Financial
Highlight=
.“C
1997
1996
1995
1994
1993
Tod azse~ ............ .. ......... . ......
$.418,380
LQans receivable, net ............ .
....
Tod deposits ........... .. ... ...
Shareholders’ equiy .......... .. ... ..
...... .
.
Book due per common share(r)..
To& rquiry
to assets.., .. .... ....~.....
270,286
2s3,85s
~. 42,286
$
16.56
Io.llwo
$404>589
254,641
246,1 I 6
43,477
$
16.11
10.75°A
$38S,008
243,534
233,406
43>210
$
14.81
11.14%
$264,213
178,552
171,793
38,013
$
14.13
14.39%
$274,115
155,497
176,167
34,683
$
12.46
12.65%
$160,827
80,224
122,813
33,438
$
11.21
20.79%
For the FEca.1Yw
~W wTI:CVSANDSmm W S-
DATA)
1998
1996
1995
1994
1993
Nec interm income ....... ...... ..
Nc,
.. ..
income ....... ...................... ...
Diuted eamin~ per shareIII ........
N= yield on inremc-raming assets
lzeNm on averageasset ..... ......-.
.-$
12,829
$11,946
$10,359
2,7850)
1.03[3
$
$
3.26%
.68 Yof31
3,642
1.28
3.38%
.98°h
8.41%
2>414(+
$
0.90[41
3.47%
.77yo(o
6.22%(*
&on
ave~
equity ............
6.43Yo~)
Total hS&
Total DeposiS
—nl—rT—
$.
m’”
NetInterest
m“
$
$
9,405
3,544
1.33
3.63V0
1.31°%
9.86V0
$
$
7,870
2,729
0.92
3.94%
1.29%
7.89%
$
$
5>077
1,352
0.44QI
3.21%
.84%
7.lo%
o
Chair
man~s
Letter
-
To
our
Shareholders
,’~ ,
r
! L.
Vision.
Eveiycompmynecclsone.
our
September 30,1998, &e subsidiary reported net income
vision
informs
you,
a
a shareholder,
where
of $355,000
con]p.wed to $168,000during he sm~e
Ficsc Midwest
Fmanciai
is going. while
a
period the prmious year. Average monthly nex income
.
strong histov
is imporwlt,
how a
concinm to rise, promising fiture gains.
comparly
performs
in che future
km
jumped from $16 I nliflion on September
is
even more
significant.
F!rst
30,
1993, when
the
compmy
became
publicfy
M]d~t
is prcp~ing
co&y for a
traded,
to ovm $418 million on September
30, 1998.
profitable
ton,orrow. what
is OUI
This
incrwe
repr~en~
a gain of more
than 160
vMen?
To build the b-t
suPcr-
pcrcellt. During
the
1998
fiscal year, =ecs
grew
communi~
bank system in our
$13 dion
from $405 m~lon to $418 rni8ion.
She.
market area.
holders’ equity at fid
year md todcd $42.3 million,
k
you read the
financial
or $16.56 per CO~On
shine our.sranding.
‘
section
of
this
year’s
annual
Deposits
incrmed
$38 mioion during &e 1998
report,
you will
find
First
lid
ya,
from $246 million co $284 miUlon. This
Midwest
continues
its proficablc
deposit
trend ~cprescnm a 15 percent gtin, much of ic
growb.
FOI Ae &ml year mld-
in demand deposit accounts where the cost of money
itlg September
30,
1998,
the
is lower.
comp:my
reported net
income
Timeless
checkg,
a packaged accounr
tkar pro-
of $3.7
n]illion. or $1.38
per
nlotes
cross-selling
and relationship
baking,
hm
shmc on a dduted b~is.
Earn-
had a crelnendous
impact
on our
retail banking
ings reflect a 7.8 pcrcenr per
share
inaae
over he
same
OperatiOns sin~ i~ ~trOduc~On a year ago. Coupled
the new phoro QUICKcard Cash & Check ad
wifi
period last w when net income
improved money mxker
accounts, dIc company has
P
w
$3.6 mWlon or $1.28
per
incremed its demand deposit nccounc bdancs
over
shin.
The
1998 net
income
is prior
30 percenc
Deposit account
fcc income jumped 27
to a one-time
prc-cu
charge of $1.5
percent during the fisd yew.
million
for
loaI~ refxted loss=
taken
Fist Wdwmc was rimed one of only meaty-eight
during the second quarter. The one-time
national
findist.s in the Bank Wkcting
hsociation’s
I
charge
relates prinlaily
co misnlwlage-
Go[den Coil Awards for ics T[md=
and QUICKcard
menc
and possible
fraud by one
loan
introductions.
The award w b=ed on tke followin~.
lff, o Leer w 10 IS no longer with the conl-
1)
industry innovations,
2) strategy dcvclopn~ent,
3)
pany. The one-tinle
charge incremes
the
cactid knplemcntation, md 4) r=uhs. We ae proud
compm]yi
raewe
balmces,
set mide for
of this recognition.
!
potential
Iosscs
portfofio. WI*
in the
company’s
.
.
the olle-time &ge,
loan
“et
Sic.
initiating Ae firsr stock mpurchwe progmm
in 1994,
the company has tivcsted a tod
of $11.2
income for f~c?l year 1998 is $2.8 milliol] or
milkon
for
shares purchased
at an average price
$1.03 per diluted share.
of $14.97
per share (adjusted for a sto& dividend),
Etinings
for
the
Security
State Balk
thereby
cr~ring
additiond
value
for
shueholdas.
subsidla~
=e parciculady noteworthy.
The
O. A.gust
24,
1998, &e
company
announced
is
bank achieved a 111 percent
fi!crme
b
intentions
to repurchase an addicioti
5 permnc of
k
earnings
during
the
fiscal
year. On
ouc.smdlng
shares. At
fisd
ymr end,
the compay
I
~
~
had 77,835 sharm remaining co repurclI=e under the
dedicated oficers
and scfi
co provide msential
l~der-
program.
ship that will ~ide
the company toward its vision. AS
DemandDeposit
BalanceGrowIh
On November 23, 1998, First Midwest announced
you r=d more about
each bank division/subsidiary,
-r-r””
an increase in &e company’s quarterly cash dividend
you ~viOsee rhat madition,
customer
service,
innova-
from 12 cents per share to 13 cenu per share. The div.
tion,
and
t-work
GIe important
concepts
of our
idcnd, which repr=en~ an increme of 8.33 percent,
is
super-communi~
stmcnue. Concepts we feel help lad
payable on or about January 4, 1999 co shareholde~s of
co resuk.s.
record m of Decmba
15, 1998. We are plwed to pay
hoking
ahd,
First Midwtit
continua
to seek
this increased ~h
dividend to you, our shareholder.
QPPQ~nities
to increase
shareholder
tiue,
~fi&
International
financial uncertain~ has contributed
includm the acquisition of savings bmks,
commercial
toward erratic move
in the U.S. madcem, particularly
banks, and other related-service compani=
in our geo”-
*OSC with Asim mposue.
First Midwest’s investment
graphid
area. Orher
capid managemen~ strategies
portfofio dom not have significant
exposure TO the
such as ~lvidends and stock repurch~es wi8 &o
be
&i
markets. Comiscent with our business manage-
mn.sidered. && opportunity is evaluared careMy. We
ment, Fiic Midw~s Fleetad Fxrm
0. DALE bON
own., LanoLlfvkulufa.,w~
Tim D. Harvey
President
6m0ki”gs Federal Bank
Dvision of Hrsi Federal
Savings Bank of tie
Midwest
Economic Dafa
Average Land Value as of
Ii?bmary 1998
High-pmducb~ non-ir?igat-
edcroplandin easf-cmkai
Sofdk Dakti
$944peracE
Buikiimg Penn& 1997
Bronkiws
Reskfmtid — $e38,6S0
CommerM — $16,W,500
T=ble R&ii SalES1997
Bmtings
$149,490,6s1
Unemplowenf Rate
as Of June Im
Bmokings
7.4%
-.
Iowa
Savings
Bank
Innovation.
lowz~zvings
~m~~~~~
A new Tc!l-A-Friend
Tiielw
and QUICfiard
A=d
in technolo~,
product offeri,]gs, and profitabil-
promotion
added a unique
twim for cuscome~s and
ity since becotilg
pm of First Feded
SaviWs Bank
employem in all bd
mwkeu.
Each pc~on
cotid
of the Midwmt
in 1995. The banks
re.stths far exceed
an
a free @r
if dtcy I&erred a ~Iend to the bank ad
original goak and projections. The Mom Help all cus-
a new account ww opened. The
average checking
tomers reach heir
financial go&. The mission. Provide
and QIJfCfiard
accounm opened during that period
a cukue
focused on continuow improvement,
de5
incr~ed
si~lady.
md perfor~ce,
a&pcabJily,
profitability,
and pro-
vidu]g customers dte bat ~ancid
produm avaifable.
Iowa Savings Bds
h~torid
fom on savings .md
“Our mmpmy
is prepued to tackle nw cbd-
stated Troy. “We m in a competitive mmket
a variery of
leng~,”
where customers we bombwded witi
single-fmily
inch,de the offcrillg.s of a fi~ semice financial
loan producu
home
h
expmded
co
promotions md advcrrisiig. Advertising is ~;
it is
imtim-
salm that ~uira
work.” Esrablishmg a proaaive de.s
tion. “We knew there m gr=t
I]larkcr potential
in D=
cuhure to mea cusromcrs’ needs k 2 priori~ for Iowa
Moil)~,”
stated Troy Moore, Prc.sident. “Branding
into
Savings Bank.
the developing W~t D= Moines ~ea,
adding new
The
compaly
products, md inlproving existing ones have contrib-
industry ti)ges
is aware of cwrcnc
and mpected
and is positioning itself co capittilze
uted towad
&e
bank’s dramatic
growdl.”
Bryce
on these oppomnitim.
New produa
and servim,
bring,
VLce Pr=ident
of Lending added, “WC hwe a
dditiond
raouce.s,
experienced leadership, ad exmp.
competent
tm
of employea who understand and
tionzl customer servia prove 10 be a successful formda
serve &e needs of existi]g customers.
In fact, many nw
for profidl.
growth at
Iowa Savings Bank and the
accoun~ come from returning customers ad refcrrafs.”
OA.W banks.
Customers
at 10wa Savings now have dle op~orl
to -e
all of *cir bmccs
from one location dt~
Iowa Savings Bank 1998 kigkfighm
to improved product and servim choim. TInld~
Check-
Troy Moore succeeds Jcanrle Pardow, who retired
ing wih ics packaged ben+lts,
Cash & Geck,
and tiered money m=ket
the pho[o QUICKcard
as President
in June after 47 succt-.ssN yews in the
accounm are
fmancid indu.st~.
J-c
remains m active
rhrm products with a signfialt
impact 011 retail cw
mmber
of Fmt Midwest F[nmcifls
Boacd of
tomes.
DiIeccoIs.
“Iowa Savings Bank hm bulefited from he r~ourca
stated LQIa white,
pmvidcs,”
a larger organization
Operations md Brmch Mmag~.
“We work as a C-
and strive towzd continuous
impcove~ncnr and CUS.
tomcr
sarisf~crion.” The mmpa.ny has devefoped .ni-
form product mixes across the bank ORCW tb= m con-
sistel]t with strategic objectives. Re&ment
prducrs,
Total deposi~ incrwe
ow $47 mfllion, a 133
percent incrm horn&e
previous fiscal year.
Net &e&g
account numbers jump 370 per~nt.
Deposit balancm in checking and monq market
accounts soar 4400 pe[cmt.
S&s ad S&e
– A Conlmitmmt a %ccfknce
credit web,
ready reserve, ACH origination,
Ioms, and
program, newly inrroduccd, providm sal~ mining
other scmic~ have been improved tii pmt year. Action
and ping-
to support prozctiie sdm and Cm
phns for additiol]d product at~dservice imovatiom and
work that improvu customer servim.
improvements are shted for the coming yw.
Iowa Savings Bank md the other bmks achieved
New Regismcd Rcprwentative offers cu.scomers
alternative invsunent
(Non-trditibml
options.
autonomy fiough
new company-wide promotions and
bankprodccti anprav~d
through Awrim
mars.
A first annti
Service Check promorion
in
Inue~mmt Cop. Thy are not FDIC-imured or
February gave customers an opportunity to rtiw thtir
~rdnteedby
First Fe&al or aq .@[&es.)
fimcid
situation and update products ~~d scrvicm.
The
r~ttfts were ducated
employeu
and customers,
new aaounts, md a retitiormd message dtac &e b~~ i
dedimted to i,~dividuafiied, hometown setice.
Inae*ed
community pmticipation improv~
bank’s image: Grand Opening in Wmt D= Moin~,
Pork Feed for Chari~, To.chdo\m .scholuship,
T=ch Children ro Save D2p and much more.
I
I
Troy Moore
President
[owa Savings Bank
Divisionof FirstFederal
%vi.gs Bank of the
Midwest
Economic Data
Average Land Valueas of
Sepfmber 1990
Highqualily fann~di”
cen&allow: $Z643per am
Bui!di”gPermits 1%
Metropolitan statistical
hrea~
Rmaential — $7,239,700,000
&mmemal— 87,189,600,000
TaxableRehil Sales ?W
DesMoines
$3>935,W,815
Unemployment Rafe
as of June, 1998
mk bun*
1.9%
Security
Stat-
Sank
Teamwork.
~ec.rity
st~t~ ~~~,
tit
~rned abour Ihe welfue of rheir clienrs. Securiry’s ~-
company’s
only
stat~~rrered
commercial
bank,
ciation wirh fin~ Midwesr offers he bellefirs of a krge
exemplifi=
-omer
how working
coge&er
service and profirabili~.
can help boost
The visiom Grow
safely, soundly, and profitably
co become
the finan-
cial
institution
of choice
in ow market place. The
mission: Offer
rhe best bank smite.s
avaifable tic
me= customers’ needs.
The
pa.sr ym we worked co improve o~ra~ionaI
eficienci~,
enhance &e loan portfolio,
and srra-
line
respomibdicies,”
scared Dana Hansen,
Vice
Pmident
and Cuey
Branch Manager,
“Our
efforts
are showing with record profitability
and improved
communiution
witiln
OUI office, wkh
customers,
and
with the other b&
in our or~ization.”
Security
Stsce Bank
employees
have seen the
benefim of
t-work
sinm becoming mociated with
First M}dwest FinmciA in 1996. Adminiimtive
SUP.
pom fmm the fiance, mmketing, account setices,
and
data processing dep~enu
allows the enrirc orgmi-
zstion to operste mom Hltiendy
and effectively. Ths
=i.srance
rcandatm into more sdned
job rwpon-
sib~lties md improved customer semie.
Common
go&, ~uw,
and idea slr~ring help &c
bank grow more profitable. “We are only as smong as
our weakest
fink,” noted Dick Colcmm,
Presidmt.
financial
i~i~u~ion
coupld with the personal
setice
you wpecr from a local bm~
Sscnrhy Stste Eanh 1998 kigfdighti
Dick Coleman joins team in Ocrober as President.
Securiry Stare Bdc
contribute
rard
anings
of
$355,070
incrae
to&e holding com~y
a I I lpercent
from the previous Sd
year.
Wmt Central hnomic
Development
group,
serving Adair and Guthrie Countic.s, opens ifs ofice
in rhe lower l-l
of Securiry Srate Bank in Stuart
and provides additiond oppomiry
for new
business.
New Registered Represarative
offers cuxomen
dtcrnative
invesr.menr options — a first in fhe
Security State Bank market area. @on-fiuditihml
bankproduc~ ,zwprouided through Amm>m
Invetimz
COT. Thy am not FDIC-iwred
or
gIuranteed ~ Semn”zyState Bank or any afl[iata.)
SQlesad SWL-e — A Commitment to &ccIlence
program, navly introduced, provide
salm rraining
and progr~
to supporf proacrive dm and ta
work &at
improves wtomer
semice.
“When
you have srrong people workin~
toward the same goals, you ~e going to be succes-
cogerher
kaed
~mrnunity
parritipation imprmti
bank’s image
Spring Fling, Pork Feed for Chariry
sful.” This philosophy holds true as Chark.s Shafer, a
Touchdown Scholmhlp,
T~ch Childrm to Save
customer and owner of Agri Drain Corp. commented,
“I am impr~d
wi& &e men and women ac SecBri~
Smte Bank. They a
sincere and are genuinely con-
Day Good ~
more.
Days p-de
sponsor, and much
..
.
DIRECTORS
OF SECURITY
STATE
BANK
J-S.
HA.4HR
CbairH of the Bo=d, Prcident & CEO f..
F,rs, Midwm Fi.m)tial, Inc., ,nd F,rstFeded
SavingsBmk .f he Midwest. a,irnun
Ward f., Semig SmreBd
of the
J-N.
Bw
Pm,”.,, Bump and Bmp Law Office,
S,mm md Pmora, Iou..
G. U
MICmON
V,ce PDes Mohes, 1-
1-
Gids’ Hi& School
E. TH~
GASm
Snce S.nawr Of Iowa, Di$micc8
Owner, GrtiII kming Operati.n
&rw;Ih> row,
3
I
S%”,i@SlateBm~
MainOiiice,61SSoti nivision$tree~
SW.
low
OFFICE
LOCATIONS
First Federa! Savings Bank Mamo.
ofic,
IowasatingsSank
MainOmt%S448Weslo’,v”Patiay,
WestDS Moin,,,[owa
Securi& Sfsfe Bank
Main O@ce
615 South Division
RO. Box 606
Stuart,
Iows 50250
515-523-2203
800-523-8003
515-523-2460
fm
CawyOfice
101 &L08sn
I?O. Box 97
CasW, ~0W2 50048
515-746-3366
800-74G3367
515-746-2828
fas
Elmenth at Msin
titbrook
425 22nd Avmue %.*
Ofice
Msnson,
Iowa 50563
Brookings, Sourh Dakota
712469-3319
712469-2458
k
57006
605-692-2314
Odeboh Ofice
Iowa Sati8s W
219 Sou& Msin Street
Odebolt,
IOW2
51458
Division
Main O@ce
712-6684881
712-668-4882
b
3448 Wmown Pzky
W=t Des MoiL~es, Iowa
50266
515-22G8474
515-226-8475
fax
Higbknd Park 0~.e
3624 Surh Avenue
Dm Moines,
Iowa 50313
Menh Ofice
515-288-4866
515-288-3104
&
501 Sherman
?0. BOX 36
Menlo,
IOWa 50164
515-5244521
sic Ciy Oficf
518 Audubon Street
Sac Ciry, Iowa 50583
712-662-7L95
712-662-7196
k
Broofcin8s
Federal Bsnfc
Dl+ion
Main Ofice
600 Main Avenue
PO. Box 98
Brookin8s, South D&m
57006
605-692-2314
800-842-7452
605-692-7059
fax
StOm Lake Dtiion
Main Bank Ofice
Erie
F&at
I?O. Box 1307
Storm Lake, Iowa 50588
712-732-4117
800-792-6815
712-732-7105
f=
Storm Lake Pb
Ofict.
1415 Nofi MC Avmuc
Iowa 50588
Storm Mc,
712-732-6655
712-732-7924
h
Lake VI.W, Iowa 51450
712-657-2721
712-657-2896
5U
Laurens Ofice
104 Nor& Ttird Street
La.rens,
50554
Iow
712-845-2588
712-845-2029
fax
First
Midwest
Financial.
inc.
and
subsidiaries
SELECTED
CONSOLIDATED
FINANCIAL
INFORMATION
September 30,
m.T“Q”tiND,)
SELECTED
FINANCIAL
CONDITION
DATA
1998
1997
1996
1995
1994
Shareholders’.quiy
.
... ...
.. . . ...
.........
.... ..... .
.
.42286.
$404,589
$388,008
254,641
.115,985
4,863
246,116
112,126
43,477
243,534
109,492
5,091
233,4o6
10G,478
43,210
$264,213
178>552
70,232
—
1,690
171>793
52,248
38,013
$274,115
155,497
37,180
65,917
1,s15
176,167
61,218
34>683.
~
Yw Elded Septanber 30,
(1NT“o”wD,, h~,,
Pm S,-
D.,d
SELECTED
OPERATIONS
DATA
Tod inreccscir.comc ............. .... .. ....... . .. ..... .. ..........
........ .....
Tod inrwm mpens .................. ..
.
... ....
...
..
Nec i,,rcmc income ................. ... .... ........ ..
Provisionfoz1*x, losses.............._.__. ... ...
Nm tit419
$
~
~.
~r”
4,110
1,696
1.08
1.03
1.08
1.03
$
$
.8
$
1,34
1,28
1.34
128
$
$
$
.$
0.95.,
0.90.,
0.95.,
0.90.,
$
~
~
~
$
$
$
$
21,054
9,405
9,155
2,286
15,153
7,870
7,765
1,078
$
~3
~
~
5>865
2,321
3>905
1,433
.
.
1.39
1.34
139
L34
$
$
$
$
0.86
0.83
0.95
0.92
---
I
,..-.::
Y= Ended September 30,
SELECTED
FINANCIAL
RATIOS
AND
1998
OTIIER
DATA
1997
1996
1995
1994
Per formarkcc Ratios
Recur,,on -s
(ratioof necit,come
w avc,q. mm!m,ls)~
.. . .
. .. . . .. . .
0.68%
0.98%
1.31%
L29Y0
Rewrn on slweholders’equi~ (ratioof ncr
timm. LO.Vmgc eqtify)~
... ...—— . ...—.
6.43
Incmcstracespc=d informwiurz
Ave~e cluing year
End ofyw ................................ .... ...
.. . .._
. .
............. .
Net yield on ;L.cwe incec~~-mnhg sets ................
&tio of openting apense co2vera8erord -m ... ..
. . ..
.
Quality Ratios
Non-per fonnin~ asses co cord asseu aLend of ~,ar
Aflowmcc for IOm low to non.pmfo”ti”g
Iom ....
Capi [cl Ratios
ShAlolders’ equitycototalwets acend of pcciod
Avera8eshuel,oldcrs’ ,qui~ to .Ww
xscm
ktio
“r .Vmqe interes-eac,tig SSB ,0
.2.76
.2,76
3.26
2.00
1.94
41.15
10.11
10.51
8,41
2.80
2.75
3.38
2.00
.82
75.36
10.75
11.62
9.86
3.13
1.85
3.63
2.06
.29
227.27
14.39
13.28
7.89
3.25
2.96
3.94
2.30
.35
148.51
12.65
20.52
2.83
2.84
3.47
2.4o
.75
83.49
11.14
12.44
avenge inrcrm!.bwi,,g Ii,tifiu
........................
110.22%
113.72%
111.35%
119,04%
Other Data
Book Vd”e per comnon ,Iwe OUmmding(,,
..
Dividends decfmd 1x, &t@]J ..................................
. . . . . . .. .
Dividendpayoutratio. .. . .
.. .._
.. . .
Numberof hdl-,ticc ofim
.. . .
.
.... ..
. .
..
.
$
16.56
0.48
44.05%
.13
$
16.11
0.36
26.41%
13
$
$
14.81
0.29
30.90?/”
12
$
14.13
0.20
14.53°h
8
12.46
—
—
8
Fist
Midwest
Financial,
Inc.
and
Subsidiaries
MA NAG EM ENT*S
DISCUSSION
AND
ANALYSIS
~
General
First Midwest Fiid,
Inc
(the “Company” or “First
M,dwmc”)
is a bti
holding company whose primary
of he Midw=c (“F,rst
Hsets are First Federal Savings Bti
Federd”) and Securky State Bank (“Securi~”). The Com-
no”-divcrsifitd
pmy was incorpomred in 1993 a.sa uniq
savings and loan holding company and, on Septembtr 20,
1993, acqtired all of the ~piral stock of First Feded in
to
co”necuon wid, First Feder.d’s conversion from mud
sto& form of ownership. On September 30, 1996,
the
Company became a bank holding compmy in conj.nc.
co he
cion wi& the acquisition of SecuriV. M refe.enca
1993, ~cepr where
Company prior co September 20,
eration of approximately $5.2 million.
The acquisition
was accounted for as a purchwe, and be accompanying
consolkk,ted financial
the combined
statements
resdw since the &ce of acqLisirion. The =cess of msr over
the ~dmated fair value of tl]e ~se~ acquired ad liabiliti~
reflect
assumed,
totaling approximately $2.8 million,
is beiog
amortid
the Consolidated Finmcid Srxcemeors).
over a fifteen y= period (see Nor= I and 3 co
On December 29, 1995, First M,dwmr compkred the
acquisition of Iowa Bmcorp,
wholly-owned subsidiay,
Inc. (“Iowt Bmcorp”) and its
Iowa Satigs
Bank, a feded
savings bmk (“Iowa Savings”) Io=ted k Des Moinm,
Iowa Bancarp was merged into
Iowa. Upon aq”isirion,
ocherwi.se indicated, are co fimc Federal md is subsidiw
the Company and Iowa Savings -
merged into Firsr
on a mnsoiidared bmis.
The Gmpany
focuses on -blishing
and mainti”-
Feded.
The Iowa Savings office opemce.s x the Iowa
Saving Bank Division of First Federd Savin& B& of the
ing long-term rdationships with customers, and k com-
mitted to serving the fi”mcial service needs of he com-
m..i~es
marktt
in ics market ar=
tbc
area includes
The Company’s prim~
following counries: Adai r,
Buena Vlsra, Calhoun,
Ida, Guthtie, Podonc~,
Polk, and
Iowa Bmcorp bad
Midwat. At the &r. of acquisition,
aers
of approximately $25 million and equity of $7.2
million. The Company purchmed all of Iowa Bmcorp’s
379,98o
to option for a cash payment of $20.39 per shwe les
shwes and 36,537
shares subja
oucs~ding
Sac located in Iowa, and Bmokin~ county located in ~
centd
retail
deposirs from the gened public and mm those deposits,
South Dakota. The Company
attracts
the aercise price of sbw subjecc co option. Tocd ner
The acquisition was
pluchme prim w $8.0 million.
the accompanying
accounted for as a purchase, ad
togefier with other borrowed funds,
to originate and
consolidated finmcid
smtemenrs
reflect
the combined
reside”d
to
consumer loans, and to provide financing for agri-
purch~c
m~
cultural ad other mmmcrcid bwin~
and commercial mortgage loans,
purposes.
resuhs since the &tc of acqtition.
The am of cosc over
the estimated Kir >due of rhe ~sets acquired and liabil-
is being
irie.s asumed,
approxim~cely $760,000,
tod,ng
The Gmpany’s
basic m~lon
is to mainttin and
wortized over a ffteen year period (see Noces 1 and 3 to
etice
core ~ni”~
wh!le seining its prim~ market
the Consoli&ced Financial Smtemencs).
area. As su&,
nas
srrat~
the Boud of DKecTors has adopted z busi-
the Compmy’s
designd
to (i) mainti
Fil>ancial Condition
requirement, K1)
~#ble
mainwin the quaJiy of tie COmpmyi XSets, (iii) concrol
in =C~S Of redatory
~pi~
oPe~ting ~ens=,
the Company’s interest race spread, and (v) mm~e
(iv) m~ntain and, a.spossibl~ incrme
the
The following d=cussion of&e Company’s consolidated
finmcid condition shodd be r~d in conjunction wkh he
Information and Consoli-
Selected Consolidated Financti
dated Fi”ancid Statements and che related noccs included
Companyk exposure to &a”ge.s in interm races.
elsewhere herein.
Acqtrisirions
On September 30, 1996, First Midwest completed the
Complecrd
Tbe Companyk total assets at September 30, 1998
were $418.4 mioion, m increase of $13.8 million, or
3.4V0, from $404.6 million at September 30, 1997. The
ad
acquisition of Cenrd West Bancorpomcion ~CentraI
Security Smte
Ww”)
Bank,
West was m~ed
located in Stuam, Iowa, Upon zcq.isirio”, Cend
into Fust Midw~t md Se~ity
irs wholly-owned mbsidiq,
became
a wholly+wned,
Sccurky opemtes ofFim in Smm, Medo md cas~,
of First Midwe.sc.
Iowa.
stand-alone subsidi~
k &c date of acquisition, Cent~d Wm had =e=
of
aPPrO~mately $33 million and equity of $2.6 million.
Central West shareholders received ah
of $18.04 md
shm of the mmmon stock of First Mldwac for
2.3528
each Central West share held, rotfing an aggregate consid-
inmeme in ~ets w due primarily to &e incrwed origi-
nation md purcbme of lores during the perid.
The Company: pomfolio of sarirics
ad~ble
for
sale, excluding morcg~ge-backed securici~,
decre,xed
$13.4 million, or 18.7Y0, to $58.2 million at Sepcen,ber
30, 1998 frol>] $71.6 million ar September 30, 1997. The
for sale was the muk of
dicr~e
in securirim ;titble
securities tit matured, were called or were sold during the
period in an mount
gr~rer dun new security purcb~es.
During fiscal 1998, he Company sold securiti~ avdabk
for de
totting
$18.3 mioion,
consisting primarily of
Ff. st Midwest
Financial,
inc.
and
Subsidiaries
MANAGEMENTS
D1SCUSS1ON
AND
ANALYSIS
(Contiued)
I
common md preferred equity securitim tit
had appreci.
ated over purchase .COSC.
The bbce
in morrg~c-bti
for-sale incracd
by $18.1 mK~on, or 40.8%,
sccwitim available.
from
Results
The foIlowing discussion of the Co”~Pany’s raufm of oper-
of Operations
ations shoufd be red in conjunction with chc Selected
and Comolidarcd
Consoli&ted
hformatio,l
Finmcid
$44.4 nlilfion at SepteInber 30, 1997,
to $62.$ @ion
at
Seprelnber 30, 1998. The incrme muhed horn dle pur-
Fmlcid
WhCIC herein.
Smrements ad dle related norm i“duded ds~
dmse of bed-rate morrgage-ba&cd
mount
greater than da
sccuriri~
in aII
and repayments on cxisdng
The purch~e of mortgage.
were generally funded by proceed
mortgage-backed securities.
bz~d
seaities
fmm the marurity, c3J.1,or sde of o~er securitim ati~le
for sale ald incr~~
in cu.scomer deposi~.
The Comlp.ny’s rcsuhs of opmtions me primarily
dependent on net inccre.stincome, noninreresr income ad
he Con,paly’s ability co manzge opemritlg mpemcs. Nec
incolne is the dlfFe~nce,
or sprmd, between the
inter=t
average yield on blcercst-earntilg am and the avenge mce
The intere.scrflte spread
pid on intewt-bwing
Iitiitie.
The Company’s porrfofio of
,Ier loans
receivable
k tifecced by regulatory, ewnoti~
ald con]pccitive fictors
purcf use of conscruuio”
10XIS
The Company’s noninteresr income consis~ primari-
incraed
Sql.mber
by $15.7 mfion,
or 6.2%,
to $270.3 milfion at
from $254.6 million ac September 30,
30,1998
1997.
Tke
incrme
in net loans receivable is due to ~le
incraed
origitmtioil
of
conm,ercti
busi”e.ss
loans,
the
incrased
IOUIS, and AC i?craed
originacioll ad purchase of raidentid mon~ge
on commercial and ]nufti-fm]ily propemiu.
Conswncr
Iom bda]m dcdh,ed ~ a ru~c
and agricuhd-related
of repaymenu in excm of new originations during ti)e
period.
The bda]ce of customer deposi~ inc.rwed by $37.8
fronx $246.1 miRion at Sepresnber 30,
million, or 15.4%,
1997 to $283.9 m~lon at September 30,
incrae
The
in deposits rcsuIced from management’s continued
deposit produce design and marketing
&or~ to cb]ce
1998.
progmns. Deposit bdmce.s incrmed i,] intermr-bearing
r~on
of deposit
accounts ald other rime cdlmtcs
in d]e ~nou”t.s of $7.9 nlillion and $3o.4 milkon, rcsFc-
tivefy. Noninter~r-beuing
deciiiti
by $601 >000.
chc~ng
acmunt
bdulces
Tbe Company’s borrowings from dIe Fedwd HOIIIC
by $22.1
.f DCS Moinm ~FHLB’~ &aed
Lo= Bd
Iniffion, or 20.60A, from $107.4 million at September 30,
1997 co $85.3 milfion ~ Sepcembm 30, 1998. The reduc-
tion in FHLB
an incrae
borrowings during the period.
borrowings was primarify d]e result of
in mcomcr deposits d,at were t~ed to repay
Sh=cholders’ equity deemed
$1.2 nlWlon,
or 2.8%,
to $42.3 million at September 30, 1998 from $43.5 mif-
in share-
1997.
Iion at
.sepcember 30,
The decrae
holders’ equi[y is dle result of stock ~cpurchm~ mid d,e
ill an
paynlellt of casfl ditidends
01) comnlon stool
amount greatm &m net innings
for the period.
chat influence intent me%, lom dem>d,
flow.
subject
and deposit
The Company,
is
to tilcerac race risk to the extent that ic incczesc.
fiic ocher Enanciaf instimtions,
earning asscw mature or reprice at ~creI1c
differe”c bmis, ti]
tim~,
i~ interest-buring liabdiri~.
or on a
f~~ &aged
on ummcrio,l
ly of
accounts md for he
origination of Ioals, boh of whl~ hefp OFSCI the costs
deposit
~otia.ced wick ficzblishlng
income is
and Iom accounts.
tild mtitfing
In addkion, nonintemt
defived from dle activitiw of First Fededs wholly-owned
subsidlarim, First Sewices Flnancid Llmi[cd and Brook-
in the safe of
ings Service Corporation. Both en&ge
wious
n“on-insured invmunent prdllcu.
HistOricaOy, &c
Compz,,y h= nor derived signi6~t
inmme m a xault
ofgaills o,> d]e sde ofsecuriti= and o&cr ~et.s. However,
during dIc yews ended S.pCembeI 30, 1998, 1997, a]d
1996, gains were recorded in rbe mounu
of $399,000,
$217,000,
of securitim av~ble
a,d $79,000,
for sale,.
rqcctivel~
as a mufr of the tic
On Scpt.mbm 30,1996,
feded legis[acion was signed
rcquiril]g dlat all thrift institutions pay a one-tinle
into k
malt
Fund (SAfF)
of
co restore &e Savin@ Association
I“sumce
insured depositor
to its statutop raerve Ievef of at Imt 1.25V0
The wsessmenc wm
accounts.
0.657°A of Fimc Fede~s
insured deposits m of Madl
3 I,
1995,
As a rmuh of
indudillg dlose held by IOW Savings at ti]at da~e.
the special ass=smenc,
[he Company
recognized a pfim chwgc of $1.27 miflion, or $795,ooo
I1et of related income cIxe.s, = of d)e September 30, 1996
effective date of he I+slation.
I
First
Midwest
Financial,
lnG.
and
Subsidiaries
T’he Following mble sets forth the weighted ave~e
IiAilicim
ar dIe end of acb of the yas praented.
effetive intermc race on i,lter=t-sing
XS.K ad int.rm-btig
At September 30,
1998
1997
1996
WEIGHTED
Lom remi&lc
AVERAGE
............... .
YIELD
.... . . ....
ON
.
....... ..
. ... ..............i. . .... ..._
. s.80%
Mortg~e-ba&ed
smitim ............... .. .......
...............................~..
.
Securici~ avdable for de
Ofier
inceresr-ming Nem ........ ..... .
................._..=_
....A..
.
.. .... ...... ... ... . ..a ........ ... ....
.. .............
~mbined weighted avemge yield on inccr=t-ezrni,]g as~ets..........-
WEIGHTED
AVERAGE
RATE
PAID ON
7.15
6.50
5.33
8.15
Demand, NOW deposi~ and Money Mach
. .....
Savings deposits ......... ..... . ....~.~~ . . ............. .. .. ....... ...................
..... ......~...r . ... ...........
Tn.
. ..........
FI337
1>107
$
*)
$
17
$
(6;)
(153)
.—
d)
&4
.-
118
(4)
1>336
707
1997 vs. 199 6
$ 3,866
(180)
929
–Q
.=
$
154
104
1,959
$ 3.700
(115)
836
~
W
$
_
w
91
140
1>825
688
First
Midwest
Financia~,
Inc.
and
Subsidiaries
Y= E,,ded September 30,
INTEREST-EARNING
ASSETS
INTEREST-BEARING
LIABILITIES
Dm.md md NOW dcposim
Sav@s dcp.siu
TImc deposirs
FHLB advmm
O&=I borrowed money
Tod inruac-btig
Notinlwc.bearjng
ii~iiiues
Deposiu
Liab&tim
T.d Iiabilitis
Shti,oldtrs’
eqti~
T.d Iiabifiricsand
eqtiy
s~~oldtis
$23,055
3,67S
4,952
>
$=
8.99%
6.9s
6.29
6.78
8.15%
$256,462
52,722
78,789
5514
-
18415
-.
$411.922
$ 34,202
20,090
203,932
95,328
$
933
502
11.99s
5>593
~
~.
357,025 W
2,73%
2.50
5.88
5.87
5.87
5.39%
5,ij41j
5956
-
~
$411922
a
$249,076
$22,433.
32,618
6s,843
2,341
3.845
$ 30,398
20,538
1s0,088
80,685
$
815
506
10,662
4,886
~.
$~
~
~
315,252
5,617
329,191
9.01Ya
7.18
5,84
6.96
8.21%
2.68%
2.46
5.92
6.06
536
5.41%
2.80%
-
m.
$207,983
$18,567
8.93%
Y6213
51,494
2,521
2,y16
7.37
5.66
7.17
8.16%
1
661
402
8,703
4,087
2.47%
2.7o
5.83
5.9o
5.73
533%
~
$=
$
>
$=
~
m+
298.3%
13417
$ 26,730
14,906
149,247
69,265
262,346
2,647
7969
272,962
~
.
~
~
m
$10358
-
—
2.83%
-
3.47%
-
110.22%
112.00%
113.72%
@
I
First
Midwest
Financial
,
In=.
and
Subsidiaries
COMPARISON
OF OPERATING
RESULTS
FOR THE YEARS
ENDED
SEPTEMBER
30,
1998
AND SEPTEMBER
30,
1997
GmeYal Net
1998 dccrmed $857,000,
inmme for d,. p
ended September 30,
or 23.5%,
to $2,785,000,
hm
The deaae
in net income AFF
for the sm)e period ended September 30,
$3,642,000
1997.
a one-time
charge co provision for loan md foreclosed rd esmrc losses
in&e p~-m mount of $1,500,000. The one-time chmgc
taken co incr%e &c allowance for loan and fore.
e.smre basses, related primaily co mismmage-
-
closed d
ment and possible &ud by one Im officer hr
longer wid, &e Cnmpany
Net lnteresr
income
The Company’s net it]terest income
for chc year ez,ded September 30,
1998 incraed
by
or 7.4V0,
$883,000,
$11,946,000
1997. Tbe inaae
to $12,829,000
to
for the same period ended Sepre~nber 30,
in net interest income reflects m ovu-
compared
afl iname
during he period. The net yield on average ~ning
of average i“temc-mrn@
in rhe b&ce
mem
uses
decr~ed
1998 fiolt] 3.38% for the same period in 1997.
co 3.260/a for he period ended Septembm 30,
Tbe
decrme
intere.s-earning ~ers
in nec yield is d“e co a dcdi”c i“ rocd aveqe
compared to tad zverage incecmc-
bearing liabilities md an incrwe in the average bdmce of
non-accmi”g low during dle 1998 period.
er exrenr, co a higher average yield on rhc securities porc-
In addition,
fofio during fisul 1998 mmpared to 1997.
income
interest
i“cremd due to a $622, ooo incrme
in
intcr~t earned o“ the loan portfolio as a result of a higl,-
er average Iom porrfolio balance during fism[ 1998 com-
pared to 1997.
IzteEst@eruc
Inceccst expense incrw,sed $2,171,000,
or
for the yew el~ded September 30,
is no
12.7%,
to $19,230,000
1998 from $17,059,000
for the me
period in 1997. The
in the
incrmse in incer~c mpcLIse
avenge outsTal)d,ng balance of dem~nd deposim, rime
is due 10 incrwes
deposits, ad FF[LB tdvmc~ d,tring &e yem ended Sep-
tember 30, 1998, compwed to the same period in 1997.
in the average bda,l~ of demnd ~d ~ime
The inc~e
deposits resufted &am inrernd grow~ of the deposit porc-
foko.
The
aVeIagC bdmce
of FHLB ~dmc=
~crwed
due to borrowing activity rbrougho”c
the period used
co find grO~b of he Iom podolio
pri~ily
purchme of securities ztilable
intere.sr expense >W pmifly
a,ld the
The increase in
offi.er by lower inrcrest Htes
for de.
ptid on time deposiw mld FHLB borrowings during the
ye= ended September 30, 1998, comp~ed co the previous
inrermt rarcs generdy have trended down-
yew, as muket
During rece,]t yeus, &c Company ha i“crea.sed its wti.
origination and purcb~
of nlufti-family and commercial
esmce lores,
rd
including construction loans on such
property typ=, and h= increaed its origination of con-
businw
sumer, commercial business, ad
agricuhud
Tbe Compmy ancicipares activity in d>is type of
Iom.
Iend,ng will conrinue in fumre y-.
Net i’]reresc income
is wpmed to continue a upward trend m a resufr of &is
type of lending acrivi~.
Interest mte fields we genedy
higher on rbese loan products comp~ed to yiekk provid-
ed by mnvenciond single-filnily
residential rd mce
Pravirionfor Loan Lo~sa The provisio~, for loan loss= for
corn.
che y=r ended September 30, 1998 was $1,663,000
oficer
pared to $120,000
1998,
the Company determined that m ~ricdn,d
lo~ted in a subsidiay branch of
for the sxme period in 1997. During
[san
ice h~d, rhro[lgh
abuse of posir.ion and misrepresenmrion co ImnzGemenc,
authorized the disbursement of funds on loans for whkb
the possibility of
collarer.d wm inadeq”ace.
in he
fraud exisrs related co sdf-dding
by the Iotn oficcr
In addition,
lores. ThN lending acrivi~ is considered to ~~
disbursemenc of lom proceeds TOpersons a“d entities wiih
m level of rkk due to the “amre of the coIkuerd ad the which the 10= oficer w affiliated. Thn mismmage-
menc md possible fraud was discovered x a resuic of d,e
si~ of individ(lal loam. As such, the Company mricipares
internal audit procedures. The loan
ComP~ny’s routiic
in its dlowmce
continued incr~es
muft of dlis le”dmg activi~.
involved is no longer with he Company.
fo~ loan losses s x
a high-
oficer
The
I?zterefl ~ncome
Seprelnber 30, 1998 increased $3,054,000,
income
Inrer=r
for
the year ended
to
or 10.5%,
horn $29,005,000
$32,059,000
1997. The inaease retIects a $2,444,oOO i“crwc
esc ear,~ed on che porrfcdio of securities avd~ble
de, which increased to $s,630,000
for &e same period in
in inccr-
for
for dIe yem e~ded
The
Seprember 30, 1998,
incrae
h interest income fro”, securiti~ zesd~ed from a
higher avemge secuiri~ portfolio balance t“d, co a Iess-
fiam $6,185,000
i“ 1997.
Compzny has conracced authorities,
and an invwtiga-
revim was
rion u in process ac his
performed by the Company of the accounm in which the
rime. A &oro,,gb
loan oficer was il>volved. Man%emenc bclievm ir b
ad
iden&Ied dl loins for which material w~essm
tit
k
d=ified
those lores accordingly.
B~ed on the rdring
in da,stificd asse~,
magemenr
the dlow-
ante for 10SSN &ough an additiond charge co the provi-
considered it prudent COincrme
incrwe
sion for loan losses i“
rhe amount
of $1.3 miULon md a
First
Midwest
Financial,
inc.
and
Subsidiaries
COMPARISON
OF OPERATING
RESULTS
FOR THE YEARS
ENDED
SEPTEMBER
30,
1998
AND SEPTEMBER
30,
1997
(Contiued)
charge to provision for 10ss on foreclosed rd =tatc in *e
amount
These amoun~ were c.hmged
of $200,000.
agimt
income durij]g he quarter etlded March 31, 199B.
Future recoverim = dependent on the ultimate ralution
of weaknm= fou]d in the Iomls, which can not be deter-
that lnay
tinle, and any insurance procd
milledat &s
be received.
Manqemenc
believes char, b~ed on a deuil review of
the lo~l portfolio, historic loan 1055e5,current emnomic
conditions, and otker factors, he cusrenr level of p~ovision
for
for 10U 10SSU, and the resukillg level of tke dowce
Ioanlossw,
Iosscs Gom d,.
loan portfolio.
rctlec~ml
adequate raemeagaimr
potential
Current
economic
c011dici0n5
in the ~ricukurd
sector of
w~]ess
the Company’s mxket
due to kiscoridlylow
aea indicate pocencid
coI]]modicypriccs.The
agridmrd
fluctuariol]s md is ge”cdly
economy is accustomed to commod~~ priti
able to handle such fluct~n-
tionswichour
period of low cojnmodky prices codd rcsuk in w~ess
significant p~oblem. However, m~temded
the Gmpmy’s
of
crate a need for he Company to inmea.seiu d[owance
loan portfolio and could
for
agrictdtti
10.2Y0, co $1,875,000
from $1,701,000
for the me
The
in nonincermc income
period in 1997.
incrwe
reflects an incrwe in loan few md deposit service ch~~
of$155,000forfisd
in 1997 m a rc.sdr of
incrwed
inmaed
activi~ on rmsztion
Imding activiy
accounts
199 Scomparedro
rhe~epcriod
subjmt
ad
co
sewicc chwges.
adable
In addition,
for sde incrmed hy $182,000
*
011 sda
of securiti~
for the yea ended
Swtcmber
1998 compaccd co 1997. No”incL’resc
income was reduced for ffiml 1998 compared to 1997 d“e
30,
to a de&lne in brokerage conunisions
non-insured investment produces through First Fedetis
{mm de.s
of
subsidlaxies and a a resulr of z)
sal= of foreclosed rd acate.
incrwe
in net loss on
Noninzerestfipeme
Noninterut
expemeincrmcd
by
$S70,000,
Seprember 30,
or 11.S%,
to $8>252,000
for &e y~
1998 compmd
to $7,382,000
ended
for the
same period h 1997. Noninterest mpemc
for employee
compensation
and bencome hy $795,000,
necofincolllc
taxes.
Net Intecrt Jzcome The Company’s netinrcrest
income
Iioofloans mdsecuritim.
inga.%tsdemaedto
cember 30, 1997 from 3.47% for&c-e
Thenecyidd
3.3870 for&e period ended SeP-
pwiod in 1996.
onave~”e~n-
First
Midwest
Financial,
Inc.
and
Subsidiaries
COMPARISON
OF OPERATING
FOR THE YEARS
RESULTS
AND SEPTEMBER
30,
1996
ENOEO
(Continued)
SEPTEMBER
30,
1997
The decrae
net avaage inrerar-mning
average balance of”on-accrui~
in net yield is due primarily to a de~lne in
assers ad an increase in the
1997
loans during he
Nonintmest
Izcorne Noninter=t
income
for tie ya
ended September
30,
1997
itlcccased $282,000,
or
19.9%,
to $1,701,000
from $1,419,000
for&e *1c
peri-
ended
to
period.
Interest Income
lnteresr income for
the Y-
September 30, 1997 increased $4,668,000,
0r19.2%,
$29,005,000
1996. The
incrw.se in inter~r
from $24,337,000
forrb.
ae
period in
increase is primarily due to a $3,866,000
euned on the loan podolio,
to
for the y-ended
$22,433,000
fiom$18,567,000
income resuked fionl higher avenge Iom portfolio bd-
in 1996. Tl>einmme
September 30,
inlominccr~c
1997,
mces due to inrerd
tbeacqtiltion
a higher aveqe
period.
growth of
of Central W=tand,
and
to
yield o“ the lo= porrfolio during he
the loan prchlio
toalmerexrent,
odin 1996. Thekcrwc
incre=e
$278,000
from loan fem ad
for fiical 1997, compared to the we
deposit servim cbtrges of
period in
tinotiacerest
inmmer&ecrsm
1996, = a resulr ofincre=ed lending zccivity md incremed
activity on nan~ction accounts subjcm to service chorges.
awil~ble for szle
In addition, the %in on sales ofsecuriria
30,
increased $137,000
1997 compared co 1996. Nonticetm income was reduced
for the ym endfd September
for fiscal 1997 compared to 1996 due to a$223,000
decline in brokerage commissions as a muk ofa decline in
des
tbro”gh First
Fedafls
invcstrne”r producrs
ofnon-hsured
subsidiaries.
Nonintmest&pcnse
$186,000,
or 2.5%,
Noninterest mpensedecrea.sedby
to $7,382,000
forcheymr
ended
Intemst+emc
Incecat
expense incrwed
$3,080,000,
September 30,
1997 compaed
co $7,568,000
for the
or 22.00A,
September
to $17,059,000
for
rhe period
30,
1997 from $13,979,000
ended
for rhe same
period in 1996. Theincrease
in the average outstanding bafance of rime
to increasa
deposiw and FFILB advances during the year ended
ininterest mpenseisdue
September
30, 1997,
comparedco
rhesame period in
1996.
deposits
The
resufred
increa-se in the average balance of
from incernd
growrh
of
portolio
and die acquisition
of Central West.
time
the deposit
The
average
ourstandlng
balance
of
FHLB
advances
increased due co borrowing
the
period used primmily co fund growth of the loan port.
folio androfid
activiry rhroughouc
ofsmwicia.
tiepurcke
Toalesser
=tent,
interest
dle illcreme in interest ~pense
rates paid on interest-b~ring
Ieflccts higher
fiabffities during
the year ended September
30, 1997,
compared co dle
previous year.
Pro.tionfo~
for theyw
compared co $100,000
Loun Losses Theprovkion
ended Scpcaber
forlou;
lows
30, 1997 was $120,000
pe~iod in 1996.
for rhe me
same period in 1996. Thedecre%e
1996 pymenr
reflects the fi~[
innoninterest
of a one-umc
cxpeme
special
-smencin
recapitafiition
themount
of SAIF.
of$l,266,000,
pre-rax, forrbe
Inadditio”, no”inrerescexpenst
wasreduced xare.sdt
deposit
insurance premiums during &e y~r
of federd legislation thar reduced
ended
SepreInber 30, 1997. Nonincer~t
compcn%rion ~ld benetim, ad occupan~ md equip-
expmseforelx]PIWec
mencexpeme,
che sme period in 1996, as a result of rhe acquisition of
kcremed dllring fiscal 1997, comparedro
&ntrd West at Seprember 30, 1996, and w a resuk of a
new bmnch office opening in DesMoines,
Iowa.
Irzcome Tn+me
Income campense
inc~ed
by
$806,000,
ro .$2,502,000
&ptember 30, 1997 from $1,696,000
or 47.5%,
for they=
ended
for the same period
in 1996. The increase in income raxcxpense reflects the
inaease in the lmd of c~able i,]come for the pmiod ended
period in
September 30, 1997 compwed co &e sme
1996.
ASSET/LIABILITY
MANAGEMENT
AND MARKET
RISK
ofMarket Ri~k ,4.ssmted above, the
Qua[itnti.tA.gecrs
in.tticutio”s,
Company derives im income prinuriiy from he recess of w impamed by chang~ in interest rates and the interest
intemc mlecced over interest paid. The races of ticerest &c mce sensitivi~ of its assets and liabilities. The risk socizc-
Gmpany
=
earns on mew md pays on Iiabifitiw generally
for ~ period of time. Market
abflity
in incer=t racm md fie Compmyi
change-sis kno~vn m intere,scrate risk md
ed with chmga
to adapt to hue
holding companies and fwcid
established m“cra~y
ficimcion
interest rare.s change over time. Accordingly,
pany’s resukt of operations,
the Corn-
lihe hose of many finmcial
is the Compmy’s signifi-c market risk.
I
I
First
Midwest
Financial,
inc.
and
Subsidiaries
ASSET/LIABILITY
MANAGEMENT
AND MARKET
RISK (Conti,,ucd)
Quntitativt
Apect~ofM~rk.t
Risk kmananprto
to ~ket
conditions, ccrtfiates
mmage
the Companyi
exposure to dlm~cs k inter~t
of six months duou~
five y-,
of deposit with !namritiw
princip~y frotn im pri-
mmadcoll~piywi~
&c Company?
~pplicable regdations, we monitor
inceresc ~arctisk.
fn monicorillginte~t
rate ri& we concindy
aldyze and nmage mser.smd lia-
biliriesbmedon Aetipaymetlt
rata,
he tinit~g of &&r m*Iuriti~, md heir scllsiriviry to accu-
d or potenIial changes ill ~Ilwket irlcerwt raru.
sTrwnsmd
interat
An user or liabdi~ is il]tere.st rdte se~~itive within a
or ~eprice witiln that
specific time period ifit will mati
cimt period.
If
more r~pidyor
the Compy$
toagr~rer mentd}al
assets mature or reprice
iwhabfitim, djen
net pordolio value md net interest income wodd ccmd to
incr=e during periods ofrisil]g inter~c mces md Jccrae
Conversely ifrb.
during periokoffflmg
it]tcrmmtm.
01 reprice more S1OW1Yor c. a 1~
company’s Wets m.tue
dlen net porfolio value and
et extent dm im Iiibfititi,
net interest incon]e wodd tend co decrease during pe~iob
of rising intermt rates a]d inccae during periods of ~Jng
itlteICSt ~t=.
The Conl}mny
currendy
focusa
lending efforts
originating and purtiillg
to-d
adjustable-rare ad ~-rate
Aortcms
tomati~,
competitively priced
Iom produces wick relatively
This
generdly15ywso~1m.
allows the Company to m3intin a podolio
will be sensirivc to .htilg@ in the level ofintcresc
whale providir]g a rwo”able
of Iow &at
races
spre~d co the cost of Iitbilities
used [0 fuud the Iom.
The Compmy’s pris~
porfolio is to provide r.hc Iiquidky neces~
objmtive for its hvestmenc
to nleet lea]
finding needs. ~ehv~mmc
rhe ongoing mmagen]entofdmlgcs
msedliabilicy mix, whale contributing
&o.gb
portfolio isdso u.scdin
m *e COmpmyk
to profitablli~
policy generfly
earnings flow. Theinv~enc
calh for finds
vmious ~rcgories of
security types and n]acuritiu based upol] the Cotnpany’s
to be invested song
need for
between n,inin,izing risk wltie mtinizing
liq~tidi~, dmire to a&L@e
a proper bdaI1m
yield, the need
marymarkeca=.
co be l= susceptible co mpid chw]gw in intecac Iatc.s.
a]d NOWamounts
The=vings
tend
b n]magingi~=cdfiabfi~mk,
&e Company, at
tilnes, depending on the rdarionship bcmecn long- and
sbon-term intecesc mtes, mmkct con$ltians, and col]sunler
~eatm emphasis on
pceierence, may place sommhac
mtimtilng
ir.slxecintmest marzin tbm on suicclv matd,.
of its ~cs
ing &c interest race switi.ity
and ~a~tlrim.
Management believ= &e inmeascd nm income dIar may
r=uk fion~ an acceptable mismatch in the acmd maturity
or repricing of ics met ad fiiility
periods of dcdiii”g
or stable interest mtcs, provide s,fi.
portfolios an, during
cienc returns to justify d>e incrmcd expsure
and unexpecccd inme
to sudden
in inreresr rates which may resuh
from such a misma~~.
limim, whlcb may cbatlge from time to tie,
The ~m+my
h= c.sublished
011 the [ad
of acceptable titerac
rate risk. There m be no ~urance,
howeva, char in rhe event of :m tdverse change in intemt
mtm,dle campmy~ cfforw to limit interest rate risk wil fx
SUCCMM.
Net Po@o[io Vulue Tbc Gmpany
Value ~NPV”)
*
he prment due
risk. This appzoach dcdate.s
approach to &c qmcifi=tion
the differel]ce bcmeen
of expected wh fTows kom Nem and
uses a Net Porfio!.io
of i“ceresc
the present d..
m well m ah
of apected ~h
flows ftom off-bbce-sheel
flows from Iiab,litim,
conmct.s.
M.magemeltt of f.he Compmy’s =eu and ~ti,litics
is per-
formed witiln the context of &c marketplace, but ASO
witiil
of Directors an the
amounr of chmge in NPV tb~c is acccpmble given ccrtin
lii]im esrb]ished by dIc Boti
intermc mte cbangcs.
Pmet~ted bdow, ~ of Septcnlber 30,
1998,
is m
atldysis of rhe Cumpmyk interest mte risk m “~t~ured by
and sustained
chmga
in NPV for m illsmtuleous
parallel shfr
in he yiefd curv~ h 100 bmk point
incrc-
to provide collztcrd for borrowtigs,
company’s a.ssed!.iabfily mana~ment goak.
and to filti
&e
menrs, up and down 300 bmi.spoints. As illwcmred in the
mblc, che Compat~’s NPV is more smicive co i-isi”g mte
The Compa]yh cost of funds r~ponds m &mgcs
i,,
interest mtm due to the relatively short-tanl nature ofiu
deposit portfoho. Grucquendp
wegenerdy
ra~.
tifluel~ced by fielevel ofshon-tam i,ltere.sc
The Compmy offers a range of maruricia on its
dz. rsdtsofoperztions
deposit pduc~
maruriria on m o“goi~
b~is.
zt competitive ca.cm md !!lonicors dlc
The Comp~ny emphxiu
and promocm ks savings,
money ,narkcG delrlaI1dar\dNOW accounu aid, subjecc
than declining
dmges
rarw. This
because, m races rise, &e nlaket due
dedk]es due both co dle race increae
occurs primarily
of fwed-rate loans
and rke rekted
slowing of prepayment on lores. When mtes decline, the
rise i!] mwkcc
Gmpmly does not experience a signfiar
vakIe for the-selWIS b=%u.se borrowers prepay at refatitly
deposim md
bighm HCW. The due
of tie COMpany’S
borrowing &ge
in [Nlng md ffllng mte smnarios.
in appmtimately &e same proportion
F~rs*
Midwest
Financial,
Inc.
and
Subsidiaries
AS SET/ Liability
MANAGEMENT
AND MARKET
RISK
(Conri,,ued)
@
Change
in Interest Rote
(Basis PoiaIs)
Board Limit
0/0Change
~DoLLA,$,:$co~,::,;
‘h Change
““
-At seprernber ~o> 199g
+300 bp
+200 bp
+100 bp
O bp
-100bp
-200 bp
-300 bp
(50)%
(40)
(25)
(Ii)
(15)
(20)
$(5,579)
(2,957)
(1,477)
—
1,115
1,877
2,284
(13)%
(7)
(3)
—
3
4
5
Cenain shortcomings ~e inherent i“ he method of
uncerctin m [o when WIS evaluation may be completed.
mdysis pre.scnred in tie foregoing cahlm. For _ple,
Mmagernent
reviews the OTS n]muraenrs
ad
I
i
dthougb
mruricies
different degrees to Ages
cemin me~
or periods
uld Iiabifiria may have simk
ro repricing,
in m-ket
in
tbV may r=ct
inter=c m[es. ALso,
the interest mces on certin W=
of assem and liabtiti~
fluctuate in advmce of cfunges
my
in~er~
races, while inreresr rac~ on other wes may lag behind
in market
ckmgm in nwket m~es. Addkiondly, certin Nes
x adjustable-rate mort%ge
[strict
such
loans, bm fmcures which
on a shore-rerm b=is md
changm in illteresl
IaI~
over the life of dle aser. Furcber, i“ the event of a dmge
irI inTerm rates, prepayments and aly withdrad
Iwek
wodd likely deviare from those ~urned in cdcularing the
ubles. Flnfly,
debr may decrae
the fillky of some borrowers to service their
in the me”c of an interest mte increze.
Tl]e Compmy mnsiders d of thee factors in monitoring
ifs exposure to intere.scraw risk.
The Office of Thrifi S“petiion
i.ss.ed a
regulation which uses a nm mmket value methodology to
(“OTS”)
mmure the interest mre risk exposure of thrift in,stimriom.
Iwel of
Und., OTS ~+tions,
200 bmis point
i“rerest rate risk in he event of an aum.d
an i~imtiods
“no&
&nge
NPV in a mount
in interest rara is a deaasc
i“ the institution’s
110[ co exceed two p?rcC”C of d,e p,~~[
relzced peer repons on a quxtedy basis.
monitoring selected muures
of ~V, mm;~ement
In addition to
also
monitors the etiecr.son ner interest income
incrm~ or dewewes in inrt~esr races. This m-ire
resuhing
fronl
is used
in conjunccio” wi[h NPV mau.=
intcrat
rate risk.
ro identify excessive
Ara Qwby
tion atiMl~
Iris mmagernenfs bJ1ti, b=ed on infornu-
that he Compmyk historic level of ~et
qutity k
ever, the COmp711y experienced a Signfiunt
been satifacto~. Dwing fid
P
1998, how-
h
i“cme
the level of im no[~-performing WeIS. At September 30,
1998, non-perfoming
lams,
resets, consisting of non-accruing
smte owned and r~osessed consumer proper-
Ial
T, roded $8,132,000,
to $3,313,000,
ended 1997.
or 1.94% of total msers, compared
or 0.82% of tod a.sse~, for d)e fiscal year
a.ssecsfor
in non-pcfiormi,]g
TF,e increae
f~cal 1998 m compared to 1997 induda
a $1,449,000
incrmc
in non-accruing agricukurd operating Ioans, a
$3,623,000
incr=~e in accruing lores more rkn 90 &Ys
definquenr relared co a participation Iom on four ntusiag
homes Iocared in ~nesom
in
foreclosed asseu due to he wq~iiition cbmush foreclosure
md a $907,000
inclwe
value of
is mers.
Thrift
i“stimtiom with gr~(er
than
of m aparunent complex located in Madison, Wucon.sin.
“no~
from their rod ~pi~d atiablc
inrer~t mte risk expo.surc mUSI uIm ~ d~”cUon
TOmeet their ri.sk-bmed
inmaed
of dut deduction is one
~Pi[4 req~rement. The ~ounc
Mf of che differmce between (a) the in.stitutiont acd
dculared
incrwe or daae
exposure to > 200 b~is point
interes[ m[e
(wh[cbcver r~ufcs ill the gr=cer pm
form~ decrease in NPV) md (b) i= “nerd
sure wh~ch k 2.000/0 of the pr~en[ due of im ~ers.
Imel of expo-
The
r&aaOn,
OTS etimtes
hwever,
will
“nUI Jlc
nor become tiective
the procm by which tl~ift insrimrions n]ay
aPP~ ~ ince~r mre risk deduccion decerntinacio”.
It is
The
in non-performing wers
incre~
an
Ievef of delinquencim in rhe Compaly’s agricd.
~ the
kIIm pomfolio due primfiy
to w&=s
refleas
[ur.d
underwriting process m a resuh of abwe of position ~nd
misrepresenmtion to management by m @cufcud
loan
o&cer who is no longer widl dle Company. Severai lams
officer wae nor “nderwrixeo
tmdenvrinen by &is loa
by the
following the written guidelines mablished
Compmy, and has resuked in hisber cb~] norrnd lmeLsof
lom delinql,e”cy snd incrmed & of loss on Aese Iom.
a dloro~~h review ofall Iom
The Gmpz.yhx
yformed
First
Midwest
Financial,
Inc.
and
Subsidiaries
ASSET/LIABILITY
MANAGEMENT
AND MARKET
RISK (Continued)
undenvriccell by rbis Ioml officer a]d Im inc=d
flwmcefor
implemented
loalosacodngly
inter*d
conrrol proced~
The ComF1r,yh
designed to
prevcnr this sicultion from recurring,
im
agement prngranl.
in intermt-anilzg
fices
overnight deposits and otbcr
liquidly is gc”emlly illvesred
shorc-
term government agency obligations.
requirm &di
the ConlpmY
beyond its ab$lty co genesate them kuccN-
If
Theil]crm
in non-pcrfortillg mc~dsorelats
co
a P=ticiPatiO1l
SepteLnber30,
]om in the an]ouzkc of $3,858,000
at
1998 securcd by four nursing boIne.s Iomt-
Iy, it hw tiditiolld
Home Lou Bank of D~ Moines md k
borrowing =pacity wi& the Federd
collacerd eligible
for use wih reverse repurck
~[ee.menn.
ed in Mmcsoi.a
This loaII w= dhq”ent
nlore thu]
The primq
investing ativiri~ of d]e Compv]y .R
90&ysac
borrower’smh
Septelnber 30, 1998 duetOadismptiOn
in the
flow. Subscquenc to September 30,1998,
the origination ald purchme of lox= md d,e pucchw of
30, 1998,
securities. DuriW Ale yean ended Seprmber
Iom -
rwcmcmred ~vicha reduction of rhe 10m bd-
tis
xlce to $1,010,000
and ao accrued interest paid current.
The new lure’ is s~used by O,ICIlursing hoxnc locared in
M,nn=ota.
Also during fisd
1998,
the Compa~y
1997 u,d 1996,
the Compa[]y origtitcd
loins of $147.2
miflion, $135.7 million wld $90.6 million,
Ic.spectivcl%
PuIchum of loans totaled $36.9 million, $29.8 million
and $25,0 million duril]g the YCW ended Septembm 30,
a~~red
pl~loar&
dlrougb fOredOs~e 2 104 ~i[ ~r~nlenr
~Onl-
hMa&mn, W~comh>. The Compmyb~a
1997 md 1996,
respectively. During &e yas
1998,
ended September 30, 1998, 1997 and 1996, dle Company
5896paticipacion
Septcn]ber 30,1998,
inrerest indtipropery.
Subscquelltto
z signed cotlcracr has heal received for
purcb=cd mor~ge-backed
for
avafible
sale in &e
secuitim md other securitim
of $89.9 million,
amount
the purchase of this proper~, subject LOdue tigence
by
$67.6 million a]d $121.0 million, re.spwtidy
&e buyer, aranmdes
Gmpaly’s
~~]g
vduc at fisd year end.
price approximately equal to Jle
At September 30, 1998, &e Compz>y bd oucscand-
of
to originate and purcf use 10-
ing con>miunencs
$27.4 million.
(See Not.
16 of Nocm to Comoli&ted
Ligclidig and Sozs, aid competition.
total $143.1 I]tillion. Bwed on ics bi.scorical experience,
believes chat a signifimt
mm~unent
dcpasics wio ceMain tith h. Company, however, here a
be ,,. =s.mce
d,ar Ae Co,npany un reti
portion of such
such
J
deposis. M-gement
mesxr and ohm sours
believes, howevm, d~t
Iom repay-
of fuL]d.sw“ti be adequate to meet
Fed~
regulation require First Fcderd ro mtinui~~
Lniniinum Imefs of liquid mseti. Currmdy, FmC Fedcrd is
the Compa,ky’s forcsee~ble short- and lo~-term liquidl~
needs.
c%uired co fi~~
age dtily bdmce
fiqfid =se= Ofat l~t
JIet with~wable
of
40/.of dl~ aver-
savhgs deposits
On Sepcelnber 20, 1993,
federally &artered mucud satins
the Bank co,lverred from z
to
atld Ioall msotition
ad borrowi,lbn pzyable o,] denltnd in O[lCyw or lH d“r-
qmrter. L~qtLidassew for pur-
ing he preceding dcild~
a federdy ch~tered stock s~vitlgs bd.
liquidation accounc W= mmblished for
At thar time, a
the bcn~lc of
poses of this r~tio il]clude ash, certir]
time deposits, U.S.
Governrnmc, govenunmtai %enq,
cie.smd obli~riol)s,
h
and corpo~arc sec”ri-
tim odIerwise pledged. First Ftdcrd
hktorically n]airlvtined its liquidity ratio at Iwcfs i“
mcm of those required. First Fededs
regLL~co~ liquidi~
mrios were 15.4°/0, 9.80/., and 5.40/o IC SeptenIbe~ 30,
1998, 1997 and 1996, respectively.
Liquidity maagunent
is bodl a Wy
and long-term
function of he Company’s management
Qmpmy
adj,s~ its i11v6u11enrs i,,
The
straccw.
liquid mse~ bmcd
upOn m~lagemtl]tk
daald
a~bilicy
in dIe ConlPmyi
of purchiud
=s=sn)enc Of
market
(i) =pec~ed [OX1
the projected
lom prod~lcm, ~li) expected
xex,
(ii)
flows,
deposit
deposirs, ad
(iv) yields avaifable on k]{ercst-ting
(v) he objective of irs as=t)fiabili~ man-
accout
holders who continue co mtin&>
their
Jlgibie
account with the BA &er
rhe conversion. The liquida-
tion acco”r,r is reduced m]udly r. he mtenc that eligible
account holdes hxve rcduwd dleir qw~$ing deposi~. At
Septen)ber 30, 1998,
d $2.6 million.
the liquidation account approximate-
Under the Filran~
md Enfo~cenlent Act of
h]scirution’s Reform, Recovery,
md the
(“FI W)
1989
Fcderd Deposit
Ins(uance Act of 1991 CFDICN),
d~e
capital requiremcn~ applicable to d tillancial institutions,
including F1rsc Federaf md Security, were substmtidly
increased. Fusr Feded u]d Securi~ am.ill fdl compliat~cc
with &c tily phased-in upitd requirunens.
(See Note
15 of Notes to Consolidated Fi!lancid Statements.)
ASSET/LIABILITY
MANAGEMENT
AND MARKET
RISK
(Continued)
of
In~ation
The
Impact
Consolihced Finmcid Smtemmts md Note dlcreto pre.
senred herein bve bten prepwed in accorhce %& gen-
Changing Price,
and
SUraerIt No.
133 on derimtives will,
in 2000,
r~uire ~ defim~v= 10 be r=Orded ~c Fair vd.e
balance sheet,
iII & due
,vid, &W
run tbro.gh
in rhe
erally accepred accounci~
ptincipla, whi~ requi~e the
mauremenr
of financial posirion and opemcing radts
in
inconle.
If anceb
by aII eq\ld chalge in dle h
due of the hedged item.
S1aremenr No. 134 on nlong~e
bmking will,
1999, d[ow mongage
&sified m reading, ?vailable for sde or, in cerrdn ciram-
chat are securitid
lams
in
co be
srances, held to mat”ricy. Currendy rhese must be clmsi6ed
as Tradl”g.
Implemenmtion guidmce on Smceme”c No. 125 wifl
co conrtin
for lom pmitiparions
cimify dIe requiemenc
d)e right for tbe purcf]=er
to r~ell
tke pxricipation,
co
neWxiJy move in *C same duection,
or
to tie
same
avoid cl~i~lng
the pmiciparion m a secured borrowitlg
extent, m dle pric~ of goods and sei-vicm.
insr=d of a ~dutioll
of Ioms.
hnpati of NW Acco,[nting Stundai-dc Durin$ the nac
few yean, nm ~ountig
kave
been issued WD r&e eEecr and obers we t.xpected. These
are sumi2Kd
pro,>ouncements
below.
tit
In the hare,
swd
new accounting pronouncements
Proposals wiU r~uire that purch~d
Ioms,
indudi”g
those acquired in the pctrchae of an enrire bank, be xcord-
ed net of mfizced
d~t
no dlowmce for loan loss~ will c?r~ over or be .mordcd
uncollectible lores. This m-s
except
rhrnugh subsequent
expmse, ddlough s[Ibscquent
loss= eq”d co rbc amount estitmted at pumhme wifl noc
be shown x ch:wge.offs.
instinltions
in
to current
will hc implemented.
comprchc”sive income”
Smcement No. 130 requires “od,er
~“d “comprehensive income” TO
The MCPA guidonce for Iiucid
be d~phyed along wi~ net income. Other comprehen-
in u,lldized gtins ad loss-
sive income inciudm ch~~
on atiable
liabilities
foreign curency relation
include deferr.~ he~lng gtis
for sde securitim, *e offset of sonle pnsion
rcduaions
in equi~,
in che fumm, wiLi dso
and losses, Comprehel]si.e
currently cecorded s
ad,
its amounting guide wilf be rmked to confornl
literature, n,dges
till be co disclose Ioms pir dcle 90 &ys or more that %e
‘redic union md finmcc
still 011 accrllal ~qd TO&dose
.Je policy for dugillg-off
income is net income plm other comprehensive inwme.
lores.
Smceme”c No.
131 fur public compmies
rcpoming TO folfow how each company’s fi,ef
redefines
segment
OPem[~g decisiOn m~cr ge~ infomrion
s%men= 10 m~ Oper~ling decisions.
zbout buines
Tbe FASB contium co study seveml tiua,
recording dl
finacid
instruments
zt
fair vduc
including
and
abolishing pooling of
likely that APB 2Ss measurement
ir is
for stock option plms
Afso,
inrer=~ accounting.
Statement No. 132 increasa and revises pension plan
wifl be Iilniced 10 employees and not to nonemployees such
disclosures for public
compmia,
and siipfifia
such
disclosur= for nonpublic compznies.
as direcroIs,
stock options co directors.
thereby =using compensation expense for
The Company is aware of&e
pro~amrning
code in existing ‘omputer
the
systems as the
issum ~ociated wifi
ym 2000
The issue k whether computer
systems will properly recognize date sensitive informa-
apprmch=.
tion when &e ym &mg*
properly
recognize
such
ro 2000.
information
Systems tit do “of
could gene~are
YEAR 2000
ISSUES
Campmy
computer
fmm unforeseen problems in the Company’s
system and from third panics whom chc
Compmy twesco process information. Such failur~ of he
Company’s comptIcer sysce”I andlor dlird pties
corIIpuc.
er Ttems mdd have a rnarerid in,pact on he Compmy’s
abdiry to conducr its bu.sinas.
euoneom &ta or cause a sysrern to Fail. The Compmy is
havily dependent on comp”cer p~ocming in its btrsines~
“mue creatm risk for &e
amiviti= and &e Y-
2000
The C.mpz”y’s prirna~ dam procain~
k provided
by a mzjor third pzrty vendor. This providw IIU advised
dIe Compy
dr~r it ha completed
the rmmtion
of its
I
I
I
First
Midwest
Finanoia
I ,
ln~.
and
Subsidiaries
YEAR 2000
ISSUES
(Co.tinued)
system to be YW 2000 rd~
profiting memofdle~stem
ald is curr.ndy ill pr-s
totcsr
theopponuni~
of
tit
~cenxforrmdine.ss.
The CompalLy plmscopcrformim
hirid twOf&e&ta
2000 r~dine.ss by Dccembcr 31, 1998.
promshg
prOviderk~cafOr
Y~
The Company has performed XI ~wmmr
and soke,
01”ics
ald lM decetmi[}ed
comptrrer krdwwe
chose systems tit
SucfI up~d=
completed by December
upgrlde to be YW 2000 ready
have eifier bcell completed or wilJ be
the
h, addition,
rcqtie
1998.
31,
adtid
by such parties thar they do nor Imve pla(~ in place
10 add~
2000 probla;
~ld mrrect
the ~“m ~otitcd
a
bowwer, no ass=-
~i& dle Ym
to
be given s
the adequacy of such plms or CO&e timelin~
of their
implemelltacion. & P=C of dxe curcenr credit approv.d
new ad renewed Ioms xe evaluated as co d]e
prows,
borrower’s Ya
2000 rm{lnms,
Bwd on die Compaly’s
review of its mn~putcr sys-
tems, mm~ement
ef60rt to m~
believes the cost of &e mm~tion
is systems Y= 2000 ready wilI be appmxi-
Company h= reviewed oher excernd dtird p.w~ vendors
fi~t provide scmicw to &e Company (i.e. ufl~cy compa.
nie.s, dectxonic tiulds trmsfer providers, danl
inraance
lom p=ritiparion
providers,
compulies,
companies, and
mortgdge
~uested
lom secon~
agencies), md hw
or drmdy received certhi=cion Iittms froln dime
]nwket
mtely $60,000.
it is estimated rh~t 1,500
man hours will & ti]curred by Compmy pemonnd relzred
to Yea 2000 imua at m approximate cost of $40,000.
hl additio(l,
SUch COS6 Wti be chmged [0 CXp~K
w dl~y ~e
incurred.
XIe Company has developed x Yw 2000 contin-
critical
gency plm disc addr=sm, among other
tiues,
vendors that their ~tems will be YW 2000 rmdy on a
three sewi~
timely bmis. T~ting wil[ be performed titil
Ope~ciOm md pOtentid WU=
concin”ation.
bmina
dImoE md stmtegies for
to dmennine heir Y=
2000
Afdlough mwgeme~ll
believa file Compmy’s com-
providers, where pmsible,
readinw.
The Comp*ny coufd incm !ox~ if lom payments ae
ddayed due to Year 2000 probl-
affecting si@,cant
borrowers. The Colnpmy
is communicating
wib
S.A
to a
ptia
thtir progrcx i,, mduating ~]d ilnpl+
menting any corrective nlmure.s required by them to be
not been
YW 2000 mdy
the Compaly
To date,
h
FORWARD-LOOKING
STATEMENTS
ptlrer W[WS ad service providers wio be Year2000 rdy,
there WI be no WWmW char these ~tems,
~stems of orh~ compani~ on which the Gmpany’s
or those
sys-
telns rely, will be My f~ctiod
coidd have a sigficant
Mwe
in the Y= 2000.
Such
adverse imptct on the
fmlcial
Company.
wndition
and results of operations
of he
‘1
the lod economia
ill which AC Colnpti\y md rhe Banks
conducr operations;
the effects 0[ md change in, tmde,
rate policim of dle Feded &ewe
and fisd polici% and laws, includil]g incerc.st
inter-
inflation,
,Eoud;
,.
The Compmy
Fed~
ward-looking
and Secwiy, my fronl
statements,”
ald im wholly-owned subsiditiies Hrsr
time to time m&e “for-
including sratemetlm cOn- mone~,
ctined in he Compmy’s
filings with the Securicic
ad
hdmge
shareholders md in od)cr communi~uom hy che Com-
COmInissiOn (the “SEC”),
in its reports t<,
pan~ whi& are made h] good && by d]e Compmy
and *C B~dm purswlt
he Privztc .securici~ Licigatio[l Reform Act of 1995.
ro &e “de harbor provisions of
Thue forwad-looking
sracemellrs tidudc starmnellcs
with rwpect
to the Comp:{my’s and the BmlW beli&,
~Pccca~OnS, =t~ac-,
co signifia]c
md intentions, dlar xc
risks md w]certainti~,
and we subject
.subjecr
to
(some of ~vbicb me
change breed on variow hcrors
beyond the Company;
and &e Balks’ mntrol). The fol-
lowing faaors, among orflers, codd cause the Compmy’s
and he BaIN fiI1m~
from tfle apccmtions,
in such foward-looking
performance to di[fer maceridy
and inrelltions aprmed
etimat=,
est race, mkm,
the timely
development of al]d acmptance of LIeWproducts and ser-
and monetary fluctuations;
vices of he &,
products and services by users; the hpacr
and the perceived overall value of three
ill
of *c<
finmcid
laws and re+tiow
cha)ges; acquisitiol]s dlanges in consumer spmding and
technologid
semiccs’
saving bbiw,
Bmks a~ Inwging
and the success of cbe Compmy and the
kc risks involved in r.he foregoing.
~e
foregoing Iiit of Factors is not exclwive. Addi-
tioild discussion of &ctom affecting the Company’s busi-
in the Compmy’s
is conrtined
n~s
and prospects
periodic Mig.s wifi
ul]dercdcc, ad expressly disdtims any incel,c or obli~-
to upckmteany forward-looking statement, wheticr
rion,
the SEC. The Coalpany do= not
Unid
Smtm ecol~omy in gened
and he
smngth of
or on bchti of the Company or the Bmks.
statetnen~
the strength of the
written or od,
that my be mzde from time to time by
Firs%
Midwest
Fiman=(ai
,
Inc.
and
Subsidiaries
CONSOLIDATED
BALANCE
SHEETS
September 30, 1998 ad 1997
1998
ASSETS
&h md due fion, bmk
.... .... .... .... ... ... .. . .... ... .... .... .. . .... . .
.. . . ... .... ...
$
~08,g84
In~est-bwii]g
deposi= in other financial instkutions - shon-term ........
Federd fi)ds
sold ....... .... . . ...... .
....
Tod uh md cash equivalents ........ ...... . ...... ............... .. ....
.... ................. .......... . ................... :
...
.
5,818,460
6,727,444
fnceret-bwing
(cost approximates m~kei
deposi~ UXofier finmckd instim94s
1,063,317
.~,170,56z
...
$
875,169
10,709,907
1,267,350
12,852,426
200,000
115,985>045
254,640>971
5,629,300
5,366,109
4,176,311
156,300
5,582,116
Tord assets .......... ................... .. . .. ............ ... ... ........ ....... ...... ..._
:.
$418,380,395
$404,588>578
LIABILITIES
Liabilities
AND
SEIAREHOLDERS>
EQUITY
Noticermt-beari~]g
.........
Savings, NOW and mo,]cy mwkcc demand deposits .............. .
deposi~ . ....... ....... ...... ... ..
de~-d
........... .
....... ...-
$
‘4,971,562
57>755,615
Orher time @Icaccs
ofdeposir ................ . .. .......... ......
... ...... . . ..a...
~. ZZI,130,975
Tord deposits .... ................
................. .....
. . . ...... .... ...
. ...
.... ... ...
Adt.mm from FHLB ............... . ............. ..... . .... ...... .... ..... ....~...~~
.... .....A.._.
securities sold under wectIIenu to mpurchwe ............._.-..-
283,858,I52
. 85,263,562
4,074,567
._.,
Orker borrowings
Advanca Son, borrowers for CUH and i“s~~lce
... ... ..... . .... . .....
.. ... ..... .... .
.....J . . . . ..... .... ... ...
..
.. .... .. ~~~
.........
........
.. ..
. . ..
,
Accrued iIICeImC papble ......... .
Accrued exynw and od]er Labiiitim ............ .
... .
....
..... .. ....... ....~.....
..... ..........
.... .. ..........._ -
.... ..
... .
.. .
..............
...... ...... .... ....... .............. ...
Total ltibfliria ..................... ...
. .
Shareholders’
Equity
Preferred stock, 800,000 hcs
Common stock, $.01 px tiU~
2,957,999
ac Septcn]bcr 30, 1998; 2,957,999
shara is”cd and 2,553,245
a“rhorized; none tiucd ... ......_ ....._ ....k
shwes authoriid;
5,200,000
shau outswnding
shxcs isued md 2,6983904
shines oursmlding at Sepccn]ber 30, 1997 .........
..... ............ .........._
~dicio~~d paid-in ~pid .... ................... ... ............ .
.. .....
.......i. ........_
Retained wnin~
Net unrdid
substa]riiy
restricted .............. .......... ....... ..............
appreciation on securiti~ atilable
for sale,
na ofw of$474 ,346 i“ 1998 and $568,o13
in 1997 ................
Unearned En]ployee Stock Ownmbip Plan shar~ ............. ..
....
......... . ...-
Traury
stock, 404,754
and 259,095
comnlon shares, at cost,
at September 30, 1998 and 1997,
KCSPeCrIVdY
. . . . .
. . . . .
. . . . . . .
. . . .
.
. . . . . . . . . .
.
.
Tod shwch.ldem’ eqtity ......................... ........... .. ...
.... ... . .......
Total [iabditim a]d shaeho[dcri
equity ....................................
$418.380,395
$404,588,578
The accompanying notes are an integralpart of these consolidatedfinancialstatements
$
5,572,296
49,838,735
190,704,667
246,115,698
107,426,225
1,800,000
2,900,000
449,487
I >065>746
1>354,418...
361,111,574
20,984,754
26>427>657
960,371
(567,200)
“:
(4,358,158)
43,477,004
550,000
405,218
834,741
1,108,592
.376,’094,832
~...
.
29,58o
21,330,075
27,985,8I4
798,82o
(367,200)
(7,491,52GI
42,285,563
(
I
I
First
Midwest
FfnanGiaI,
Inc.
and
Subsidiaries
CONSOLIDATE
STATEMENTS
OF INCOME
Years ended September 30, 1998,1997
and 1996
1998
1797
1996
Interest md dividend income
receivable, including fms ....... ... ........... .... .................
............................. ............
bms
Saritim available for de ..... ..
Dividend on FHLB sco& ..... .. .. ...........................~............
‘~
Incermr apense
Deposirs
FHLB adwces
.......... ............ ... .....................+................ ... .. .... ..
and ofier borrowings ............. ...................
Nonincer~c income
I.om fm and deposit service charges ............... .. ...... ..........
Gin on sdcs ofsecuririm available for sale, nm ......... . ...-.
Gain (lm) on de.s of foreclosed rd .SCII., II.:
....
Broke% commissions ...................... ........... ............. ........
..... ......
Other income
... ... .... .... .... ... ...z. ... ..... . . .... .... ... .... .. . ... ... ....2......
Noninrerest expense
Employee mmpel)sation and benefits .............
Occupanv md ~tipm,nt
SAIF deposit insurance special wsasmenr..,
......... ....... ..
.....................................
... ... ...
.............
~pense
SAIF deposit bum..
plemium
. .... .. .... .... . . .... ... .... .. .. ... ... .
.
expense ,.................- ................._.L ......... .. -.
Data proc~ng
Provision for losses on foreclosed r~ estate ........ ................
. ... . . ..
........ .......................= . .... ........4.fi
Otker apmse
.
$23,054,813
‘ 8:629,761
‘
“’
374,220
32,058,794
13,432,454
5,797>499
19,229,953
$22,432,826
6,185,385
386,462
29,004>675
11;982,913
5,076,144
17,059,057
$18,567,097
5,437,734
332.634
24,337,465
9,766,586
4212024
13.978.610
-
11,945,618
10,358,855
120,000
100,000
11,825,618
10,258,855
1>263,367
398,903
(33>034)
52,479
“’* 193.158
. .
. .
1,874.873
.
4,644,S09
1,133,187
~~
.
]43,199
339>385
299,532
1,692,728
8>252,84o
1,108,233
216>614
.(6>7.~)
69,379
313.168
1,700,672
4,341,038
1,006,190
220,849
“321,369
1,492,819
7.3 82,265
830,256
79,317
(8,630)
292,I89
226,163
1,419,295
3,732,839
668,784
1,265,996
433,367
289,390
“20,000
1,157.886
7.5 68,262
Income
before
income
raxe.s .,.., ........................... ......-----
4,788,402
6,144,025
4,109,888
Income cm tipe.se ..................=...x ....... ..x ...............j .............
-
‘ 2:003,520
2.502,069
1,696.323
Earning per common md common equivalent sba~
Bmic ear”in~ per common she
Dilutd ml~ings per common shwe ... ......_ ... ..............Z.._.=
........... .......... ................ .
“$
.$
1.08
1.03
$
$
1.34
1.28
$
$~o
.95
$3,641,956
$2,413,565
The accompanying notes are an integralpati of these consolidated financialsfatemenfs.
First
Midwest
Fiman=ia,
,
[nc.
and
Subsidiaries
CONSOLIDATED
STATEMENTS
OF CHANGES
IN SHAREHOLDERS,
EQUITY
3
Years ended Sepcembm 30, 1998, 1997 and 1996
COn,mOn
Srock
Ad&tional
Paid-i,,
Capital
Retained
Eunings
Net Un,cdized
Aep,ecia~iOn
(Dcpreciarion)
0. Sewicies
Atilabk
For Sale,
Net of T=
Unc.med
hployee
S,embe, 30>1995
.. ... ..............–— $
19,915 $19310,045
$22>080,579 $
571,564
$
(967,200) $ (~,oo2,~o~ $ 3~,0~2>~9~
Pur&aseof41,91 Ocomon
...
Seek ..........................
shwmof rreasv
.... .... .
.. ......_
htirunmt
30,000 conunon Sk
.f958 commond,-
commitccd r.
b, .,lwsd underh, ~OP ............................
AmOrtiti.n
of recog,ici.n md cerenti.’t
pk aIrmIIOIIkm md tax benefit of
mimed
S,OCI,under &e ~[~
W dividc,,& dedared .,, commorz sto&
(Ii)
10
303,524
168,120
($.29PC,d13,e)................ .... .. ......... .........
.
.
(745>761)
-
Iswce of 171,158 common shars fmm
mwsu~ stack in CO,.,ection Wih
acquisitior~.f Qnd Wat BanmrporauoI,
fss.ante of 9,450 comon sh~ [rem
~
~~.~ d.. ~ m.rcise of sto& opti.m
N.c dwge
i. unrti
apprcciati.n
(depretition) o. securitiesavtile
for sal.,
IICCof taxof($321 ,860 ..................... .._.._.
1,192,990
(112,138)
(542,866)
Net i,,cornehr d,. ~
endedSeptcmk 30,1996
-
-
2,413,56z
-
-
-
(630,710)
(G3O,71O)
200,000
503>524
168,120
(745,761)
2,743,644
3,936,634
206,638
94,500
(34228G@
2,413,565
Bdma ., September 30, 1996 .. . .. ... . ......
.. .....
19,905
10,862,55 I
23,748,383
28,698
!767,200)
(682,635)
43,209,702
Pur&e
of 248,419 como”
shara of
-w
=.~
.......................
Retirement of 3,474 com.n
. . ... .
.
shua
...
30,000 common&m canuni~edcob.
refmcd undc, he F.SOP . ....... ..... .... .... ...
.
AMoticion of rem~ition md rex.ti.an
(35)
35
(4,268,777)
(4,268,~
295>740
200,000
495,740
pk co-on
,b-
rauicced SCockmder the plm .
M dividendsd,chcd on ammo.
a,d m hcnedcof
. . . .. . ..
swck
...
93,401
($.36 WCSkC) ...................... ... ....
...
km..
uf 970,978 conunonsharu 6. sco&
divida,d declard on conur,onsco&, net
ofcuh ptid u, fieuof &ctio,& sbw~
shwa upon
Purchae .f 7,263 comon
(961>849)
9,710
(9>710)
(833)
93,401
(961>849)
(833)
GWk
ofscock oprio”s ..................
......
.-
.
(175,445)
(175,445)
k-e
of 41,347 come.
dwcs f,.m ueas”q
stock due co exerciseof std
options
Ner dwgc h uncdtid appccciati.n.,,
securiri~availablefor safq necof taxof
S549,689 _.......___....
. .. .. ..
........ .... .
Net inmmefor theP
endedSeptember30, 1997 _
(257,263)
-
768,699
511,436
—
.3,641 ,956
—
-_
-
931,673
931,673
3,641,956
Mm..
ac Scp,e”,kr 30, 1997
.. .... ..
.. . ......-
29,580
20,984>754
26,~U7,657
960,371
(567,200)
(4,358,158)
43,477,oo4
CO NSOLIDATEIJ
STATEMENTS
OF CHANGES
IN SHAREHOLDERS,
EQUITY
(CONTINUED)
First
Midwest
Financial,
Inc.
and
Subsidiaries
Years ended September 30, 1998,1997
.L,d 1996
Common
stock
Addiciond
P,id.in
Capiral
Rm5ned
Ea~ings
Net Unrealized
Aper=i~ci~m
(Depxeciati.n)
on see”.irim
Avtilable
For Sale,
N., oFT=
Un~r.ed
Employee
Sc.ck
Ownecsbip
Plan Shze~
T,muv
sco&
Tocal
S1,~eholders,
EquiT
Bdmm .[ Seprember30>1997 ...............–.– .._.-
.$
29.580 $20,984,754
$26,427,637
$
960,371
$
(567,200) $ (4,358 >158) $43,477,W
hrduse
m“ry
of 152.226 common sk
Srd ......... ...__.=..”
.... .
of
.. .... ...
.
.-
30,000 conun.. hxa
cammined [. be
relaed under d>. HOP ................. . . . .
&h dtiidcndsdecfmed on comma. scocb
...
($.48 Pm ske)
...... ..— .. ........—--------
Pur&,
of 1,033 common he
up”
mcruse of scocb oprions ....................._.-....=..
I.n-um- of 7,600 ammo.
sha &m -UT
xo& due co mrtie
Nec change h unrdti
ofsrodi options
.
apprcaarion on
,eauines avtihblc for de, ncc of m of
$(93,G671 ........ .................
. .
.. ... ..
.._
-.
--
.
-
[3271.203)
(3,271,203)
454>460
200>000
654,460
“’‘-
““ (1,226,725)
(109,I39)
-
-
.
-
(1,226>725)
(21,972)
(21,!372)
159,807
50,668
,Y,t income for me y= ended Sepraber 30, 1998
-
-
2>784,882
Oalmce a, Sqcember 30, 1998 .............. ...........
$
—.
29,580 $21,330.075
$27,985,814
—.
(161,551)
-
$
798,820
-
$
.
-
-
(16,551)
2,784.882
(367>200) $ (7,491,526) $42,285>563
.
—
I
G
I
I
r
1
The accompanying notes are an integralpad of these consolidatedITnancia,statements.
First
Midwest
Financial,
inc.
and
Subsidiaries
CONSOLIDATED
STATEMENTS
OF CASH FLOWS
3
Years .I,dcd Septenlber 30, 1998, 1997 and 1996
1998
1997
1996
Cash flows from operaring
acrivicies
income ..................... ............ ........... .. ... . .
N.t
Adjusu~lencs to recontile ner inconle to net CX1,
from operating activitie5
.. ..............
$
2,784,882
$
3,641,956
$
2,413>565
,,et
.. ..
Depreciariorl, an,ortization and accretion,
.. .................. ....
Provision for loan loSm ..........................
Provision for loss= on fordoscd red es~ate
.
. ... .
.
-..
Izet ........ .... .
tian on sties ot sccurIcia
Procce& fro~n A. safm ofloms hefd for safe ...... ............
Originations of ioms held for sale................ .............. .. . ...
.
.
tor tie,
avtible
.. . .
. .
.
973,454
. ..1.662,472
299.532
(398,903)
5,613,115
=(5>613>115)
I >092,782
120,000
(216,61;)
3,592,055
(3,592,055)
Stock dividends fio,,l FHLB sto& .
(Gak,) loss on da
of office property, rlct........................ .
.. .. . ..
. .. ....
(GaiL,) loss on Sd~ of foreclosed red e.svace,,,et
Net chmge in
. .
.
.
33,034
6,722
Accrued inc.rst
Other wsem ...........................................
receivable ... .......... . ........................
....................
Acmued interw payable
..
. .
... ....
.. ..
.. ...
Accrued expcnsa md od,er hab,bu~
Net mh from opcmting acciviti=
.
.
. ..
.
. . ....
. . .
.
397,502
46>622
.
(231,005)
(152,159)
5,415,431
(337,062)
223>344
(205,719)
(2,348,712)
1,976,697
907,721
100,000
20,000
(79,31n
1>064,000
(1,064,000)
(78,900)
(24,739)
8,63o
(1,406,034)
(399,200)
348,940
1,689>497
3,500,163
Cash flows !rcm irlvcsring
acri.icies
Net hge
in intere.st-bearillg
deposits in other
fi=mcid insticu:ions ............................... ............... ............ ...
Purch=e of securities .vaiMle
Proceeds from sdm of securities .\,tiable for sale ..... ....... .....
.. ...... ... ...... .
for de
. .
200,000
(89,877,6361
..18,280>412
100,000
(67,569,57@
804,067
(300,000)
(120>994,759)
366,829
Proceeds froln maturities md principal rcpay]nent of
p,,rclrmed ......y ..... ........ ... .
securlu= amdable for de ............................ ........... ...... ........
.................. ............. .... ...
... .... ...........
of focedosed rd amt . ..................... .........
. ............
Loa
Net change i~~low ................. .......... .... ........ .
Proceeds from da
Purd,~
of FHLB stock .................
. . . ..... ........
67,062,074
(36>947,582)
.....18.415.456
440,401
(447,700)
61,943,630
(29,819,316)
...18.519,590
93>453
(104,600)
Procee& from redelnpcioll of FHLB stock
.
.
.
..
.
571,200
Purcl>a.seof Iowa BancoT,
Purchase of Centi Wwc Bmwcporation,
......... ....... .. ... .......... .. . . .. ..
re~ved
net of cash
. ..... ..........................
In.., net of at, ~cceived
.
Purchae of premises md ~quipme”c, ner
Proce& from Sda Ofasseu ................ .
..
... ... .
................................
(227,893
(842,423)
95,068,472
(24>975,540)
(3.599,754)
132,842
(1>355>100)
(5>217>265)
(229,430)
(845,38o)
.,72,925
Net u.sh fioln invating activitim .......... .................... .....
(22,531,27;)
(16,875,175)
(61,876,160)
First
Midwest
CONSOLIDATE
Financial,
STATEMENTS
Inc.
and
subsidi=rie~
OF CASH FLOWS
(C ON TIN UEO]
Yews ended Sepzember 30, 1998, 1997 and 1996
1998
1997
1996
Cash flows from financing
activities
Net chge
in noninterest-bearing den)md,
aavmgs, NOW, and money mmkec d-d
.... .
Net cbmge in other time dePosiu ........ ......- .......... .....~...........
depos,m
Premed.s from adwcm from FHLB ................ .... ....... ....
Wpaymenu of advance from firLB
......
....... ....... .................... ...
Net change in sectitiw sold under agreemenw
to xepurdxae .. ........ .... . ..........& ... . .. ......... ...... ... ................~
Net chngc in odIer borrowings .........
Nec change in admcm from borrowe~s for wes
and lnSUImcc ................ .. ..~........ ...<....... ...
...
..............................
. ...........?.. .... ...
Cwh dividends paid ........................ .....
.......L . ...
Proceeds from exercise of stock options .......... .........................
Purclwe Ofmmury stO& .........
........ ..... ............ .. ......
. . ...........
...
Net ah
from financing a.ti,918)
1,500,000
+
(44,269)
(1,226,725)
28,696
(3,271,203)
10,gg0,857
(40,75@
(962,682)
335,991.
(4,268,777)
13,422,252
Net change in cash md A
equivalents ............... ..... .. .......... ....
~~(6,124,982)
(I,476,22@
Cash and mb equitients
at begiuning ofya
..........-_ .... .......~.
12,852,426
~2
$
(295,265)
18,54 S,037
210,000,000
(160,510,5s5)
1,640>000
(11,279)
(745>761)
94,500
(630,710)
6S,088,937
9>712,940
4,615,712
Cash and wh equivd.nts ar end ofyex
.......
. ..... ....... ......... ......
$
6,j’27,444
$
12,852,426
$
14,328,652
Supplement
disclosure of ah
flow information
Cash paid during the y-
Interest
....... ... ... .
for:
...~ .
......ti...
.... ...... . .................
$
19,4io>958
$ ,17,264,776..
$
Income u=
......... ... ..&.....G....<.= .. ....... .........L. .. ...........
lr95,805
2,415,042
13,629,670
1,736,192
Supplwend
s&edule of “o,]-ab
investing a“d
Iinmcing ocrivid~
LO~S ~msferred EOforeclmed d
Isuance of common sto& for purchase of
=mw ........... ....... .. ... ..... $
1,679,984
$
169,6S7
$
220,474
Cen[rd We.sr Ba”’orpomrion .......... .......... ...... ... .. .... .... ...
~~~.
3,936,634
The accompanying notes are an integralpafi of these consolidated financialstatements
First
Midwest
Financial,
[nc.
and
Subsidiaries
NOTES TO CONSOLIDATED
FINANcIAL
STATEMENTS
SEPTEMBER
30,
1998,1997
ANO 1996
3
NOTE
1 - SUMMARY
OF SIGNIFICANT
ACCOUNTING
?OLICIES
f?rincipl=
statments
of Consolidation:
include the accoun~ of First Msdwcsc Financial,
The consolidated fmand
fnc., a bank holding mmpany Iouted in Srorm Iake, Iowa,
(&e “Compw,y”) and im wholly-owned subsidiwies which
include First Feded Savinss Bu& of d]e Mldwcsc (die
“Bmk” or “Fm Fcde~al”), Securi~
SBte Bank (“Swi-
V’>), Hnc Sti.=
age semicm and non-insured invfiml~c
Fimmcid timiced, which oKets broktI.
products ~Id
Brooti]gs
Smite
Corporzcion. AU significant intercom-
pany bbc~
~ld ~actions
h~ve been etitnarcd.
Nanue of Business, Colxcentration of Credir Nds and
The prknary source of
Indusmy Segn,cnt
izlconle for dle Conxpany is d>c purd,me or ori8il,acion of
Itiorrmaxion
consumer, commcrcid,
commertil
rd esute, and r~i-
dentid rd sate
anuarions
from mtomers
loans. Sec Nore 5 for a d~cu.ssion of con-
risk. TI]e Company accepts deposits
course of bu.sinas prin]wily
the normal
ill
of crctIt
in northwmt md central IoTva and emcern Soucb D&,ou
The Con]pany operacm prin=ily
which mounts
for nlore b)
in the banki~lg indusq
90% ofics revaucs, opemc-
ing income and mets.
Assets held in crust or fiduc@ capaci~ are no[ asses
of&e Compal~y md, accordklgly, are not il]cfuded in the
sczternenu. At Sep-
accompmying consolidated fiL~lCd
tooled approti-
ren]ber 30, 1998 ~,d 1997,
marely $14,165,000
~ld $12,392,000,
r~ectively,
sts
-C
Use of fitimar~
prepmtion of fimti]cid srataenu
in Pcep~ing Fiim’iai
Statemenw The
iII cotiormi~ with gcn-
erdy acmpced accounting principl~ reqtira m-merit
to m~
dle reported
amowlc.s of rose=, Iiablliries ad disclmurc of contingent
cstimatw m]d ~umptions
rhar flea
=CE and Liabilities at &e dare of tbe fmmcid statelnenm
of revenue and expenses during
mld &e reported mounu
che reporting period. Acrual rmtd~ codd Mer
fionl dIosc
e$timarc.s.
Certill Sia~ificmc
S,
and sco&-b.wed colnpcl~arion expense, involve ceti
fair vducs of securities ~ld odIer financd instwenu,
The allowance hr lom los-
htin,ates
sig-
nifi~t
~tilnat-
Inade by rnan~enlenr.
Th6e mtimatm
are reviewed by mm-cut
possible that circum.swm dlat &I
routineIy nd it is r~onably
at September 30,
1998 nlay chmge ill &e nem-terin f“mre ~]d chat the
effect codd be mzterid to che mnsoli&tcd flnmckd suce-
mmm.
Certain Vkembfity
M~ement
d)ac nuke d~e~mpany
Due TO Certin
Co.cenmcions:
is of &e opinion rfmr no concellwcions m’sc
vufner~le to the Fik ofna-term
SeVex impact.
Cash ad Call ~ui$dcnts
flows, dl
F.rpurposes of reporting mh
cquivafenm is defined ro include the
and ah
Compmly’s ush on bald and due ~o,n fwd
insticu-
tiom ad
fimtial
short-term inte~-bwillg
insritutio,~.
The Company report.s net A
deposits it~ o&er
flows
for customer lom tmsacrions, deposit -actions,
csc-bwi”g
short-term borrowings wkh maturities of 90 days or less.
inter-
institutiol>s, and
deposim in o&er
fitmcid
Securitiw The bmpmy
maturity, available for sa[e and mding categorim.
n]arurity
cl=fim securitim iIIto held to
f-fefd to
securirim aIc tkose which the Comptny has dIe
positive incenc md abii!~ to hold to maturity, and we
repomed at arnortied cost. Available for sde securities ae
chose II,. Com~)y may decide to seJl if nwded for liquid-
iw, ~~-fiab~lv m%enlcllt
for sde securities mc reported at fti value, wi& unrbcd
gtim and Iossm incfuded as 2 sepmte mnlpo”ent ofsbe-
or ohm raom.
Available
equi(y, net of U.
h.ld.rs’
Trading securities ~e bought
pril,cipdly for de in the ne~ term, ad are reported at F&
value with unrdized @
and Iowa included in earning...
Gains md Iossw on de de of securici= am detc~-
~nincd usi~lg &e spccfic idcnrfi~tion method bwed on
morcized cost md aIe reflected in resuks of ope~ations at
ofsde.
fnrerest md dividend income, adjusted by
the tie
amortition
of purcfwse premium or dncounc over che
esrimared life of tile security using d~e Imel yield method,
is incfuded in anif~gs.
Lores Held for Sde Momgage Iwm originated md
nlarket ate wricd at rhe
intexldcd for sale in the secon~
lowm of cost or estinared m=kec due
Net unrealized lossa
are recognimd in
u, the s_~e~cr.
a vafuation
dowance by cfwgcs to income.
Ngkw
EKecrive Octobw 1, 1996, Ae
LoaII Sewicing
adopted Statement of Finmtid
bmp.my
~SFAS7 No. 122, Xccoumrzg fir Morcgagt
Smlh&
Smuing fighti. v This Smcenler)r changed cbe accounting
for mortgage sewicing rights rewincd by a lW otiginaror.
if he originator seffs or securities
Under this sr~ldard,
mortgage Io-
teal COS[oftbe n~orrb~e lam is dlomted betwa
the rdared servicing righm, the
ald retiv
tiounting
the la
First
Mitiwe=t
Financial,
[“G.
and
Subsidiaries
NOTE
1 - SUMMARY
OF SIGNIFICANT
ACCOUNTING
POLICIES
(Conrinu.d)
the servicing righrs) and A.
(wicho.t
b=d on their relariw fir values. Under prior practim,
such coscs were ~igmed co he loan. The costs allocared co
righ~ are now recorded as a separate
mom~e
seticing
seticing
rights,
d]
Net and are monkd
of,
the net servicing inmme.
i“ proportion
~o, ad
~vcr
The mrying due
the w
of &e
momg~e
semicing rigbs me periodically duatcd
for
imp.tirment. The effea ofadoprfilg the statement was not
material.
loan simciorls,
loan charge. ofi
the whole allowance is a.nillble
tbac occur.
for a“y
Loans are con.sidercd impaired if fidl prklcipd or
I
loan xerms.
not mricipated in accortice
wick
Impaied Ioms are carried ar
inter~t payments =
he canmmal
of mpeaed &wre mh flows &counted
the presen[ tiuc
at rhe loan$ effective interest r~rcor at &e Gr ~lue of&e
collated if he loan k collateral dependent. A portion of
the allowance for Iom Iosse.sis aJlomted m impaired loans
LOUS Receivable h-
receimble &t management h
&e intenr and ability co hold for ~},c fo-=ble
&nIre or
until macuri~ or pay-oK ~ reported at theti our.scandi{lg
~p~d balance If three fl~~Ons
loan loses co require an ins-,
~we he aflowmce for
such incrme is reported
as a componenr of rhe provision for lom loses.
if the value of such Iom k deemed ~o be less d~m the
balanca
zdjusred for my chmge-offs,
principal
rhe
allowance for loan losses, ad any def..rred f~ or coscs on
originated loans md Honked
on purcbxd
premiums or discounm
loans.
Premiums or disco””rs on pur&zed loans xc ainor-
to income using dle leveI yield method over &e
tid
remaining period to conmcmd mamri~,
anric.ipacedprepayments.
adjt,sred for
Interest income on [am is a~ed
over &e Term of
breed upon the amomt of principal o“rstandi”g
&. 10-
except when serious doubt &ts
as to &e colletibiIi~ of a
loan, in which me dle accrual of inter~c is discontinued.
Sm&er-bdance
impairmen~ in cod.
mo~ge
=identil
homogcneom lores are eva.luacedfor
Su& Iom include cesidentid fmc
re.side”ces,
loans secured by one-to-four kily
consrn,ction Ioa”s, md automobile, n]mhc-
cured homes, home equity and second mo~ge
Commercial
propcnies
low and mort~e
are ~“ated
individudy
10=s
secured by ocher
impairment.
for
loans.
of borrower opemting r=d~ and finmdd
When mdysis
condition indi~te.s rhac underlying cash flws of he bor.
rower’s business m noc adequate co meet i~ debt service
requirements, dle [oan is evaluated for impairment. Often
this is ~ociated with a delay or shofi~
in payments of90
Interest
excenc &t
income is subsequently remgniti
cash payments we remi”ed wtil,
only
10 rhe
in “~mage-
&ys oc more. Nonaccmd Ioans we often dso considered
Impaired Ioa”s, or portions dIereof ae chtrged
imptired.
ment’s j“dgmenr, &e borrower hu &e abili~ co m~ m.-
tracmd inrerest and principal payments, in which w dle
loan is rmurncd 10 accmal sticw.
and Wlated
f.om Origination Fees, Commitment
Cosw Loan fees and cesttin direct lom origination cosw
Fw,
are deferred, ad &e ner fm or COSLis recogntied as m
adjustment
inmmc using he inccrest m~od.
to inrerat
Allowance
for Lou LOSSW Because some loans may not
be reptid in fi~, m allowance for Iom losses is recorded.
The &owance for loan lossa is incraed
by a prov~,on for
lom 1.ss= cb~ed
co expense and decreased by cb~ofi
offwhep deemecl uncollectible.
Foreclosed Wd Gti:e: W esrare properti~ ~qlured
through, or in lieu 06 Ioa” foreclmure ~e iniTtiIy record-
aab~ih~ng a new
ed at&I due
at the &re ofquisicion,
cost b~is. Any reduction to fti due
due
of
accouncd
dlomce
the related lom at d>e dme of acquisition is
du
fo~ Iom Iossw, VabIItiOns are periodically per.
for a.s a loan low and hged
from d,e ~iog
a~nsc
formed by mmagement md vduacion a~owanca
adjusted through ~ hge
co income for changes in fir
arc
value or estimated selling costs.
(net of recowria).
&timating
the risk of loss and the
Income T=
The Compmy recor& income cm =pense
aounr
agemenis periodic duation
dlomce
of Ios on my Iom is necessmily subjeaive. Mm-
the
lom loss experi-
is bmcd on he Compmy’s put
adeqm~
of &c
of
enm, known md inhaent
risks in he portfolio, adverse sit-
Lutions that may affect che borrows’s abilky to repay the
estimated d“e
of any underlying cofl~ceraf, and currel,c
economic condirio”s. While mamgemenr may periodical.
ly alloute portions of the flowance for specific problem
bwed on che amount of taxa due on irs w remrn plus
computed bd
deferred -
on &e mpected furure tax
conseq~lenm of ~mpomiy differences beiww~ the cany-
and ta bw~ of ~em md liabilities, using
ing aounts
enacted QX rate. Avduation allowance, ifneeded, redum
deferred w ~seu 10 dle .axnouncexpected 10 be realized.
I
3
First
Midwest
FInan=ial,
Ino.
and
Subsidiaries
NOTE
1 - SUMMARY
OF SIGNIFICANT
ACCOUNTING
POLICIES
(Continued)
Premises a]d Equipmenu b]d
at cost. Buifd-
ings, furniture, fixtures md equipment arc w~ied at cost,
computtd
lW zcnunulated depreciation and ionization
is ~ied
principally by ming &e maigbt-line method over the e.sti-
USd
=ed
~V@ of the assem ranging fronl 3 [“ 40 }WS.
These assem arc reviewed for impairment under SFAS No.
121 when events ind~mre he wryiog amount may not be
recoverable.
EnlploFc Stock Ownership Plm The Company accouncs
Stock Dlvida)ds: Commo,l
share amo”ncs rclaced co &c
MOP plm, sro& comp~ation
dividends per tie
and
are r=tared for stock splits and stock
plms md ew.ings
dividends, including d~e rkree-for-mo stock splir effected
in the form of a 500/ostock diiidcnd which }va paid o“
Ja,~
2, 1997.
<ings Per Gmlnon
S&C
Basic md diluted eunings
per comn)on share are computd under a new accounting
ended
scmdard effective beginning with the quarter
I
for i~ employee std
ownmship plan (“ESOP”)
in accor-
Dealber31,
1997. All prior =ilings per colnmol] shwe
dance with AfCPA St.te,nent
of Position f“SOP”) 93-6.
Under SOP 93-6, the cost of skm i,5SUd to dle ~OI\ but
nor yet domted to pxticipants, Xe pr=nted
in the con-
solidate
bdmce
sheem as a reduction of shweholdem’
equi~. Gmpensarion
on the
marker prim of he shars m alley ae commimed to be
expcme is recorded b=d
reiaed for Aocation to pxcicipanr accounts. The differ-
ence betwtil~ d~e mmkec price and the cost of shaes com-
atnoun~ bzve been restated co he mmpmble.
Bmic eun.
ings per common shze is bmd 01] be net income divided
o“c-
by dle weighted average Ilurnber of common shes
are mn.sidered
sranding during the period. F.SOP sbaa
outsmding for earnings per common sb~e calcdations ~
hey =e commin.d to be refereed; un-ned MOP sh~
a
recognition
and rcrention plan skwes we considered outstanding for
not comidcred ou=randing. M-merit
mined to be rdeased is recorded x an adjusu]]enc to
addiciond ptid-in capital. Dividends on aliocatcd ESOP
shares we recorded x a rcductio~~of retained wnin~
div-
calculacio”s w ihcy
basic eanings per common sh~e
become ve.seed Dduted wnings per common share shows
conlmon shw~
he diJutive Wecc of additiond potenti
idends =e !lot paid on unearned F.SOP slwm.
isuabk under sto& options and nonvcsted shwes issued
Fi:lmcid Inscrume”n wirh Ofl-Bdmcc-SI,eec
~k
The
Gmpany,
in the normal course of business, m&m conl-
miunen~ to make loans whIdI are not reflccced in tie con-
solidated filmcid
comlirments
is {Isclosed in Note 16.
sratemenm. A summ~
of
the.se
h,ra”gible &sew Goodwiff arising from tie acquisiio,l of
banks is anorcid
suhsidi~
straigkt-line method. &of
unamorci~d goodw”ti rorafcd approtin]ately $4,497,815
using dlc
September 30, 1998 ald 1997,
over 15 y-
and $4,862,747,
respectively. Amorbriotl
expense wm
$364,932,
September 30, 1998.1997
$363,923
znd 1996.
and $170,070
for the yeas ended
Securiia
Sold Under Agrecmet,cs co Repurchase
The
Company encem into sd~. of securitim under agreelne”cs
alders only which provide for
to repurchme wirh ptia~
&e rcpurchme of the san,e secusity. Securitim sold under
agreemen~ to purcbme identical securitim m collatedi~d
by assets wh,& a. held in s&&cePing in the m,le of &e
Batdr by &c ddcm who wranged d~e trauacriol]. Securi-
ties sold under agreemcnu w repmchm m xeztcd as
fin~]cings and&e obligariom to ~cpurchase such sccuritim
a.
The securici~ undedyfi~g A.
tiI the asset accouns of &e Comp3ny.
agrecmenm retin
retlected ~ a liabili~.
under mmagemenc recognition and recentio~] plans.
RecI~iIi=tiotls
Cur,,.
amou!~ts in &e 1997 u,d 1996
cOnsOli&ted fulat,cid smten>en= were retilfi~
form wirh cbc 1998 prese~lcation.
to co”-
Stock Compcmario,l:
tion understock option plans is based o:) Accounting Prin-
for employee compe”~-
Epensc
(’mB”)
opinion 25, ~vicb expense mponcd
UPJCS Bead
only if optiom =e granted below mwket prim at gmnc
If appficabk, disdosm of net klcome md earnk]gs
date.
per shre ae provided as if the fair due merhod of SFAS
No. 123 we
used for stock-b~ed compensation.
Ncw Accounting Pronounmnlellx
During the nmc few
YWS, new accounting pro,) ouncemen= that have been
issued wifl take effect and orkers are expected. These m
summwizcd below.
In the future, several new accounting prO”ounct-
mcnts will be implemented. Statement No. 130 requires
income” Wd “compref]en.sivc
‘other
[let income. O&w
income” to he displayed along wifi
comprehc”sive
comp~eha]sive
income
includ= ckang=
in unre~zed
gains md Iossm on avail~le for sdc securiria, he ofiec of
ccducciom in
some paion
foreigtl currency cransfation, md in the future will
Iiabilici- Wendy
recodeds
equi~,
&o include deferred hedging ~ins and Iossm. Compre-
First
Midwest
Finan-~al.
Inc.
and
Subsidiaries
NOTE
1 - SUMMARY
OF SIGNIFICANT
ACCOUNTING
POLICIES
(Con,inucd)
hen.sive income is n= income plw oher
income,
co”tpreh.nsive
insce~d of a m+uction of loans.
Propomk will require thar purchased Iomsj
Smremenr No. 13 I
for pubkc companies ~ed&lne
&ose acquired i,] he purck
ofm entire bti
indudlng
be record-
s%ment mpOfing tO fOUow ~O~V A
cornpmy~
chief
OPe~tW decisiOn mkr
~enc.s
to mahe opemting decisiom.
gets information
abour business
Smtcment No. 132 i,]meases and revkes pcmion ph
ed net ofestin]aced uncollectible loans. ms nl~”s d,ar no
for Imn Iossm will cu~ over or be recorded
allomce
exmp[ through subsequent exp”se, dthougb subquer,t
10S
estimated ac purchase will not
equal to che mou”c
dKclosum for pt,blic companies, and sfinphfin such dis-
be shown m charge-ofi.
CIOSUS for nonpublic companies,
No.
Sracaent
in 2000,
in che ba-
require d] deriwcives [O be recorded at fir due
lancesheer, wirh chmges in Fti value run thro~,gh income,
133 on deriv.rivm will,
Jf derivative arc dommenred md effective w hedges, rbe
cbmge in the derimtive ftir due will be offsa by an cqud
&ange in the M tiue of che hedged item.
The AfCPA guidanm for finm~
instirucions in i~
accomting guide will be revised ro conform co current iit-
eranue, make
~e
and combine
few changm,
a
banbing/savings guide, credit union, and fmnce
comp,ny
g,,ides,
changes will be to disclose lores ~t
.Iiminacing
some differenm Aerein.
Some
due 90 days or more
&at are sdil on accrual and to disclose the policy fot charg-
Smtemenc No.
154 0. mortgage banbing will,
in
ingoff
loans.
1999, allow mortg%e Iom that w semitimd to be cfa-
sified as trad~g,
for sale, or in certain circum-
sranc= held to rnamiy. Cmendy rhe.semust be cfmsified
as mdmg.
sable
Implemcntario” guidance on Stacemenc No, 125 will
claii+ the quiremenr
for lom pticipations
to contin
the right
avoid &!@ing
for the p.r~er
to r~e~ the p=iciption,
to
the pmicipation as a secured borrowi~
The FASB collcinum m study W4
isum,
including
recording dl financial tismenr.s
ar fir value and abol.
ishing poahng of interm accounting.
APB 25’s maurm.enc
ired TOemployees and not co nonemployes
it is likely chat
fro,
for stock option pkns will be Iim-
duec-
su&s
cors, hereby ~using
options to directors.
comp~tion
mpen.se for stock
NOTE 2. F.ARNINGS PER COMMON
SHARE
A reconciliation of the numerar.m and denominators used in &e computation of bwic wnings per common sh~re and
&lured mni”gs per mmmon share is prmented below.
YW ended September 30,
1998
1997
1996
Basic Earnings
Per Common
Share:
Numerator
Net income ............... ..........U .. ...
........d. ...................... “ $2,784,882
—
$3,641,956
$2413,565
-
Denominator
Weighted aver~e common
sh=m ouomdlng
........ ........
. .....ti ... ..........
.........=... ......
2>646,105
2,822,021
2,682,650
Lw. Weighrd avmge unflo=ced
ESOP harw ............ ..... . ..... .
...A ................i
... . . ..L.. ..
V1;327)
(101 375)
-
(130,662)
Weighted aver~e common shares
oucswdmg br basic sings
per
common shm .............. .. .......... .
...... .... ...... ...i ......~ .......‘““ 2:9-4,n8
—
2,720,646
2,551,988
Bmic mni”~
per common s~re ......... . ......... ........... ... .......... . . $
1,08
$
1.34
$
.95
First
Midwest
Finan=ia
I,
Inc.
amd
Subsidiaries
NOTE 2- EARNINGS
PER COMMON
S13ARE (Continu.d)
Yea ended September 30,
1998
1997
1996
Diluted Earnings
Numerator
Per Common
Share
Na income ......................ti................... .................... .............
.$2,784,882
$3,641,956
w
Denominator
Weighted average mnnon
sharm oursmding for bwic
‘ni!i$
Pcr cOnlmOn sh:ue ...-....-..-...-
...... .. ...... . ... ...... ~-2574,778
2:720,646
2,551>988
Add: Dilutive &-wcs of munled
exerase.s of stock Opao[l$ ............_ .........__..= . ......-_._..
127,862
130,638
.136,81.1
Weighred ave~e
common
and dilutive potential
common share on~ran&ng ...... ... ........... ... .. . . ................
2,702.640
2,851,284
2.688,799
Diluted anings pcr common ske
.......... .
........... ... ..........
$
1.03
$
1.28
u
I
fncenrive stock OptiOIls for 55,500
sbm of conunon
During &e yeaI a]ded September 30,
1998,
tf~e
stock, Wanted during dle year ended September 30, 1997,
were nor considered in computing diluted earnings pm
common shwe for dle year a]ded Seprcmber 30, 1997
because alley were mtiddutive. AddiuonaOB on Sepcen]bvr
30, 1998 the Compsl,y granred stock opcio,]s for 13,418
shaes of common stock whi& may atFcct de compucatio”
of d~utcd earnings per comnon share in ficure periods.
NOTE
3
ACQUISITIONS
On December 29, 1995,
die con,nlctn stool< of Iowa Bancorp, hc.
the Company aqutied 100% of
(“Iowa Bm-
COT~), ~d
Bak,
IOWa Savings
z federd savings bank, in a purd]ase uansactioll with
i~ ~vhOlly-Own~dsubsidiaw,
Company redeemed approfitely
5.6% of its begimi”g
year out.sranllt~ common shm (I 52,226 shares) under
its conlmon stock sepurcf=t
wdl .Mcct &e ~mpmy’s
program. T& repurchx
future stings
cOm*non
PI
shtie compumtiom by reducing mounu
available for
investment ad weighted avuage sbzes oucsmlding.
mon stock was mchanged for $20.39 in cash. ~Ie ~n]-
pany paid approxknacdy $8 miUlon.
Ioxva BmcoT:s
rcsuks of opcmrions w included ii] &e consolidated
b@nning m of &c pur-
ticome statement of &c ~mpmy
$25 m~ion i], =sers. && share of Iowa Ba,cQrp’s cm.
&a5e are
Pre.smred below ~e dle cousofidated proforma I&B
of operations of d,. Compmy for he year ended September 30,
1996, ~uming
the Iowa Bancorp acquisition W occurred a.sof Ae beginning of che fisd yew.
Nec interest ilicome
Net income
hlGngs
per comn]oll and mmtno,x
equitienr
shae
Basic anings
per colnrnon share
Dilured wnings pcr common he
$10,467,578
2,268>794
$.89
$,84
First
Midwest
FinanCial,
Inc.
and
Subsidiaries
On Scpcember 30, 1996,
rhe Company zcquired 100%
of &e common stock of ~d
Wmt Bancorpomtion
aPPrOximarely $1.3 m~iOn and isued 256,737 common
shara valued at $15.33 per share, u re.smcedfor the time.
NOTE
3 - ACQUISITIONS
(Concinu.d)
(
rCencral West”),
&curiry Sac. B*
miU1Onii ~ec.s.
and its wholly-owned
subsidia~,
with $33
fich bare of Centi Wsz’s common
in a purchase _tion
for-two stock split paid on January 2, 1997,
for a toral
of $3,936,634.
due
of operations
are inc[tied in he consolidated income sracemti>t of the
Central Wmt’s ralr.s
StOCkw daged
for $18.04 in cash and 2.352s
shares
Compmy ~ginning m of the pmcba.se d=te.
of the Compnyi
common stock. The Company paid
Presented below ue the consolidated pmforma rmlt.s of opemrions of the Compzny for the ya
ended September 30,
1996, ~nting
&e Central W~c acquisition hd occurred m of rbe beginning of tile fisd y~r.
Net interesr income
Nm income
Earnings per common md mmon
qtil,denc
sk
Basic earnings per mrnrnon share
DJuced anings
pr mnmon shm
YW end securities available for sak were m fol[ow
$11>326,730
2,410,218
$.86
$.82
NOTE.
4 - SECURITIES
Amortized
Cosr
Gross
Unrealized
Gains
G,oss
Unrealized
Losses
Fair
value
$27,638,030
$
61,333
$
(443,567)
$27,255,796
1,307,076
26,985,523
61,767,555
117,698,184
1,638,181
34,588
786,407
778,96I
1,661>289
315,815
(711)
(n
(92>073)
(536,428)
(167,510)
1,340,953
27,771,853
62,454,443
118>823,045
1,786,486
$119,336,365
$
1,977,104
~
$120,609,531
1998
Debt sectiri~
Trust preferred...............- ...............a?... . ..
Obli~ciom of stare and
pobr[d subdivi,sions........... . ...... ........
US. Govemmenr md fcded agencies . ...
Morrgage-backed xcuritiw ........................
~kerable
equity s-ities
..... ........ .. ..........
1997
Debt securities
Obligation of smtes and
.
.,
pohrlcd subditiio,u...,
.....~.......... ..~...
$
U.S. Government md federal ~encies
Morr~e-backed
.....
securiti~ ............... .........
kkerable
equi~ smtities
............ .. ..
.........
],367,42I
68,129,132
43,644,377
113,140,930
1,315,731
$
26,299
543,889
882,930
1,453,118
369,652
(3,7751
(188,059)
(293,996J
$
~
~
$
1,389,945
68.484,962
44;425;145
114,300,052
1,684,993
$114,456,661
$
1,822,770
$
(294,386)
$115,985,045
First
Midwest
Financial,
Inc.
and
Subsidiaries
NOTE
4
SECURITIES
(Conri,,ued)
The amortized cost mld ftir value of deb[ securici= by collw.cd
differ from contracc.d maturiti~ because borro,ve= nmy have he ri~t
IIlaturiry we shown below. Expected maturities may
or prepayment pemdties.
co call or prepay obli~tions wifi or wirhout dl
Septernher 30, 1998
Amortized
cost
Fair
Value
$
1,558,889
11,373,772
15>359,937
27>638,031
55,930,629
61,767,555
$
1,567,466
11,609,81 I
15,935,529
27,255,79G. ~
56,368,602
62,454,443
$117,698,184
$118.823>045
Activiti= related to &c sde ofsecuriti~ available for sde ad mo~cmw-bzcked securitiu atiahle
fo~ sale WCsuai~
a5 foflows:
PrOWds from dcs
Gross gains on dc.s ........... ... ....... .......... .......... ........za
................... ............................. ......t....
....
$ 18,280,412
. ..398.903
$
804,067
216,614
$
366,829
79,317
Y-
Ended Se”cembcr 30,
1998
1997
1996
NOTE
5 - LOANS
RECEIVABLE,
NET
Y-
end loans receivable were m follows
One ro four family rc.sidential mort~e
lo=
................. ... .... ...._
Insured by F~
Convmtiond ................................ ........................... .. ................ .... .... ........
by VA .........................
or gu~teed
Corlsu”ctioll
............................. ...... ...... ................................... .... ......
. . . ..
Comlercid
Agridturai
&nunercid
rd rotate lam
ad Inldti-Fdy
.._
rd estate lom .................................................. ... ............. . . . . ... .
. .. ..
businm loms ........... ........ . .................... .
.. ... ....
... .......
...... . ...
. ..
. .
.
Agriculcur.d bu.sin~ 10=w ................... .. .. ..... . ...... .......... ..... .............. .... ... ...
Iom .................. .... ...... .. ....... .. . . ............ ........... ...... .....=....... ... ..
consumer
k:
Allowance for loan lossc.s ................................. ... .. .. .. ..... ...
Undisuibuted portion of Ioms i,, pm’ess ..
..........
Net de6emed Iom origk.cio,,
........................... .
... .......
... ......... ... ... .......... .. .......
....... ..._
fem ...
1998
1997
$
299,454
85,499,468
32,989,982
66,845,149
. 10,536,857
21,587,249
..37,233,902
26,238>825
281,230,886
.(2,908,902)
(7,738,379)
(297>41Q
$
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>700,40Q
(552,965ti.
$270,286> 189
$254,640,971
I
First
Midwest
Fina”~ia[,
Inc.
and
Subsidiaries
A@vity in tie dlow~ce
for Iom Josje.s for dIe y-
ended Seprember 30 ww x follows
NOTE
5 - LOANS
RECEIVABLE,
NET
(Continued)
1998
1997
1996
$
2,379,091
1,662,472
$
2>356,113
-. 120,000
$
1,649,520
100,000
“33,635
25,638
-,
132,500
563,310
(89,217)
Beginning balmce .......
. .............. ... ...... .... ........~........... ...
PrOvlslon for loan Imes ........... ............ ......L .. ....L.iZ. .... ......
...... . ................... ......~ ... ... ........ ........... .............
Reco,vries
at acqtti,rion date ............. ...........
Iow Bmcorp dlowce
Central West dowm.e
at acquisition d31e ... ..................... .
.
.-
~ .,.
,.
Cha~.oEs
.......
......... . .. ......... ....u..z.L.x ................Y....... .
‘“” (1.166,299
~
Ending hafmce .......... ....... ..............................I.2 . ..
.....k...
“
$
2,908,902
$
2379,091
VuNdly dl of cbe Compmy’s originated Ioa
are to Iowa
in swenteen odter
states.
md South D&om-bwd
The Companyk purked
i“dividuak md orgmizations.
loam totaled approximrdy
$93,482,000
properci= 10c3ted, x a percenmge of cod IOUE, 3.sfolfom
.C Sepcem&r 30, 1998 and were secured by
4% in Minnesota,
5% in Wsco,lsin,
10% in Wtihington,
2% in Nmv .Mtim,
2% i~ Nor& D&om, 2% in Sou&
D&om, and&e remaining 8% i“ sixteen other stares. The
approximately
loans
Company’s
purchmed
totalled
$75,851,000
propeni~ lo~ted, ~ a percen~e
at Sep~mbm 30, 1997 ad were secured by
afcotal Ioms, as follows;
6% in Wscomin,
5% in Wa.shingron, 3% in Minncsora,
2% in Iowa, 2% in North Dakota md AC remaining 10%
The Company origti.tm and purchxes
commercd
=mte IoaI]s. Thwe loans arc mnsidered by manage
d
menc to be of somewhat grater
risk of uncolfecribtity due
to the dependency on income prodution.
commercti
real estate
loans
The Company’s
inchrde approximately
$8,100,000 md $10,776,000
of Ioms secured hy nursing
homes at Sepre,nber 30, 1998 ind 1997, re.speccively The
retinder
fied by indus~.
of the commerdd rd esracc portfolio is diversi-
The Compmy3 policy for requiring ml.
and guar..t~
bt~
each bomower.
mi~ with the crcdimrthiness
of
The mount of rwumrcd md related parry Ioms w of September 30,1998
of non-accruing 10.w m of September 50, 1998 and 1997 were $3,164,000
and 1997 were not signi6mt.
rmpecrively
and $2,875,000,
The mount
Impaired loans weIe as follows:
(
I
I
First
Midwest
Financial,
lnC.
and
Subsidiaries
NOTE
6 - FORECLOSED
REAL
ESTATE
Ym end foreclosed rd esute wa m follows:
1998
1997
Foreclosed rcd estate ...................... .......... ....... ..... .. ...... . ..... .
..................
..$
1,362,849
k
AoOwan@
for fo,ecfosed Id amt. 10sse.s............... .. .. ....... ... ... .
. .......
(299>532)
$
1,063,317
Activi~ in &e flowance for foreclosed rd mcate 10SSGfor &e yms el]dcd Septenlber 30 m m folfows:
Balmc,
begin”i!~g of period ........... ........ ... . ....................-
Provision for Iossm on forecfoscd rd rotate ............. .. ........
$
ks:
bss= &=ed
~ainst aflowance ......... .... .. ... ...... ...
1998
-299,532
Balance, end of period ............................ .
... .. . ..................
~.$
299,532
1997
5,W0
$
~
$
I
$
$
$
~
$
156,300
156>300
1996
20,000
5,000
NOTE
7
LOAN
SERVICING
Mort~e
were as follows
loans sewiced for orhers as. not reported a.sassets. The unptid printipd bdmcm of ticse Iom at ycu end
Tod .............. ... ..... ................. ...... ..............e ....... ........... . ....... . ......
.. .. ....... . ~$ 10,964,000
$
5,884,000
Cu.stodid escrow bafances mtintiled
in conl,eccio,] wicfl he foregoing loan setictig wme approtirately
$111,000
and
$19,000 at September 30, 1998 and 1997, respectively.
NOTE
8 .
rREMISES
AND
EQUIPMENT,
NET
Ym end prti=
and equipment were m follow
hd
............ .
...... ....
. . ..... .............
........ .... . .
.... .
.. .
..... .................
Buil&gs
Furnimre, 6xturcs and eq”ipmcnc ......... .... ....... .... ... ....
.................. ... ... .... ....... .. ........ ......
..
...... .......... .... ..... ...........................
. . ...... ............. .....~..
... . ....$
:
1998
1997
535,233
4,674,g69
2,451J,5z6
7,660,728
$
535,233
4,607,698
2.292,29S
7,435,226
k
accumufatcd depreciation ......................
.... . . .. ... . ..... ................. ...
... ...A
(3>611,783)
(3,258>9 15)
$
4,-5
$
4>17&311
Depreciation of premis= and equipment
included in occ.pan~
and equipment expense w $355,261,$346,444
md
$214,201
for &e yeas ended September 30, 1998, 1997 and 1996.
~irs~
~idw==*
Financial,
inc.
and
Subsidiaries
Jumbo ~fiute.s
of deposit ill de,;ominacions of $100,000
or more w approximately $14,183,000
and $19,265,000
at y= end 1998 md 1997.
AL ScpIembcr 30, 1998,
the scheduled maruriri= of certificate
of deposi~ were u follows for&e
years el]ded
September 30:
NOTE
9
DBPOs
ITS
@
$221.130,975
NOTE
10
- ADVANCES
FROM
FEDERAL
HOME
LOAN
BANK
At Sepcerz~ber30, 1998, admcw from the FHLB of D= Moinm wirh fixed and varhble mre.sringing from S.0570 to
7.82% mature in che yw ending Septemkr
30 as fo[lo~m.
“.. I
I
I
pldge
The Bank and Se&T
agreemenm wherehy he Bmk md Security assign, transfer
TOthe FHLB and grant to she FHLB a securicy
and pl~e
have aemred
blkt
incer=t
HOIWW, cbe Bmk and Security
in all proper~
now 01 hereher
(it
have he
owned.
TO use,
commingle
and dispose of
rhe collateral d,ey have
=siglled to the FHLB. Under the Weemenu,
and Securi~ must mtirain
the Bank
“eligibfe collateral” chat has a
“lendlng vd.e”
zr Iwt
c~ud m the “required c0113r~
$85,263,562
amount,” ao % defined by he a~eemenrs.
At y~r end 1998 and 1997,
the Bank and Security
pledged securiti~ with amomitid costs of approximately
ad Ltir vdum of approti-
specific
a@nst
In addition, qutifing mom~ge Ioms
$41,980,000
mtely
FHLB adm]ces.
and $84,261,000
and $83,544,000
$42,636,000
of approximarefy $82,165,OOO and $65,305,000
were
pledged as cokrerd at year end 1998 and 1997.
First
Midwest
Financial,
Inc.
and
Subsidiaries
3
NOTE
11 . SECURITIES
SOLD
UNDER
AGREEMENTS
TO REPURCHASE
Ymr end sccurici~ sold under agmemenm to repurchwe totaled $4,074,567
and $1,800,000
for 1998 ad 1997.
An analysis of secwicim sold under agreemelRs ro rep~lrch~e is w foflom
Highac mo,,th-end balance ............................
Aver~c hafance ........... ... ...........~ ........ ........... ... .....
Wei@ted average inccrmc rate during che period ........ ..._ ......- ...._..— ..... ......
.. ....... . ............_ :$
... . ~”
... ....... ............... . .
... .....
.....
....
Weighted average interest r~ce at e~]dof period ................. ........ .... .
....
.....
Y~s
ended
1998
1997
4,07.4,567
2,915,614
$
2,789,918
234,590
5.80%
5.71V0
5.620/o
5.79%
I
At y=
repurchme had mturitim mging
end 1998,
from I to 20 n]onh
widI a weighted aveWe maturity of 6 mandls. The Com-
appIOximaCely $4>439,000
Ie.spcccivdY,
ar yeaI end 1998 ad 1997 u colfaterd for securities sold
~d $2,380,000,
securitim sold under agmmcnu
co
macdy $4,285,000
and $2,267,oOO and fair tium of
pany p[edg+ sccwitia with amoriid
costs of appmxi-
under agreements to rep(ucfwze.
NOTE
12
OTHER
BORROWINGS
OrheI bomowings ar yw ald 1998 and 1997 mmisced of
amortizd
coscs of
approximately
$1,499,000
and
of advanca from tie Federal
$550,000 md $2,900,000
of Chicago, The advmm Oumrandmg at
Rmerve Bd
y-
rate and were due
October 2, 1998. The Company pledged securities with
end 1998 N a 5.45% inter=t
NOTE
13
- EMPLOYEE
BENEFITS
$3,491,000
and $3,507,000
o&m borroti”~.
and fair vdum of approximatdy $1,512,000
at ya
end 1998 and 1997 w colfa.red for
Employee Srocb Ownership Plan (MOP):
maintains an ~OP
The Compmy
for efi8ib]e employem who have 1,000
hours of cn]ployment with the B~
attilled age 21. The MOP borrowed $1,534,100
md who have
from
of seven yeaIs
credited service. Prior 10 dIc compltion
of credird service, a participant who terminatm ernploy-
menc for reasons other than deztb, normaf retirement, or
disabili~ receivw a reduced benefit b=ed on the MOP’Z
the CompaI]ytopurbe230,115
shu~ of the Comp,.
ny’s common SEOCL Collated
ezned
sIwe.s of common
lom proceeds by de ~01
sto& purtied
for dle loan is he UII-
wifi &c
Tbe loan wifl be repaid
principfly from the BaWs &crerion~
mnuibutions
to
The i“ter~c rate for
the MOP ova a period of 8 yws.
&c lom is 80A. Sbc.s
p.rcbmed by cbe ESOP m held
in suspense fo~ affocation among participants 3.5the Iozn
is repaid.
ESOP mpense of $654,460,
$49s,740
ad
$451,500 was recorded for the years ended September 30,
1998,
znd 1996. Contributions
$200,000 ~ld $200,000 were made to *. ESOP d“ri”g
of $200,000,
1997
the y-
ended September 30, 1998, 1997 md 1996.
Contributions
suzpense in a
to the ~OP md sh=~ released fion~
to the repayment
proportional
aount
of the MOP lom Ue zflo~wd among ESOP pticipzn~
on *C basis of conlpensation i“ the ya
Bencfi~ generally become 100% vested &eI seven y-of
of aoocarion.
Forfeicurm ate
pwcicipacing employees,
reallocated among
vesting schedde.
in dIe same prOpOr-
rmaini”g
tioll as contributions.
Benefits ze payable in tile form of
sto& upon termination of employmel]t. The Compa1y3
conuibutiom to dle ESOP ze not
payable under the ESOP cannoc be cstimared.
freed, so benefits
ESOP participants we entitled to receive &uibu-
tions from theti MOP accouns ordy upon termination
of servim.
For &e years ended September 30, 1998, 1997 and
30,000 and 30,000 sh-
1996, 30,000,
hiI due of $21.82,.$16.52
rivdy, were commitred co be rdaed.
ended September 30, 1998,
wirb an aVeI~e
and $15.05 per share, rcspec-
Afso, for he pm
1997 and 1996, alfoared
and cod ESOP Sb~S
ShI~
and
2,858 shwes wirhdmwn fronl the ESOP by pwticipant.s
lefleCtS 8,617,
4,517
who arc no longer with the ~mpmy,
net of sbes
pur-
tied
for divideIld reinvestment.
F*.S*
Midwest
Financial,
inc.
and
subsitiiaries
NOTE
13
- EMPLOYEE
BE NEFITs
(con~inucd)
1
Y-r
end ~OP
shares ~e as follows:
1998
1997
A80cated shar~ ....... ....
........
......................
.........<......
.
157,128
135,745
1996
110,262
Unmned shtres ............ .. . .
......... ..L...
.... ........ ......... .. ...
~ ~ ~~~ 55,080.
S5,0S0
115,080
Tad HOP shar~ .......... ....... ... ... ........... ..................... ..-
212,208
220,825
225,342
M1r value of unearned sha~ ...._._ ....... ..- .... ....... ..._..+___
$
“950,130
$
1,690>965
$
1,860,460
Stock Options md Inmncive PkUIS Grrain OFIWIS and
directors of the Company have been granted oprions to
purcke
srock option plans.
common stock of
the &mpmy
pursuant 10
SFAS No. 123,
,vhich became effective for sto&-
kd dIe fir vdlle mechcd been used [o m-e
compen.
satio” cosc for stock option plms. The mercisc price of
options granted is equivalent to the marker due of under-
compensation
lying sro& ar &e grant date. Acofllngly,
for
cost actually recognized for stool options w= $-O-
bmed compensation during &cal yews beginning &er
1998, 1997 ad 1996.
December
compania
15, 1995,
that do not adopt
reqti
method for
stod<-based employee
proforma disclosures for
accounting
its ti,r due
for
compensation
The fir due
ofoprions granted during 1998, 1997
and 1996 is estimated uting tbe following weighced-~ver-
age information
risk-free interest mte of 4.49%,
6.44%
awards granred in the fmt
6=1 Y=
begining
afier
December 15, 1994. Accordingly, tbe foUowing profo~ma
information p%en~ net income md etings
per sbre
and 6.18%,
of 2.69%,
expeaed life of 7.o yms, expecced dividcuds
2.02V. and 1.911% per year ad expected stock
price volatifi~ of 20V0, 18% and 18% per ya
Net income as rcponed
Profonna n= incOme .............. .... ... ..A.........A....... ...
. ... .. ... .. .. ... ..
. .... . . ..... ... .. .
....
.
... ... . .
1998
1997
1996
~$
~~~~$
2,784>882
2>689,596
$
$
3,641,956
3>531,215
$
$
2,413,565
2,266,238
+rced
mings
per common and
common equitient
share
Btic ................... ...
.. ..~.............t .... ...z .. ........ ...............
DJuld
................. . .
.
......__
--.. - .... .... ... ..... .....
.
““-’
. ... ...
$1.08
““” “’”:”’$1.03
Pm forma earnings per common ad
Comlnon eqtialen[
she
Mlc.
Difuted
.... . .. ...........
........... .......... .........
.
..
... .......... ........
.... ............2...+
. .... ... ......... ... .. ...>......
$1.04
$i :00
$1.34
$1.28
$1.30
$1.24
$.95
$.90
.8.89
$.84
In ficme y=s, &e profom e~cc of not applying this standard is expaed to incme
as dditiond options are grmred.
1’
First
Midwest
Financial,
Inc.
and
Subsidiaries
NOTE
13
- EMPLOYEE
BENEFITS
(Co.rinuccl)
Srock optio,l plms are mcd c. reward employees and provide &a wid] an additio!]al equity intermt. Options m issued
for 10 year perio&, wi& 100% vesting zendlv
48 monrhs after grmt dare. At &d ycu .Ild 1998, 151,117
occurti
sham werea.thorized for future ~~~
InforI~ation ab~ut option grmts f~!lows.
Number
of options
Wcighced-avernge
exe~cise price
264,141
58,740
(14,175)
308,706
69>930
(51,838)
.(1,500)
.325,298
.. 13,418
(7>600)
331,116
$6.80
15.44
6.67
.
8.45
17.91
9.87
1475
10.23
17.88
6.67
$IoGi-
and $3.52. At
The weighted-a-e
Y= end 1998, options outswding
fti value per option for optiom granred in 1998, 1997 and 1996 was $2.01,$4.15
Imd a weighted-avcmge raaining
life of 6.29 Y-
and a rmlge of =ercise price h“,
$6.67 to $20.13.
Wagement
Compmy
Recog,]ition
and Rcte”cio*~ PlmS
‘rhe
(8,986 of which
gmted
7,191 ~~d 106,428
have heell forfeited under terms of the PI~l due co termi-
nation of sewice) rmtricced shares of dle Gmpanyi
c<,m-
mon srock on May 23, 1994 and September 20, 1993,
respectively, to certi
mmagtment
offiwrs of he Bank pursuant TOa
recognition and rertncion plm (he “Plan”).
a shueholder, except that they culnot sell, a.ss~n, pledge or
tmsfm any of che mtricred stock during &e resuicrcd
petiod The r=cricced stock vats at a rate of 250/non ~ch
date. Expense of $-O-, $41,947
annivc~
of A. ~C
and $117,064 was recorded for fiae pbs
for the years
ended 1998, 1997 and 1996. There w no remaining
unaortimd
untuned compcmation value of the plans at
The holders of the rmuicted stock have fl of dle rights of
Sepcen]ber 30, 1998 or 1997.
First
Midwest
Financi=I,
In=.
and
Subsidiaries
The Company rl~eBank md its subsidimia ad Secuity
file a comolidatcd federd income u return on ?. fsd y=
basis. Prior to fiscal ya
met in determining treble
if ~tin
1997,
conditions were
income x reported on the con-
legislation pined in Augusr 1996 now cequir~ the Bmk to
dduct a provision for bad debts for tm purposu breed OKI
aad
10SS expedience md re=pture the exws bad debt
r-e
accumdated in w ym beginning after Sep{embcr
NOTE
14 - IN COhi E TAXES
solidated federal income u return, cbe Bank was Mowed
a special bad debt deducrion breed on a percentage of W-
able income (8% far 1990 or on specifid experience for.
of tuable income
m~.
me Bank used the percen~e
method for &e u year e“dcd SepCetnbex 30, 1996. Tax
The provfion for income taxes mmisr.s OE
Federal
30, 1987.
which mu.sr be recaptured is approtiarely
is papble over a sk ymr period be@ning
The related amount of deferred w liabiity
and
no ktec thm &e
$554,000
~ Y~ en~ng September 30, 1999.
1998
1997
1996
...... . ........... .............& ..... ... ................... .......~..
Curenc
D&mred . ........... ... ......~.... .. .......... ..................1.............
$ “’2,012,841
-
“ (23.0,8s7)
1,781,954
$
1,599,255
$
569>133,
2,168,388
state
Cunent
...... ... ... .............. .. ... .. ............. ..... ..... ..... .......
.......... .......=...... ........
D.femd ........... ..... .... .......~~~.~
““ 304,679 ~
(83,1 13)
221,566
...
314,712
18,969
333,681
1,735,099
(282,756)
1,452,343
290,825
(46>845)
243,980
hcome
tax expense .............. ... . ... ....tiX .... . . .... ... .. . ..>. .....>.
“.
$“ 2,003,520 $
2>502:069
$
1,696,323
Tod income w expem. differs from the sramto~ feded income w rate m follows
Income We
fncrease (demease) ddng
at 34% Federal mY Hte ..................
fiorn.
Years ended Ser)temher 30.
1998
1997
1996
....................
$
1,6287000
$
2>089,000
$
1,397,000
Srace income taxm - “cc of federaI be”&t
....... ....................
&c~
of cost over net wsers acqtied .. ............................. ..
146,000
124,000
fic~
of fti due
of ESOP bm reiaed
over msc .......... ..e .... ...............e.......... .... ................ .. ..... ...
...
Odler - net .................... . . .....=.. .. .. ....... ..a.
. .................
.
.
.
155,0(?0 ..
~~~~~ ~~‘ (49>4jo) “
220,000
124,000
101,000
(31,931)
161,000
58,000
66,000
(5,67~
Tod income tax mpe”se ................b ... ..- ....- ...... ...~..~. ...$
2,003,520
$
2,502,069
$
1,696,323
1
1
I
First
Midwest
Financia[,
InC.
and
Subsidiaries
NOTE
14
INCOME
TAXES
(C.,,tit,.ed)
Defer& tax wets:
Bad debts ....... ....... ...... ....................... ..
........................ ...
......
...
1998
..$
.......
.
.. ~~
375,ooo
-111,000
$
Deferred lom fem ............ .
Management
incentive progra
..........
.............
....
. .....................x.+ ....
.... ....
............
...... . ............... ...= .. ......%z.,.
Alfow.~lm for foreclosed rd estate Ioss@ ................................... ....... . .... .
. .
Odler ircnu .......................... .....
. ....Z....= ....... .... ..... ..
...... . ....
.. ...
Deferred @ liabifiti~
Federal Home ban B~
Accruai co cash b~k ............
Net un~dzed
........................ . ....... ..... ............... ... ... . .......
,Pprcriation OrIsecurities avdabk Eorsde ........... ........ ........
stock divide,,d .................. .................. ..... .. . .
Odlw ............. ......... .. ........ ......&..a
. . . .
. . . . . .
. . .
. . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .
.
11 S,ooo
46,000
650,000
.
.
(452,000)
(178,000)
(474,346)
(76,000)
(1,180,340
I
128,000
140,000
27,000
101,000
396,000
(452,000)
(258,000)
(568,013)
(5 G,000)
(1,334,013)
Vdutio,l
flowmce
............
....... .. .................. .. ................... .......... ...... ..... ..
Nm deferred w asset (liab~i~)
.............
. ... ... ...... ................................. .......-
$
(530,34~)
$
(938,01~)
Fcded
addiriond bad debt deductio,~s tiugb
1987,
i,,come c= laws provide savings bak wirh
Septenlbcr 30,
Accounting
for the Bh
$6,744,000
toti,ng
do nor I~Uk= a deferred tax liabili~ to be
SW&d5
recorded on chii amount, whi~ L~bilicy ochcrwise woufd
COU[$2,300,000
Bd were Iiquikd
at September 30, 1998 and 1997.
co be a bti
oc otherwise -m
ffthe
or if
t= laws were to change, the $2,300,000 woufd be record-
ed m ~p~ll~e.
NOTE
15
CAPITAL
REQUIREMENTS
AND
REs TRACTIONS
ON RETAINED
EARNINGS
The ~mp~ny
km two pri!n~
subsiti,~,
First Fedcrd
ad Swuri~.
First Feded md Securiry ~e s,ubject to W-
capid 8uid&@
off-baku) m-sheet
using rbek a.ssecs,Iitiicia,
itms m dcdated
under
and mrtain
regdatory
ious re~acory ~pical requiren]ellts. Faifurc to meet nlin.
certain manda-
im.m capid
if under-
tory or discretion~
coufd have a di~c matefial @ect on tbc financial
den,
actions by regulators tic,
requirement
initite
a
staremenm. Under capid adequacy guidefincs and the
regldato~ framework for proulpl corrective aaion, Fint
Federd md Securiry must meet
specific q.atitative
accounting practica. T1le reqtiemen~
~e also subject co
qualimcive judgments by the re~co~
risk weighings and ocher kctors.
about components,
Re@ations
require First Federal to mainti] mini-
mun] =piti
amowt.s md ratios as set forfi bdow. MaJI-
ag~nent befim~, u Of Septembm 30,
Federal meer.s the capird adequacy requirements.
1998,
thar First
First
Midwest
Financial,
Inc.
and
Subsidiaries
NOTE
15 - CAPITAL
REQUIREMENTS
AND
RESTR1CTIONS
ON RETAINED
EARNINGS
(
(Contin”td)
Minimum
Rcq,u,emcnc
TO Be Well
Capitttzed Under
Promnt Comecti,.e
Action Provisions
boll.,
Iblcio
Minimum
Requirement
For Capital
& of Sepcembcc 30, 1998
Tad ~,d
Te,
I (Co,.) Capiral
(co=k weighred m,~)
$33>520
13.2V0
$20>396
8.0%
$25,495
10.0%
(m rii wei~~d =)
?ier 1 (Cnre) Capid
.....________
$ 31s13
12,2%
$10,198
(r. adjmred tord mets)
....-._.–.–._
$31,113
Tangible &pi[d
(r. adjwed tod =.s)
,....-–-–
.....
$31>113
mm 1 (care) C,p;d
(c. awe
mer.s)
......-............._-*=
$31,113
8.3%
8.3%
8.8%
4.0%
3.0%
$11>219
$ 5>610
1.59k
$15,297
6.o%
N/A
NtA
NIA
NIA
$14>108
4.0%
$17,635
5.09k
As of September 30, 1997
Toni Gpid (r. riskw~hted assers)
licr 1 (Ore) Capid
$31,239
i4. IY.
$17,780
8.0’%
10.0%
(to riskwei3h,edNets)..._....._ ...._z.
.-$29,465
13.3%
$ 8,890
4.0%
$13,335
6.0%
Ta 1 (~re) Capid
(10 adimed coed=er.s) ...... ............
.
$29>465
8,2aA
$10,791
3.0%
Tm&ble Cz},ital
(r. adjured COCdmers)
...... . ...... .......
$29,465
8.?%
$ 5,396
‘Iier I (~re) Ctpird
(10 .Vm%e me~)
....--.......--....~_A-
-$29,465
8.8Y0’
$13,383
1.5%
4.0%
N/A
N/A
N/A
NIA
$16,728
5.0%
Re~tions
of&e Office of Tbrifi Supervision
fimit
mum mou”u
md mrios (set forth in the cable below) of
dle arnounr of dividends
and odIer ca.pitd dktrib~ltions
that may be paid by a savin~
i“stimcion wi&our prior
rod risk-breed capid and Tier 1 capiml (U defined in fie
to risk-weighted msers (as defined), md a
WUti.ns)
aPPrO~ 0$ *e OffICe OfThrifi Supervision. The ~a-
rory resuicrion is baed on a three-riered system with the
gr-resr
(?ier
flexibili~ beulg tibrded to ~-capidued
First Fcded is currently a lier 1 imticu-
1) instimtiens.
leverage ratio consisting-of ~er
I upical
average mem (as defit~ed). Mmagemmt
(= d&:,ed)
to
b~le,,es, m of
September 30, 1998,
quacy requirements to which it is subjem
that Security meers d capid ade-
tion. Accordingly, FIrsc Fcdeml a m&e, wifilour prior
As of the most retit
nocifiation dare, the Feded
I
1
I
r@tOV
zppmmI, diitributiOns during a caJendw ym
up to 1000A of iIs nm income co &re dting dIe cdendw
year phLS an amount &c ~vodd reduce by one-klf
iu
“surplus capital ratio”
(the excess over
ir.s capid
require-
men~) at &e b~inning of die cakndti y=. Accordingly,
of
ar September
.$6,500,000
for
FLrstFederals retained earnings was pote,~rifly atilable
approtimccly
1998,
30,
distribution co the Company.
Quanrimtive mm.res
Deposit fnsumce Gqoration mtegorized Securi~ m well
capidized under cbe re~aro~
corretive
Securiy mu.sc ntitin
action.
Earnework for prompt
To be cuegorized m well capidid
minimum, Tier I rkk-based, TIU
I [evewe md rod risk-breed apiti mrios *S set forck in
below. There m no conditions or evmts since
the ~le
rhat nocficacion that mmgemenr
bdieves have chmged
&c inscimrionk mtego~. At September 30, 1998, approx-
ensure mpical adequa~ require security to tintain mini-
daliy avtilable for dtilbution
to d)e Compmy.
escabhshed by re~cion
to
imately $24,oOO of Smuriry’s remined mings wes poten-
First
Midwest
Financial,
Inc.
and
Subsidiaries
3
NOTE
15 . CAPITAL
REQUIREMENTS
AND
REsTRICTIONS
ON RETAINED
EARNINGS
(continued)
Security’s act.d capital aid required capird amounts ad ratios are presented below
As of S.pten~ber 30, 1998
Tod Capiul (TOriskweighted assccs)
~cr 1 C.Pid (LOtik weisk~ed mcs)
Xer 1 &pid
(i. avc~c mm)
As of .scpcember 30, 1997
Tod Gpid (coCMweighted=CG)
T,y 1 Capital(to risk wci8hted-E)
lier 1 Gpird (co.v*.
assem)
Amount
$ 3,751
$ 3,469
$ 3,469
Acruai
Ratio
16.7v0
15.5%
8.8%
$ 3>744
$ 3,4o6
$ 3,406
13.9%
12.7%
9.9%
.
.
Action Pco.%.ns
Amount
Ratio
$ 2242
$ 1,345
$ 1,981
10.0%
6.0%
5.0%
$ 2,685
$ 1>611
$ 1,724
11209&
6.o%
5.00,
$ 1,794
$
897
$ 1,585
$ 2,148
$ 1>074
$ 1,379
8.0%
4.0%
4.0%
8.OY.
4.0%
4.0%
NOTE
16
- COMMITMENTS
AND
CONTINGENCIES
In*.
nor,nd come of busin=,
the Compa,y’s s.bsidi~
The mposure to cmtiLc IOS in the event of non-
tie
b~
commitments
=e not reflected in the accompanying consolidated fm-
[o ~tend .redic wbi&
wious
cial scatemencs.
At September 30, 1998 and 1997,
loan conunitmencs
apprO*aIed
=cluding un&bumed pOtdOns of loa~ in p~o~.
and $15,782,000,
$27,353,000
r~pectivcly,
ban
commitnlenw at Septem&[
menm to origin?tc freed-race loans with intermt nrm mng-
30, 1998 included comit-
ing from 6.5V0 co 12.50% todng
:md
*djustabl&race lo~l commic”lenrs with inrcra racesrang-
ing from 8.3% TO10.25% rod”g
pany dso had corrunitmenm to pwchase
The um.
adjustable
$6,142,000
$9,277,000.
rate loans of $9,934,000
from 7.75% to 9.75%,
$2,000,000 u, f~ed me loans at 7.45% as of y~
1998. Loan conuniments
with incerec
and comiunents
race
ac September 30, 1997 inclu-
ranging
co purchase
end
to originate fmcd-rate Iom with inter-
dedcommitments
est mce.s ranging
pwformance by other paics
to fmancid instruments for
commitmmu
rractuaf amount of those insuuments.
to acend credit is represented by the mn-
The same crcdic
politi= and collateral requirements are d
obligations
and condition
commimmts
in mahing
arc used
s
for on-balance-diem insalenrs.
%,nce cenain .omtimcnL?
to make low md c. &d
Iinm of reedit and loans in procm mpice without beklg
used, dlc amount do= not ncce.ssztiy repre.sent h-4
commiunen~.
credit are agrccmen~ co lend co a customer as long as &~
commiuncnts wed to extend
In tidirion,
is no viotion
of any condition established in the conuact.
Sec.ricia with an]omized cosm of approximately
$7,663,000
matdy $7,859,000
and $5,835,000
and $5,710,000
and F& vdum of approti-
at September 30, 1998
and 1997, r=pectivdy, were pledged a.scolfatcrd for public
finds on &posit.
from 7.37% to
11.509’0
toting
Securitim with amortized com of approximtdy
$4,876,000
titemt
and adjustable-mre loan mmmitments widl
races rmlging from 7.9% to 12.0% cot&lng
The Company also had commitments co pur-
$5,523,000.
chase adjustabl~race
loans of $5,343,oOO with interst
mccs ranging from 8.3950/. co 10.OOO/O,and commim]e,~ts
co pllrhme
end 1997.
in fied rate Iom at 9.OVO~ of year
$40,000
Commiunen~, which ae disbursed subjcc~
ro cercaiu Iizx]imcions, wtend over variom perio& of
tile. Generally unv.scd commicmcrlts uc canceled upon
mpiration of the commitment
indlvidud conrracc.
rerm as oudiied UI each
and $2>077,000 and Fdir tium of approxi-
$6,557,000
mately $6,827,000 md $2,149,000
at Sepmnlbcr 30, 1998
md 1997, rmpectively, were pledged m colfaced for indi-
vidual, trust, md ~mte deposits.
Under employment agreemen= with&n
executive
ments
be
lading
officers, cdn
Company mdd rest.drin wh payments todlng approxi-
mately $2,794,000
as of September 30, 1998.
to separation hnl
The Compmy
daim.s ad
subject m
actions a~ising in *C ordinaty
cati
course of busuless. h tie opinion of ma>aganenc, after
and ifs subsidiary= ae
led
First
Midwest
Finan
Ci=I,
Inc.
and
Subsidiaries
NOTE
16
COMMITMENTS
AND
CONTINGENCIES
(C.mtin,,ed)
consdtation wifi
Ie@ mumcl,
fie.se mamas is “or mpected to hzve a mcerid
tbe dtimatc disposition of
adverse Opemtiom of &e ConlPmF
efict
on he consolidated f~wci.d position or r~dts of
Praented below ue condensed fillmcid smremcnts for &e pmnt
compmy, Firsr Midwmt Finmcid,
Inc
NOTE
17
. PARENT
CO btPANY
FINANCIAL
STA1’EMEN~S
CO ND ENSEO BALANCE
Seprember 30,1998
ad 1997
SHEETS
1
ASSETS
1998
1997
‘
367,200
131,945
567,200
306,656
$45,504,896
$43>603.940
$“
3,050,000
$-
i69,333
3,219>333
.126,936
126,936
29,58”o
21,330,075
27>985,814
“n8;820
~3@>200)
(7! 4~i.526j:
42,2~5,563
$ 4L504,B96
29,580
20,984,754
26,427,657
960,371
(567,200)
(4,358,158)
43,477,004
First
Midwest
Finan=ia,,
Inc.
and
Subsidiaries
3
NOTE
17
- PARENT
COMPANY
FINANCIAL
STATEMENTS
(Co,,tinu,d)
CO ND ENSEO STATEMENTS
Y~s
ended September 30, 1998, 1997 and 1996
OF INCOME
D,vidend income fro”, subsi~ry
b~
. . ............ ......... ... ...
$
Interest income ... ... ..... .. .... .... ... .... .. . .... .... ... . . ... .... .... .... ... .... .... .
Gain on d=
ofsecuritim avdable for sale, llct .. . ...................
1998
1997
1996
2,000,000
Z72J60
317,960
2,590,220
.72,581
3.%4,945
427,526
$
6,000,000
145,339
216,614.
63361,953
$
9,500,000
219.546
51,237
9>770,783
132,014
348> 162
480,176
182,743
182,743
Income
before
income
taxes and equity in
undlstr: buted Llet Income
of subsldlarles
.... .............. .
2,162,694
5,881,777
9,588,040
Income w expcme (benefit)
.............. ...... ....... ... .... ............-
~
(55, 000)
53, 000
Ixco.ze
before
eqxi:y
ifi undistributed
XC:
income
of subsldl~rles
..................... . .... ... .... ............. ....
2,112,694
5,936,n7
9,535,040-
(Distributions
in excess of) equity ill ulldistrib”ted
net income of subsidiary b~
.............. .
. .
......... . .... .........
672,188
(2,294,821)
(7,121 ,475)
Net
incol,)e
............................. ..............................
.............
$
2,784,882
$
3,641,956
~
2>413,565
First
Midwest
Financial
,
[ne.
and
Subsidiaries
NOTE
17
- PARENT
COMPANY
FINANCIAL
STATEMENTS
(Conr;nut.d)
STATEMENTS
OF CASH FLOWS
CONDENSED
Yas
ended September 30, 1998, 1997 and 1996
Cash flows from operating
activities
Ner income ..... ..
Adjustments to reconcile na income zo
.........
...A..L ...............i.... ... ...... .......z.....
1998
1997
1996
$
2,784,882
$
3,641,956
$
2,413,765
net -h
horn opemcing ativiti~
Distribution in_
of (equi~ in undsmibuted)
net Income ofsubs~ch~ banb . ......- .. .......~ ..........
(672,188)
2,294,821
7.121.475
1
of recognition and ~ertntio” plan .... ...._
Amortition
tin
on sales ofsecuriries avtilable for sale, net ..... .......
Change in ether assets......... ... ... ... . . ..... ............ .. ....
and ofier habd,u~ ............
Chg.
kom operating actititiu ............................
in acaued ~pns~
Net ah
Cash flows from investing
activities
PuIcha.seof securiri~ available for sale........... ....... ........... .._.
from sde.s of securiti~ avajlable for de
Prod
Pu,chase of Imm BaIImWraUOn,
IrIc.
Purchase of Cenual West Bancopmtio”
................
................ .. .. .. .........
......... ... ... ..... ......
Mpaymen~ on loan receimble from ESOP ..................... ... .
.....
Net cad, from i“vmmenc ativiciej
........__. . .. ....
.
Cash flows from financing
activities
Proceeds from loan pa.~ble m subsidi~ W
..............
..
dividen& ptid ....................... ..........
Wpaymenm on Iom payable co subsidiW bank ...... .........
...... ... .... ..... ......
Gh
Proceeds from tir~
........ ....
Purcba.se of amury Stoch ............. .... .... ............. .... .. ... . ...
of stoch options .......... .......
Net ush from finanting activities ......................... ........
(317,960)
~~ > 174,711
142,705
..-
‘“
41,947
(216>614)
(245,225)
(611,711)
. 2,112,150
4,905,174
‘117;OG4
(51 >237)
110,759
721,109
10,432>735
(5,150,000)
2,195,509
200,000
(2>754,491)
4>550,000
(1,500,000)
(1,226,725)
28,696
(3,271,203)
(1,419,232)
(231,000)
(1,014,438)
804,067
.
200,000
773,067
338,750
(6,529,615)
(1,923,519)
200,000
(8,928,822)
(962,68;)
335>991
(4,268,77~
(4,895,468)
(745,76;)
94,500
(630,710)
(1,281,971)
Net change in cash and cash eguitienm ..................... ............
(2,061,573)
782,773
221,942
&h
and ah
equivalen~ ar beginning of y= .........
............
2,16G,091
1>383,318
.._.
1,161,376
CaSII and cash equivalents
ac end of year ...................... .
Supplemental disdosure ofcasb flow i“focmtian
Cwh paid during the Y= for interest ...........
....................
$
$
104,518
$
2,166>091
$
I,383,3I8
72,581
$
132,014
$
.
Supplement
schedde of noncash investing
and fi”a.nbg
activities:
Issuance of common stock for purchw of
Cend West Bmcoprarion
... ...._ ...
..........
. ................ ~~ ~.
$-
$
3,936,634
The extent to which the Compmy m~y pay d
rhe Comp,ny
x well m *.
abdi~ of A, subsidiary banb to pay dividen& to dIe Comptny (se. Note 15).
dividends ro shar&olders wilJ depend o~~the wh mrmntLy atilablc
at
First
Midwest
Financial,
lnc.
and
Subsidiaries
NO TE’18
- SELECTED
QUARTERLY
FINANCIAL
DATA
(UNAUDITED)
Fiscal ym 1998:
Tod
intcrat
Totaf i,ltcr~t mpe”se
income .......... ..................
.
.
.
.
.
Net inccrest income ................................
Provision for lom 105sc.s. .
..
Net income ......................... ............
Farnings per common and
share
common equinlent
B=ic ........ .... ....... ... ........
......
Diluted .................. ... ......................
....
Fiid ym 1997:
Tocal
interest
income
. .
..
.
Total interet apense
. .......
Net inter=r income .............................. ..
........... ......
Provision for loan low ............ ............
.
Nm income
. .
.
.
.
.
hnin~
per mmrno,] md
Comon Cquidmt
B~ic
..................
Share
.......... .......... .......
Dduted .................. ....... .................
Fiscal ym 1996:
i“cera
Total
income .
.
.
.. ..
Toral interest expense . ... .... ...... ........... ..
Net interest income ........................ ........
Provision for loan Iosscs
..
Net income .................. . ..................
. .. ..
December
31
March 31
June
30
September
30
QMer
Ended
$
7,894,734
.4,712,639
3,182,095
35,000
989,055
.% 7,839,781
4,622,771
3,217;010
1,345,000
46,316
$
$
$
$
,$
$
.38
.36
7,305,929
.4,288,793
3,017,13
30,000
953,216
.34
.33
5,363,332
2,960,194
2,’403,138
30,000
776,845
$
$
$
$
$
$
.02
.02
6,882,095
3,973,985
2,908,110
30,000
849,539
.31
.29
5,962,258
3,407,485
2,554,773
30,000
726,806
$
$
$
$
$
$
$
7,996,291
4,815,319
3>180,972
55,000
893,056
.35
.33
7>331,501
4,356,367
2,975,134
30,000
912,504
.34
.33
6>499,056
3,735,106
2,763,950
30,000
892,181
$
$
$
$
$
$
$
8,327,988
5,079,224
3,248,764
227,472
856,455
.34
32
“’
7,485,150
4,4393912
3.045,238
‘“ 30,000
926,697
.35
.33
6,512,819
3,875,825
2,636,994
10,000
17,733
krlin~
p,l CO~Otl
and
common equident
share
Basic
.. ..
.
.
Ddud
.
.. ..
.. ... .. .. .....
....... .............
i
.31
.29
$
$.
.28
.27
$
$
.35
.33
$
$
.01
.01
First
Midwest
Financial,
Inc.
and
Subsidiaries
NOTE
19
- FAIR
VALUES
OF FINANCIAL
INSTRUMENTS
“Dti.lomreJAbozt F~i~ Vdzti of Finaiztia~
SFAS No. 107,
Imti000
120,609,531
. ..270.286,18g
5,505,800
4,968,607
120,610,000
273,096,000
5>506,000
4,969,000
200,000
115,985,045
254,640,971
5>629,300
5,366,109
200,000
115,9s5,000
254,455,000
5>629>000
5,366,000
deposits ............._ ...... ...... ......... . .. ....i . ..
(4,971,562)
(4,972;000)
(5,572,2961
(5>572>000)
Savings, NOW md money
maket dared
deposits ..,. ............
.....
Odler rime cdficate.s
ofdepotit
Tod dcpasiw ............ ..
.... ... ...
..........
....
Advances from FHLB ........ ....... ..... ......
Securitim sold under
agreem.”cs co repurchase ........ .... . ...
.
Other borrowings .,.....- ........a ..........-.
Adwces
for ~
from borrowes
and insurance ......
......
.
...
. .. . .
Accrued interest payable .. ............
OFF-BALANCE-SHEET
INSTRUMENTS
(57>755,615)
(221,130>975)
(283,858,152)
(57>756,000)
(222,807,000)
(285,535,000)
(49,838,735)
(190>704,667)
(246,1 15,698)
(49,839,000)
(190,190,000)
(245,601,000)
(85,263,562)
(87,360,000)
(107,426,225)
(107,247,000)
(4,074>567)
(550>000)
(4,095,000)
(550,000)
(1,800,000)
(2,900>000)
.
..
(405,218)
(834,741)
(405>000)
(835,000)
(449,487)
(1,065,740
(1,806,000)
(2,900,000)
(449,000)
(1>066,000)
Loancommitmtncs
....... . .... . .............. . . .. . .
(27,353,000)
(15,782,000)
First
Midwest
Financial,
Inc.
and
Subsidiaries
~
NOTE
19 - FAIR VALUES
OF FINANCIAL
INSTRUMENTS
(Continued)
The following ses
used in decermilling the h
pan~s financial
forth Ae nlerhock and assumptions
value C.SUMCS for the ~m-
inscrumen~ at September 30, 1998 and
1997.
SFAS No. 107, no vafue has been =sigl]ed to the Gmpz-
its deposit cuscomcm
ny’s long-term rdatiomkips wifi
(tom value of deposi~ intangible) since such int~ible
is
not a finalcid instrument as defined under SFAS No. 107.
Gb
and Gh
Equival.n& The m~i.g
ao.,)t
of cash
and shon-renn invesr.nlent is assumed to approximate the
fair value.
AdwcG from FHLB: The fair value of such tivancc.s w
mtimatcd by &counting
flom
using current interest races x of September 30, 1998 and
the expected future ah
Intcr~-beuing
The carrying amount of inreresr-bcui,lg deposi~ in ocher
In Other Financial Imtimti<~ns
Dcposis
financial
value.
institutions
is assmed to approtiate
the fair
WIties
Available For Sale Q.oIed mxkct prices or
alder quotes were used to determine the fair value ofsccu.
rities adable
for sale.
1997, for ad-cm with simifw terms and rm~afiii matu-
rities.
Securicie.s Sold Under Agreemen~ :. Repucchme md
The fir value of securicim sold under
Other Bomowin~
ad odler Iwmowing was esti-
agreemmn co repurcke
mated by discounth~g &e expected future ah
flows using
derived interest HI= approximating mwker as of Septem-
ber 30, 1998 and 1997 over che concraaaf maturity of
such borrowings.
hm
net was estimated by discounting &c finlre
Receivable, Nec The fair value of lom receivable,
cash flows
Advances From Borrowers for Tax-
and Ins”rmcc
The
using &e c-r
made co borrowers widI sitiar
rates at whi& sinlilw low woufd be
credit ratings and for sim-
wrying amount of adwcc.s
inswance k assumed co approximate tie F.r value.
froln borrowers for uxcs ad
ilar maining maturicie When wing he
method co determine Fair value, loans were gathered by
diwou.tig
homogeneous groups with tix
and discounted at a uget
Em and conditions
race at which simiim loans woufd
Accrued Intcrcsc Payable: The ~ing
intaw papble is assumed to approximate tie fair vd”c.
amount of accrued
and 1997.
be made to borrowers x of September 30,1998
In addition, when computing the ~cimated Fair due
for
all loans, aUowanm for loan loss= have been subtracted
Commitment
The commim>enw co originate and
h
purch=
Ioms have terms rhac xc consistent with current
market terms. Accordingly, he Company =timacm &w
from &e cdcufated h
value for consideration of credk
the ftir dues of that
comnfimencs we not significant.
issues.
Ff-ILB SCock: Tbe fair wdue of SUdl stock ~pp~Oti~t~
book ml..
since the Company k able co redeem a
stock
Lilnitations
It must be noted that% vd”e mtiat~ me
made xc a sptific point in ttine, breed on dwat market
information &our the finmdd instnunellc. Additionfly,
with the Feded Home Lea” Bmk at p= vai”c.
h
due
timac= w based on existing on- and off.bal-
Accrued klterar Receivable
accrued intaest
amount of
The wing
receivable is assumed to approximate the
FairvaJue.
Deposiw The fair value of deposits wme determined as fol-
lows (i) for noninteresc bming daand
NOW and moncy wket
deposits we immediately wihdra~le,
deposits, savings,
demand deposim, since such
value is deter-
(the amount
due
h
mined co approximate &c wryi”g
payable on demand);
deposit, &e h
of
value bas been csci,nated by discounci”g
tiunc certifiata
for other
(ii)
expected future A tlows by he currenr rata offered m of
September 30, 1998 and 1997 on cerrificatm of deposit
In accordance wkh
wick similw rc”,aining maturities.
finmcid
insrrumen= without accempcing to
ante-sheet
estimate &e value of anricipatd future bwitl=.
customw
relationships and the value of ~ers and IiabJ!ties that uc
not mmidered finand
not reflect any praiunl
offering the Company’s mcire holdings of a partidw
in.scrumenrs. Th6e mtitcs
do
or di.scaunt that codd resuh Gom
insuutnent
for SJICat one time.
Furchmmore,
financial
since no muket Gt.s
for certain of the Campaoy’s fman.
ciai insuurnerits, fir value e.stimata may be b~d on judg-
men~ r+ng
furure mpeued 10S mperience, current
economic condiciolls, risk chaacteristic.s of wious
cial inmeim,
finan-
and o“&erfactors. Th&, UUrnat= are sub-
jective in nature and involve uncerraintim and maccms of
significant judgment md rhereforc mot
be detamined
with a high lmd of pcectilon. Chang6 in =umptiom m
First
Mirlwest
Financial,
lnc.
and
Subsidiaries
NOTE
19 . FAIR VALUES
OF FINANCIAL
INSTRUMENTS
(Conti”,,.d)
@
we!.1as w considemtiom could signifimdy &em the @ti-
mates. Accordingly, b~ed on the limitations described
e.stimacesae Ilot intended co
above, rhe a~regate ftir due
r~rm~nt *e ~d~lfing
going concern or a liquidation btiis.
due OFAe Company, on eirker a
NOTE
20
- SUPPLEMENTAL
CAS1i
FLOW DISCLOSURES
Ou Decaber
29, 1995,
the Company purcbd
dl of Ihe conimon stock of Iowa BmCOEP fal $8,000,000
in cash.
I“
conjunction wick the aquisiio~,
Iiabiliti~ were resumed x foJlows
Fair due
of mm acquired
Cash paid
Uabfiries ~~~
$25>429,434
(8>000>000)
$ 17>429,434
On September 30, 1996,&e
bmpmy
purc~d
dl of &e common stock of Centd We.sr for $1,312,474
in ah md
i.smed 256,737
ed in the form of a 500/ostock Wldend paid on Jmu~
ac a mmket value of $15.33 per skme, m mrared for the thme-for-wo stock split effect-
liabilities were
In conj”ntion with the acquisition,
common &es
2, 1997.
assumed m follmvs:
Fair tiue of assers acquired
Cah ptid
Common stock issued
Li&&tia m~
$35>577,247
(1,312,474)
(3,936,634
$30,328>139
NOTE
21
FEDERAL
DEPOSIT
INSURANCE
PREMIUM
The deposim of savings asswiaciom such w the Bank arc
insured by he
Savings Association
Insumnce
find
31, 1995. Breed on the Btnk’s deposim w OFti!s dare, a
one-time asswment of $1,265,996 was paid a]d recorded
(“SAIF”). A rempitization
plm signed into law on Sep.
rember 30, 1996 provided for z one-time ass~smenr of
m federd deposit insurance premium expense for &e Y=
ended Sepcen]ber 30, 1996.
65.7 bwis poin~ applied to W SAfF deposits w of March
Directors
of
First
Midwest
Financial,
inc.
Jama
S. Haahr — Clrtirmm of the Bored, Praidenc
Savings Bank of the M,dwmt, and Security State Bank.
and Chief Executive Officer
for F[rsc Midwest FInm-
Mr. Gukifl has owned and operated a grain farming
cid,
Inc. and FLrst Federaf Savings Bank of the MidwesV
Chairman of
the Bod
for Securi~ SUte BtiL Mr.
Opcra~On 10~tcd n~r CO~idl,
Iowa, since 1958. He
has served z a commissioner wifi he Iowa Dcparunenc
H~~
is a mcmher of the Bored of Trustem of Bt!cna
Vlsca University. He lrw served in various capacities sil,ce
of Eonoulic Development and also as a commissioner
with the
Iowa Department
of Natural Resources.
beginning his seer with First Federd in 1961. He is a
membe~ of the Board of Directors of Atnerimk Com-
Mr. Ga.skill is d~e pwt president of IOW COILLGrowers
Association, pmc chairn]al
of
the United States Feed
muniry Bankers and a member of &e S~vings Associa-
Grains Council,
and has served in numcrom od)er
tion Insumcc
Fund Industry Adviso~ Committee.
Mr. H&lr
is forrncr Vice Chairman of
the Baud of
agri~lcure pOsiEiOns. He W= elecccd co *e
10wa state
Senare in 1998 and represents District 8. Board com-
Directors of the Federd Home Loan Bank of Dgs Moiues,
mittea: Chairmm of the Flrsc Federal Trust ComInit-
former Chaicman
of
the
Iowa L=gu.
of Savings
cee and member of the Audit-CompemationlPersonuel
Inscicucions,.md a for[ner diiector of the U.S. League of
COll]micree.
Savi,,gs
Institutions.
Bo=d committee
First Federal
Trust Committee.
Jmes
S. HAI
is the father ofJ. Tyler
H&r.
G. Mark
Directors for Fmsc Midwest Finmcid,
~l~son
— Member of
the Board of
Inc., First Federd
Savings Bmk of the M,dwmt, and Securi~ S[.[. Bank.
J. Tyler HA
— Senior Vice President, Sec~etacy and
Mr. Mlckelsoxl
is VICC President of AcquKlcions
for
Chief Opera[ing Officer
for F,rst Midw=c
Fina,lcial,
Northwestern
Growth Corporation
in Sioux
Falls,
Inc.;
Executive
Vice
President,
Secretary,
Chief
South Dakota. Northwestern Growth Corpomtion
is
Operating Officer,
and Divklon
Praident
for First
the unregulated tivestmcnt
subsidii~
of Northwestern
Federd Savin~ Bank of the Midwmq Chief
fiecutive
Public Semite. Mr. Mickclson
graduated with h,gh
Oficer
of Security Stare Bank ad TIC. Praident
and
honors
from Harvad hw School
and is a Certified
Secrerq
of First Sewicm Fin~lciaf
Ltited.
First
Public Accountant.
Board commitce~
First Feded
Midwest u]d its affiliates have employed Mr. Hti
Au&t-ColnpensationlPemonnel
Commitcce
and Stock
since March 1997.
Previously Mr. HadIr was a partner
Option Committee.
with the law firm of Lewis and Rocz LLR Phoenix,
Arizona.
Board
committe~
First
Federal
Trust
Rodney G. Muilenburg — Member of the Bead of
Committee.
J. Tyler Haahr is the son ofJan]~ S. HA.
Directors for Fiic ~ldwmr Financial,
Inc., First Fcderd
Savings Bank of the Midwest, and Security State B.*
E. Wayne
~ol~
— Member
of &e Board of
Mr. Muilcnburg is employed as a dtiry specialist with
Directors for First Midwmt Financial,
Inc., First Federal
Purina Mdk,
Inc. and supervisw the sde of agricukurd
Savin& Bank of dlc Midwest, and Security State Bmk.
products
in a region encomp%sing
northwest
lo}va,
Dr. COOIV h= served * F.xccuuve Secret~
of dle Iowa
souchea.srern South Dakota, and souchwesr Minnesota.
Girls’ High School Athletic Union
in Des Moines,
Bo=d
commitrem Chairman
of
the Stock Oprion
Iowa, since 1954. He is Excc”cive Vice Pre.sidc”c of the
Committee
and member of
the Audit-Conlpen.sationf
Iowa High School
Speech &sociatiolt,
a member of
Personnel Committee.
the Buena Vista University Board of Trustees, a men!bc~
of the Dr&e Relays Fxccutive Comn>icrce, and on the
Jeanne
Partlow — Member of the Board of D,recrors
Board of Directors of
the Women’s College Ba,sketbdl
for First Mldwesr Financial,
Inc. Mrs. Pardow retired
Association HafI of Fame. Dr. ~oley
hm served w Chair-
in June
1998 as Pr-ident
of &e Iowa Savings Bmk
man of
the
Iowa Heart Association
and as Vice
Division of First Federal,
located in Des Moines,
Iowa.
Chairmm of he
Iowa Gmes.
Board committe~
She was President,
Chief
Execurive OffIccr
and
Chairn,a
of
the Au&t-Compensation/Pe~sonnel
Commircee
and member
of
the
Stock Option
Chairperson of he Bo~d of Iowa Savings Bmk, F.S.B.,
1995, when Iowa
from 1987 untif che end of Demmbcr
Comnliccee.
Savings Bank w= acquired by and be=lne
a division
of First Federal Savings Bank of
*C Mldwesc. Mrs.
E. Thurman
Gaskifl — Member of
the Board of
Pardow is a past member of the Board of Directors of the
DIrecrors for First Midwest Financial,
Inc., First Federd
Federd Home Lom Bank of Des Moines.
Executive
Officers
J. TYLER HAAHR
Senior Ece Prtn”&t, Stcreta~
and Cbi~fOper~zing ~cmfir
FintMidwest Financii~ Ins.;
Extmtiue Wce fimidmc Semekzq
Chiefoperating Oficm, and
Division Prni&tfir
FiM
FederaiS.uings Bank of the
Midwes% and Chief &mtic
O@cwfir S.mriy State B.nk
J. WINCHELL, CPA
DON&D
Smior Vi’e Presi&g Twasurn
for
and ChiefFinanci21 ~cer
First Midwest Finunti~ InC.
=nd
Fiti Fe&d SavingsBank of tht
Midwext; andSecretaqfir
Sea,n”p Smte Bank
JAMES S. HAAHR
Chairman of th~Board
Presi&nt and Chief&mtivt.
O@cerfor First MidwEst
Finun&l
Inc. ondFira Fehe[
Bank of rhe Midwnt; and
tin~
~m”rman of tht.Boardfi,
Semn”q StateBank
ELLEN E. H. MOO~
Rce Prea”&r, Marktting
and Snbsfir Fiti MiduJot
Fimncial
Inc.; and Senior Elf
fiesidmr Marketin~ axd Sa[a+r
FirstFederal saving Bank
of the MiduJext
TIM D. HARVEY
fisidmtfir
Bank Diukion offirxc Fe&l
Brookinp Federal
Sau~ngsBank of the Midwest
TROY MooRE
Presidentfor Iowa Savi.@ Bank
Divtiion ofFarst Fe&[
Sauinp
Bank oftie Midwest
RICnARD
Pra&tfir
H.
C05.EMAN
St.curityState Bezk
SUSAN C.
Smior Vice PreIidpnt@r
JESSE
Fim Federa[Sauinp Bank of tht
FRED A. STEVENS
$miorEc. b~idmtfir
Fe&al Saving Bank of the
Fint
Midwest
-
M&est
corporate
Information
Corporate Hadqwers
First Mldwmt Fulancid,
Inc
First Feded Building
Ffi
PO. Box 1307
ar Etie
Storln Lake, Iowa 50588
Annd Meeting of Shareholders
The Annti Meeting of Skeholda
,til
convene ar
1 p.m. on Monda}
be held in the Bowd Room of First Feded Savings BA
25, 1999. The meeting will
Jm~
Auditors
J.ndependat
Crowe, Ch~ek and Company LLP
33o ~t
Jderson Boufevmd
I?O. Box 7
South Bend, Indiana 46624
Shar~older
S-i-
and Invesmr Refations
Shzeholders desiring to change the name, addrc.ss,or own-
ertiip of stock; co repon lost certifi=cm OJ co cOmOhdate
accounm, should contact be co~oracion’s uansfer agent
P.egiscm & Tmsfer Con)pany
of the Midwest, Fifth at Erie, Storm M,
Iowa. Further
10 Commerce Drive
co this meeting can be found in
Cranford, New Jcmey 07016
Telephone:
1-800-368-5948
information widl r+
the proxy staten]enc.
Gend
Gunsel
Mack, Hansen, Gadd, Armsrong & Brown, f?C.
Sixd] SUmc
316 &t
f?O. Box 278
Storm me,
Iowa 50588
COunsd
Sped
Silver, Freedman & Tti, LLP
1100 New York Avenue, NW
W~hLngcon, DC 20005-3934
Stock Market
Information
Annuaf Report on Form 1O-K
tiysts,
invesrors, and others seeking a copy of he Form
1O-K or ocher pubfic fwtial
the followin~
information should mnmct
Invaror Relariom
Fmt Midwest Finan&,
Inc.
Fi~t Feded Bti&IIs
Fii
at Efie
PO. Box 1307
Storm Lake, Iowa 50588
712-7324117
Tefephone
.
Fimt Midwest Financiaf, 1...’s mmmon stock uad= on he Nasdaq Nauonal Market under rhe ~mbol “CASH.” The
Wnfl S*et Joamal publishe
in
&e National Market Listing. The ptice range of &e common stock m reported on Ae Nas&q
each qwer
System for
of f~d 1997 and 1998, after giving retroactive effect for&e three-for-two stock splk paid by&e Company
daily trad,ng information for the stock under the abbreviation, “FstMidwFnf,”
in the form of a fifty percent stock dividend on Januw 2, 1997, ~ M fOIlO~.
1997
1998
Dividend Dividend
Paid
Ptid
Fis.A Year I 997
Fiscal Year 1998
Low
High
Low
nigh
Fmt Qumer
............. ................... .......-
Second Quancr ..... .......... ............
Third Qume
Fourth Qmcer
... . .
............ ........ .............-..-.
.................... ................
$.09
$.09
$.09
$.09
$.12
$.12
$.12
$.12
.$15.00
$15.25
$15.00
$16.25
$16.67
$17.88
$18.00
$20.88
$19.50
$21.88
$21.38
$17.13
$22.63
$23.25
$25.25
$24.00
The prim reflect inter-dealer quotations wirhouc retail made-up, mark-down or commissions, and do [lot nec~arily
rcpre5mt acrual transamions.
Dividend paymenr decK1ons are made wi& comideracion of a vmie~ of fictors including =nin%,
finmcial con-
dition, nw.rkcc considerations, and regulatory re.sccictions. Restrictions on dividend payrnen= arc descsibed in Note 14
of&e Not= to Consolidated Fiaancid Statements included in tils Annual Report.
&of
September 30, 1998, Fmt Midwest had 2,553,245
shaes ofcornmon stock outstanding, which were held by
321 shareholdfls of record. The shweholders of record number does not reflect approximately 608 persons or entiti=
who hold d]eir stock in nominee or “street” name.
The follotving securities fmms i.di=ted
they were acting as market mkers
for First Midw=t Fmancia.1, 1...
as of Seprelnbcr 30, 1998: Everen Securities, Inc.; Hemog, Heine, Gcdufd, fnc.; FIowe B~m Inv=unenrs,
Jfiray Compim,
Inc.; Sandlcr ONeill & Mm.m and Tucker hthony
fnmrporaced.
stock
Inc.; Y[per