SOURCE: First Midwest Bancorp, Inc.

First Midwest Bancorp, Inc.

July 27, 2011 06:55 ET

First Midwest Bancorp, Inc. Announces 2011 Second Quarter Results

Improved Earnings and Fees, Solid Margin -- Non-Performing Asset Decrease -- Enhanced Capital and Liquidity

ITASCA, IL--(Marketwire - Jul 27, 2011) - First Midwest Bancorp, Inc. (the "Company" or "First Midwest") (NASDAQ: FMBI)

Operating Performance

  • Net income applicable to common shares of $8.1 million, or $0.11 per share, increased 8.6% and 57.5% versus first quarter 2011 and second quarter 2010, respectively.
  • Core operating earnings of $34.3 million, up 9.2% from first quarter 2011 and down 1.2% versus second quarter 2010.
  • Total loans, excluding covered loans, of $5.1 billion, up 1.4% annualized, led by commercial and industrial loan annualized growth of 6.8% from March 31, 2011.
  • Average core transactional deposits of $4.7 billion, up 4.7%, from first quarter 2011 and 10.4% from second quarter 2010.
  • Fee-based revenues of $24.2 million, improved 11.5% and 10.6% from first quarter 2011 and second quarter 2010, respectively.

Credit and Capital

  • Non-performing assets reduced to $222.9 million, down 7.0% linked quarter and 17.3% from December 31, 2010.
  • Non-accrual loans to total loans of 3.47%, improved 19 and 68 basis points from March 31, 2011 and December 31, 2010, respectively.
  • Allowance for credit losses to non-performing loans of 76%, unchanged from March 31, 2011 and increased from 67% at December 31, 2010.
  • Tier 1 common capital to risk-weighted assets of 10.20% as of June 30, 2011, up 23 basis points from 9.97% at March 31, 2011 and up 39 basis points from 9.81% at December 31, 2010.

Today First Midwest Bancorp, Inc. (the "Company" or "First Midwest") (NASDAQ: FMBI), the holding company of First Midwest Bank, reported results of operations and financial condition for second quarter 2011. Net income for the quarter was $10.8 million, before adjustments for preferred dividends and non-vested restricted shares, with net income of $8.1 million, or $0.11 per share, applicable to common shareholders after such adjustments. This compares to net income of $10.2 million and net income applicable to common shareholders of $7.5 million, or $0.10 per share, for first quarter 2011 and net income of $7.8 million and net income applicable to common shareholders of $5.2 million, or $0.07 per share, for second quarter 2010.

Quarters Ended
June 30, March 31, June 30,
2011 2011 2010
Operating Performance (Dollar amounts in thousands)
Net income $ 10,828 $ 10,218 $ 7,809
Net income applicable to common shares $ 8,144 $ 7,497 $ 5,171
Diluted earnings per common share $ 0.11 $ 0.10 $ 0.07
Return on average common equity 3.47 % 3.27 % 2.16 %
Return on average assets 0.53 % 0.51 % 0.40 %
Pre-tax, pre-provision core operating earnings $ 34,324 $ 31,427 $ 34,746
Net interest margin 4.10 % 4.15 % 4.21 %
Efficiency ratio 60.19 % 62.40 % 57.92 %
Loans, including covered loans $ 5,427,853 $ 5,444,989 $ 5,373,271
Loans, excluding covered loans $ 5,112,911 $ 5,095,543 $ 5,208,347
Average core transactional deposits $ 4,742,889 $ 4,527,937 $ 4,297,585
June 30, March 31, December 31,
2011 2011 2010
Credit and Capital (Dollar amounts in thousands)
Non-performing assets, excluding covered loans and covered OREO (1) $ 222,933 $ 239,777 $ 269,466
Non-performing assets, excluding covered loans and covered OREO to loans plus other real estate owned ("OREO") (1) 4.34 % 4.67 % 5.25 %
Non-accrual loans to total loans, excluding covered loans (1) 3.47 % 3.66 % 4.15 %
Allowance for credit losses to non-performing loans, excluding covered loans (1) 76 % 76 % 67 %
Tier 1 common capital to risk-weighted assets 10.20 % 9.97 % 9.81 %
Tangible common equity to tangible assets 8.47 % 8.34 % 8.06 %
(1) Covered loans and covered OREO were acquired through transactions with the Federal Deposit Insurance Corporation ("FDIC") and are subject to loss sharing agreements with the FDIC whereby the Company is indemnified against the majority of any losses incurred related to these assets.

SUMMARY UPDATE

"Our second quarter performance reflects continued improvement on a number of business fronts," said Michael L. Scudder, President and Chief Executive Officer of First Midwest Bancorp, Inc. "Overall earnings increased on the strength of solid margins, enhanced fee revenues, and controlled expenses. Sales activity remains robust, reflecting active lending, growth in lower cost, core deposit funding, and advancement in trust and investment management and card-based lines of business. We continue to make progress in reducing the level of problem credits, having reduced non-performing assets by some 20% since the start of the year."

Mr. Scudder further commented, "With ample liquidity and a strong capital position, we are well positioned to benefit as economic and operating conditions stabilize and demand for credit grows."

OPERATING PERFORMANCE

Pre-Tax, Pre-Provision Core Operating Earnings (1)
(Dollar amounts in thousands)
Quarters Ended
June 30, March 31, June 30,
2011 2011 2010
Income before income tax $ 13,669 $ 10,248 $ 7,948
Provision for loan losses 18,763 19,492 21,526
Pre-tax, pre-provision earnings 32,432 29,740 29,474
Non-Operating Items
Securities gains, net 1,531 540 1,121
Gain on Federal Deposit Insurance Corporation ("FDIC")-assisted transaction - - 4,303
Losses on sales and write-downs of OREO (3,423 ) (2,227 ) (8,924 )
Integration costs associated with FDIC-assisted transactions - - (1,772 )
Total non-operating items (1,892 ) (1,687 ) (5,272 )
Pre-tax, pre-provision core operating earnings (1) $ 34,324 $ 31,427 $ 34,746
(1) The Company's accounting and reporting policies conform to U.S. generally accepted accounting principles ("GAAP") and general practice within the banking industry. As a supplement to GAAP, the Company has provided this non-GAAP performance result. The Company believes that this non-GAAP financial measure is useful because it allows investors to assess the Company's operating performance. Although this non-GAAP financial measure is intended to enhance investors' understanding of the Company's business and performance, this non-GAAP financial measure should not be considered an alternative to GAAP.

The increase in core operating earnings from first quarter 2011 resulted from a rise in all fee-based categories and higher net interest income, primarily due to a reduction in interest expense paid on time deposits. Second quarter 2011 was relatively unchanged compared to second quarter 2010, as higher net interest income and fee-based revenues offset higher noninterest expense, excluding losses recognized on OREO. Further discussion of net interest income and noninterest income and expense is presented in later sections of this release.

Net Interest Income and Margin Analysis
(Dollar amounts in thousands)
Quarters Ended
June 30, 2011 March 31, 2011
Yield/ Yield/
Average Rate Average Rate
Balance Interest (%) Balance Interest (%)
Assets:
Federal funds sold and other short-term investments $ 566,315 $ 341 0.24 $ 467,880 $ 292 0.25
Trading securities 16,255 23 0.57 15,372 30 0.78
Investment securities (1) 1,150,221 12,933 4.50 1,166,991 13,048 4.47
Federal Home Loan Bank ("FHLB") and Federal Reserve Bank stock 59,745 340 2.28 61,338 357 2.33
Loans, excluding covered loans (1) 5,108,234 63,521 4.99 5,075,840 63,301 5.06
Covered interest-earning assets (2) 420,108 7,655 7.31 444,242 7,822 7.14
Total loans 5,528,342 71,176 5.16 5,520,082 71,123 5.23
Total interest-earning assets (1) 7,320,878 84,813 4.64 7,231,663 84,850 4.75
Cash and due from banks 120,599 121,494
Allowance for loan losses (148,092 ) (148,051 )
Other assets 877,710 889,845
Total assets $ 8,171,095 $ 8,094,951
Liabilities and Stockholders' Equity:
Interest-bearing transaction deposits $ 3,277,451 1,590 0.19 $ 3,185,924 1,656 0.21
Time deposits 1,813,164 5,379 1.19 1,937,890 6,015 1.26
Borrowed funds 262,525 687 1.05 285,847 680 0.96
Subordinated debt 137,747 2,279 6.64 137,745 2,286 6.73
Total interest-bearing liabilities 5,490,887 9,935 0.73 5,547,406 10,637 0.78
Demand deposits 1,465,438 1,342,013
Total funding sources 6,956,325 6,889,419
Other liabilities 80,000 83,217
Stockholders' equity - common 941,770 929,315
Stockholders' equity - preferred 193,000 193,000
Total liabilities and stockholders' equity $ 8,171,095 $ 8,094,951
Net interest income/margin(1) $ 74,878 4.10 $ 74,213 4.15
Quarters Ended
June 30, 2010
Yield/
Average Rate
Balance Interest (%)
Assets:
Federal funds sold and other short-term investments $ 300,346 $ 176 0.24
Trading securities 14,134 27 0.76
Investment securities (1) 1,213,455 17,592 5.80
Federal Home Loan Bank ("FHLB") and Federal Reserve Bank stock 59,758 335 2.24
Loans, excluding covered loans (1) 5,204,566 65,811 5.07
Covered interest-earning assets (2) 233,907 2,598 4.45
Total loans 5,438,473 68,409 5.05
Total interest-earning assets (1) 7,026,166 86,539 4.94
Cash and due from banks 170,524
Allowance for loan losses (153,537 )
Other assets 862,211
Total assets $ 7,905,364
Liabilities and Stockholders' Equity:
Interest-bearing transaction deposits $ 3,116,488 2,889 0.37
Time deposits 1,916,116 6,737 1.41
Borrowed funds 342,808 749 0.88
Subordinated debt 137,738 2,280 6.64
Total interest-bearing liabilities 5,513,150 12,655 0.92
Demand deposits 1,181,097
Total funding sources 6,694,247
Other liabilities 58,723
Stockholders' equity - common 959,394
Stockholders' equity - preferred 193,000
Total liabilities and stockholders' equity $ 7,905,364
Net interest income/margin(1) $ 73,884 4.21
(1) Interest income and yields are presented on a tax-equivalent basis, assuming a federal income tax rate of 35%.
(2) Covered interest-earning assets consist of loans acquired through the Company's FDIC-assisted transactions and the related FDIC indemnification asset.

Average interest-earning assets for second quarter 2011 increased $89.2 million, or 1.2%, from first quarter 2011. The quarter-over-quarter improvement in average interest-earning assets was driven by a rise in average short-term investments stemming from the normal seasonal increase in public fund deposits. The Company is maintaining an elevated level of short-term assets as it manages its liquidity in the current low-yield environment.

Average interest-earning assets for second quarter 2011 rose $294.7 million, or 4.2%, from second quarter 2010. This increase was due primarily to the addition of covered interest-earning assets and the investment of deposits acquired in the Company's FDIC-assisted transactions in short-term investments, partially offset by reductions in loans resulting from sales, paydowns, and charge-offs.

Average funding sources for second quarter 2011 grew $66.9 million, or 1.0%, from first quarter 2011. The rise in core transactional deposits from first quarter 2011 to second quarter 2011 resulted from seasonal increases in public funds balances. This increase was partially offset by a $124.7 million, or 6.4%, decline in average time deposits, primarily public time deposits.

Average funding sources increased $262.1 million, or 3.9%, from second quarter 2010 to second quarter 2011. The growth during this period resulted from a $284.3 million, or 24.1%, rise in average demand deposits partially offset by a $103.0 million, or 5.4%, decline in average time deposits. The addition of core transactional deposits reflected ongoing sales efforts, customers' liquidity preferences in today's low interest rate environment, and the acquisition of deposits through the Company's FDIC-assisted transactions.

Tax-equivalent net interest margin for second quarter 2011 was 4.10%, a decline of 5 basis points from first quarter 2011 and 11 basis points from second quarter 2010, primarily reflecting the impact of the growth in deposits invested in short-term investments. The reduction in margin resulted from declines in the average yield on interest-earning assets, partially offset by declines in the average rate paid for interest-bearing liabilities.

Interest earned on covered loans is generally recognized through the accretion of the discount taken on expected future cash flows. The Company realized actual cash flows in excess of estimates upon final settlement of certain covered loans, resulting in additional interest of $1.1 million for second quarter 2011 and $954,000 for first quarter 2011. This additional income is included in interest on covered interest-earning assets in the table above and increased net interest margin by 6 basis points for second quarter 2011 and 5 basis points for first quarter 2011.

Noninterest Income Analysis
(Dollar amounts in thousands)
June 30, 2011
Quarters Ended Percent Change From
June 30, March 31, June 30, March 31, June 30,
2011 2011 2010 2011 2010
Service charges on deposit accounts $ 9,563 $ 8,144 $ 9,052 17.4 5.6
Trust and investment advisory fees 4,118 4,116 3,702 0.0 11.2
Other service charges, commissions, and fees 5,362 4,914 4,628 9.1 15.9
Card-based fees 5,162 4,529 4,497 14.0 14.8
Total fee-based revenues 24,205 21,703 21,879 11.5 10.6
Bank-owned life insurance income 259 252 349 2.8 (25.8 )
Other income 501 978 680 (48.8 ) (26.3 )
Total operating revenues 24,965 22,933 22,908 8.9 9.0
Trading (losses) gains, net (2 ) 744 (1,022 ) (100.3 ) (99.8 )
Gains on securities sales, net 1,531 540 2,255 183.5 (32.1 )
Securities impairment losses - - (1,134 ) - N/M
Gain on FDIC-assisted transaction - - 4,303 - N/M
Total noninterest income $ 26,494 $ 24,217 $ 27,310 9.4 (3.0 )
N/M - Not meaningful.

Fee-based revenues for second quarter 2011 rose 11.5% from first quarter 2011 and 10.6% compared to second quarter 2010 with increases in all categories for both periods, except for trust and investment advisory fees, which were consistent with first quarter 2011.

The rise in service charges for both periods was due primarily to a combination of higher volume NSF fees and market-driven pricing increases. The increase from first quarter 2011 to second quarter 2011 was also influenced by normal seasonality.

An increase in trust assets under management drove the rise in trust and investment advisory fees from second quarter 2010 to second quarter 2011. During this period, trust assets under management grew 13.0% from $4.0 billion to $4.5 billion. Approximately $400 million of this growth was derived equally from improved equity market performance and new sales results, with the remaining $100 million resulting from the addition of managed assets acquired in an FDIC-assisted transaction.

Increased merchant fees led to the increase in other service charges, commissions, and fees from both prior periods presented. The year-over-year increase in merchant fees was due primarily to a 25% volume increase resulting from customers acquired in an FDIC-assisted transaction.

The Company experienced a continued favorable variance in card-based fees for both periods, which was attributed to both volume and transaction rates. Volume increases were due to a higher number of transactions and an increase in the average purchase per transaction.

Noninterest Expense Analysis
(Dollar amounts in thousands)
June 30, 2011
Quarters Ended Percent Change From
June 30, March 31, June 30, March 31, June 30,
2011 2011 2010 2011 2010
Salaries and wages $ 25,493 $ 25,665 $ 21,146 (0.7 ) 20.6
Retirement and other employee benefits 5,765 6,858 5,394 (15.9 ) 6.9
Total compensation expense 31,258 32,523 26,540 (3.9 ) 17.8
Write-downs of OREO 1,523 1,112 3,272 37.0 (53.5 )
Losses on sales of OREO, net 1,900 1,115 5,652 70.4 (66.4 )
OREO operating expense, net 1,800 1,704 2,926 5.6 (38.5 )
Total OREO expense 5,223 3,931 11,850 32.9 (55.9 )
Loan remediation costs 2,878 2,848 2,649 1.1 8.6
Other professional services 2,762 2,271 3,003 21.6 (8.0 )
Total professional services 5,640 5,119 5,652 10.2 (0.2 )
FDIC premiums 1,708 2,725 2,546 (37.3 ) (32.9 )
Net occupancy and equipment expense 8,012 9,103 7,808 (12.0 ) 2.6
Technology and related costs 2,697 2,623 2,785 2.8 (3.2 )
Advertising and promotions 1,378 1,079 2,473 27.7 (44.3 )
Other expenses 9,507 8,020 7,801 18.5 21.9
Total noninterest expense $ 65,423 $ 65,123 $ 67,455 0.5 (3.0 )
Total noninterest expense, excluding losses recognized on OREO $ 62,000 $ 62,896 $ 58,531 (1.4 ) 5.9

Total noninterest expense for second quarter 2011 was relatively unchanged compared to first quarter 2011 and decreased 3.0% from second quarter 2010.

OREO expenses were elevated in 2010 due to higher levels of write-downs and losses on sales of OREO and related operating expenses. Excluding OREO losses, total noninterest expense was down 1.4% for the current quarter compared to first quarter 2011 and up 5.9% from the same period last year.

The increase in salaries and wages from second quarter 2010 to second quarter 2011 resulted primarily from additional staff employed through the Palos Bank & Trust acquisition in August 2010, the expansion of commercial sales staff, and annual merit increases. The variances in employee benefits for the periods presented were impacted by the timing of certain benefit accruals.

FDIC premiums decreased compared to first quarter 2011 and second quarter 2010, primarily due to a change in regulatory requirements for calculating the premium. Specifically, the insurance premium assessment base was revised from all domestic deposits to the average of total assets less tangible equity.

High snow removal costs in first quarter 2011 resulted in increased net occupancy expense for that period, accounting for the decrease from first quarter 2011 to second quarter 2011. An increase in the rates charged for property taxes as well as property taxes associated with branches acquired through the Company's FDIC-assisted transactions resulted in an increase in net occupancy and equipment expense from second quarter 2010.

Advertising and promotions expense was down from the same period in the prior year. Second quarter 2010 advertising costs included costs to implement a new consumer overdraft program and one-time expenses incurred in response to FDIC-assisted transaction activity in the Chicago banking market.

The increases in second quarter 2011 other noninterest expense from first quarter 2011 and second quarter 2010 were due primarily to higher cardholder expenses driven by higher transaction volumes and miscellaneous losses.

Income Taxes

Income tax expense was $2.8 million for second quarter 2011, increasing from $30,000 for first quarter 2011 and $139,000 for second quarter 2010. The increases resulted primarily from an increase in pre-tax income in second quarter 2011 over that of the prior periods and a $1.6 million state tax benefit recorded in first quarter 2011 related to the write-up of state deferred tax assets.

LOAN PORTFOLIO AND ASSET QUALITY

Loan Portfolio Composition
(Dollar amounts in thousands)
June 30, 2011
As Of Percent Change From
June 30, March 31, December June 30, March 31, June 30,
2011 2011 31, 2010 2010 2011 2010
Corporate:
Commercial and industrial $ 1,518,772 $ 1,493,465 $ 1,465,903 $ 1,494,119 1.7 1.7
Agricultural 237,518 234,898 227,756 199,597 1.1 19.0
Commercial real estate:
Office 415,654 412,256 396,836 415,846 0.8 (0.0 )
Retail 324,977 320,313 328,751 310,819 1.5 4.6
Industrial 488,469 473,311 478,026 493,526 3.2 (1.0 )
Multi-family 336,138 344,645 349,862 369,281 (2.5 ) (9.0 )
Residential construction 129,327 151,887 174,690 241,094 (14.9 ) (46.4 )
Commercial construction 146,679 153,392 164,472 202,041 (4.4 ) (27.4 )
Other commercial real estate 852,966 850,334 856,357 831,723 0.3 2.6
Total commercial real estate 2,694,210 2,706,138 2,748,994 2,864,330 (0.4 ) (5.9 )
Total corporate loans 4,450,500 4,434,501 4,442,653 4,558,046 0.4 (2.4 )
Consumer:
Home equity loans 429,923 434,138 445,243 458,066 (1.0 ) (6.1 )
1-4 family mortgages 185,002 178,538 160,890 145,457 3.6 27.2
Installment loans 47,486 48,366 51,774 46,778 (1.8 ) 1.5
Total consumer loans 662,411 661,042 657,907 650,301 0.2 1.9
Total loans, excluding covered loans 5,112,911 5,095,543 5,100,560 5,208,347 0.3 (1.8 )
Covered loans 314,942 349,446 371,729 164,924 (10.6 ) 91.0
Total loans $ 5,427,853 $ 5,444,989 $ 5,472,289 $ 5,373,271 (0.3 ) 1.0

Total loans, including covered loans, of $5.4 billion as of June 30, 2011 remained relatively unchanged from March 31, 2011. Annualized growth of 6.8% in commercial and industrial loans was substantially offset by a decline in the construction loan portfolios.

Total loans increased $54.6 million, or 1.0%, from June 30, 2010 to June 30, 2011. The growth was driven by the addition of covered loans acquired through the Company's FDIC-assisted transactions, which more than offset declines in the construction loan portfolios.

Asset Quality
(Dollar amounts in thousands)
As Of June 30, 2011
2011 2010 Percent Change From
December March 31, December
June 30 March 31 31 June 30 2011 31, 2010
Non-performing assets, excluding covered loans and covered OREO
Non-accrual loans (1) $ 177,495 $ 186,563 $ 211,782 $ 193,689 (4.9 ) (16.2 )
90 days or more past due loans 6,502 5,231 4,244 6,280 24.3 53.2
Total non-performing loans 183,997 191,794 216,026 199,969 (4.1 ) (14.8 )
Restructured loans (still accruing interest) 14,529 14,120 22,371 9,030 2.9 (35.1 )
Other real estate owned 24,407 33,863 31,069 57,023 (27.9 ) (21.4 )
Total non-performing assets $ 222,933 $ 239,777 $ 269,466 $ 266,022 (7.0 ) (17.3 )
30-89 days past due loans $ 30,424 $ 28,927 $ 23,646 $ 32,012 5.2 28.7
Allowance for credit losses $ 139,831 $ 145,003 $ 145,072 $ 145,477 (3.6 ) (3.6 )
Non-accrual loans to total loans 3.47 % 3.66 % 4.15 % 3.72 %
Non-performing loans to total loans 3.60 % 3.76 % 4.24 % 3.84 %
Non-performing assets to loans plus OREO 4.34 % 4.67 % 5.25 % 5.05 %
Allowance for credit losses to loans 2.73 % 2.85 % 2.84 % 2.79 %
Allowance for credit losses to non-performing loans 76 % 76 % 67 % 73 %
Covered loans and covered OREO(2)
Non-accrual loans $ 3,588 $ - $ - $ - 100.0 100.0
90 days or more past due loans (3) 68,324 88,605 84,350 47,912 (22.9 ) (19.0 )
Total non-performing loans 71,912 88,605 84,350 47,912 (18.8 ) (14.7 )
Restructured loans (still accruing interest) - - - - - -
Other real estate owned 14,583 21,543 22,370 10,657 (32.3 ) (34.8 )
Total non-performing assets $ 86,495 $ 110,148 $ 106,720 $ 58,569 (21.5 ) (19.0 )
30-89 days past due loans $ 26,180 $ 10,399 $ 18,445 $ 13,725 151.8 41.9
Non-performing assets, including covered loans and covered OREO
Non-accrual loans $ 181,083 $ 186,563 $ 211,782 $ 193,689 (2.9 ) (14.5 )
90 days or more past due loans 74,826 93,836 88,594 54,192 (20.3 ) (15.5 )
Total non-performing loans 255,909 280,399 300,376 247,881 (9.6 ) (14.8 )
Restructured loans (still accruing interest) 14,529 14,120 22,371 9,030 2.9 (35.1 )
Other real estate owned 38,990 55,406 53,439 67,680 (29.6 ) (27.0 )
Total non-performing assets $ 309,428 $ 349,925 $ 376,186 $ 324,591 (11.6 ) (17.7 )
30-89 days past due loans $ 56,604 $ 39,326 $ 42,091 $ 45,737 43.9 34.5
Non-accrual loans to total loans 3.34 % 3.42 % 3.87 % 3.60 %
Non-performing loans to total loans 4.71 % 5.15 % 5.49 % 4.61 %
Non-performing assets to loans plus OREO 5.66 % 6.36 % 6.81 % 5.97 %
Allowance for credit losses to loans 2.58 % 2.66 % 2.65 % 2.71 %
Allowance for credit losses to non-performing loans 55 % 52 % 48 % 59 %
(1) Includes $22.0 million in restructured non-accrual loans.
(2) Covered loans and covered OREO were acquired through transactions with the FDIC and are subject to loss sharing agreements with the FDIC whereby the Company is indemnified against the majority of any losses incurred related to these assets.
(3) These loans are past due based on contractual terms, but are performing according to the Company's current expectations of cash flows.

Non-performing assets, excluding covered loans and covered OREO, were $222.9 million at June 30, 2011, decreasing $16.8 million, or 7.0%, from March 31, 2011 and $46.5 million, or 17.3%, from December 31, 2010. The reductions were substantially due to remediation activities, dispositions, and charge-offs partially offset by loans downgraded to non-accrual status.

Charge-off Data
(Dollar amounts in thousands)
Quarters Ended
June 30, % of March 31, % of June 30, % of
2011 Total 2011 Total 2010 Total
Net loans charged-off:
Commercial and industrial $ 5,585 28.2 $ 3,128 16.9 $ 2,679 13.2
Agricultural 799 4.0 9 0.1 546 2.7
Office, retail, and industrial 609 3.1 1,183 6.4 2,353 11.6
Multi-family 6,652 33.6 549 3.0 485 2.4
Residential construction 899 4.5 5,418 29.3 9,994 49.4
Commercial construction 133 0.7 261 1.4 115 0.6
Other commercial real estate 2,107 10.6 5,358 29.0 1,507 7.5
Consumer 3,043 15.3 2,563 13.9 2,543 12.6
Total net loans charged-off, excluding covered loans 19,827 100.0 18,469 100.0 20,222 100.0
Net charge-offs on covered loans 4,108 1,092 651
Total net charge-offs $ 23,935 $ 19,561 $ 20,873
Net loan charge-offs to average loans, excluding covered loans, annualized:
Quarter-to-date 1.56 % 1.48 % 1.56 %
Year-to-date 1.52 % 1.48 % 1.49 %

Net charge-offs for second quarter 2011, excluding charge-offs related to covered loans, were $19.8 million, compared to $18.5 million for first quarter 2011 and $20.2 million for second quarter 2010. Higher charge-offs on multi-family loans were mostly offset by lower charge-offs on residential construction loans. The charge-offs on multi-family loans were largely driven by three loan relationships.

Charge-offs related to covered loans for second quarter 2011, as well as the other quarters shown, reflect the decline in cash flows of certain acquired loans, net of the reimbursement from the FDIC under loss sharing arrangements. The comparative increase reflects the initial re-estimation of the present value of loans acquired in the Palos Bank & Trust acquisition in August 2010. Management performs such remeasurements of cash flows periodically, and any declines, net of loss share, are reflected as charge-offs in the period of remeasurement. Conversely, any increases in estimated cash flows, net of loss share, are recorded through prospective yield adjustments over the remaining lives of the specific loans. To date, increases in estimated cash flows have exceeded declines, and such increases will be reflected in higher margins in future periods. Overall, the total portfolio of covered loans has experienced a net increase in estimated cash flows since acquisition and continues to perform better than originally expected.

CAPITAL MANAGEMENT

Capital Ratios
(Dollar amounts in thousands)
Regulatory Excess Over
Minimum Required
June 30, March 31, June 30, For "Well- Minimums at
2011 2011 2010 Capitalized" June 30, 2011
Regulatory capital ratios:
Total capital to risk-weighted assets 16.70% 16.45% 17.31% 10.00% 67% $ 419,579
Tier 1 capital to risk-weighted assets 14.63% 14.38% 15.25% 6.00% 144% $ 540,461
Tier 1 leverage to average assets 11.65% 11.61% 12.70% 5.00% 133% $ 523,055
Regulatory capital ratios, excluding preferred stock (1):
Total capital to risk-weighted assets 13.62% 13.38% 14.27% 10.00% 36% $ 226,579
Tier 1 capital to risk-weighted assets 11.55% 11.31% 12.21% 6.00% 92% $ 347,461
Tier 1 leverage to average assets 9.20% 9.13% 10.17% 5.00% 84% $ 330,055
Tier 1 common capital to risk-weighted
assets (2) (3)
10.20% 9.97% 10.88% N/A (3) N/A (3) N/A (3)
Tangible common equity ratios:
Tangible common equity to tangible assets 8.47% 8.34% 9.05% N/A (3) N/A (3) N/A (3)
Tangible common equity, excluding other comprehensive loss, to tangible assets 8.67% 8.65% 9.22% N/A (3) N/A (3) N/A (3)
Tangible common equity to risk-weighted assets 10.61% 10.27% 10.71% N/A (3) N/A (3) N/A (3)
(1) These ratios exclude the impact of $193.0 million in preferred shares issued to the U.S. Department of the Treasury in December 2008 as part of its Capital Purchase Program.
(2) Excludes the impact of preferred shares and trust-preferred securities.
(3) Ratio is not subject to formal Federal Reserve regulatory guidance.

All regulatory mandated ratios for characterization as "well-capitalized" were exceeded as of June 30, 2011. The improvement from March 31, 2011 was driven by net income increasing capital.

About the Company

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 some 100 offices located primarily in metropolitan Chicago. First Midwest was recently recognized by the Chicago Tribune as one of the top 20 best places to work in Chicago among large employers. First Midwest Bank received the highest numerical score among retail banks in the Midwest region in the proprietary J.D. Power and Associates 2011 Retail Banking Satisfaction Study (SM). The study was based on 51,620 total responses measuring 27 providers in the Midwest region (IA, IL, KS, MO, MN, and WI) and measures opinions of consumers with their primary banking provider. These proprietary study results are based on experiences and perceptions of consumers surveyed in January 2011. Visit www.jdpower.com for further information.

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, 2010 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, July 27, 2011 at 10:00 A.M. (ET). Members of the public who would like to listen to the conference call should dial (877) 317-6789 (U.S. domestic) or (412) 317-6789 (international) and ask for the First Midwest Bancorp, Inc. Earnings Conference Call. The number should be dialed 10 to 15 minutes prior to the start of the conference call. There is no charge to access the call. The conference call will also be accessible as an audio webcast through the Investor Relations section of the Company's website, www.firstmidwest.com/investorrelations. For those unable to listen to the live broadcast, a replay will be available on the Company's website or by dialing (877) 344-7529 (U.S. domestic) or (412) 317-0088 (international) conference I.D. 10001491 beginning one hour after completion of the live call until 9:00 A.M. (ET) on August 4, 2011. 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:

  • Condensed Consolidated Statements of Financial Condition
  • Condensed Consolidated Statements of Income

Press Release and Additional Information Available on Website

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

Condensed Consolidated Statements of Financial Condition
Unaudited
(Amounts in thousands)
June 30, March 31, December 31, June 30,
2011 2011 2010 2010
Assets
Cash and due from banks $ 110,159 $ 104,982 $ 102,495 $ 136,982
Interest-bearing deposits in other banks 601,310 421,478 483,281 3,217
Federal funds sold and other short-term investments - - - 232,881
Trading account securities, at fair value 16,230 16,227 15,282 13,067
Securities available-for-sale, at fair value 1,009,873 1,057,758 1,057,802 1,090,109
Securities held-to-maturity, at amortized cost 76,142 81,218 81,320 87,843
Federal Home Loan Bank and Federal Reserve Bank stock, at cost 58,187 61,338 61,338 59,864
Loans, excluding covered loans 5,112,911 5,095,543 5,100,560 5,208,347
Covered loans 314,942 349,446 371,729 164,924
Allowance for loan losses (137,331 ) (142,503 ) (142,572 ) (145,027 )
Net loans 5,290,522 5,302,486 5,329,717 5,228,244
Other real estate owned ("OREO"), excluding covered OREO 24,407 33,863 31,069 57,023
Covered OREO 14,583 21,543 22,370 10,657
Federal Deposit Insurance Corporation ("FDIC") indemnification asset 95,752 85,386 95,899 75,991
Premises, furniture, and equipment 131,952 138,119 140,907 132,335
Investment in bank-owned life insurance 198,149 197,889 197,644 198,399
Goodwill and other intangible assets 284,120 284,785 286,033 281,255
Accrued interest receivable and other assets 218,005 229,245 233,145 197,222
Total assets $ 8,129,391 $ 8,036,317 $ 8,138,302 $ 7,805,089
Liabilities and Stockholders' Equity
Deposits
Transactional deposits $ 4,731,329 $ 4,545,670 $ 4,519,492 $ 4,218,383
Time deposits 1,764,220 1,874,224 1,991,984 1,905,182
Total deposits 6,495,549 6,419,894 6,511,476 6,123,565
Borrowed funds 272,024 273,342 303,974 328,470
Subordinated debt 137,748 137,746 137,744 137,739
Accrued interest payable and other liabilities 82,479 81,459 73,063 59,803
Total liabilities 6,987,800 6,912,441 7,026,257 6,649,577
Preferred stock 191,220 191,050 190,882 190,553
Common stock 858 858 858 858
Additional paid-in capital 424,877 422,405 437,550 435,605
Retained earnings 802,072 794,569 787,678 819,890
Accumulated other comprehensive loss, net of tax (15,339 ) (24,373 ) (27,739 ) (12,803 )
Treasury stock, at cost (262,097 ) (260,633 ) (277,184 ) (278,591 )
Total stockholders' equity 1,141,591 1,123,876 1,112,045 1,155,512
Total liabilities and stockholders' equity $ 8,129,391 $ 8,036,317 $ 8,138,302 $ 7,805,089
Condensed Consolidated Statements of Income
Unaudited
(Amounts in thousands, except per share data)
Quarters Ended
June 30, March 31, June 30,
2011 2011 2010
Interest Income
Loans $ 63,089 $ 62,917 $ 65,439
Investment securities 9,848 9,865 13,699
Covered loans 7,655 7,822 2,598
Federal funds sold and other short-term investments 704 679 538
Total interest income 81,296 81,283 82,274
Interest Expense
Deposits 6,969 7,671 9,626
Borrowed funds 687 680 749
Subordinated debt 2,279 2,286 2,280
Total interest expense 9,935 10,637 12,655
Net interest income 71,361 70,646 69,619
Provision for loan losses 18,763 19,492 21,526
Net interest income after provision for loan losses 52,598 51,154 48,093
Noninterest Income
Service charges on deposit accounts 9,563 8,144 9,052
Trust and investment advisory fees 4,118 4,116 3,702
Other service charges, commissions, and fees 5,362 4,914 4,628
Card-based fees 5,162 4,529 4,497
Total fee-based revenues 24,205 21,703 21,879
Bank-owned life insurance income 259 252 349
Securities gains, net 1,531 540 1,121
Gain on FDIC-assisted transaction - - 4,303
Other 499 1,722 (342 )
Total noninterest income 26,494 24,217 27,310
Noninterest Expense
Salaries and employee benefits 31,258 32,523 26,540
OREO expense, net 5,223 3,931 11,850
FDIC premiums 1,708 2,725 2,546
Net occupancy and equipment expense 8,012 9,103 7,808
Technology and related costs 2,697 2,623 2,785
Professional fees 5,640 5,119 5,652
Other 10,885 9,099 10,274
Total noninterest expense 65,423 65,123 67,455
Income before income tax expense 13,669 10,248 7,948
Income tax expense 2,841 30 139
Net income 10,828 10,218 7,809
Preferred dividends (2,582 ) (2,581 ) (2,573 )
Net income applicable to non-vested restricted shares (102 ) (140 ) (65 )
Net income applicable to common shares $ 8,144 $ 7,497 $ 5,171
Diluted earnings per common share $ 0.11 $ 0.10 $ 0.07
Dividends declared per common share $ 0.01 $ 0.01 $ 0.01
Weighted average diluted common shares outstanding 73,259 73,151 73,028

Contact Information

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

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