UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
|_| TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transaction period from __________ to __________
Commission File Number: 0-22140
FIRST MIDWEST FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 42-1406262
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Fifth at Erie, Storm Lake, Iowa 50588
(Address of principal executive offices)
(712) 732-4117
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class: Outstanding at May 12, 2003:
Common Stock, $.01 par value 2,493,949 Common Shares
Transitional Small Business Disclosure Format: Yes |_|; No |X|
FIRST MIDWEST FINANCIAL, INC.
FORM 10-Q
INDEX
Page No.
--------
Part I. Financial Information
Item 1. Financial Statements (unaudited):
Consolidated Balance Sheets
at March 31, 2003 and September 30, 2002 3
Consolidated Statements of Income for the Three Months
and Six Months Ended March 31, 2003 and 2002 4
Consolidated Statements of Comprehensive Income (Loss)
for the Three Months and Six Months Ended
March 31, 2003 and 2002 5
Consolidated Statement of Changes in Shareholders'
Equity for the Six Months Ended March 31, 2003 6
Consolidated Statements of Cash Flows for the
Six Months Ended March 31, 2003 and 2002 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosure About Market Risk 18
Item 4. Disclosure Controls and Procedures 20
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
Certifications 24
2
Part I. Financial Information
Item 1. Financial Statements
FIRST MIDWEST FINANCIAL, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
March 31, 2003 September 30, 2002
-------------- ------------------
Assets
Cash and due from banks $ 1,319,165 $ 1,325,139
Interest-bearing deposits in other financial institutions -
short-term (cost approximates market value) 20,981,110 6,051,295
------------- -------------
Total cash and cash equivalents 22,300,275 7,376,434
Securities available for sale, amortized cost of
$333,364,069 at March 31, 2003 and $217,460,796
at September 30, 2002 333,440,820 218,247,310
Loans held for sale 1,460,236 1,254,962
Loans receivable - net of allowance for loan losses of
$4,899,036 at March 31, 2003 and $4,692,988 at
September 30, 2002 338,804,181 341,937,408
Foreclosed real estate, net 1,629,037 1,327,802
Accrued interest receivable 3,983,236 4,320,514
Federal Home Loan Bank stock, at cost 10,004,800 6,842,600
Premises and equipment, net 11,313,956 11,054,243
Other assets 16,418,751 15,287,187
------------- -------------
Total Assets $ 739,355,292 $ 607,648,460
============= =============
Liabilities and Shareholders' Equity
Liabilities
Deposits $ 409,376,152 $ 355,779,753
Advances from Federal Home Loan Bank 180,695,130 125,089,999
Securities sold under agreements to repurchase 91,618,703 70,176,228
Company Obligated Mandatorily Redeemable Preferred Securities
of Subsidiary Trust Holding Solely Subordinated Debentures 10,000,000 10,000,000
Advances from borrowers for taxes and insurance 354,954 355,884
Accrued interest payable 540,983 671,033
Other liabilities 1,473,546 987,797
------------- -------------
Total Liabilities 694,059,468 563,060,694
------------- -------------
Shareholders' Equity
Preferred stock, 800,000 shares authorized, no shares
issued or outstanding -- --
Common stock, $.01 par value, 5,200,000 shares authorized,
2,957,999 shares issued and 2,493,949 shares outstanding
at March 31, 2003; 2,957,999 shares issued and
2,468,804 shares outstanding at September 30, 2002 29,580 29,580
Additional paid-in capital 20,496,202 20,593,768
Retained earnings - substantially restricted 33,054,932 31,940,648
Accumulated other comprehensive income 49,173 494,834
Unearned Employee Stock Ownership Plan shares (169,100) (46,142)
Treasury stock, 464,050 and 489,195 common shares, at cost,
at March 31, 2003 and September 30, 2002, respectively (8,164,963) (8,424,922)
------------- -------------
Total Shareholders' Equity 45,295,824 44,587,766
------------- -------------
Total Liabilities and Shareholders' Equity $ 739,355,292 $ 607,648,460
============= =============
The accompanying notes are an integral part of these consolidated financial
statements.
3
FIRST MIDWEST FINANCIAL, INC.
AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
2003 2002 2003 2002
------------ ------------ ------------ ------------
Interest and Dividend Income:
Loans receivable, including fees $ 5,982,126 $ 6,283,460 $ 12,275,762 $ 12,869,786
Securities available for sale 2,973,549 2,299,163 5,578,546 4,633,413
Dividends on Federal Home Loan Bank stock 46,008 51,265 100,124 121,487
------------ ------------ ------------ ------------
Total interest and dividend income 9,001,683 8,633,888 17,954,432 17,624,686
Interest Expense:
Deposits 2,621,701 3,404,532 5,422,568 7,208,537
FHLB advances and other borrowings 2,233,038 2,024,664 4,459,355 4,148,694
------------ ------------ ------------ ------------
Total interest expense 4,854,739 5,429,196 9,881,923 11,357,231
------------ ------------ ------------ ------------
Net interest income 4,146,944 3,204,692 8,072,509 6,267,455
Provision for loan losses 108,000 136,000 283,000 435,000
------------ ------------ ------------ ------------
Net interest income after provision for loan losses 4,038,944 3,068,692 7,789,509 5,832,455
Noninterest income:
Deposit service charges and other fees 299,399 253,819 611,863 549,971
Loan fees on sold loans 224,335 126,252 510,184 334,739
Gain on sales of securities available for sale, net 6,530 32,552 196,390 39,431
Gain (loss) on sales of foreclosed real estate, net 1,970 (8,102) (580) (9,806)
Brokerage commissions 26,208 43,507 44,273 119,163
Other income 334,044 193,544 543,694 386,239
------------ ------------ ------------ ------------
Total noninterest income 892,486 641,572 1,905,824 1,419,737
Noninterest expense:
Employee compensation and benefits 2,023,322 1,919,380 4,119,773 3,770,787
Occupancy and equipment expense 590,127 488,959 1,086,936 943,426
Federal deposit insurance premium 14,929 15,273 30,303 31,054
Data processing expense 165,984 139,712 307,036 279,457
Prepayment fee on FHLB advances 274,398 -- 500,674 --
Other expense 496,381 463,324 1,035,615 938,169
------------ ------------ ------------ ------------
Total noninterest expense 3,565,141 3,026,648 7,080,337 5,962,893
------------ ------------ ------------ ------------
Income before income taxes 1,366,289 683,616 2,614,996 1,289,299
Income tax expense 451,103 235,493 855,555 404,391
------------ ------------ ------------ ------------
Net income $ 915,186 $ 448,123 $ 1,759,441 $ 884,908
============ ============ ============ ============
Earnings per common share:
Basic $ 0.37 $ 0.18 $ 0.71 $ 0.36
------------ ------------ ------------ ------------
Diluted $ 0.37 $ 0.18 $ 0.71 $ 0.36
------------ ------------ ------------ ------------
The accompanying notes are an integral part of these consolidated financial
statements.
4
FIRST MIDWEST FINANCIAL, INC.
AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
2003 2002 2003 2002
----------- ----------- ----------- -----------
Net income $ 915,186 $ 448,123 $ 1,759,441 $ 884,908
Other comprehensive income (loss):
Net change in net unrealized gains and losses on
securities available for sale (99,571) (1,277,492) (709,763) (2,325,430)
Deferred income tax benefit (37,052) (475,354) (264,102) (863,054)
----------- ----------- ----------- -----------
Total other comprehensive loss (62,519) (802,138) (445,661) (1,462,376)
----------- ----------- ----------- -----------
Total comprehensive income (loss) $ 852,667 $ (354,015) $ 1,313,780 $ (577,468)
=========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
5
FIRST MIDWEST FINANCIAL, INC.
AND SUBSIDIARIES
Consolidated Statement of Changes in Shareholders' Equity (Unaudited)
For the Six Months Ended March 31, 2003
Accumulated Unearned
Other Employee
Additional Comprehensive Stock
Common Paid-In Retained Income (Loss), Ownership Treasury
Stock Capital Earnings Net of Tax Plan Shares Stock
------------ ------------ ------------ ------------ ------------ ------------
Balance at September 30, 2002 $ 29,580 $ 20,593,768 $ 31,940,648 $ 494,834 $ (46,142) $ (8,424,922)
Cash dividends declared on common
stock ($0.26 per share) -- -- (645,157) -- -- --
Purchase of 10,147 shares of treasury
stock -- -- -- -- -- (165,092)
Purchase of 19,574 common shares
for ESOP -- -- -- -- (311,934) --
12,402 common shares committed to be
released under the ESOP -- 4,656 -- -- 188,976 --
Issuance of 35,292 common shares from
treasury stock due to exercise of stock
options -- (189,770) -- -- -- 425,051
Tax benefit from exercise of stock options -- 87,548 -- -- -- --
Net change in net unrealized losses on
securities available for sale, net of
effect of income taxes of $(264,102) -- -- -- (445,661) -- --
Net income for the six months ended
March 31, 2003 -- -- 1,759,441 -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Balance at March 31, 2003 $ 29,580 $ 20,496,202 $ 33,054,932 $ 49,173 $ (169,100) $ (8,164,963)
============ ============ ============ ============ ============ ============
Total
Shareholders'
Equity
------------
Balance at September 30, 2002 $ 44,587,766
Cash dividends declared on common
stock ($0.26 per share) (645,157)
Purchase of 10,147 shares of treasury
stock (165,092)
Purchase of 19,574 common shares
for ESOP (311,934)
12,402 common shares committed to be
released under the ESOP 193,632
Issuance of 35,292 common shares from
treasury stock due to exercise of stock
options 235,281
Tax benefit from exercise of stock options 87,548
Net change in net unrealized losses on
securities available for sale, net of
effect of income taxes of $(264,102) (445,661)
Net income for the six months ended
March 31, 2003 1,759,441
------------
Balance at March 31, 2003 $ 45,295,824
============
The accompanying notes are an integral part of these consolidated financial
statements.
6
FIRST MIDWEST FINANCIAL, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended March 31,
2003 2002
------------- -------------
Cash flows from operating activities:
Net income $ 1,759,441 $ 884,908
Adjustments to reconcile net income to net cash from operating activities:
Depreciation, amoritization and accretion, net 2,315,133 798,847
Provision for loan losses 283,000 435,000
(Gain)/loss on sales of foreclosed real estate, net 580 9,806
(Gain)/loss on sales of securities available for sale, net (196,390) (39,431)
(Gain)/loss on sales of office property, net (134,700) --
Loss on early extinguishment of FHLB advances 500,674 --
Proceeds from sales of loans held for sale 43,062,897 16,547,407
Originations of loans held for sale (43,268,171) (16,547,407)
Net change in accrued interest receivable 337,278 723,564
Net change in other assets (867,461) (333,122)
Net change in accrued interest payable (130,050) (129,871)
Net change in accrued expenses and other liabilities 485,748 132,047
------------- -------------
Net cash from operating activities 4,147,979 2,481,748
Cash flows from investing activities:
Purchase of securities available for sale (215,306,727) (60,484,078)
Proceeds from sale of securities available for sale 20,648,999 1,391,023
Proceeds from maturities and principal repayments of
securities available for sale 77,223,576 18,213,576
Net change in loans receivable 14,783,213 11,773,893
Loans purchased (12,280,134) (15,015,994)
Proceeds from sales of foreclosed real estate 84,032 174,144
Proceeds from sales of office building 197,169 --
Purchase of shares by ESOP (311,934) --
Purchase of FHLB stock (3,162,200) (443,700)
Purchase of premises and equipment, net (755,113) (509,494)
------------- -------------
Net cash from investing activities (118,879,119) (44,900,630)
Cash flows from financing activities:
Net change in noninterest-bearing demand, savings, NOW, and
money market demand deposits 26,551,166 9,384,074
Net change in other time deposits 27,045,233 10,716,925
Proceeds from advances from Federal Home Loan Bank 369,550,000 155,420,000
Repayments of advances from Federal Home Loan Bank (314,445,543) (167,343,221)
Net change in securities sold under agreements to repurchase 21,442,475 36,336,830
Net change in advances from borrowers for taxes and insurance (930) (297,124)
Cash dividends paid (645,157) (641,307)
Proceeds from the exercise of stock options 322,829 195,088
Purchase of treasury stock (165,092) (622,216)
------------- -------------
Net cash from financing activities 129,654,981 43,149,049
------------- -------------
Net change in cash and cash equivalents 14,923,841 730,167
Cash and cash equivalents at beginning of period 7,376,434 8,766,305
------------- -------------
Cash and cash equivalents at end of period $ 22,300,275 $ 9,496,472
============= =============
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 10,011,973 $ 11,487,102
Income taxes 731,688 229,768
Supplemental schedule of non-cash investing and financing activities:
Loans transferred to foreclosed real estate $ 385,846 $ 305,477
The accompanying notes are an integral part of these consolidated financial
statements.
7
FIRST MIDWEST FINANCIAL, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies followed by First Midwest Financial, Inc. ("First
Midwest" or the "Company") and its consolidated subsidiaries, First
Federal Savings Bank of the Midwest ("First Federal"), Security State Bank
("Security"), First Services Trust Company, First Services Financial
Limited and Brookings Service Corporation, for interim reporting are
consistent with the accounting policies followed for annual financial
reporting. All adjustments that, in the opinion of management, are
necessary for a fair presentation of the results for the periods reported
have been included in the accompanying unaudited consolidated financial
statements, and all such adjustments are of a normal recurring nature. The
accompanying financial statements do not purport to contain all the
necessary financial disclosures required by generally accepted accounting
principles that might otherwise be necessary in the circumstances and
should be read in conjunction with the Company's consolidated financial
statements, and notes thereto, for the year ended September 30, 2002.
2. EARNINGS PER SHARE
Basic earnings per share is based on net income divided by the weighted
average number of shares outstanding during the period. Diluted earnings
per share shows the dilutive effect of additional common shares issuable
under stock options.
A reconciliation of the numerators and denominators used in the basic
earnings per common share and the diluted earnings per common share
computations for the three months and six months ended March 31, 2003 and
2002 is presented below.
Three Months Ended Six Months Ended
March 31, March 31,
--------- ---------
2003 2002 2003 2002
---- ---- ---- ----
Basic Earnings Per Common Share:
Numerator:
Net Income $ 915,186 $ 448,123 $ 1,759,441 $ 884,908
=========== =========== =========== ===========
Denominator:
Weighted average common
shares outstanding 2,483,715 2,456,872 2,476,178 2,461,809
Less: Weighted average
unallocated ESOP shares (11,193) (10,000) (7,601) (11,895)
----------- ----------- ----------- -----------
Weighted average common
shares outstanding for
basic earnings per share 2,472,522 2,446,872 2,468,577 2,449,914
=========== =========== =========== ===========
Basic earnings per common share $ 0.37 $ 0.18 $ 0.71 $ 0.36
=========== =========== =========== ===========
8
Three Months Ended Six Months Ended
March 31, March 31,
--------- ---------
2003 2002 2003 2002
---- ---- ---- ----
Diluted Earnings Per Common
Share:
Numerator:
Net Income $ 915,186 $ 448,123 $ 1,759,441 $ 884,908
=========== =========== =========== ===========
Denominator:
Weighted average common
shares outstanding for basic
earnings per common share 2,472,522 2,446,872 2,468,577 2,449,914
Add: Dilutive effects of
assumed exercise of stock
options, net of tax benefits 27,692 38,556 27,056 38,909
----------- ----------- ----------- -----------
Weighted average common and
dilutive potential common
shares outstanding 2,500,214 2,485,428 2,495,633 2,488,823
=========== =========== =========== ===========
Diluted earnings per common share $ 0.37 $ 0.18 $ 0.71 $ 0.36
=========== =========== =========== ===========
3. COMMITMENTS
At March 31, 2003 and September 30, 2002, the Company had outstanding
commitments to originate and purchase loans totaling $45.2 million and
$35.6 million, respectively, excluding undisbursed portions of loans in
process. It is expected that outstanding loan commitments will be funded
with existing liquid assets.
4. INTANGIBLE ASSETS
As of March 31, 2003 and September 30, 2002 the Company had intangible
assets of $3,403,019, all of which has been determined to be goodwill.
There was no goodwill impairment loss or amortization related to goodwill
during the three-month periods ended March 31, 2003 and 2002.
5. CURRENT ACCOUNTING DEVELOPMENTS
In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46 ("FIN 46)", "Consolidated Variable Interest
Entities." The objective of this Interpretation is to provide guidance on
how to identify a variable interest entity and determine when the assets,
liabilities, non-controlling interests, and results of operations of a
variable interest in an entity need to be included in a company's
consolidated financial statements. A company that holds variable interests
in an entity will need to consolidate the entity if the company's interest
in the variable interest entity is such that the company will absorb a
majority of the variable interest entity's losses and/or receive a
majority of the entity's expected residual returns, if they occur. FIN 46
also requires additional disclosures by primary beneficiaries and other
significant variable interest holders. The provisions of this
interpretation are effective upon issuance. The Company does not expect
the provisions of FIN 46 to have material impact on its financial position
or results of operations.
In December 2002, the FASB issued SFAS No, 148, "Accounting for
Stock-Based Compensation - Transition and Disclosures - an amendment of
SFAS 123" ("SFAS 148"). SFAS 148 permits two
9
additional transition methods for entities that adopt the fair value based
method of accounting for stock-based employee compensation. The disclosure
provisions of this Statement are effective for this quarter ended March
31, 2003 and are included herein. The Company does not currently use the
provisions of Statement No. 123 and therefore SFAS No. 148 does not effect
the Company's financial position or results of operations.
In April 2003, the FASB issued Statement No. 149, "Amendment of Statement
No. 133, Accounting for Derivative Instruments and Hedging Activities."
This statement clarifies the definition of a derivative and incorporates
certain decisions made by the Board as part of the Derivatives
Implementation Group process. This statement is effective for contracts
entered into or modified, and for hedging relationships designated after
June 30, 2003 and should be applied prospectively. Adoption of this
standard is not expected to have a significant impact on the Corporation's
financial condition or results of operations.
6. STOCK OPTION PLAN
FASB Statement No. 123, Accounting for Stock-Based Compensation,
establishes a fair value based method for financial accounting and
reporting for stock-based employee compensation plans and for transactions
in which an entity issues its equity instruments to acquire goods and
services from nonemployees. However, the standard allows compensation to
continue to be measured by using the intrinsic value based method of
accounting prescribed by APB No. 25, Accounting for Stock Issued to
Employees, but requires expanded disclosures. The Company has elected to
apply the intrinsic value based method of accounting for stock options
issued to employees. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the Company
stock at the date of grant over the amount an employee must pay to acquire
the stock.
Had compensation cost for the Plan been determined based on the grant date
fair values of awards (the method described in FASB Statement No. 123),
the approximate reported income and earnings per common share would have
bee decreased to the pro forma amounts shown below:
Three Months Ended Six Months Ended
March 31, March 31,
--------- ---------
2003 2002 2003 2002
---- ---- ---- ----
Net income, as reported $ 915,186 $ 448,123 $ 1,759,442 $ 884,908
Deduct: Total stock-based
employee compensation expense
determined under fair value
based method for all awards,
net of related tax effects (3,281) (3,738) (6,561) (7,477)
----------- ----------- ----------- -----------
Pro forma net income $ 911,905 $ 444,385 $ 1,752,881 $ 877,431
=========== =========== =========== ===========
Earnings per common share - basic:
As reported $ .37 $ .18 $ .71 $ .36
Pro forma $ .37 $ .18 $ .71 $ .36
Earnings per common share - diluted:
As reported $ .37 $ .18 $ .71 $ .36
Pro forma $ .36 $ .18 $ .70 $ .35
10
Part I. Financial Information
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
FIRST MIDWEST FINANCIAL, INC.
AND SUBSIDIARIES
GENERAL
First Midwest Financial, Inc. ("First Midwest" or the "Company") is a bank
holding company whose primary assets are First Federal Savings Bank of the
Midwest ("First Federal") and Security State Bank ("Security"). The Company was
incorporated in 1993 as a unitary non-diversified savings and loan holding
company and, on September 20, 1993, acquired all of the capital stock of First
Federal in connection with First Federal's conversion from mutual to stock form
of ownership. On September 30, 1996, the Company became a bank holding company
in conjunction with the acquisition of Security.
The following discussion focuses on the consolidated financial condition of the
Company and its subsidiaries, at March 31, 2003, compared to September 30, 2002,
and the consolidated results of operations for the three months and six months
ended March 31, 2003, compared to the same periods in 2002. This discussion
should be read in conjunction with the Company's consolidated financial
statements, and notes thereto, for the year ended September 30, 2002.
FINANCIAL CONDITION
Total assets increased by $131.8 million, or 21.7%, to $739.4 million at March
31, 2003, from $607.6 million at September 30, 2002. As described below, the
increase was due primarily to increases in total cash and cash equivalents and
securities available for sale.
Total cash and cash equivalents increased by $14.9 million, rising to $22.3
million at March 31, 2003 from $7.4 million at September 30, 2002. The increase
was almost entirely due to an increase in interest-bearing deposits in other
financial institutions.
The portfolio of securities available for sale increased $115.2 million, or
52.8%, to $333.4 million at March 31, 2003, from $218.2 million at September 30,
2002. The increase reflects the purchase of mortgage-backed securities,
primarily with balloon maturities, which have relatively short expected average
lives and limited maturity extension.
The increases in cash and cash equivalents and securities available for sale
were funded primarily by increases in deposits, advances from the Federal Home
Loan Bank of Des Moines (FHLB), and securities sold under agreements to
repurchase.
The portfolio of net loans receivable decreased by $3.1 million, or 0.90%, to
$338.8 million at March 31, 2003, from $341.9 million at September 30, 2002. The
decrease reflects a reduction in conventional one to four family residential
mortgage loans as existing originated and purchased loans were repaid in amounts
greater than new originations retained in portfolio during the period. The
decrease was partially offset by the increased origination of commercial and
multi-family real estate loans on existing and newly constructed properties and
by the increased origination of commercial business loans.
Deposit balances increased by $53.6 million, or 15.1%, to $409.4 million at
March 31, 2003, from $355.8 million at September 30, 2002. The increase in
deposit balances resulted from increases in checking
11
accounts, money market demand accounts, savings accounts and certificates of
deposit in the amounts of $8.6 million, $15.9 million, $2.1 million, and $27.0
million, respectively.
The balance in advances from the FHLB increased by $55.6 million, or 44.4%, to
$180.7 million at March 31, 2003, from $125.1 million at September 30, 2002. The
balance in securities sold under agreements to repurchase increased by $21.4
million, or 30.5%, to $91.6 million at March 31, 2003, from $70.2 million at
September 30, 2002. The increases in FHLB advances and securities sold under
agreements to repurchase were used to fund balance sheet growth during the
period.
Total shareholders' equity increased $700,000, or 1.6%, to $45.3 million at
March 31, 2003, from $44.6 million at September 30, 2002. The increase in
shareholders' equity reflects earnings during the period, which were partially
offset by the payment of a cash dividend to shareholders and a decrease in
unrealized gain on securities available for sale in accordance with SFAS 115.
NON-PERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES
Generally, when a loan becomes delinquent 90 days or more, or when the
collection of principal or interest becomes doubtful, the Company will place the
loan on non-accrual status and, as a result of this action, previously accrued
interest income on the loan is taken out of current income. The loan will remain
on non-accrual status until the loan has been brought current, or until other
circumstances occur that provide adequate assurance of full repayment of
interest and principal.
At March 31, 2003, the Company had loans delinquent 30 days and over totaling
$2.9 million, or 0.8% of total loans compared to $6.7 million, or 1.9% of total
loans at September 30, 2002. The decrease is due primarily to three commercial
and multi-family real estate loans totaling $3.5 million that were brought
current during the period.
At March 31, 2003, commercial and multi-family real estate loans delinquent 30
days and over totaled $417,000, or 0.1% of the total loan portfolio as compared
to $3.9 million, or 1.1% of total loans at September 30, 2002. Multi-family and
commercial real estate loans generally present a higher level of risk than loans
secured by one- to four-family residences. This greater risk is due to several
factors, including the concentration of principal in a limited number of loans
and borrowers, the effect of general economic conditions on income producing
properties and the increased difficulty of evaluating and monitoring these types
of loans. These loans are being closely monitored by management, however, there
can be no assurance that all loans will be fully collectible.
At March 31, 2003, agricultural operating loans delinquent 30 days and over
totaled $1.5 million, or 0.4% of the total loan portfolio as compared to $1.5
million, or 0.4% of total loans at September 30, 2002. Agricultural lending
involves a greater degree of risk than one- to four-family residential mortgage
loans because of the typically larger loan amounts. In addition, payments on
loans are dependent on the successful operation or management of the farm
property securing the loan or for which an operating loan is utilized. The
success of the loan may also be affected by factors outside the control of the
agricultural borrower, such as the weather and grain and livestock prices.
Although management believes the Company's portfolio of agricultural real estate
and operating loans is well structured and adequately secured, there can be no
assurance that all loans will be fully collectible.
The table below sets forth the amounts and categories of non-performing assets
in the Company's loan portfolio. The Company's restructured loans (which
involved forgiving a portion of the interest or principal on the loan or making
loans at a rate materially less than market rates) are included in the table and
were performing as agreed at the date shown. Foreclosed assets include assets
acquired in settlement of loans.
12
March 31, 2003 September 30, 2002
-------------- ------------------
(Dollars in Thousands)
Non-accruing loans:
One-to four family $ 156 $ 51
Commercial and multi-family 417 417
Agricultural real estate -- 41
Consumer 75 --
Agricultural operating 294 394
Commercial business 195 408
------ ------
Total non-accruing loans 1,137 1,311
Accruing loans delinquent 90 days or more 804 819
------ ------
Total non-performing loans 1,941 2,130
------ ------
Restructured loans:
Consumer -- --
Agricultural operating 43 9
Commercial business 33 71
------ ------
Total restructured loans 76 80
------ ------
Foreclosed assets:
One-to four family 213 --
Commercial real estate 1,209 1,310
Consumer 7 18
Agricultural operating 7 --
Commercial business 193 --
------ ------
Total foreclosed assets 1,629 1,328
Less: Allowance for losses -- --
------ ------
Total foreclosed assets, net 1,629 1,328
------ ------
Total non-performing assets $3,646 $3,538
====== ======
Total as a percentage of total assets 0.49% 0.58%
====== ======
Classified Assets. Federal regulations provide for the classification of loans
and other assets as "substandard", "doubtful" or "loss", based on the level of
weakness determined to be inherent in the collection of the principal and
interest. When loans are classified as either substandard or doubtful, the
Company may establish general allowances for loan losses in an amount deemed
prudent by management. General allowances represent loss allowances which have
been established to recognize the inherent risk associated with lending
activities, but which, unlike specific allowances, have not been allocated to
particular problem loans. When assets are classified as loss, the Company is
required either to establish a specific allowance for loan losses equal to 100%
of that portion of the loan so classified, or to charge-off such amount. The
Company's determination as to the classification of its loans and the amount of
its valuation allowances are subject to review by its regulatory authorities,
whom may require the establishment of additional general or specific loss
allowances.
On the basis of management's review of its loans and other assets, at March 31,
2003, the Company had classified a total of $12.9 million of its assets as
substandard, $69,000 as doubtful and none as loss as compared to classifications
at September 30, 2002 of $13.5 million substandard, $114,000 doubtful and none
as loss.
13
Allowance for Loan Losses. The Company establishes its provision for loan
losses, and evaluates the adequacy of its allowance for loan losses based upon a
systematic methodology consisting of a number of factors including, among
others, historic loss experience, the overall level of non-performing loans, the
composition of its loan portfolio and the general economic environment within
which the Bank and its borrowers operate.
Current economic conditions in the agricultural sector of the Company's market
area are stable due to generally higher commodity prices. Price levels for grain
crops and livestock have improved in recent months and are currently at levels
that present minimal concern. The agricultural economy is accustomed to
commodity price fluctuations and is generally able to handle such fluctuations
without significant problem. Although the Company underwrites its agricultural
loans based on normal expectations for commodity prices and yields, an extended
period of low commodity prices or adverse growing conditions could result in
weakness in the agricultural loan portfolio and could create a need for the
Company to increase its allowance for loan losses through increased charges to
the provision for loan losses.
At March 31, 2003, the Company has established an allowance for loan losses
totaling $4.9 million. The allowance represents approximately 252% of the total
non-performing loans at March 31, 2003 as compared to approximately 220% of the
total non-performing loans at September 30, 2002.
The following table sets forth an analysis of the activity in the Company's
allowance for loan losses for the six-month periods ended March 31, 2003 and
2002:
2003 2002
---- ----
(In Thousands)
Balance, September 30, $ 4,693 $ 3,869
Charge-offs (97) (87)
Recoveries 20 32
Additions charged to operations 283 435
------- -------
Balance, March 31, $ 4,899 $ 4,249
======= =======
The allowance for loan losses reflects management's best estimate of probable
losses inherent in the portfolio based on currently available information.
Future additions to the allowance for loan losses may become necessary based
upon changing economic conditions, increased loan balances, changes in the
underlying collateral of the loan portfolio, or regulatory comment.
CRITICAL ACCOUNTING POLICY
The Company's financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America. The financial
information contained within these statements is, to a significant extent,
financial information that is based on approximate measures of the financial
effects of transactions and events that have already occurred. Based on its
consideration of accounting policies that involve the most complex and
subjective decisions and assessments, management has identified its most
critical accounting policy to be that related to the allowance for loan losses.
The Company's allowance for loan loss methodology incorporates a variety of risk
considerations, both quantitative and qualitative in establishing an allowance
for loan loss that management believes is appropriate at each reporting date.
Quantitative factors include the Company's historical loss experience,
delinquency and charge-off trends, collateral values, changes in nonperforming
loans, and other factors. Quantitative factors also incorporate known
information about individual loans, including borrowers' sensitivity to interest
rate movements. Qualitative factors include the general economic environment in
the Company's markets, including economic conditions throughout the Midwest and
in particular, the state of certain industries. Size and
14
complexity of individual credits in relation to loan structure, existing loan
policies and pace of portfolio growth are other qualitative factors that are
considered in the methodology. As the Company adds new products and increases
the complexity of its loan portfolio, it will enhance its methodology
accordingly. Management may report a materially different amount for the
provision for loan losses in the statement of operations to change the allowance
for loan losses if its assessment of the above factors were different. This
discussion and analysis should be read in conjunction with the Company's
financial statements and the accompanying notes presented elsewhere herein, as
well as the portion of this Management's Discussion and Analysis section
entitled "Nonperforming Assets and Allowance for Loan Losses." Although
management believes the levels of the allowance as of both March 31, 2003 and
September 30, 2002 were adequate to absorb losses inherent in the loan
portfolio, a decline in local economic conditions, or other factors, could
result in increasing losses.
RESULTS OF OPERATIONS
General. For the three months ended March 31, 2003, the Company recorded net
income of $915,000 compared to net income of $448,000 for the same period in
2002. For the six months ended March 31, 2003, net income was $1,759,000
compared to $885,000 for the same period in 2002. Both periods reflect increases
in net interest income and noninterest income, a decrease in provision for loan
losses, an increase in noninterest income, offset in part by increases in
noninterest expense and tax expense.
Net Interest Income. Net interest income increased by $942,000, or 29.4%, to
$4,147,000 for the three months ended March 31, 2003 from $3,205,000 for the
same period in 2002. For the six months ended March 31, 2003, net interest
income increased $1,806,000, or 28.8%, to $8,073,000 from $6,267,000 for the
same period in 2002. The increase in net interest income reflects increases in
the average balance of interest-earning assets of $153.2 million and $125.4
million for the three-month and six-month periods, respectively. In addition,
the increase in net interest income reflects an increase in the net yield on
average earning assets between the comparable periods. For the three months
ended March 31, 2003, the net yield on average earning assets was 2.44% compared
to 2.43% for the same period in 2002. For the six months ended March 31, 2003,
the net yield on average earning assets was 2.50% compared to 2.41% for the same
period in 2002.
Provision for Loan Losses. For the three months ended March 31, 2003, the
provision for loan losses was $108,000 compared to $136,000 for the same period
in 2002. For the six months ended March 31, 2003, the provision for loan losses
was $283,000 compared to $435,000 for the same period in 2002. Management
believes that, based on a detail review of the loan portfolio, historic loan
losses, current economic conditions, and other factors, the current level of
provision for loan losses, and the resulting level of the allowance for loan
losses, reflects an adequate allowance against probable losses from the loan
portfolio. See "Non-Performing Assets and Allowance for Loan Losses."
Noninterest Income. Noninterest income increased $250,000, or 38.9%, to $892,000
for the three months ended March 31, 2003 from $642,000 for the same period in
2002. For the six months ended March 31, 2003, noninterest income increased
$486,000, or 34.2%, to $1,906,000 from $1,420,000 for the same period in 2002.
The increase in noninterest income for both periods reflects increases in
service charges collected on deposit accounts and loan fees on sold loans. In
addition, other non-interest income increased for both periods due to a $134,000
gain on the sale of a drive-up branch facility. The increases were partially
offset by a decrease in commissions received through the Company's brokerage
subsidiary.
Noninterest Expense. Noninterest expense increased $538,000, or 17.8%, to
$3,565,000 for the three months ended March 31, 2003, from $3,027,000 for the
same period in 2002. For the six months ended March 31, 2003, noninterest
expense increased $1,117,000, or 18.7%, to $7,080,000 from $5,963,000 for the
same period in 2002. The increase in noninterest expense reflects the costs
associated with opening new offices
15
during the period. In November 2001, the Company opened its third Des Moines,
Iowa, location and in November 2002, the Company opened its newly constructed
facility in Urbandale, Iowa, which serves as the Company's Des Moines area main
office. Noninterest expense also increased by $274,000 and $501,000 during the
three months and six months ended March 31, 2003 due to prepayment penalties
associated with the early extinguishment of FHLB advances, which were repaid in
conjunction with the sale of securities available for sale and early repayments
received on loans.
Income Tax Expense. Income tax expense was $451,000 for the three months ended
March 31, 2003 compared to $235,000 for the same period in 2002. For the six
months ended March 31, 2003, income tax expense was $856,000 compared to
$404,000 for the same period in 2002. The increase for both periods reflects the
increase in the level of taxable income between the comparable periods.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are deposits, borrowings, principal and
interest payments on loans, investments and mortgage-backed securities, and
funds provided by operations. While scheduled payments on loans, mortgage-backed
securities and short-term investments are relatively predictable sources of
funds, deposit flows and early loan repayments are greatly influenced by general
interest rates, economic conditions and competition.
The Company relies on competitive pricing policies, advertising and customer
service to attract and retain its deposits and only solicits these deposits from
its primary market area. Based on its experience, the Company believes that its
passbook savings, money market savings accounts, NOW and regular checking
accounts are relatively stable sources of deposits. The Company's ability to
attract and retain time deposits has been, and will continue to be,
significantly affected by market conditions. However, the Company does not
foresee significant funding issues resulting from disintermediation of its
portfolio of time deposits.
The Company uses its capital resources principally to meet ongoing commitments
to fund maturing certificates of deposits and loan commitments, to maintain
liquidity, and to meet operating expenses. At March 31, 2003, the Company had
commitments to originate and purchase loans totaling $45.2 million. The Company
believes that loan repayment and other sources of funds will be adequate to meet
its foreseeable short- and long-term liquidity needs.
Regulations require First Federal and Security to maintain minimum amounts and
ratios of total risk-based capital and Tier 1 capital to risk-weighted assets,
and a leverage ratio consisting of Tier 1 capital to average assets. The
following table sets forth First Federal's and Security's actual capital and
required capital amounts and ratios at March 31, 2003 which, at that date,
exceeded the capital adequacy requirements:
16
Minimum
Requirement To
Be Well
Minimum Capitalized
Requirement Under Prompt
For Capital Corrective
Adequacy Action
Actual Purposes Provisions
------ -------- ----------
At March 31, 2003 Amount Ratio Amount Ratio Amount Ratio
- ----------------- ------ ----- ------ ----- ------ -----
(Dollars in Thousands)
Total Capital (to risk weighted assets):
First Federal $ 49,822 12.3% $ 32,394 8.0% $ 40,492 10.0%
Security 4,537 15.8 2,303 8.0 2,878 10.0
Tier 1 (Core) Capital (to risk weighted assets):
First Federal 45,185 11.2 16,197 4.0 24,295 6.0
Security 4,217 14.7 1,151 4.0 1,727 6.0
Tier 1 (Core) Capital (to adjusted total assets):
First Federal 45,185 6.7 27,020 4.0 33,774 5.0
Security 4,217 7.1 2,392 4.0 2,990 5.0
Tier 1 (Core) Capital (to average assets):
First Federal 45,185 7.4 24,557 4.0 30,696 5.0
The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA)
established five regulatory capital categories and authorized the banking
regulators to take prompt corrective action with respect to institutions in an
undercapitalized category. At March 31, 2003, First Federal and Security
exceeded minimum requirements for the well-capitalized category, and are
considered to be "well capitalized."
Forward-Looking Statements
The Company, and its wholly-owned subsidiaries, First Federal and Security, may
from time to time make written or oral "forward-looking statements," including
statements contained in its filings with the Securities and Exchange Commission,
in its reports to shareholders, and in other communications by the Company,
which are made in good faith by the Company pursuant to the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements include statements with respect to the
Company's beliefs, expectations, estimates, and intentions, that are subject to
significant risks and uncertainties, and are subject to change based on various
factors, some of which are beyond the Company's control. Such statements address
the following subjects: future operating results; customer growth and retention;
loan and other product demand; earnings growth and expectations; new products
and services; credit quality and adequacy of reserves; technology; and our
employees. The following factors, among others, could cause the Company's
financial performance to differ materially from the expectations, estimates, and
intentions expressed in such forward-looking statements: the strength of the
United States economy in general and the strength of the local economies in
which the Company conducts operations; the effects of, and changes in, trade,
monetary, and fiscal policies and laws, including interest rate policies of the
Federal Reserve Board; inflation, interest rate, market, and monetary
fluctuations; the timely development of and acceptance of new products and
services of the Company and the perceived overall value of these products and
services by users; the impact of changes in financial services' laws and
regulations; technological changes; acquisitions; changes in consumer spending
and saving habits; and the success of the Company at managing the risks involved
in the foregoing.
The foregoing list of factors is not exclusive. Additional discussion of factors
affecting the Company's business and prospects is contained in the Company's
periodic filings with the SEC. The Company does not undertake, and expressly
disclaims any intent or obligation, to update any forward-looking statement,
whether written or oral, that may be made from time to time by or on behalf of
the Company.
17
Part I. Financial Information
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Market Risk
The Company is exposed to the impact of interest rate changes and changes in the
market value of its investments.
The Company currently focuses lending efforts toward originating and purchasing
competitively priced adjustable-rate loan products and fixed-rate loan products
with relatively short terms to maturity. This allows the Company to maintain a
portfolio of loans that will be sensitive to changes in the level of interest
rates while providing a reasonable spread to the cost of liabilities used to
fund the loans.
The Company's primary objective for its investment portfolio is to provide the
liquidity necessary to meet loan funding needs. This portfolio is used in the
ongoing management of changes to the Company's asset/liability mix, while
contributing to profitability through earnings flow. The investment policy
generally calls for funds to be invested among various categories of security
types and maturities based upon the Company's need for liquidity, desire to
achieve a proper balance between risk and yield, the need to provide collateral
for borrowings, and to fulfill the Company's asset/liability management goals.
The Company's cost of funds responds to changes in interest rates due to the
relatively short-term nature of its deposit portfolio. Consequently, the results
of operations are generally influenced by the level of short-term interest
rates. The Company offers a range of maturities on its deposit products at
competitive rates and monitors the maturities on an ongoing basis.
The Company emphasizes and promotes its savings, money market, demand and NOW
accounts and, subject to market conditions, certificates of deposit with
maturities of six months through five years, principally from its primary market
area. The savings and NOW accounts tend to be less susceptible to rapid changes
in interest rates.
In managing its asset/liability mix, the Company, at times, depending on the
relationship between long- and short-term interest rates, market conditions and
consumer preference, may place somewhat greater emphasis on maximizing its net
interest margin than on strictly matching the interest rate sensitivity of its
assets and liabilities. Management believes that the increased net income which
may result from an acceptable mismatch in the actual maturity or repricing of
its asset and liability portfolios can, during periods of declining or stable
interest rates, provide sufficient returns to justify the increased exposure to
sudden and unexpected increases in interest rates which may result from such a
mismatch. The Company has established limits, which may change from time to
time, on the level of acceptable interest rate risk. There can be no assurance,
however, that in the event of an adverse change in interest rates the Company's
efforts to limit interest rate risk will be successful.
Net Portfolio Value The Company uses a Net Portfolio Value ("NPV") approach to
the quantification of interest rate risk. This approach calculates the
difference between the present value of expected cash flows from assets and the
present value of expected cash flows from liabilities, as well as cash flows
from off-balance-sheet contracts. Management of the Company's assets and
liabilities is performed within the context of the marketplace, but also within
limits established by the Board of Directors on the amount of change in NPV that
is acceptable given certain interest rate changes.
Presented below, as of March 31, 2003 and September 30, 2002, is an analysis
of the Company's interest
18
rate risk as measured by changes in NPV for an instantaneous and sustained
parallel shift in the yield curve, in 100 basis point increments, up and down
200 basis points. As illustrated in the table, the Company's NPV at March 31,
2003 and September 30, 2002 was more sensitive to declining interest rates than
to increasing interest rates. This reflects management's effort to manage the
Company's interest rate sensitivity in light of the significant decline in
interest rates during the periods. With interest rates at historically low
levels, management believes there is less risk from interest rates declining
substantially from current levels than from the potential increase in interest
rates. The Company's sensitivity to declining interest rates exceeded the
established limits at March 31, 2003 and September 30, 2002; however, the Board
considers this to be acceptable given the interest rate environment.
At March 31, 2003 At September 30, 2002
----------------- ---------------------
Change in Interest Rates Board Limit
(Basis Points) % Change $ Change % Change $ Change % Change
- -------------- -------- -------- -------- -------- --------
(Dollars in Thousands)
+200 bp (40)% $(1,009) (3)% $ 1,543 4%
+100 bp (25) 434 1 1,898 5
0 bp -- -- -- -- --
-100 bp (10) (1,990) (6) (4,362) (12)
-200 bp (15) (6,217) (17) (8,873) (25)
Certain shortcomings are inherent in the method of analysis presented in the
foregoing table. For example, although certain assets and liabilities may have
similar maturities or periods to repricing, they may react in different degrees
to changes in market interest rates. Also, the interest rates on certain types
of assets and liabilities may fluctuate in advance of changes in market interest
rates, while interest rates on other types may lag behind changes in market
rates. Additionally, certain assets such as adjustable-rate mortgage loans, have
features which restrict changes in interest rates on a short-term basis and over
the life of the asset. Further, in the event of a change in interest rates,
prepayments and early withdrawal levels would likely deviate from those assumed
in calculating the tables. Finally, the ability of some borrowers to service
their debt may decrease in the event of an interest rate increase. The Company
considers all of these factors in monitoring its exposure to interest rate risk.
19
Part I. Financial Information
Item 4. Disclosure Controls and Procedures
Disclosure Controls and Procedures
With the participation and under the supervision of the Company's management,
including the Company's Chief Executive Officer and Chief Financial Officer, and
within 90 days of the filing date of this quarterly report, the Company's Chief
Executive Officer and Chief Financial Officer have evaluated the effectiveness
of the design and operation of the Company's disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14(c) and 15(d)-14(c)) and, based on their
evaluation, have concluded that the disclosure controls and procedures are
effective. There were no significant changes in the Company's internal controls
or in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective action with regard to
significant deficiencies and material weaknesses.
20
FIRST MIDWEST FINANCIAL, INC.
PART II - OTHER INFORMATION
FORM 10-Q
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders on January 27, 2003.
At the meeting, shareholders of the Company considered and voted upon the
following matters:
1. The election of the following individuals as directors for a
three-year term:
James S. Haahr
G. Mark Mickelson
Jeanne Partlow
The results of the election of directors are as follows:
Votes
-----
In Favor Withheld
-------- --------
James S. Haahr 2,025,563 284,006
G. Mark Mickelson 2,030,966 278,603
Jeanne Partlow 2,033,666 275,903
There were no broker non-votes or abstentions on this proposal.
The following directors' terms of office continued after the meeting:
E. Wayne Cooley
J. Tyler Haahr
E. Thurman Gaskill
Rodney G. Muilenburg
John Thune
2. The approval of the 2002 Omnibus Incentive Plan. The results of the
voting are as follows:
Votes
-----
For 1,251,214
Against 374,667
Abstain 70,400
Broker Non-Votes 613,288
21
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
99.1 Certification of Chief Executive Officer.
99.2 Certification of Chief Financial Officer.
(b) Reports on Form 8-K:
During the three month period ended March 31, 2003, the Registrant
filed a current report on Form 8-K dated January 27, 2003 to report
the issuance of a press release announcing the appointment of former
South Dakota Congressman John Thune to its Board of Directors.
All other items have been omitted as not required or not applicable under the
instructions.
22
FIRST MIDWEST FINANCIAL, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST MIDWEST FINANCIAL, INC.
Date: May 15, 2003 By: /s/ James S. Haahr
-------------------------------------------
James S. Haahr, Chairman of the Board,
President and Chief Executive Officer
Date: May 15, 2003 By: /s/ Donald J. Winchell
-------------------------------------------
Donald J. Winchell, Senior Vice President,
Treasurer and Chief Financial Officer
23
CERTIFICATION
I, James S. Haahr, certify that:
1. I have reviewed this quarterly report on Form 10-Q of First Midwest
Financial, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 15, 2003
/s/ James S. Haahr
------------------
Chief Executive Officer
24
CERTIFICATION
I, Donald J. Winchell, certify that:
1. I have reviewed this quarterly report on Form 10-Q of First Midwest
Financial, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 15, 2003
/s/ Donald J. Winchell
----------------------
Chief Financial Officer
25