ASV Software for point-and-click access by end users to the Business E-Banking Services. Customer agrees that M&I and/or the ASV may use Customer’s name and logo and any name or logo used by the Customer to brand the Business E-Banking Services (a) to promote the fact that end users of the ASV Software may access data and perform transactions on their accounts with Customer as permitted through the Business E-Banking Services, and (b) to download to a Customer’s personal computer upon the Customer’s initial use of the Business E-Banking Services through the ASV Software.

© 1999, M&I Data Services 4 First Midwest BE Amend 6

C. Customer shall promote the Business E-Banking Services accessible through the ASV Software through miscellaneous marketing channels which may include mailers, in-branch materials, and web sites.

D. M&I shall record the number of End Users who subscribe to the Business E-Banking Services through the ASV Software and may report these numbers to the ASV. Customer will share with M&I comments, complaints, and/or other feedback it may receive from End Users regarding the ASV Software.

7. Customer Service Enrollment, Software Distribution and Internet Access

A. Customer will use the Workstation to enter in the System the names of its business customers authorized to receive the Windows Banking Option Software and Business E-Banking Services.

B. M&I will distribute the Windows Banking Option Software to Customer’s End Users based on the customer address information that Customer enters through the Workstation. Customer address accuracy is the responsibility of Customer. M&I will produce the Windows Banking Option Software and maintain inventory based on quarterly sales projections supplied by Customer for any Customer private labeled Software.

C. M&I may also distribute Windows Banking Option Software updates to End Users electronically or via diskette/CD-ROM. The Materials will provide instructions to End Users on installation of the Windows Banking Option Software.

D. If the Customer has elected to utilize the Internet Browser Banking Option as an access method, any End User may utilize the Internet Browser installed on its modem-equipped personal computer to dial into an ISP and access the System through the Business E-Banking Services Web Site, whereupon the End User will be requested to provide user identification and password information. Upon validation of an End User’s response to such information request, the End User shall be allowed access to the System for the purposes of using the Business E-Banking Services. The Internet Browser Banking Option does not include, nor shall M&I be responsible to provide to Customer or End Users, the Internet Browser required to access and use the Internet Browser Banking Option. Under the Internet Browser Banking Option, a copy of the Windows Banking Option Software is not required to reside on the End User’s computer, nor will a copy be automatically provided to an End User during the enrollment process.

8. Availability of System and Services

The System and Business E-Banking Services and any particular aspect thereof shall be available for access and use during the normal hours offered generally by M&I. In the event of an interruption or outage during such time, M&I will use reasonable efforts to restore the availability of the System and Business E-Banking Services as quickly as possible. M&I may change its general availability periods from time to time and shall give Customer at least thirty (30) days prior written notice of any changes in such hours of availability. M&I may, by written notice to Customer, make particular portions of the Business E-Banking Services available during periods other than the general availability periods described above. In such event, Customer may, at its option and subject to any additional charges applicable thereto (as set forth in the applicable notice) use the Business E-Banking Services at such other times.

© 1999, M&I Data Services 5 First Midwest BE Amend 6

9. M&I Support

A. M&I maintains a Customer Operations Support Group which is available to provide support and is responsible for monitoring the receipt and transmission of data files for between the Customer, or its designated data processor, and M&I. The availability of this support group consists of on-M&I-location staffing from 6:00 AM - 8:00 PM Eastern Time, Monday through Friday, excluding M&I recognized national holidays, with on-call pager support during other times. The pager support goal is to respond within thirty (30) minutes of a page. This service level is not part of the penalties, but First Midwest reserves the right to reopen if issues arise. M&I reserves the right to change these hours subject to prior notification to Customer.

B. M&I maintains a Business E-Banking Customer Partner Help line that shall respond to Customer telephone inquiries relating to the Workstation, Windows Banking Option Software and Business E-Banking Services. M&I shall make available to Customer a toll-free telephone line for contacting such service group during the hours of 8:00 A.M. to 8:00 P.M. Eastern Time, Monday through Friday, excluding national holidays recognized by M&I (“Business Hours”). M&I reserves the right to change these hours subject to prior notification to Customer.

C. M&I maintains a Customer Hotline that shall respond to End User telephone inquiries relating to the Windows Banking Option Software and Business E-Banking Services. M&I shall make available to Customers/End Users, a toll-free telephone line for contacting such service group during the hours of 8:00 A.M. to 8:00 P.M. Eastern Time, Monday through Friday, excluding national holidays recognized by M&I. M&I reserves the right to change these hours subject to prior notification to Customer.

10. Performance Measures

A. Customer will use reasonable efforts to ensure that M&I has received End User balance data and all other account information by 6:00 A.M. Eastern Time each day. If the data is not received by that time, Customer may issue an alert message to End Users alerting them of the delay via an alert feature within the Workstation. M&I shall have no responsibility to provide the Business E-Banking Services with respect to such balance data and other account information until it has been received and processed accordingly.

B. M&I maintains various standards to measure service quality. Such standards are described in further detail in Attachment 3 hereto.

11. Indemnification

The following shall be added to Customer’s indemnities under Section 14.2(A) of the Agreement: (a) any transactions initiated by End Users; (b) transactions effected with a lost, stolen, counterfeit or misused PIN issued to any End User; (c) any Failed Payments or Reversed Payments initiated by an End User; (d) content or information prepared or distributed by Customer regarding or relating to the Business E-Banking Services (including without limitation information included in Customer’s web site, if any, or any changes thereto); (e) tortious acts or omissions by any End User; (f) any claim of infringement by any third party with respect to any private label used by Customer to identify the Business E-Banking Services, or Customer’s trade name, trade marks, or logos; and (g) economic loss or damage to any End User arising from M&I’s performance of or failure to perform the Business E-Banking Services (including, without limitation, any late charges imposed by bill payment payees for late payment).

12. Responsibility For Bill Payments

If Customer has elected to receive M&I’s Bill Payment Services, Customer understands that it is fully responsible for the availability of good funds necessary to settle the bill payment activities of End User’s initiated through the use of the Business E-Banking Services. M&I shall initiate debit ACH entries against each End User’s designated account for bill payment activities initiated by End Users. Customer is and shall remain solely and exclusively responsible for the entire amount of any and all Failed Payments and Reversed Payments (as those terms are defined below) initiated by any End User. For purposes of this Section 13, a “Failed Payment” is any bill payment processed for and on behalf of an End User which fails to be completed due to insufficient funds in the applicable depository account or for any other reason outside M&I’s control. A “Reversed Payment” is any bill payment processed for and on behalf of an End User which is reversed for any reason and cannot be charged back to the End User’s account due to insufficient funds or any other reason outside M&I’s control.

© 1999, M&I Data Services 6 First Midwest BE Amend 6

ATTACHMENT 1

Business E-Banking and Bill Payment Services. Fees, and Charges

1. Business E-Banking Fees and Charges

1. Implementation Fees

Web Only Implementation See Table Below

Standard platform implementations included:

• Web, Standard

• Accounting Software, Standard

Standard support implementations included:

• End User Support—Telephone and Email, Standard

• Bank Partner Operations Support

• Administrative Workstation—up to 5 people

Module implementations included:

• Balance Reporting

• Transfers

• Stop Payment

• Cash Disbursement, Direct Deposit, Vendor Payments (when available)

• Wires

• Email

• Account Reconciliation

• Bill Payment

	M&I COST		FMB Price
Implementation Fees - per Bank	$	7,500 WAIVED	$	8,475 WAIVED
				(one time as part of the initial implementation)

© 1999, M&I Data Services 7 First Midwest BE Amend 6

2. Ongoing Fees

	M&I Cost			FMB Price
Monthly Unit Sales Minimum	$	1,500	*	$	1,500	*
For months 1 through 6, monthly minimum is waived. For months 7 and thereafter, monthly minimum is $1,500
End User Module, Platform, and Technical Support Monthly Fees (up to 3 accounts per end user per month)	$	20.44		$	23.09
Additional accounts per user per month	$	2.65		$	3.00
Transaction Fees
Cash Disbursement / Direct Deposit	$	0.133/ea.		$	0.15/ea.
Wire Transfer Request	$	.885/ea.		$	1.00/ea.
Consumer Bill Payment	$	.29/ea.		$	.33/ea.
Commercial Bill Payment	$	.29/ea.		$	.33/ea.

3. Miscellaneous Fees

	M&I Cost		FMB Price
Product Fulfillment and Upgrade Fees	$	13.27/kit	$	15/kit
Information Kit (includes doc, security and admin info, required for each end user)
Disk Set (Business Express disks*, required for each Windows user, may be required for version upgrades)	$	13.27/kit	$	15/kit
* does not include any accounting software or accounting software licenses
Reports and Special Task Fees
Fax Reports Per Page	$	.44/page	$	.50/page
Enable Deleted User	$	17.70/user	$	20/user
Restore Deleted User Data	$	44.25/user	$	50/user
Billing Fees
Monthly Summary Invoice		No Charge		No Charge
Detail Invoices on Paper	$	.885/page	$	1/page
Electronic Invoice Detail File (Auto Transmission)	$	44.25/month	$	50/month
Electronic Invoice Detail File (Manual Transmission)	$	177/month	$	200/month

© 1999, M&I Data Services 8 First Midwest BE Amend 6

4. Private Label Fees

Web—Private Label Implementation

Includes branding options, as Mom.

• Bank Name

• Bank Product Name

• Bank Logo (148 x 60 pixels)

• Bank Home Page Link

• Background Color for Navigation Region of Web Page

• Background Color for Legend Region of Web Page

• Background Color for Application Region of Web Page

• Text Color

• Link Colors

• Viewed Link Color

• Active Link Color

• Table & Register Control Colors

• Heading Lines

• Lighter Color for Alternating Lines

• Darker Color for Alternating Lines

• Ad Rotator Schedule

• Up to 5 Ad Images (468 x 60 pixels)

• Link to URL

• Weight of Ad to Control Display

• Enrollment Message Destination

• Internet Address; or

• Administrative Workstation

	M&I Cost		FMB Price
WEB Private Label Implementation (see above)	$	8,550 one time fee	$	9,660 one time fee
WEB—Private Label Maintenance	$	1,327/year	$	1,500/year
End User Technical Support—Private Label Implementation	$	884 one time fee	$	1,000 one time fee
End User Technical Support—Private Label Maintenance	$	353/month	$	400/month
End User Technical Support—Private Label Maintenance	$	.44/FaxBack page	$	.50/FaxBack page

© 1999, M&I Data Services 9 First Midwest BE Amend 6

ATTACHMENT 2

End-User (Windows Only) Software License Agreement

IMPORTANT—READ CAREFULLY. BY CLICKING THE ACCEPTANCE BUTTON OR INSTALLING THE SOFTWARE, YOU AGREE TO THE TERMS AND CONDITIONS OF THIS END-USER SOFTWARE LICENSE AGREEMENT. IF YOU DO NOT AGREE TO ALL OF THE TERMS OF THIS LICENSE AGREEMENT, CLICK THE BUTTON THAT INDICATES YOU DO NOT ACCEPT THE TERMS AND DO NOT INSTALL THE SOFTWARE. IN SUCH EVENT, YOU MAY NOT USE OR COPY THE SOFTWARE, AND YOU SHOULD PROMPTLY CONTACT THE CLIENT SERVICES HELPLINE BY CALLING THE PHONE NUMBER LISTED ON THE SECURITY LETTER SENT UNDER SEPARATE COVER FROM THIS SOFTWARE, FOR INSTRUCTIONS ON THE RETURN OF THE SOFTWARE.

This End-User License Agreement (the “License Agreement”) between you (either as an individual or as an authorized representative for an entity) and M&I Data Services, a division of Marshal! & Ilsley Corporation (M&I) sets forth the terms and conditions for your use of the software product(s) (the “Software”). The Software includes computer software, any printed materials, any electronic documentation and any modifications, revisions, or enhancements received by you from M&I from time to time.

1. Grant of License. This License Agreement grants you the following rights and limitations:

You are granted a limited, nonexclusive, nontransferable license to use the Software on one (1) computer at any one time, subject to the terms of this License Agreement.

You may not assign, sell, distribute, lease, rent, sublicense, or transfer the Software or this license or disclose the Software to any other person.

You may not make copies, translations, or modifications of or to the Software, except you may make one (1) copy of the Software for backup purposes in support of your use of the Software.

You may not reverse-engineer, merge, de-compile, disassemble or attempt to discover the source code or structural framework of the Software, or sublicense, lease, rent, or assign the Software to any other person or entity.

2. Limited Warranty; Liability

M&I warrants that for a period of ninety (90) days from the date of receipt, the Software, if operated as directed, will perform substantially in accordance with the accompanying written materials and electronic documentation. M&I does not warrant, however, that your use of the Software and related services will be uninterrupted or that operation of the Software and related services will be error-free or secure.

M&I further warrants, for a period of ninety (90) days from date of receipt, that the media on which the Software is furnished is not defective and that the programs are properly recorded on such media.

M&I’s sole liability for any breach of this warranty shall be, in M&I’s sole discretion: (i) to replace your defective media or Software; or (ii) to advise you how to achieve substantially the same functionality with the Software as described in the documentation through a procedure different from that set forth in the documentation or if the above remedies are impracticable, to refund the license fee, if any, you paid for the Software. Repaired, corrected, or replaced Software and documentation shall be covered by this limited warranty for the period remaining under the warranty that covered the original Software, or if longer, for thirty (30) days after the date (a) of delivery to you of the repaired or replaced Software, or (b) M&I advised you how to operate the Software so as to achieve substantially the same functionality described in the documentation.

© 1999, M&I Data Services 10 First Midwest BE Amend 6

If, during the warranty period, you make any modifications to the Software; or if the media is subjected to accident, abuse, or improper use; or if you violate the terms of this Agreement, then the warranty shall immediately terminate. Moreover, this warranty shall not apply if the Software is used on or in conjunction with hardware or software other than the unmodified version of hardware and software with which the Software is designed to be used as described in the documentation.

THE FOREGOING WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES. M&I MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT OF THIRD PARTIES’ RIGHTS. EXCEPT AS EXPRESSLY STATED HEREIN, THE SOFTWARE IS PROVIDED “AS IS”. MOREOVER, IN NO EVENT WILL WARRANTIES PROVIDED BY LAW, IF ANY, APPLY UNLESS THEY ARE REQUIRED TO APPLY BY STATUTE NOTWITHSTANDING THEIR EXCLUSION BY CONTRACT. NO PARTY OTHER THAN M&I IS AUTHORIZED TO MAKE MODIFICATIONS, EXTENSIONS, OR ADDITIONS TO THIS LIMITED WARRANTY.

IN NO EVENT AND UNDER NO LEGAL THEORY, TORT, CONTRACT, OR OTHERWISE, INCLUDING NEGLIGENCE SHALL M&I, ITS THIRD PARTY SUPPLIERS, OR RESELLERS BE LIABLE TO YOU OR ANY OTHER PERSON OR ENTITY FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES FOR PERSONAL INJURY, LOSS OF BUSINESS PROFITS, COMPUTER FAILURE OR MALFUNCTION, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION, OR ANY OTHER PECUNIARY LOSS) ARISING OUT OF THE USE OR INABILITY TO USE THE SOFTWARE, EVEN IF M&I HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN ANY CASE, M&I’S ENTIRE LIABILITY UNDER THIS AGREEMENT FOR ANY REASON AND REGARDLESS OF THE FORM OF THE CLAIM (TORT, CONTRACT, NEGLIGENCE, OR OTHERWISE) SHALL BE LIMITED TO THE REMEDIES FOR BREACH OF WARRANTY EXPRESSLY PROVIDED UNDER THIS SECTION 2.

3. Title

Title, copyrights, ownership rights, and intellectual property rights in the Software (including but not limited to any images, photographs, animation, video, text, or applications incorporated into the Software), the accompanying printed or electronic documentation, and any copies of the Software, are and shall remain with M&I, and/or the third parties from whom M&I has secured the right to use such rights, if any. The Software is licensed, not sold. The Software is protected by copyright laws and international copyright treaties, as well as other intellectual property laws and treaties.

4. Termination

Without prejudice to any other rights, M&I may terminate this Agreement upon ten (10) days prior notice if you fail to comply with any provision of this Agreement or if the service agreement between you and the financial institution through which this Software is made available is terminated for any reason. M&I will contact the financial institution and give ten (10) days to cure the breach before actual termination. You agree upon termination to destroy the Software, together with all copies and modifications, including any copy in your computer memory or on a hard disk.

5. General

This Agreement represents the complete agreement concerning the license granted hereunder and may be amended only by a writing executed by both parties. The acceptance of any purchase order placed by you is expressly made conditional on your assent to the terms and conditions set forth herein, and not those in your purchase order. The captions of Sections hereof are for convenience only and shall not control or affect the meaning or construction of any of the provisions for this Agreement. If any provision of this Agreement is held to be unenforceable, such provision shall be reformed only to the extent necessary to make it enforceable. This Agreement shall be governed by the laws of the State of Wisconsin, without regard to conflicts of law provisions. Regardless of any disclosure made by you to M&I of an ultimate destination of the Software, you will not export and/or re-export either directly or indirectly the Software without first obtaining, at your own expense, a license from the United States government, as required.

© 1999, M&I Data Services 11 First Midwest BE Amend 6

6. Access to Services

You may be able to use the Software to directly access certain services (“Services”) made available to you by the financial institution with which you maintain deposit accounts (the “Customer”). M&I is not responsible for the quality, availability, or performance of such Services in any way. The terms and conditions on which you receive such services are subject to your agreement with the Customer, if any, and you agree that M&I has no liability to you for any loss or damage arising from your use of the Services.

7. No Waiver

No waiver of any of M&I’s rights or remedies will be effective unless the waiver is in writing and signed by an authorized officer of M&I. Delay or omission on the part of M&I in exercising any right or remedy is not a waiver of the right or remedy. A The fact that M&I may waive a right or remedy on any one occasion does not affect M&I’s authority to enforce a right or remedy on any future occasion.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]

© 1999, M&I Data Services 12 First Midwest BE Amend 6

ATTACHMENT 3

Performance Measurements and Standards

M&I maintains various standards for the measurement of service quality. Such standards are measured monthly on a calendar basis. The first month to be measured and reported shall be the fourth (4th) month following the date hereof. Within twenty-five (25) calendar days of the end of each month, M&I agrees to make a report available to Customer indicating M&I’s performance with respect to each of the following standards. M&I agrees to review such report with appropriate personnel of Customer on a periodic basis. M&I’s calculations of its performance with respect to each standard shall be based on data captured by its internal systems. M&I agrees to use its reasonable efforts to meet each standard set forth below.

Computer Operations

System Availability. M&I shall use reasonable efforts to make access to the System available twenty-four (24) hours per day, seven days per week; provided, however, that scheduled maintenance may occur between Saturday 10:00 PM and Sunday 1:00 PM Eastern Time. In the event of an interruption or outage during such time as the System is to be available, M&I will use its reasonable efforts to restore the availability of the System as quickly as reasonably possible. M&I shall measure the availability of the System by computing the cumulative number of minutes which the System is actually available for access, divided by the total number of minutes during this same period. This standard is expressed as a percentage of time the System is available for access, and M&I shall use its commercially reasonable efforts to assure that the System shall not be unavailable for less than two (2) hours per month. In the event Customer agrees to allow M&I to perform routine maintenance or the upgrading of computer hardware which may require the System to be off-line during the aforementioned availability times, such off-line times shall not be included in determining the attainment of this standard.

On-line Availability. M&I will ensure that its on-Oline computing facilities for System and Business E-Banking and any particular aspects thereof shall be available for the processing of Customer’s on-line transactions at a minimum of ninety nine percent (99.0%) of the time, as prescribed by Customer, measured over a calendar month at the point of departure from M&I’s communications controller. The time prescribed by Customer for each processing day for which on-line computing facilities shall be made available for each product or service is set forth below. Processing day shall mean any weekday which is not declared a holiday by the Federal Reserve Bank of Chicago. “Availability” for purposes of this paragraph shall be expressed as a percentage for each calendar month and shall be the number 100 less the ratio of (i) time period of unscheduled outages over (ii) total time prescribed less the time period of scheduled outages.

Penalties

If M&I is deficient in any standard:

M&I will pay a credit of five percent (5%) of the affected applications for the first month following receipt of notice of the deficiency.

If the deficiency continues for sixty (60) days, a credit of ten percent (10%) will be paid for the next month’s applicable invoice. If the deficiency remains for ninety (90) days or more, a credit of twenty percent (20%) will be paid for the third and each of the subsequent months of continued deficient performance thereafter.

Customer Data Processing

BAI transmission window. While the System is capable of receiving a high speed previous day balance data file (utilizing an industry standard BAI format) at any time during which the System is available, technical support staff are available starting at 6:00 AM Eastern Time each business day to monitor such processing.

BAI update processing turnaround. M&I Data Services processes the Balance Reporting data on behalf of the Customer and will use its reasonable efforts to meet the quality standard of providing data for end-user access by 8:00 a.m. EST. In the event M&I Data Services does not meet 8:00 a.m. EST, all reasonable efforts will be made to make previous day balance data available as soon as possible.

© 1999, M&I Data Services 13 First Midwest BE Amend 6

AMENDMENT TO OUTSOURCING AGREEMENT

THIS AMENDMENT, to the Outsourcing Agreement dated July 1, 1999 (the “Agreement”) is made as of this 31 day of March, 2000, by and between the undersigned parties, and does hereby alter, amend, and modify the Agreement and supersedes and takes precedence over any conflicting provisions contained in the Agreement.

FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, the undersigned parties agree as follows:

A. For the purpose of clarification, the following are added to Section 1.2. Definitions, of the Agreement:

“Conversion” shall mean the transfer of data to M&l’s Systems for the purpose of processing such data for Customer by M&I, whether such transfer results from Customer’s acquisition of a new financial institution or portfolio, merger with another financial institution, or new M&I product/service requested by Customer. Conversion services provided by M&I do NOT include start-up, one-time, set-up, third-party fees and charges, or custom programming services.

“Pass-through Fees” shall mean any fee charged by a third-party and billed to Customer through M&I.

B Section III. Allowances of Schedule 8.1 to the Agreement is hereby deleted in its entirety and is replaced with the following:

“III. Allowances.

M&l agrees to provide Customer an allocation of ten thousand two hundred fifty dollars ($10,250) in each month of the term of the Agreement to be applied against specific charges as provided in this Section.

This allocation is derived by adding sixty (60) programming hours at the contract rate of one hundred twelve dollars and fifty cents ($112.50) per hour, plus the amounts of three thousand dollars ($3,000) for general expenses and five hundred dollars ($500) training expenses. The cost for the sixty (60) programming hours is built into the monthly processing fee and no additional charge shall be payable to M&I for the same. With respect to the remaining allocation specified above totaling three thousand five hundred dollars ($3,500), the “general” services charged against this allocation will be discounted twenty-five percent (25%) prior to applying any portion of this allocation. Therefore, Customer agrees to pay M&I a monthly amount of two thousand six hundred twenty-five dollars ($2,625) for these discounted services.

This allocation of $10,250 is to be applied to charges for programming and “general” services (such as training and workshop fees). No portion of the allocation may be applied to monthly processing services, new product implementation or licensing fees or to any product/service where a separately negotiated discount is applicable. Any charges for programming and general services usage in excess of this monthly amount shall be discounted twenty-five percent (25%). Pass-through or third party charges shall not be subject to any discount or credit.

M&I will provide Customer a monthly statement detailing all activity charged against this allocation. The total monthly allocation may be changed by the mutual agreement of the parties.”

Except as expressly modified herein, all other terms and conditions contained in the Agreement remain in full force and effect.

© 1999, M&I Data Services First Midwest Amendment 030200

IN WITNESS WHEREOF, the undersigned parties have duly executed this Amendment in a manner appropriate to each.

M&I DATA SERVICES, a division of Marshall & Ilsley Corporation (“M&I”)
By:
Name:	[ILLEGIBLE]
Title:	VICE PRESIDENT
FIRST MIDWEST BANCORP, INC. (“CUSTOMER”)
By:
Name:	KENT S. BELASCO
Title:	EVP/CIO

© 1999, M&I Data Services First Midwest Amendment 030200

AMENDMENT TO OUTSOURCING AGREEMENT

THIS AMENDMENT to the Outsourcing Agreement dated July 1, 1999 (the “Agreement”) is made as of this 30 day of June 2000, by and between the undersigned parties, and does hereby alter, amend, and modify the Agreement.

FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, the undersigned parties agree as follows:

Customer desires to add the Predictive Risk Management services (“PRM Services”) to its Agreement with M&I. The description of the PRM Services are set forth on attached Exhibit A and the related fees are set forth on attached Exhibit B.

The term of this Amendment shall be in effect for a period of twelve (12) months from the date of execution of this Amendment.

Any Services requested by Customer which are not specifically priced as of the date of this Amendment shall be considered New Services, and will be charged in keeping with the current discount arrangement between the undersigned parties.

Except as expressly modified herein, all other terms and conditions contained in the Agreement remain in full force and effect.

IN WITNESS WHEREOF, the undersigned parties have duly executed this Amendment in a manner appropriate to each.

M&I DATA SERVICES, a division of Marshall & Ilsley Corporation (“M&I”)
By:
Name:	Gregory T. Nurre
Title:	President Enterprise Solutions Group
By:
Name:	Frank G. D Angelo
Title:	Senior Vice President, Electronic Funds Delivery
FIRST MIDWEST BANCORP
By:
Name:	Kent Belasco
Title:	Executive Vice President

EXHIBIT A

Description of Services

PRM SERVICES

System Description

M&I Data Services’ PRM solution will be utilized for VISA/MasterCard™ debit-card transactions (PINned and non-PINned) and will be monitored by M&I’s Risk Management department.

M&I’s PRM solution utilizes neural-network technology that can help financial institutions minimize fraud by learning customer buying habits. Comparing against previous card usage keeps “false positives” to a minimum. PRM is not comparing against an institution’s general customer spending habits. This tends to cause a high level of false positives. PRM will assign a score to every transaction, with higher scores representing more suspicious transactions.

M&I’s Risk Management department will analyze current fraud trends and build rules to match the fraud trends. These rules are very dynamic and are modified frequently as the fraud environment changes. Risk Management has the capability of building rules for various transactions types, regardless of the score for the transaction. For example, a rule could be built for all transactions that occur in Japan or all automated fuel purchases in Los Angeles.

PRM monitors transactions in near realtime, within minutes of the transaction being authorized, and will not impact the customer at the point of sale. Near-realtime monitoring can help limit the number of fraudulent transactions that will post against a customer’s account. With near-realtime alerts, fraud analysts can detect fraud quickly and close suspicious accounts.

Process Description

When authorizations are routed to M&I Data Services for approval, the PRM system compares data from the current authorization with recent history completed on that card. The system assigns a score to each authorization. Based on the scoring parameters and rules established by Risk Management, certain authorizations will generate alerts that will cause the authorizations to be routed to queues for review by fraud analysts.

The fraud analysts monitor the queues and contact cardholders if they believe the activity is suspicious. The analysts contact the cardholders by using the information contained on the Cardbase Management System (CMS) 611/616 screen.

When a fraud analyst contacts a cardholder, one of the following scenarios will take place:

1. The cardholder will confirm that the transaction(s) was valid.

© 2000, M&I Data Services 2 First Midwest Amendment PRM 060100

No action will be taken on the cardholder’s account.

2. The cardholder will confirm that the transaction(s) was fraudulent.

The fraud analyst will hot-card the account on CMS. The analyst will list the card on MasterCard’s Stand-in file for 180 days or VISA’s Exception file until the card’s expiration date. If the suspicious activity is occurring in a foreign country, the analyst will block the appropriate foreign region(s) for 30 days. The fraud analyst will note the information on the CMS 720 screen for the financial institution to view.

The fraud analyst will advise the cardholder to initiate a dispute with their financial institution. The financial institution initiates fraud cases with the M&I’s Debit Card Services area.

3. The cardholder cannot be reached and transactions seem suspicious.

There are several possible reasons that a cardholder cannot be reached. The cardholder may not be available or there may be missing or inaccurate telephone information on CMS. If the cardholder is not available, the fraud analyst will attempt to leave a message requesting that the cardholder contact our Risk Management department as soon as possible. If the telephone number is missing or inaccurate, the fraud analyst will proceed with the investigation

If activity is highly suspicious, the Cardbase status on the account will be changed to “warm card” (4). Deposits will be allowed on the account, but authorizations will be declined. The fraud analyst will not add the card to the VISA Exception file or the MasterCard Stand-In file. The fraud analyst will note the information on the CMS 720 screen for the financial institution to view.

Monitoring Schedule

Risk Management’s fraud analysts monitor alerts from 8 a.m. to 9 p.m. (CST) 7 days a week (these hours are subject to change). Holiday coverage hours will be determined by the M&I Risk Management department. The Risk Management department’s telephone number is 1-800-221-5920, Extension 7422.

Cardbase Reports

Financial institutions should review all of their daily exception file maintenance reports, including the Call Center report 881 (MasterCard) and 781 (VISA). The Call Center report should be reviewed to verify negative status and make reissuing decisions. The financial institution can view exception file maintenance on the card level on the CMS 716 (MasterCard) and 717 (VISA) screens.

© 2000, M&I Data Services 3 First Midwest Amendment PRM 060100

PRM Reports

Currently, there are no generated reports available specifically for PRM. As indicated previously, financial institutions should review their daily Call Center report to find information related to maintenance performed on their cardholders’ accounts. Actions that occur on cardholder accounts are also reported on the CMS 720 screen as described in the preceding section of this document.

Implementation Requirements

In order to begin the implementation process for PRM, a financial institution will need to submit a written request to their assigned account manager or an EFD Services sales representative. After a request is received, the financial institution will be assigned an EFD Conversion Representative or Product Support Representative who will schedule the implementation. The Representative will work through the process of setting up the financial institution on the PRM product.

A critical component of the implementation is the completion of an introductory conference call between the financial institution and our Risk Management department. This is the initiation of the relationship between Risk Management and the financial institution and is used to further educate the financial institution on the process.

In order to use PRM, additional cardholder information is required. The Conversion Representative or Product Support Representative will work with the financial institution to obtain necessary cardholder information. In order for the system to be most efficiently utilized, this information should be loaded on CMS before PRM can be implemented.

• The method used to obtain the required information is dependent upon the type of relationship the financial institution has with M&I Data Services. It is critical that cardholder information is regularly maintained so that the information on CMS is accurate. Failure to maintain accurate information will increase the time it takes to contact cardholders and may increase fraud losses.

The cardholder information necessary in order to efficiently utilize PRM is as follows:

• Business phone number

• Home phone number

• Mother’s maiden name

• Date of birth

• Social security number

• Last Address Change date

© 2000, M&I Data Services 3 First Midwest Amendment PRM 060100

Non-CIS institutions must provide M&I with a cardholder information file containing the required data. As non-CIS institutions receive notification from their customers when this information changes, they must update the CMS 611 and 616 screen. This will provide the fraud analysts with the most current customer information.

The same information is required for CIS institutions. They are not required to send in a file, since this information is already maintained on CIS. As CIS institutions receive notification from their customers when this information changes, they must update CIS. CMS receives the updated information from CIS.

After PRM has been implemented, the financial institution’s cardholder transactions will run through PRM to build a historical reference of cardholder behavior. Fraud Analysts will begin calling cardholders on alerted transactions after the information has been loaded and the participation indicators have been set.

M&I Data Services’ PRM System Diagram

EXHIBIT B

FEES

Conversion and set up fee	$400.00
Per account	$.02
Per authorized transaction	$.005
Transaction alert fee	$.10
Case review and analysis	$2.00

© 2000, M&I Data Services 6 First Midwest Amend PRM 060100

AMENDMENT TO OUTSOURCING AGREEMENT

THIS AMENDMENT, to the Outsourcing Agreement dated July 1, 1999 (the “Agreement”) is made as of this 1 day of January, 2001, by and between the undersigned parties, and does hereby alter, amend, and modify the Agreement and supersedes and takes precedence over any conflicting provisions contained in the Agreement. All references in the Agreement to “M&I Data Services, a division of Marshall & Ilsley Corporation” or to “M&I” are replaced with “Metavante Corporation” or “Metavante”, respectively.

FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, the undersigned parties agree as follows:

Effective as of the date of this Amendment, Customer shall no longer pay to Metavante per CPU second, rather a per account fee of $0.0075 for Data Warehouse Services. This fee will be in effect until July 1, 2002. Thereafter, for the remainder of the Term, Customer shall pay for Data Warehouse fees in accordance with the Cost-Pius scenario outlined in the Fee Schedule (Schedule 8.1) attached to the Agreement. Accounts stored in the Data Warehouse include, but are not limited to, CIS, Deposits, Loans, Card Base, Sales Partner sessions, and others as may be agreed upon by the parties.

In the event Customer’s usage of the Data Warehouse Services materially diminishes, the parties shall negotiate in good faith, a modification of the billing methodology for such Services, if appropriate.

Any Services requested by Customer which are not specifically priced as of the date of this Amendment shall be considered New Services, and will be charged according to Metavante’s then current prices.

Except as expressly modified herein, all other terms and conditions contained in the Agreement remain in full force and effect.

IN WITNESS WHEREOF, the undersigned parties have duly executed this Amendment in a manner appropriate to each.

	METAVANTE CORPORATION (“Metavante”)
	By:
	Name:	Thomas J. McBride
	Title:	Sr. Vice President, Client Services
	By:
	Name:	Owen J. Sullivan
	Title:	President, Client Development and Services
	FIRST MIDWEST BANCORP, INC. (“CUSTOMER”)
	By:
	Name:	Kent S. Belasco
	Title:	Executive Vice President and Chief Information Officer

© 2001, Metavante Corporation 1 FMW Adenda

AMENDMENT TO OUTSOURCING AGREEMENT

THIS AMENDMENT, to the Outsourcing Agreement dated July 1, 1999 (the “Agreement”) is made as of this 8th day of October, 2001, by and between the undersigned parties, and does hereby alter, amend, and modify the Agreement and supersedes and takes precedence over any conflicting provisions contained in the Agreement. All references in the Agreement to “M&I Data Services, a division of Marshall & Ilsley Corporation” or to “M&I” are replaced with “Metavante Corporation” or “Metavante”, respectively.

FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, the undersigned parties agree as follows:

Customer desires to receive and Metavante agrees to provide certain ConnectWare Services, as more fully described on the attached Schedule A. Customer shall pay for these Services in accordance with the attached Exhibit A.

Any Services requested by Customer which are not specifically priced as of the date of this Amendment shall be considered New Services, and will be charged according to Metavante’s then current prices.

Except as expressly modified herein, all other terms and conditions contained in the Agreement remain in full force and effect.

IN WITNESS WHEREOF, the undersigned parties have duly executed this Amendment in a manner appropriate to each.

	METAVANTE CORPORATION (“Metavante”)
	By:
	Name:	Michael E. Touhey
	Title:	President, Market Solutions and Products
	By:
	Name:	Jamie R. Geschke
	Title:	Senior Vice President and General Manager Financial Technology Services
	FIRST MIDWEST BANCORP, INC. (“Customer”)
	By:
	Name:	KENT BELASCO
	Title:	EVP / CIO
	By:
	Name:
	Title:

© 2001, Metavante Corporation 1 First Midwest TConnect Amend 091201

SCHEDULE A

CONNECTWARE

1. Definitions. These terms are defined as follows:

Connectware Product(s): The Connectware Programs and the Documentation.

Connectware Programs: The Connectware computer software programs and interfaces identified on Exhibit A as well as any Improvements, Enhancements, and Modifications installed on Customer’s systems.

CPU: Central Processing Unit.

Documentation: Metavante’s standard software user instructions and descriptions for the Connectware Programs, including tutorials, on-screen help, and operating procedures, as provided to Customer in printed or electronic form.

Enhancements: Any additional business functions or customizations to the Connectware Products made generally available by Metavante for a separate charge to licensers of the Connectware Products.

Improvements: All improvements, extensions, upgrades, and other changes to the Connectware Product(s) made generally available by Metavante, without a separate charge, to licensees of the Connectware Product(s) who are under a current agreement for Maintenance Services. Enhancements (as defined above) are not Improvements.

Initial Use Period: The period beginning upon the date of completion of installation of the Connectware Programs and continuing until the fifth anniversary of the installation date.

Interactive Applications: The applications provided by Customer to its banking customers using Customer’s selected front end software and the Connectware Programs.

License: The license rights granted to Customer under Section 2 of this Amendment.

Maintenance Services: Services which include distribution of Improvements and Metavante’s reasonable efforts to correct or provide “workaround” for any error which causes the Connectware Programs to fail to operate in any material respect in conformance with the Documentation, but not including efforts by Metavante to correct any malfunction or error if Metavante determines that the malfunction or error is not a defect in the Connectware Programs or that the malfunction or error is caused by Customer or is attributable to the use of the Connectware Programs with hardware or operating systems not specified in the Documentation.

Metavante Systems: The proprietary data processing systems maintained by Metavante to provide data processing services.

Messaging Services: Interactive application services described in the Documentation.

Modifications: Alterations and customizations to the Connectware Programs made by Customer or by Metavante at Customer’s request and/or according to Customer’s specifications.

Professional Services: Means (a) services provided to install or assist with the installation of a software product, or (b) services other than Maintenance Services that are provided, before or after delivery, to customize or modify a software product in accordance with the user’s specifications or requests, or services provided by Metavante in investigating and/or resolving errors and malfunctions that are not covered under Maintenance Services.

Transaction: A Transaction is carried out whenever a single piece or group of data is pulled from the Metavante host through the use of the Messaging Services.

© 2001, Metavante Corporation 2 First Midwest TConnect Amend 091201

2 License Rights.

2.1 License Grant. Metavante hereby grants to Customer a personal, nonexclusive, and nontransferable license and right to use the Connectware Products solely in connection with Customer’s Interactive Applications set forth in the applicable Documentation with the Metavante Systems and for no other purposes. Customer shall not: (a) distribute, sell, assign, transfer or sublicense the Connectware Products, or any part thereof, to any third party; (b) except as specifically set forth in this Agreement, adapt, modify, translate, reverse engineer, decompile, disassemble, or create derivative works based on the Products or any part thereof; (c) copy the Connectware Products, in whole or in part, without including appropriate copyright notices; (d) except for providing banking services to Customer’s customers, use the Connectware Products in any manner to provide Service Bureau, time sharing, or other computer services to third parties; (e) export the Connectware Products outside the United States, either directly or indirectly; or (f) install the Connectware Programs on a different platform or interface the Connectware Programs to an application written in a different computer language other than set forth in the Documentation.

2.2 Derivative Works. Customer may use the Connectware Programs for the sole purpose of developing interfacing applications to the Metavante Systems for the purpose of accessing the Messaging Services. Customer may use agents or contractors for the purpose of developing such applications, but Customer understands and agrees that Customer’s agents and contractors shall have no rights in the Connectware Programs and shall have access to the Connectware Programs strictly in accordance with the terms and conditions of the license rights granted to Customer hereunder. Any derivative works developed by Customer or its agents and contractors from the Connectware Programs shall be the exclusive property of Metavante; provided, however, that Customer shall have a personal, nonexclusive and nontransferable license and right to use such derivative works solely in connection with Customer’s Interactive Applications.

2.3 Initial License Fee. Upon acceptance of the Connectware Programs by Customer, Customer shall pay to Metavante the Initial License Fee described in Exhibit A.

2.4 Termination. The License shall continue until the expiration or termination of the Agreement for any reason. In addition, Metavante may terminate the License effective immediately if Customer shall breach the confidentiality provisions in Section 9 below. Within 10 days of any termination of the License, Customer shall, at its own expense, return the Connectware Products to Metavante and destroy all copies thereof. The exercise of any remedy hereunder will be without prejudice to other remedies available to Metavante. The rights and obligations of the parties contained in this Section 2.4 and Sections 8 and 9 shall survive termination of the License.

3. Delivery and Installation.

3.1 Delivery. Metavante shall deliver to Customer one copy of machine-readable object code for each of the Connectware Programs and related Connectware Documentation.

3.2 Installation. For purposes of installing the Connectware Programs, Metavante agrees to provide Customer with Professional Services subject to the terms of attached Exhibit B. Metavante shall install the Connectware Programs on the one (1) CPU identified by Customer.

3.3 Acceptance. Customer shall be deemed to have accepted the Connectware Products upon delivery.

3.4 Appointment of Coordinators. Customer and Metavante will designate one (1) person each from their respective organizations to coordinate activity with respect to the Connectware Products.

3.5 Fees. Customer shall pay Metavante for Professional Services at Metavante’s then current standard rate for such services.

4. Ongoing Metavante Services.

4.1 Maintenance Services. Following payment of the License Fee by Customer, and subject to Metavante’s right to terminate such services hereunder, Metavante shall provide Maintenance Services for Customer.

© 2001, Metavante Corporation 3 First Midwest TConnect Amend 091201

4.2 Messaging Services. Beginning upon installation of the Connectware Programs, and subject to Metavante’s right to terminate such services hereunder, Metavante shall make the Messaging Services available to Customer.

4.3 Maintenance and Usage Fee. Customer agrees to pay to Metavante a monthly maintenance and usage fee for the services described in this Section 4.3 (“Maintenance and Usage Fee”). For the Initial Use Period, the Maintenance and Usage Fee shall be in the amount set forth on Exhibit A. Thereafter, the Maintenance and Usage Fee for each subsequent twelve (12) month period may be increased by Metavante subject to any limitations set forth in the Agreement (the “Fee Schedule”).

4.4 Termination of Services. Notwithstanding anything to the contrary in the Agreement, Customer shall use, and Metavante shall provide, the services described in this Section 4 until termination of the License for any reason, provided that (a) either party may terminate the services following the Initial Use Period upon providing sixty (60) days’ written notice of termination to the other party, and (b) Metavante may immediately terminate the services by written notice to Customer at any time in the event that Customer fails to pay Metavante any Maintenance and Usage Fee in full when due. In addition, if Metavante determines, in its reasonable discretion, that transactions initiated by Customer or its customers, agents or contractors result in problems or errors on the Metavante Systems, Metavante shall have the right to terminate Customer’s access to the Messaging Services until such problems or errors are corrected and Metavante is given reasonable assurances that such problems or errors shall not reoccur.

5. Additional Services. From time to time, Metavante may develop new Enhancements to the Connectware Programs. Metavante will make all such options available to Customer at Metavante’s standard price so long as Customer receives Maintenance Services, but such options are not included as part of Maintenance Services under this Agreement.

6. Customer Responsibilities.

6.1 Development and Performance. Customer shall be solely responsible for:

a. Developing the Interactive Applications and testing them on the Metavante Systems;

b. Performance of the Interactive Applications and resolving all system problems in a timely manner;

c. Compliance of the Interactive Applications to Metavante’s service levels of performance and system availability time frames;

d. Complying with Metavante’s security standards in insuring a secure connection to the Metavante Systems;

e. Testing application changes on Metavante’s test bank environment and complying with Metavante’s test system availability; and

f. Complying with Metavante’s change control and change certification procedures as provided to Customer by Metavante.

6.2 Indemnity. In addition to any indemnities provided under the Agreement, Customer shall indemnify Metavante from, defend Metavante against and pay any final judgment awarded against Metavante in favor of a Third Party resulting from: (a) the Interactive Applications; (b) breach of the firewall or any unauthorized access to information contained in the Interactive Applications; (c) content or information included in Customer’s Interactive Applications or web site, if any, or any changes thereto; (d) any transactions initiated by Customer or its customers; (e) transactions effected with a lost, stolen, counterfeit or misused access code or number issued to any of Customer’s customers; and (f) economic loss or damage to Customer’s customers arising from the Connectware Programs on the Messaging Services.

7. Warranties. Metavante warrants that so long as Customer is receiving the Maintenance Services, the Connectware Programs will perform in all material respects consistently with the Documentation. Metavante does not warrant that the Connectware Products will meet Customer’s requirements, that operation of the Connectware Products will be uninterrupted or

© 2001, Metavante Corporation 4 First Midwest TConnect Amend 091201

error-free, or that all errors will be corrected. Customer’s sole and exclusive remedy for a breach of this warranty shall be limited to (a) correction of defects of which Metavante receives written notice during the period of Maintenance Services (provided that Customer furnishes, at its expense, modem and voice telephone line connections suitable for remote diagnosis); or (b) if such defect cannot be corrected, to terminate this Agreement and return the Connectware Products to Metavante in return for a refund equal to depreciated value of the Connectware Programs (based on a 60 month straight line method). EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION, METAVANTE MAKES NO WARRANTIES, GUARANTEES OR REPRESENTATIONS OF ANY KIND WITH RESPECT TO THE CONNECTWARE PROGRAMS OR THE SERVICES TO BE PROVIDED HEREUNDER, EITHER EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

8. Intellectual Property. If notified promptly in writing of any action brought against Customer based on a claim that Customer’s use of the Connectware Programs infringes a United States patent or copyright, Metavante will defend such action (to the extent based upon such claim of infringement) at its expense and pay the costs and damages awarded in any such action, provided that Metavante shall have the sole control of defense and negotiations for settlement or compromise. If, in Metavante’s opinion, the Connectware Programs or any portion thereof may be determined in any action to infringe upon any United States patent or copyright, Metavante may, at its option and expense, replace or modify the Connectware Programs to eliminate the infringement or grant Customer a refund equal to the depreciated value of the Connectware Programs (based on a 60-month straight-line method) upon return of the same to Metavante. Metavante shall have no liability under this Section if the infringement claim is based on use of the Connectware Programs in combination with software not furnished by Metavante, or the use of the Connectware Programs which are altered or modified in any way, other than modifications made by Metavante, or the continued infringing use by Customer of the Connectware Programs after being notified thereof, or after being informed of modifications that would have avoided the alleged infringement. The foregoing shall be Customer’s exclusive remedies against Metavante for infringement claims relating to the Connectware Product(s).

9. Confidentiality. Customer hereby agrees that: (a) the Connectware Products are the confidential property of Metavante; (b) Customer shall instruct and require all of its employees and agents who have access to the same to maintain such confidentiality; (c) Customer shall exercise at least the same degree of care (but no less than reasonable care) to safeguard the confidentiality of the Connectware Products as Customer would exercise to safeguard the confidentiality of Customer’s own confidential property of equal importance; and (d) Customer shall not disclose the same, or any part or parts thereof, to any of its employees or agents except on a “need-to-know” basis. Customer shall require all nonemployees to execute the Metavante standard form of Confidentiality Agreement prior to disclosure. Customer agrees to undertake whatever action is necessary to remedy any breach of Customer’s confidentiality obligations or any other unauthorized use or disclosure of the Connectware Products by Customer, its employees or its agents. Customer further agrees not to remove or destroy any proprietary or confidential legends or markings placed upon or contained within the Connectware Products. Customer acknowledges and agrees that the Connectware Products, including all copies, are the exclusive property of Metavante, are proprietary to Metavante, and that title and full ownership rights are reserved to and remain with Metavante.

© 2001, Metavante Corporation 5 First Midwest TConnect Amend 091201

EXHIBIT A

FEES

Connectware Programs and Fees

1a. License. Metavante Transfer Connect software

• Metavante TransferConnect software

• Windows Version

• Workstation Version 4.01 (written in C++)

To include the business functionality identified in the TransferConnect 4.01 Documentation. Additional functionality will be provided in subsequent releases if Customer continues to pay the Maintenance and Usage Fees for the Product.

Fees.

Initial License Fee	$10,000
Maint & Usage Fees (Trans)	Monthly Minimum = $500
	All MBS = .0176

© 2001, Metavante Corporation 6 First Midwest TConnect Amend 091201

EXHIBIT B

Professional Services Agreement

This Agreement is entered into this day of     ,                  200  , by and between Metavante Corporation (“Metavante”) and                      (“Customer”).

In consideration of the mutual covenants described herein and other good and valuable consideration, the receipt and sufficiency of which are expressly acknowledged, the parties agree as follows:

1. Services. Metavante agrees to provide to Customer the consulting and professional services described on the Statement of Work (“SOW”) attached to this Agreement. The exact description of the specific services to be rendered by Metavante from time to time shall be as specified on the SOWs, as defined below. The SOWs shall incorporate, and shall be specifically bound by, the terms and conditions of this Agreement.

2. Statement of Work. The SOW will be generated by Metavante and shall detail the specific services to be supplied by Metavante for any given transaction. Each SOW shall be in the form of a mutually executed letter agreement substantially in the form of SOW 1 attached hereto. Each SOW shall contain a detailed explanation of the project, the service to be performed, deliverable specifications, personnel requirements and any additional pertinent information. Customer shall be deemed to have accepted the deliverable upon demonstration by Metavante that the deliverable performs in substantial compliance with the specifications set forth in the applicable SOW.

3. Term. This Agreement shall remain in full force and effect unless terminated by either party upon at least thirty (30) days prior written notice to the other party; provided, however, that all work in progress and any SOWs executed by both parties for which work has not commenced shall be completed by Metavante unless otherwise agreed to by both parties. Notwithstanding the foregoing, either party may terminate this Agreement following a material breach by the other party that remains uncured after ten (10) days’ written notice from the non-defaulting party.

4. Fees and Payment. Customer agrees to pay Metavante for services provided and expenses incurred on the basis and at the rate specified in each SOW. Payment shall be due within twenty (20) days after the date of Metavante’s invoice. If Customer fails to make timely payment, Metavante shall have the right to cease all work on such SOW, without terminating the Agreement, until Metavante has received all past due payments.

5. Independent Contractor. Metavante and Customer are independent contractors. Neither party or any of its employees, agents or contractors shall be deemed for any purpose to be an employee or agent or contractor of the other party. Each party shall at all times act independently and at no time shall either party make any commitment or incur any charges or expenses for or on behalf of the other party, except in accordance with the terms of this Agreement.

6. Taxes. Customer shall be solely and exclusively responsible for the payment of required federal, state and local taxes arising from or relating to the services rendered hereunder, except for taxes related to the net income of Metavante and any taxes or obligations imposed upon Metavante under federal, state and local wage laws.

7. Confidentiality and Ownership.

7.1 Metavante and Customer agree to preserve the confidentiality of any and all materials and information (collectively, “Materials”) furnished by either party in connection with this Agreement. Such Materials shall include, without limitation, studies, fees and terms of this Agreement, plans, reports, surveys, analyses, and/or projections. The provisions of this Section 7.1 shall not apply to any information which: (a) is independently developed by the receiving party, provided the receiving party can satisfactorily demonstrate such independent development with appropriate documentation; (b) is known to the receiving party prior to disclosure by the disclosing party; (c) is lawfully disclosed to the receiving party by a third party not under a separate duty of confidentiality with respect thereto to the disclosing party; or (d) otherwise is publicly available through no fault or breach by the receiving party.

© 2003, Metavante Corporation 7 First MidwestTConnect, Inc Amend 091201

7.2 Metavante and Customer intend and agree that Metavante shall retain title and all other ownership and proprietary rights in and to any computer code, computer programs, programming or processing procedures or techniques, methods, ideas, concepts, or know-how (“Metavante Proprietary Information”) developed by Metavante in connection with its performance of services to Customer under this Agreement. Such ownership and proprietary rights shall include, without limitation, any and all rights in and to patents, trademarks, copyrights, and trade secret rights. Metavante and Customer agree that Metavante Proprietary Information is not “work for hire” within the meaning of U.S. Copyright Act 17 U.S.C. Section 101.

8. Disclaimer of Warranty; Limitation on Liability.

8.1 Metavante warrants that all Services provided to Customer herein shall be performed in a workmanlike manner by qualified, trained personnel. Metavante MAKES NO OTHER WARRANTIES OR REPRESENTATIONS WITH RESPECT TO THE SERVICES PROVIDED UNDER THIS AGREEMENT. Metavante HEREBY EXPRESSLY DISCLAIMS THE EXISTENCE OF ANY OTHER REPRESENTATIONS AND WARRANTIES, INCLUDING WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

8.2 Metavante’s total liability under this Agreement, whether arising out of or relating to the services provided by it pursuant to the same, shall not exceed the total amount of the fees paid by Customer for the relevant SOW. This limitation of liability shall apply regardless of the cause or form of action, including without limitation, claims under breach of contract or tort. Under no circumstances shall either party be liable to the other party for lost profits or business opportunities, or any other special, indirect, consequential, punitive or incidental damages arising out of or relating to the first party’s performance, or failures in the performance, of its obligations hereunder.

9. Miscellaneous.

9.1 Notices. Any notices provided for in this Agreement shall be given in writing and transmitted by personal delivery of prepaid first-class U.S. mail or by facsimile, addressed as follows:

Metavante:	Metavante	Customer:
	4900 West Brown Deer Road CAPELL Milwaukee, Wl 53224
	Attention: Beth Griffin		Attention:
	Fax No. (414)577-9364		Fax No.:

9.2 Assignment. Metavante and Customer may not assign this Agreement, or any of their rights or obligations hereunder, without the prior written consent of the other party, which consent shall not be unreasonably withheld.

9.3 Force Majeure. Except for payment of sums due under this Agreement, neither party shall be deemed to be in default of any provisions of this Agreement or for any failure in performance, resulting from acts or events beyond the reasonable control of such party. Moreover, Metavante shall not be responsible for any failures or delays in its provision of Services hereunder to the extent caused by Customer’s failure to fulfill one or more of its responsibilities as set forth in any SOW attached to this Agreement.

9.4 Governing Law. This Agreement shall be governed, interpreted, construed, and enforced in accordance with the internal laws of the state of Wisconsin, United States of America.

9.5 Severability. If any provision, clause, or party, or the application of this Agreement is held illegal or otherwise unenforceable, the remainder of this Agreement or the application of such provision, clause, or part under other circumstances shall remain unaffected.

9.6 Legal Expenses. If any legal action is brought be either party to this Agreement against the other party regarding the subject matter hereof, the prevailing party shall be entitled, in addition to any other rights and remedies it may have, to reimbursement for its expenses, including court costs and reasonable consultants’, experts’ and attorneys’ fees.

© 2001, Metavante Corporation 8 First Midwest TConnect Amend 091201

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above.

METAVANTE CORPORATION (“METAVANTE”)		(“CUSTOMER”)
By:		By:
Name:	Michael E. Touhey	Name:	Kent Belasco
Title:	President, Market Solutions & Products	Title:	EVP/CIO

© 2001, Metavante Corporation 9 First Midwest TConnect Amend 091201

Statement of Work No. 1

to

Professional Services Agreement between

Metavante

and

Professional Services:

As defined in the Agreement (1. Definitions).

Fees and Expenses:

Licensee shall pay to Metavante, within twenty (20) days of receipt of Metavante’s invoice, a fee for Professional Services (the “Professional Services Fee”) plus travel, lodging, and related out-of-pocket expenses incurred by Metavante in connection with the Professional Services. The Professional Services Fee will represent actual time spent by Metavante Professional Services staff at a rate of $150 per hour in 2000 or the then current rate for Customer. Five hours of professional Services will be provided to Customer free of charge for each Connectware implementation (i.e., VRU implementation, Internet Banking implementation).

© 2001, Metavante Corporation 10 First Midwest TConnect Amend 091201

AMENDMENT TO OUTSOURCING AGREEMENT

THIS AMENDMENT, to the Outsourcing Agreement dated July 1, 1999 (the “Agreement”) is made as of this 28^th day of November, 2001, by and between the undersigned parties, and does hereby alter, amend, and modify the Agreement and supersedes and takes precedence over any conflicting provisions contained in the Agreement. All references in the Agreement to “M&I Data Services, a division of Marshall & Ilsley Corporation” or to “M&I” are replaced with “Metavante Corporation” or “Metavante”, respectively.

FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, the undersigned parties agree as follows:

By that amendment dated February 2000, the parties added to the Agreement the Business Express Services described in Exhibit A to that amendment. Pricing for the Business Express Services was set forth in Attachment 1 to that Exhibit A.

Metavante and Customer agree that Attachment 1 of that Business Express amendment dated February 2000 is hereby replaced with Attachment 1 attached hereto.

Any Services requested by Customer which are not specifically priced as of the date of this Amendment shall be considered New Services, and will be charged according to Metavante’s then current prices.

Except as expressly modified herein, all other terms and conditions contained in the Agreement remain in full force and effect.

IN WITNESS WHEREOF, the undersigned parties have duly executed this Amendment in a manner appropriate to each.

	METAVANTE CORPORATION (“Metavante”)
	By:
	Name:	Michael E. Touhey
	Title:	President, Market Solutions
	By:
	Name:	Todd C. Hutto
	Title:	Senior Vice President and General Manager
	FIRST MIDWEST BANCORP, INC (“Customer”)
	By:
	Name:	Stephanie R. Wise
	Title:	EVP
	By:
	Name:
	Title:

© 2001, Metavante Corporation 1 First Midwest BE Amend 100401.doc

ATTACHMENT 1

Business Internet Banking Services. Fees, and Charges

A. Additional Module Implementation Fees

The following modules must be purchased by Customer. Once purchased, a module may be added to the Micro, Small, or Midsized packages at no additional monthly User Fee.

Loans	$3,500
File Download	$2,500	Note 3
Interface to Account Analysis	$5,000	Note 3
OFX- Interface to Quickbooks	TBD	Note 3&4
Image Retrieval	TBD	Note 3&4
Credit Card	TBD	Note 3&4
Positive Pay	TBD	Note 3&4

B. Monthly End User Fees

Micro Business End User Fee $10

Included in this fee are the following modules:

(Basic Reporting (i.e., quick balance screen with up to 4 summary fields chosen by Customer), up to 2 accts, multiple users, 500 detail records, book transfers, express transfers, stop payments, file uploads, ACH Collection & Payment, basic bill payment.)

Base monthly fee for first 500 @ $10, $8 above 500 Note 1

Small Business End User Fee $12

Included in this fee are the following modules:

(Standard Reporting (i.e., quick balance screen with up to 6 summary fields chosen by Customer) up to 3 accts, multiple users, 1500 detail records, book transfers, Express transfers, stop payments, file uploads, basic bill payment, ACH Collection & Payment, Loan transactions). Additional accounts @ $3.00.

Base monthly fee for the first 500 @ $12, $10 above 500 Note 1&2

Midsize Business End User Fee $30

Included in this fee are the following modules:

(Premium Reporting (i.e., quick balance screen with up to 10 summary fields chosen by Customer) up to 7 accts, multiple users, 5000 detail records, book transfers, Express transfers, stop payments, file uploads, basic bill payment, ACH Collection & Payment, Loan transactions). Additional accounts @ $3.00.

© 2001, Metavante Corporation 2 First Midwest BE Amend 100401.doc

Base monthly fee for first 75 @ $30, $25 above 75 Note 1&2

Transaction Fees
ACH Payment	$	0.10
ACH Collection	$	0.10
ACH Addenda Records	$	0.02
Basic Bill Payment	$	0.33
Loan Transactions	$	0.40
Repetitive Wire	$	1.00
Stop Payment	$	0.50
Excess Retail Records	$	0.08
Monthly Minimums
Months 1-3	$	3,500
Months 4-7	$	4,000
Months 8-13	$	6,500
Months 14-15	$	9,000
Months 16 and Beyond	$	11,500

Note 1- When the bank meets the first level the monthly base fees for all customers in the category move to the lower amount. Example 500 customers @ $10 = $5000/monthly. With the five-hundred and first sale, 501 customers @$8 = $4008/monthly. All fees are plus transaction fees.

Note 2- First Midwest must purchase the Loan functionality before this function is included.

Note 3- No transaction fee from Internet Banking. Fee would come from point of origin (i.e., system creating the input).

Note 4- Development is not complete so modules are not priced yet. Assume the range of $2500 to $5000

C. Website Customization Fees

Complete Branding Option Fee

Included in this fee is the customization of the generic site (internet.ebanking-services.com) to create a complete branded site (bankname.ebanking-services.com) that contains the Customer logo and color selections.

Complete Website Branding One-Time Customization Fee	$	9,660 per site
Complete Website Branding Site Hosting & Maintenance Annual Fee	$	1,500 per site

D. End User Support Customization Fees

Branded Option Fee

Included in this fee is the use of a bank specific toll free, end user support number and fax back service.

© 2001, Metavante Corporation 3 First Midwest BE Amend 100401.doc

Branded End User Support Number One-Time Fee	$	1,000 per number
Branded End User Support Number Monthly Fee	$	400 per number

E. Fulfillment Kit Fees (per kit sent)

Complete Branding Option Fee

The branding option includes a welcome letter printed on Customer letterhead, a security letter, and additional Customer defined items.

Kit Distribution Fee	$12.00 for Welcome and Security Letter
Kit Re-Distribution Fee	$20.00
Kit Returned For Bad Address	Cost Plus 10%
International Shipments	Cost Plus 10%
Bank Letterhead	Supplied By Customer
Inventory Stocking/Mgt Fee	$1,000 per year per kit
Fulfillment Kit Change Fee	Quoted on Request
Additional Fulfillment Items Printing of Additional Items	Quoted on Request Cost Plus 10%

F. Miscellaneous Fees

Auto Electronic Invoice	$50 per month
Profile Changes	$112.50 each
End User Setup/Change (special change activity)	$50 per hour
Additional Administrative Workstations (in excess of 5)	$75 per year per user
Bill Payment Check Photocopy	$3 per check
Bill Payment NSF Returned Item Fee	$15 per item
Bill Payment Stop Payment Request	$15 per item

© 2001, Metavante Corporation 4 First Midwest BE Amend 100401.doc

AMENDMENT TO OUTSOURCING AGREEMENT

THIS AMENDMENT, to the Outsourcing Agreement dated July 1, 1999 (the “Agreement”) and an Amendment dated October 8, 2001 (the “Amendment”) is made as of this 28^th day of March, 2002, by and between the undersigned parties, and does hereby alter, amend, and modify the Agreement and supersedes and takes precedence over any conflicting provisions contained in the Agreement.

FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, the undersigned parties agree as follows:

In addition to certain Connectware Services described on Schedule A to the Amendment, Customer desires to receive and Metavante agrees to provide additional Connectware Services, as more fully described on the attached Exhibit A-1. Customer agrees to pay for these Services in accordance with the attached Exhibit A-1.

Any Services requested by Customer which are not specifically priced as of the date of this Amendment shall be considered New Services, and will be charged according to Metavante’s then current prices.

Except as expressly modified herein, all other terms and conditions contained in the Agreement remain in full force and effect.

IN WITNESS WHEREOF, the undersigned parties have duly executed this Amendment in a manner appropriate to each.

	METAVANTE CORPORATION (“Metavante”)
	By:
	Name:	Michael E. Touhey
	Title:	President, Market Solutions
	By:
	Name:	James R. Geschke
	Title:	Senior Vice President
		Financial Technologies Solutions/Client Relationship Management
	FIRST MIDWEST BANCORP, INC. (“Customer”)
	By:
	Name:	Kent Belasco
	Title:	EVP/CIO

© 2002, Metavante Corporation 1 Connectware Addendum

EXHIBIT A-1

FEES

Connectware Programs and Fees

License, Metavante Connectware

• Metavante’s Connectware software – FinancialConnect NT version

• Workstation Version 4.02

To include the business functionality identified in the FinancialConnect 4.02 Documentation. Additional functionality will be provided in subsequent releases if Customer continues to pay the Maintenance and Usage Fees for the Product.

Fees.

Argo Integration 2002 ONLY
Initial License Fee for Argo Integration	$46,875
Ongoing Maintenance & Usage Fees (Transactions)	*Flat cost of $2000 all transactions
Argo Integration Jan 2003 to Jan 2005
License Fee for Argo Integration	Paid in 2002
Ongoing Maintenance & Usage Fees (Transactions)	*Flat cost of $2000 up to 125,000 transactions
	*All MBS over 125,000 charged at .0139 cents and all transactions under 125,000 treated as a credit to future months
Future Vendor Integration
License for any other 3rd Party Vendor using NT version of Connectware	$0

Ongoing Maintenance & Usage Fees                             (Transactions)	Monthly Minimum = $500
	<250K MBS = .028
	251K - 500K MBS = .025
	500K -1,000,000 MBS = .022
	1,000,001 - 1,500,000 MBS = .019
	1,500,001 - 2,000,000 MBS = .016
	over 2,000,000 MBS = .013

© 2002, Metavante Corporation 2 Connectware Addendum

EXHIBIT A

Statement of Work Dated: June 26.2002

To

Attached to the Outsourcing Agreement Dated: July 11999

Between

Metavante Corporation

And

First Midwest Bank (Bank 642)

Description of Project:

One day on-site training for how to use Foxtrot with the Metavante system; and one day of off-site class preparation time.

On-site training will include:

• Basic script witting

• Creating sub-script routines

• Tips for preventing “back-ups”

• Tracking errors

• Creating summary reports and error reports

Miscellaneous:

First Midwest will provide training room with PCs that have Foxtrot software installed and 3270 session with connection to host.

Personnel:

Consulting services will be performed by qualified consultants with extensive banking backgrounds and industry expertise who possess thorough knowledge of the Metavante business solutions. Project scheduling is based on consultant staff availability and this signed Statement of Work by First Midwest Bank.

Fees and Expenses:

The fee for this project will be $3,600,00, plus travel expenses.

Payment Terms:

Payment for these services will be made upon presentation of an invoice for the professional consulting services.

Expiration Date:

This Statement of Work and offer expires in 30 days, July 26,2002.

METAVANTE CORPORATION		FIRST MIDWEST BANK
By:		By:
Name:	Dan Shannon	Name:	Claire A. Caldini
Title:	Vice President	Title:	Senior Vice-President
Date:	7-21-02	Date:	6-28-02

© 2001, Metavante Corporation 1 SOW Foxtrot Training (BK 642).doc

EX-10.25

Exhibit 10.25

4/28/04

AMENDMENT TO OUTSOURCING AGREEMENT

THIS AMENDMENT (“Amendment”) amends the Outsourcing Agreement dated July 1, 1999, as amended, by and between First Midwest Bancorp, Inc. (“Customer”), and Marshall & Ilsley Corporation, acting through its division, M&I Data Services (the “Agreement”). Subsequent to the effective date of the Agreement, Marshall & Ilsley Corporation assigned the Agreement to Metavante Corporation (“Metavante”), which assumed all of the rights and obligations of Marshall & Ilsley Corporation under the Agreement. This Amendment is made as of this      day of             , 2004 (the “Effective Date”), by and between the undersigned parties, and does hereby alter, amend and modify the Agreement and supersedes and takes precedence over any conflicting provisions contained in the Agreement. All other terms and conditions contained in the Agreement shall continue in full force and effect. Except as set forth herein, all capitalized terms not defined herein shall have the same meaning given to them in the Agreement.

FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, the undersigned parties agree as follows:

Amendment to the Agreement.

1. Services. All Services provided under the Agreement from and after the Effective Date of this Amendment are defined in Exhibit A attached hereto and made a part hereof. All Services shall be performed in accordance with the terms of this Amendment and all documentation published by Metavante describing such Services. In the event that the parties mutually agree upon additional Services or modifications to existing Services, the parties shall execute an amendment to the Agreement detailing the scope of the additional Services, related specifications and warranties, pricing terms, and any other terms relevant to such additional Services. All new Services shall be performed in accordance with the documentation published by Metavante describing such Services except to the extent the applicable amendment specifies other standards.

2. Fees. Schedule 8.1 of the Agreement and all previous amendments to the Agreement pertaining to fees are hereby amended, superseded and replaced by the Fee Schedule attached hereto as Exhibit B. Notwithstanding anything to the contrary in the Agreement, the prices and rates specified in the Fee Schedule shall apply effective as set forth in Exhibit B through the remainder of the Term of the Agreement.

3. Pursuant to Section 1.2 JJ, “Term” and Section 2.1, Initial Term, of the Agreement, the parties hereby agree that the Agreement shall be extended to June 30, 2014, unless earlier terminated pursuant to the terms of the Agreement (as amended).

4. Section 18.1, Account Representatives, shall be deleted in its entirety.

5. Section 22.20, IBS Software Purchase, shall be deleted in its entirety.

6. Exhibit D, Special Considerations, attached hereto and made a part hereof, shall be added as a new schedule to the Agreement.

7. Schedule 11.1, Termination Fee Schedule, of the Agreement is hereby deleted in its entirety and replaced with the Termination Fee Schedule attached as Exhibit E hereto.

8. Schedule 9.1 of the Agreement, and any amendments thereto, is hereby deleted in its entirety and replaced by the Master Service Level Schedule attached as Exhibit F hereto.

9. The “ARGO Solution” is defined as all functionality comprising the ARGO Suite as of the date of this Amendment, as well as additional functionality released by ARGO in the future if made a part of the Suite.

10. Customer desires to receive and Metavante agrees to provide Wealth Management Services, as more fully described on the attached Exhibit G. Customer agrees to pay Metavante for the Wealth Management Services in accordance with Exhibit G2 attached. Notwithstanding anything to the contrary, Customer shall only be required to receive Wealth Management Services for a term of three (3) years from the initial date of receipt of the Wealth Management Services.

© 2003, Metavante Corporation 1

Further, any agreement Customer shall have with its customers with regard to these Services, shall include the language attached as Exhibit G3.

Confidential Treatment. Customer understands and agrees that information set forth in the Exhibits to this Amendment contains Confidential Information of Metavante. Therefore, Customer agrees as follows:

a. Customer shall not file the Agreement or this Amendment with the U.S. Securities and Exchange Commission (the “SEC”) unless such filing is required under Item 601 of Regulation S-K.

b. In the event that this Amendment must be filed by Customer with the SEC under Regulation S-K, Customer shall take all actions necessary to obtain confidential treatment of the Exhibits to this Amendment in accordance with Rule 406 under the Securities Act of 1933. Specifically, and without limitation, Customer shall omit the Exhibits from the material filed with the SEC and, in lieu thereof, shall indicate in the appropriate place in the material filed that the confidential information has been so omitted and filed separately with the SEC. Customer shall file the Exhibits separately in accordance with the requirements of Rule 406 to maintain the confidentiality of the documents, and file an application making an objection to the disclosure of these materials. If the SEC denies the application, Customer will seek review of the decision under Rule 431.

New Services. Any Services requested by Customer, which are not specifically priced as of the date of this Amendment shall be considered New Services, and will be charged according to Metavante’s then current prices, unless otherwise agreed to by the parties.

Continuance of Agreement. Except as amended herein, the conditions and terms of the Agreement shall remain in full force and effect.

Binding Agreement. The parties hereto acknowledge that each has read this Amendment, understands it, and agrees to be bound by its terms and conditions as stated herein.

Miscellaneous. Capitalized terms used in this Amendment, which are not otherwise defined herein, shall have the meanings ascribed thereto in the Agreement.

IN WITNESS HEREOF, the parties hereto, through their duly authorized officers and agents, hereby execute this Amendment on the date before written.

	METAVANTE CORPORATION (“Metavante”)
	By:
	Name:	Paul T. Danola
	Title:	Executive Vice President
		Financial Technology Services and Wealth Management
	By:
	Name:	James R. Geschke
	Title:	Senior Vice President and General Manager
		Financial Technology Services and Customer Relationship Management
	FIRST MIDWEST BANCORP, INC. (“Customer”)
	By:
	Name:	KENT S. BELASCO
	Title:	EVP/CIO

© 2003, Metavante Corporation 2

EXHIBIT A

SERVICES SCHEDULE

THE APPLICATIONS/SERVICES LISTED IN THIS SCHEDULE MAY POSSESS ADDITIONAL FEATURES AND FUNCTIONS WHICH HAVE NOT BEEN REQUESTED BY CUSTOMER AS PART OF THE INITIAL SERVICES. DURING THE TERM OF THIS AGREEMENT, FUTURE PRODUCT DEVELOPMENT WILL LIKELY CREATE ADDITIONAL FEATURES AND FUNCTIONS NOT CONTEMPLATED BY THIS AGREEMENT. IF THE FEES FOR ADDITIONAL OR FUTURE FEATURES/FUNCTIONS ARE PRICED SEPARATELY, THEN SUCH FEES SHALL BE NEGOTIATED BY THE PARTIES. IF FEES FOR ADDITIONAL OR FUTURE FEATURES/FUNCTIONS ARE NOT PRICED SEPARATELY, THEN SUCH FEES SHALL BE INCLUDED AT THE RATES INCLUDED IN THE AGREEMENT.

Services Included in the Monthly Base Fee:

INTEGRATED BANKING SYSTEM

Deposit Suite	Financial Control (General Ledger) System
Demand Deposit Accounts	Base Fee
NOW Accounts	Detail accounts
Money Market Accounts	Transactions
Statement Savings Accounts	Control totals
Passbook Savings Accounts	Consolidating transactions
Certificates of Deposit	On-line account inquiry and transaction history
Repurchase Agreements
Retirement Processing	Currency Transaction Reporting
Exception Processing	Forms Created on Mag Tape
Online Check Ordering
New Account Verification	IRS Reporting
Interest and Service Charge Processing
Combined Statements	Account Analysis
Overdraft Protection
Kiting Detection	ACH Origination and Receiving Transmissions &
CSF Laser Printed Statements	Transactions
Standard Reports and Notices
	Automated Transfers to Other Metavante Applications
Loan Servicing	(Integrated Funds Management System)
Consumer Notes
Commercial Notes	Customer Information System
Real Estate / Mortgage Notes	Customers
Floor Plans	Households
Revolving Credit	Accounts
Checks	Combined Statements
Coupon Book Orders
Escrow Analysis	Safe Deposit System
Escrow Tax/Insurance
Investor Reporting	National Change of Address / Zip + 4 Automatic
Letter Writer	Maintenance
Note Pad
Tickler	Online Services
CSF Laser Printed Statements
Standard Reports and Notices	Download to Third Party Optical System (if Starview is not
	retained)
Operations Desktop
	LaserPro Interface Maintenance
Exceptions Desktop
	Remote Data Transmissions

© 2003, Metavante Corporation 3

Online Collections System	Inbound Transmissions for Item Processing
Account Reconciliation Plan 1, Plan 3, Plan 9 Test/Training Bank FinancialConnect Transactions related to an ARGO or other third party front-end Treasury Connect, Balance Reporting, EDI, MIS Money Talks	As part of the monthly base fee, Metavante will set aside $8333.33/month for prepaid professional services. The dollar amount may be applied to any professional services supplied by Metavante, including but not limited to, professional services, consulting, customization, or user education. Such services shall be completed either under a Work Request or under a Statement of Work related to the Professional Services Agreement dated June 9, 2000, between the parties. These fees may also be applied to individual items that are negotiated by the parties in the future. These fees may not be used to lower the monthly base fee.
Cash Manager
Teller Transactions
Starview
Network Solution (LU Fees only)
Services Not Included in the Monthly Base Fee:
Third Party Feeds to CIS	Business Internet Banking
	Base Package Customers
Enterprise Contact Management Hosting Fees	Base Package Customers with Optional Services
License Fee	Web Cash Concentration
Teller/Platform	EFT/Card Processing Services
BankerInsight and TellerInsight Software Maintenance/ Support	Card Management Switch/ Routing
Credit Revenue?	Terminal Support Debit Card Processing
Information Desktop/ Data Warehouse	Network Fees PRISM Fraud Management
Business Intelligence Center	Custom Card Personalization
Data Storage of Accounts	Compliance Fees
Transactions
Subscription Fees	Card Personalization and Fulfillment
Asset Liability Management Interface
Call Report Interface	On Us Fraud by Carreker
Consumer Internet Banking
Banking Only Customers
Bill Pay Customers
Bill Payments

© 2003, Metavante Corporation 4

EXHIBIT B

FEES

Financial Accounts Processing Fees:

Fees below are effective July 1, 2004

Prices subject to annual increase of 2.0% except where indicated. First increase effective January 1, 2006.

All fees are monthly unless otherwise indicated.

	Fee
Integrated Banking System
Monthly Base Fee	$	120,000
Includes various services (see included services document)
Growth Pricing:
Open/Closed Deposit accounts & Open/Paid Loan notes
1 – 700,000		included
700,001 - 900,000	$	0.19	per account/note
>900,000	$	0.04	per account/note
Financial Control (General Ledger)
1- 23,000		included
> 23,000	$	0.05	per account
Account Analysis
1 – 22,000		included
> 22,000	$	0.05	per account
Financial Connectware Transaction
Argo solution functionality present in the current releases and for new functionality added in the future.			No fee
If First Midwest chooses another third-party platform solution over Argo, transaction activity equal to the Metavante proposed solution of TI, BI, and ECM			No fee
Host Connect (One Source)
Transfer Connect for Appro, Shared
VRU for Card Activation; New
Applications (not part of an Argo solution)
0-600,000			No fee
600,001 to 1,000,000	$	0.005	per transaction
> 1,000,000	$	0.002	per transaction

© 2003, Metavante Corporation 5

ACH Originating/Receiving Transactions
0 - 700,000		included
> 700,000	$	0.005	per transaction
Cash Manager Investment Accounts
0 - 135		included
> 135	$	9.75	per account
Money Talks Transactions
0 - 375,000		included
> 375,000	$	0.012	per transaction
Transmissions
POD/Bulk file/Exc BF//Statement Fine Sort/DDA/GL		included
Special Data and all other	$	8.00	per transmission
Tape Processing
Insurance and Credit Bureau Tapes		included
Master file unload tapes	$	20.00	per tape
On-Us Fraud Detection (Carreker)	$	0.0005	per item
Business Intelligence Center1
User Fees
Casual User
1 - 50 Users	$	7.00	per user
> 50 Users	$	6.00	per user
Advanced User
1 - 150 Users	$	16.00	per user
> 150 Users	$	14.00	per user
Casual Report Creator	$	40.00	per user
Advanced Report Creator	$	165.00	per user
Dimensional Data Warehouse Hosting/Support/Maintenance
Accounts*
1 - 1,750,000	$	0.022	per account
1,750,001 - 2,500,000	$	0.019	per account
> 2,500,000	$	0.005	per account
*   Account volume includes deposit, GL, account analysis, internet banking, credit card, trust, and Cardbase accounts; CIS customers, loan notes, and potential other third party accounts.
Transactions		included

© 2003, Metavante Corporation 6

Concurrent Information Products/BIC
User and Hosting Fees
First 12 months after implementation		included
>12 months	$	10,000	per month
1   Note: Current Information Products pricing applies until 7/1/04 or conversion date, whichever is later. There will be no price increase for BIC the new contract term.
TellerInsight2
License Fees		amortized
1 - 70 locations	$	2,500.00	per location - one time fee
71 - 100 locations	$	2,000.00	per location - one time fee
> 100 locations
Support/ Maintenance/Usage
1 - 70 locations	$	100.00	per location
> 70 locations	$	75.00	per location

² First Midwest is eligible for a monthly credit of $8,333.33 for a maximum of 60 months. The credit will be given only if First Midwest installs TellerInsight, and will applied to the monthly invoice beginning the first month after the installation is completed. PCTeller will be supported through 12/31/2005, unless otherwise agreed to by both parties on terms to extend the support.

Internet Banking Services 7/04 6/30/09

Fees are effective July 1, 2004. Fees for Internet Banking

Services are not subject to annual price increase.

All prices are monthly unless otherwise indicated.

Consumer Internet Banking	Fees
CIB Only Users (price includes end user support)
1 - 7,500	1.75	per user
7,501 - 15,000	1.50	per user
15,001 - 35,000	1.25	per user
> 35,000	0.30	per user
CIB Plus Bill Payment Users (price includes end user support)
1 - 7,500	2.75	per user
7,501 - 25,000	2.25	per user
> 25,000	1.00	per user
Bill Payment Transactions
1 - 20,000	0.35	per transaction
20,001 - 75,000	0.32	per transaction
> 75,000	0.17	per transaction

© 2003, Metavante Corporation 7

Business Internet Banking Services, Fees and Charges

A. One-Time Implementation Fees

Business Internet Banking Standard Services Package includes
•Bank Administration/Bank Mail	N/A—Already Installed
•Basic Account Reporting (4 summary fields)
•Standard Account Reporting (6 summary fields)
•Premium Account Reporting (10 summary fields)
•Book and Express Account Transfers
•Stop Payment
•ACH Payments & Collections
•File Upload
•Pay-Anyone Bill Payment
Business Internet Banking Additional Optional Services
•*WebConnect for Quicken & Quickbooks	$1,500
•Loan Reporting, Payments, and Advances	$2,000 for First Midwest
•ACH Federal Tax Payments	$1,500—waived for First Midwest
•Free-Form Wire Transfer	$1,500
•Special Reports File Download	$2,500 (per report)
•Client Billing Module	$3,500 for First Midwest
•Check Imaging	Installation Fee of $7,500 includes all MVNT applications offering Check Image Access

* Additional Fees and separate agreement, for both Quicken and Quickbooks, with Intuit will apply

** Additional Professional Services fees will apply if an online interface is required.

*** Professional Services fees may apply depending upon data source and format.

B. Monthly End User Fees	NOT USING
*

Basic Business End User Fee
•Basic Account Reporting (4 summary fields)	$6.50
•Unlimited Detail Records
•Book & Express Account Transfers
•Unlimited Stop Payments
•Bill Payment	Includes up to 2 accounts
	3
Micro Business End User Fee
•Basic Account Reporting (six summary fields)	$8.00
•Unlimited Detail Records
•Book & Express Account Transfers
•Unlimited Stop Payments
•ACH Payments & Collections
•ACH File Upload
•Bill Payment	Includes up to 3 accounts

© 2003, Metavante Corporation 8

Small Business End User Fee
•Standard Account Reporting (up to 6 summary fields)	$9.50
•Unlimited Detail Records
•Book and Express Account Transfers
•Unlimited Stop Payments
•Bill Payment
•Wire Transfers—Ticket Print (Repetitive & Free-Form)
•ACH Payments & Collections (including Fed Tax Payments)	Includes up to 7 accounts
•File Upload	$3.00 per account over 7
Midsize Business End User Fee
•Premium Account Reporting (up to 10 summary fields)	$25.00
•Unlimited Detail Records
•Book & Express Account Transfers
•Unlimited Stop Payments
•Bill Payment
•Wire Transfer—Ticket Print (Repetitive & Free Form)
•ACH Payments & Collections (including Fed Tax Payments)
•ACH File Upload Includes unlimited file uploads and no per item fees per file	Includes up to 15 accounts $3.00 per account over 15
Additional End User Services and Fees
•Special Reports Download—if installed (available in Micro, Small Business, and Midsize Business packages) Includes unlimited downloads	N/C
•WebConnect for Quickbooks—if installed (available in Micro, Small Business, and Midsize Business packages)	N/C
•Loan Reporting, Payments, and Advances (available in Micro, Small Business, and Midsize Business packages) Unlimited payments and	N/C
•Check Image Retrieval—if installed (available in Micro, Small Business, and Midsize Business packages)	N/C
•End User Support Fee (optional)—7:00 a.m. to 7:00 p.m.	$2.75 per month per user

© 2003, Metavante Corporation 9

Transaction Fees
•ACH Payment or Collection	$0.05/ Item
•ACH Addenda Record	$0.02 / Item
•Wire Transfer	$1.00 / Wire
•Bill Payment	$0.33 / Payment
Other Service Fees
Fulfillment
•Fulfillment Kit	$10.00/ Customer
•Re-distribution Fee	Cost + 10%
•Returned for Bad Address	Cost + 10%
•International	Cost + 10%
Billing
•Client Billing Monthly Maintenance—if installed (Direct Debit or upload to Account Analysis system)	$150.00/ month
•Detail Bank Billing Invoice on Paper	$1.00 / page
•Automatic Transmission Electronic Invoice Detail File	$50.00 / month
•Manual Transmission Electronic Invoice Detail File	$200.00 / month
•Add/Change Billing Information	$150.00 / hour
ACH & Wire
•Add New ACH Batch or Change Existing ACH Batch Configuration	$150.00 / hour
Bill Payment
•Bill Payment Check Photocopy	$3.00 / copy
•Bill Payment Stop Payment Request	$15.00 / request
•Bill Payment NSF Returned Item Fee	$15.00 / item
Check Imaging
•Annual Maintenance	$500.00 per block of 10,000 image requests per bank per month.
Other
•Add’l Special Reports Download Setup	$2,500.00 / report
•BAI Code Changes	$150.00 / hour
•BAI File Backout	$50.00 / request
•Bank Profile Changes	$150.00 / hour
•End User Setup / Change	$50.00 / hour
•Enable Deleted User	$20.00 / user
•Restore Deleted User Data	$50.00 / user
•Customer Data Backout	$150.00 / hour
•Customer Data Restore	$150.00 / hour
•SSL Website Registration	$1,000.00 / year
Services Requiring Custom Professional Services Quote
•Online Interface to Customer’s Wire Transfer System
•Customization not included in Current Branding
•Custom Product Demo
•Conversion of Existing Client Base to MVNT Business Internet Banking

© 2003, Metavante Corporation 10

EFD FEES

Fees are effective July 1, 2004

Fees are not subject to annual increase.

All fees are monthly unless otherwise indicated.

EFT and Card Services		Rate
Terminal Management
ATM Terminal Support		30.00	per terminal
Dial ATM Terminal Support		30.00	per terminal
Dial ATM Terminal Cost		0.055	per transaction
ATM Surcharging Terminal Support		Waived
Card Management
Card Management Base Fee (Includes CMSe)		175.00	per institution
Cardholder Account Fee		0.020	per cardholder account
Debit Card Account Fee		Waived
Card Account File (CAF)		Waived
Online cardholder verification		Waived
Card activation fee		Waived
Chargebacks/requests for copies		Waived
Transaction Processing
Transaction Switch/Route Fee	1-1,000,000	0.0090	per transaction
	1,000,001 - 2,000,000	0.0080	per transaction
	>2,000,000	0.0050	per transaction
ATM/POS (Pin) Authorization Fee	1-1,000,000	0.0300	per authorization
	1,000,001 - 2,000,000	0.0280	per authorization
	>2,000,000	0.0200	per authorization
Debit POS (Signature) Authorization Fee	1-1,000,000	0.0450	per authorization
	1,000,001 - 2,000,000	0.0430	per authorization
	2,000,001 - 4,000,000	0.0410	per authorization
	>4,000,000	0.0200	per authorization
Debit POS (Signature) Settle Fee		Waived	per settled transaction

© 2003, Metavante Corporation 11

PRISM Neural Network Support (Fraud Management):
PRISM Account Fee		Waived
PRISM Authorization Scoring Fee	1-2,000,000	0.007	per authorized transaction
	2,000,001 - 4,000,000	0.006	per authorized transaction
	>4,000,000	0.002	per authorized transaction
Verified by Visa
One time Debit Card Startup		200.000	per institution
Web Site Hosting Fee		Waived	per institution
User Fee-Registration Fee		0.075	per card
Authentication Fee		0.010	per attempt
Customer Support		included
Card Personalization
Generis ATM & Debit Card Program*
Per Order Submission Fee		Waived	per order per card type
Card Production-ATM Cards		0.60	per card
Card Production-Standard Debit Cards		0.75	per card
PINS/Pre-/Post-Mailers		0.25	per Pin
Standard Card Carrier - Debit		0.13	per carrier
Standard Card Carrier - ATM		0.13	per carrier
Standard Activation Label - Visa		Waived	per label
Additional/Optional Services
Add for Thermal Print Second Side		0.05	per side
Duplex Carrier Print		0.05	per form
Customer Card Carrier Setup Fee		5.00	per issuer ID/program
Custom Activation Label Setup Fee		5.00	per issuer ID/program
Custom Activation Label		0.05	per card
Insert Setup Fee		5.00	per issuer ID/program
Insert		Waived	per insert
Envelopes		0.06	per envelope
CVC/CVV/Indent Print on Back of Card		0.05	per card
Indent Print Front of Card		0.05	per card
Postage		Actual

© 2003, Metavante Corporation 12

Special Services
Emergency Cards	10.00	per card
Expedited Card	Waived	per card
Pull & Destroy	Waived	per card
Pull & Re-address	Waived	per card
Pull & Overnight	Waived	per card
Recovered Card Processing	10.00	per card
Network Services
On-Line Host Interface (applies to non core processing clients)	500.00	per interface
Metavante Network Admin Fee	75.00	per institution
Plus/Cirrus Duality Fee	75.00	per network
Regional Network Fee - EDS/ Cash	Waived
Regional Network Fee - ITS	Waived
Telecommunication	Quote
Other Services
Web Based Adjustment	Waived	per adjustment
Debit Card Compliance/Processing Fee ($500 max.)	Waived
Debit Card Lost/Stolen Reports by Metavante	8.25	per account
Activity/ Balance File Transmission Fee	Waived	per transmission
*  Custom ATM & Debit Card Programs Available	Quote

Note: New services will be billed according to the then current price.

© 2003, Metavante Corporation 13

All Other Services

Metavante Corporation

Price Schedule

Prepared for: First Midwest Bancorp

			Rate
Miscellaneous Services
Programming Services		25% discount off then current price
Services Continuity	$	1,250.00		per month
EFT/Card Services
VISA processing guarantee fee			pass through
VISA key merchant incentive			pass through
VISA compliance fee			pass through
Other Services
Router maintenance			pass through
Treasury Connection network access (MWAN)			pass through
Sales tax			pass through
Mail			pass through
UPS			pass through
Optional Services1
			Rate
Enterprise Contact Management
One Time Fees
Enterprise License Fee for up to 70 locations			No charge
Professional Services (includes project management, business consulting, customization, solution acceptance, train-the-trainer, and post implementation business consulting follow-up)			$ 105,000
Fee subject to change based on additional due diligence and changes to FMB organization after 1/1/04

© 2003, Metavante Corporation 14

Monthly Fees
Hosting/Maintenance/Support for up to 70 locations	$	35,000	per month
Additional Locations
License Fee	$	12,500	per additional location
Hosting/Maintenance/Support	$	400	per add’l location per month
BankerInsight
One Time Fees
Enterprise License Fee for up to 71 locations (banking offices+call center)		No charge
Implementation//Customization - Deposits only	$	150,000
Fee subject to change based on additional due diligence and changes to FMB organization after 1/1/04.
Monthly Fees
Hosting/Maintenance/Support for up to 71 locations	$	12,500	per month
Additional Locations
License Fee	$	10,000	per additional location
Hosting/ Maintenance/Support	$	125	per add’l location per month

¹ Prices valid for 90 days from contract signing date.

© 2003, Metavante Corporation 15

EXHIBIT D

SPECIAL CONSIDERATIONS

The following Special Considerations have been mutually agreed to by the parties and do hereby alter, amend and modify the Agreement and supersede and take precedence over any conflicting provisions contained in the Agreement. All other terms and conditions contained in the Agreement shall continue in full force and effect.

1. Cornerstone Services. The parties have agreed that the final terms and pricing as set forth herein shall be treated as strictly confidential and shall not be made available to any member of the staff of Cornerstone Services.

1. Control of Information

The Business Intelligence Center (“BIC”) offers a vendor-independent financial services model to enable clients to use data warehouse to gain more insight into their business performance. The Business Intelligence Center can be used as a competitive differentiator, allowing clients to perform more complex analysis, track progress against goals, and use the resulting insight to develop and modify pricing, promotion, and performance strategies. This model leverages open data integration capabilities and industry-leading business intelligence tools that have the flexibility to meet a wide variety of end users.

The BIC solution utilizes tools from Business Objects of America to enable more users within a financial institution to take advantage of data analysis either as a casual user, a manager making key business decisions, or a power user responsible for more complex execution of analytic functions. The tools also give the ability to bring in data from non-Metavante systems for analysis.

i. The BIC solution has many options for installation that allows Customer total ownership of all their information. Further due diligence would help Metavante understand the business requirements under which Customer makes this request. Upon completion of the due diligence, Metavante would present its recommendations. There are multiple scenarios possible ranging from a download of information from the BIC databases to physically housing portions of the database at Customer’s location.

ii. Metavante will provide a copy of the BIC data dictionary upon request to illustrate the types of data currently available.

iii. Today, the BIC receives sales session information from BankerInsight, and teller transactions and electronic journal information from TellerInsight. The Metavante professional services team is available to build the integration capabilities to other platform systems such as ARGO. This would be included as part of the 10,000-hour commitment made previously.

iv. Today, Metavante provides daily and monthly refreshes of data in a nightly batch load process. In addition, for some clients who maintain their own universes, Metavante provides a monthly update of the universes that incorporates any maintenance, and enhancement changes it has made over the course of the month. Once all deployment requirements of Customer are defined, Metavante can provide further detail on formats and other requirements that would be unique to their environment.

v. Hardware, software, database and other requirements will be provided in further discussion once all requirements for deployment are understood.

vi. The support model is contingent upon the deployment option chosen. Upon further due diligence to define the deployment option, Metavante would propose a recommendation for support that may include preparation and delivery of the data, troubleshooting issues, and user education regarding the data structures.

2. Buyout Options (Customer)

See Exhibit E attached hereto and made a part hereof.

3. Product/Functionality Delivery Schedules

Browser access to Deposits, Loans (Operational Desktop equivalent), and CIS will be available 3^rd Quarter 2004. Additional functionality is planned for Phase II. The delivery schedule for Phase II has not been finalized, but the date would be available within 60-days of contract signing.

© 2003, Metavante Corporation 16

TellerInsight is available now with a new release coming in January 2004. A conversion request may be submitted as usual.

Metavante will use its best efforts to provide planned release schedules for any product described in the Request for Proposal within 60-days of signing this Amendment.

4. Trust System Concerns – Commitment to “fix” the Trust System

Metavante shall work with the product areas within the Trust Division to help personnel leverage current technology in support of enhancing the service delivery and operating models.

Customer agrees to receive Trust Processing Services from Metavante as further described on Exhibit G.

The Revenue consulting project will be invoiced in full as part of the June invoice and closeout of the current contract. If the allotment bucket does not contain the needed funding, the difference will be assessed against the prepaid funding account set up by the new contract.

6. Pricing for 2004

The new contract and pricing is effective July 1, 2004, and runs through June 30, 2014.

7. Pricing for the first six months of 2004

The discounts put in place for 2003 shall remain in place through June 30, 2004, and include re-instatement of the allocation of sixty (60) programming hours per month. This has a value of $160,500 in 2004. The re-pricing for July 1, 2003, that was delayed until January 1, 2004, will be suspended. Also, Metavante will waive the buyout for CoVest, which is estimated at $350,000. The total hard dollar benefit to Customer in the first half of 2004 is $510,500.

8. Conversion Costs

As it relates to the cost of converting bank acquisitions by Customer, Metavante will provide:

Years 1 thru 3	75% discount
Years 4 thru 7	50% discount
Years 8 thru 10	25% discount

9. Desk Top Browser (Operational Desktop and 3270 replacement)

An enterprise license for Metavante’s desktop browser is included in the revised pricing.

10. Acquisition Account Volumes

The pricing based on Customer’s growth scenarios is not dependent on how that growth occurs - organic and/or acquisition account growth.

11. Language on Additional Services

Metavante has and will provide a number of new products and services over the term of the Agreement. Metavante will provide a minimum twenty percent (20%) discount on products and services (not applicable to third party products or services sold or re-sold by Metavante). Metavante will use reasonable efforts to work with Customer to build a business case with defined value for Customer.

© 2003, Metavante Corporation 17

12. Openness to Third-Party Software

With Metavante’s recent and continued investments into middleware and Connectware architecture, Metavante has over sixty (60) third-party systems integrated into the Metavante systems.

13. Optional Branch Suite Solution

As with any provider, Metavante has included the interfaces of its Branch Suite into its core banking systems. While it is nearly impossible to understand the scope and cost of integrating a third-party suite for which detailed specifications have not been provided, Metavante provides the following:

1. If Customer elects to deploy Metavante’s TellerInsight, Metavante will provide Customer a $100,000 credit per year for the first five years of the TellerInsight deployment.

2. If, Customer elects to use Argo as the third-party branch solution, Metavante will provide its message set ( industry standards based) to Argo and will work with them to build and test the interface. Metavante will commit 10,000 hours to this project. If Metavante’s project requirements take less than 10,000 hours, Metavante will credit Customer the equivalent (at the then current rate) of the remaining hours towards the costs that Argo would invoice related to the project. Historically the third-party vendor also commits to a portion of the work in exchange for the interface to their product. Additional hours would be made available to the project at fifty (50%) discount to Metavante’s then current date.

14. Ability to Detach without Penalty Internet Banking and ATM Services at any Point in the Contract

Customer will have the option to remove without penalty, without notice, and without right of first refusal, Internet Banking Services (Consumer and Business) and Credit Card (consumer) at any time.

Customer will have the option to remove without penalty ATM, Credit Card (business), and Wealth Management Services after July 1, 2007.

1. Unless the cause is to move to an in-house solution for strategic reasons, Metavante will have the right of its first refusal on the terms that would cause Customer to remove these services.

2. Customer will be required to provide a twelve-month notice of termination of these services.

15. Ability to use TCPIP communications protocol with Metavante for all applications

Metavante is positioned to move TCPIP communications with all applications Customer uses or are proposed to use. There are four areas that would need to be addressed to move from SNA to TCPIP protocol, each area will require Customer to upgrade some combination of equipment, emulators, and/or software. In one case an SNS backbone conversion would need to be performed.

1. 3270-type traffic would need to switch from SNA to CGS. All current emulators would need to be upgraded to work with the new protocol. The solution requires a commitment to an SNS backbone.

This solution includes changing the Broadwing backbone to an SNS backbone, eliminates the need for the current continuity fee of $1250/month, and allows for TCPIP for all 3270-type traffic. Further due diligence is required, but with what is known today the related costs are:

Cost to Customer (see note below)
One Time	$	5,315.00
Monthly Ongoing	$	5,000.00

Metavante understands the Broadwing contract is not due for sometime. If the desire would be to move to TCPIP before that time, Metavante would explore, with Customer, ways to lower a buyout of that contract.

© 2003, Metavante Corporation 18

Note: The current proposal included the Broadwing backbone at $4,000/month and the disaster recovery of $150/month. This nets to the $5000/month SNS fee, which includes the backbone, disaster recovery connections, and CGS to handle TCPIP. Impact to the current pricing would be $250/month lower for this portion of the service.

2. Metavante has multiple customers on TCPIP ATMs today. Each Customer ATM would need to have an upgrade to handle TCPIP protocol.

3. VRU. Metavante is in the beginning of a project to communicate with Customer’s new VRU using the TCPIP protocol and Connectware TCPIP. The current Argo Connectware solution would need to be upgraded to Connectware TCPIP and all host communications that use either host connect or the old HDPs would need to be upgraded to Connectware TCPIP.

4. BARR RJE. Metavante can do direct TCPIP with IBM printers you have installed using the RSC server that drives them and some software changes. It is unknown if the Wausau part of the solution would run with TCPIP protocol.

16. Credit Summary

The credit is contingent on Customer hitting aggressive levels of account growth.

Year#	Date of Eligibility#	Credit Start Date	Credit End Date	Minimum Required Core Account Volume*	Annual credit amount prorated over 12 months		Cumulative Total
1**	6/30/2004	7/1/2004	6/30/2005		$	0	$	0
2	6/30/2005	7/1/2005	6/30/2006	671,715	$	300,000	$	300,000
3	6/30/2006	7/1/2006	6/30/2007	738,887	$	300,000	$	600,000
4	6/30/2007	7/1/2007	6/30/2008	812,775	$	400,000	$	1,000,000
5	6/30/2008	7/1/2008	6/30/2009	894,053	$	400,000	$	1,400,000
6	6/30/2009	7/1/2009	6/30/2010	983,458	$	400,000	$	1,800,000
7	6/30/2010	7/1/2010	6/30/2011	1,081,804	$	500,000	$	2,300,000
8	6/30/2011	7/1/2011	6/30/2012	1,189,984	$	500,000	$	2,800,000
9	6/30/2012	7/1/2012	6/30/2013	1,308,983	$	600,000	$	3,400,000
10	6/30/2013	7/1/2013	6/30/2014	1,439,881	$	600,000	$	4,000,000

# Eligibility is determined on an annual basis, based on June billing volumes.

* Based on total number of open/closed deposit accounts and open/paid loan notes.

Closed accounts and paid notes above 18% of total core accounts will not be used in determining eligibility of the credit.

Training and test bank accounts not included in the eligible volume.

** no credit in year 1

Example: As of June 30, 2005, Customer has achieved 671,715 Deposit accounts and loan notes. Customer will receive monthly credits beginning July 31, 2005 and proceeding for 12 months totaling $300,000. If on June 30, 2006, Customer has reached 725,000 Deposit accounts and loan notes; Customer will receive no credits for the following 12 months.

© 2003, Metavante Corporation 19

17. Connectware Pricing for a complete Argo Solution or other third-party front-end

Financial Connectware Transaction Argo solution functionality present in the current releases and for new functionality added in the future.	No fee
If Customer chooses another third-party platform solution over Argo, transaction activity equal to the Metavante proposed solution of TI, BI, and ECM.	No fee
Host Connect (One Source), Transfer Connect for Appro, Shared VRU for Card Activation; New Applications (not part of an Argo solution)
0-600,000 600,001 to 1,000,000 > 1,000,000	No fee $0.005 per transaction $0.002 per transaction

18. Co Vest Conversion Costs

The cost for the conversion of data related to the Co Vest acquisition will be waived. Non-data related items would be completed at the contract rate of $112.50 or as negotiated (Special Mortgage servicing training and support, Special tape handling and processing for conversion to BIB, extension of online availability of Co Vest files, and other similar items).

19. Availability of XML version of Connectware

Metavante commits to deliver the product upgrade to XML at no extra license fee. Metavante is prepared to focus on this project with the commitment of Customer to work through the final design and business requirements with Metavante. The click charges are covered in section 17 of this document.

Connectware Programs

FinancialConnect (current)

• C++

• JAVA

• COBOL

XMLConnect (future)

Brief Description of Connectware Services

Connectware Programs Solutions – Ability to interface real time to third party applications.

FinancialConnect (C++, JAVA, COBOL) – A real time interface to the Metavante Deposit, Loan, CIS and Cardbase Systems. Uses for FinancialConnect include Internet banking, VRU/IVR, Branch Automation, wire transfers, loan origination and return items (version 4.52).

FinancialConnect-XML-will be available at a future date.

20. ECM Integration

As discussed, ECM and Carit are similar in functionally and there would not be a need to have both systems installed. If the decision is to use ECM, the integration in the Metavante solution is complete. The integration into the ARGO solution would be covered as part of section 13 of this document. If the decision is Carit, the integration in to Metavante Systems is also covered in Section 13.

21. Definition and use of the “High Availability” area

Business Need / Current Situation

The focus of this project is to meet Customer’s needs for “hardening” of the processing environment. This includes the following general requirements:

• Provide a high availability systems environment approaching 24x7 with minimal maintenance and system upgrade outage windows, and minimal impact from batch processing windows

© 2003, Metavante Corporation 20

• Automated co-ordination of Metavante batch processing cycle with the Customer’s account updating processes for balance and transaction information

• Eliminate unavailability of on-line transactions due to “blackout period” for batch processing

• Address miscellaneous anomalies or gaps in availability of information

• Dividend information for Anchor accounts

• Finance charge information for Northern line accounts

• EFT/Cardbase information consistency

• Correction to Stop Delete services

The business benefits would include:

• High availability increases end-customer satisfaction with direct access systems such as VRU and Internet Banking

• Ability to extend hours of customer service

• Improved ability to service customers across time zones

Approach

The approach proposed for 2004 includes the following three efforts:

Automated coordination / synchronization of Metavante batch processing with the Customer’s account updating processes for balance and transaction information

• Eliminate unavailability of on-line transactions due to “blackout period” for batch processing

• Address miscellaneous anomalies or gaps in availability information

• To be defined

Project Deliverables

Project deliverables for each of the 3 efforts will include high-level analysis and documentation of the following:

• Initial scope document

• Ball-park estimate(s)

• Business requirements document and Customer sign-off

• Refined, preliminary estimate

• Functional and Technical design documents

• Detailed estimate and Customer sign-off

• Implementation/Project Plan

• Phased implementation of solution

Project Plan and Timeline

Task Description	Timeframe	Deliverable
1.      Planning - Phase I Requirements		Scope document and requirements documents
2.      Planning - Phase II - Inception and Elaboration		Requirements review and sign-offs
3.      Implementation - Phase I		Detailed functional and technical designs, sign-off, initial component build
4.      Implementation - Phase II		Completed high availability improvements, pilot

© 2003, Metavante Corporation 21

Project Team

A project team comprised of individuals from Metavante and Customer will be assembled for the life of the project. Throughout the project, regular team meetings will be held, as appropriate, to discuss the tasks that have been accomplished, any issues or problems, and tasks to be completed in the following period.

Metavante Executive Sponsor	Jim Dempster
TNT Executive Sponsor	Kent Belasco
Metavante Project Manager	TBD
FMB Project Team members	•   Designated project lead: TBD •   Technical resources on an ‘as needed’ basis
Metavante Team Members	Resources ‘as needed’: TBD •

Preliminary Requirements

• Eliminate unavailability of on-line transactions due to “blackout period” for batch processing

• To be jointly defined

• Address miscellaneous anomalies or gaps in availability of information

• To be jointly defined

22. Commitment to include Customer in product direction, design, and delivery process for products involved with interface to online delivery systems and high performance options.

Initially, Customer has identified John Hudak as its representative to participate with Metavante. These projects and focus groups come under the sponsorships of Jim Dempster. Metavante welcomes John’s input and participation in definition of the business requirements and prioritization on delivery of the components. Ongoing, John Hudak will be included in focus groups related to this area to work with Metavante on future direction and delivery.

© 2003, Metavante Corporation 22

EXHIBIT E

TERMINATION FEE SCHEDULE

1. Termination for Convenience. Except for situations described in Section 2, Section 3, and Section 4 below, in the event that Customer terminates this Agreement or Metavante terminates this Agreement pursuant to Section 11.2 or 11.3, Customer shall pay a Termination Fee in the amount of forty percent (40%) of the Estimated Remaining Value, not to exceed twenty million dollars ($20,000,000). The Termination Fee shall be paid prior to the Effective Date of Termination of the Agreement or Service, as applicable. In addition to the foregoing, Customer shall pay to Metavante any amortized but unpaid Conversion fees and all reasonable costs in connection with the disposition of equipment, facilities and contracts specifically related to Metavante’s performance of the Services under this Agreement.

2. Termination for Change in Control of Customer. In the event that Customer shall experience a Change in Control, Customer may, upon providing 180 days prior written notice to Metavante, terminate the Agreement and pay to Metavante a Termination Fee determined as follows:

Months into Contract	Equivalent months of Metavante Fees in Buyout*
0 – 36	12
37 – 60	9
61 – 84	6
85 – 108	5
109 – 120	3

* Fees will be calculated using the average of the three previous monthly invoices and multiplying by the number of months set forth in this column. Months into Contract will be measured based on the date of execution of this Amendment.

This Termination Fee will be capped in the amount of $6,000,000. The Termination Fee shall be paid prior to the Effective Date of Termination of the Agreement or Service, as applicable. In addition to the foregoing, Customer shall pay to Metavante any amortized but unpaid Conversion fees and all reasonable costs in connection with the disposition of equipment, facilities and contracts specifically related to Metavante’s performance of the Services under this Agreement.

3. Termination for Change of Control of Metavante. “Change in Control” of Metavante shall be defined as a change in the ownership of more than 50% of the voting securities of Metavante to an unaffiliated Third Party. It will specifically exclude any initial public offering of Metavante. If there is a Change in Control of Metavante (as defined) during the Term of this renewal Amendment, Customer shall have the right to terminate the Agreement without payment of a termination fee, provided that Customer exercises this right in writing within one hundred eighty (180) days after written notification to it of the Change in Control; and (i) the acquirer has financial industry processing experience and has a net worth, measured prior to the acquisition of controlling interest in Metavante (“Net Worth”), of less than $375 million; or (ii) the acquirer does not have financial industry processing experience and has a Net Worth of less than $500 million; or (iii) the acquirer is either BISYS Group, Inc. or Intercept, Inc., Notwithstanding the foregoing sentence, during the first five (5) years after the date of this renewal, Customer shall have the right to terminate the Agreement by delivering written notice to Metavante, within sixty (60) days following notification of a Change in Control of Metavante, accompanied by a payment equal to the amounts payable by Customer under the Agreement for the prior twelve (12) calendar months.

4. Termination for Cause by Customer. If Customer terminates this Agreement in accordance with Section 11.2 or 11.3 of the Agreement, then Customer shall not be obligated to pay Metavante the Termination Fee.

5. Termination Fee. The Termination Fee shall be an amount equal to forty (40%) of the Estimated Remaining Value, not to exceed twenty million dollars ($20,000,000) of the terminated Services.

© 2003, Metavante Corporation 23

6. Rebate of Termination Fee. Subject to Metavante’ rights under Section 8 below, Customer shall receive a rebate of a portion of any Termination Fee paid by Customer hereunder in the event that Customer shall enter into a new exclusive agreement with Metavante to receive the Initial Services within six (6) months following the Effective Date of Termination. Such rebate shall be determined according to the following schedule:

Number of Months Following Termination	Rebate
1	100	%
2	5/6
3	4/6
4	3/6
5	2/6
6	1/6

7. Payment of Rebate. The applicable rebate of the Termination Fee shall become payable to Customer upon execution of a new exclusive agreement for Initial Services by and between Customer and Metavante within six (6) months following the Effective Date of Termination (the “New Agreement”). The terms of such New Agreement shall be as mutually agreed by the parties and nothing herein shall obligate Metavante or Customer to accept any terms or conditions, whether or not previously acceptable to either of them. The rebate may be paid to Customer by Metavante, in its sole discretion, in the form of a discount to fees payable by Customer under the New Agreement or as a credit against implementation, conversion, training, or professional services fees payable by Customer, or in such other manner as Metavante shall decide.

8. Revocation. Customer’s right to receive the rebate of the Termination Fee as provided under Section 6 of this Schedule may not be cancelled or revoked except by a written instrument that is (a) signed by Metavante expressly revoking Customer’s right to receive such rebate; and (b) delivered to Customer by Metavante within thirty (30) days following the date of termination of this Agreement.

© 2003, Metavante Corporation 24

EXHIBIT F

Master Service Level Schedule

I. GENERAL

A. Introduction

This Schedule identifies Service Levels for the Services obtained by Customer from Metavante. These Service Levels are set forth in Exhibit A hereto.

B. Reporting. Metavante shall provide reports of its performance against the Service Levels on a monthly basis.

© 2003, Metavante Corporation 25

EXHIBIT F-1

In this Exhibit F-1, “Processing Day” shall mean any Monday – Saturday which is not declared a holiday by the Federal Reserve Board of Chicago.

A. On-line Systems Availability

The applications subject to this Critical Service Level are the Deposit System, the Loan System, General Ledger, and CIS.

1. Core Services

Each of the Deposit System, Loan System, General Ledger, and CIS (the “Core Services”) shall be deemed “Available” for purposes of this Critical Services Level if it is able to be used by Customer’s end users in accordance with its intended functionality, with all required database files and tables being accessible with current data (or previous Processing Day’s data outside scheduled hours of availability, as defined below).

a. The Critical Service Level for On-Line Systems Availability is stated in terms of the percentage of the monthly Scheduled Hours of Availability that the application actually is Available: “Scheduled Hours of Availability” shall mean, for each “Processing Day”, 7:00 a.m. to 10 p.m. CST/ CDT. Scheduled hours of Availability shall exclude scheduled outages for which Metavante needs to perform, regular technical maintenance (e.g., NCP maintenance, CPU IPLs, DASD installs, IMS gens, etc.) This type of maintenance is performed Sundays between 2:00 a.m. and 6:00 a.m. CST/CDT, between 4:00 a.m. and 8:00 a.m. for West Coast locations, or between 1:00 a.m. and 6:00 a.m. for some East Coast locations (the “Maintenance Window”). These activities may result in downtime during the Maintenance Window. In cases where other planned outages are necessary, Metavante shall provide notice of any such planned outage using Metavante’s InfoSource notification system prior to the planned outage specifying the duration of the planned outage. Metavante shall use commercially reasonable efforts to effect planned outages during the Maintenance Window.

b. The Service Level for On-line System Availability for the Core Services is ninety-nine percent (99%).

B. Critical Batch Report Delivery

1. Batch Processing. This Critical Service Level measures the availability of Critical Operations Reports print files and report feeds, excluding eBanking. “Critical Operations Reports” are defined as standard Loan System (R6000-R7530) and Deposit System (R1000-2640 and R-2699-R4998) Reports excluding Informatter. Metavante will initiate batch processing and have critical operations reports available for transmission to Customer or available for print at an Metavante center within five (5) hours on all processing days in a calendar month [fifteen (15) hours at year-end] starting at the later of: (a) the on-line access being disabled; or (b) Metavante receives all input date from Customer (the “Scheduled Delivery Times”). (Metavante’s obligation under this Service Level is subject to Customer meeting its data input commitment.) Metavante must receive all input data from Customer by 1:00 a.m. CST/CDT.

2. The Service Level for Critical Batch Report Delivery shall be: Not more than two (2) Processing Days per calendar month where the Critical Operation Reports are not available by the Scheduled Delivery Time. A “miss” by Metavante is a failure to achieve this on any Processing Day.

© 2003, Metavante Corporation 26

C. Network Availability

“Core Network infrastructure” shall mean Metavante network devices that bring customer traffic into the Metavante building to destined application servers.

Core Network infrastructure at Metavante will be available at least 99.9% of the time each calendar month. Availability is defined as the network infrastructure at the Metavante Data Centers. Monthly availability is calculated for 24 X 7 X the number of days in the month less scheduled hours of maintenance.

Scheduled Maintenance. Scheduled hours of Availability shall exclude scheduled outages for which Metavante needs to perform, regular technical maintenance (e.g., NCP maintenance, CPU IPLs, DASD installs, IMS gens, etc.) This type of maintenance is performed Sundays between 2:00 a.m. and 6:00 a.m. CST/CDT, between 4:00 a.m. and 8:00 a.m. for West Coast locations, or between 1:00 a.m. and 6:00 a.m. for some East Coast locations (the “Maintenance Window”).

D. Business Intelligence Center/Data Warehouse Definitions:

“Business Intelligence Center” shall mean the information support system implemented by Metavante to access key business information contained in the Metavante Dimensional Data Warehouse. The tools included in the Business Intelligence Center offering are designed to support both casual and power customer users. The software for the Business Intelligence Center offering will reside on equipment located at both the Customer and Metavante facilities and operated by the Customer’s employees.

“Data Warehouse” shall mean the Metavante Dimensional Data Warehouse.

1. Data Warehouse: This availability refers to the time frames that the Business intelligence Center or Information Desktop can be used to access the Data Warehouse. The Business Intelligence Center or Information Desktop will be able to access the Data Warehouse during the following time frames:

Monday – Friday	6:30 a.m. to	10 p.m.
Saturday	6:30 a.m. to	6 p.m.
Sunday	not available

Availability times are specific to an institution’s time zone.

2. AVAILABILITY OF PRIOR-DAY DATA WAREHOUSE UPDATES:

Availability of prior-day data updates refers to the time frames for when Customer’s latest Integrated Banking System application data is available in the data warehouse. Due to varying account volumes and month-end processing being three times that of a normal day’s processing, two Service Levels will apply as follows:

Normal processing day – Availability of prior day data warehouse updates.

6:30 am CT for general ledger – 90% service level

8:00 am CT for all other applications excluding Consumer Internet Banking and Account Analysis – 100% service level

Month-end processing day service levels for previous month’s data

6:30 am CT for general ledger – 90% service level

8:00 am CT for all other applications excluding Consumer Internet Banking and Account Analysis – 90% service level

12:00 pm for all other applications excluding Consumer Internet Banking and Account Analysis – 100% service level

During the 12-month transition period from warehouse to BIC, Metavante will strive to meet the requested availability of the BIC databases for both daily and month-end processing by the times previously noted.

At the end of the 12-month period Metavante and Customer will evaluate the service level progress. If Metavante has met the levels requested, the service level language will be re-evaluated to mutually agree on the language. If Metavante has not attained the availability as noted, Metavante will extend the parallel processing of Warehouse for an additional 12-month period at no fee to Customer.

If the service level language is not finalized after the initial 12-month period, it will be re-evaluated/finalized after the 12-month extension.

© 2003, Metavante Corporation 27

Metavante will not be deemed to have failed to achieve the service level, if Customer fails to release to post by 11:00 PM CT each night and end-of-month.

Note: This excludes Customer Internet Banking and Account Analysis due to re-analysis processing.

Normal Processing Day

On normal processing days, only the Data Warehouse daily tables are updated. If processing has been completed prior to the performance standard listed above, data will be accessible and will reflect the updates from the previous day. If processing is still occurring upon the Business Intelligence Center availability, the updates will not be available until loading is complete. If processing has not yet started the performance standard listed above, the data in the Data Warehouse daily tables will remain the same as the prior day until loading begins for the most recent updates. During the loading process, the Data Warehouse daily tables will not be available.

Month-End Processing Day

At month-end, daily and monthly tables of the Data Warehouse are updated. Similar to Normal Processing Days, if the month-end updates are not started prior to the performance standard listed above in L1, the prior day’s data will be available until loading begins. Once loading of month-end updates begins, data will not be available until the load is complete.

E. On-line Response Time

Metavante will process transactions in an average of 2.5 seconds for teller transactions and in an average of 3.5 seconds for CRT transactions as measured over a calendar month, from the time the transaction is sent by the Customer’s point of demarcation to the time the processed data is returned to the Customer’s point of demarcation. For CGS (centralized gateway) clients, this is measured from the time the transaction is received at Metavante’s consolidated Gateway System (CGS) in Brown Deer, Wisconsin to the time the processed data is returned to the CGS (“Average Response Time”). Should Metavante not be able to perform in accordance with the Service Level because Customer failed to acquire network or equipment recommended by Metavante, or such additional network or equipment as may be reasonably necessary based on the circumstances, Metavante shall notify Customer in writing and Customer shall either acquire such network and/or equipment or accept the response time that is achieved.

F. Electronic Funds Delivery

1. System Availability

Calculation for Monthly Availability:

1 - (OM/MA-SA)

Brackets include both the numerator and denominator.

OM = Outage Minutes.

MA = Number of minutes available in the month.

© 2003, Metavante Corporation 28

SA = Scheduled Maintenance.

Scheduled hours of Availability shall exclude scheduled outages for which Metavante needs to perform, regular technical maintenance (e.g., NCP maintenance, CPU IPLs, DASD installs, IMS gens, etc.) This type of maintenance is performed Sundays between 2:00 a.m. and 6:00 a.m. CST/CDT, between 4:00 a.m. and 8:00 a.m. for West Coast locations, or between 1:00 a.m. and 6:00 a.m. for some East Coast locations (the “Maintenance Window”). Further excluded is emergency maintenance where Customer has been notified within 48 hours and maintenance to occur between 12 a.m. and 6:00 a.m. CST/CDT.

Scheduled Maintenance for CMSE Cardbase Open Systems:

1. Maintenance performed Sundays between 2:00 a.m. and 6:00 a.m. CST/CDT, between 4:00 a.m. and 8:00 a.m. for West Coast locations, or between 1:00 a.m. and 6:00 a.m. for some East Coast locations (the “Maintenance Window”).

2. Wednesday mornings around 4:30 – 5:30 a.m. lasting less than one hour.

3. Server maintenance may occur Monday mornings between 00:00 and 04:00.

Standard: Average Monthly Availability

99.7% for Tandem Base 24

99.5% for Cardbase Management System Authorization (equates to 7.2 mm/day or 213.6 minutes/ month)

Measurement/Reporting Requirement: Metavante to provide status reports reflecting statistics.

2. Report Availability

Report files must be available for delivery to Client by 3:00 a.m. CST/CDT. Report files for Metavante generated reports, Settlement Manager, Card Management Systems reports. Network generated reports are excluded from this standard.

Standard: by 3:00 a.m. CST/CDT, Metavante allowed 1 miss per month <60 minutes after standard. Credits will not apply unless critical reports cannot be delivered in alternative format.

Measurement/reporting Requirement: Metavante to provide status reports reflecting statistics.

G. E-Banking Services

1. “Availability” is defined as the time when the network, database and other elements under direct Metavante control are available and responsive to remote customer service inquiry, minus the scheduled down time utilized for system maintenance. Availability is measured on a system wide average during the “Availability Period” for a calendar month, which excludes any periods when the e-Banking application is not Available due to scheduled or unplanned emergency maintenance. Metavante shall measure the Availability of the e-Banking services by computing the cumulative number of minutes that the applicable system is actually Available during the Availability Period, divided by the total number of minutes during the Availability Period. This standard is expressed as a percentage of time the system is available for access.

2. The Service Level for e-Banking applications is ninety-eight percent (98%) Availability during each Availability Period, provided that Metavante is not responsible for lack of Availability to end users due to failure of Internet service providers, failure in communications (communications lines), a security breach not resulting from Metavante’s negligence or misconduct, or failure of the end user’s hardware or software.

3. Metavante shall make access to the System available twenty-four hours a day, seven days a week less scheduled outages for which Metavante needs to perform, regular technical maintenance (e.g., NCP maintenance, CPU IPLs, DASD installs, IMS gens.) This type of maintenance is performed Sundays between 2:00 a.m. and 6:00 a.m. CST/CDT, between 4:00 a.m. and 8:00 a.m. for West Coast locations, or between 1:00 a.m. and 6:00 a.m. for some East Coast locations (the “Maintenance Window”).

© 2003, Metavante Corporation 29

H. Wealth Management Technology Services

1. Metavante will initiate batch processing and have bank operations reports available for transmission to Customer or make the processed item and reports within six (6) hours (fifteen (15) hours at year end) after receiving all input data from Customer, and with such performance being missed not more than two (2) Processing Days per calendar month.

2. Metavante’s on-line computing facilities shall be available for the processing of customer’s on-line transactions at a minimum of ninety-five percent (95%) of the time during Scheduled Hours of Availability, as prescribed by Customer, measured over a calendar month at the point of departure from Metavante’s communications controller.

3. Metavante will process CRT synchronous transactions in an average of 2.5 seconds as measured over a calendar month using IBM System Monitoring Facility (SMF) or similar product. Should Metavante not be able to achieve this objective, Metavante may recommend network or equipment upgrades over which Customer has control and Customer shall be responsible for making such changes or accepting the response time that it achieved.

Scheduled Maintenance. Scheduled Hours of Availability shall execute scheduled outages for which Metavante needs to perform, regular technical maintenance (e.g., NCP maintenance, CPU IPLs, DASD installs, IMS gens, etc.) This type of maintenance is performed Sundays between 2:00 a.m. and 6:00 a.m. CST/CDT.

I. Enterprise Contact Management

Metavante shall make access to the System available 7:00 a.m. to 10:00 p.m. CST/CSD. Scheduled hours of Availability (the same hours as the core online systems) shall exclude scheduled outages for which Metavante needs to perform, regular technical maintenance (e.g., NCP maintenance, CPU IPLs, DASD installs, IMS gens, etc.) This type of maintenance is performed Sundays between 2:00 a.m. and 6:00 a.m. CST/CDT, between 4:00 a.m. and 8:00 a.m. for West Coast locations, or between 1:00 a.m. and 6:00 a.m. for some East Coast locations (the “Maintenance Window”).

Additionally, scheduled maintenance occurs Sundays between 7:00 p.m. and midnight CST/CDT for this System. System availability is defined as the time when the network, core systems, database, and other elements under direct Metavante control are available and responsive. Availability shall mean that, within the production environment, the application is operating properly and available at not less than a minimum of ninety-nine percent (99%) during a calendar month.

J. Electronic Presentment and Bill Payment Services

I. Consumer Services Provider (CSP Services)

1. Call Center (Tier One Only)

85% of inbound calls received each month shall be answered within 30 seconds, based on a system wide average. If misdirected calls are 3% or more of Customer’s total monthly volume routed to the Metavante call center, the foregoing standards do not apply and a $10 fee will be charged for each misdirected call.

The monthly average abandoned call rate shall not exceed five percent (5%) of all incoming calls (does not include calls answered by an automated response unit), based on a system wide average.

Metavante will respond to e-mail inquires as follows: 95% within 2 business days, 100% within 5 business days (measured monthly, based on a system wide average).

2. Claim Inquiry Processing (measured monthly, based on a system wide average)

Standard Research Inquiries. End User initiated research may be handled within three (3) Business Days, 90% of the time, after the initial contact to Metavante Customer Service by the End User.

Escalated service cut-off inquiries, mortgage payments and insurance payments will be initiated within one (1) business day after the initial consumer contact 90% of the time.

Pending status inquiries will be tracked by or on the next action date and follow up will continue until the problem is resolved. The follow-up with End Users and payees will occur on the date of next follow-up 80% of the time.

3. Processing. CSP Brands: payments entered into the system by 3:00 p.m., CST/CDT will be processed in that day’s processing cycle. Any payments entered after the cutoff time will be processed in the next available cycle.

© 2003, Metavante Corporation 30

EX-10.26

Exhibit 10.26

AMENDMENT TO OUTSOURCING AGREEMENT

THIS AMENDMENT, to the Outsourcing Agreement dated July 1, 1999, (the “Agreement”) is made as of this      day of             , 2006, by and between the undersigned parties, and does hereby alter, amend, and modify the Agreement and supersedes and takes precedence over any conflicting provisions contained in the Agreement.

FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, the undersigned parties agree as follows:

1. Amendment to the Agreement.

a. Effective July 1, 2006 the Wealth Management Services shall be extended for an addition eight (8) years terminating on June 30, 2014.

b. Effective July 1, 2006, in addition to the Wealth Management Services provided under the Agreement, Customer desires and Metavante agrees to provide additional services in accordance with Exhibit A.

c. Effective July 1, 2006 the Electronic Funds Delivery (EFD) Services shall be extended for an additional eight (8) years terminating on June 30, 2014.

d. Metavante agrees to the terms and conditions regarding the EFD Services in accordance with Exhibit B.

e. Effective July 1, 2006 the Business Internet Banking (BIB) Services shall be extended for an additional three (3) years and shall automatically renew at the end of the Term on the same terms (including pricing terms) for twelve-month periods unless earlier terminated or unless Customer provides Metavante with written notice of non-renewal at one-hundred twenty (120) days prior to the expiration of the Term.

f. The monthly base fee for the Business Internet Banking (BIB) Services as described in the Amendment

dated July 1, 2004 shall be amended as set forth in Exhibit B.

g. Effective July 1, 2006 the Consumer Internet Banking (CeB) Services pricing shall be modified in accordance with Exhibit B.

h. In addition to the Consumer Internet Banking (CeB) Services provided under the Agreement, Customer desires and Metavante agrees to provide Direct Bill Pay Services in accordance with Exhibit C. Customer agrees to pay for the fees associated with Direct Bill Pay Services as set forth on Exhibit D. These services are subject to additional terms outlined in Exhibit E.

i. Effective July 1, 2006 the Credit Card (Business) Services shall be extended for an additional eight (8)

years terminating on June 30, 2014.

j. Effective July 1, 2006 Metavante shall provide monthly discounts on processing fees as outlined in Exhibit B.

2. Continuance of Agreement. Except as amended herein, the conditions and terms of the Agreement shall remain in full force and effect.

3. Binding Agreement. The parties hereto acknowledge that each has read this Amendment, understands it, and agrees to be bound by its terms and conditions as stated herein.

4. Miscellaneous. Capitalized terms used in this Amendment, which are not otherwise defined herein, shall have the meanings ascribed thereto in the Agreement.

IN WITNESS WHEREOF, the undersigned parties have duly executed this Amendment in a manner appropriate to each.

© 2006 Metavante Corporation 1 First Midwest Bancorp, Inc Amend 060506

METAVANTE CORPORATION (“Metavante”)
By:
Name:	Paul T. Danola
Title:	President and Chief Operating Officer
	Financial Solutions Group
By:
Name:	James R. Geschke
Title:	Executive Vice President
	Financial Technology Solutions
FIRST MIDWEST BANCORP, INC. (“Customer”)
By:
Name:
Title:

© 2006 Metavante Corporation 2 First Midwest Bancorp, Inc Amend 060506

EXHIBIT A

INVESTMENT TECHNOLOGY SERVICES

PRICING SCHEDULE

Annual Cost Structure
Trust Accounts
Tier I	$	259,200
2,700 accounts - $96 per account
Tier II	$	36,000
2,701 – 3,500 accounts - $90 per account
Tier III	$	0
3,501+ accounts - $88 per account
Third Party Pass Through	$	50,500	*
(Includes VMS, FTI, BSI, DayVest, etc.)
Miscellaneous Services	$	4,940	*
TOTAL PROPOSED FEES	$	350,640

Additional Functionality

InvestDesk® - The standard rate is $20 per account per year. Metavante will offer this product for $5 per account per year.

ReturnTrack™ - The standard rate is $15 per account per year. Metavante will offer this product for $8 per account per year.

Annual Review Suite™ - The standard rate is a $10,000 annual base fee, plus $4 per account per year. Metavante will offer this product for an annual base fee of $5,000 plus $2 per account per year

Conversion Pricing

The Bank of Calumet standard conversion has been estimated at 650 hours at the rate of $112.50 per hour. The conversion cost will be $73,125 plus travel expenses. Future conversions will be performed on the sliding rate scale defined in the amendment dated July 1, 2004.

• Costs are approximated using existing fees from third-parties and miscellaneous fees consistent with previous activities.

© 2006 Metavante Corporation 3 First Midwest Bancorp, Inc Amend 060506

EXHIBIT B

PRICING

Electronic Funds Deliver (EFD) Services Terms and Conditions:

• Inclusion of Micall Web access to be invoiced at $500 per month

• Create and execute loads to allow for Local PIN changes to be invoiced as one-time fee of $3000

• Metavante will commit to the requested SLAs within 30 days of the agreement to the contract extension. The SLA - Day 0 receive request, within 24 hours PIN is mailed, within an additional 48 hours card will be mailed.

Business Internet Banking (BIB) Services

• The monthly base fee shall be $10,000.

Consumer Internet Banking (CeB) Pricing:

Modification to CEB Bill Pay Transaction Tiers
Bill payment transaction pricing of:
Bill Payment transactions 1 - 20,000	$0.35 per transaction
Bill Payment transaction 20,001 - 40,000	$0.32 per transaction
Bill Payment transaction 40,001 - 75,000	$0.25 per transaction
Bill Payment transaction over 75,000	$0.17 per transaction

Monthly Discounts on Processing Fees:

• Monthly discount of $16,160 per month (the “Monthly Discount”).

© 2006 Metavante Corporation 4 First Midwest Bancorp, Inc Amend 060506

EXHIBIT C

DESCRIPTION OF BILL PAYMENT PROCESSING SERVICES

Payment Initiation

Metavante will provide bill payment processing on behalf of Users who enroll for the Bill Payment Processing Services. Depending upon the Bill Payment Processing Services selected by client, Users will be able to initiate payments, except for government or court directed payment, subject to any maximum payment limit established by Metavante to any payee in the United States.

Back End Processing

Each business day, Metavante will process User payment instructions received or scheduled for that processing day. Metavante will apply a set of business rules/edit checks to the payment instructions prior to completing the payee remittance. Payments that pass these rules will be remitted for the amounts specified to the appropriate payees either electronically or by check. All checks mailed using the U.S. Postal Service will be sent first class mail or other commercially acceptable delivery method.

Payment Remittance

Metavante agrees to execute the delivery of all payments as instructed by an End User in good standing unless one or more of the following conditions occurs: (1) erroneous or incomplete information is provided by the End User; (2) the payment was insufficiently funded; (3) a payee cannot or will not accept a payment delivered by Metavante; (4) the payment is suspected of being fraudulent; or (5) the payee is a suspected blocked entity.

Credit Remittance to Payee

Metavante will remit credits to payees within one (1) business day after the payment processing date, providing Metavante receives the request by the established cut-off time as defined in the Service Level Schedule. Average length of time from End User payment request and receipt of payment by payee will be five (5) business days for check payments (subject to U.S. Postal Services) and three (3) business days for electronic payments (subject to the rules and performance of the electronic transmission service provider).

Payments with Insufficient Funds

In the case of a returned End User debit due to insufficient funds (NSF) or other ACH return reason, Metavante will automatically block the End User’s access to Bill Payment Processing Services. All unprocessed scheduled payments will be cancelled. To collect funds for the NSF payment, Metavante may attempt any of the following: retry the debit, stop payment if the payment is made by Metavante check, or reverse the payment back to the payee when allowed. If the funds are collected and no additional debit returns have been received after five (5) business days, the End User’s Bill Payment Processing Services will be unblocked. End User must reschedule any payments that were cancelled due to a blocked condition. If the Customer is utilizing direct checks, checks drawn on End User accounts, Bill Payment Processing Services are not blocked, and Metavante takes no responsibility to collect NSF funds.

Payment Settlement

Customers are required to establish a Settlement Account for electronic settlement of payment transactions.

RISK FUNDING MODEL

Electronic Payment and Metavante Check: Metavante will submit a debit request via the ACH to the User’s funding account within 2 Business Days after the User selected payment date, or otherwise as required under the rules of the National Automated Clearing House Association.

Direct Check: Metavante will not settle for Direct Check payments since these are funded directly on the User’s funding account.

© 2006 Metavante Corporation 5 First Midwest Bancorp, Inc Amend 060506

Good Funds FUNDING MODEL

Electronic Payment and Metavante Check. Metavante will debit the Customer Settlement Account via ACH for the total of completed payments within 2 Business Days after the payment processing date, or otherwise as required under the rules of the National Automated Clearing House Association.

Electronic Payment and Direct Check. Metavante will debit the Customer Settlement Account via ACH for the total of completed electronic payments within 2 Business Days after the payment processing date, or otherwise as required under the rules of the National Automated Clearing House Association.

Payment Operations

Check Stop Payments (applies to Metavante checks only). Stop Payment service requests will be accepted by Metavante for any Metavante Check that has not yet cleared, the funds are automatically refunded. The Stop Payment Fee will be applied whenever any Payment is stopped by Metavante at the Client’s or the End User’s request. Metavante will not assess the Stop Payment Fee if Metavante stops the payment due to a Metavante error.

Returned Payments. If a payment is returned from a payee for any reason, Metavante will attempt to contact the User or Customer, as applicable, for resolution if necessary. If information needed to resolve the payment is not provided within 5 (five) business days, Metavante will cancel the payment. and return the funds to the User or Customer as applicable.

Stale Check Expiration. (For Metavante Trust checks only) Metavante shall set an expiration date for payment checks of up to ninety (90) days following the date of the payment check. If a check has not been presented to Metavante for payment on or before the expiration date, Metavante may choose to cancel the check, refund the amount of the check to the User or Customer, as applicable, and notify the User or Customer as applicable, that the payment did not post.

Payment Error. Metavante will use commercially reasonable efforts to resolve a payment error including recovering funds from the payment recipient, crediting funds back to user/customer, returning the payment to the payment recipient and other appropriate resolution/actions.

User Late Fees: Metavante will bear responsibility for any late payment related charges up to $50.00 incurred by the End User provided that Metavante received the payment instruction within agreed upon service level. Metavante may require that User or Customer provide satisfactory written documentation of any late fees before making reimbursement to User or Customer.

Customer Support

Tier 1 End User Support. The Customer Care specialist provides assistance to your customers’ inquiries to a variety of Bill Payment related questions through a dedicated Toll Free Number or email request. End User inquiries can include assisting with presentment and/or payment verification or status, stop payments, blocked accounts, and specific ‘How To’ questions related to the Bill Payment products used. All calls received within the Metavante Customer Care Center are handled within a shared environment and service levels are reported within a shared environment.

Payment Inquiries. From time to time user/customer may request that Metavante research a payment to resolve an issue or verify posting. Customer understands that in order to resolve an issue or complete the investigation, Metavante may need to obtain data and information from user/customer, the payment recipient or other third parties.

Implementation Services. The Conversion Team is responsible for the successful implementation/conversion of all new customers onto the Metavante Bill Payment platform. During the implementation process, a project manager is assigned to each customer and will function as the liaison to the customer’s and Metavante’s management teams. If possible, it is suggested the customer also assign an individual with a similar role for the life of this project.

The Metavante Project/Implementation Manager will establish key milestones and success criteria. Standard project management tools and methodology will be customized to meet the needs of each individual project. Periodic meetings will be scheduled between the customer and Metavante throughout the implementation cycle.

© 2006 Metavante Corporation 6 First Midwest Bancorp, Inc Amend 060506

LATE PAYMENT SCHEDULE

Notwithstanding anything to the contrary in the Agreement, Metavante and Customer agree that Metavante shall be responsible to Customer for the amount of any late charges, up to $50.00, actually incurred by a User and reimbursed by Customer as follows:

Reason for Late Payment	Responsibilities for Paying Late Charges/Penalties
	Metavante	Customer	User
Lost, Cannot Determine Reason	X
Not Sent as Scheduled	X
Sent to Wrong Location	X
U.S. Mail Delay			X
Delay by Merchant			X
Failure of Customer to Maintain Database		X
Intervention by Customer		X
Incorrect Entry by Customer		X
Scheduled Incorrect Number of Days before Due Date			X
Scheduled Incorrectly			X
Incorrect Account Information Supplied by User			X

In the event that Metavante is responsible for a late charge according to the above chart, Metavante will reimburse any payee-imposed late fees, up to $50.00, incurred by any User provided that the User provided Metavante with payment instructions at least five (5) Business Days prior to the due date to allow for proper and timely receipt by the Payee. Late fees for payments not initiated at least five (5) Business Days prior to the due date will not be reimbursed. However, Metavante will attempt on behalf of the User to have late fees reversed or waived, even when payments have not been timely initiated by the User. Notwithstanding the foregoing, Metavante will not reimburse any amount of late fees in connection with court ordered payments or payments to government entities. Metavante reserves the right to require proof of payment of any late fee by the User prior to reimbursing Customer or the User.

© 2006 Metavante Corporation 7 First Midwest Bancorp, Inc Amend 060506

BILL PAYMENT PROCESSING SERVICES

SERVICE LEVEL SCHEDULE

I. GENERAL

Introduction - - This Schedule identifies Service Levels for the Services obtained by Customer from Metavante. These Service Levels are set forth below.

Reporting - Metavante shall provide reports of its performance against the Service Levels on a monthly basis.

Effective Date of Applicability. Service Levels shall be applicable thirty (30) days after the Conversion Date.

Emergency Maintenance. Metavante shall use commercially reasonable efforts to effect planned outages during the Maintenance Windows. In cases where emergency outages are necessary, Metavante shall provide notice of any such planned outage using Metavante’s InfoSource notification system prior to the planned outage specifying the duration of the planned outage.

Scheduled Maintenance. All maintenance activity will be carried out between Sunday, 2:00 a.m. (CST/CDT) through Sunday, 6:00 a.m. (CST/CDT) except once a month where Metavante can use an extended Maintenance Window for the purposes of major infrastructure or application upgrades. Metavante will use reasonable efforts to provide Customer with 30 days advanced notice of intent to use an extended Maintenance Window.

II. SERVICE LEVELS

Processing. 100% of non-rejected payment transaction requests received by Metavante by 11:00 p.m. CST/CDT (Day 0) will be processed in the next Business Day’s processing cycle (Day 1).

100% of non-rejected payment transactions received by Metavante after the 11:00 p.m. CST/CDT deadline will be processed in the following Business Day’s processing cycle (Day 2).

Customer Care Center (Tier One Only) - measured monthly, within the shared environment.

Standard hours of operation for Metavante Customer Care Center shall be 24 hours, seven days a week, excluding the following holidays: New Years Day, Christmas Day, Easter, Thanksgiving Day, Labor Day, Independence Day and Memorial Day. On these holidays, the Metavante Customer Care Center will close at 11:00 p.m. CST/CDT the night before the holiday and reopen at 11:00 p.m. CST/CDT the day of the holiday.

Telecommunication charges associated with a unique 800 number are the responsibility of the Customer.

85% of inbound calls received each month shall be answered within 30 seconds, within the shared environment.

In the event that misdirected calls are 3% or more of Customer’s total monthly volume routed to the Metavante call center, the client will be allowed 30 days to correct the situation to prevent a future occurrence. In the event that misdirected calls are 3% or more of Customer’s total monthly volume routed to the Metavante call center a second consecutive month, the customer will be charged $10 per misdirected call for the second month. If the same situation occurs a third consecutive month, the customer will be charged $10 per misdirected call for the third month and so forth.

The monthly average abandoned call rate shall not exceed five percent (5%) of all incoming calls (does not include calls answered by an automated response unit), within the shared environment. The abandon rate refers to how many callers hang up before speaking with an agent.

Claim Processing and Resolution

Customer representative will enter research items into Metavante system. Metavante personnel will handle these research items and move them from open to pending to closed. Customer personnel can view the status of the research item at any time using the CST tool. The date of next follow-up refers to the date that Metavante will next review the inquiry if it requires additional information from the End User, payee, or Customer. “Handled” refers to items fully brought to resolution and items that require more information from the End User (via Customer) or payee before Claim can be brought to resolution.

© 2006 Metavante Corporation 8 First Midwest Bancorp, Inc Amend 060506

Payment research investigations will be accepted as early as five (5) business days from the date the payment is remitted by Metavante (“Payment Processing Date”) for Electronic payments and ten (10) business days from the payment processing date for payments made by check. Any Payment Research Investigations received before the lead times stated in the prior sentence will not be included in the Service Level calculations.

Standard Research Claims. End User initiated research may be handled within three (3) Business Days, 90% of the time, after the initial contact to Metavante Customer Service by Customer.

Service Levels:

90% of Claims handled within three (3) business days following the date of receipt of claim, during normal business hours, during the calendar month.

The remaining 10% of Claims handled within five (5) business days following the date of receipt of claim, during normal business hours, during the calendar month.

Escalated Research Claims – Customer representative will open research claim in an escalated status for mortgage payments and insurance payments. These claims will be handled within one (1) Business Day after the initial consumer contact 90% of the time.

Pending status inquiries will be tracked by or on the next action date and follow up will continue until the problem is resolved. The follow-up with payees will occur on the date of next follow-up 80% of the time.

Customer Service Tool (CST) System Availability

Metavante shall make access to the CST System twenty-four hours per day, seven days per week, less: (i) scheduled maintenance and (ii) excusable downtime resulting from events beyond Metavante’s reasonable control (the “Availability Period”). System availability is defined as the time when the network, database and other elements under direct Metavante control are available and responsive to remote customer service inquiry, minus the scheduled down time utilized for system maintenance. The Service Level for system availability is 99% during the Availability Period, measured monthly, based on a system wide average.

Service Level: System availability is 99% during the Availability Period, measured monthly, based on a system wide average measured separately for each system used to provide Services.

III. SERVICE LEVEL FAILURES

Excused Performance Problems

Metavante shall not be liable to Customer for any failure to meet a Service Level to the extent that such failure is attributable to: (i) a force majeure event as defined in Section 18.11 of the Agreement; or (ii) acts or omissions of Customer; or (iii) breaches of the Agreement by Customer. The foregoing are referred to herein collectively as an “Excused Performance Problem.”

ADDITIONS AND MODIFICATIONS TO SERVICE LEVELS

Documentation of Changes

Any additions or modifications to Service Levels shall be documented in a written amendment to the Agreement (and this Schedule).

© 2006 Metavante Corporation 9 First Midwest Bancorp, Inc Amend 060506

EXHIBIT D

DIRECT BILL PAY SERVICES

PRICING SCHEDULE

One Time Fees:

$25,000 covers the Remote Suites interface, branding of the webpage as an entry point to Bill Pay, and transition of the Bill Pay Customer from the current CeB solution to the Direct Bill solution, date to be determined

Direct Biller Model

Start Up Fee $25,000.00

Includes –

1.) Remotes Interface Suite - Middleware to interface the First Midwest front-end to work with the Bill pay ASP.

2.) Creation and branding of a unique website for FMB.

3.) Transition of bill pay information from Current template to new template.

Note: Experience has shown that it will require 70 - 200 hours of development by First Midwest depending on the extent that they want to interface. If a need for custom programming is determined during due diligence, it will be performed at a contract rate of $120/hour.

If Customer wants to have Metavante provide Tier One customer support (option 1):

Bill Payment Users	$1.50 per user per month
Bill payment transaction pricing of:
Bill Payment transactions 1 - 20,000	$0.35 per transaction
Bill Payment transaction 20,001 - 40,000	$0.32 per transaction
Bill Payment transaction 40,001 - 75,000	$0.25 per transaction
Bill Payment transaction over 75,000	$0.17 per transaction

If Customer does NOT want to have Metavante provide Tier One customer support (option 2):

Bill Payment users	$1.00 per user per month
Bill payment transaction pricing of:
Bill Payment transactions 1 - 20,000	$0.35 per transaction
Bill Payment transaction 20,001 - 40,000	$0.32 per transaction
Bill Payment transaction 40,001 - 75,000	$0.25 per transaction
Bill Payment transaction over 75,000	$0.17 per transaction

© 2006 Metavante Corporation 10 First Midwest Bancorp, Inc Amend 060506

EXHIBIT E

ADDITIONAL TERMS FOR CONSUMER INTERNET BANKING (CEB)

Pay Anyone Services. “Pay Anyone” services are those services that Metavante provides to remit payments to any U.S. payee using electronic funds transfer or paper checks. The services may include online user interfaces and electronic statement presentment. The following terms apply to these Services.

A. Access. Customer shall comply with Metavante’s requirements for making the Services operational and available for Customer and/or End Users (as hereinafter defined). An “End User” is a person for whom Metavante provides the Services on Customer’s instruction or on Customer’s behalf. In the event that Metavante shall provide online user interfaces for the Services (the “Branded Website(s)”), Customer agrees that Metavante is under no obligation to provide any person with access to the Services unless and until Customer has provided Metavante with all information and documentation required by Metavante for End User set-up.

B. End User Agreements. Customer is solely responsible for verifying each End User’s identity, and for contracting with, and managing the relationship with, End Users of the Services, and obtaining all necessary End User authorization to provide the Pay Anyone Services. Metavante will not have a contractual relationship with End Users, and so must rely upon Customer to manage liability and risk issues. Customer will include reasonable provisions in its End User agreements regarding, and shall indemnify Metavante against, defend Metavante against, and hold Metavante harmless from claims arising from (a) Customer’s failure to verify the End User’s identity; (b) any End User’s use of or inability to use the Services, specifically including any End User’s claim for economic loss or damages arising from the End User’s use of the Services; (c) transactions effected with a lost, stolen, counterfeit, or misused log-in ID and/or password; or (d) actions taken by Metavante in accordance with an End User’s instruction. Customer and its End Users shall be responsible for selecting and safeguarding their passwords for using the Services. As between Customer and Metavante, any use of the Services through use of a valid password shall be authorized use, provided that Metavante will cancel or disable any End User promptly following notification from Customer.

C. Settlement Account. Customer shall designate the applicable settlement account for transactions. The settlement account shall be either each End User’s designated account for bill payment activities initiated by the End User or Customer’s designated central settlement account to fund such payments. Customer is and shall remain solely and exclusively responsible to Metavante for the entire amount of any payment processed for and on behalf of an End User that is not funded due to insufficient funds in the applicable settlement account or for any other reason outside Metavante’s control, whether or not the payment was authorized by the End User.

D. Payment Processing. Metavante shall have the right to remit, stop, cancel, and manage payments and ACH re-issuance and returns as deemed most reasonable by Metavante, and Metavante may cancel payments, or block any User from initiating additional payments, in Metavante’s reasonable discretion. Customer authorizes Metavante to contact payees and End Users with respect to payments processed by Metavante. Metavante may process payments using the Automated Clearing House (“ACH”). In doing so, Metavante acts as Customer’s third-party service provider and is not itself an “Originator,” “ODFI,” or “RDFI” (as defined under National Automated Clearing House Association (“NACHA”) rules). Metavante may remit payments using checks drawn on Metavante’s clearing account, and may set an expiration date for such checks. Metavante may also remit payments using checks drawn on the User’s designated account. From time to time, Metavante may contact End Users to recover payment errors (common sources of payment errors include incorrect recipient (payee); delivered incorrectly by the postal service; consolidation error directed the payment to an incorrect party; stop-payment request honored and funds re-credited to End User’s account, but the check was paid; Metavante error; or duplicate payment made to payee). In the case of payment errors, Metavante will always contact the payee first to attempt direct retrieval of the funds. If Metavante is unable to retrieve the funds from the payee and the End User received benefit of the payment, Metavante may seek reimbursement from the End User. Customer shall be responsible for any losses to Metavante associated with payments by Metavante to, or at the direction of, government agencies, organizations and institutions, or court-directed payments. In the event that any payment processed by Metavante for Customer is past due as a result of Metavante’s fault, Metavante shall reimburse Customer for the amount of any late payment fee paid by Customer for the applicable User as set forth in the Late Payment Schedule attached hereto.

E. Data Transfers. In the event that Customer transfers data from another service provider to Metavante to convert Customer’s end users to Metavante’s systems, Metavante will not be responsible for any errors, delays, or problems in providing the Services that arise from the quality, reliability, or currency of the transferred data, including, without limitation, late fees for payments that are delayed due to the conversion of inaccurate or outdated payee data. In the case of deconversions of User data from Metavante’s system, Customer shall pay Metavante fees, at Metavante’s then-standard professional services rates, to deconvert the User data at Customer’s request. Customer agrees to provide Metavante at least six (6) weeks notice of any request to convert or deconvert User data to or from Metavante’s systems. All payee data and Metavante’s payee database shall be Metavante’s property, which may be used by Metavante without limitation for purposes of maintaining and providing “Pay Anyone” bill payment services for Metavante’s customers.

F. Service Levels. Metavante will use commercially reasonable efforts to provide the Services in accordance with the performance standards (“Service Levels”) set forth in the Service Level Schedule. Performance at or above a Service Level shall constitute satisfactory performance by Metavante. In the event that, at any time, a monthly Service Level report shows any material failure by Metavante to meet any of the Service Levels, Metavante shall: (i) within thirty (30) days after the date of delivery of such report, deliver to Customer a remedial plan showing in reasonable specificity and detail (A) Metavante’s

© 2006 Metavante Corporation 11 First Midwest Bancorp, Inc Amend 060506

findings regarding the causes for such failure to meet Service Levels and (B) a remedial plan of actions reasonably designed to eliminate, prevent or reduce the future likelihood of recurrence of such causes; and (ii) diligently proceed to carry out such plan. Except for Customer’s right to terminate for material breach in accordance with the terms of Section 8.2 hereof (in the event that repeated, frequent, or specific material failures by Metavante to meet Service Levels constitute a material breach of this Agreement), the foregoing shall constitute the sole and complete remedy for Customer with respect to the corresponding failures by Metavante to meet Service Levels.

© 2006 Metavante Corporation 12 First Midwest Bancorp, Inc Amend 060506

EX-10.27

Exhibit 10.27

OMNIBUS ASSET SERVICING AGREEMENT

between

FIRST MIDWEST BANK

as the Owner

and

BAYVIEW LOAN SERVICING, LLC

as the Servicer

Dated as of November 23, 2009

Exhibit 10.27

TABLE OF CONTENTS

ARTICLE I DEFINITIONS        1

1.1            Certain Defined Terms.          1

ARTICLE II AGREEMENTS OF THE SERVICER     9

2.1            General.  9

2.2            Collection of Asset Payments. 10

2.3            General Servicing Procedures.  10

2.4           Other.    15

2.5            Accounting, Remittances and Owner Reporting.     16

2.6           Delinquency Control.  17

2.7            Foreclosure and Other Similar Realization on Collateral.   17

2.8           Acquired Collateral.    19

2.9            Books and Records.    20

2.10            No Delinquency Advances/Non-Recoverable Advance.         21

2.11            No Prepayment Interest Shortfalls or Payments for Civil Relief Act Reductions.        21

2.12            Reimbursement of the Servicer.        21

2.13           Licenses.           21

2.14            Confidentiality/Protecting Customer Information.      22

ARTICLE III AGREEMENTS OF THE OWNER  22

3.1            Transfer of Servicing.   22

3.2            Documentation.                                           22

3.3            Transfer Notices. 22

3.4            Losses.   23

3.5            Licenses.    23

3.6            Confidentiality/Protecting Customer Information.     23

ARTICLE IV COMPENSATION                   24

4.1            Servicing Compensation.            24

ARTICLE V TERM AND TERMINATION 24

5.1            Term.     24

5.2            Termination.         24

5.3            Transfer Upon Termination; Costs and Expenses.                        25

5.4            Reimbursement.                                       25

5.5           Accounting.                   25

5.6           Survival.         25

ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE OWNER             26

6.1            Authority.        26

6.2            Authorization, Enforceability and Execution.       26

6.3            No Conflict.     26

6.4            No Consent.                   26

6.5            No Litigation.                 27

6.6            Statements Made.          27

6.7            The Assets.     27

ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE SERVICER       27

7.1            Authority.              28

7.2            Authorization, Enforceability and Execution.         28

7.3           No Conflict.      28

7.4            No Consent.28

7.5            No Litigation.             29

ARTICLE VIII INDEMNIFICATION AND LIABILITY                           29

8.1            Standard of Liability; Indemnification.      29

8.2            Indemnification by the Owner.         29

8.3            Procedure for Indemnification.                   30

8.4            Limits on Servicer Obligations.                                 30

ARTICLE IX ANNUAL REPORTING       31

9.1           Servicer Compliance Statement.         31

9.2            Report on Assessment of Compliance and Attestation.           31

ARTICLE X MISCELLANEOUS               31

10.1            Independence of Parties.             31

10.2            Changes in Practices.         31

10.3            Assignment of Servicing.            31

10.4           Prior Agreements.               32

10.5           Entire Agreement.               32

10.6            Invalidity.                   32

10.7            Effect.                          32

10.8            Damage Limitation.       32

10.9            Applicable Law.                        32

10.10                Notices.                           33

10.11                Waivers.                                     33

10.12                Binding Effect.                33

10.13                Headings.                       33

10.14                Appendices, Schedules and Exhibits.           33

10.15                Counterparts.  33

           This OMNIBUS ASSET SERVICING AGREEMENT is made as of November 23, 2009 by and between First Midwest Bank(the “Owner”), and Bayview Loan Servicing, LLC (the “Servicer”).

RECITALS:

WHEREAS, from time to time the Owner will acquire ownership of certain Assets (as defined herein);

WHEREAS, the Owner desires that the Servicer perform certain servicing functions for the Owner, and the Servicer desires to perform such servicing functions, with respect to the Assets made subject to this Agreement by the mutual agreement of the Owner and the Servicer from time to time; and

WHEREAS, different categories of Assets will require different terms for servicing and other operative terms, and the Owner and the Servicer desire to supplement this Agreement with Appendices (as defined herein) related to specific categories of Assets, as necessary and as mutually agreed to by the Owner and the Servicer from time to time.

NOW, THEREFORE, in consideration of the mutual promises contained herein and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS

1.1Certain Defined Terms. 

For purposes of this Agreement, each of the following terms shall have the meaning specified with respect thereto.

“Acquired Collateral Account” shall have the meaning assigned thereto in Section 2.8(b) hereof.

“Acquired Collateral” shall mean Collateral acquired by the Servicer through foreclosure, deed-in-lieu of foreclosure, other realization upon a Security Instrument, or otherwise in connection with a defaulted Loan, or as to which the servicing or management is transferred to the Servicer and made subject to this Agreement and the applicable Appendix by the written agreement of the parties, including but not limited to Mortgaged Property in the case of a Mortgage Loan.

“Affiliate” shall mean with respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person.  For the purposes of this definition, “control” when used with respect to any specified Persons means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Agreement” shall mean this Omnibus Asset Servicing Agreement, as supplemented by the Appendices executed by the parties from time to time, and together with all schedules and exhibits hereto and thereto, as the same may be from time to time amended.

“Ancillary Income” shall include, but not be limited to late fees, late charges, not sufficient funds fees, satisfaction fees, assumption and modification fees and interest on Custodial Accounts, Escrow Accounts (to the extent not required to be paid to the related Borrower pursuant to Applicable Requirements) and Acquired Collateral Accounts, and any other amounts specified in an applicable Appendix.  Ancillary Income shall not include any prepayment premiums, penalties or charges or yield maintenance payments.

“Appendix” shall mean an appendix to this Agreement containing additional terms and obligations of the parties related to one or more specific categories of Assets subject to this Agreement, as executed by the parties from time to time, and as the same may be from time to time amended.

“Applicable Requirements” shall mean, as of the time of reference, all of the following, as applicable:  (i) all Asset-related obligations of the Servicer, including without limitation those contractual obligations of the Servicer contained in this Agreement and in the Asset Documents for which the Servicer is responsible; (ii) all applicable Asset-related federal, state and local legal and regulatory requirements (including statutes, rules, regulations and ordinances) binding upon the Servicer; and (iii) generally accepted servicing customs and practices in the servicing industry for the related Asset.

“Asset” shall mean an asset made subject to this Agreement and the applicable Appendix by the mutual written agreement of the parties, which may include, among other assets: (i) a Single Family Mortgage Loan, (ii) a Multifamily Mortgage Loan, (iii) a Commercial Mortgage Loan, (iv) a Residential Construction Loan, (v) a Commercial Construction Loan, (vi) a HELOC, (vii) a Reverse Mortgage Loan, (viii) a Revolving Unsecured Loan, (ix) a Vehicle Loan, (x) a Farm Loan, (xi) an Equipment Lease Loan, (xiii) a Closed-End Unsecured Consumer Loan, (xiv) Acquired Collateral, and (xv) any asset falling into such other categories of assets agreed to by the parties in writing.

“Asset Documents” shall mean with respect to any Asset, as applicable, the related Note with applicable addenda and riders, Security Instrument with applicable addenda and riders, Assignment and any intervening related Assignments, title Insurance Policy, mortgage Insurance Policy, Collateral Insurance Policy, appraisal report, and all other documents and instruments pertaining to an Asset, to the extent in the Owner’s or the Owner’s agent’s (including a custodian’s) possession and delivered to Servicer.

“Asset Payment” shall mean the scheduled monthly principal and/or interest payment on an Asset for any month, and any other payment due from a Borrower pursuant to the Asset Documents, as such payments may have been reduced by any Deficient Valuation.

“Asset Schedule” shall mean a listing of Assets to be made subject to this Agreement, as agreed to by the parties from time to time, and containing such information as may be agreed to by the parties.  An Asset Schedule may, but is not required to be, incorporated into or attached to an Appendix.

“Assignment” shall mean with respect to each Asset, an assignment of the Security Instrument, notice of transfer or equivalent instrument sufficient under the laws of the jurisdiction wherein the related Collateral and/or Borrower is located or domiciled (as appropriate under Applicable Requirements) to reflect of record the transfer of the Security Instrument.

“Borrower” shall mean with respect to any Asset, the Person or Persons primarily obligated to make payments on the related Note.

“Business Day” shall mean any day other than a Saturday, Sunday or national holiday, or a day on which banking and savings and loan institutions in the State of Florida and federally chartered savings banks are authorized or obligated by law or executive order to be closed.

“Closed-End Unsecured Consumer Loan” shall mean an unsecured, closed-end Loan made for a consumer purposes, made subject to this Agreement and the applicable Appendix by the written agreement of the parties

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Collateral” shall mean any and all of the collateral securing the obligations of a Borrower under a Security Instrument, including but not limited to the Mortgaged Property in the case of a Mortgage Loan.

“Collection Period” shall mean, unless otherwise provided in the related Appendix, (a) as to any Servicer Remittance Date, the calendar month preceding the calendar month in which such Servicer Remittance Date occurs, and (b) as to the first Servicer Remittance Date hereunder, the Cut-off Date through the last Business Day of the calendar month preceding the calendar month in which the first Servicer Remittance Date occurs.

“Commercial Construction Loan” shall mean a Loan secured by commercial real property (or by mixed residential/commercial, or single family or multifamily residential real property, including condominium developments, to the extent such Loan is made to a commercial Borrower developing such property) for the financing of the construction thereof and made subject to this Agreement and the applicable Appendix by the written agreement of the parties.

“Commercial Mortgage Loan” shall mean a Loan secured by commercial real property (or by mixed residential/commercial or multifamily residential real property, including condominium developments) and made subject to this Agreement and the applicable Appendix by the written agreement of the parties.

“Custodial Account” shall have the meaning assigned thereto in Section 2.3(e) hereof.

“Cut-off Date” shall mean the cut-off date for any Asset, as set forth in the related Asset Schedule, or otherwise mutually agreed to by the parties in writing.

“Deficient Valuation” shall mean with respect to any Asset, the dollar amount of any reduction in the principal balance owed by the related Borrower, as ordered by a court in connection with a bankruptcy proceeding with respect to the related Borrower.

“Determination Date” shall mean the 15th day of each month or, if such day is not a Business Day, the immediately preceding Business Day, or such other date as provided in the applicable Appendix with respect to a given category of Assets.

“Eligible Account” shall mean  (i) An account or accounts maintained with a federal or state chartered depository institution or trust company the short-term unsecured debt obligations of which (or, in the case of a depository institution or trust company that is the principal subsidiary of a holding company, the short-term unsecured debt obligations of such holding company) are rated at the time any amounts are held on deposit therein (a) “P-1” by Moody’s (or at least “A2” if such institution has no short-term rating from Moody’s), (b) at least “A-2” by S&P (or at least “BBB+” if such institution has no short-term rating from S&P) and (c) “F1” by Fitch (with respect to the preceding clauses (a), (b) and (c), in each case if such rating agency is a Rating Agency, and such applicable ratings from S&P, Fitch and Moody’s, the “Required Ratings”), provided, in each case, that following a downgrade, withdrawal or suspension of any such institution’s rating below any applicable Required Rating, each such account shall promptly (and in any case within not more than 30 calendar days) be moved to another institution which has the Required Ratings, or to one or more segregated trust accounts as provided in clause (ii); or (ii) a segregated trust account or accounts maintained with the trust department of a federal or state chartered depository institution or trust company, which institution or company has capital and surplus of not less than $50 million, acting in its fiduciary capacity.

“Eligible Investments” shall mean any of the following (which may be purchased by or through the Servicer or any Affiliate):

(i)obligations of, or guaranteed as to the full and timely payment of principal and interest by, the United States or obligations of any agency or instrumentality thereof, when such obligations are backed by the full faith and credit of the United States;

(ii)repurchase agreements on obligations specified in clause (i); provided that the short-term debt obligations of the party agreeing to repurchase are rated at least one of the following:  F1 by Fitch, A-1 by S&P or P-1 by Moody’s;

(iii)federal funds, certificates of deposit, time deposits and bankers’ acceptances (which shall each have an original maturity of not more than 90 days and, in the case of bankers’ acceptances, shall in no event have an original maturity of more than 365 days) of any United States depository institution or trust company incorporated under the laws of the United States or any state; provided that the short-term obligations of such depository institution or trust company are rated at least one of the following:  F1 by Fitch, A-1 by S&P or P-1 by Moody’s;

(iv)commercial paper (having original maturities of not more than 30 days) of any corporation incorporated under the laws of the United States or any state thereof which on the date of acquisition is rated at least one of the following:  F1 by Fitch, A-1 by S&P or P-1 by Moody’s;

(v)securities bearing interest or sold at a discount issued by any corporation incorporated under the laws of the United States of America or any state thereof which have a short-term credit rating from a rating agency, at the time of investment or the contractual commitment providing for such investment, at least one of the following:  F1 by Fitch, A-1 by S&P or P-1 by Moody’s;

(vi)securities of money market funds or mutual funds rated AAAm or AAAm-G by S&P, AAA or better by Fitch or Aa1 by Moody’s (including any such funds for which the Servicer, or any Affiliate, receives compensation as administrator, sponsor, agent or the like); and

(vii)any other demand, money market, common trust fund or time deposit or obligation, or interest-bearing or other security, or other investment rated in the highest rating category by each rating agency that rates such security;

provided that (A) such obligation or security is held for a temporary period pursuant to Treasury Regulation Section 1.860G-2(g)(1) and (B) no instrument described above is permitted to evidence either the right to receive (a) only interest or only principal with respect to obligations underlying such instrument or (b) both principal and interest payments derived from obligations underlying such instrument and the interest and principal payments with respect to such instrument provided a yield to maturity at par greater than 120% of the yield to maturity at par of the underlying obligations; and provided, further, that no instrument described above may be purchased at a price greater than par if such instrument may be prepaid or called at a price less than its purchase price prior to stated maturity.

“Equipment Lease Loan” shall mean a Loan secured by a Borrower’s leasehold interest in commercial equipment, and made subject to this Agreement and the applicable Appendix by the written agreement of the parties.

“Escrow Payments” shall have the meaning assigned thereto in Section 2.3(f) of this Agreement.

“Farm Loan” shall mean a Loan secured by real property used for agricultural purposes, or other Loan made pursuant to United States Department of Agriculture Rural Housing Services or Farm Service Agency programs as agreed to by the parties, and made subject to this Agreement and the applicable Appendix by the written agreement of the parties.

“FDIC” shall mean the Federal Deposit Insurance Corporation.

“Fitch” shall mean  Fitch, Inc., or any successor thereto.

“HELOC” shall mean an open-ended loan or line of credit secured by residential real property that includes one through four dwelling units, made subject to this Agreement and the applicable Appendix by the written agreement of the parties.

“Insurance Policy” shall mean any hazard, title, flood or other insurance policy insuring the Asset.

“Liquidation Proceeds” shall mean any amounts (including the proceeds of any Insurance Policy and the proceeds from the sale of any Acquired Collateral) recovered by the Servicer in connection with an Asset, whether through trustee’s sale, foreclosure sale or otherwise, other than amounts required to be paid to the Borrower pursuant to the terms of the applicable Asset Documents or otherwise pursuant to applicable law.

“Loan” shall mean an Asset comprised of an extension of credit to a Borrower that is evidenced by a Note and may be secured by Collateral pursuant to a Security Instrument.  A Loan includes a Mortgage Loan.

“Loan Rate” shall mean the annual rate of interest borne by a Note, which is set forth in such Note.

“Loss Share Agreement” shall mean a loss share agreement relating to one or more Assets entered into between the FDIC and the Owner, in the form provided to Servicer on or prior to the applicable Transfer Date, and specified in the applicable Appendix.

“Moody’s” shall mean Moody’s Investors Service, Inc., or any successor thereto.

“Mortgage” shall mean, with respect to any Mortgage Loan, the written instrument creating a valid lien on real property, which instrument may be in the form of a mortgage, deed of trust, deed to secure debt or other instrument creating a lien on or interest in the Mortgaged Property and any other Collateral.

“Mortgage Loan” shall mean a Single Family Mortgage Loan, Multifamily Mortgage Loan, Commercial Mortgage Loan, Residential Construction Loan, Commercial Construction Loan, HELOC, Reverse Mortgage Loan, Farm Loan (to the extent secured by real property), or any other Loan secured by interest in real property made subject to this agreement and the applicable Appendix by the written agreement of the parties.

“Mortgaged Property” shall mean any of the fee simple interest in real property, together with improvements thereto and any fixtures, leases and other real or personal property, or interests therein, securing the related Note related to a Mortgage Loan.

“Multifamily Mortgage Loan” shall mean a Loan secured by residential real property that includes five or more dwelling units, made subject to this Agreement and the applicable Appendix by the written agreement of the parties.

“Non-Recoverable Advance” means any Servicing Advance which the Servicer has determined in its good faith business judgment would not be ultimately recoverable by the Servicer from Liquidation Proceeds or other collections and recoveries in respect of the Asset or Collateral.

“Note” shall mean the original executed promissory note evidencing the indebtedness of a Borrower under a Loan, or if such Loan is not evidenced by a promissory note, the original executed document or other instrument primarily evidencing the indebtedness of the Borrower under such Loan, or lost note affidavit if and as permitted under Applicable Requirements.

“Out of Pocket Expenses” shall mean the direct, out-of-pocket expenditures of the Servicer incurred, or to be incurred, as the context requires, in connection with the servicing, administration, management, property protection, disposition, operation, full, partial or discounted liquidation, sale or enforcement proceedings, foreclosure or other realization on Collateral underlying Assets, including, but not limited to amounts to be paid for or paid to or on behalf of independent legal counsel (including court filing fees), independent arbitrators, independent repossession agents, appraisers, brokers, environmental consultants, property managers, tax services, receivers, and state and federal regulatory agencies incident to their audits or inquiries, required UCC searches and title searches, tax searches, structural reviews, third-party fees, Asset-related travel, property inspections, and the like and for arbitration filing fees, UCC and mortgage filing and release fees, charges the Servicer has paid in connection with checks from Borrowers returned for insufficient funds, and expenses not otherwise reimbursed to maintain, store, and dispose of the Collateral.

“Owner” shall mean First Midwest Bank.

“Person” shall mean an individual, partnership, corporation (including a statutory trust), joint stock company, limited liability company, trust, association, joint venture, governmental authority or any other entity of whatever nature.

“Preservation Expenses” shall mean the expenditures made by the Servicer in connection with a foreclosure or other realization on Collateral, or in connection with Acquired Collateral and its management and servicing, prior to the liquidation thereof, including, without limitation, expenditures for real estate or personal property taxes and assessments (including any penalties, late fees or late charges incurred for late payment or nonpayment), payments to senior lienholders or holders of any ground lease, Insurance Policy premiums, property restoration or preservation.

“Rating Agency” shall mean each of Fitch, Moody’s and S&P and any successors thereto.

“Regulation AB” shall mean Subpart 229.1100 – Asset Backed Securities (Regulation AB), 17 C.F.R. §§229.1100-229.1123, as such may be amended from time to time, and subject to such clarification and interpretation as have been provided by the United States Securities and Exchange Commission in the adopting release (Asset-Backed Securities, Securities Act Release No. 33-8518, 70 Fed. Reg. 1,506, 1,531 (Jan. 7, 2005)) or by the staff of the Securities and Exchange Commission, or as may be provided by the Securities and Exchange Commission or its staff from time to time.

“Residential Construction Loan” shall mean a Loan secured by residential real property that includes one through four dwelling units, for the financing of the construction thereof, and made subject to this Agreement and the applicable Appendix by the written agreement of the parties.

“Reverse Mortgage Loan” shall mean a Loan that is, or is intended to be, insured by the Federal Housing Administration pursuant to FHA’s Home Equity Conversion Mortgage program, is intended for sale to Fannie Mae pursuant to Fannie Mae’s Home Keeper program, or is another reverse mortgage loan product, secured by residential real property that includes one through four dwelling units, and made subject to this Agreement and the applicable Appendix by the written agreement of the parties.

“Revolving Unsecured Loan” means an unsecured, open-ended Loan, made subject to this Agreement and the applicable Appendix by the written agreement of the parties.

“S&P” shall mean Standard and Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., or any successor thereto.

“Security Instrument” shall mean, with respect to any Loan secured by any Collateral, any and all documents, agreements, filings, financing statements or other materials evidencing the Owner’s or the Servicer’s interest (as applicable) in the Collateral securing the obligations of Borrower with respect to such Loan, including but not limited to a Mortgage in the case of a Mortgage Loan.

“Servicer” shall mean Bayview Loan Servicing, LLC or any successor or permitted assign under the terms of this Agreement.

“Servicer Remittance Date” shall mean the 18th day of each month and if such day is not a Business Day, the next succeeding Business Day, or such other date as provided in the applicable Appendix with respect to a given category of Assets.

“Servicing Advance” shall mean the Out of Pocket Expenses incurred by the Servicer in the performance of its servicing obligations under this Agreement, including, but not limited to, the cost of (i) the preservation, restoration and protection of any Asset or Collateral, (ii) any enforcement or administrative or judicial proceedings, including foreclosures and other realizations on Mortgages, Security Instruments, liens and other security interests in Collateral, (iii) the management (including fees in connection therewith) and liquidation of any Acquired Collateral or Assets, (iv) taxes, assessments, water rates, sewer rents and other charges which are or may become a lien upon the Collateral or Assets, fire and hazard insurance coverage, (v) all Preservation Expenses, and (vi) other amounts designated as Servicing Advances pursuant to this Agreement or an applicable Appendix.  In addition, Servicing Fees, to the extent not paid when due, shall be deemed, and shall be reimbursable as, a Servicing Advance.

“Servicing Fees” shall have the meaning assigned thereto in Section 4.1 hereof.

“Servicing Fee Schedule” shall mean the applicable listing of Servicing Fees with respect to any Assets, as agreed to by the parties from time to time.  A Servicing Fee Schedule may, but is not required to be, incorporated into or attached to an Appendix.

“Servicing Standard” shall have the meaning assigned thereto in Section 2.1(c) hereof.

“Single Family Mortgage Loan” shall mean a Loan secured by residential real property that includes one through four dwelling units, made subject to this Agreement and the applicable Appendix by the written agreement of the parties.

“Termination Date” shall mean the date for termination of this Agreement with respect to any or all Assets, that is the earlier of (i) mutual consent of the Servicer and the Owner in writing to termination or (ii) a termination in accordance with Section 5.2 hereof.

“Transfer Date” shall mean each date on which the Servicer shall assume responsibility for performing the servicing functions and responsibilities related to an Asset as provided herein and in the applicable Appendix.

“Termination Fee” shall mean the applicable fee associated with the termination of this Agreement with respect to any or all Assets, as set forth in the applicable Servicing Fee Schedule or Appendix.

“UCC” shall mean the Uniform Commercial Code, as in effect in the applicable jurisdictions.

“Vehicle Loan” shall mean a Loan secured by one or more motor vehicles or boats, and made subject to this Agreement and the applicable Appendix by the written agreement of the parties.

ARTICLE II

AGREEMENTS OF THE SERVICER

2.1General.

(a)Appointment.  Owner hereby appoints Servicer, and Servicer hereby accepts such appointment, to service and administer the Assets for Owner in accordance with the terms of this Agreement.

(b)Authority.  The Servicer shall have full power and authority, acting alone or through agents (but subject to Section 10.3), to do or cause to be done any and all things in connection with such servicing and administration which the Servicer may deem necessary or desirable and consistent with the terms of this Agreement and the applicable Appendices, subject to the Servicing Standard, and any and all things that may otherwise be authorized by Owner.

(c)Servicing Standard.  The Servicer shall service and administer the Assets on behalf of, and in the best interests of and for the benefit of, the Owner (as determined by the Servicer in its good faith and reasonable business judgment) in accordance with (i) Applicable Requirements, (ii) the terms of this Agreement, (iii) the applicable Appendices, (iv) the applicable Asset Documents, and (v) to the extent consistent with the foregoing requirements, in the same manner in which, and with the same care, skill, prudence and diligence with which the Servicer services and administers similar assets for third parties; provided, however, that such skill, prudence and diligence shall be at least as favorable as the degree of care, skill, prudence and diligence generally applied by prudent institutional lenders (or owners of the underlying assets, as applicable) servicing their own assets and exercising reasonable business judgment without regard to:

(i)any relationship that the Servicer or any Affiliate of the Servicer may have with the related Borrower;

(ii)the Servicer’s obligation to make Servicing Advances; or

(iii)the Servicer’s right to receive compensation for its services hereunder or with respect to any particular transaction.

The standard set forth in the immediately preceding sentence shall be referred to herein as the “Servicing Standard.”  Owner acknowledges that the Assets include and involved a variety of types of Loans, Collateral, Acquired Collateral, payment status, payment methods and interest calculations, and the applicable Servicing Standard will vary in respect of such differences among the Assets.

(d)Loss Share Agreement.  The Servicer shall provide Owner with the information and services set forth in the related Appendices in order to facilitate Owner’s compliance with its obligations under the Loss Share Agreement(s) specified in such Appendices.

(e)Appendices.  Additional detailed procedures for the servicing of any category of Assets shall be as provided in the related Appendices.  In the event of any conflict between this Agreement and an applicable Appendix, the applicable Appendix shall govern.

2.2Collection of Asset Payments.

The Servicer shall make reasonable efforts to collect all payments called for under the terms and provisions of the Asset Documents (other than any prepayment premiums, penalties or charges that the Servicer has waived in accordance with the Servicing Standard), and shall, to the extent such procedures shall be consistent with this Agreement, follow such collection procedures for all Assets that are consistent with the Servicing Standard.  The Servicer may, consistent with the Servicing Standard, waive, modify or vary any non-material term of any Asset Documents or consent to the postponement of strict compliance with any such term or in any manner grant a non-material indulgence to any Borrower.  Notwithstanding the foregoing, in the event that any Asset is in default or, in the judgment of the Servicer, such default is reasonably foreseeable, the Servicer, consistent with the Servicing Standard, may also waive, modify or vary any term of such Asset Documents (including, with respect to a Loan, material modifications that would change the Loan Rate, defer or forgive the payment of principal or interest or extend the final maturity date of such Loan), accept payment from the related Borrower of an amount less than the principal balance in final satisfaction of such Asset or consent to the postponement of strict compliance with any term or otherwise grant any indulgence to any Borrower.

2.3General Servicing Procedures.

Until the principal and interest of each Loan and satisfaction of the Borrower’s obligations with respect to each Asset is paid in full, unless this Agreement is sooner terminated with respect to such Asset pursuant to the terms hereof, and subject to all Applicable Requirements and the Servicing Standard, the Servicer shall:

(a)With respect to Loans requiring advances of principal to Borrowers or other Persons, disburse Loan proceeds in accordance with the requirements of the Asset Documents, and as may be provided in the applicable Appendix, provided that notwithstanding anything to the contrary in this Agreement, the Servicer shall not be required to advance its own funds for such purposes.  In the event Servicer funds any such advances with its own funds, such amounts shall, in addition, be deemed to be Servicing Advances, recoverable as provided in this Agreement.

(b)Collect applicable payments of principal, interest and, to the extent required under the Asset Documents, applicable deposits for taxes, assessments and other public charges that are generally impounded, reserve funds, fire and hazard insurance premiums, mortgage insurance premiums, flood insurance premiums and other insurance premiums, as required and as they become due.

(c)Accept Asset Payments in accordance with the Asset Documents.  Deficiencies or excesses in payments or deposits shall be accepted and applied, or accepted and unapplied.

(d)Apply all Asset Payments and impound deposits collected from the Borrower, and maintain permanent account records capable of producing, in chronological order: the date, amount, distribution, installment due date or other transactions affecting the amounts due from or to the Borrower and indicating the latest outstanding balances of principal, impound deposits, advances, and unapplied payments.

(e)Unless otherwise provided in the applicable Appendix, establish and maintain one or more accounts (collectively, the “Custodial Account”), entitled “Bayview Loan Servicing, LLC, as servicer for First Midwest Bank, as Owner.”  Each Custodial Account shall be an Eligible Account.  The Servicer will be required to deposit into each Custodial Account no later than the second Business Day after receipt all proceeds (except Ancillary Income and amounts to be deposited into Escrow Accounts or Acquired Collateral Accounts pursuant to this Agreement) of the related Asset received by the Servicer and to remit such proceeds to the Owner not later than the Servicer Remittance Date.  Funds in each Custodial Account may be invested only in Eligible Investments in accordance with the provisions set forth in Section 2.3(h) hereof.  The Servicer shall, from time to time, make withdrawals from each Custodial Account for any of the following purposes: (i) to remit to the Owner in the amounts and in the manner set forth in Section 2.5(a) and (b); (ii) to fund disbursements of principal to the Borrowers or other Persons with respect to Residential Construction Loans, Commercial Construction Loans, Revolving Unsecured Loans, HELOCs, Reverse Mortgage Loans, and other Assets providing for disbursements of principal; (iii) to pay the Servicer any unpaid Servicing Fees and to reimburse the Servicer for any unreimbursed Servicing Advances from the general funds in the Custodial Account; (iv) to reimburse the Servicer for any expenses incurred by the Servicer of its obligations under this Agreement from the general funds in the Custodial Account; (v) to pay to the Servicer as servicing compensation (in addition to the Servicing Fees) on the Servicer Remittance Date any interest or investment income earned on funds deposited in the Custodial Account; (vi) to reimburse the Servicer for any penalty, late fee or late charge incurred by the Servicer for the late payment or nonpayment of any property taxes and assessments by any prior servicer of any Asset; (vii) to withdraw any amounts deposited to the Custodial Account in error; and (viii) following the Termination Date with respect to the related Assets, to clear and terminate the Custodial Account.   Notwithstanding anything to the contrary in this Agreement, the Servicer is not obligated to deposit Ancillary Income into the Custodial Account, although it may do so for ease of operations, and to the extent the Servicer does deposit such amounts into the Custodial Account, the Servicer shall be permitted to withdraw such amounts at any time in its sole discretion.  In addition, the Servicer may withdraw amounts from a Custodial Account to make distributions in accordance with the terms of a cash management agreement or similar agreement in respect of any Asset serviced hereunder.

(f)Unless otherwise provided in the applicable Appendix, establish and maintain one or more accounts (the “Escrow Accounts”, in the form of time deposit or demand accounts, titled, “Bayview Loan Servicing, LLC, as servicer for First Midwest Bank, as Owner, and various Borrowers”) into which (x) all collections from the Borrowers for the payment of taxes, assessments and other public charges that are generally impounded, reserve funds, fire and hazard insurance premiums, mortgage insurance premiums, flood insurance premiums and other insurance premiums and comparable items for the account of the Borrowers (“Escrow Payments”) and (y) all amounts representing proceeds of any hazard or other Insurance Policies which are to be applied to the restoration or repair of any Collateral shall be deposited and retained.  The Escrow Accounts shall be Eligible Accounts.  The Servicer shall deposit in the Escrow Accounts, no later than the second Business Day after receipt, and retain therein, all Escrow Payments collected on account of the Assets, for the purpose of effecting the timely payment of any such items as required under the terms of this Agreement.  Withdrawals of amounts from an Escrow Account may be made only to (i) effect timely payment of taxes, assessments, hazard insurance premiums, and comparable items for each Asset; (ii) reimburse the Servicer out of related collections for any Servicing Advances made pursuant to Section 2.3(j) (with respect to taxes and assessments) and Section 2.3(k) (with respect to hazard insurance) with respect to each Asset; (iii) refund to the Borrowers any sums as may be determined to be overages; (iv) pay interest, if required and as described below, to the Borrowers on balances in the Escrow Account; (v) to withdraw any amount deposited in the Escrow Accounts in error; or (vi) clear and terminate the Escrow Account at the termination of the Servicer’s obligations and responsibilities in respect of the related Assets under this Agreement; (vii) for application to restoration or repair of the Collateral; and (viii) for transfer to the Custodial Account and application to reduce the principal balance of the Assets in accordance with the terms of the related Note and other Asset Documents.  As part of its servicing duties, the Servicer shall pay to the Borrowers interest on funds in Escrow Accounts, to the extent required by law and, to the extent that interest earned on funds in the Escrow Accounts is insufficient, to pay such interest from its or their own funds, without any reimbursement therefor.  As applicable, the Servicer will determine the amount of deposits to be made by the Borrowers and will furnish to each Borrower, at least once a year, an analysis of the escrow/impound account, to the extent required by Applicable Requirements.

(g)Be responsible for monitoring and reconciling the Custodial Accounts and Escrow Accounts in accordance with Applicable Requirements.  The Servicer shall attempt to promptly resolve any discrepancies and shall be responsible for all expenses and consequences for failure to reconcile and resolve such discrepancies.

(h)Direct, in its discretion, any depository institution maintaining the Custodial Accounts to invest the funds in one or more Eligible Investments.  All such Eligible Investments shall be held to maturity, unless payable on demand.  Any investment of funds in a Custodial Account shall be made in the name of the Servicer as nominee of the Owner.  The Servicer shall deposit in the Custodial Account, from its own funds, the amount of any loss incurred in respect of any such Eligible Investment made with funds in such account immediately upon realization of any loss.

(i)Maintain accurate records reflecting the status of taxes, ground rents and other recurring charges generally accepted by the servicing industry for the related Asset, which would become a lien on any Collateral.  For all Assets providing for the payment to and collection by the Servicer of impound deposits for taxes, ground rents or such other recurring charges, the Servicer shall remit payments for such charges before the later of (i) any penalty date and (ii) 30 days after the applicable Transfer Date.

(j)In accordance with the standards of the preceding Section 2.3(i), advance or cause to be advanced funds as necessary for the purpose of effecting the timely payment of taxes and assessments with respect to any Collateral, which Servicing Advances shall be reimbursable in the first instance from related collections from the Borrowers.  Servicing Advances incurred by the Servicer in connection with the servicing of the Assets (including any penalties in connection with the payment of any taxes and assessments or other charges) on any Collateral shall be recoverable by the Servicer to the extent described herein.

(k)Use its reasonable efforts in accordance with the Servicing Standard to cause the related Borrower to maintain for each Asset (other than any Acquired Collateral), to the extent applicable, and if the Borrower does not so maintain, shall itself maintain to the extent the Owner as holder has an insurable interest, insurance with coverage on the related Collateral in a commercially reasonable amount, to the extent provided in the applicable Appendix.  The Servicer shall maintain such insurance from an insurer with coverage on Collateral in a commercially reasonable amount.  The Servicer shall require that all Insurance Policies required hereunder shall name the Servicer and its successors and assigns as the holder, as loss payee.

(l)Deposit into the related Custodial Account any amounts collected by the Servicer under any Insurance Policies (other than amounts to be applied to the restoration and repair of the related Collateral or amounts to be released to the Borrower in accordance with the terms of the related Asset Documents, or amounts typically deposited into Escrow Accounts).  It is understood and agreed that no earthquake or other additional insurance is to be required of any Borrower or to be maintained by the Servicer other than pursuant to the terms of the related Asset Documents and pursuant to such applicable laws and regulations as shall at any time be in force and as shall require such additional insurance.  If any Mortgaged Property is located in a federally designated special flood hazard area, the Servicer will use its reasonable efforts in accordance with the Servicing Standard to cause the related Borrower to maintain or will itself obtain flood insurance in respect thereof.  If any Acquired Collateral is comprised of improved real property is located in a federally designated special flood hazard area, the Servicer will obtain flood insurance in respect thereof.  Costs of the Servicer of maintaining insurance policies shall be paid by the Servicer as a Servicing Advance and shall be reimbursable to the Servicer.  The Servicer agrees to prepare and present, on behalf of itself and the Owner, claims under each related insurance policy in a timely fashion in accordance with the terms of such policy and to take such reasonable steps as are necessary to receive payment or to permit recovery thereunder.

(m)Except as may otherwise be provided in the applicable Appendix, unless the Servicer is required to exercise its rights under a “due on sale clause” pursuant to the last paragraph of this Section 2.3(m), approve the sale, assignment or other transfer of any Collateral, if the current Borrower makes a request therefor, provided that the Servicer shall have received sixty (60) days’ prior written notice of the proposed transfer, no event of default under the related Asset Documents shall have occurred and be continuing, and the following additional criteria are satisfied.

(i)the current Borrower shall pay any and all fees and out-of-pocket costs incurred in connection with the transfer of the Collateral (including without limitation counsel fees and disbursements and all recording fees, insurance premiums intangible and other taxes, and with respect to Mortgaged Property, any applicable title insurance premiums and mortgage and transfer taxes);

(ii)if applicable, the proposed transferee or its principals shall have demonstrated expertise in owning and operating properties similar in location, size and operation to the Collateral, which expertise shall be determined by the Servicer, in the Servicer’s sole discretion;

(iii)the proposed transferee and its principals shall, as of the date of such transfer, have an aggregate net worth and liquidity acceptable to the Servicer, in the Servicer’s sole discretion;

(iv)the proposed transferee shall assume all of the obligations of the current Borrower under the related Asset Documents in all respects, including without limitation by entering into an assumption agreement in form and substance satisfactory to the Servicer (in the Servicer’s sole discretion) and, if applicable, shall execute in favor of the Owner a guaranty and an affidavit and indemnity of borrower and guarantor regarding hazardous and toxic materials in the case of Mortgage Loans;

(v)no event of default under the related Asset Documents, or other event which, with the giving of notice, passage of time or both would constitute an event of default under the related Asset Documents, shall otherwise occur as a result of such transfer, and the proposed transferee and its principals shall deliver (A) all organization documentation requested by the Servicer, which shall be satisfactory to the Servicer (in the Servicer’s sole discretion) and (B) all certificates, agreements and covenants required by the Servicer; and

(vi)with respect to Mortgage Loans, the current Borrower shall deliver, at its sole cost and expense, an endorsement to the existing title policy insuring the Security Instrument, as modified by the assumption agreement, as a valid first lien on the Mortgaged Property and naming the proposed transferee as owner of the Mortgaged Property, which endorsement shall insure that, as of the date of the recording of the assumption agreement, the Mortgaged Property shall not be subject to any additional exceptions or liens other than those contained in the title policy issued in conjunction with the related Asset Documents.

When any Collateral has been or is about to be conveyed by the Borrower, to the extent it has knowledge of such conveyance or prospective conveyance, exercise its rights to accelerate the maturity of the related Asset under any “due-on-sale” clause contained in the related Security Instrument or Note; provided, however, that the Servicer shall not exercise any such right if either (i) the “due-on-sale” clause, in the reasonable belief of the Servicer, is not enforceable under applicable law or (ii) the Servicer determines that such enforcement would not be in the best economic interest of the Owner.  In such event, the Servicer shall make reasonable efforts to enter into an assumption and modification agreement with the Person to whom such Collateral has been or is about to be conveyed, pursuant to which such Person becomes liable under the Note and, unless prohibited by applicable law or the Security Instrument, the Borrower remains liable thereon.  If the foregoing is not permitted under applicable law, the Servicer is authorized to enter into a substitution of liability agreement with such Person, pursuant to which the original Borrower is released from liability and such Person is substituted as the Borrower and becomes liable under the Note.  In connection with any such assumption or substitution agreement, the Asset Payments on the related Loan shall not be changed but shall remain as in effect immediately prior to the assumption or substitution, the stated maturity or outstanding principal amount of such Loan shall not be changed nor shall any required Asset Payments of principal or interest be deferred or forgiven.  Any fee collected by the Servicer for consenting to any such conveyance or entering into an assumption or substitution agreement shall be retained by or paid to the Servicer as Ancillary Income.

(n)With respect to a Loan that contains a provision in the nature of a “due-on-encumbrance” clause, which by its terms (i) provides that such Loan becomes due and payable (or may become due and payable at the lender’s option) upon the creation of any lien or other encumbrance on the related Collateral or (ii) requires the consent of the related lender to the creation of any such lien or other encumbrance on the related Collateral, then for so long as such Loan is owned by the Owner, and to the extent it has knowledge of such lien or other encumbrance, the Servicer, on behalf of the Owner, will be requested to exercise (or decline to exercise) any right it may have as the lender of record with respect to such Loan to (x) accelerate the payments thereon or (y) withhold its consent to the creation of any such lien or other encumbrance, in a manner consistent with the Servicing Standard.

(o)Monitor all UCC financing statements and certificates of title, and file all UCC continuation statements as necessary to avoid a lapse in continuation of a security interest in any Collateral constituting personal property.

2.4Other.

(a)The Owner hereby authorizes the Servicer, at the Servicer’s option, to bring or defend any claim, action, arbitration, litigation or other similar proceeding, in the name of the Owner, to effectuate the servicing of the Assets.  Without limiting the preceding sentence, the Servicer may also assert claims or defend against claims involving the insurance coverage with respect to the Assets.  To the extent that the Servicer incurs any fees, costs, liabilities, judgments, attorney’s fees in connection with the circumstances described in this Section 2.4(a), the Servicer shall be entitled to be reimbursed for these items as Servicing Advances.

(b)The Owner shall execute powers of attorney to the Servicer and furnish it with any other documents as the Servicer shall reasonably request to enable the Servicer to carry out its servicing and administrative duties hereunder.  The Owner shall execute any documentation furnished to it by the Servicer for recordation by the Servicer in the appropriate jurisdictions, as shall be necessary to effectuate the foregoing.

2.5Accounting, Remittances and Owner Reporting.

Unless otherwise provided in the applicable Appendix, the Servicer shall:

(a)On each Servicer Remittance Date, remit by wire transfer of immediately available funds to the Owner all amounts deposited in the related Custodial Account relating to the related Assets as of the close of business on the final Business Day of the related Collection Period, net of charges against and withdrawals from the Custodial Account permitted pursuant to this Agreement.

(b)The Servicer shall remit the amounts described in this Section 2.5 by wire transfer of immediately available funds to the account designated by the Owner.

(c)Upon payment of a Loan in full and receipt from the Owner or its agent of any documents or information necessary to effect such release, have prepared and file any necessary release or satisfaction documents, continue servicing of the Asset pending final settlement, and refund any of the Borrower deposits.

(d)Make applicable Loan Rate adjustments in compliance with the related Asset Documents, Applicable Requirements and the Servicing Standard.  The Servicer shall execute and deliver all appropriate notices required by the related Asset Documents, Applicable Requirements and the Servicing Standard of applicable information regarding such interest rate adjustment, and methods of implementation of such interest rate adjustments and of all prepayments of any Asset hereunder by the Borrower.

(e)Furnish reports in the format provided in Exhibit A hereto on or before the fifth (5th) Business Day of each calendar month, with respect to the preceding Collection Period, and such other reports (or copies of reports) in the format and on the dates set forth in the related Appendices.

(f)Perform such other customary duties and execute such other documents in connection with its duties hereunder as the Owner from time to time reasonably may require subject to the provisions of Section 2.5(g) hereof.

(g)In the event the Owner requests the Servicer to provide special reports or data files or render other related services to the Owner or any third party, the Servicer shall use commercially reasonable efforts to provide said reports, data files, or related services subject to the payment a separate fee to be determined in advance by the Owner and the Servicer. The Servicer shall thereupon bill the requesting party for the cost of such reports, data files or related services including related delivery costs, in accordance with the negotiated fee schedule.

2.6Delinquency Control.

The Servicer shall in accordance with the Servicing Standard:

(a)Be responsible for protecting the Owner’s interest in the Assets by dealing effectively with the Borrowers who are delinquent or in default.  The Servicer’s delinquent Asset servicing program shall include an adequate accounting system which will immediately and positively indicate the existence of delinquent Assets, a procedure that provides for sending delinquent notices, and assessing late charges, and a procedure for the individual analysis of distressed or chronically delinquent Assets;

(b)Maintain a collection department and an on-line automated collection system that substantially complies with the Servicer’s collection guidelines, as applicable; and

(c)Provide the Owner with a month-end collection and delinquency report identifying any delinquent Assets, and from time to time as the need may arise, provide the Owner with Asset service reports relating to any items of information which the Servicer is otherwise required to provide hereunder, or detailing any matters the Servicer believes should be brought to the special attention of the Owner.

2.7Foreclosure and Other Similar Realization on Collateral.

(a)The Servicer shall use its best efforts, consistent with the Servicing Standard, to foreclose upon or otherwise comparably convert the ownership of Collateral securing such of the Assets (if any) as come into and continue in default and as to which no satisfactory arrangements can be made for collection of delinquent payments or for other disposition of such Assets.  To the extent the Acquired Collateral was subject to the UCC, Servicer may exercise all of Owner’s rights and remedies as a secured creditor under the UCC, and under the Asset Documents, including selling the interests of the Borrower in the Collateral at public or private sale, in the entirety or in separate parts, as the Servicer may determine.  The Servicer shall be initially responsible for all costs and expenses incurred by it in any such proceedings; provided, however, that such costs and expenses will be recoverable as Servicing Advances by the Servicer.  The foregoing is subject to the provision that, in any case in which Collateral shall have suffered damage that is not covered by a hazard Insurance Policy or other Insurance Policy, the Servicer shall not be required to expend its own funds toward the restoration of such Collateral unless it shall determine in its discretion that such restoration will increase the net Liquidation Proceeds for the related Asset after reimbursement to itself for such expenses and that such expenses will be recoverable to it through Liquidation Proceeds or otherwise.

(b)As an alternative to foreclosure or comparable conversion of the ownership of Collateral, subject to the terms of any applicable Loss Share Agreement, the Servicer may sell a defaulted Asset if the Servicer determines that such a sale is likely to increase the amount of Liquidation Proceeds, and any such sale of a defaulted Asset by the Servicer shall be effected in a manner expected, in the reasonable judgment of the Servicer, to maximize Liquidation Proceeds.  Notwithstanding the forgoing, the Servicer has no duty to pursue Asset sales as part of its loss mitigation procedures.

(c)Notwithstanding the foregoing provisions of this Section 2.7 or any other provision of this Agreement, with respect to any Mortgage Loan as to which the Servicer has received actual notice of, or has actual knowledge of, the presence of any toxic or hazardous substance on the related Mortgaged Property, the Servicer shall neither obtain title to such Mortgaged Property as a result of or in lieu of foreclosure or otherwise, nor otherwise acquire possession of, or take any other action with respect to, such Mortgaged Property, if, as a result of any such action, the Owner would be considered to hold title to, to be a “mortgagee-in-possession” of, or to be an “owner” or “operator” of such Mortgaged Property within the meaning of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time, or any comparable law, unless the Servicer has also previously determined, based on its reasonable judgment and a report prepared by a Person that regularly conducts environmental audits in accordance with customary industry standards, that:

(i)such Mortgaged Property is in compliance with applicable environmental laws or, if not, that it would be in the best economic interest of the Owner to take such actions as are necessary to bring the Mortgaged Property into compliance therewith; and

(ii)there are no circumstances present at such Mortgaged Property relating to the use, management or disposal of any hazardous substances, hazardous materials, hazardous wastes or petroleum-based materials for which investigation, testing, monitoring, containment, clean-up or remediation could be required under any federal, state or local law or regulation, or that if any such materials are present for which such action could be required, that it would be in the best economic interest of the Owner to take such actions with respect to the affected Mortgaged Property.

(d)With respect to each Mortgage Loan, the Servicer shall make the determination described above on the basis of a report prepared by a Person that regularly conducts environmental audits in accordance with customary industry standards, without regard to whether the Servicer has received notice or has actual knowledge of the presence of any toxic or hazardous substances on the related Mortgaged Property.

(e)The cost of the environmental audit report contemplated by this Section 2.7 shall be advanced by the Servicer, subject to the Servicer’s right to be reimbursed therefor as a Servicing Advance.

(f)If the Servicer determines, as described above, that it is in the best economic interest of the Owner to take such actions as are necessary to bring any such Mortgaged Property into compliance with applicable environmental laws, or to take such action with respect to the containment, clean-up or remediation of hazardous substances, hazardous materials, hazardous wastes, or petroleum-based materials affecting any such Mortgaged Property, then the Servicer shall take such action as it deems to be in the best economic interest of the Owner.  The cost of any such compliance, containment, cleanup or remediation shall be advanced by the Servicer, subject to the Servicer’s right to be reimbursed therefor as a Servicing Advance.

(g)Notwithstanding the foregoing provisions of this Section or any other provision of this Agreement, the Servicer shall not foreclose upon or otherwise comparably convert the ownership of Collateral securing an Asset if in the reasonable judgment of the Servicer it would not be in the best economic interests of the Owner to do so.  In such event, the Servicer will not be required to make any further Servicing Advances in connection with the Asset.

2.8Acquired Collateral.

Except to the extent that the Applicable Requirements or any applicable Appendices provide otherwise, the following provisions shall apply to the management and disposition of Acquired Collateral:

(a)The deed, title, or certificate or bill of sale to any Acquired Collateral shall be taken in the name of the Owner or any other entity or entities used by the Owner to hold Acquired Collateral for investors/owners.

(b)The Servicer shall segregate and hold all funds collected and received in connection with the operation of any Acquired Collateral separate and apart from its own funds and general assets and shall establish and maintain with respect to Acquired Collateral an account held in trust for the Owner (the “Acquired Collateral Account”), which shall be an Eligible Account.  The Servicer shall be permitted to allow the Custodial Account to serve as the Acquired Collateral Account, subject to separate ledgers for each Acquired Collateral.  The Servicer shall be entitled to retain or withdraw any interest income paid on funds deposited in the Acquired Collateral Account.

(c)The Servicer shall have full power and authority, subject only to the specific requirements and prohibitions of this Agreement, to do any and all things in connection with any Acquired Collateral as are consistent with the manner in which the Servicer manages and operates similar property owned by the Servicer or any of its Affiliates, all on such terms and for such period as the Servicer deems to be in the best interests of the Owner.  In connection therewith, the Servicer shall deposit, or cause to be deposited, in the Acquired Collateral Account all revenues received by it with respect to an Acquired Collateral and shall withdraw therefrom funds necessary for the proper operation, management and maintenance of such Acquired Collateral including, without limitation: (i) all insurance premiums due and payable in respect of such Acquired Collateral; (ii) all taxes and assessments in respect of such Acquired Collateral that may result in the imposition of a lien thereon; and (iii) all costs and expenses necessary to maintain such Acquired Collateral.  To the extent that amounts on deposit in the Acquired Collateral Account with respect to an Acquired Collateral are insufficient for the purposes set forth in clauses (i) through (iii) above with respect to such Acquired Collateral, the Servicer shall advance from its own funds such amount as is necessary for such purposes if, but only if, the Servicer would make such advances if the Servicer owned the Acquired Collateral and if in the Servicer’s judgment, the payment of such amounts will be recoverable from the rental or sale of the Acquired Collateral.

(d)Upon request by the Owner or in the Servicer’s discretion, with respect to any Acquired Collateral, the Servicer shall obtain estimations of the value of the Acquired Collateral from parties selected by the Servicer, which may be broker price opinions if the Acquired Collateral is real property, and shall solicit, in a commercially reasonable manner, bids for the purchase of such Acquired Collateral.

(e)Each disposition of Acquired Collateral shall be carried out by the Servicer at such price and upon such terms and conditions as the Servicer reasonably determines to be in the best interest of the Owner and provided the sales price and the related terms and conditions are results of arm’s-length negotiation.  To the extent the Acquired Collateral was subject to the UCC, Servicer may exercise all of Owner’s rights and remedies as a secured creditor under the UCC, and under the Asset Documents, including selling the Acquired Collateral at public or private sale, in the entirety or in separate parts, as the Servicer may determine.  The proceeds of sale of the Acquired Collateral shall be promptly deposited in the Acquired Collateral Account.  As soon as practical thereafter the expenses of such sale shall be paid and the Servicer shall reimburse itself for any related unreimbursed Servicing Advances, unpaid Servicing Fees and unreimbursed advances made pursuant to this Section, and on the Servicer Remittance Date immediately following the date on which such sale proceeds are received, the net cash proceeds of such sale remaining in the Acquired Collateral Account shall be distributed to the Owner.

(f)In addition to the withdrawals from the Custodial Account permitted under Section 2.3(e), the Servicer may from time to time make withdrawals from the Acquired Collateral Account for any Acquired Collateral to reimburse itself for unreimbursed Servicing Advances made in respect of such Acquired Collateral or the related Loan.  On the Servicer Remittance Date, the Servicer shall withdraw from each Acquired Collateral Account maintained by it and remit to the Owner the income from the related Acquired Collateral received during the prior calendar month, net of any withdrawals made pursuant hereto.

(g)The Servicer shall file required information returns (or extensions, if necessary), if any, with respect to the receipt of interest received in a trade or business, reports of foreclosures and abandonments of any Collateral and cancellation of indebtedness income with respect to any Collateral as required by the Code, to the extent set forth in the applicable Appendix.  Such reports shall be in form and substance sufficient to meet the reporting requirements imposed by the Code and a copy thereof shall be sent to the Owner promptly after the filing thereof.

2.9Books and Records .

(a)Upon written request of the Owner, the Servicer shall furnish a detailed statement of its financial condition, shall give such requesting party or its authorized representative opportunity upon notice at any time during its normal business hours to examine the Servicer’s books and records and operating procedures, or shall cause a nationally recognized certified public accountant selected and employed by it to provide the Owner not later than ninety (90) days after the close of the Servicer’s fiscal year, with a certified statement of the Servicer’s financial condition as of the close of its fiscal year.  The Servicer shall make its servicing personnel available during regular business hours to respond to reasonable inquiries from the Owner.  Any additional requests for loan audit or confirmations to be performed by the Servicer’s audit firm on the Assets shall be at the sole expense of the requesting party.  The Servicer will keep records in accordance with industry standards pertaining to each Asset, and such records shall be the property of the Owner and upon termination of this Agreement shall be delivered to the Owner at the Owner’s expense.

(b)The Servicer shall provide to the Owner, and the supervisory agents and examiners of the Owner (which, in the case of supervisory agents and examiners, may be required by applicable state and federal regulations), access to the Asset Documents, such access being afforded without charge but only upon reasonable request and during normal business hours at the offices of the Servicer designated by it.

2.10No Delinquency Advances/Non-Recoverable Advance.

The Servicer shall not be obligated to make any advances for principal or interest payments in respect of any Asset.  Notwithstanding anything in this Agreement to contrary, no Servicing Advance shall be required to be made hereunder by the Servicer if such Servicing Advance would, if made, constitute a Non-Recoverable Advance in the reasonable judgment of the Servicer.

2.11No Prepayment Interest Shortfalls or Payments for Civil Relief Act Reductions.

(a)The Servicer shall not be obligated to make any payments with respect to prepayment interest shortfalls with respect to any Asset.

(b)The Servicer shall not be obligated to make any payments with respect to amounts by which interest collectible on a Loan is less than the interest that would normally be accrued on a Loan at the Loan Rate as a result of application of the Servicemembers Civil Relief Act, as such may be amended from time to time, and similar state and local laws and regulations.

2.12Reimbursement of the Servicer.

In the event the Servicer is entitled to reimbursement for any Servicing Advances, disbursements of principal under a Loan, or other expenses incurred under this Agreement (including penalties, late fees or late charges incurred by the Servicer), any such request for reimbursement shall be reasonably documented by the Servicer in accordance with the Servicing Standard.  In the event that amounts on deposit in the Custodial Account are insufficient to reimburse the Servicer for (i) Servicing Advances, (iii) disbursements of principal under Loans, (iii) penalties, late fees or late charges incurred by the Servicer, or (iv) expenses and costs incurred and reimbursable in accordance with Section 8.1 hereof, the Servicer shall be entitled to request reimbursement from the Owner by providing the Owner with an invoice (and the documentation required in accordance with the previous sentence) on the related the Servicer Remittance Date, or on any date on which such the aggregate total of such amounts outstanding and reimbursable to Servicer exceed $1,000,000 (provided that such invoices shall not be provided any more frequent than weekly), and the Owner shall reimburse the Servicer in full no later than five (5) Business Days thereafter.

2.13Licenses.

The Servicer shall maintain at all times during the term of this Agreement, without suspension or revocation, all material licenses and approvals required by applicable regulatory agencies and governmental authorities, including all material licenses and approvals necessary in each state where Assets, Collateral and Borrowers are located if the laws of such state require licensing or qualification in order to conduct the business of the Servicer with respect to the Assets, Collateral and Borrowers, including as contemplated in this Agreement, and in any event the Servicer shall remain in compliance with the laws of any such state to the extent necessary to ensure the enforceability of the Assets.

2.14Confidentiality/Protecting Customer Information.

The Servicer agrees that it shall comply with all applicable laws and regulations regarding the privacy or security of any personal information concerning Borrowers and shall maintain appropriate administrative, technical and physical safeguards to protect the security, confidentiality and integrity of Customer Information, including, if applicable, maintaining security measures designed to meet the Interagency Guidelines Establishing Standards for Safeguarding Customer Information, 66 Fed. Reg. 8616 and complying with the privacy regulations under Title V of the Gramm-Leach-Bliley Act, 15 U.S.C. § 6801 et seq., and the rules promulgated thereunder.

ARTICLE III

AGREEMENTS OF THE OWNER

3.1Transfer of Servicing.

On or prior to the applicable Transfer Date, the Owner shall take or cause to be taken such steps as may be necessary or appropriate to effectuate and evidence the transfer of the servicing of the related Assets to the Servicer in accordance with applicable law and Applicable Requirements, including any transfer instructions prescribed in any applicable Appendix, at its sole cost and expense.  Subject to the foregoing, Servicer shall use commercially reasonable efforts to assist Owner in transferring the servicing of the related Assets to Servicer.

3.2Documentation.

At its sole cost and expense, on or prior to the related Transfer Date, the Owner shall provide the Servicer with:

(a)All Asset Documents or records in its possession, other than Asset Documents delivered to a custodian, with respect to which Owner shall ensure that Servicer can obtain such Asset Documents directly from such custodian; and

(b)Sufficient data and documentation for each Asset to enable the Servicer to place and continue to service the Asset on its computer system.

3.3Transfer Notices.

The Owner and the Servicer shall cooperatively (other than to the extent either party individually is subject to related requirements pursuant to applicable law, in which case such party shall), in accordance with Applicable Requirements:

(a)Provide or cause to be provided any notices to Borrowers of the transactions contemplated herein as required by applicable law and Applicable Requirements.  The parties shall cooperate to accomplish such notification in a timely and efficient manner as will best facilitate the assumption by the Servicer of the servicing responsibilities.

(b)Notify, or cause to be notified, as applicable, all insurers, by overnight or registered mail, that all insurance premium billings related to the Assets must be sent to the Servicer.  Additionally, the Owner shall, prior to the Transfer Date, obtain or cause to be obtained the written consent of any insurers that have the contractual right to approve the assumption of the servicing responsibilities by the Servicer.

(c)Notify, or cause to be notified, as applicable, taxing authorities of the assumption of the servicing responsibilities by the Servicer and include instructions to deliver all notices and tax bills to the Servicer or the applicable tax service provider, as the case may be, from and after the Transfer Date.

(d)Notify, or cause to be notified, as applicable, all attorneys who, on the Transfer Date, are providing legal services to or on behalf of the Owner or with respect to the Assets in connection with pending litigation, including but not limited to foreclosure litigation, involving one or more of the Assets, of the transfer of the servicing rights and obligations with respect to the Assets to the Servicer.

3.4Losses.

The Owner shall remain responsible, as between the Owner and the Servicer, for losses related to the Owner’s investment in the Assets. Anything herein contained in this Agreement to the contrary notwithstanding, the representations, warranties and covenants of the Servicer contained in this Agreement shall not be construed as a warranty or guarantee by the Servicer as to future payments by any Borrower.

3.5Licenses.

The Owner shall maintain at all times during the term of this Agreement, without suspension or revocation, all material licenses and approvals required by applicable regulatory agencies and governmental authorities, including all material licenses and approvals necessary in each state where Assets, Collateral and Borrowers are located if the laws of such state require licensing or qualification in order to conduct business of the Owner with respect to the Assets, Collateral and Borrowers, including as contemplated in this Agreement, and in any event the Owner shall remain in compliance with the laws of any such state to the extent necessary to ensure the enforceability of the Assets.

3.6Confidentiality/Protecting Customer Information.

The Owner agrees that it shall comply with all applicable laws and regulations regarding the privacy or security of any personal information concerning Borrowers and shall maintain appropriate administrative, technical and physical safeguards to protect the security, confidentiality and integrity of Customer Information, including, if applicable, maintaining security measures designed to meet the Interagency Guidelines Establishing Standards for Safeguarding Customer Information, 66 Fed. Reg. 8616 and complying with the privacy regulations under Title V of the Gramm-Leach-Bliley Act, 15 U.S.C. § 6801 et seq., and the rules promulgated thereunder.

ARTICLE IV

COMPENSATION

4.1Servicing Compensation.

The Owner shall pay the Servicer on each the Servicer Remittance Date or such other date(s) as provided in the applicable Appendix or as otherwise agreed to by the parties in writing,  servicing fees (the “Servicing Fees”) as set forth in the applicable Servicing Fee Schedule.  The Servicer, at its sole option, may net the Servicing Fees (or a portion thereof) and any Ancillary Income that has been deposited in the Custodial Account (or portion thereof) from the amounts on deposit in the Custodial Account and the Owner hereby approves of such action.  The Servicer shall also be entitled to any and all Ancillary Income as additional compensation for the services provided hereunder.  The Owner hereby authorizes the Servicer, to deduct and withdraw the Servicing Fees and Ancillary Income that has been deposited in the Custodial Account from the Custodial Account.

ARTICLE V

TERM AND TERMINATION

5.1Term.

The term of this Agreement with respect to any Asset shall commence on the related Transfer Date and shall extend to the related Termination Date.

5.2Termination.

(a)In the event that the Servicer materially breaches any of its obligations under this Agreement, the Owner shall give prompt written notice to the Servicer.  If such breach is not cured by the Servicer within two (2) Business Days in the case of a breach of the Servicer’s obligation to make the remittances required pursuant to Section 2.5, or within thirty (30) days in the case of a breach of any other provision of this Agreement by the Servicer, after receipt of such notice, the Owner may terminate this Agreement.

(b)In the event that the Owner materially breaches any of its obligations under this Agreement, the Servicer shall give prompt written notice to the Servicer.  If such breach is not cured by the Owner within two (2) Business Days in the case of a breach of the Owner’s obligation to pay the Servicer as required pursuant to Sections 2.12 and 4.1, or within thirty (30) days in the case of a breach of any other provision of this Agreement by the Owner, after receipt of such notice, the Servicer may terminate this Agreement.  In connection with any such termination, Owner shall pay the related Termination Fee, if any.

(c) Upon ninety (90) calendar days’ notice to the Servicer, the Owner may terminate, without cause at its sole option, this Agreement with respect to some or all of the Assets, provided that Owner shall pay the related Termination Fee, if any.

(d)Upon ninety (90) calendar days’ notice to the Owner, the Servicer may terminate, without cause at its sole option, this Agreement with respect to some or all of the Assets.

5.3Transfer Upon Termination; Costs and Expenses.

In connection with any termination, the Servicer hereby agrees to transfer the servicing of the applicable Assets that remain outstanding to the Owner or a successor servicer designated by the Owner.  Upon any termination of this Agreement or Assets subject to this Agreement, the Servicer shall prepare, execute and deliver to the successor entity designated by the Owner any and all Asset Documents and other instruments in its possession with respect to the related Assets, place in such successor’s possession all related Assets, and, in a timely manner, do or cause to be done all other acts or things necessary or appropriate to effect the purposes of such notice of termination, including but not limited to the transfer of the Assets and related Asset Documents and data (i) at the Servicer’s sole cost and expense if the termination is pursuant to Section 5.2(a) or 5.2(d), or (ii) at the Owner’s sole cost and expense if the termination is for any other reason.

5.4Reimbursement.

In connection with any termination or transfer, on the servicing transfer date, the Owner shall reimburse the Servicer for all related unreimbursed Servicing Advances, advances of principal on Loans, and expenses subject to recovery or reimbursement hereunder, and any related unpaid Servicing Fees, net of any amounts owed to the Owner by the Servicer pursuant to this Agreement.

5.5Accounting.

Upon termination of this Agreement, the Servicer shall additionally account for and turn over to the Owner or the Owner’s designee all related funds collected hereunder, less the Servicing Fees then due the Servicer, and deliver to the Owner, the Owner’s designee, as applicable, all records and Asset Documents relating to each Asset then serviced and will advise the Borrowers that their Loans will henceforth be serviced by the applicable successor servicer in accordance with Applicable Requirements.

5.6Survival.

The indemnification obligations and representations and warranties of the parties set forth in this Agreement, the obligations of the parties set forth in Sections 2.12, 2.14, 3.4, 3.6, 4.1, 5.3, 5.4, 5.5, 5.6, 10.8, 10.9, and 10.10 of this Agreement, and any obligations of the parties in the applicable Appendices that by their terms survive termination, shall survive the termination or assignment of this Agreement.

ARTICLE VI 

REPRESENTATIONS AND WARRANTIES OF THE OWNER

As of the date hereof and as of each Transfer Date, the Owner warrants and represents to the Servicer as follows:

6.1Authority.

The Owner is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all material licenses and approvals necessary to carry on its business as now being conducted, including all licenses and approvals required by applicable regulatory agencies and governmental authorities, and is licensed, qualified and in good standing in each state where Assets, Collateral and Borrowers are located if the laws of such state require licensing or qualification in order to conduct business of the type conducted by the Owner as contemplated in this Agreement, and in any event the Owner is in compliance with the laws of any such state to the extent necessary to ensure the enforceability of the terms of this Agreement.

6.2Authorization, Enforceability and Execution.

The Owner has the absolute and unrestricted right, power, authority, and capacity to execute and deliver this Agreement, and to perform its obligations hereunder.The Owner has duly authorized, executed, and delivered this Agreement.  This Agreement constitutes the legal, valid, and binding obligation of the Owner, enforceable against it in accordance with its terms, except to the extent bankruptcy, insolvency, reorganization, fraudulent conveyance, or similar laws affect the enforcement of creditors’ rights generally.  The signatory executing this Agreement on behalf of the Owner is duly authorized to execute and deliver such document.

6.3No Conflict .

Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby, nor compliance with its terms and conditions, shall: (a) violate, conflict with, result in the breach of, or constitute a default under, be prohibited by, or require any additional approval under any of the terms, conditions or provisions of the Owner’s Articles of Incorporation or By-Laws, or of the Owner’s other formative documents, including partnership, limited partnership or joint venture agreements, if any, or of any mortgage, indenture, deed of trust, loan or credit agreement or instrument to which the Owner is now a party or by which it is bound, or of any order, judgment or decree of any court or governmental authority applicable to the Owner, (b) result in the violation of any law, rule, regulation, order, judgment or decree to which the Owner or its property is subject, or impair the ability of the Servicer to service the Assets or (c) result in the creation or imposition of any lien, charge or encumbrance of any material nature upon any of the properties or assets of the Owner.

6.4No Consent .

No consent, approval, authorization or order of any court or governmental agency, instrumentality or body is required for the execution, delivery and performance by or compliance by the Owner with this Agreement or if required, such approval has been obtained prior to the date of execution hereof or related Transfer Date, as applicable.

6.5No Litigation .

There is no litigation, proceeding, claim, demand or governmental investigation pending or, to the knowledge of the Owner, threatened, nor is there any order, injunction or decree outstanding against or relating to the Owner or the Assets, which could result in any material liability to the Servicer or materially impair the ability of the Owner or Servicer to perform its obligations hereunder; nor does the Owner know of any material basis for any such litigation, proceeding, claim or demand or governmental investigation.  The Owner is not in default in any material respect with respect to any order of any court, governmental authority or arbitration board or tribunal to which the Owner is a party or is subject, and the Owner is not in violation of any laws, ordinances, governmental rules or regulations to which it is subject, which such default or violation might materially and adversely affect any of the Assets or result in material cost or liability to the Servicer.

6.6Statements Made.

No representation, warranty or written statement made by the Owner in this Agreement or with respect to any Assets, contains, or will contain, any untrue statement of a material fact or omits, or will omit, to state a material fact necessary to make the statements contained herein or therein not misleading.

6.7The Assets.

The Owner hereby makes the following representations and warranties to the Servicer as of the related Transfer Date only:

(a)There are no accrued liabilities of the Owner with respect to the Assets or circumstances under which such accrued liabilities will arise against the Servicer.

(b)To the best of the Owner’s knowledge, the information set forth in the schedule of Assets and the information contained on the electronic data file delivered to the Servicer is true and correct in all material respects.

(c)The Owner has, on or before the Transfer Date, delivered, or caused to be delivered to the Servicer or the applicable custodian all of the books, records, data, files and other Asset Documents, including records on microfiche, electronic form of their equivalent, in the Owner’s possession or in the possession of the immediately preceding owner or servicer of the Asset.

(d)The Owner is the record titleholder of each Asset, holding title sufficient to enable the Servicer to foreclose upon or otherwise realize against the related Collateral in accordance with this Agreement.

ARTICLE VII

REPRESENTATIONS AND WARRANTIES OF THE SERVICER

As of the date hereof and as of each Transfer Date, the Servicer warrants and represents to the Owner as follows:

7.1  Authority.

The Servicer is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all material licenses and approvals necessary to carry on its business as now being conducted, including all licenses and approvals required by applicable regulatory agencies and governmental authorities, and is licensed, qualified and in good standing in each state where Assets, Collateral and Borrowers are located if the laws of such state require licensing or qualification in order to conduct business of the type conducted by the Servicer as contemplated in this Agreement, and in any event the Servicer is in compliance with the laws of any such state to the extent necessary to ensure the enforceability of the terms of this Agreement.

7.2Authorization, Enforceability and Execution.

The Servicer has the absolute and unrestricted right, power, authority, and capacity to execute and deliver this Agreement, and to perform its obligations hereunder.The Servicer has duly authorized, executed, and delivered this Agreement.  This Agreement constitutes the legal, valid, and binding obligation of the Servicer, enforceable against it in accordance with its terms, except to the extent bankruptcy, insolvency, reorganization, fraudulent conveyance, or similar laws affect the enforcement of creditors’ rights generally.  The signatory executing this Agreement on behalf of the Servicer is duly authorized to execute and deliver such document.

7.3No Conflict.

Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby, nor compliance with its terms and conditions, shall: (a) violate, conflict with, result in the breach of, or constitute a default under, be prohibited by, or require any additional approval under any of the terms, conditions or provisions of the Servicer’s Certificate of Formation, Operating Agreement, or of the Servicer’s other formative documents, including partnership, limited partnership or joint venture agreements, if any, or of any mortgage, indenture, deed of trust, loan or credit agreement or instrument to which the Servicer is now a party or by which it is bound, or of any order, judgment or decree of any court or governmental authority applicable to the Servicer, (b) result in the violation of any law, rule, regulation, order, judgment or decree to which the Servicer or its property is subject, or impair the ability of the Servicer to service the Assets or (c) result in the creation or imposition of any lien, charge or encumbrance of any material nature upon any of the properties or assets of the Servicer.

7.4No Consent.

No consent, approval, authorization or order of any court or governmental agency, instrumentality or body is required for the execution, delivery and performance by or compliance by the Servicer with this Agreement or if required, such approval has been obtained prior to the date of execution hereof or related Transfer Date, as applicable.

7.5No Litigation.

There is no litigation, proceeding, claim, demand or governmental investigation pending or, to the knowledge of the Servicer, threatened, nor is there any order, injunction or decree outstanding against or relating to the Servicer, which, if decided against the Servicer, could have a material adverse effect upon any of the Assets, result in any material liability to the Servicer or materially impair the ability of the Servicer to perform its obligations hereunder.  The Servicer is not in default in any material respect with respect to any order of any court, governmental authority or arbitration board or tribunal to which the Servicer is a party or is subject, and the Servicer is not in violation of any laws, ordinances, governmental rules or regulations to which it is subject, which such default or violation might materially and adversely affect any of the Assets or result in material cost or liability to the Owner.

ARTICLE VIII

INDEMNIFICATION AND LIABILITY

8.1Standard of Liability; Indemnification.

The Servicer shall not be liable to the Owner or its officers, employees, agents and directors for any actions or omissions to act in connection with the servicing of the Assets pursuant to this Agreement or for errors in judgment, except for actions or omissions to act of the Servicer which involve the Servicer’s fraud, negligence, willful misconduct or bad faith.  The Servicer and any director, officer, employee or agent of the Servicer may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising hereunder.

The Servicer agrees to indemnify, defend, and hold harmless, the Owner, its officers, employees, agents and directors from any liability, claim, loss, demand, action, damage, assessment, deficiencies, taxes, costs and expenses, including reasonable attorneys’ fees (“Damages”), directly or indirectly resulting from or arising out of the Servicer’s fraud, negligence, willful misconduct or bad faith.

Except as otherwise expressly provided herein, the Servicer shall not be under any obligation to appear in, prosecute or defend any legal action which is not incidental to its duties to service the Assets in accordance with this Agreement and which in its opinion may involve it in any expense or liability; provided, however, that the Servicer may, with the consent (not to be unreasonably withheld) of the Owner, undertake any such action which it may deem necessary or desirable in respect of this Agreement and the rights and duties of the parties hereto.  In such event, or if the Servicer deems it necessary to defend any such action, the Servicer shall be entitled to reimbursement from the related Custodial Account for its reasonable legal expenses and costs of such action.

8.2Indemnification by the Owner.

The Owner agrees to indemnify, defend, and holds harmless the Servicer, its officers, employees, agents and directors from any Damages, directly or indirectly resulting from or arising out of (i) the Owner’s failure to observe or perform any or all of the Owner’s covenants, agreements, warranties or representations contained in this Agreement; (ii) the origination, making, funding, sale or servicing of the Assets prior to the related Transfer Date or after the related Termination Date, (iii) the absence or unavailability of any documents evidencing or relating to an Asset, including but not limited to any documents necessary to service the Assets in accordance with Applicable Requirements, other than to the extent resulting for the actions or omissions of the Servicer, (iv) compliance with any instructions of the Owner to the extent that compliance with such instructions does not comply with Applicable Requirements, (iv) the continuation by the Servicer of the past practices of any prior servicer or owner of the Asset that fails to comply with Applicable Requirements or the Servicing Standard, except if and to the extent the Servicer reasonably should have become aware of such compliance failure under the Servicing Standard, or (v) any actions or omissions to act by the Servicer in connection with the servicing of the Assets (including, without limitation, actions or omission in connection with any Loss Share Agreement), in each case unless due to the Servicer’s fraud, negligence, willful misconduct or bad faith.

8.3Procedure for Indemnification.

Promptly upon receipt of notice of any claim, demand or assessment or the commencement of any suit, demand, action or proceeding in respect of which indemnity may be sought pursuant to the terms of this Agreement, the party seeking indemnification (the “Indemnitee”) will use its best efforts to notify the other party (the “Indemnitor”) in writing thereof in sufficient time for the Indemnitor to respond to such claim or answer or otherwise plead in such action.  Except to the extent that the Indemnitor is prejudiced thereby, the omission of the Indemnitee to promptly notify the Indemnitor of any such claim or action shall not relieve the Indemnitor from any liability which it may have to the Indemnitee in connection therewith.  If any claim, demand or assessment shall be asserted or suit, action or proceeding commenced against the Indemnitee, the Indemnitor will be entitled to participate therein, and to the extent it may wish to assume the defense, conduct or settlement thereof, with counsel reasonably satisfactory to the Indemnitee.  After notice from the Indemnitor to the Indemnitee of its election to assume the defense, conduct, or settlement thereof, the Indemnitor will not be liable to the Indemnitee for any legal or other expenses consequently incurred by the Indemnitee in connection with the defense, conduct or settlement thereof.  The Indemnitee will cooperate with the Indemnitor in connection with any such claim and make its personnel, books and records relevant to the claim available to the Indemnitor.  In the event the Indemnitor does not wish to assume the defense, conduct or settlement of any claim, demand or assessment, the Indemnitee will not settle such claim, demand or assessment without the prior written consent of the Indemnitor, which consent shall not be unreasonably withheld.

8.4Limits on Servicer Obligations.

Anything in this Agreement to the contrary notwithstanding, the Servicer shall not be responsible or liable for any obligations of Owner or any other Person under any other agreement related to the Assets, other than as expressly set forth herein, including but not limited to any obligations of Owner or any other Person under any agreements related to the origination, sale or repurchase of the Assets.

   ARTICLE IX     

ANNUAL REPORTING

9.1 Servicer Compliance Statement.

On or before March 20 of each calendar year, commencing in 2010, the Servicer shall deliver to the Owner one or more statements of compliance addressed to the Owner and signed by an authorized officer of the Servicer, to the effect that (i) a review of the Servicer’s activities during the immediately preceding calendar year (or applicable portion thereof) and of its performance under this Agreement during such period has been made under such officer’s supervision, and (ii) to the best of such officers’ knowledge, based on such review, the Servicer has fulfilled all of its obligations under this Agreement in all material respects throughout such calendar year (or applicable portion thereof) or, if there has been a failure to fulfill any such obligation in any material respect, specifically identifying each such failure known to such officer and the nature and the status thereof.

9.2 Report on Assessment of Compliance and Attestation.

On or before March 20 of each calendar year, commencing in 2010, the Servicer shall, to the extent applicable to the servicing of Assets serviced pursuant to this Agreement by Servicer during the preceding calendar year, deliver to the Owner: (a) a report regarding the Servicer’s assessment of compliance with applicable servicing criteria during the immediately preceding calendar year, as required under Rules 13a-18 and 15d-18 of the Securities Exchange Act of 1934, as amended, and Item 1122 of Regulation AB with a related report of a registered public accounting firm for such assessment of compliance; or (b) a Uniform Single Attestation Program audit report from its independent auditors.

 ARTICLE X   

MISCELLANEOUS

10.1Independence of Parties.

The Servicer shall have the status of, and act as, an independent contractor.  Nothing herein contained shall be construed to create a partnership or joint venture between the Owner and the Servicer.

10.2Changes in Practices.

The parties hereto acknowledge that the standard practices and procedures of the servicing industry change or may change over a period of time.  To accommodate these changes, the Servicer may from time to time notify the Owner of such material changes in practices and procedures.

10.3Assignment of Servicing.

This Agreement may not be assigned by the Servicer without the prior written consent of the Owner; provided, however, that this Agreement shall be assumed by (i) any entity into which the Servicer may be merged or consolidated, or any entity succeeding to the business of the Servicer; provided, however, that the successor or surviving Person shall be an institution whose business includes the servicing of mortgage loans or (ii) any Affiliate of the Servicer.  This Section does not prohibit the Servicer from engaging service providers to assist the Servicer in performance of its obligations under this Agreement.  This Section does not limit or impair the Servicer’s right to terminate this Agreement in accordance with Section 5.2(c) of this Agreement.  The Owner may not assign this Agreement without the prior written consent of the Servicer; provided, however, that this Agreement can be assigned to (i) any entity into which the Owner may be merged or consolidated, or any entity succeeding to the business of the Owner; or (ii) any Affiliate of the Owner.

10.4Prior Agreements .

If any provision of this Agreement is inconsistent with any prior Agreements between the parties, oral or written, the terms of this Agreement shall prevail, and after the effective date of this Agreement, the relationship and agreements between the Owner and the Servicer shall be governed in accordance with the terms of this Agreement.

10.5Entire Agreement .

This Agreement contains the entire agreement between the parties hereto and cannot be modified in any respect except by an amendment in writing signed by both parties.

10.6Invalidity.

The invalidity of any portion of this Agreement shall in no way affect the remaining portions hereof.

10.7Effect.

Except as otherwise stated herein, this Agreement shall remain in effect until the Termination Date, unless sooner terminated pursuant to the terms hereof.

10.8Damage Limitation.

IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND INCLUDING, BUT NOT LIMITED TO LOST PROFITS, LOSS OF GOODWILL OR BUSINESS INTERRUPTION, ARISING OUT OF THIS AGREEMENT.

10.9Applicable Law.

THIS AGREEMENT SHALL BE CONSTRUED AND GOVERNED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA.  VENUE FOR ANY LITIGATION ARISING UNDER THIS AGREEMENT OR ITS SUBSEQUENT PERFORMANCE SHALL BE MIAMI-DADE COUNTY, FLORIDA.  ANY LITIGATION BETWEEN THE PARTIES ARISING FROM THIS AGREEMENT SHALL ONLY BE BROUGHT IN MIAMI-DADE COUNTY, FLORIDA AND THE PARTIES HEREBY AGREE TO SUCH JURISDICTION IN MIAMI-DADE COUNTY, FLORIDA.  ANY ISSUE REGARDING ENFORCEABILITY OF THE ASSET DOCUMENTS OR DOCUMENTS RELATING TO ACQUIRED COLLATERAL SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS SPECIFIED THEREIN, OR APPLICABLE UNDER APPLICABLE LAW.

10.10Notices.

All notices, requests, demands and other communications which are required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given upon receipt or upon three (3) Business Days after the delivery or mailing thereof, as the case may be, sent by certified mail, return receipt requested, or by nationally recognized overnight carrier, to the attention of the person named at the address set forth on the signature page hereof.

10.11 Waivers .

The Owner and the Servicer may:

(a)Waive compliance with any of the terms, conditions or covenants required to be complied with by the other hereunder; and

(b)Waive or modify performance of any of the obligations of the other hereunder.

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

10.12 Binding Effect.

This Agreement shall inure to the benefit of and be binding upon the parties hereto and their successors and assigns.

10.13 Headings .

Headings of the Articles and Sections in this Agreement are for reference purposes only and shall not be deemed to have any substantive effect.

10.14 Appendices, Schedules and Exhibits.

The Appendices to this Agreement, and the exhibits and schedules to this Agreement and to the Appendices, are hereby incorporated and made a part hereof and are integral parts of this Agreement.

10.15 Counterparts .

This Agreement may be executed simultaneously in any number of counterparts.  Each counterpart shall be deemed to be an original, and all such counterparts shall constitute one and the same instrument.  Delivery of an executed counterpart of a signature page of this Agreement in Portable Document Format (PDF) or other electronically imaged form, or by facsimile transmission, shall be effective as delivery of a manually executed original counterpart of this Agreement.

[SIGNATURE PAGE TO FOLLOW]

IN WITNESS WHEREOF, each party has caused this Agreement to be signed in its corporate name on its behalf by its proper officials duly authorized as of the day, month and year first above written.

Servicer:

BAYVIEW LOAN SERVICING, LLC

By:      /s/ RICHARD O'BRIEN                                                                       

Name:           Richard O’Brien

Title:             President

Addresss:    4425 Ponce de Leon Blvd, 5th Floor

 Coral Gables, Florida 33146

Owner:

FIRST MIDWEST BANK

By:       /s/ STEPHANIE R. WISE                                                                     

Name:           Stephanie R. Wise

Title:  E.V.P. Business and Institutional Services

Address:      c/o First Midwest Bancorp, Inc.

One Pierce Place, Suite 1500

P.O. Box 4169

Itasca, Illinois 60143-4169

EX-10.28

Exhibit 10.28

Summary of Executive Compensation

The Compensation Committee of the Board of Directors (the “Compensation Committee”) of First Midwest Bancorp, Inc. (the “Company”), after considering a market review of total compensation and applicable regulations limiting executive compensation for certain executive officers expected to be named in the Company’s 2010 Proxy Statement, determined the 2010 base salary for such officers, which is presented in the table below.

Name and Principal Positions	2010 Base Salary
Mr. Michael L. Scudder, President and Chief Executive Officer	$1,008,884
Mr. Thomas J. Schwartz, Group President Commercial Banking	682,987
Mr. Paul F. Clemens, Executive Vice President and Chief Financial Officer	388,438
Mr. Victor P. Carapella, Executive Vice President and Commercial Banking Group Manager	362,815
Ms. Janet M. Viano, Group President Retail Banking	236,000

Each of these officers is also eligible to receive certain benefits and to participate in the Company’s employee benefit plans applicable to executive officers, including the Company’s Savings and Profit Sharing Plan, Pension Plan, Short-Term Incentive Compensation Plan, the Omnibus Stock and Incentive Plan, and Nonqualified Retirement Plan in accordance with the terms and conditions of such plans.  These officers are also parties to Indemnification Agreements and Employment Agreements that, among other things, entitle them to payments upon severance or upon a change in control.

EX-10.29

Exhibit 10.29

Summary Of Director Compensation

We use a combination of cash and equity-based compensation to attract and retain qualified candidates to serve on the Company’s board of directors (“Board”). In setting director compensation, we consider the significant amount of time that directors expend in fulfilling their duties and comparative data regarding director compensation of our peers.  Neither Michael L. Scudder (our President and Chief Executive Officer) nor Thomas J. Schwartz (our Executive Vice President) receive compensation for serving as a member of the Board.

Cash Compensation. In 2010, the cash component of our director compensation program will consist of an annual fixed retainer of $40,000 for each non-employee director plus additional annual retainers of: (1) $8,000 for the chair of the audit committee; (2) $1,000 for each audit committee member; (3) $4,000 for the chair of the Compensation Committee; (4) $0 for the chair of the Nominating and Corporate Governance Committee; and (5) $100,000 for our non-employee Chair of the Board. Each annual retainer will be paid in equal quarterly installments in arrears. Payment of each annual retainer will be contingent upon the director’s service during the preceding quarter. We also reimburse our directors for any Board and committee attendance-related expenses.

Equity-Based Compensation. In 2010, the equity component of our director compensation program consisted of the issuance of shares of restricted common stock of the Company in February of 2010.  For each director, the aggregate value of his or her grants of nonqualified stock options and restricted common stock was $56,000. The number of shares granted under each award was equal to the average of the high and low sales price of common stock on the date of grant. These equity awards have a vesting period of one year from the date of grant, and are nontransferable except to family members, family trusts or partnerships.

Deferred Compensation Plan for Non-Employee Directors.  The First Midwest Bancorp, Inc. Deferred Compensation Plan for Non-employee Directors (Directors Deferred Plan) allows non-employee directors to defer receipt of either fifty or one hundred percent of any director fees and retainers. Deferral elections are made in December of each year for amounts to be earned in the following year. Accounts are deemed to be invested in separate investment accounts under the plan, with the same investment alternatives as those available under the our Retirement Plan, including an investment account deemed to be invested in shares of Company Common Stock.

EX-12

Exhibit 12

First Midwest Bancorp, Inc.

Ratio of Earnings to Fixed Charges (1)

(Dollar Amounts in Thousands)

	Years ended December 31,
	2009			2008			2007			2006			2005
Ratio 1 - Including Interest on Deposits
Earnings available for fixed charges:
Income from continuing operations	$	(25,750)		$	49,336		$	80,159		$	117,246		$	101,377
Add:
Income tax provision		(50,176)			(13,291)			13,853			35,052			34,452
Fixed charges		91,308			163,680			237,930			225,585			131,690
Total earnings available for fixed charges	$	15,382		$	199,725		$	331,942		$	377,883		$	267,519
Fixed charges (2)
Interest on deposits	$	64,177		$	110,622		$	166,267		$	148,118		$	86,675
Interest on borrowed funds		12,569			37,192			55,540			62,974			35,834
Interest on subordinated debt		13,473			14,796			15,025			13,458			8,341
Total interest expense		90,219			162,610			236,832			224,550			130,850
Portion of rental expense representative of         interest factor		1,089			1,070			1,098			1,035			840
Total fixed charges		91,308			163,680			237,930			225,585			131,690
Preference security dividend (3)		30,267			520			-			-			-
Total fixed charges and preferred stock dividends	$	121,575		$	164,200		$	237,930		$	225,585		$	131,690
Ratio of earnings to fixed charges		0.17	x		1.22	x		1.40	x		1.68	x		2.03	x
Ratio of earnings to combined fixed charges and   preferred stock dividends		0.13	x		1.22	x		1.40	x		1.68	x		2.03	x
Ratio 2 - Excluding Interest on Deposits
Earnings available for fixed charges:
Income from continuing operations	$	(25,750)		$	49,336		$	80,159		$	117,246		$	101,377
Add:
Income tax provision		(50,176)			(13,291)			13,853			35,052			34,452
Fixed charges		27,131			53,058			71,663			77,467			45,015
Total earnings available for fixed charges	$	(48,795)		$	89,103		$	165,675		$	229,765		$	180,844
Fixed charges (2):
Interest on borrowed funds	$	12,569		$	37,192		$	55,540		$	62,974		$	35,834
Interest on subordinated debt		13,473			14,796			15,025			13,458			8,341
Portion of rental expense representative of         interest factor		1,089			1,070			1,098			1,035			840
Total fixed charges		27,131			53,058			71,663			77,467			45,015
Preference security dividend (3)		30,267			520			-			-			-
Total fixed charges and preferred stock dividends	$	57,398		$	53,578		$	71,663		$	77,467		$	45,015
Ratio of earnings to fixed charges		(1.80)	x		1.68	x		2.31	x		2.97	x		4.02	x
Ratio of earnings to combined fixed charges and   preferred stock dividends		(0.85)	x		1.68	x		2.31	x		2.97	x		4.02	x

(1)	The ratio of earnings to fixed charges represents the number of times “fixed charges” are covered by “earnings.”
(2)	“Fixed charges” consist of interest on outstanding debt plus one-third (the proportion deemed representative of the interest factor) of operating lease expense.
(3)	This is computed as the amount of the preferred dividend divided by (1 minus the effective income tax rate applicable to continuing operations).

EX-21

Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
Subsidiary	State of Jurisdiction of Organization	Type of Subsidiary
First Midwest Bank	Illinois	Corporation
First Midwest Capital Trust I	Delaware	Statutory Business Trust

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in this Annual Report (Form 10-K) of First Midwest Bancorp, Inc. of our report dated March 1, 2010, with respect to the consolidated financial statements of First Midwest Bancorp, Inc., included in the 2009 Annual Report to Shareholders of First Midwest Bancorp, Inc.

We consent to the incorporation by reference in the following Registration Statements:

• 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 Director Stock Option Plan,

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

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

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

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

of our report dated March 1, 2010, with respect to the consolidated financial statements of First Midwest Bancorp, Inc. incorporated herein by reference, and our report dated March 1, 2010, with respect to the effectiveness of internal control over financial reporting of First Midwest Bancorp, Inc. included in this Annual Report (Form 10-K) of First Midwest Bancorp, Inc. for the year ended December 31, 2009.

/s/ Ernst & Young LLP

Chicago, Illinois

March 1, 2010

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Michael L. Scudder, certify that:
1.    I have reviewed this annual report on Form 10-K of First Midwest Bancorp Inc.;
2.    Based on my knowledge, this annual 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 annual report;
3.    Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual 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                               annual 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:  March 1, 2010	/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 annual report on Form 10-K of First Midwest Bancorp Inc.;
2.    Based on my knowledge, this annual 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 annual report;
3.    Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual 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                               annual 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:  March 1, 2010	/S/ PAUL F. CLEMENS
	[Signature] Executive Vice President and Chief Financial Officer

EX-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 Annual Report on Form 10-K for the year ended December 31, 2009 (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/ MICHAEL L. SCUDDER    

  Name:  Michael L. Scudder

  Title:    President and Chief Executive Officer

Dated: March 1, 2010

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 Annual Report on Form 10-K for the year ended December 31, 2009 (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

Dated: March 1, 2010

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-99.1

Exhibit 99.1

FIRST MIDWEST BANCORP, INC.

Emergency Economic Stabilization Act of 2008 (“EESA”)

Section 111(b)(4) Certification

 I, Michael L. Scudder, President and Chief Executive Officer, certify, based on my knowledge, that:

(i) The compensation committee of First Midwest Bancorp, Inc. has discussed, reviewed, and evaluated with senior risk officers at least every six months during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009, and ending with the last day of the TARP recipient’s fiscal year containing that date, senior executive officer (SEO) compensation plans and employee compensation plans and the risks these plans pose to First Midwest Bancorp, Inc.;

(ii) The compensation committee of First Midwest Bancorp, Inc. has identified and limited during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009, and ending with the last day of the TARP recipient’s fiscal year containing that date, the features in the SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of First Midwest Bancorp, Inc. and identified any features in the employee compensation plans that pose risks to First Midwest Bancorp, Inc. and limited those features to ensure that First Midwest Bancorp, Inc. is not unnecessarily exposed to risks;

(iii) The compensation committee has reviewed at least every six months during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date, the terms of each employee compensation plan and identified the features in the plan that could encourage the manipulation of reported earnings of First Midwest Bancorp, Inc. to enhance the compensation of an employee and has limited those features;

(iv) The compensation committee of First Midwest Bancorp, Inc. will certify to the reviews of the SEO compensation plans and employee compensation plans required under (i) and (iii) above;

(v) The compensation committee of First Midwest Bancorp, Inc. will provide a narrative description of how it limited during any part of the most recently completed fiscal year that included a TARP period the features in

(A) SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of First Midwest Bancorp, Inc.;

(B) Employee compensation plans that unnecessarily expose First Midwest Bancorp, Inc. to risks; and

(C) Employee compensation plans that could encourage the manipulation of reported earnings of First Midwest Bancorp, Inc. to enhance the compensation of an employee;

(vi) First Midwest Bancorp, Inc. has required that bonus payments, as defined in the regulations and guidance established under section 111 of EESA (bonus payments), of the SEOs and twenty next most highly compensated employees be subject to a recovery or “clawback” provision during any part of the most recently completed fiscal year that was a TARP period if the bonus payments were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria;

(vii) First Midwest Bancorp, Inc. has prohibited any golden parachute payment, as defined in the regulations and guidance established under section 111 of EESA, to a SEO or any of the next five most highly compensated employees during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date;

(viii) First Midwest Bancorp, Inc. has limited bonus payments to its applicable employees in accordance with section 111 of EESA and the regulations and guidance established thereunder during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date;

(ix) The board of directors of First Midwest Bancorp, Inc. has established an excessive or luxury expenditures policy, as defined in the regulations and guidance established under section 111 of EESA, has provided this policy to Treasury and its primary regulatory agency, and First Midwest Bancorp, Inc. and its employees have complied with this policy during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date, and that any expenses requiring approval of the board of directors, a committee of the board of directors, an SEO, or an executive officer with a similar level of responsibility, were properly approved;

(x) First Midwest Bancorp, Inc. will permit a non-binding shareholder resolution in compliance with any applicable federal securities rules and regulations on the disclosures provided under the federal securities laws related to SEO compensation paid or accrued during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date;

(xi) First Midwest Bancorp, Inc. will disclose the amount, nature, and justification for the offering during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date of any perquisites, as defined in the regulations and guidance established under section 111 of EESA, whose total value exceeds $25,000 for each employee subject to the bonus payment limitations identified in paragraph (vii);

(xii) First Midwest Bancorp, Inc. will disclose whether First Midwest Bancorp, Inc., the board of directors of First Midwest Bancorp, Inc., or the compensation committee of First Midwest Bancorp, Inc. has engaged during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date, a compensation consultant; and the services the compensation consultant or any affiliate of the compensation consultant provided during this period;

(xiii) First Midwest Bancorp, Inc. has prohibited the payment of any gross-ups, as defined in the regulations and guidance established under section 111 of EESA, to the SEOs and the next twenty most highly compensated employees during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date;

(xiv) First Midwest Bancorp, Inc. has substantially complied with all other requirements related to employee compensation that are provided in the agreement between First Midwest Bancorp, Inc. and Treasury, including any amendments;

(xv) The employees disclosed on Schedule I are the SEOs and the twenty next most highly compensated employees for the current fiscal year and the most recently completed fiscal year, with the non-SEOs ranked in order of level of annual compensation starting with the greatest amount; and

(xvi) I understand that a knowing and willful false or fraudulent statement made in connection with this certification may be punished by fine, imprisonment, or both.

/S/ MICHAEL L. SCUDDER                 

 Michael L. Scudder

President and Chief Executive Officer

EX-99.2

Exhibit 99.2

FIRST MIDWEST BANCORP, INC.

Emergency Economic Stabilization Act of 2008 (“EESA”)

Section 111(b)(4) Certification

I, Paul F. Clemens, Executive Vice President and Chief Financial Officer, certify, based on my knowledge, that:

(i) The compensation committee of First Midwest Bancorp, Inc. has discussed, reviewed, and evaluated with senior risk officers at least every six months during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date, senior executive officer (SEO) compensation plans and employee compensation plans and the risks these plans pose to First Midwest Bancorp, Inc.;

(ii) The compensation committee of First Midwest Bancorp, Inc. has identified and limited during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date, the features in the SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of First Midwest Bancorp, Inc. and identified any features in the employee compensation plans that pose risks to First Midwest Bancorp, Inc. and limited those features to ensure that First Midwest Bancorp, Inc. is not unnecessarily exposed to risks;

(iii) The compensation committee has reviewed at least every six months during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date, the terms of each employee compensation plan and identified the features in the plan that could encourage the manipulation of reported earnings of First Midwest Bancorp, Inc. to enhance the compensation of an employee and has limited those features;

(iv) The compensation committee of First Midwest Bancorp, Inc. will certify to the reviews of the SEO compensation plans and employee compensation plans required under (i) and (iii) above;

(v) The compensation committee of First Midwest Bancorp, Inc. will provide a narrative description of how it limited during any part of the most recently completed fiscal year that included a TARP period the features in

(A) SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of First Midwest Bancorp, Inc.;

(B) Employee compensation plans that unnecessarily expose First Midwest Bancorp, Inc. to risks; and

(C) Employee compensation plans that could encourage the manipulation of reported earnings of First Midwest Bancorp, Inc. to enhance the compensation of an employee;

(vi) First Midwest Bancorp, Inc. has required that bonus payments, as defined in the regulations and guidance established under section 111 of EESA (bonus payments), of the SEOs and twenty next most highly compensated employees be subject to a recovery or “clawback” provision during any part of the most recently completed fiscal year that was a TARP period if the bonus payments were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria;

(vii) First Midwest Bancorp, Inc. has prohibited any golden parachute payment, as defined in the regulations and guidance established under section 111 of EESA, to a SEO or any of the next five most highly compensated employees during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date;

(viii) First Midwest Bancorp, Inc. has limited bonus payments to its applicable employees in accordance with section 111 of EESA and the regulations and guidance established thereunder during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date;

(ix) The board of directors of First Midwest Bancorp, Inc. has established an excessive or luxury expenditures policy, as defined in the regulations and guidance established under section 111 of EESA, has provided this policy to Treasury and its primary regulatory agency, and First Midwest Bancorp, Inc. and its employees have complied with this policy during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date, and that any expenses requiring approval of the board of directors, a committee of the board of directors, an SEO, or an executive officer with a similar level of responsibility, were properly approved;

(x) First Midwest Bancorp, Inc. will permit a non-binding shareholder resolution in compliance with any applicable federal securities rules and regulations on the disclosures provided under the federal securities laws related to SEO compensation paid or accrued during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date;

(xi) First Midwest Bancorp, Inc. will disclose the amount, nature, and justification for the offering during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date of any perquisites, as defined in the regulations and guidance established under section 111 of EESA, whose total value exceeds $25,000 for each employee subject to the bonus payment limitations identified in paragraph (vii);

(xii) First Midwest Bancorp, Inc. will disclose whether First Midwest Bancorp, Inc., the board of directors of First Midwest Bancorp, Inc., or the compensation committee of First Midwest Bancorp, Inc. has engaged during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date, a compensation consultant; and the services the compensation consultant or any affiliate of the compensation consultant provided during this period;

(xiii) First Midwest Bancorp, Inc. has prohibited the payment of any gross-ups, as defined in the regulations and guidance established under section 111 of EESA, to the SEOs and the next twenty most highly compensated employees during the period beginning on the later of the closing date of the agreement between the TARP recipient and Treasury or June 15, 2009 and ending with the last day of the TARP recipient’s fiscal year containing that date;

(xiv) First Midwest Bancorp, Inc. has substantially complied with all other requirements related to employee compensation that are provided in the agreement between First Midwest Bancorp, Inc. and Treasury, including any amendments;

(xv) The employees disclosed on Schedule I are the SEOs and the twenty next most highly compensated employees for the current fiscal year and the most recently completed fiscal year, with the non-SEOs ranked in order of level of annual compensation starting with the greatest amount; and

(xvi) I understand that a knowing and willful false or fraudulent statement made in connection with this certification may be punished by fine, imprisonment, or both.

/S/ PAUL F. CLEMENS                                                    

Paul F. Clemens

Executive Vice President and Chief Financial Officer