SOURCE: First Midwest Bancorp, Inc.

October 24, 2007 06:55 ET

First Midwest Bancorp, Inc. Announces Third Quarter 2007 EPS of $0.55 per Share

Portfolio Positioning and Tax Benefit Recognition Impact Performance

ITASCA, IL--(Marketwire - October 24, 2007) -


Third Quarter Synopsis:

First Midwest Bancorp, Inc. (the "Company" or "First Midwest") (NASDAQ: FMBI), the holding company of First Midwest Bank, today reported results of operations and financial condition for third quarter 2007. First Midwest Chairman and Chief Executive Officer, John M. O'Meara, reported, "Third quarter earnings of $0.55 per fully diluted share were reported by the Company compared to second quarter 2007 earnings of $0.59 and third quarter 2006 earnings of $0.62. Responding to the capital markets turmoil, the Company sold securities amounting to $200 million during September at a pre-tax loss of $5.2 million. Partially offsetting this transaction was the recognition of tax benefits associated with state income tax loss carryforwards of $2.2 million. The net effect of these two items reduced after-tax income by $0.04 per share. Return on average equity amounted to 14.6% compared to second quarter 2007 and third quarter 2006 of 15.5% and 17.1%, respectively. Return on average assets was 1.35% compared with 1.44% for both second quarter 2007 and third quarter 2006."

O'Meara further commented, "Underlying operating performance for the quarter improved from second quarter 2007. Loan portfolio growth improved from second quarter 2007. Net interest margin improved slightly to 3.63%. Asset quality as measured by charge-offs was stronger than any quarter since the second quarter of 2005 at 0.12%. And, the efficiency ratio of 51.9% was an improvement from second quarter 2007."

Balance Sheet Discussion:

The turmoil in the capital markets resulted in premiums being charged in some sectors for access to funding. Responding to this condition, the Company sold certain readily marketable fixed income securities guaranteed by Fannie Mae and Freddie Mac totaling approximately $200 million and used the proceeds to reduce the Company's overnight and other short dated borrowings. The Company recorded a $5.2 million pre-tax loss. These funds may be redeployed into more traditional bank investments in the fourth quarter and beyond as market conditions normalize.

Loans outstanding for third quarter 2007 were up $22 million from June 30, 2007 compared to a decline of $84 million in the second quarter from March 31, 2007. Second quarter prepayment trends were diminished in the third quarter at the same time that growth in real estate commercial and construction portfolios improved. Sales activity was rigorous. Across the Company's commercial middle market, small business, and trust sales platforms over 1,600 new customer relationships were added through the first three quarters of 2007.

Third quarter 2007 average transaction deposit balances increased $58 million from second quarter 2007 due primarily to growth in savings and money market accounts and a seasonal increase in tax deposits. The Company has adjusted the rates it pays on its customer deposits in response to the September cut by the Federal Reserve, while taking into account competition for deposits within the market. In the wholesale funding book, the Company extended FHLB borrowings and issued new term certificates of deposit to further mitigate the necessity to access overnight markets.

Asset Quality Performance:

Loan charge-offs for third quarter 2007 were 0.12% of average loans, which is the lowest level for more than 8 quarters. Consumer loan charge-offs accounted for approximately 0.03% and commercial and real estate loan charge-offs accounted for the balance. Nonperforming assets, including ninety day past due loans, aggregated $38.2 million or 0.77% of loans plus foreclosed real estate, down slightly from 0.78% for second quarter 2007. Loan valuation reserves, as a percentage of total loans, stood at 1.25%, equal to year-end 2006. Review of this reserve has been and will continue to be ongoing. The risk in single-family residential markets is also being carefully monitored.

Margin Performance:

Net interest margin for third quarter 2007 stood at 3.63%, compared with 3.61% for second quarter 2007 and 3.53% for first quarter 2007. The fifty basis point cut in the federal funds rate announced by the Federal Reserve on September 19th came as something of a surprise to sectors of the market. The anticipated future track of this rate is important in terms of changes to consumer savings, transaction and certificate rates. Even lock-stepped movements in rates paid may result in margin compaction due to timing differences. Conversely, credit spreads are being recognized in certain borrowing and securities sectors, which may partially offset this trend.

Efficiency Performance:

The efficiency ratio for third quarter 2007 was 51.9%, compared with 52.1% and 52.2% for the second and first quarters of 2007, respectively. While the Company will maintain its focus on controlling expenses, it intends to expand its revenues from trust services, investment sales, and debit and credit card sales.

Capital Analysis and Projection:

First Midwest's capital position continues to exceed all of the regulatory minimum levels to be considered a "well capitalized institution" by the Federal Reserve System. As of September 30, 2007, First Midwest's Total Risk Based Capital ratio was 12.2%, compared to 12.5% as of June 30, 2007. Its Tier 1 Risk Based Capital ratio was 9.6%, compared to 9.9% as of June 30, 2007. First Midwest's tangible capital ratio, which represents the ratio of stockholders' equity to total assets excluding intangible assets, stood at 5.8%, unchanged from June 30, 2007. Excluding other comprehensive losses, the tangible capital ratio stood at 6.3%, at both September 30, 2007 and June 30, 2007.

During third quarter 2007, 792,284 shares were repurchased in accordance with the Company's ongoing share repurchase program. Dividends at the rate of $0.295 per share were declared as well. The Company intends for dividend payouts and share repurchases to continue to be features in the Company's capital management plan going forward.

Tax Discussion:

In August, the State of Illinois enacted new legislation that will affect the taxation of banks operating in the state. The legislative provisions have various effective dates, the earliest beginning January 1, 2008. As a result of this legislation, the Company has adjusted its valuation allowance related to Illinois net operating losses. The adjustment resulted in a $1.4 million after-tax benefit to net income in third quarter 2007.

Outlook for Fourth Quarter 2007 and Beyond:

O'Meara commented, "Earnings per share for fourth quarter 2007 should track the operating trends demonstrated in third quarter 2007. Net interest margin should approximate 3.60%, loan growth appears to have new momentum, asset quality is solid, and efficiency is tracking lower. The results will be influenced by, among other factors, the timing and amplitude of federal funds rate movements on the one hand and generation of loans on the other hand. Also influencing this near term performance should be the timing of the redeployment of the securities which were sold in late September.

"All of these trends are expected to have their impact on 2008 performance. We anticipate that a vigorous competitive marketplace with both new and old competitors will influence the outcome. A flexible balance sheet should allow for smooth relevering in more advantageous markets. Asset quality remains a strong boost as we are able to focus most of our attention on sales activities. Finally, our operating efficiency should allow us to bring this activity profitably to the bottom line."

About First Midwest:

First Midwest is the premier relationship-based banking franchise in the growing Chicagoland banking market. As one of the Chicago metropolitan area's largest independent bank holding companies, First Midwest provides the full range of both business and retail banking and trust and investment management services through 103 offices located in 63 communities, primarily in metropolitan Chicago. First Midwest was recently recognized by the Alfred P. Sloan Awards for Business Excellence in Workforce Flexibility in the greater Chicago Area.

Safe Harbor Statement

This press release contains "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not historical facts but instead represent only the Company's beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside of the Company's control. It is possible that actual results and the Company's financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. For a discussion of some of the risks and important factors that could affect the Company's future results, see "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2006 and other reports filed with the Securities and Exchange Commission. Forward-looking statements represent management's best judgment as of the date hereof based on currently available information. Except as required by law, the Company undertakes no duty to update the contents of this press release after the date hereof.

Conference Call

A conference call to discuss the Company's results, outlook and related matters will be held on Wednesday, October 24th, at 10:00 am (ET). Members of the public who would like to listen to the conference call should dial 1-800-510-0219 (U.S. domestic) or 1-617-614-3451 (international) and enter passcode number 67614770. The number should be dialed at least 10 minutes prior to the start of the conference call. The conference call will also be accessible as an audio webcast through the Investor Relations section of the Company's web site, www.firstmidwest.com/aboutinvestor_overview.asp. There is no charge to access the call. For those unable to listen to the live broadcast, a replay will be available on the Company's web site or by dialing 1-888-286-8010 (U.S. domestic) or 1-617-801-6888 (international) passcode number 11968276, beginning approximately one hour after the event through 11:59 pm (ET) on October 31, 2007. Please direct any questions regarding obtaining access to the conference call to First Midwest Bancorp, Inc. Investor Relations, via e-mail, at investor.relations@firstmidwest.com.

Accompanying Financial Statements and Tables

Accompanying this press release is the following unaudited financial information:

-- Operating Highlights, Balance Sheet Highlights and Stock Performance
   Data (1 page)
-- Condensed Consolidated Statements of Condition (1 page)
-- Condensed Consolidated Statements of Income (1 page)
-- Selected Quarterly Data and Asset Quality (1 page)

Press Release and Additional Information Available on Website.

This press release, the accompanying financial statements and tables, and certain additional unaudited Selected Financial Information (totaling 3 pages) are available through the "Investor Relations" section of First Midwest's website at www.firstmidwest.com.


First Midwest Bancorp, Inc.          Press Release Dated October 24, 2007



Operating Highlights
Unaudited                    Quarters Ended            Nine Months Ended
                     ------------------------------   -------------------
(Amounts in
 thousands except    Sept. 30,  June 30,   Sept. 30,  Sept. 30,  Sept. 30,
 per share data)        2007       2007       2006       2007       2006
                     ---------  ---------  ---------  ---------  ---------
Net income           $  27,237  $  29,311  $  31,215  $  85,577  $  85,718
Diluted earnings per
 share               $    0.55  $    0.59  $    0.62  $    1.71  $    1.74
Return on average
 equity                  14.57%     15.47%     17.09%     15.18%     17.05%
Return on average
 assets                   1.35%      1.44%      1.44%      1.40%      1.40%
Net interest margin       3.63%      3.61%      3.69%      3.59%      3.71%
Efficiency ratio         51.87%     52.13%     49.06%     52.06%     50.86%


Balance Sheet Highlights
Unaudited                              Period Ending Balances As Of
                                 -------------------------------------
(Amounts in thousands except
 per share data)                   Sept. 30,     June 30,     Sept. 30,
                                     2007         2007          2006
                                 ------------ ------------ ------------
Total assets                     $  7,884,345 $  8,055,358 $  8,596,864
Total loans                         4,931,472    4,909,858    5,069,554
Total deposits                      5,834,175    5,814,744    6,229,390
Stockholders' equity                  727,928      741,060      745,869
Book value per share             $      14.94 $      14.97 $      14.92
Period end shares outstanding          48,735       49,494       50,001

Stock Performance Data
Unaudited                                     Quarters Ended
                                 --------------------------------------
                                    Sept. 30,     June 30,     Sept. 30,
                                     2007         2007          2006
                                 ------------ ------------ ------------
Market Price:
   Quarter End                   $      34.16 $      35.51 $      37.89
   High                          $      36.62 $      38.17 $      38.89
   Low                           $      31.87 $      34.82 $      34.42
Quarter end price to book value           2.3x         2.4x         2.5x
Quarter end price to consensus
 estimated 2007 earnings                 14.5x        14.9x         N/A
Dividends declared per share     $      0.295 $      0.295 $      0.275
                                 --------------------------------------





First Midwest Bancorp, Inc.          Press Release Dated October 24, 2007



Condensed Consolidated Statements of Condition
Unaudited (1)                                           September 30,
                                                  ------------------------
(Amounts in thousands)                               2007          2006
                                                  -----------  -----------
Assets
Cash and due from banks                           $   182,495  $   182,484
Funds sold and other short-term investments             4,842        9,516
Trading account securities                             17,431       14,069
Securities available for sale                       1,924,357    2,561,962
Securities held to maturity, at amortized cost         92,913       98,745
Loans                                               4,931,472    5,069,554
Reserve for loan losses                               (61,412)     (62,370)
                                                  -----------  -----------

    Net loans                                       4,870,060    5,007,184
                                                  -----------  -----------

Premises, furniture, and equipment                    126,322      122,662
Investment in corporate owned life insurance          201,418      194,632
Goodwill and other intangible assets                  289,341      293,839
Accrued interest receivable and other assets          175,166      111,771
                                                  -----------  -----------

    Total assets                                  $ 7,884,345  $ 8,596,864
                                                  -----------  -----------

Liabilities and Stockholders' Equity
Deposits                                          $ 5,834,175  $ 6,229,390
Borrowed funds                                        998,502    1,295,316
Subordinated debt                                     227,948      228,747
Accrued interest payable and other liabilities         95,792       97,542
                                                  -----------  -----------

     Total liabilities                              7,156,417    7,850,995
                                                  -----------  -----------

Common stock                                              613          613
Additional paid-in capital                            206,951      203,860
Retained earnings                                     865,435      807,039
Accumulated other comprehensive (loss)                (36,385)      (1,674)
Treasury stock, at cost                              (308,686)    (263,969)
                                                  -----------  -----------

     Total stockholders' equity                       727,928      745,869
                                                  -----------  -----------

     Total liabilities and stockholders' equity   $ 7,884,345  $ 8,596,864
                                                  -----------  -----------


(1)  While unaudited, the Condensed Consolidated Statements of Condition
     have been prepared in accordance with U.S. generally accepted
     accounting principles and, as of September 30, 2006, are derived from
     quarterly financial statements on which Ernst & Young LLP, First
     Midwest's independent registered public accounting firm, has rendered
     a Quarterly Review Report; Ernst & Young is currently in the process
     of completing their Quarterly Review Report for the quarter ended
     September 30, 2007.



First Midwest Bancorp, Inc.           Press Release Dated October 24, 2007



Condensed Consolidated
 Statements of Income              Quarters Ended       Nine Months Ended
Unaudited (1)                       September 30,         September 30,
                                --------------------- ---------------------
(Amounts in thousands except
 per share data)                   2007        2006      2007        2006
                                ---------  ---------- ---------  ----------

Interest Income
Loans                           $  93,020  $   93,929 $ 277,372  $  258,756
Securities                         26,885      32,374    84,354      91,833
Other                                 185         134       624         423
                                ---------  ---------- ---------  ----------
  Total interest income           120,090     126,437   362,350     351,012
                                ---------  ---------- ---------  ----------
Interest Expense
Deposits                           41,949      40,335   125,669     105,349
Borrowed funds                     13,680      16,799    43,392      46,869
Subordinated debt                   3,764       3,630    11,258       9,698
                                ---------  ---------- ---------  ----------
  Total interest expense           59,393      60,764   180,319     161,916
                                ---------  ---------- ---------  ----------
  Net interest income              60,697      65,673   182,031     189,096
Provision for loan losses             470       2,715     5,191       6,364
                                ---------  ---------- ---------  ----------
  Net interest income after
   provision for loan losses       60,227      62,958   176,840     182,732
                                ---------  ---------- ---------  ----------
Noninterest Income
Service charges on deposit
 accounts                          11,959      10,971    33,029      29,442
Trust and investment management
 fees                               3,934       3,736    11,640      10,603
Other service charges,
 commissions, and fees              5,601       5,471    16,859      14,773
Card-based fees                     4,054       3,734    11,946      10,065
                                ---------  ---------- ---------  ----------
  Subtotal, fee-based revenues     25,548      23,912    73,474      64,883
                                ---------  ---------- ---------  ----------
Corporate owned life insurance
 income                             2,023       2,206     5,916       5,650
Security (losses) gains, net       (5,165)        509      (760)        898
Other                                 989         364     4,088       2,199
                                ---------  ---------- ---------  ----------
  Total noninterest income         23,395      26,991    82,718      73,630
                                ---------  ---------- ---------  ----------
Noninterest Expense
Salaries and employee benefits     27,354      27,023    83,912      79,694
Net occupancy expense               5,686       5,482    16,574      15,146
Equipment expense                   2,580       2,651     7,796       7,487
Technology and related costs        1,767       1,770     5,324       5,052
Other                              12,594      12,192    35,267      37,441
                                ---------  ---------- ---------  ----------
  Total noninterest expense        49,981      49,118   148,873     144,820
                                ---------  ---------- ---------  ----------
Income before taxes                33,641      40,831   110,685     111,542
Income tax expense                  6,404       9,616    25,108      25,824
                                ---------  ---------- ---------  ----------
  Net Income                    $  27,237  $   31,215 $  85,577  $   85,718
                                ---------  ---------- ---------  ----------
  Diluted Earnings Per Share    $    0.55  $     0.62 $    1.71  $     1.74
                                ---------  ---------- ---------  ----------
  Dividends Declared Per Share  $   0.295  $    0.275 $   0.885  $    0.825
                                ---------  ---------- ---------  ----------
  Weighted Average Diluted
   Shares Outstanding              49,447      50,315    49,915      49,158
                                ---------  ---------- ---------  ----------

(1)   While unaudited, the Condensed Consolidated Statements of Income have
      been prepared in accordance with U.S. generally accepted accounting
      principles and, for the quarter ended September 30, 2006, are derived
      from quarterly financial statements on which Ernst & Young LLP, First
      Midwest's independent registered public accounting firm, has rendered
      a Quarterly Review Report; Ernst & Young is currently in the process
      of completing their Quarterly Review Report for the quarter ended
      September 30, 2007.


First Midwest Bancorp, Inc.            Press Release Dated October 24, 2007

Selected Quarterly Data
Unaudited

(Amounts in
 thousands         Year to Date                 Quarters Ended
 except per     ----------------- ----------------------------------------
 share data)    9/30/07  9/30/06  9/30/07 6/30/07 3/31/07 12/31/06 9/30/06
                -------- -------- ------- ------- ------- -------- -------
Net interest
 income         $182,031 $189,096 $60,697 $60,964 $60,370 $ 62,763 $65,673
Provision for
 loan losses       5,191    6,364     470   1,761   2,960    3,865   2,715
Noninterest
 income           82,718   73,630  23,395  30,623  28,700   29,653  26,991
Noninterest
 expense         148,873  144,820  49,981  50,737  48,155   47,795  49,118
Net income        85,577   85,718  27,237  29,311  29,029   31,528  31,215
Diluted earnings
 per share      $   1.71 $   1.74 $  0.55 $  0.59 $  0.58 $   0.63 $  0.62
Return on
 average equity    15.18%   17.05%  14.57%  15.47%  15.48%   16.40%  17.09%
Return on
 average assets     1.40%    1.40%   1.35%   1.44%   1.42%    1.47%   1.44%
Net interest
 margin             3.59%    3.71%   3.63%   3.61%   3.53%    3.57%   3.69%
Efficiency ratio   52.06%   50.86%  51.87%  52.13%  52.19%   49.56%  49.06%
                -------- -------- ------- ------- ------- -------- -------


Period end shares
 outstanding      48,735   50,001  48,735  49,494  49,747   50,025  50,001
Book value per
 share          $  14.94 $  14.92 $ 14.94 $ 14.97 $ 15.16 $  15.01 $ 14.92
Dividends declared
 per share      $  0.885 $  0.825 $ 0.295 $ 0.295 $ 0.295 $  0.295 $ 0.275
                -------- -------- ------- ------- ------- -------- -------



Asset Quality
Unaudited

(Amounts in        Year to Date                 Quarters Ended
 thousands)     ----------------- ----------------------------------------
                9/30/07  9/30/06  9/30/07 6/30/07 3/31/07 12/31/06 9/30/06
                -------- -------- ------- ------- ------- -------- -------
Nonaccrual
 loans          $ 12,771 $ 17,459 $12,771 $14,927 $17,582 $ 16,209 $17,459
Foreclosed real
 estate            4,032    4,088   4,032   3,683   3,195    2,727   4,088
Loans past due
 90 days and
 still accruing   21,421   11,296  21,421  19,633  15,603   12,810  11,296
                -------- -------- ------- ------- ------- -------- -------

Nonperforming
 loans to loans     0.26%    0.34%   0.26%   0.30%   0.35%    0.32%   0.34%
Nonperforming
 assets to loans
 plus foreclosed
 real estate        0.34%    0.42%   0.34%   0.38%   0.42%    0.38%   0.42%
Nonperforming
 assets plus loans
 past due 90 days
 to loans plus
 foreclosed real
 estate             0.77%    0.65%   0.77%   0.78%   0.73%    0.63%   0.65%
Reserve for loan
 losses to loans    1.25%    1.23%   1.25%   1.27%   1.25%    1.25%   1.23%
Reserve for loan
 losses to
 nonperforming
 loans               481%     357%    481%    418%    355%     385%    357%
                -------- -------- ------- ------- ------- -------- -------

Provision for
 loan losses    $  5,191 $  6,364 $   470 $ 1,761 $ 2,960 $  3,865 $ 2,715
Net loan
 charge-offs       6,149    6,322   1,449   1,770   2,930    3,865   2,704
                -------- -------- ------- ------- ------- -------- -------

Net loan
 charge-offs to
 average loans      0.17%    0.18%   0.12%   0.14%   0.24%    0.30%   0.21%
                -------- -------- ------- ------- ------- -------- -------

Contact Information


  • CONTACT:
    Paul F. Clemens
    EVP, Chief Financial Officer
    (630) 875-7347
    www.firstmidwest.com

    First Midwest Bancorp
    One Pierce Place, Suite 1500
    Itasca, Illinois 60143
    (630) 875-7450