NEW YORK ( TheStreet) -- First Midwest Bancorp ( FMBI) on Friday made its first acquisition of a failed bank in nearly two years. The Illinois Department of Financial and Professional Regulation shuttered Waukegan Savings Bank, which had been included in TheStreet's Bank Watch List of undercapitalized institutions for more than a year. When it failed, Waukegan Savings Bank had two offices, $88.9 million in total assets and $77.5 million in deposits. The Federal Deposit Insurance Corp. was appointed receiver, and sold the failed bank to First Midwest's main subsidiary, First Midwest Bank, of Itasca, Ill. The failed bank's two branches will reopen during their normal business hours as branches of First Midwest Bank. The FDIC estimated that the cost of Waukegan Savings Bank's failure to the deposit insurance fund would be $19.8 million. First Midwest CEO Michael Scudder said that "with our complementary branch locations, business lines, and community banking values, Waukegan Savings Bank and First Midwest are a great match." First Midwest said that it picked up $63 million in loans as part of its deal with the FDIC. > > Bull or Bear? Vote in Our Poll First Midwest's previous failed bank acquisition was Palos Bank and Trust of Palos Heights, Ill., which failed in August 2010, and had $493 million in assets, with five branches. First Midwest Bancorp had $8.1 billion in total assets as of June 30. The company on July 25 reported second-quarter net income of $6.3 million, or 9 cents a share, down from $8.0 million, or 11 cents a share, a year earlier. Earnings also fell sequentially, from $7.6 million, or 11 cents a share, in the first quarter of 2012. The declines mainly reflected an increase in the company's provision for loan loss reserves to $22.5 million in the second quarter, from $18.2 million in the first quarter and $18.8 million a year earlier. First Midwest has been trying to work through an elevated level of problem loans, and its ratio of nonperforming loans to total loans was 3.9% as of June 30. The year-over-year earnings decline also resulted from a narrowing of the company's net interest margin -- the difference between the average yield on loans and investments and the average cost for deposits and borrowings -- to 3.88% in the second quarter and the first quarter, from 4.10% in the second quarter of 2011, following the trend for many regional banks in the prolonged low-rate environment.