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Waterstone Financial, Inc 1997
ANNUAL
REPORT
—
Financial Highlights
At September 30
1993
1994
1995
(Dollars in Thousands
1996
ex~~pt Per Share Data)
1997
Total
assets
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$160,827
$274,115
$264,213
$388,”008
$404,589
Total
loans
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
80,224
155,497
178,552
243,534
254,641
Total deposits ..........................
122,813
176,167
171,793
233,406
246,116
Stockholders’equity ..................
33,438
34,683
38,013
43,210
43,477
Bookvalue percommon share(’1.. $
11.21
$
12.46
$
14.13
$
14.81
$
16.11
Total equity to assets ................
20.790/.
12.650/.
14.39 ”/0
11.140/o
10.75 ”/0
For the Hscal Year
1993
1994
1995
1936
1997
(Dollars in Thousands
e~ept
Per Share Data)
Netinterest income .................. $
5,077
$
7,870
$
9,405
$ 10,359
$ 11,946
Net income ..............................
1,352
2,729
3,544
2,414(3)
3,642
Netincome per share(’).............. $
0.44(2)
$
0.91
$
1.33
$ 0.8-9[3)
$
1.27
Net yield on interest-emtig assets
Return on average assets ...........
Return on average equity ..........
3.210/0
.84°1.
7.100/.
3 .940/0
1.29”/0
7.89”1.
3.630/0
3.47°10
1.31°/0
.76”/o(’]
9.860/.
6.18.0/0[3]
3.380/,
.980/.
8.4170
CONTENTS
Financial
Highlights ................1
Chairman’s
Letter ......................2
First Federal
SavingsBank ............4
Brookings
FederalBank..............5
Iowa Savings
Bank ........................6
Security State
Bank ........................7
OfficeLocations ........8
Financials..................9
Directors..................46
ExecutiveOfficers....47
Corporate
Information ............48
Stock Market
Information ............48
TotalAssets
Net Income
—
Total
Deposits
INet Interest
Income
,
(1)
(2]
(3)
AmountsreDortedhavebeenadiustedforthethreefor Iwostocks~lit paidJanuarv2,1997 in theform of a 50 perc~r stockdividend
Netincome”pershareis basedon the assumptionthattheweightedaverageshare; outstandingat September30,1993, wereoutstandingthe
entireyear.
Reflectstheone-timeindustrywide specialassessmentto recapitalizetheSavingsAssociationInsuranceFund.EIc~ing thespecial
assessment,Netincome,Netincomeper share,Returnon averageassets,and Returnon averageequitywould have.]een$3,209,000,$1.18,
1.01%, and 8,22%, respectively.
—
]1
–
Chairman’s Letter — To Our Stockholders
FirstMidwestFinancial,Inc.has continued its
growth trend since becoming a publicly traded company in
1993, and I am confident profitable growth will continue.
September 30, 1993, assets were $161 million compared to
$405 milfion at September 30, 1997. This represents an
increase of more than 150 percent.
Ik
[ j~~”-”,
;
)
.
{h
m
u~ir company reported net income
of $3,642,000, or $1.27 per share, for
the fiscal year ended September 30, 1997. Dur-
income was
ing the fourth quarter 1997, net
1
$927,000, or $.33 per share.
During fiscal 1996, First Midwest recog-
nized a $1,266,000 pre-t= charge as a result
required all insti-
of federal
legislation that
insured by the Savings Association
tutions
Insurance Fund (SAIF) to pay a one-time
special assessment
to restore the SAIF to
reserve level. The charge
its statuto~
was $795,000, or $.29 per share on an
special
basis. Excluding the
after-tax
assessment, First Midwest’s per share net
income for
the 1996 fiscal year and
1
fourth quarter would have been $1.18
and $.3o, respectively.
Retail operations provide the com-
I pany with ample growth opportunities.
1997 earnings were
~ Fiscal year
enhanced by a 15 percent
interest
in
net
income.
increase
This
a $12.7 million increa=e in retail deposits.
First Midwest invested $4.3 milbon
in its
own stock during the -1997 fiscal year; repur-
chasing shares at an average price of $16.68.
Since initiating the first stock repurchase pro-
gram in 1994, our company has invested a
total of $7.9 million for shares that are worth
over $12 million today. These shares were
repurchased at an aver~e price of $13.30 per
thereby
share (adjusted for a stock dividend),
creating additional value for shareholders. On
June 25, 1997, we annouiced our intention to
an additional 5 percent of out-
repurchase
standing shares and, at fiscal year end, had
102,000 shares remainimg to be repurchased
under this program.
_
At September 30, 1997, assets were $4o5
compared to $388 milhon at
million,
the
beginning of the fiscal year. At
that date,
stockholders’ equity totaled $43.5 million, or
$16.11 per common sha~e outstanding. Both
First Federal and Security State Bank signifi-
cantly exceed their regulato~ capital require-
ments.
A 33 percent
increase in the company’s
quarterly cash ditidend from 9 cents per share
on
to 12 cents per
November 24, 1997. This dividend is payable
share—~as announced
on or about January 2, 1998 to stockholders of
record on December 15,1997. First Midwest is
pleased to pay this increased cash dividend to
its stockholders.
Our company maintains
as a
super-community organization. Each division
is committed to its local community, while
its niche
benefiting
and
improved efficiencies of the holding company.
from the financial
strength
This approach has proven to be an important
, was due in part to an $11.1 million
loan portfolio,
increase
in our
strategy
and
customer loyalty in a consolidating financial
to maintain
identity
local
and to an overall
increase in
industry.
e.;
-y”%:”
.+
%
\
the yield on interest-earning
First Midwest is focused on consolidating
assets. The loan portfolio
increase was primar-
L
administrative functions to improve employee
efficienq. The first comp=n@de
promotion
~ ily funded
by
proved to be a tremendous success, surpassing
expectations
and providing substantial
Assume ownership for improvement
deposit growth. The notable First Midwest
logo, highlighted on our cover, was intro-
areas.
Listen to all ideas and viewpoints.
stockholder value.
is committed to increastig return on equi-
in turn, positively impact
ty that will
duced as the official emblem at each divi-
sion. This is symbolic of the improved
Learn from our successes and
mistakes.
continuity across the company.
J. Tyler Haahr and Ellen E. H. Moore
were welcomed as new members of the
team in March of
executive management
1997. Both join the company with strong
educational backgrounds, practical busi-
ness experience, and proven leadership
stills. First Midwest has already benefited
from their contributions.
Properly plan, fund, and staff
projects.
Focus on quafity.
In addition to capital management
strategies, First Midwest is dedicated to
functions,
consolidating
administrative
utilizing technology to improve efficien-
cies, and meeting customers’ ever-chang-
Take pride in our work.
ing financial needs. Watch for our new
Clearly communicate intentions and
expectations.
web site
and other
—
vances coming in 1998.
technological
ad-
GREAT
WORK
ENVIRONMENT
Midwest’s implementation
In
the
retail
environment,
First
of explicit
Team work is instrumental
to our success.
product, pricing, promotion, and distrib-
Four key values were initiated in 1997
to provide focus for employees. These
values are guiding individuals to “do the
to:
We strive
n Be professional, open, and direct.
n Respect and trust each other.
ution strategies across its divisions has
begun. The objective ~ to increase mar-
ket share while enhancing the deposit
right”
things
right
and are positively
impacting the direction of our company.
The values are as follows:
n Recognize and reward accomphsh-
ments.
n Be an asset to the community.
q Have fun!
base with lower costing money accounts.
New product
QUICKcard
Cash & Check, Timeless Checking, and
Automated Clearing House (ACH)origina-
introductions,
CUSTOMER
SERVICE
Outstanding customer service is the foun-
dation to our success. Properly meeting
customers’ financial needs and exceeding
expectations contributes to our customers’
satisfaction and to our success.
We strive
to:
Listen carefully to customer needs.
Know product features and benefits.
UtiLize selLing skills to cross-sell
products based on needs.
Deliver competitive products and
services.
Clearly communicate intentions and
RESULTS
We are results and goal-oriented.
We strive
to:
Set challenging and competitive
goals.
Take action and track progress
toward goals.
Assume ownership — make and
meet commitments.
Pay attention to detail.
Be proactive problem solvers.
LOOKING
AHEAO
expectations.
Make it simple to work with us.
The upcoming fiscal year promises
to
be an exciting one for First Midwest.
Smile, work efficiently, and say
Our
company
is
seeking
additional
into that
tion fit
objective.
These products, and others, will provide
strategic
our customers with value-added product
packages that meet -their needs while
differentiating us from the competition.
We are confident that our commitment
to profitable, Iong-terrn growth will bene-
increased stockholder
fit you through
support and
value. We appreciate ,your
look forward to an exciting and profitable
1998.
erelyr
&Si
JAMESS. HAAHR
-,K(.
“Thank you.”
opportunities
to acquire savings banks,
commercial banks, and other related-ser-
Chairman of the Board:
President & CEO
CONTINUOUS
lMPn
OVEMENlr
To succeed, we must embrace change in
vice companies in our geographic area.
strategies,
Other
capital management
December 15, 1997
order to improve our effectiveness and
such as dividends and stock repurchases
efficiency. Quality is key.
We strive
to:
also will be considered. Each oppotiunity
will be evaluated carefully. First Midwest
\,
— First Federal Savings Bank
TheStormLak(:DivisionofFirstFederalSav-
ingsBankof the Midwest has grown in profitability
and efficiency since becoming a publicly traded compa-
ny. Sharing best practices between bank divisions and
implementing smart changes have positively impacted all
divisions.
Fred A. Stevens
President and Trust Officer
Storm Lake Division of
First Federal Savings
Bank of the Midwest
ECONOMIC
OATA
Average Land Value as of
1997
September,
High-quality farmland in
northwestIowa: $2,519 per acre
Building Permits 1996
StormLake
Residential— $4,003,946
Commercial— $3,843,377
Taxable Retail Sales 1996
Storm Lake— $111,123,460
Unemployment Rate
as of June, 1997
BuenaVistaCounty— 2.3%
F irst Federa~s dedication to the company
values has given employees a renewed
focus on “doing the right things right” in their
everyday work. Accountability has increased
employees
plans
as
focused on goals and performance relating to
development
utilize
First Federal Savings Bank of the Midwest,
Main Bank Office, Fifth at Erie, Storm Lake,
Iowa.
tunities
for
range of investment
their
retirement
dollars. A full
choices is available for
Individual Retirement Accounts (IRAs), Simpli-
fied Employee Pension Plans (SEPPS),and Keogh
(KEO)plans.
The bank understands customers’ needs to
the company values. The First Federal team is
invest in non-traditional bank products. LaSalle
committed to profitable growth and improved
St. Securities, Inc., Ameritas Investment Corpo-
efficiency.
The Main Bank Office houses many com-
panywide administrative
functions. Central-
ized account services, marketing, purchasing,
computer
are
improving internal and external customer ser-
systems, and other
functions
vice, enhancing communication, and reducing
expenses.
First Federal offers all types of loans, with
an increased emphasis on consumer and agri-
lending. Financing for start-up and
cultural
existing operations of any size is available.
Home lending for purchase, new construction,
refinancing, and home improvements provide a
valuable cross-selling link to other bank prod-
ucts and services.
Timeless Checting’s relationship banking
focus estabhshes cross-selhng opportunities for
deposit customers. Savings products ako are
available to satisfy deposit customers’ needs.
the bank reahzed excellent
This past year,
deposit growth due to competitive pricing on
both long-term and short-tern
certificates of
deposit.
The Retirement
and Trust Department
provides customers with money-saving oppor-
ration, and Cross Americar through contracts
with First Services Financial Limited, a sub-
sidia~ of First Federal, offer alternative invest-
ment products and discount brokerage services
to satisfy customer needs.-.These products are
not FDIC-insured, nor guaranteed by First Fed-
eral or any affiliates.
_
DIRECTORS
OF FIRST
FEOERAL
SAVINGS
BANK
OF THE MIOWEST
JAMESS. HA.AHR
Chairman of the Board, Presidtit
First Midwest Financial,
Savings Bank of the Midwest
& CEO for
Inc., and First Federal
J. TYLERHA.AHR
Senior Vice President, Secrettiy
Financial,
& COO for First Federal Savings Bank of the Midwest
Inc. and Executive “Vice President,
& COO for First Midwest
Secreta~
E. WAYNE COOLEY
Executive Secretary,
Athletic Union, Des Moines,
Iowa
lowa GirE~High School
E. THURMANGASKILL
Owner, Grain Farming Operation
Corwith,
Iowa
G. Mark Mickelson
Vice President of Acquisitions;
Corporation, Sioux Falls, Soutfi Dakota
Northwestern Growth
RODNEYG. MUILENBURG
Dairy Specialist, Sioux City Diti~sion
Iowa
Purina Mills,
Inc., Storm Lake,
r Brookings Federal Bank
BrookingsFederalBank,a Division of First Federal
Savings Bank of the Midwest since 1994, recognized its
most profitable year in history. Contributing greatly to
First Midwest’s earnings, Brookings Federal is a leader in
both lending and satings products.
4 ~
gricultural
lending
significantly
~
~
division’s overall
loan portfoho growth in 1997. A focused mar-
impacted
the
Brookings Federal Bank, Main Offi~,
Brookings, South Dakota
600 Main Avenue,
and future
product
introductions.
“This is
an exciting time for us,” states President Jim
keting approach, competitive loan structuring,
Winterboer. “We continue to embrace change
and an experienced team of lending profes-
and search for opportunities lo better serve our
sional provide the groundwork for agricultural
customers.”
—
James C. Winterboer
President
Brookings Federal Bank
Division of First Federal
Savings Bank of the
Midwest
ECONOMIC
O~TA
Average Land Value as of
September, 1997
High-productivity,non-irrigated
croplandin east-central
South Dakota:$930 per acre
(as of February,1997)
Building Permits 1996
Brookmgs
Residential— $5,488,640
Commercial— $5,555,650
Taxable Ftelai[ Sales 1996
Brookings— $144,939,780
Unemployment Rate
as of June, 1997
Brookings— 1.7%
growth.
Consumer
also
and mortgage
prove to be expanding areas for Brookings
Federal. With loan discounts tied to Timeless
lending
Checking accounts, cross-selhng is a successful
component of relationship
loans
of mortgage
types
banking. Various
to
are available
loans,
customers,
Federal National Mortgage Association fixed-
construction
including
rate mortgages,
gages. Brookings Federal
and adjustable-rate mort-
involved with
is
As well as offering traditional banting ser-
vices, Brootings Service Co~oration provides
customers with a wide range of alternative
Investment
investing opportunities. PtieVest
Center, operating through Brookings Service
Corporation (a subsidia~ of F=st Services Finan-
teams with Broohngs Federal
cial Limited),
Bank to support customers’ expanding fiancial
needs. These products are not FDICinsured nor
guaranteed by First Federal or any affiliates.
special assistance
lending and can provide
BROOKINGS
FEDERAL
BANK
AOVISORY
BOARO
first-time
home
buyers
and
low-income
borrowers with a low-interest South Dakota
Housing Development Authority loan.
Since its introduction
in 1993, Timeless
Checking has significantly increased Brookings
FederaVs checking deposits. Because of this
growth and the accounts’ abitity to provide
packaged value
to
and brand
customers, all divisions under First Midwest
recognition
Financial,
Inc.
introduced Timeless Checking
—.
this
fall. The dU.CKcard Cash & Check is a
complementary product of Timeless Checking.
Brootings Federal
remodel
its main ofice
is finalizing plans
to
and expand branch
hours to provide better service to its customers.
In addition to updated facilities, customers
will appreciate a new automated teller machine
O. DALELARSON
Chairman of the Advisory Board__
–
Owner, Larson Manufacturing
FmD J. RITTERSHAUS
Vice Chairman of the Advisory BMrd
Consulting Engineer and Partner=
Banner and Associates,
Inc.
~
VIRGILG. ELLERBRUCH
Assistant Dean of Engineering,
South Dakota State University
=
__
J. TYLERHAAHR
Senior Vice President, Secretary&
Financial,
& COO for First Federal Savings-Bank
Inc. and Executive Vice-President,
Secretary
of the Midwest
COO for First Midwest
Earl R. Rue
Consulting Manager, Running Fleet and Farm
JAMESC. WINTERROER
President, Brookings Federal Bank
r Iowa Savings Bank
IowaSavingsBank,a Division of First Federal Savings
Bank of the Midwest since 1995, opened its second loca-
tion in the expanding West Des Moines area. Remodeled,
professionally Ianclscaped, and strategically situated on a
high-traffic
corner across from a major mall, the newest
office has attract[?d a significant
number of new cus-
tomers since opening in March, 1997. New products and
lowa Savings Bank, Main OfficF 3448 Westown
Parkway, West Des Moines,
Iowa
sertices help distinguish Iowa Savings Bank from nearby
competitors, while a characteristic blue roof promises to
become a recognizable landmark in the area.
Ju
he original Iowa Savings Bank office,
located in the historic Highland Park
area of Des Moines since 1925, continues as an
established, growing branch. Loyal Des Moines
and West Des Moines customers are pleased to
have the convenience two locations provide.
IowaSavings Bank, Highland Park Office, 3624 SiMh
Avenue, Des Moines,
Iowa
–
Alternative investments are now available
to Iowa Savings Bank customers who seek non-
Jeanne Partlow
President
lowa Savings Bank Division
of First Federal Savings
Bank of the Midwest
ECONOMIC
OATA
Average Land Value as of
September, 1997
High-qualityfarmlandin
centralIowa $2,724per acre
Buifding Permiis 1996
Greater Des Moines
Residential — $233,257,396
Commercial — $5,555,650
Taxabfe Relail Sales 1996
GreaterDesMoines—
$3,844,208,882
Unemployment Rate
as of June, 1997
Polk County-2.5%
Iowa Savings Bank made a significant
traditional
bank producti. Amentas
Invest-
contribution to First Midwest’s deposit growth
companywide
this past year. During the fist
of deposit “Summer CD Celebra-
certificate
ment Corporation and Cross America, through
contracts with First Services Financial Limited,
a subsidiary of First Federal Savings Bank of
tion” promotion,
Iowa Savings Bank produced
several million dollars in new money toward
deposit growth. This gain in deposits allowed
for an increase in First Midwest’s loan portfo-
lio.
the Midwest, offer
products
and discount
alternative
brokerage
investment
services.
These products are not FDIC-insured, nor guar-
anteed by First Federal or any affibates.
A successful grand op~ning event
in the
Established
savings
and
single-family
fall of 1997 helped position Iowa Savings Bank
home loan products provide the bank with a
solid foundation of financial service offerings.
as a notable competitor in the Des Moines and
product
West Des Moines markets~Improved
—
The Iowa Savings Bank team is breaking new
the
ground with Timeless Checking Clubs,
and increased
structure,
promotion will enable Iowa Savings Bank to
aggressive pricing,
loans, and commercial
QUCKcard Cash & Check, consumer loans, resi-
dential
loans. Cross-
selling effotis are the key to developing broad-
er-based financial
relationships with existing
customers, and to offering new customers more
product and service options.
achieve its challenging growth and profitabili-
ty goals in the next fiscal year.
—
‘r Security State Bank
I
I
SecurityStateBank,a Subsidiary of First Midwest
Financial,
Inc. since September 30, 1996, provides the
company with the benefits of being a commercial bank,
chartered by the State of Iowa. First Midwest has capi-
talized
on the charter
differences
to increase profit-
ability of the company and increase stockholder value.
~
ECONOMIC
OATA
Average Land Value as of
September, 1997
High-qualityfarmlandin west-
central Iowa $2,611 per acre
Building Permils 1996
Stuart
Residential — N/A
Commercial — N/A
Taxable Retail Sales 1996
Stuart — $7,736,939
Unemployment Rale
as of June, 1997
Guthrie County — 2.8%
wecurity State Bank has
locations
a
growing consumer population located just west
in Stuart, Casey, and Merdo –
of Des Moines. The new Stuart office is strate-
exit
gically placed near a growing interstate
commercial area, while the Casey and Merdo
offices remain in well-established main street
locations.
Security State Bank is reliant on agricul-
ture and agricultural business. A successful
to positively
season promises
harvest
1997
impact
Agricultural
the local economy and this division.
to expand
continues
lending
the bank’s loan portfolio as loyal customers
appreciate
and
the well-structured
knowledge provided by Security State Bank’s
10ans
lending
professionals.
Borrowers
typically
use variable rate revolving Lines of credit
to
assist in managing their farming or agri-busi-
ness operations. This loan product has been
well received by customers over the past few
years and is geared toward seasonal borroting
that
is normal in agricultural
To better balance total portfoho risk, Secu-
lending.
rity State Bank has increased its commitment
—
to commercial, consumer, and real estate lend-
ing. This past fiscal year, the bank’s lending in
these areas has increased as a percentage of
total business. This growth is expected to con-
focused on
tinue
as the division remains
Security State Bank,MainOffice,615 South Division
Street, Stuart, Iowa
increasing market share and improving earn-
ings.
Security State Bank offers a full
line of
bank deposit products. Beginning in the fall
the bank expanded ~~sfree and tiered
of 1997,
interest checking account offerings to include
“Better Than Free” Ttiele_~ Checking. The
bank utilizes its numerous ~automated teller
machines to promote the new complementary
QUICKcard Cash & Check, which provides more
convenience and service to customers.
DIRECTDRS
OF SECURITY
STATE
BANK
JAMESS. HAAHR
Chairman of the Board, Presidenf-& CEO for
First Midwest Financial,
Savings Bank of the Midwest
Inc., and “First Federal
_
JEFFREYN. BUMF
Pa~ner, Bump and Bump Law Offices
Stuart and Panora,
Iowa
E.
WAYNECOOLEY
Executive Secretary,
Athletic Union, Des Moines,
Iowa Girls’ ~
lowa-
School
E.
THURMANGASRILL
Owner, Grain Farming Operation _
Corwith,
Iowa
J. TYLERHAA~R
Senior Vice President, Secretary &.COO for First Midwest
Financial,
Inc. and Executive Vice-lresident,
Secretary
& COO for First Federal Savings ~nk
of the Midwest
RODNEYG. MUILENBURG
..—
Dairy Specialist, Sioux City DlvlsLon
Iowa
Purina Mifls,
Inc., Storm Lake,
.
—
Bank Locations
—
—
First Federal Savings Bank of the Midwest
Office
Locations
STORM
LAKE
DIVISIDN
Main Bank Office
Fifth at Erie
P.O.Box 1307
Storm Lake,Iowa 50588
712-732-4117
800-792-6815
Storm Lake Plaza
Office
1415 North LakeAvenue
Storm Lake,Iowa 50588
712-732-6655
Laurens Office
104 North Third Street
Laurensr Iowa 50554
712-845-2588
Manson Office
Eleventh at Main
Manson, Iowa 50563
712-469-3319
Odebolt Office
219 South Main Street
Odebolt, Iowa 51458
712-668-4881
Lake View Office
Fifth at Main
Lake View, Iowa 51450
712-657-2721
Sac City Office
518 Audubon Street
50583
Iowa
Sac City,
712-662-7195
BROOKINGS
FE OERAL
IOWA
SAVINGS
DIVISION
BANK
Main Office
600 Main Avenue
Brookingsr South Dakota
57006
605-692-2314
800-842-7452
Eastbrook Office
425 22nd Avenue South
Brookings, South Dakota
57006
605-692-2314
DIVISION
BANK
Main Office
3448 Westown Parkway
West Des Moines, Iowa
50266
515-226-8474
.
Highland Park Office
3624 Sixth Avenue
Des-Moines, Iowa 50313
515-288-4866
Security State Bank
Office
Locations
Main Office
615 South Division
P.o. Box 606
Stuart,
515-523-2203
800-523-8003
Iowa 50250
Casey Office
101 East Logan
P.O. Box 97
Caseyr Iowa 50048
515-746-3366
800-746-3367
.—
Menlo Office
501 Sherman
P.O. BOX 36
Menlo, Iowa 50164
515-524-4521
—
First Midwest Financial,
Inc. and Subsidiaries
SELECTED
CO NSOLIDfiTED
FINANCIAL
INFORMATION
30,
Oata:
Financial
Condition
September
(In Thousands)
Selectl:d
Totalassets..........................................................
Loansreceivable,net ............................................
Securitiesavailablefor sale....................................
Securitiesheldto maturity....................................
Ezccessof costovernet assetsacquired,net ............
Deposits..............................................................
Totalborrowings..................................................
Shareholders’eqtity ............................................
30,
Year Ended September
(In Thousands, Except Per Share Data)
Selected
Data:
Operation
Totalinterestincome............................................
Totalinterestexpense ..........................................
Net interest income..........................................
Provisionfor loan losses ..................................
Net interest income after provision for loan losses ..
Total noni~terest ticome ......................................
TotaInonfilterest expense......................................
Income before income taxes, extraordinary
items and cumulative effect of changes
in accounting principles..............................
Income ta expense ............................................
Extraordinaryitems — net of taxes ........................
Cumulativeeffect of changes in accounting principles
Net income ..........................................................
Earningsper share (fully diluted):
Income before extraordinary items and
cumulative effect of changes in accoutig
pticiples(’) ................................................
Net incc]met'j....................................................
1997
1996
1995
1994
1998
$ 404,589
254,641
115,985
—
4,863
246,116
112,126
43,477
$
$ 388,008
243,534
109,492
—
5,091
233,406
106,478
43,210
264,213
178,552
70,232
—
1,690
171,793
52,248
38,013
~
274,115
-z 155,497
—
37,180
65,917
=
—
— 1,815
—
~176,167
-=. 61,218
34,683
-
$ 160,827
‘80,224
20
56,085
.
122,813
3,115
33,438
1997
1996
1995
_
1994
1993
$
$
$
$
29,005
17,059
11,946
.120
11,826
1,700
7,382
6,144
2,502
—
3,642
$
$
24,337
13,978
10,359
100
10,259
1,419
7,568(’)
21,054
11,649
sJr405
250
9,155
2,286
5,576
4,110
1,696
—
—
$
2,414~’1
$
5,865
2,321
—
—
3,544
$=
—
-
—.--
—
—
—
_
$:
15,153
7,283
7,870
7,765
1,078
4,938
3,905
1,433
—
257
2,729
$
11,586
.6,509
5,077
225
4,852
1,555
,3,725
2,682
1,045
(285)
$
<,3;
1.27
1.27
$
$
0.89(’1
0.89P)
$
$
1.33
1.33
$7
$-
0.83
0.91
$
$
0.53
0.44
Year Ended September 30,
1997
1996
1995
1994
199a
Selectedl
Financial
Performance Ratios:
Ratios
and
Other
Oata:
Return t)n assets (ratio ofnet
income
toaverage total assets)lz)............................
0.980/.
0.76°/.[’)
1.31”/0
—
1.29%
0.84%
Return on shareholders’equity (ratio of net
income to average equity)(’) ........................
Interest rate spread information:
Averageduring year ....................................
End (Ifyear ................................................
Netyielc[ onaverage interest-carting assets ......
Ratio of operating expense to average total asseti
Quality Ral:ios:
Non-perfortig
Allowancefor loan losses to non-perfotig
assets to total assets at end of year
loans
Capital Ratios:
Shareholders’equity to total assets at end of period
Averageshareholders’equity to average assets....
Ratio of average interest-earning assets to
average interest-bearing liabilities................
Other Data:
8.41
2.90
2.75
3.38
2.00
.75
78.49
10.75
11.63
6.18(’)
2.88
2.84
3.47
2.40
.70
89.04
11.14
12.45
9.86
3.13
2.85
3.63
2.06
.29
227.21
14.39
13.28
7.89
3.25
2.96
3.94
2.30
=
.34
=148.51
-: 12.65
—20.52
7.10
2.69
2.88
3.21
2.31
.78
65.42
20.79
11.83
109.96”/.
112.580/.
111.35 ”/0
7319 .04%
112,690/.
Bookvalue per common share outstantig~’1 ......
Ditidends declared per share~’1..........................
Dividendpayout ratio ......................................
Number c)ffill-service offices............................
$
$
16.11
0.36
26.41%
13
$
14.81
0.29
30.90%
12
ormofa50~.s
14.13
0.20
14.53%
8
$ ~12.46—
—
— —
8
$
11.21
—
—
7
)10
(I) Amounts repo~edhavebeena djustedf orthethreef ortwostocks plitpaidJ anuav2,1 997inthef
(2J ~eturnon
[s) Reflect~the one-~mei ndustry.wides peciala ssessmentt orecapitalizet
a~~etsand return onequjty
for fiscajyear
lgg4isl,17y.
and7.54%,
heSavin95A ssocia~onln suranceFund,
respectively, excluding thecumulative
tockdividend.
=
effects ofchan9notice procedures set forth in the Bylaws of First Midwest. Pursuant to fie Bylaws,
nominations by stockholders must be delivered in writing to the Secretary of First Midwest at least 30 days
prior to the date (If the annual meeting.
Directors Fees
During fiscal 1997 all directors of First Midwest received a retainer fee of $3,000 per year. The
directors of First Midwest (except for Director Partlow) also serve as directors of either one or both of the
Bafis. Non-employee directors of First Federal were paid a fee of $6,000 per year plus $5–Wfor each
regular meeting attended, and $200 for each committee meeting attended, with the exception of the
Nominating Committee members, who receive no fee for service on such committee. Non-employee
directors of Security were paid a fee of $300 for each regular meeting attended and $lW for each
committee meeting attended, with the exception of the Nominating Committee members, who.receive no
fee for service on such committee. Board members who are employees of the Banks received no fee for
their service on th~eBanks’ Boards, or their respective committees.
!
Executive Comp6msation
The following table sets forth information regarding the compensation of First Midwest’s Chief
Executive Officer and each other executive officer of the Company whose aggregate salary and bonus
exceeded $100,000 during fiscal 1997 (collectively,
the “Named Officers”).
SUMMARY COMPENSATION
TABLE
Annual Corn~ensation
Long Term
Compensation Awards
—
“R-
Name and
Principal
Position
James S. Haahr
Chaimn of the Board,
Presidentand Chief
Executive Oflcer
J. Tyler Haahr(3)
Senior VicePresident,
Chief OperatingOj~cer
and Secretaq
Fred A. Stevens
Presidentof StormMe
Division of First Federal
Donald J. Winchell
Vice President, Chief
Financial~cer
and
Treasurer
Yeai=
1997
1996
1995
1997
1997
1996
1995
1997
1996
1995
Salary
($)
Bonus
($)
Other Afmual
Compensation
($)
estricted
Stock
Award(s)
($)
$180,000(]).
$56,000
-lso,m!l)
155,000(’)
45,500
30,000
---
---
---
80,662(4)
22,400
$35,587(5)
105,OOO
105,OOO
97,000
33,600
27,300
19,400
---
---
---
103,OOO
103,OOO
90,000
32,960
26,780
18,000
---
----
.
---
---
----
---
---
--
---
---
---
---
---
Options/
SARS
(#)
All Other
Compensation
($)
5,250
$37,01 1(2)
23,250
.1,575
~4,883
40,328
39,600
‘-. 887(6)
-3,150
5,025
1,018
3,090
10,215
945
2~277(V
17519
2~,754(*)
lq-949
23,503
(Footnotes begin on nat page.)
6
I
—
_—
(1)
(2)
(3)
(4)
(5)
(Q
(7)
(8)
Includes $2,0C0 of compensation deferred in fiscal 1995,1996 and 1997 pursuant to the deferred compensation agreement
entered into io 1980 between Mr. Haahr and First Federal and $3,000 paid to Mr. Haahr in fiscal 1995, 1996 and 1997 for
service as a director of the Company.
Includes contributions by First Federal on behatf of Mr. Haahr for fiscal 1997 of $23,096 under the ESOP an~$9, 159 under
First Federal’s Benefit Equaltition Plan. This amount also includes $756 of life insurance premiums paid on behalf of Mr.
Haahr by Firsf Federal for fiscal 1997.
—
Mr. Haahr joined the Company as an employee in March 1997.
——
Includes $3,000 paid to Mr. Haahr for service as a director of the Company and $8,200 paid to Mr. Haahr for service as
a director of tkleBanks during fiscal 1997.
——.
Includes $I0,6J4 in reimbursed relocation expenses and $24,688 in real estate fees paid on the sale of Mr. Haahr’s residence
in comection with his employment with the Company. No other amounts required to be reported hereunder individually
exceeds 25% of the value of the total amount reported,
—
Includes $252 alflife insurance premiums paid on behalf of Mr. Haahr by First Federal and $635 of sales comfisions
by Mr. Haahr.
earned
Inchrdes contrikjutionsby First Federal on behalf of Mr. Stevens for fiscal 1997 of $20,823 under the ESOP and $454 of life
insurance premiums.
—.
Includes contributions by Firat Federal on behalf of Mr. Winchell for fiscal 1997 of $20,309 under the ESOF-and $445 of
life insurance premiums.
The following table sets forth certain information concerning stock options granted du~ing fiscal
1997 to the Named Officers.
OPTION GRANTS IN LAST FISCAL YEAR
Individti
Grants(l)
Number of
Securities
Underlying
Options Granted
(#)
% of Total
Options
Granted to
in
Employees
Fiscrd Year
Exercise
or Base
Price
($/Sh)
Potential Realizable
Value at Assumed
Annual Rates of Stock
Appreciation
for Option Terms(z)
Expiration
Date
5%
($)
—
10%
($)
5,250
37,500
2,100
3,150
3,090
7.5%
$20.125
09-30-07
$66,439
$ ?68,394
53.6
-3.0
4.5
4.4
17.375
20.125
20.
25
20,
25
03-25-07
09-30-07
409,688
26,576
1~38,563
-67,358
09-3-0-07
39,863
~01,036
09-30-07
39,104
‘99,112
Nme
James S. Haahr
J. Tyler Haahr
Fred A. Stevens
Donald J. Winchell
(1) All the options set forth in this table vested as of the date of the grani
except for the options to purchase 37,5@ shares of
Common Stock granted to J. Tyler Haahr which vest in four equal amual
installments commencing March 25, ‘199S.
(2) Represents the potential realizable value of the option grant assuming that the market price of the underlying security
appreciates in value from the date of the grant to the end of the option term (10 years) at the annualized rates as~et forth in
the table above.
7
The following table provides information as to the value of the options held by the Naed Officers
on September 30, 1997. To date, no stock appreciation rights have been granted by First Midwest.
AGGREGATE OPTION EXERCISES
IN LAST FISCAL YEAR AND FY-END OPTION VfiUES
Number of
Unexercised
Options at
FY-End (#)
Value of
Unexerci~d
In-the-Money
Options zt
FY-End ($)(1)
Shares
Acquired on
Exercise
(#)
Value
Realized
($)
Name
Exercisable
(#)
Unexercisable
(#)
Exercisable
($)
Unexercisable
($)
James S. Hati
3,000
$28,250
131,632
---
--
$1,485,950
:---
J. Tyler Haabr
21,573
203,145
9,291
37,500
96,779
$fi3, 125
Fred A. Stevens
Donald J. Winchell
3,300
2,100
31,625
18,400
19;775
24,732
---
-–
153,653
“~---
T
194,710
‘---
—
(1) Represents the aggregate market value (market price of the Common Stock less tie exercise price) of the option granted based
upon the average of the closing bid and the asked price of $20.125 per share of the Common Stock as reported on The Nasdaq
Stock Market on September 30, 1997.
Employment Agreements
First Fede~d has employment agreements with the Named Officers. The employment agreements
are designed to assist the Company in maintaining a stable and competent management
te~m. The
continued success of the Company depends, to a significant degree, on the skills and competence of their
officers. Each employment agreement provides for annual base salary in art amount not less=than the
employee’s current salary and a term of three years. Each agreement provides for extensions of one year,
in addition to the then-remaining term under the agreement, on each anniversary of the effective date of
the agreement, subject to a formal performance evaluation perfomed by disinterested members of the
Board of Directors of First Federal. The agreements terminate upon such Named Officer’s &eath, for
cause, in certain events specified by OTS regulations, or by such Named Officer upon 90 days=otice to
First Federal. For the year ended September 30, 1997, the disinterested members of First Federal’s Board
of Directors authorized one year extensions of the Named Officers’ employment agreements. =
Each employment agreement provides for payment to the employee of the greater of his salary for
in ‘tie event
the remainder of the term of the agreement, or 299% of the employee’s base compensation,
there is a “change in control” of First Federal where employment terminates involuntarily in co~ection
is snbject to
with such change in control or within 12 months thereafter. This termination payment
reduction by the amount of all other compensation to the employee deemed for purposes of the Internal
Revenue Code of 191$6,as amended (the “Code”), to be contingent on a “change in control”, and may not
exceed three times the employee’s average annual compensation over the most recent five year p=riod or
be non-deductible by the Company for federal income tax purposes. For the purposes of the employment
agreements, a change in control is defined as any event which would require the filing of an application
for acquisition of control or notice of change in control pursuant
to 12 C.F.R. ~ 574.3 or ~574.4,
respective] y. Such events are generally triggered prior to the acquisition or control of 10% .of First
8
Midwest’s Common Stock. Each agreement also guarantees participation in an equitable manner in
employee benefits applicable to executive persomel.
Based on their current salaries,
if employment of Messrs. J. Haahr, T. Haahr, Stevens and
Winchell had bet~nterminated as of September 30, 1997, under circumstances entitling them to benefits
pay as described above,
they would have been entitled to receive lump sum cash payments of
approximately $9.03,000, $663,000, $655,000 and $621,000, respectively.
Compensation Committee Interlocks and Insider Participation
Compensation of the executive officers of the Company is currently determined by the ACP
Committee of First Federal and the Stock Option Committee of the Company. Directors Cooley,
Mickelson and Muilenburg are the current members of these two committees. All decisions .by the ACP
Committee relating to the cash compensation of executive officers are reviewed by the full Board, except
that Board memhlers who are also executive officers do not participate in deliberations regzrding their
respective compensation. See “Compensation Committee Report on Executive Compensation” below.
Compensation Committee Report on Executive Compensation
First Midwest has not paid any crish compensation to its executive officers since its fofiation. All
executive officers of First Midwest also currently hold positions with First Federal and receive cash
compensation from First Federal. The function of administering the executive compensatioripolicies of
First Federal is currently perfoned
by the ACP Committee of the Board of Directors of First Federal,
consisting of Directors Cooley, Mickelson and Muilenburg. All decisions by the ACP Committee relating
to the cash compensation of First Federal’s executive officers are reviewed by the full Board of First
Federal, except that Board members who are also executive officers do not participate in dQiberations
regarding their respective compensation.
Awards glranted under First Midwest’s Stock Option Plans are made solely by the Stock Option
Committee.
Overview and Philosophy
The ACP Committee has developed and implemented an executive compensation program that is
based on guiding principles designed to align executive compensation with the values and objectives,
initiatives, and the business and financial performance of the Company.
business strategy, management
In applying these principals,
the ACP Committee has established a program to:
o
o
o
o
Support a ]performance-oriented environment that rewards performance not only with respect to
the Comp:~ny’s goals, but also the Company’s performance as compared to that of industry
performance levels;
Attract and retain key executives critical to the long-term success of the Company;
Integrate cclmpensationprograms with both the Company’s annual and long-term strategic planning
and measuring processes; and
Reward executives for long-tern strategic management and the enhancement of shareholder value.
9
Furthermf]re,
in making compensation decisions, the ACP Committee focuses on the individual
contributions of t>xecutive officers to the Company.
The ACP Committee uses its discretion to set
executive compem~ationwhere, in its judgement, external, internal or an individual’s circumstices warrant
it. The ACP Connrnittee also periodically reviews the compensation policies of other similarly situated
companies, as set forth in various industry publications, to determine whether the Company’s compensation
decisions are com]?etitive within its industry.
Executive Oficer {CompensationProgram
The executive officer compensation program is comprised of base salary, armual incentive bonuses,
long-term incentive compensation in the form of stock options and restricted stock awards, and various
including medical and retirement plans generally available to employees of the Banks.
benefits,
Base Sala~.
publicly traded batig
into account individual experience and performance and specific issues particular to the Company.
Base salary levels for executive officers are competitively set relative to other
In determining base salaries, the ACP Committee-also takes
and thrift companies.
Annual
Incentive Bonuses.
incentive bonus, which is
determined as a percentage of such executive officers’ base salary,
if the Company’s targeted goals
(including its targ[>ted goals for return on assets, return on equity, asset quality and interest rate risk
exposure) established at the beginning of the year are met and certain safety and soundness standards at
the Bank level are maintained.
Executive officers are paid an amual
Stock Benefit Plans. The Stock Option Plans are the Company’s Iong-tem incentive-plans for
directors, officers and employees. The objective of the program is to align executive and shareholder long-
term interests by creating a strong and direct link between executive pay and the Company’s performance,
and to enable executives to develop and maintain a significant, long-tern stock ownership position in the
Company’s Common Stock. Awards are made at a level calculated to be competitive with other publicly
traded banking and thrift companies.
Chief Executive Of@cerCompensation
Mr. James S. Haahr was appointed to the position of President and Chief Executive Officer of First
Federal in 1974 anclChairman in 1990, and has also served in such capacities with the Company since its
inception in 1993. Mr. Haahr’s fiscal 1998 base salary is approximately $175,000 per year, subj=ct to such
adjustments in future years as shall be determined by the ACP Committee. Mr. Haahr’s base salary for
fiscal 1997 was approximately $175,000. The ACP Committee determined to maintain Mr. Haahr’s
current year base sa~laryat the same level as last year due to the Company’s continued focus on hcentive-
based compensation, with the use of long-term incentive awards as an integral part of the overall
compensation program.
Mr. Haahr was awarded a cash bonus in September 1997 of approximately $56,000Jand was
incentive award consisting of options to purchase 5,250 shares of the Company’s
granted a long-teml
Common Stock. Tkleseawards were determined by the ACP Committee after consideration of Mr. Haahr’s
contribution to the Company’s fiscal 1997 performance relative to predetermined targeted goals for return
on equity, return on,assets, asset quality and interest rate risk exposure, and in recognition of Mr. Haahr’s
anticipated future performance.
In 1993, Section 162(m) was added to the Internal Revenue Code,
the effect of which is to
eliminate the deductibility of compensation over $1 million, with certain exclusiom, paid to each of certain
highly compensated executive officers of publicly held corporations, such as the Company. Section 162(m)
applies to all remuneration @oth cash and non-cash) that would otherwise be deductible for tax years
beginning on or aftier,January 1, 1994, urdess expressly excluded. Because the current compe.mationof
the
each of the Company’s and the Bank’s executive officers is well below the $1 million threshold,
Company has not yet considered its policy regarding the new provision.
The foregoing report is furnished by the members of the Audit-Compensation\Persomel Committee
and Stock Option Committee of the Board of Directors of the Company.
E Wqne Cooley
G. Mark Mickelson
Rodney G. Muilenberg
Shareholder Return Performance Presentation
The line graph below compares the cumdative total shareholder return on the Company’s Common
Stock to the cumulative total return of a broad index of the Nasdaq Market and a savings and loan industry
index for the period commencing on September 20, 1993 (the date the Company became a public company)
through September :30, 1997.
—.—
,4
/’
/’
-
300
260
k
d
50
~
Flrat Midwest
~
Salected Thfi
Indax
~
NASDA4
Index
First Midwest Financial,
Selected Tlu-ift Index .
Nasdaq Market
Index
IrIc..
. .
.
.
. .
. .
.
.
~
$100.00
100.00
100.00
.
.
~
$106.78
100.00
100.00
~
$106.78
105.04
105.82
~
$138.04
135.01
128.48
~
$170.65
162.16
150.00
09130197
$2@.18
275.17
20~.88
11
Certain Transactions
The Banks have followed a policy of granting loans to eligible directors, officers, employees and
members of their immediate families for the financing of their personal residences and for consumer
purposes. As of September 30, 1997, all loans or extensions of credit to executive officers and directors
were made on substantially the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with the general public and do not involve more than the-nomal
risk
of repayment or present other unfavorable features.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) requires
First Midwest’s directors and executive officers, and persons who own more than 10% of a registered class
of First Midwest’s equity securities, to file with the SEC initial reports of ownership and reports of changes
in ownership of First Midwest common stock and other equity securities of First Midwest by the tenth of
the month following a change. Officers, directors and greater than 10% stockholders are requl=d by SEC
regulations to furrlish First Midwest with copies of all Section 16(a) forms they file.
To First hfidwest’s knowledge, based solely on a review of the copies of such reports tirnished
to First Midwest and written representations that no other reports were required during the @seal year
ended September :30, 1997, all Section 16(a) filing requirements applicable to its officers, directors and
greater than 10 percent beneficial owners were complied with.
INDEPENDENT AUDITORS
The Company’s independent auditors are Crowe, Chizek and Company LLP. Representatives of
Crowe, Chizek and Company LLP are expected to attend First Midwest’s Amual Meeting to respond to
appropriate questions and to make a statement if they so desire.
STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in the First Midwest’s proxy materials for the next Annual
Meeting of Stockholders, any stockholder proposal to take action at such meeting must be received at First
Midwest’s main ofilce, Fifth at Erie, Stem Lake, Iowa no later than August 17, 1998. Any such proposal
shall be subject to tie requirements of the proxy rules adopted under the Exchange Act.
OTHER MATTERS
The Board of Directors is not aware of any business to come before the Meeting other than those
matters described above in this Proxy Statement. However,
if any other matter should properly come
before the Meetin~;, it is intended that holders of the proxies will act in accordance with their best
judgment.
1
First Midwest Financial,
CO NSOLIDflTED
STATEMENTS
Inc. and Subsidiaries
SHAREHOLDERS’
IN
OF
CHANGES
EQUITY
(continued)
Years ended September 30, 1997, 1996 and 1995
NetUnrealized
Appreciation
(Depreciation)
on Securities
Available
ForSale,
Netof Tan
Retained
Earnings
Unearned
Employee
Stock
Ownership
PlanShares
Common
Stock
Additional
Paid-in
Capital
Total
Treasury Shareholders’
Eqrrity
Stock –
Balance at September 30, 1996 ............................$
19,905 $20,862,551 $23,748,383 $
28,698
$ (767,200) $ (682,635) $43,209,702
Puchase
of 248,419 common shwes of
treasu~ stock ..........................................
Retirement of 3,474 common shares ................
30,000 common shares cotitted
(35)
35
-
(4,268,777)
(4,268,777)
to be released under the ESOP....................
295,740
200,000
; 495,740
Amortization of recognition and retention
plan common shares and tax Ilenefit of
restricted stock under thepla]l
..................
Cash dividends declared on common stock
($.36 per share) ................... ...................
Issuance of 970,978 common shares
for stock dividend declared on common
stock, net of cash paid in lieu of
fractional shares ........................................
Exchangeof 7,263 common shares
upon exercise of stock options....................
Issuance of 41,347
common
shares
from treasury stock due to exercise
of stock options ........................................
Net change ti unreatied appreciation on
securities avtilable for sale, net of
t= of $549,689 ........................................
Net income for the yem ended
93,401
(961,849)
93,401
-_(961,849)
9,710
(9,710)
(833)
(257,263)
-
-
-
931,673
-
-
-
(833)
(175,445)
.:(175,445)
768,699
511,436
.
931,673
~641,956
September 30, 1997 ..................................
3,641,956
Balance at September 30, 1997 ............................ $ 29,580 $20,984,754 $26,427,657 $
–--—
960,371 $ (567,200) $ (4,358,158) $4~477,004
—
The accompanying
notes are an integral part of these consolidated
financial statements.
125
First l!idwest Financial,
CO NSOLIOATEO
STATEMENTS
Inc. and Subsidiaries
FLOWS
OF
CASH
Years ended September 30, 1997, 1996 and 1995
Cash
flo~~s from operating
activities
Net income .......................................................................
Adjustments to reconcile net income to net cash
1997
1996
1995
$ 3,641,956
$ 2,413,565
_- $ 3,544,352
from operating activities
forsale, net......
Depreciation, amortization and accretion, net ..........
Provision for loan losses .........................................
Provision for losses on foreclosed real estate ............
Gain on sales of securities atilable
Proceeds from the sales of loans held for sale ...........
Originations of loans held for sale ...........................
Stock dividends from FHLBstock ............................
(Gain) loss on sales of office property, net ...............
loss on sales of foreclosed real estate, net ......
(Gti)
Net change in
hterest
receivable ...........................................
Other assets ................... .................................
Accrued interest payable ..................................
Accrued expenses and other babilities ...............
Net cash from operating activities ...............
1,092,782
120,000
(216,614)
3,592,055
(3,592,055)
6,722
(337,062)
223,344
(205,719)
(2,348,712)
1,976,697
907,721
100,000
20,000
(79,317)
1,064,000
(1,064,000)
(78,900)
(24,739)
8,630
(1,406,034)
(399,200)
346,940
1,689,497
3,500,163
_.
:
_
=
:
.-
–
–
‘_
:“”
697,879
250,000
(1,070,247)
(504,937)
(55,643)
(47,662)
(122,777)
2,690,965
Cash flows from investing
activities
Net ch~nge in interest-bearing deposits in other
financial institutions ....................................................
Purchase of securities available for sale ...............................
Purchase of securities held to maturity ...............................
Proceeds from sales of securities available for sale ................
Proceeds from maturities and principal repay-merit of
100,000
(300,000)
–
(67,569,576)
(120,994,759)
(31,580,132)
804,067
366,829
— 49,445,258
=
(11,888,625)
securities available for sale ...........................................
61,943,630
95,068,472
29,105,289
Proceeds from maturities and principal repayment of
mortgage-backed securities held to maturity ..................
Loans purchased ................................................................
Net ck[nge in loans ...........................................................
Proceec[sfrom sales of foreclosed real estate ........................
Purchase of FHLBstock ......................................................
Purchase of Iowa Bancorp, Inc., net ofcash received ............
Purchase of Central West Bancorporation, net of cash
recl~ived...... ................................................................
Purcha~e of premises and equipment, net ............................
Proceecls from sales of assets .............................. ................
Net cash from investing activities ...........................
(29,819,316)
18,519,590
93,453
(104,600)
(842,423)
(24,975,540)
(3,599,754)
132,842
(1,355,100)
(5,217,265)
(229,430)
(845,380)
72,925
(16,875,175)
(61,876,160)
. —— 27,205
(19,211,940)
:
:
–
-
.:.
=
(4,280,762)
78,738
(899,800)
(581,126)
10,214,105
-
-
-
-
126
I
First Midwest Financial, Inc. and Subsidiaries
(continued)
CO NSOLIOATEO
STATEMENTS
FLOWS
CASH
OF
Years ended September 30, 1997, 1996 and 1995
—.
Cash flows from financing
activities
Net change in noninterest-bearing demand,
savings, NOW,and money market demand deposits ........
Net change in other time deposits ......................................
Proceeds from advances from FHLB ....................................
Repayments of adval~cesfrom FHLB............................~.......
Net change in securities sold under agreements
to repurchase ..............................................................
Net change in other bomotings ..........................................
Net change in advances from borrowers for taes
and insurmce ..............................................................
Cash dividends paid ..........................................................
Proceeds from exercise of stock options ..............................
Purchase of treasury stock ................................................
Net cash from financing activities ..........................
1997
1996
1995
$
599,642
12,110,330
143,000,000
$
(295,265)
18,548,037
210,000,000
(137,861,578)
(160,510,585)
$ (5,082,6(4j
708,93~’
246,000,00~
(255,209,67~
(989,918)
1,500,000
(40,756)
(962,682)
335,991
(4,268,777)
13,422,252
1,640,000
240,000-
.—
(11,279)
(745,761)
94,500
~630,710)
70,919
(515r09g
~.
68,088,937
(14,719,593
Net change in cash and cash equivalents .................................
(1,476,226)
9,712,940
(1,814,523
Cash and cash equivabnts at beginning of ye.
.......................
14,328,652
4,615,712
6,430,23~
Cash and cash equivalents
at end of year
........................
$12,852,426
$14,328,652
$
4,615,712
.
Supplemental disclosure of cash flow information
Cash paid during the year for:
Interest
Income t~es
......................................................................
..............................................................
$17,264,776
$13,629,670
2,415,042
1,736,192
$ ll,696r386-
2,366,886”
Supplemental schedule of non-cash investing and
financing activities
Loans transferred to foreclosed real estate ....................
Issuance of common stock for purchase of
Central West 13ancorporation ..................................
$
169,657
$
220,474
$
129,40~
3,936,634
_.—
The accompanying
notes art? an integral part of these consolidated financial statements.
127
First N[idwest Financial,
1~0 CO NSOLIOATEO
NOTES
Inc. and Subsidiaries
FINANCIAL
STATEMENTS,
SEPTEMBER
30,
1997,
1996
AND
1995
1 - SUMMARY
OF
SIGNIFICANT
NOTE
Principles of Consolidation: The consohdated financial statements include the accounts of First Midwest Financial,
Inc., a ba]~kholding company located in Storm Lake, Iowa, (the “Company”) and ik wholly-owned subsidiaries which
include First Federal Savings Bank of the Midwest (the “Bank” or “First FederaY), Security State Bank (“S-ecuntyr’),First
Services Financial Limited, which offers brokerage services and non-insured investment products and BrGokingsService
Corporation. All significant intercompany balances and transactions have been eliminated.
ACCOUNTING
POLICIES
Nature of Business, Concentration
source of
of Credit Bisk and Industry Segment
income fo]rthe Company is the purchase or origination of commercial, commercial real estate, and residential real estate
[oans. See Note 4 for a discmsion of concentrations of credit risk. The Company accepts deposits from customers in
The
the normal course of business primarily in nofihwest
Company operates primarily in the banking industry which accounts for more than 900/0of its revenues, operating
income and assets.
Iowa and eastern South Dakota.
and central
Information
The prim~
Assets held in trust or fiducia~ capacity are not assets of the Company and, accordingly, are not @eluded in the
accompan~ng consolidated financial statements. At September 30, 1997 and 1996, trust assets totaled approximatel-
y $12,392!,000 and $10,172,000, respectively.
The preparation of financial statements in cofiformity with
Use of Estimates in Preparing Financial Statements:
generally accepted accountig
to make estimates and assumptions that affect the
reported amounts of assets, habilities and disclosure of contingent assets and liabilities at the date of the fiancial
statements and the repofied amounts of revenue and expenses during the reporting period. Actual results could
differ from those estimates.
principles requires management
Certtin Significant Estimates: The allowance for loan losses, deferred income tax provisions, fair values of securities
the determination and carrying value of impaired loans, goodwill amortization and
and other financial instruments,
depreciation of premises and equipment,
These
estimates are reviewed by management routinely and it is reasonably possible that cticumstances that exist at Sep-
the effect could be material to the financia] statements.
tember 30, 1997 may change in the near-term future and that
involve certain significant estimates made by management.
Certain Vulnerability Due to Certain Concentrations: Management is of the opinion that no concentrations errist
that make the Company vuherable to the risk of nea-term severe impact.
Cash and Cash Equivalents: For purposes of reporting cash flows, cash and cash equivalents is defined to include the
Company’scash on hand and due from financial institutions and short-term interest-bearing deposits in other finan-
deposit_transactions,
cial
interest-beatig depositsin other financialinstitutions, and short-term borrowingswith maturities of 90 days or less.
The Company reports net cash flows for customer
loan transactions,
institutions.
Securities: The Companyclassifiessecuritiesinto held to maturity, availablefor sale and trading cate~ries. Heldto
maturity securitiesare those whichthe Companyhas the positiveintent and abihty to hold to maturity,and are report-
ed at ainorlized cost. Availablefor sale securities are those the Companymay decide to sell if needed for
liquidity,asset-liabilitymanagementor other reasons. Availablefor sale securitiesare reported at fairvahre,with unre-
alized gains and lossesincluded as a separate component of shareholders’equity, net of tax. Tradingsecurities are
bought principally for sale in the near term, and are reported at fair value with unrealized g~s
and losses
includedfi~eamtigs.
In May 1995, all securities previously designated as held to maturity,
inclutig mortgage-backed securities,
were transferred to the available for sale category. The Company does not have any securities classified a: held to matu-
to-sell the secu-
rity or trachng at September 30, 1997 or 1996. Although the Company does not have a current intent
rities available for sale, and it is management’s opinion that
the Company has the abibty to hold these securities to
maturity, management considers the designation as available for sale to provide flexibihty in adjustinq the composi-
tion of the securities portfolio as may become deskable in the future.
Gains and losses on the sale of securities are determined wing the specific identification method based on
amortized cost and are reflected in resulti of operations at the time of sale. Interest and dividend income, adjusted by
amortization of purchase premium or discount over the estiated
life of the security using the level yie]d method, is
included ir[ earnings.
Loans Held for Sale: Mortgage loans originated and htended for sale in the secondary market are~carried at the
lower of cost or estimated market value in the aggregate. Net unrealized losses are recognized in a valuation
allowance by charges to income.
128
First Midwest Financial,
Inc. and Subsidiaries
1 - SUMMARY
OF
POLICIES
(continued)
SIGNIFICANT
ACCOUNTING
NOTE
Loan Servicing Rights: Effective October 1, 1996, the Company adopted Statement of Financial Accounting Stafi
‘Accounting for Mortgage Sem”cing Rights. ” This Statement changed the accounting fo~
dards (“SFAS”)No. 122,
mortgage servicing rights retained by a loan originator. Under this standard,
if the originator selk or securitiz=
mortgage loans and retains the related servicing rights, the total cost of the mortgage loan is allocated between t=
loan (without the servicing rights) and the servicing rights, based on their relative ftir values. Under prior practic~
all such costs were assigned to the loan. The costs allocated to mortgage servicing rights are now recorded as a
separate asset and are amortized in proportion to, and over the tie of, the net servicing income. The carrying valu~
of the mortgage servicing rights are periodically evaluated for impairment. The effect of adopting the statement wa~
not material.
.
Loans Receivable: Loans receivable that management has the intent and ability to hold for the foreseeable futu~
or until maturitY or pi~y-off are reported at their outstanding principal balances adjusted for any charge-offs, th~
allowance for loan 10SS!:S,and any deferred fees or costs on originated loans and unamortized premiums or discounb
.
on purchased loans.
Premiums or discounts on purchased loans are amotiized to income using the level yield method over the remairi
ing period to contractual maturity, adjusted for anticipated prepayments.
Interest
income on loans is accrued over the term of the loans based upon the amount of principal outstandiri~
is discontin:
in
interest and printipal payments, in whifi
except when serious doubt exists as to the collectibility of a loan, in which case the accrual of interest
ued.
management’s judgment,
case the loan is returned to accrual status.
income is subsequently recognized only to the errtent
the borrower has the ability to make contractual
that cash payments are received until,
Interest
—.
—.
LoanOriginationFees,CommitmentFees,and Relatedcosts: Loanfees and certain direct loan origination costs
income using the interest method. ~—
are deferred, and the net fee or cost is recognized as an adjustment
to interest
Allowance for Loan Losses: Because some loans may not be repaid in fill, an allowance for loan losses is recorded.
The allowance for loan losses is increased by a provision for loan losses charged to expense and decreased by charg<-
offs (net of recoveries). Estimating the risk of loss and the amount of loss on any loan is necessarily subjective.
Management’s periodic evaluation of the adequacy of the allowance is based on the Company’spast loan loss experi~
ence, known and inherent
risks in the portfolio, adverse situations that may affect the-borrower’s abihty to repay,
the estimated value of any underlying collateral, and current economic conditions. While management may period-
ically allocate portions of the allowance for specific problem loan situations,
the whole allowance is available for aiy
loan charge-offs that clccur.
SFASNo. 114, ‘Accounting by Creditors for Impaiment
of a Loan, ” as amended by SFASNo. 118, was adopted effec-
tive October 1, 1995 and requires recognition of loan impairment. Loans are considered impaired if full principal o.r
interest payments are not anticipated in accordance with the contractual
Imptied loans are carried at
the present value of expected future cash flows discounted at the loan’s effective interest rate or at the ftir value..of
is collateral dependent. A portion of the allowance for loan losses is allocated to impaired
the collateral if the loi~n
loans if the value of such loans is deemed to be less than the unpaid balance.
If these allocations cause the allowance
for loan losses to reqti~e an inmeaser such increase is reported as a component of the provision for loan losses, The
.
effect of adopting thes;e standards was not material to the consohdated financial statements.
loan terms.
in total.
Smaller-balance homogeneous loans are evaluated for impairment
fir~t
mortgage loans secured by one-to-four
family residences; residential constmction loans, and automobile, manufac-
tured homes, home equity and second mortgage loans. Commercial loans and mortgage loans secured by other
properties are evaluated individually for impairment. When analysis of borrower operating results and financial co~-
its debt sem=ce
dition indicates that underlying cash flows of the borrower’s business are not adequate to meet
Often this is associated with a delay or shortfall in paymenkof
requirements,
90 days or more. Nonaccrual loans are often ako considered impaired.
tie
charged off when deemed uncollectible. The nature of disclosures for impaired loans is considered generally compl=
rable to prior nonaccnlal and renegotiated loans and non-performing and past due asset disclosures.
Impaired loans, or portions thereof,
the loan is evaluated for imptient.
Such loans include residential
.
Foreclosed Real Estate: Real estate properties acquired through, or in lieu of, loan foreclosure are initially record-
ed at fair value at the date of acquisition, establishing a new cost basis. Any reduction to fair value from the
carrying value of the related loan at the time of acquisition is accounted for as a loan loss and charged against the
allowance for loan losses. Valuations are periodically performed by management and valuation allowances are adjuit-
.
ed through a charge to income for changes in fair value or estimated selling costs.
.
129
First Midwest Financial,
Inc. and Subsidiaries
1 - SUMMARY
OF SIGNIFICANT
NOTE
Income Taxes: The Company records income tax expense based on the amount of taxes due on its tax return plus
deferred taxes computed based on the expected future t~ consequences of temporaW differences between the
carrying amounts and tm bases of assets and Eabilities, using enacted tax rates. A valuation allowuce,
if needed,
reduces deferred tax assets to the amount expected to be realized.
ACCOUNTING
(continued)
POLICIES
and equipment arecarned at cost,
Premises and Equipment
less accumulated depreciation and amortization computed principally by using the straight-be method over the
estimated useful lives of the assets ranging from 3 to 40 years. These assets are retiewed for impaiment under SFAS
No. 121 when events indicate the carrying amount may not be recoverable.
Land is carried at cost. Builtigs,
furniture, fitures
Employee! Stock Ownership Plan: The Company accounts for its employee stock owership plan (“ESOP”)in accor-
dance with AICPAStatement of Position (“SOP”)93-6. Under SOP93-6, the cost of shares issued to the ESOP,but not
yet alloczted to participants, are presented in the consolidated balance sheets as a reduction of shareholders’ equity.
Compensation expense is recorded based on the market price of the shares as they are committed to be released for
allocation to participant accounts. The difference between the market price and the cost of shares committed to be
released is recorded as an adjustment
to additiona[ paid-in capital. Dividends on allocated ESOPshares are recorded
as a reduction of retained earnings; dividends are not paid on unearned ESOPshares.
ESOPshares are considered outstanding for eartings per share calculations as they are committed to be released;
unearned shares are not considered outstanding.
—
Instruments with Off-Balance-Sheet Risk
Financial
commitments to make loans which are not reflected in the financial statements. A summary of thes=commitments
is disclosed in Note 15.
The Companyr in the normal course of business, makes
IntangibleAssets: Goodwill arising from the acquisition of subsidiary banks is amortized over 15 years using the
straight-hne method. As of September 30, 1997 and 1996, unamortized goodwill totaled approximately $4,862,747
and $5,090,958,
respectively. Amortization expense was $363,923, $170,070 and $125,160 for the years ended
September 30, 1997, 1996 and 1995.
Securities Sold Under Agreements
to Repurchase: The Company enters into sales of securities und~r agreements
to repurchase with primary dealers only, which provide for the repurchase of the same security. Securities sold under
agreements to purchase identical securities are collateralized by assets which are held in safekeeping h. the name of
the Bank by the dealers who arranged the transaction. Securities sold under agreements to repurchase:are treated as
financing and the obligations to repurchase such securities are reflected as a bability. The securities underlying the
agreements remain in the asset accounts of the Company.
Stock Dividends: Common share amounts related to the ESOPplan, stock compensation plans and earnings and
dividends per share disclosures have been restated for the three for two stock spht effected in the form of a 500/.
stock dividend which was paid on Januay Z, 1997.
Per Share:
Earnings per common share is computed by dividing net income by the weightedaverage num-
Earnings
ber of common shares outstanding and common share equivalents which would arise from considering_tilutive stock
options, less ESOPshares not committed to be released. The difference between primay and fully diluted earnings
per share is not material. The weighted average number of shares for calculating fully diluted earnings per common
share is:
Year ended September 30,
Fully tiluted ....................................................................
1997
2,878,718
1996
2,698,459_.
1995
2,670,888
Reclassifications:Certti amountsin the 1996and 1995consolidatedfinancialstatementswerereclassifiedto
conformwiththe 1997presentation.
Expense
Compensation:
for employee compensation under stock option plans is based on Accounting
Stock
Principles 130ard(“APB”)Opinion 25, with expense reported only if options are granted below market price at grant
date.
No. 123 were used for stock-based compensation.
per share are provided as if the fair value method of SFAS
If apphcable, disclosures of net income and eutigs
/30
First Midwest Financial,
Inc. and Subsidiaries
OF
1 -
POLICIES
SUMMARY
SIGNIFICANT
ACCOUNTING
SFASNo. 125, ‘Xccountingfor Transfers and Sem”cing of Financial Assets an@
of Liabilities, ” provides accounting and reporting standards for transfers and servicing of financial
Several transactions common to banking are affected by SFASNo. 125,
asset securi~
NOTE
Impact of New Accounting Standards:
Eti”nguishment
assets and extinguishment of liabilities.
including servicing of loans and other
tizationsr and transfers of receivables with recourse. This statement was effective for some transactions occuti~
after December 31, 1996, and will be effective for others in 1998. The impact of partial adoption in 1997 was not
material to the 1997 c(]nsobdated financial statements and the impact of the complete adoption in 1998 is ako not
expected to be material to the Company’sconsobdated financial statements.
financial assets, repurchase agreements,
loan participations,
(continued)
2 -
ACQUISITIONS
NOTE
On’ December 29, 1995, the Company acquired 1000/. of the common stock of Iowa Bancow, Inc. (“Iowa BancoT’~),
and its wholly-owned subsidia~,
in a purchase transaction with $25
million in assets. Each share of Iowa Bancorp’s common stock was exchanged for $20.39 in cash. The Company pfi-d
approximately $8 million.
Iowa Bancow’s results of operations are included in the consolidated income statement {f
the Company beginning as of the purchase date.
Iowa Savings Bank, a federal savings bank,
Presented below are the consolidated proforma results of operations of the Company for the years ended Septern~
ber 30, 1996 and 1995, assuming the Iowa Bancorp acquisition had occurred as of the beginning of each fiscal yea=
income ....................................................................
Net interest
Net income ................................................................................
Earnings per common and common equivalent share ....................
Fully diluted:
1996
$ 10,467,578
2,268,794
$
1995
9,872,849
3,569,052-
Net income ....................................................................
$.84
$1.33-
On September 30, ~.996,the Company acquired 1000/.of the common stock of Central West Bancorporation (“Cefi-
tral West”), and its wh[]lly-owned subsidiay, Security State Bank, in a purchase transaction with $33 milbon in assets.
Each share of Central West’s common stock was exchanged for $18.04 in cash and 2.3528 shares of the Compan~s
common stock. The C[]mpanypaid approximately $1.3 million and issued 171,158 common shares valued at $23 per
share for a total value of $3,936,634. Central West’s results of operations are included in the consolidated incorn=e
statement of the Company beginning as of the purchase date.
Presented below an? the consolidated proforma re~ults of operations of the Company for the years ended Septem-
ber 30, 1996 and 1995, assuming the Central West acquisition had occurred as of the beginning of each fiscal yea:,__
1996
1995
Net
interest
income
....................................................................
$
11,326,730
income
Net
Earnings per common and common equivalent share
........ ......................................................................
2,410,218
$
10,265,36CI
3,481,751
Fully diluted:
Net income ..............................................................
$.81
$1.19
3
NOTE
Year end securities avtilable for sale were as follows:
SECURITIES
-
1997
Debt securities
Obligations of states and
Amortized
cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
pohtical subdivisions ......................
$
1,367,421
$
26,299
$
(3,775)
$
1,389,945
U.S. Government
and federal agencies ......................
..................
Mortgage-backed securities
Marketable equity securities ......................
68,129,132
43,644,377
113,140,930
1,315,731
543,889
882,930
1,453,118
369,652
(188,059)
(102,162)
(293,996)
(390)
68,484,9.62
44,425,145
l14,300,0m
1,684,9.93
$114,456,661
$
1,822,770
$
(294,386)
$115,985,035
131
First lflidwest Financial,
Inc. and Subsidiaries
NOTE
3 -
SECURITIES
(continued)
1996
Debt
securities
Obbgations
of states and
Amortized
cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
pohtical subdivisions ......................
$
1,392,354
$-
$
$
1,392,354
U.S. Government
and federal agencies ......................
Corporate obligations
..........................
Mortgage-backed securities ....... ... .. .... ..
Marketable equity securities ......................
69,595,584
199,971
35,278,943
106,466,852
2,977,684
63,693
2,466
633,751
699,910
125,983
(450,111)
(326,380)
(776,491)
(2,380)
69,209,166
202,437
35,586,314
–
106,390,271
3,101,287
$109,444,536
$
825,893
$
(778,871)
‘$-109,491,558
The amortized cost and fair value of debt securities by contractual maturity are shown be~ow. Expected
maturities may fifferfiom contractual maturities became bomowers mayhavethe
with or without call or prepayment penalties.
right to call orprepayobhgations
September 30, 1997
.............................. ....................................
Due in one year or less
Due after one year through five years ..............................................
Due after five years through ten years .............................................
Mortgage-backed securities ..............................................................
$
Amortized
cost
15,544,879
23,537,354
30,414,320
69,496,553
43,644,377
Fair
Value
15,591,657
$
_–” 23,483,675
30,799,575
r
–
69,874,907
‘Z 44,425,145
$113,140,930
:x 114,300,052
Activities related to the sale of securities available for sale and mortgage-backed securities av_tilable for sale
are summarized as follows:
September 30, 1997
Proceeds from sales ......................... ... . ... ....... ... .... ... ...... ....... ..
Gross gains on sales ................................................................
1997
$804,067
216,614
—
1996
1995
$366,829 ‘$ 49,445,258
1,070,247
79,317 –
the Company
reclastied
In May 1995,
all securities,
including mortgage-backed securities, previoudy designated
as held to maturity to the available for sale category. The reclassification was performed after consideration by
management of a pending regulato~ policy clarification in regard to the measurement of interest sensl~vity of float-
the pending regulatory PObW clarification
ing-rate mortgage-backed securities.
provided /sufficient potential
of the
securities held by the Company to the available for sale designation. The amotized cost and approximate fair vahre
of securities and mortgage-backed securities that were transferred to the available for sale category were $77,832,845
and $78,948,854, respectively.
risk to the market value of this type of security to warrant
It_was ‘management’s opinion that
reclass~cation
132
First Midwest Financial,
Inc. and Subsidiaries
4
NOTE
Year end loans receivable were as follows:
RECEIVABLE,
LOANS
-
NET
One to four family residential mortgage loans:
Insured by FHA or guaranteed by VA......................................
Conventional ........................................................................
Construction ......... ....................................................................
Commercial and multi-family real estate loans ..............................
Agricultural real estate loans ......................................................
Commercial business loans ..........................................................
Agricultural business loans ..........................................................
Consumer loans ..... ...................................................................
Less: Allowance for loan losses ..................................................
Undistributec[ portion of loans in process ............................
Net deferred loan origination fees ......................................
$
1997
388,589
73,514,864
21,263,847
74,869,777
11,732,395
18,456,004
38,650,322
27,397,629
266,273,427
(2,379,091)
(8,700,400)
(552,965)
$
1996
502,786-
77,973,05T
7,819,129.
85,157,278
11,068,05~
15,468,175?
30,364,235
20,427,63”T
248,780,35.li
(2,356,113)
(2,240,373)
(650r34@=
S 254,640,971
$243,533,519-
Activity in the allowance for loan losses for the years ended September 30 was as follows:
Beginning balance ........................................................
Provision for loan l(]sses................................................
Recoveries....................................................................
Iowa Banco~ allowance at acquisition date ....................
Central West allowance at acquisition date ......................
Charge-offs ..................................................................
$
1997
2,356,113
120,000
25,638
(122,660)
$
1996
1,649,520
100,000
$
19B5
1,442,077
250,00-~
132,500
563,310
(89,217)
(42,55_~
$
—.
1,649,520
Ending balance ............................................................
$
2,379,091
$
2,356,113
Virtually all of the Cornpan~s originated loans are to Iowa and South Dakota-based individual
and organizations.
The Company’s purchased loans totalled approximately $75,851,000 at September 30, 1997 and were secured by
located, as ;i perCentage of tOta~10anS,as fo~~ows: 6°/0in WISCOnSin,50/.in WaShngtOn, 30/.in Minnesotar
properties
20/.in Iowa, 20/0in North Dakota, and the remaining 10% in seventeen other states. The Cornpan~s purchased loans
totalled approximately $76,444,000 at September 30, 1996 and were secured by properties located, as a percentage
of total loans, as follows: 8% in Wisconsin, 5°1.in Minnesota, 4°10in Iowa, 20/.in South Dakotar 2°[.in New York, 2%
in Nebraska, 20/.in Notih D&ota and the remaining 70/.in thirteen other states.
The Company originates and purchases commercial real estate loans. These loans are considered by manageme_~t
to be of somewhat greater risk of uncollectibihty due to the dependency on income production. The Compan~s
commercial real estate loans include approfiately
$10,776,000 and $8,766,000 of loans secured by nursing honr.s
at September 30, 1997 and 1996, respectively. The remainder of the commercial real estate portfolio is diversified
by industry. The Company’spoliq for requiring collateral and guarantees varies with the creditworthiness of each
borrower.
The amount of restructured and related party loans as of September 30, 1997 and 1996 were not significant. The
amount of non-accting
loans as of September 30, 1997 and 1996 were $2,875,000 and $2,646,000, respectively. _
Impaired loans were as follows:
Year end loans with no allowance for loan losses
allocated ........ ...................................................=. .................
Year end loans with allowance for loan losses allocated ..................
Amount of the allowance allocated ..............................................
Average of impaired loans during the year ............ ........................
Interest
.............................
income recognized ..........................................
Cash-basis interest
income recognized during impairment
1997
1996
$-
$
1,623,00~-
2,131,692
337,600
1,707,690
49,000
49,000
—
405,000
78,000-
78,00”0
133
First hlidwest Financial,
Inc. and Subsidiaries
5
NOTE
Yem end foreclosed real estate was as follows:
FORECLOSE
ESTATE
REAL
-
Foreclosed real estate ..................................................................
Less: Allowance for foreclosed real estate losses ..........................
1997
156,300
156,300
$
$
1996
91,818
(5,000)
86,818
$
$.
Activity in the allowance for foreclosed real estate losses for the years ended September 30 was as follows:
Ba[anct;, beginning of period ........................................
Provision forlosses on foreclosed real estate ..................
Less: I.osses charged agtimt allowance ..........................
$
Balance?.end of period ..................................................
$
1997
5,000
(5,000)
1996
1995
$
$
20,000
(15,000)
5,000
$-
:
=
$-
-
NOTE
6 -
LOAN
SERVICING
l.oans serviced for others are not reported as assets. Theunpaid principal balances of these_loans at year
Mortgage
end were ~s follows:
Mortga!3e loan portfohos
seticed
for ~~
..............................................................................
$
4,864,000
$-
1,748,000
1997
1996
Custodial escrow balances maintained in connection with the foregoing loan servicing were approximately $19,000
and $48,000 at September 30, 1997 and 1996, respectively.
7
NOTE
Year end premises and equipment were as follows:
EQUIPMENT,
PREMISES
ANO
-
NET
Land ........................................................................................
Buildings ..................................................................................
fixtures and equipment ................................................
Furtiture,
Less accumulated depreciation ....................................................
$
1997
535,233
4,607,698
2,292,295
7,435,226
(3,258,915)
1996
.
$.
:
535,233
3,979,312
2,078,258
6,592,803
_(2,912,471)
$
4,176,311
$
3,680,332
Depreciation of premises and equipment
included in occupan~ and equipment expense was $346,TZ4, $214,201
and $134,733 for the years ended September 30, 1997, 1996 and 1995.
8 -
DEPOSITS
NOTE
Short-term jumbo certificates of deposit in denominations of $100,000 or more was approximately $14,472,000 and
$12,463,000 at year end 1997 and 1996.
At September 30, 1997, the scheduled maturities of certificates of deposit were as follows for the ye~: ended Sep-
tember 30:
. . . .. . .. .. . . .. . .. . .. . ... .. .. . .. . .. . . .. . .. . . .. .. . . .. . .. . .. . .. . . .. . .. . . .. . . . .. .. . . .. . .. . ..
1998
1999 ........................................................................................
2000 ........................................................................................
2001 ........................................................................................
2002 and thereafter ....................................................................
=
$118,117,383
51,100,428
19,125,371
1,871,026
490,459
$190,704,667
134
First Midwest Financial,
Inc. and Subsidiaries
I
-
9
ADVANCES
LOAN
NOTE
At September 30, 1997, advances from the FHLBof Des Moines with fixed andvariable rates ranging from 4.96°/~~
7.82°/0mature in the yf?ar ending September 30 as follows:
FEDERAL
FROM
HOME
BANK
1998
. . .. . .. . .. . . .. .. . . .. . .. . . .. .. . . .. . .. . . .. .. . . .. . . .. . .. . .. . .. . . .. . .. . .. . . . .. .. . . .. . . .. . .. .
1999
.. . . . .. . .. . . .. . . .. . .. .. . . .. . . . ... . .. . . . .. . .. . .. . .. . . .. . .. ... . . .. . .. ... . . .. . .. ... . . .. . . ..
2000
. . .. . . . .. .. . .. . .. . . ... . . .. . . . .. .. . .. . . .. . . .. .. . .. . . .. . . .. .. . . .. . . .. .. . ... . .. . . .. . . .. . . .
. . . .. . .. . .. . . .. . . .. .. . .. . . .. . . .. .. . .. . . .. . .. . . .. . .. . .. . . .. . .. . . .. . .. . .. . . .. . . .. . .. . .. . ..
2001
2002 and thereafter ....................................................................
$57,550,000
12,200,000
14,600,000
7,200,000
15,876,225
$107,426,225
—
The Bank has executed a blanket pledge whereby the Bank assigns, transfers and pledges to the FHLBand grants
to use,
the Bank must maintain
collateral amount'', all as defined byth=
to the FHLBa security interest
commingle and dispose of the collateral it has assigned to the FHLB. Under the agreement,
''ebgible collateral
agreement.
now or hereafter owned. However, the Bank has the right
value'' atleast equal tothe''reqtired
that hasa''lending
in all prope~
At year end 1997 a]~d 1996, the Bank pledged securities tith amortized costs of approximately $83,544,000 a~d
$61,163,000 and fair values of approximately $84,261,000 and $60,605,000 against specific FHLB advances.
Iii
addition, qualifying mortgage loans of approximately $65,305,000 and $69,296,000 were pledged as collateral at year
end 1997 and 1996.
-
10
SECUIIITIES
NOTE
Year end securities sold under agreements to repurchase totaled $1,800,000 and $2,789,918 for 1997 and 1996.
An analysis of securiti[:s sold under agreements to repurchase is as follows:
AGREEMENTS
REPURCHASE
UNDER
SOLO
TO
Years ended
1997
1996
Highest month-end
balance
........................................................
$
2,789,918
$
2,789,918.
balance
........................................................................
Average
Weighted average interest rate during the period ..........................
Weighted average interest rate at end of period ............................
2,284,590
2,197,6fl
5.620/0
5.790/0
5.56°~
5.52%–
.
At year end 1997, sl~curities sold under agreements to repurchase had maturities ranging from 1 to 57 months witi
a weighted average maturity of 10 months.
The Company pledged securities with amortized costs of approximately $2,267,000 and $3,045,000 and fair values
respectivelyrat year end 1997 and 1996 as collateral for securities sold
of approximately $2,380,000 and$3,117,000,
under agreements to repurchase.
NOTE
11
-
OTHErn
BORROWINGS
year end 1997 and 1996 consisted of $2,900,000 and$l,400,0000f
advances from the Federal
Other borrowingsat
Reserve Bank of Chicago. The advances outstanding at year end 1997 had a 5.550/. interest
rate and were due
$3,49 l, OOOand$l,983,O~O
October l,1997.
and fair values of approximately $3,507,000 and $1,982,000 at year end 1997 and 1996 as collateral for other
borrowings.
The Company pledged securities tithamofized
cosRofapprofimately
-
12
BENEFITS
EMPL[)YEE
NOTE
Profit Sharing Plan: The profit sharing plan covers substantially all full-time employees and provides for the
Company, at its option and subject to a percentage of employee earnings limitation imposed by the Internal Revenue
Code, to contribute to a trust created by the plan. Related expense for years ended September 30, 1997, 1996 and
1995 was $-O-, $-O- and $106,188, respectively.
Employee Stock Own[?rship Plan (ESOP): The Company mtintains an ESOPfor eligible employees who have 1,00-0
hours of employment with the Bank and who have attained age 21. The ESOPborrowed $1,534,100 from the Comp-
any to purchase 230,115 shares of the Compan~s common stock. Colbteral for the, loan is the unearned shares~f
common stock purchased with the loan proceeds by the ESOP. The loan will be repaid principally from the Bank’s dis:
cretionary contributions to the ESOPover a period of 8 years. The interest rate for the loan is 8“/0. Shares purchased
by the ESOPare held i~~suspense for allocation among participants as the loan is repaid. ESOPexpense of $495,740,
135
First IIidwest Financial,
Inc. and Subsidiaries
NOTE
1:!
-
EMPLOYEE
BENEFITS
(continued)
and
$358,613
was recorded for the years ended September 30, 1997, 1996 and 1995. Cfitributions
Contributions to the ESOPand shares released from suspense in an amount proportional
of
$451,500
$200,000, $ZOO,OOOand $218,800 were made to the ESOPduring the years ended September 30,1997, 1996 and 1995.
of the
ESOPloan are allocated among ESOPparticipants on the basis of compensation in the year of allocation. Benefits
generally become 1000/. vested after seven years of credited service. Prior to the completion of seven years of
credited sf?rvice,a participant who terminates employment for reasons other tian death, normal retirement, or dis-
ability receives a reduced benefit based on the ESOP’Svesting schedule. Forfeitures are reallocated among remaining
participating employees, in the same proportion as contributions. Benefits are payable in the form--of stock upon
termination of employment. The Company’s contributions to the ESOPare not fixed, so benefits payable under the
ESOPcannot be estimated.
to the reps-~ent
—
are entitled to receive distributions from their ESOPaccounts only upon termination of service.
ESOPpaficipants
For the years ended September 30, 1997, 1996 and 1995, 30,000, 30,000 and 32,820 shares with ti average fair
value of $~.6.52, $15.05 and $10.93 per share, respectively, were committed to be released. Ako, for the years ended
September 30, 1997, 1996 and 1995, 4,517, 2,858 and 1,915 shares were withdrawn from the ESOPby participants
who are no longer with the company.
Year end ESOPshares are as follows:
Allocated shares ..........................................................
1997
135,745
1996
110,262
Unearned shares ..........................................................
85,080
115,080
1995
83,120
145,080
=
~
Total ESOPshares ........................................................
220,825
225,342
Z
228,200
Fair value of unearned shares ........................................
$
1,690,965
$
1,860,460
$ “: 1,934,400
Stock Optian and Incentive Plans: Cert*
officers and directors of the Bank have been granted optionr to purchase
to the lg93 Stock Option and hcentive Plan (the “1993 Plan”) .~For the year
common stock of the Company pursuant
ended September 30, 1997, options on 252 shares were granted at an exercise price of $20.13 per share an~ expire Sep-
tember 30, 2007. For the year ended September 30, 1996, options on 22,500 shares were granted at an exercise price
per share and =xpire Janu-
of $15.00 per share and options on 750 shares were
w 23, 200ti and September 30, 2006, respectively. For the yea ended September 30, 1995, optiom on 5,264 shares
were granted at an exercise price of $13.33 per share and expire September 30, 2005. For the year ended September
30, 1994, options on 258,877 shares were granted at an exercise price of $6.67 per share and expire September 20,
2003. During the year ended September 30, 1997, options on 32,473, 1,365 and 9,000 common shares wae exercised
at $6.67, $13.33 and $15.00, respectively. Options on 14,175 common shares were exercised at $6.67 p=share
dur-
ing the year ended September 30, 1996. No options were exercised during the fiscal yems ended September 30, 1995
and 1994. & of September 30, 1997, no options have expired under the 1993 Plan.
of $15.75
exercise
granted
at a
price
Certain oticers and directors of the Bank have been granted options to purchase common stock of tie Company
pursuant
to the 1995 Stock Option and Incentive Plan (the “1995 Plan”). For the year ended September 30, 1997,
options on 18,000 shares were granted at an exercise price of $17.25 per share, options on 37,500 shares were grant-
ed at an exercise price of $17.38 per share and options on 14,178 shares were granted at an exercise pnc~ of $20.13
per share. These options expire March 10, 2007, March 25, 2007 and September 30, 2007, respectively. For the year
ended September 30, 1996, options on 1,500 shares were granted at an exercise price of $14.75 per share–and expire
July 25, 2006 and options on 33,990 shares were granted at an exercise price of $15.75 per share and expire Septem-
ber 30, 2006. Options on 9,000 shares were =ercised at $15.75 per share during the fiscal year ended September 30,
1997. Dunn!] the year ended September 30,1997, options on 1,500 shares with an exercise price of $14.75 per share
were forfeited. As of September 30, 1997, no options have expked under the 1995 Plan.
SFASNo. ‘123,wtich became effective for 1997, requires proforma disclosures for companies that do not adopt its
value accounting method for stock-based employee compensation. Accordingly, the following profo~~a informa-
fi
tion presents net income and earnings per share had the fair value method been used to measure compensation cost
for stock option plans. The exercise price of options granted is equivalent to the market value of underlying stock at
the grant dat[~. Accordingly, compensation cost actually recognized for stock options was $-O-for 1997, 199=md 1995.
using the following weighted-average infor-
The fair value of options granted during 1997 and 1996 is estiated
I
risk-free interest rate of 6.440/.
mation:
per year and ~:xpected stock price volatility of 180/..
and
6. 18°/0, expected life of 7.0 years, expected dividends of 2.020/0and 1.900/0
136
First Midwest Financial,
Inc. and Subsidiaries
NOTE
12
-
EMPLOYEE
BENEFITS
(continued)
Net income as reported ..............................................................
Proforma net incom[? ..................................................................
Earnings per share as reported ....................................................
Proforma pnmay and fully diluted earnings per share ..................
1997
$ 3,641,956
3,459,936
$
$
1.27
1.20
$
1996
2,413,565
2,287,151.
—
$
$
.89
.831
In future years, the proforma effect of not applying this standard is expected to increase as additional options are.
—.
granted.
Stock option plans are used to reward employees and provide them with an additional equity interest. OptionS
are issued for 10 year periods, with 100°/0vesting generally occurring 48 months after grant date. At year end 1997,
164,535 shares were au.thonzed for future grants.
Information about option grants follows:
Outstanding, September 30, 1994 ..............................................
Granted ............. ....................................................................
Exercised ................................................................................
Forfeited ........... .....................................................................
Outstandingr September 30, 1995 ....... .......................................
Granted ..................................................................................
Exercised ................................................................................
Forfeited ................................................................................
Outstanding, September 30, 1996 ..............................................
Granted ..................................................................................
Exercised ................................................................................
Forfeited ................................................................................
Outstandingr September 30, 1997 ..............................................
Number Weighted-average
of options
258,877
5,264
$
exercise price
6.67
13.3”r
.
264,141
58,740
(14,175)
308,706
69,930
(51,838)
(1,500)
325,298
6.87
15.4K
6.67
_
8.45
17.91
9.87
14.75
10.23._
The weighted-average fair value per option for options granted in 1997 and 1996 was $4.15 and $3.52. At yew
end 1997, options outstanding had a weighted-average remaining life of 7.11 years and a range of exercise price from
.
.
$6.67 to $20.13.
Options exercisable at year end are as follows:
1995 ......................................................................................
1996 ......................................................................................
1997 ......................................................................................
Number
of options
134,703
242,487
269,798
Weighted-average
exercise price
$6.93-
$8.83
$8.77
Management Recognition and Retention Plans: The Company granted 7,191 and 106,428 (8,986 of which have
been forfeited under t~!rmsof the Plan due to termination of service) restricted shares of the Company’scommon sto~k
to a manageme~t
on May 23, 1994 and September 20, 1993, respectively, to certain officers of the Bank pursuant
recognition and retention plan (the “Plan”). The holders of the restricted stock have all of the rights of a sharehold-
er, except that
they ci~nnot sell, assign, pledge or transfer any of the restricted stock during the restricted period.
The restricted stock vests at a rate of 250/.on each anniversary of the grant date. Expense of $41,947, $117,064 ad
$208,159 was recorded for these plans for the years ended 1997, 1996 and 1995. There was no remaining unamor-
tized unearned compensation value of the pkns at September 30J 1997.
-
13
TAHES
IN COMIE
NOTE
The Company, the Bank and Security file a consohdated federal income tax return on a fiscal year basis. Prior to
fiscal year 1997, if certain conditions were met in determining taxable income as reported on the consohdated fed-
the Bank was allowed a special bad debt deduction based on a percentage of taxable income
eral income tax return,
137
First l~idwest Financial,
Inc. and Subsidiaries
(continued)
-
13
I N C O M E TAXES
NOTE
(80/. for 1996) or on specified experience formulas. The Bank used the percentage of taxable incomernethod for the
to deduct
tax years ended September 30, 1996 and 1995. Taxlegislation passed in August 1996 now requires th~ank
a provision for bad debts for tax purposes based on actual loss experience and recapture the excess bad debt reserve
accumulated in tax years beginning after September 30, 1987. The related amount of deferred tax liabihty which
must be recaptured is approximately $l,500rO00 and is payable over a six year period beginning no later than the tax
year ending September 30, 1999.
The provision for income taxes consists of
Federal
Current ..................................................................
Defemed ................................................................
$
State
CulTent ..................................................................
Deferred ................................................................
1997
1996
1995
1,599,255
569,133
2,168,388
$
1,735,099
(282,756)
1,452,343
314,712
18,969
333,681
290,825
(46,845)
243,980
.$
~
:-
‘-
=
1,946,687
46,000
1,992,687
324,000
4,000
328,000
Income tax expense ......................................................
$
2,502,069
$
1,696,323
$=
2,320,687
Total income tm expense differs from the statutory federal income tax rate as follows:
Income tm:es at 34°/0Federal tax rate ..................................
Increase (decrease) resu[ting from:
State income taxes - net of federal benefit ................
Excess of cost over net assets acquired ......................
Exct?ss of fair value of ESOPshares released
Oth(?r - net
over cost ..........................................................
. .. . . .. . .. .. .. . .. .. .. .. . . .. . .. . . .. .. . ... . .. . . .. . .. . . .. . .. .. .
income tax expense ............................
Total
1997
$2,089,000
1996
1995
$1,397,000
--$1,995,000
220,000
124,000
101,000
(31,931)
$2,502,069
——
161,000
58,000
86,000
(5,677)
$1,696,323
~~
Z
_
214,000
43,000
48,000
20,687
~2r320,687
Year end deferred tax assets and liabilities consist of:
I
Deferred tax assets:
13addebts ......................................................................
Deferred loan fees ..........................................................
ltianagement incentive program ........................................
SMF assessment ..............................................................
Other items ....................................................................
Deferred tax babilities:
Federal Home Loan Bank stock dividend ............................
Accrual to cash basis ......................................................
Net unrealized appreciation on securities available for sale
Other ............................................................................
Valuation allowance ..............................................................
$
128,000
140,000
27,000
101,000
396,000
$=
173,000
140,000
68,000
472,000
63,000
916,000
(452,000)
(258,000)
(568,013)
(56,000)
(1,334,013)
~ (452,000)
= (206,000)
(18,324)
~
(
= (7::::;;;
—
Net deferred tm asset (liability) ............................................
$
(938,013)
$ ~ f199,~78
Federal income tax laws provide savings banks with additiona[ bad debt deductions through September 30, 1987,
totabng $6,744,000 for the Bank. Accounting standards do not require a deferred ta bability to be recoied on this
If the Bank were Equi-
amount, which Iiabibty othetise would total $2,300,000 at September 30, 1997 and 1996.
dated or otherwise ceases to be a bank or if t= laws were to change, the $2,300,000 would be recorded as expense.
138
First Midwest Financial,
Inc. and Subsidiaries
-
14
AND
CA PITIIL
RESTRICTIONS
REQUIREMENTS
NOTE
The Companyhas two primary subsidiaries,First Federaland Security. First Federaland Securitg are subject to vari-
ous regulatorycapital requirements. Failureto meet minimumcapital requirementscan titiate certain mandatoryZ
discretional actions by regulators that, if undertaken, could have a direct material effect on the financial state-
ments. Under capital :\dequacyguidelinesand the regulatory frameworkfor prompt correctiveaction, First Fedeia~
and Securitymust meet specificquantitative capital guidelinesusing their assets, habilities, and certain off-balance-
sheet items as calcubted under regulatory accounting practices. The requirements are also subject to quahtativ~
judgments by the regulatorsabout components,risk weighings and other factors.
EARNINGS
RETAINED
ON
RegulationsrequireFirstFederalto maintain minimumcapital amountsand ratios as set forth below. Managemen~
believes,as of September30, 1997,that First Federalmeets the capital adequaq requirements.
First Federa~sactual.capital and reqtied capital amounts and ratios are presented below
Minimum
Requirement
ToBe Well
Capitalized Under
Prompt Corrective
Action Provisions
Amount
Ratio=
Minimum
Requirement
For Capital
AdequacyPurposes
Amount
Ratio
(Dollars in thousands)
Actual
Amount
Ratio
As of September 30, 1997
Total Capital
(to risk
weighted assets) ..................
$31,239
14.060/.
$17,780
8.000/0
$22,225
lo.oo”/o-
Tier I (Core) Capital
(to risk weighted assets) ......
$29,465
13.,260/o
$
8,890
4.00%
$13,335
6.00”~
Tier I (Core) Capital
(to adjusted total assets) ......
$29,465
8.190/,
$10,791
3 .00%
Tangible Capital
(to adjusted total assets) ......
$29,465
8.190/.
$
5,396
1. 50%
NjA
NiA
N/A
.
N/A-
Tier I (Core) Capital
(to average assets)
..............
$29,465
8.810/0
$13,383
4.000/.
$16,728
5.00°/o–
As of September 30, 1996
Total Capital
(to risk
weighted assets) ..................
$33,084
16.360/,
$16,176
8.00°10
$20,220
10.0070
Tier I (Core) Capital
(to risk weighted assets) ......
$31,343
15.500/.
$
8,088
4.00%
$12,132
6.000/0
Tier I (Core) Capital
(to adjusted total assets) ......
$31,343
9.040/0
$10,396
3.00%
Tangible Capital
(to adjusted total assets) ......
$31,343
9. 04”/.
$
5,198
1.50%
NIA
N/A
NjA
NIA
Tier I (Core) Capital
(to average assets)
..............
$31,343
10.050/0
$12,478
4.00%
$15,598
5.00”/0
Regulations of the office of Thrift Supervision bmit the amount of dividends and other capital distributions that
may be paid by a savin!]s institution without prior approval of the Office of Thrift Supervision. The regulatory restni
tion is based on a three-tiered system with the greatest flexibility being afforded to well-capitalized (Tier 1) instit~-
prior regulatofi
tions. First Federal is currently a Tier 1 institution. Accordingly, First Federal can make, tithout
approval, distributions during a ca[endar year up to 1000/.of its net income to date during the calendar year plus m
amount that would reduce by one-half its “surplus capital ratio” (the excess over its capital requirements) at the ~
beginning of the calendar year. Accordingly, at September 30, 1997, approximately $5,500,000 of Ftist FederaVs
retained earnings was potentially available for distribution to the Company.
Quantitative measru:es established by regulation to ensure capital adequacy require Security to mtitain minim=
amounts and ratios (set forth in the table below) of total risk-based capital and Tier I capital (as defined in the reg-
ulations) to risk-weighted assets (as defined), and a leverage ratio consisting of Tier I capital (as defined) to average
assets (as defined). Management believes, as of September 30, 1997, that Security meets all capital adequacy require:
ments to which it is subject.
139
First Midwest Financial,
Inc. and Subsidiaries
NOTE
Ill
CAPITAL
-
As ofIlecember31,
REQUIREMENTS
AND
RESTRICTIONS
ON
RETAINEO
EAR NlN6S_(continued)
1996, the most recent notification date, the Federal Deposit Insurance Corporation categorized
Security as well capitalized under the regulatory framework for prompt comective action. To be cate~onzed as well
Tier I risk-based, Tier I leverage and total risk-based capital ratios as
capitalized Security must maintain mitiurn,
set forth in the table below. There are no conditions or events since that notification that management betieves have
changed the institution’s catego~. At September 30, 1997, approximately $168,000 of Secunt~s retained earnings
was potentially available for distribution to tie Company.
Security’s actual capital and required capital amounts and ratios are presented below:
Atiual
Amount
Ratio
As of Septenlber 30, 1997
Total Capital (to risk
weighted assets) ..................
$ 3,744
13.90/o
Tier I Capital (to risk
weighted assets) ..................
Tier I Ci~pital(to
average assets) ....................
$
$
3,406
12. 7%
3,406
9.9”/0
As of September
30, 1996
Total Capital
(to risk
weighted
assets)
. . . . . . . . . . . . . . . . . .
$
3,323
15.40/.
Tier
I Capital
wei~lhted assets) ..................
(to risk
Tier I Capital (to
$ 3,049
14.1”/0
Minimum
Requirement
For Capital
Adequacy Purposes
Amount
Ratio
(Dollars in thousands)
2,148
1,074
1,379
8.0%
4.0”10
4.0”10
1,729
8.00/0
865
4.070
$
$
$
$
$
average assets) ....................
$ 3,049
10.0%
$
1,220
4.0%
Minimum
Requirement
To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
Ratio
Amount
$
$
$
$
$
$
2r68~
10.OO/O
1,611-
6.00/0
1,72~-
5.00/0
2,161=
10.0”/0
1,297~
6.00/0
1,5257
5.0”/0
-
15
COMMITMENTS
NOTE
In the normal course of business, the Company’ssubsidia~ banks make various commitments to errtend credit which
are not reflected in the accompanying consolidated financial statements.
CONTINGENCIES
ANO
At September 30, 1997 and 1996, loan commitments approximated $15,782,000 and $20,671,000, respectively,
excluding undisbursed portions of loans in process. Loan commitments at September 30, 1997 included commitments
rates ranging from 7.370/. to 11.500/0totaling $4,876,000 aridladjustable-
to originate fixed-rate loans with interest
rates ranging from 7.90/.to 12.0°/0totahng $5,523,000. The company also had
rate loan commitments with interest
commitments to purchase adjustable rate loans of $5,343,000 with interest
and commitments to purchase $40,000 in fixed rate loans at 9.00/. as of year end 1997. Loan commitments at Sep-
tember 30, :1996included commitments to originate fixed-rate loans tith interest
rates ranging from 8.”~0/0to 9.250/.
totahng $31.4,000, adjustable-rate Loan commitments with interest
$14,723,000 and adjustable-rate purchase loan commitments of $5,634,000 with interest
to 9.50°/0. Commitments, which are disbursed subject
Generally, umrsed commitments are canceled upon expiration of the commitment
ual contract,,
to certain timitations, errtend over various periods of time.
term as outbned in ezch individ-
rates ranging from 8. 130/Dto 11.O~/Ototahng
rates ranging_fiom 9.25°/0
rates ranging from 8.395°K.to 10.OOYO,
The exposure to crefit
loss in the event of non-performance by other parties to financial instruments
for com-
mitments to extend credit is represented by the contractual amount of those instruments. The same c~e”ditpoticies
and collateral requirements are wed in making commitments and conditional obhgations as are used for-on-balance-
sheet instmments.
Since ceri:ain commitments to make loans and to fund lines of credit and loans in process expire without being
used, the amount does not necessarily represent future cash commitments.
In addition, commitments used to extend
credit are agreements to lend to a customer as long as there is no violation of any condition established M the con-
tract.
Securities with amortized costs of approximately $5,835,000 and $9,711,000 and fair values of app~oximately
$5,710,000 and $9,633,000 at September 30, 1997 and 1996, respectively, were pledged as collateral for public funds
on deposit.
140
First Midwest Financial,
Inc. and Subsidiaries
NOTE
15
-
COMMITMENTS
AND
CONTINGENCIES
(continued)
with
Securities
fair values of approximately
$2,076,777
$2,149,000 and $2,456,000 at September 30, 1997 and 1996, respectively, were pledged as collateral for individual.
tmst, and estate deposits.
of approximately
$2,404,000
amortized
costs
and
and
Under employment agreements with certain executive o_ficers, certain events leacling to separation from the Com~
pany could result in cash payments totaling approximately $2,843,000 as of September 30, 1997.
The Company and its subsidiaries are subject to certain_claims and legal actions arising in the Ordinay course ~
business.
In the opinion of management, after con~ultation with legal counsel, the uttimate disposition of these
matters is not expected to have a material adverse effect on the consobdated financial position or results of opera:
tions of the Company.
16
NOTE
Presented below are condensed financial statements for the parent company, First Midwest Financial, Inc.
STATEMENTS
FINANCIAL
COMPANY
PARENT
-
Condensed
Balance
Sheets
September 30, 1997 and 1996
1997
1996
Assets
Cash and cash equivalents ..........................................................
Securities available for sale ......... ................... .... .. ......................
Investment
..................................................
Loan receivable from ESOP..........................................................
Other assets ..............................................................................
in subsidia~ banks
$
2,166,091
1,254,610
39,309,383
567,200
306,656
$
1,383,318
1,433,285 .-
40,258,011=
767,20Q
61,43L”
Total assek ..........................................................................
$ 43,603,940
$ 43,903,245
Liabilities
Accmed expenses and other Eabihties ..........................................
$
126,936
$
693,543L-
ShareholdersJ Equiiy
Common stock ............................................................................
Additional paid-in capital ............................................................
Retained earnings - substantially restricted ..................................
Net unrealized appr<:ciation on securities available for sale,
net of tax of $568,013 in 1997 and $18,324 in 1996 ................
Unearned Employee Stock Omership Ptan shares ... ............ ...........
Treasury stock, at ccJst................................................................
Total shareholders’ eqtity ......................................................
29,580
20,984,754
26,427,657
960,371
(567,200)
(4,358,158)
43,477,004
19,905
20,862,551
23,748,383~-
28,698
(767,200)-
(682,635)
43,209,702 --
Total habihti.es and shareholders’ equity ............................
$ 43,603,940
$ 43,903,245.
Condensed
Statements
nf
Income
1997
1996
1995
Years ended September 30, 1997, 1996 and 1995
Dividend income from subsidiary banks ..............................
Interest
income ................................................................
Gain on sales of securities available for sale, net ..................
$
Interest expense ...........................................................~..
..........................................................
Operating expenses
6,000,000
145,339
216,614
6,361,953
132,014
346,162
480,176
$
9,500,000
219,546
51,237
9,770,783
$
1,800,000--
177,901=
51,250
2,029,151._.
182,743
182,743
132,175_–
132,175
Income
before
income
taxes
and equity
in
undistributed
net
income
of subsidiaries
...................
5,881,777
9,588,040
1,896,97~
Income t= expense (benefit)
(continued)
............................................
(55,000)
53,000
50,000-:
141
First Midwest Financial,
Inc. and Subsidiaries
NOTE
16
-
PARENT
COMPANY
FINANCIAL
STATEMENTS
(continued)
Condensed
Statements
Income
Years ended September 30, 1997, 1996 and 1995
01
Income
bt!fore
equity
in undistributed
net
(continued)
1997
1996
1995
income
of subsidiaries
................................................
5,936,777
9,535,040
1,846,976
(Distributi{]ns in excess o~ equity in undistributed
net income of subsidiary banks ......................................
(2,294,821)
(7,121,475)
1,697,376
Net
incom.e ......................................................................
$
3,641,956
$
2,413,565
$
3,544,352
Condensed
Statements
of
Cash
Flows
1997
1996
1995
Years ended September 30, 1997, 1996 and 1995
Cash flows
from operating
activities
Net income ....................................................................
Adjustments to reconcile net income to
net cash from operating activities
Distribution in excess of (equity in unclistributed)
net income of subsidiary banks ........................
Amortization of recognition and retention plan ......
Gain on sales of securities available for sale, net ......
Change in other assets ..........................................
....
Change in accrued expenses and other liabilities
Net cash from operating activities ....................
Cash flows
from investing
ativities
of securities
available for sale ..............................
Purchase
Proceeds from sales of securities available for sale ..............
Purchase of Iowa Bancorporation, Inc.
..............................
Purchase of Central West Bancorporation ............................
Repayments on loan receivable from ESOP..........................
............................
Net cash from investment activities
Cash flows
from financing
activities
paid
Cash dividends
from exercise of stock options
........................................................
............................
Proceeds
Purchase of treasuy stock ................................................
Net cash from financing activities ................................
$
3,641,956
$
2,413,565
$.. 3,544,352
2,294,821
41,947
(216,614)
(245,225)
(611,711)
4,905,174
(231,000)
804,067
200,000
773,067
7,121,475
117,064
(51,237)
110,759
721,109
10,432,735
~ (1,697,376)
208,159
=
(51,250)
_-
291,107
_
54,984
.=
2,349,976
e
(1,014,438)
338,750
(6,529,615)
(1,923,519)
200,000
(8,928,822)
–
_
~
(617,562)
241,875
-
218,800
(156,887)
(962,682)
335,991
(4,268,777)
(4,895,468)
(745,761)
94,500
(630,710)
(1,281,971)
(515,095)
=
–
(932,030)
=(1,447,125)
Net change in cash and cash equivalents ................................
782,773
221,942
Cash and cash equivalents at beginning of year ......................
1,383,318
1,161,376
Cash and cash equivalents
at end of year
Supplemental
disclosure of cash flow information
Cash paid during the year for interest ................................
$
$
2,166,091
132,014
$
$
1,383,318
$
$:
-
“
~
745,964
415,412
1,161,376
Supplemental schedule of noncash investing
and financing activities:
Issu:lnce of common stock for purchase of
Central West Bancorporation ..................................
$
$
3,936,634
$
-
142
First Midwest I!inancial, Inc. and Subsidiaries
NOTE
16
-
The extent
PA REN’T
to which the Company may pay cash ditidends to shareholders will depend on the cash currently
STATEMENTS
FINANCIAL
COMPANY
(continued)
available at the Company, as well as the abitity of the subsidiay banks to pay dividends to the Company (see Note:
14).
NOTE
17
- SE LECTEO
QUARTERLY
FINANCIAL
DATA
(U NAUDITEO)
Fiscal
year
1997:
Total
interest
income
..................................
expense ................................
Total
interest
income ...................................
Net interest
Provision for loan losses ..............................
Net income ..........................................
December
31
March
31
June
30
September
30
Quarter Ended
$
$
7,305,929
4,288,793
3,017,136
30,000
953,216
$
$
6,882,095
3,973,985
2,908,110
30,000
849,539
7,331,501
4,356,367
2,975,134
30,000
912,504
7,485,150_
4,439,912 “-
3r045,23&.-
30,000=
926,697 “
Earnings per share (fully diluted)
Net income ..........................................
$
.33
$
.29 $
.33
$
.33-
Fiscal
year
1996:
interest
income ..................................
Total
Total interest expense ................................
Net interest
income ....................................
Provision for loan losses ..............................
Net income ..........................................
$
5,363,332
-2,960,194
2,403,138
30,000
776,845
$
5,962,258 $
3,407,485
2,554,773
30,000
726,806
6,499,056
3,735,106
2,763,950
30,000
892,181
$
6,512,819-=
3,875,825?
2,636,994-=
10,000:
17,733?
Earnings per share (h~lly diluted)
Net income ..........................................
$
..29
$
.27 $
.33
$
.OL
Fiscal
.
“Iotal
year
. .
1995:
interest
. .
income
..............................
expensf? ................................
Total
interest
Net interest
income . ..................................
Provision for loan losses ..............................
Net income ....... ..................................
-----
J
A-
.--
5,ZOZ,55b $
2,815,729
2,386,857
30,000
776,494
$
$
------A
5,558,U39
3,154,619
2,403,420
30,000
774,220
-.
--.-.4
5,1 bZ,491
2,897,007
2,265,484
130,000
1,262,075
-.
----,
b,13u,354 >
2,781,369J
2r348,9851-
60,000 ‘“”
731,563 ~
Earnings per share (fidly diluted)
Net income ..........................................
$
.29
$
.29 $
.48
$
.27–
18
OF
VALUES
- FAIR
INSTRUMENTS
FINANCIAL
NOTE
SFASNo. 107, “Disclosurc?sAbout Fair Value of Finana”al Instruments, ” requires that
the Company disclose estimated_
fair value amounts of its financial instruments.
the fair values presented below are rea- .
sonab[e based on the valuation techniques and data available to the Company as of September 30, 1997 and 1996, as=
more fully described below. It should be noted that
cem basis and not a Liquidation basis. As a result, the ultimate value reahzed for the financial instruments present-
ed could be substantially different when actually recognized over time through the normal course of operations.
Additionally, a substantiid portion of the Company’sinherent va[ue is the subsidiary banks’ capitalization and fran--
chise value. Neither of these components have been given consideration in the presentation of fair values below.
the operations of the Company are managed from a going con___
It is management’s behef that
143
First B[idwest Financialr Inc. and Subsidiaries
NOTE
Ill
- FAIR
VALUES
OF
FINANCIAL
INSTRUMENTS
(continued)
The following presents the carrying amount and estimated fair value of the financial instruments hgu by the Com-
pany at September 30, 1997 and 1996. This information is presented solely for compbance with SFASNo. 107 and is
subject to change over time based on a variety of factors.
Selected Assets:
Cash and cash equivalents
Interest-bearing deposits in
other financial institutions
Securities available for sale
Loans ~eceivable, net
FHLBStock
Accrued interest receivable
Selected ILiabitities:
Noninterest bearing demand deposits
Savings, NOWand money market
demand deposits
Other time certificates of deposit
Total deposits
Advances from FHLB
Securities sold under
agreements to repurchase
Other borrowings
Advances from borrowers
for taxes and insurance
Accrued interest payable
Off-Balance-Sheet
Instruments:
Loan commitments
1997
1996
Carrying
Amount
Estimated
Fair Value
Carrying
Amount
Estimated
FairValue
$
12,852,426
$
12,852,000
$
14,328,652
$
14,329,000
200,000
115,985,045
254,640,971
5,629,300
5,366,109
200,000
115,985,000
254,455,000
5,629,000
5,366,000
300,000
109,491,558
243,533,519
5,524,700
5,029,047
300,000
~-109,492,000
243,654,000
5,525,000
5,029,000
.
(5,572,296)
(5,572,000)
(5,452,911)
(5,452,000)
(49,838,735)
(49,839,000)
(49,358,478)
:(49,358,000)
~)
(246,115,698)
(190,190,000)
(245,601,000)
(178,594,337)
‘(178,762,000)
(233,405,726)
~233,572,000)
(107,426,225)
(107,247,000)
(102,287,803)
‘(102,185,OOO)
(1,800,000)
(2,900,000)
(1,806,000)
(2,900,000)
(2,789,918)
(1,400,000)
_ (2,790,000)
_“ (1,400,000)
(449,487)
(1,065,746)
(449,000)
(1,066,000)
(490,243)
(490,000)
(1,271,465) ~ (1,271,000)
(15,782,000)
(20,671,000)
_-
-
The following sets forth the methods and assumptions used in determining the fair value estimates for the Com-
pany’s fini~ncial instruments at September 30, 1997 and 1996.
Cash and Cash Equivalents: The carrying amount of cash and short-term investment
fair value.
is assumed to approximate the
Interest-bearing Deposits In Other Financial
other financial institutions
is assumed to approximate the fair value.
Institutions:
The carrying amount of interest-beatig
deposits in
Securities Available For Sale: Quoted market prices or dealer quotes were used to detertine
rities available for sale.
the ftir value of secu-
Loans Rel:eivable, Net: The ftir value of loans receivable, net was estimated by discounting the future cash flows
using the current rates at which similar loans would be made to borrowers with similar credit ratings and for sitilar
remaining maturities. When using the discounting method to determine fair value, loans were gathered by homoge-
neous groups with similar terms and conditions and discounted at a target rate at which similar loans would be made
to borrowers as of September 30, 1997 and 1996. In addition, when computing the estimated fair value for all loans,
allowance for loan losses have been subtracted from the calculated fair value for consideration of cre.tit issues.
FHLB Stock: The fair value of such stock approximates book value since the Bank is able to redeem this stock with
the Federal Home Loan Bank at par value.
Accrued Interest Receivable: The carrying amount of accrued interest receivable is assumed to approximate the far
value.
144
First Midwest Financial,
Inc. and Subsidiaries
18
OF
VALUES
- FAIR
FINANCIAL
INSTRUMENTS
NOTE
Deposits: The fair value of deposits were determined as follows: (i) for noninterest bearing demand deposits, sav~
ings, NOWand money market demand deposits, since such deposits are immediately Withdrawable, ftir value is deter-
mined to approximate the carrying value (the amount payable on demand); (ii) for other time certificates of deposit.
the fair value has been estimated by discounting expected future cash flows by the current rates offered as of Sep~
tember 30, 1997 and 1!196on certificates of deposit with similar remaining maturities.
In accordance with SFASNo.
107, no value has been assigned to the Bank’s long-term relationships with its deposit customers (core value of
deposits intangible) sti,ce such intangible is not a financial instrument as defined under SFASNo. 107.
(continued)
Advances from FHLB: The fair value of such advances was estimated by discounting the expected future cash flowi
using current interest rates as of September 30, 1997 and 1996, for advances with similar terms and remaiting matu-
rities.
SoldUnderAgreementsto Repurchaseand OtherBorrowings:Thefairvalue of securities sold under
Securities
agreements to repurchase and other borrowings was estimated by discounting the expected future cash flows using
derived interest rates approximating market as of September 30, 1997 and 1996 over the contractual maturity of such
borrowings.
—
Advances From Borro~rers for Taxes and Insurance: The carrying amount of advances from borrowers for tues
insurance is assumed to approximate the fair value.
and
Accrued Interest Payable: The carrying amount of accrued interest payable is assumed to approximate the fair value.
Loan Commitments: The commitments to originate and purchase loans have terms that are consistent with current
the face amounts of these commitments are not significant.
market terms. Accordirlglyrthe Company estimates that
financial
instruments without
fair value estimates are made at a specific point in tie,
Limitations: lt mustbe notedthat
based on relevant mm=
ket information about the financial instrument. Additionally, fair value estimates are based on existing on- and off-
balance-sheet
attempting to estimate the value of anticipated future business,
customer relationships and the va[ue of assets and Inabilities that are not considered financial instruments. These
estimates do not reflect. any premium or discount that could result from offering the Company’sentire holdings of a
particular financial instrument
for sale at one time. Furthermore, since no market exists for certain of the Comp&
fair value estimates may be based on judgments regarding future expected 10SSexperience~
rqfs financial instruments,
current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates
are subjective in nature and involve uncertainties and matters of significantjudgment and therefore cannot be dete~
mined with a high level of precision. Changesin assumptionsas well as tax considerationscould significantlyaffec_f
the estimates. Accordingly,based on the Limitationsdescribedabove, the aggregate fair value estimates are not.
intended to represent the underlyingvalue of the Company,on either a going concern or a Liquidation basis.
-
19
SUPPLEMENTAL
NOTE
On December 29, 1995, the Company purchased all of the common stock of Iowa Bancorp for $8,000,000 in cash. Efi”
conjunction with the acquisition, Liabilities were assumed as follows:
DISCLOSURES
FLOW
CASH
Fair value of assets a.cqtired ........................................................
Cash paid ..................................................................................
Liabilities assumed ................................................................
$
$
25,429,434
(8,000,000)
17,429,434
On September 30, 1996, the Company, purchased all of the common stock of Central West for $1,312,474 in cash_
In conjunction with the acquisition, Liabi&
shares at a market value of $23 per share.
and issued 171,158
ties were assumed as foLlows:
common
Fair value of assets acquired ........................................................
Cash paid ..................................................................................
Common stock issue[l ..................................................................
Liabilities assumed ................................................................
$ 35,577,247
(1,312,474)
(3,936,634)
$ 30,328,139
-
20
OEPOSIT
INSURANCE
FE DE Rfl\L
NOTE
PREMIUM
The deposits of savings i~ssociations such as the Bank are insured by the Savings Association I~urance Fund (“s~~)-..
A recapitalization plan signed into law on September 30, 1996 provided for a one-time assessment of 65.7 basis points
apphed to all SNF deposits as of March 31, 1995. Based on the Bank’s deposits as of this date, a one-time assessment
of $1,265,996 was paid ;~ndrecorded as federal deposit insurance premium expense for the year ended September 30,
1996.
—
145
Directors of First Midwest Financial,
Inc.
JAMESS. H~HR — Chairman of the Board, Presi-
E. THURMANGASKILL— Member of the Board of
dent
and Chief Executive Officer for First Midwest
Directors for First Midwes~ Financial,
.
Inc., First
Financial,
Inc. and First Federal Savings Bank of
Federal Savings Bank of the Midwest, and Security
the Midwest; Chairman of the Board and Chief Exec-
State Bank. Mr. Gaskill has_owned and operated a
utive Officer for Security State Bank. Mr. Haahr is
grain farming operation located near Corwithr Iowa
a member of the Board of Trustees of Buena Vista
since 1958. Board committees: Chairman of the
University. He has served in various capacities since
First Federal Trust Committee and member of the
beginning his career with First Federal in 1961. He
Audit-Compensation/Personnel Committee.
is a member of the Board of Directors of America’s
Community Bankers and a member of the Savings
G. MARKMICKELSON— Member of the Board of
Association
Insurance
Fund Industry Advisory
Directors for First Midwest Financial, Inc. and First
Committee. Mr. Haahr is former Vice Chairman of
Federal Savings Bank of the Midwest. Mr. Mickelson
-
the Board of Directors of the Federal Home Loan
is Vice President of Acquisitions for Northwestern
Bank of Des Moines, former Chairman of the Iowa
Growth Corporation in Sioux Falls, South Dakota.
League of Savings Institutions,
and a former direc-
Northwestern Growth Corporation is the unregulat-
tor of the U.S. League of Savings Institutions. Board
committee: First Federal Trust Committee. James S.
ed investment
.
Service. Board committees: First Federal Audit-
subsidiay =f Northwestern Public
Haahr is the father of J. Tyler Haahr.
Compensation/Personnel
-Committee
and Stock
Option Committee.
J. TYLERHAAHR— Senior Vice President, Secretay
and Chief Operating Officer
for First Midwest
RODNEYG. MUILENBURG—_Member of the Board of
Financial, Inc.; Executive Vice President, SecretaW
Directors for First Midwest Financial, Inc., First Fed-
and Chief Operating Officer for First Federal Savings
eral Savings Bank of the Midwest, and Security
Bank of the Midwest; Secretay
of Security State
State Bank. Mr. Muilenburg_is employed as a dairy
Bank; and Vice President
and Secretary of First
specialist with Purina Mills, Inc., and supervises the
_—
Services Financial Limited. Mr. Haahr has been
sale of agricultural products in a region encompass-
employed by First Midwest and its affiliates since
ing northwest
Iowa, northeast Nebraska, eastern
Marchr 1997. Previously Mr. Haahr was a partner
South Dakota, and southwest Minnesota. Board
with the law firm of Lewis and Rota LLP,Phoenix,
committees: Chairman of the Stock Option Commit-
Arizona. Board committee:
Fhst Federal Trust
tee
and member
of
the Audit-Compensation/
Committee. J. Tyler Haahr is the son of James S.
Personnel Committee.
T
Haahr.
JEANNEPARTLOW— Member of the Board of Direc-
E. WAYNECOOLEY— Member of the Board of
tors for First Midwest Financialr Inc. Mrs. Partlow is
Directors for First Midwest Financial,
Inc., First
President of the Iowa Savings Bank Division of First
Federal Savings Bank of the Midwestr and Security
Federal, Des Moines, Iowa. She was President, Chief
State Bank. Dr. Cooley has served as Executive
Executive Officer and Chai~person of the Board of
Secretary of the Iowa Girls’ High School Athletic
Iowa Savings Bank, F.S.B., from 1987 until
the end
Union in Des Moines,
Iowa since 1954. Board
of December 1995, when ‘Tows Savings Bank was
committees: Chairman of
the Audit- Compensa-
acquired by and became a division of First Federal
tion/Personnel
Committee
and member of
the
Savings Bank of the Midwest.
Stock Option Committee.
Executive Officers
JAMESS. HAAHR
Chairman of the Board,
President and Chief Executive
Oficer for First Midwest
Financial,
Federal Savings Bank of the
Inc. and First
Midwest
J. TYLERHAAHR
Senior Vice President,
Secretary and Chief Operat-
First Midwest
ing Oficerfor
Financial,
Vice President, Secretay
Inc.; and Executive
and
Chief Operating Oficer for
First Federal Savings Bank
DONALrIJ.WINCHELL,CPA
Vice President, Treasurer
and Chief Finanm”al Oficer
for First”Midwest Financial,
Inc.; and Senior Vice Presi-
dent, Treasurer and Chief
Financia~Ofl”cer for First
Federal S_avingsBank of
of the Midwest
the Midwest
ELLENE. H. MOORE
Senior Vice President
Marketing and Sales for
First Federal Savings Bank
of the Midwest
FREDA. STNENS
President and Trust Oficer
for Storm Lake Division of
First Federal Savings Bank
of the Midwest
OAMES G. WINTERBOER
President~or Brookings
Federal Bank Division of
First Federal Savings Bank
of the Mid-west
JEANNEPARTLOW
SUSANC. JESSE
President for Iowa Savings
Bank Division of First Federal
Savings Bank of the Midwest
Senior Vice President Branch
Administration and Compli-
ance Oficer for First Federal
Savings Bank of the Midwest
]47
—
Corporate Information
RTERS
HEAOQUh
CORPORATE
First Midwest Financial, Inc.
First Federal Building
Fifth at Erie
P.O. Box 1307
Storm Laker Iowa 50588
OF
MEETING
STOCKHOLDERS
ANNUAL
The Annual Meeting of Stockholders will convene at
lp.m.
on Monday, January 26, 1998. The meeting
till be held in the Board Room of First Federal
Savings Bank of the Midwestr Fifth at Erie, Storm
Lake, Iowa. Further information with regard to this
meeting can be found in the proxy statement.
GENERAL
COUNSEL
Gadd, Armstrong &Brown, P.C.
Mack, Hansen,
316 East SixthStreet
Storm Laker Iowa 50588
SPECIAL
COUNSEL
Silver, Freedman & Taff, LLP
llOONew York Avenue, NW
Washington, DC 20005-3934
Stock Market Information
AUOITORS
INDEPENDENT
Crower Chizek and CompanylLP
330 East Jefferson Boulevard
P.O. BOX7
South Bend, Indiana 4662~-
.
STOCKHOLDER
SERVICES
ANO
INVESTOR
RELATIONS
Stockholders desiring to change the namer address,
or ownership of stock; to re~ort lost certificates; or
to consolidate accounts, sho~ld contact the corpora-
tion’s following transfer agerit:
Registrar & Transfer Company
10 Commerce Drive
Crawford, New Jersey 07016
Telephone: 1-800-368;5948
~
Analysts,
investors, and ot~ers seeking a copy of
the Form 1O-Kor other pub~c financial information
should contact
the following:
Investor Relations
First Midwest Financia], Inc.
First Federal Building, Fifth at Erie
P.O. BOX1307
Storm Lake, Iowa 50538
Telephone: 712-732-4117
the symbol “CASH.”
First Midwest Financial, Inc~s common stock trades on t-he Nasdaq National Market ~der
Journal publishes daily trading information for the stock under the abbreviation, “FstMidwFnl,”
The Wall Meet
in the National Market Listing. The price range of the common stock as reported on the Nasdaq System for
split paid by
each quafier of fiscal 1996 and 1997, after giving retroactive effect for the three for two
the company in the form of a fifty percent stock dividend, was as follows:
stock
~
—.
199G
Oividend
Paid
1997
Oividend
Paid
.
$.073
$.073
$.073
$.073
$.09
$.09
$.09
$.09
fiscal Year 1996
Fiscal Year 1997
Low
Iiigh
$13.17
$14-67
$14.50
$14.50
$15.67
$15.67
$16.17
$16-50
Low
———
$15.00
$15.25
$15.00
$16,25
.:
High
I
$16.67
$17.88
$18-00
$20.88
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
The prices reflect inter-dealer quotations without
necessarily represent actual transactions.
retail mark-up, mark-down or commissions, and do not
.
of factors including earnings, finan-
Dividend payment decisions aremade tithconsideration
cial condition, market considerations, and regulato~ restrictions. Restrictions on dividend payments are
described in Note 14 of the Notes to Consobdated Financial Statements included~n this Annual Report.
ofavariety
As of September 30, 1997, there were 2,698,904 shares of common stock outsta~ing, which were held by
of record
332stockholders
number does not reflect approximately 590 persons or entities who hold their sto~k in nominee or’’street”
name.
ofrecord, and325,298 shares subject to outstanding options. Thestockholders
.
The folloting securities firms indicated they were acting as market makers for First Midwest Financialr Inc.
stock as of September 30, 1997: Everen Securities, Inc.; Herzog, Heine, Gedu[d, I;c.; Howe Barnes Invest-
ments, Inc.; Piper Jaffray Companies, Inc.; Sandier O’NeillPartners; Trident Sectitiesr
Inc.; Tucker Antho-
ny Incorporated.
148
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