SOURCE: First Midwest Bancorp, Inc.

First Midwest Bancorp, Inc.

April 25, 2012 06:55 ET

First Midwest Bancorp, Inc. Announces 2012 First Quarter Results

Increased Earnings -- Targeted Loan Growth -- Improved Fee-Based Revenues and Reduced Noninterest Expense

ITASCA, IL--(Marketwire - Apr 25, 2012) - First Midwest Bancorp, Inc. (NASDAQ: FMBI)

Operating Performance

  • Earnings per common share of $0.11, up 10% compared to $0.10 per share for first quarter 2011 and up 120% compared to $0.05 per share for fourth quarter 2011.

  • Fee-based revenues of $22.6 million, up 4.1% from first quarter 2011 and seasonally down 5.3% from fourth quarter 2011.

  • Noninterest expense of $62.6 million, down 4.3% from first quarter 2011 and 6.0% from fourth quarter 2011.

  • Total loans, excluding covered loans, of $5.1 billion, up $41.8 million from March 31, 2011 and $49.2 million from December 31, 2011, including growth in commercial and industrial loans of 2.6%, or over 10% annualized, from December 31, 2011.

Credit and Capital

  • Loans 30 to 89 days past due decreased by 23% to $21.2 million compared to December 31, 2011, the lowest level since 2003.

  • Non-performing assets, excluding covered loans and covered OREO, of $244.6 million declined $3.8 million from December 31, 2011.

  • Tier 1 common capital to risk-weighted assets of 10.38% as of March 31, 2012 compared to 9.96% at March 31, 2011 and 10.26% at December 31, 2011.

Significant First Quarter Events

  • Redeemed and retired approximately $21 million in 6.95% trust preferred securities at a discount of 2.25%, resulting in a pre-tax gain of $256,000.

  • Completed an organizational realignment, resulting in the elimination of 38 positions and severance-related costs of $315,000 for the quarter.

Today First Midwest Bancorp, Inc. (the "Company" or "First Midwest") (NASDAQ: FMBI), the holding company of First Midwest Bank (the "Bank"), reported results of operations and financial condition for first quarter 2012. Net income for the quarter was $7.9 million, before adjustments for non-vested restricted shares, with net income applicable to common shares of $7.8 million, or $0.11 per share. This compares to net income applicable to common shares of $7.3 million, or $0.10 per share, for first quarter 2011 and $3.9 million, or $0.05 per share, for fourth quarter 2011.

Quarters Ended
March 31,
2012
December 31,
2011
March 31,
2011
Operating Performance
Net income $ 7,892 $ 6,924 $ 10,044
Net income applicable to common shares $ 7,753 $ 3,877 $ 7,326
Diluted earnings per common share $ 0.11 $ 0.05 $ 0.10
Return on average common equity 3.21 % 1.60 % 3.20 %
Return on average assets 0.40 % 0.34 % 0.50 %
Net interest margin 3.88 % 3.95 % 4.15 %
Efficiency ratio 64.62 % 64.76 % 62.70 %
Loans, excluding covered loans, at period end $ 5,137,328 $ 5,088,113 $ 5,095,543
Average transactional deposits (1) $ 4,823,339 $ 4,866,776 $ 4,527,937
(1) Comprised of demand deposits and interest-bearing transactional accounts.

SUMMARY UPDATE

"Performance for the quarter reflected progress on a number of our strategic priorities," said Michael L. Scudder, President and Chief Executive Officer of First Midwest Bancorp, Inc. "Quarterly earnings per share of $0.11 grew 10% from a year ago and increased significantly from the fourth quarter of 2011. This improvement reflects the full benefit of our fourth quarter repayment of TARP as well as lower operating and credit costs. Organizational investments made to both strengthen our sales teams and realign our workforce are gaining traction. Annualized, our total loans grew 4% from last quarter, largely due to strong, broad-based growth in corporate and residential mortgage lending. Our non-performing asset levels reflected modest improvement from year-end 2011, as we continue to work to lessen future credit costs through active remediation of potential problem credits."

Mr. Scudder concluded, "The pace of economic recovery and the evolving regulatory environment present both operational challenges as well as market opportunities. Solid core earnings and our strong capital foundation enable our priorities to remain centered on growing our business, aggressively reducing problem asset levels, and judiciously deploying our capital."

OPERATING PERFORMANCE

Pre-Tax, Pre-Provision Operating Earnings (1)
(Dollar amounts in thousands)
Quarters Ended
March 31,
2012
December 31,
2011
March 31,
2011
Income before income tax $ 9,048 $ 7,220 $ 9,953
Provision for loan losses 18,210 21,902 19,492
Pre-tax, pre-provision earnings 27,258 29,122 29,445
Adjustments to Pre-Tax, Pre-Provision Earnings(1)
Net securities (losses) gains (943 ) (110 ) 540
Gain on acquisition of deposits - 1,076 -
Gain on early extinguishment of debt 256 - -
Losses on sales and write-downs of other real estate owned ("OREO") (303 ) (1,425 ) (2,227 )
Severance-related costs (2) (315 ) (2,000 ) -
Total adjustments (1,305 ) (2,459 ) (1,687 )
Pre-tax, pre-provision operating earnings (1) $ 28,563 $ 31,581 $ 31,132
(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 provided this non-GAAP performance result, which the Company believes is useful because it assists investors in assessing the Company's operating performance. Although it 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.
(2) This item represents costs related to an organizational realignment that included the elimination of 38 positions in first quarter 2012 and 100 positions in fourth quarter 2011.

Pre-tax, pre-provision operating earnings for first quarter 2012 decreased $2.6 million from first quarter 2011 and $3.0 million from fourth quarter 2011.

During the fourth quarter of 2011, the Company redeemed $193.0 million shares of Series B preferred stock held by the United States Department of the Treasury (the "Treasury") using a combination of existing liquid assets and proceeds from the completion of a $115.0 million senior debt offering. This transaction replaced a $2.4 million quarterly preferred dividend with $1.8 million in quarterly interest expense related to the new senior debt, which was reflected in the first quarter of 2012 and affects its comparison to prior periods.

A more detailed 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
March 31, 2012 December 31, 2011 March 31, 2011
Average Balance Interest
Earned/
Paid
Yield/
Rate
(%)
Average Balance Interest
Earned/
Paid
Yield/ Rate (%) Average Balance Interest
Earned/
Paid
Yield/
Rate
(%)
Assets:
Federal funds sold and other short-term investments $ 449,788 $ 275 0.25 $ 718,631 $ 450 0.25 $ 467,880 $ 292 0.25
Trading securities 14,585 36 0.99 13,420 92 2.74 15,372 30 0.78
Investment securities (1) 1,163,338 11,734 4.03 1,069,844 11,224 4.20 1,166,991 13,048 4.47
Federal Home Loan Bank and Federal Reserve Bank stock 52,531 330 2.51 58,187 341 2.34 61,338 357 2.33
Loans, excluding covered loans (1) 5,089,286 61,983 4.90 5,085,792 63,202 4.93 5,075,840 63,301 5.06
Covered interest-earning assets (2) 318,569 4,202 5.31 343,479 6,787 7.84 444,242 7,822 7.14
Total interest-earning assets (1) 7,088,097 78,560 4.45 7,289,353 82,096 4.47 7,231,663 84,850 4.75
Cash and due from banks 109,717 116,166 121,494
Allowance for loan losses (123,667 ) (133,824 ) (148,051 )
Other assets 883,044 870,808 889,845
Total assets $ 7,957,191 $ 8,142,503 $ 8,094,951
Liabilities and Stockholders' Equity:
Interest-bearing transaction deposits $ 3,232,141 1,022 1.11 $ 3,253,555 1,029 1.16 $ 3,185,924 1,656 1.26
Time deposits 1,621,926 4,491 1.02 1,688,995 4,933 1.05 1,937,890 6,015 0.96
Borrowed funds 203,548 515 6.57 252,839 670 6.45 285,847 680 6.73
Senior and subordinated debt 248,232 4,058 0.76 187,488 3,047 0.71 137,745 2,286 0.78
Total interest-bearing liabilities 5,305,847 10,086 0.76 5,382,877 9,679 0.71 5,547,406 10,637 0.78
Demand deposits 1,591,198 1,613,221 1,342,013
Total funding sources 6,897,045 6,996,098 6,889,419
Other liabilities 89,778 73,721 83,217
Stockholders' equity - common 970,368 961,500 929,315
Stockholders' equity - preferred - 111,184 193,000
Total liabilities and stockholders' equity $ 7,957,191 $ 8,142,503 $ 8,094,951
Net interest income/margin (1) $ 68,474 3.88 $ 72,417 3.95 $ 74,213 4.15
(1) Revenue from tax-exempt securities and investments that receive tax credits is presented on a basis comparable to taxable securities and investments. Consequently, interest income and yields are presented on a tax-equivalent basis, assuming a federal income tax rate of 35%. This non-GAAP financial measure allows management to assess the comparability of revenue arising from both taxable and tax-exempt sources. The corresponding income tax impact related to tax-exempt items is recorded within income tax expense. These adjustments have no impact on net income.
(2) Covered interest-earning assets consist of loans acquired through the Company's Federal Deposit Insurance Corporation ("FDIC")-assisted transactions and the related FDIC indemnification asset.

Average interest-earning assets for first quarter 2012 decreased $143.6 million, or 2.0%, from first quarter 2011 and $201.3 million, or 2.8%, compared to fourth quarter 2011. The reduction from first quarter 2011 was primarily attributable to the decline in covered interest-earning assets. Lower average short-term investments resulting from the seasonal decline in average time deposits and borrowed funds drove the decrease from fourth quarter 2011.

Average funding sources for first quarter 2012 were $7.6 million higher than first quarter 2011 and $99.1 million lower than fourth quarter 2011. For first quarter 2012 compared to the prior year period, growth in demand deposits offset the decline in interest-bearing liabilities, which resulted in a more favorable product mix. The linked-quarter decline resulted from the aforementioned decline in average time deposits and borrowed funds, partially offset by an increase in senior and subordinated debt.

Average senior and subordinated debt grew for first quarter 2012 compared to both prior periods due to the issuance of $115.0 million in senior debt during the fourth quarter of 2011, which was used in combination with existing liquid assets to redeem the Series B preferred stock issued to the Treasury. Interest paid on the new senior debt reduced net interest margin by 10 basis points for first quarter 2012 and 4 basis points for fourth quarter 2011.

Tax-equivalent net interest margin for first quarter 2012 was 3.88%, a decline of 27 basis points from first quarter 2011 and 7 basis points from fourth quarter 2011. The decrease from the fourth quarter 2011 was primarily due to the interest paid on the senior debt, lower average covered interest-earning assets, and the impact of lower interest rate spreads earned on loans and investment securities resulting from a decline in market interest rates over this period. The linked-quarter variance was driven by the funding costs associated with the new senior debt.

Interest earned on covered loans is generally recognized through the accretion of the discount taken on expected future cash flows. The yield on covered interest-earning assets for first quarter 2012 declined from both 2011 periods presented since the 2011 periods included adjustments in accretable yield based on actual cash realized in excess of estimates upon final settlement of certain covered loans.

Noninterest Income Analysis
(Dollar amounts in thousands)
Quarters Ended March 31, 2012
Percent Change From
March 31, 2012 December 31, 2011 March 31, 2011 December 31, 2011 March 31, 2011
Service charges on deposit accounts $ 8,660 $ 9,957 $ 8,144 (13.0 ) 6.3
Wealth management fees 5,392 5,052 5,053 6.7 6.7
Other service charges, commissions, and fees 3,520 3,877 3,977 (9.2 ) (11.5 )
Card-based fees 5,020 4,971 4,529 1.0 10.8
Total fee-based revenues 22,592 23,857 21,703 (5.3 ) 4.1
Bank-owned life insurance ("BOLI") income 248 241 252 2.9 (1.6 )
Other income 1,135 652 978 74.1 16.1
Total operating revenues 23,975 24,750 22,933 (3.1 ) 4.5
Net trading gains (1) 1,401 919 744 52.4 88.3
Net (losses) gains on securities sales (206 ) 649 540 N/M N/M
Securities impairment losses (737 ) (759 ) - N/M N/M
Gain on acquisition of deposits - 1,076 - N/M N/M
Gain on early extinguishment of debt 256 - - N/M N/M
Total noninterest income $ 24,689 $ 26,635 $ 24,217 (7.3 ) 1.9
N/M - Not meaningful.
(1) Net trading gains represent the changes in the fair value of diversified asset securities held in a grantor trust under deferred compensation agreements.

Fee-based revenues for first quarter 2012 grew 4.1% compared to first quarter 2011 and declined 5.3% compared to fourth quarter 2011. The increase in fee-based revenues from first quarter 2011 to first quarter 2012 resulted from market-driven price increases that were effective in the second quarter of 2011. Lower NSF fees (included in service charges on deposit account) and merchant fees (included in other service charges, commission, and fees) accounted for the decrease from fourth quarter 2011, which reflects a normal seasonal trend.

Net trading gains result from changes in the fair value of diversified investment securities held in a grantor trust under deferred compensation agreements. These net trading gains are substantially offset by an adjustment to salaries and wages for each period presented.

Noninterest Expense Analysis
(Dollar amounts in thousands)
Quarters Ended March 31, 2012
Percent Change From
March 31, 2012 December 31, 2011 March 31, 2011 December 31, 2011 March 31, 2011
Salaries and wages (1) $ 27,257 $ 27,588 $ 25,665 (1.2 ) 6.2
Retirement and other employee benefits (1) 6,793 7,632 7,153 (11.0 ) (5.0 )
Total compensation expense 34,050 35,220 32,818 (3.3 ) 3.8
Write-downs of OREO 690 476 1,112 45.0 (37.9 )
Net (gains) losses on sales of OREO (387 ) 949 1,115 N/M N/M
Net OREO operating expense 1,561 1,540 1,704 1.4 (8.4 )
Total OREO expense 1,864 2,965 3,931 (37.1 ) (52.6 )
Loan remediation costs 2,788 4,846 2,848 (42.5 ) (2.1 )
Other professional services (1) 2,841 3,180 2,271 (10.7 ) 25.1
Total professional services 5,629 8,026 5,119 (29.9 ) 10.0
Net occupancy and equipment expense 8,331 7,681 9,103 8.5 (8.5 )
Technology and related costs 2,858 2,876 2,623 (0.6 ) 9.0
FDIC premiums 1,719 1,758 2,725 (2.2 ) (36.9 )
Advertising and promotions 870 1,239 1,079 (29.8 ) (19.4 )
Other expenses 7,292 6,826 8,020 6.8 (9.1 )
Total noninterest expense $ 62,613 $ 66,591 $ 65,418 (6.0 ) (4.3 )
N/M - Not meaningful.
(1) In fourth quarter 2011, the Company recorded a $2.0 million charge for severance-related costs from an organizational realignment that included $1.6 million in salaries and wages, $96,000 in retirement and other employee benefits, and $274,000 in other professional services. In first quarter 2012, the Company completed the organizational realignment and recorded a $315,000 charge for severance-related costs that included $258,000 in salaries and wages, $26,000 in retirement and other employee benefits, and $31,000 in other professional services.

Total noninterest expense for first quarter 2012 declined 6.0% compared to fourth quarter 2011 and 4.3% compared to first quarter 2011.

First quarter 2012 salaries and wages increased $1.6 million from first quarter 2011 and decreased by $331,000 from fourth quarter 2011. Salaries and wages in first quarter 2012 were higher than first quarter 2011 due to annual merit increases and changes in the fair value of trading securities held on behalf of participants in deferred compensation agreements. The reduction in salaries and wages from fourth quarter 2011 to first quarter 2012 was driven by lower severance-related costs, partially offset by increased expense related to changes in the fair value of trading securities and share-based compensation expense.

Compared to first quarter 2011, retirement and other employee benefits declined primarily as a result of lower pension and profit sharing expense. Fourth quarter 2011 retirement and other employee benefits included a $1.3 million correction of the 2010 actuarial pension expense calculation related to the valuation of future early retirement benefits. The impact of this adjustment on the linked-quarter decrease was partially offset by an increase in employee insurance costs.

Lower loan servicing costs in first quarter 2012 related to certain covered loans contributed to the reduction in loan remediation costs from both periods presented. An increase in real estate taxes paid to preserve the Company's rights to collateral associated with problem loans resulted in elevated loan remediation costs in fourth quarter 2011.

FDIC premiums decreased in first quarter 2012 compared to first quarter 2011 primarily due to a change in regulatory requirements for calculating the premium.

LOAN PORTFOLIO AND ASSET QUALITY

Loan Portfolio Composition
(Dollar amounts in thousands)
As Of March 31, 2012
Percent Change From
March 31, 2012 December 31, 2011 March 31, 2011 December 31, 2011 March 31, 2011
Corporate:
Commercial and industrial $ 1,496,966 $ 1,458,446 $ 1,493,465 2.6 0.2
Agricultural 237,686 243,776 234,898 (2.5 ) 1.2
Commercial real estate:
Office 480,288 444,368 412,256 8.1 16.5
Retail 371,258 334,034 320,313 11.1 15.9
Industrial 515,353 520,680 473,311 (1.0 ) 8.9
Multi-family 301,356 288,336 344,645 4.5 (12.6 )
Residential construction 99,768 105,836 151,887 (5.7 ) (34.3 )
Commercial construction 142,307 144,909 153,392 (1.8 ) (7.2 )
Other commercial real estate (1) 829,005 888,146 850,334 (6.7 ) (2.5 )
Total commercial real estate 2,739,335 2,726,309 2,706,138 0.5 1.2
Total corporate loans 4,473,987 4,428,531 4,434,501 1.0 0.9
Consumer:
Home equity loans 406,367 416,194 434,138 (2.4 ) (6.4 )
1-4 family mortgages 217,729 201,099 178,538 8.3 22.0
Installment loans 39,245 42,289 48,366 (7.2 ) (18.9 )
Total consumer loans 663,341 659,582 661,042 0.6 0.3
Total loans, excluding covered loans 5,137,328 5,088,113 5,095,543 1.0 0.8
Covered loans 251,376 260,502 349,446 (3.5 ) (28.1 )
Total loans $ 5,388,704 $ 5,348,615 $ 5,444,989 0.7 (1.0 )
(1) Approximately $50 million of certain loans as of December 31, 2011 were reclassified into other categories as of March 31, 2012, primarily office and retail commercial real estate.

Total loans, excluding covered loans, of $5.1 billion, were up $41.8 million from March 31, 2011 and $49.2 million from December 31, 2011.

From March 31, 2011 to March 31, 2012, the increase in loans, excluding covered loans, reflected growth in the 1-4 family mortgage portfolio as the Company continued to add sales staff. Additionally, office, retail, and industrial loans were higher for this period due in part to the reclassification of approximately $50 million of certain loans from other commercial real estate to office and retail commercial real estate.

The Company experienced over 10% annualized growth in commercial and industrial loans from December 31, 2011. Continued efforts to reduce lending exposure to less favorable real estate categories contributed to a 14% annualized decline in the construction portfolios.

Asset Quality, Excluding Covered Loans and Covered OREO (1)
(Dollar amounts in thousands)
As Of March 31, 2012
Percent Change From
March 31, 2012 December 31, 2011 March 31, 2011 December 31, 2011 March 31, 2011
Non-accrual loans $ 199,545 $ 187,325 $ 186,563 6.5 7.0
90 days or more past due loans 7,674 9,227 5,231 (16.8 ) 46.7
Total non-performing loans 207,219 196,552 191,794 5.4 8.0
Troubled debt restructurings (still accruing interest) ("TDRs") 2,076 17,864 14,120 (88.4 ) (85.3 )
OREO 35,276 33,975 33,863 3.8 4.2
Total non-performing assets $ 244,571 $ 248,391 $ 239,777 (1.5 ) 2.0
30-89 days past due loans $ 21,241 $ 27,495 $ 28,927 (22.7 ) (26.6 )
Allowance for credit losses $ 118,764 $ 121,962 $ 145,003 (2.6 ) (18.1 )
Non-accrual loans to total loans 3.88 % 3.68 % 3.66 %
Non-performing loans to total loans 4.03 % 3.86 % 3.76 %
Non-performing assets to loans plus OREO 4.73 % 4.85 % 4.67 %
Allowance for credit losses to loans 2.31 % 2.40 % 2.85 %
Allowance for credit losses to non-accrual loans 60 % 65 % 78 %
(1) 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 on these assets.

Non-performing assets, excluding covered loans and covered OREO, were $244.6 million at March 31, 2012, increasing $4.8 million from March 31, 2011 and declining $3.8 million from December 31, 2011. Loans 30 to 89 days past due decreased to $21.2 million, the lowest level since 2003.

The reduction in non-performing assets from December 31, 2011 to March 31, 2012 was substantially due to remediation activities, charge-offs, the return of $16.0 million in TDRs to performing status, and $8.5 million in OREO dispositions, largely offset by the downgrade of performing loans.

Potential problem loans consist of special mention and substandard loans that continue to accrue interest and totaled $357.4 million as of March 31, 2012, down $224.9 million, or 38.6%, from March 31, 2011 and $45.9 million, or 11.4%, from December 31, 2011. The declines from both prior periods reflect management's continuing success in aggressively remediating problem loans. As of March 31, 2012, 11 borrowers, each having balances greater than $5 million, comprised approximately 30% of potential problem loans.

Charge-off Data
(Dollar amounts in thousands)
Quarters Ended
March 31, 2012 % of
Total
December 31, 2011 % of
Total
March 31, 2011 % of
Total
Net loans charged-off:
Commercial and industrial $ 7,524 35.6 $ 8,910 32.3 $ 3,128 16.9
Agricultural (50 ) (0.2 ) 484 1.8 9 -
Office, retail, and industrial 2,665 12.6 3,779 13.7 1,183 6.4
Multi-family 9 0.0 4,803 17.4 549 3.0
Residential construction 463 2.2 2,498 9.1 5,418 29.4
Commercial construction 170 0.8 1,673 6.1 261 1.4
Other commercial real estate 8,177 38.7 3,002 10.9 5,358 29.0
Consumer 2,176 10.3 2,395 8.7 2,563 13.9
Total net loans charged-off, excluding covered loans 21,134 100.0 27,544 100.0 18,469 100.0
Net charge-offs of covered loans 274 3,687 1,092
Total net charge-offs $ 21,408 $ 31,231 $ 19,561
Net loans charged-off to average loans, excluding covered loans, annualized:
Quarter-to-date 1.67 % 2.15 % 1.48 %
Year-to-date 1.67 % 1.84 % 1.48 %

Net charge-offs for first quarter 2012, excluding charge-offs related to covered loans, were $21.1 million, up 14.4% from $18.5 million for first quarter 2011 and down 23.3% from $27.5 million for fourth quarter 2011. The elevated level of charge-offs in other commercial real estate loans during first quarter 2012 resulted from the write-down of three credits, including one that was transferred to held-for-sale status and sold in April 2012. Fourth quarter 2011 charge-offs were higher primarily due to actions taken to position two borrower relationships for accelerated resolution.

CAPITAL MANAGEMENT

Capital Ratios
(Dollar amounts in thousands)
March 31, 2012 December 31, 2011 Regulatory Minimum For "Well- Capitalized Excess Over Required Minimums at March 31, 2012
Regulatory capital ratios:
Total capital to risk-weighted assets 13.47 % 13.68 % 10.00 % 35 % $ 217,431
Tier 1 capital to risk-weighted assets 11.41 % 11.61 % 6.00 % 90 % $ 338,648
Tier 1 leverage to average assets 9.38 % 9.28 % 5.00 % 88 % $ 333,429
Tier 1 common capital to risk-weighted assets (1) 10.38 % 10.26 % N/A (2) N/A (2) N/A (2)
Tangible common equity ratios: (3)
Tangible common equity to tangible assets 8.95 % 8.83 % N/A (2) N/A (2) N/A (2)
Tangible common equity, excluding other comprehensive loss, to tangible assets 9.10 % 9.00 % N/A (2) N/A (2) N/A (2)
Tangible common equity to risk-weighted assets 11.01 % 10.88 % N/A (2) N/A (2) N/A (2)
(1) Excludes the impact of trust-preferred securities.
(2) Ratio is not subject to formal Federal Reserve regulatory guidance.
(3) Tangible common equity ("TCE") represents common stockholders' equity (i.e., total stockholders' equity less preferred stock) less goodwill and identifiable intangible assets, net of related deferred tax liabilities. Return on tangible common equity measures the Company's earnings as a percentage of TCE. In management's view, these measures are meaningful to the Company, as well as analysts and investors, in assessing the Company's use of equity and in facilitating comparisons with competitors.

The Company's regulatory ratios as of March 31, 2012 exceeded all regulatory mandated ratios for characterization as "well-capitalized."

In first quarter 2012, the Company redeemed and retired approximately $21 million in 6.95% trust preferred junior subordinated debentures ("TRUPs") at a discount of 2.25%. This transaction resulted in the recognition of a pre-tax gain of $256,000. Although the TRUPs were included as a component of Tier 1 capital, the Company elected to retire them given the low interest rate environment.

The Board of Directors reviews the Company's capital plan each quarter, giving consideration to the current and expected operating environment as well as an evaluation of various capital alternatives.

About the Company

First Midwest is the premier relationship-based banking franchise in the dynamic Chicagoland banking market. As one of the Chicago metropolitan area's largest independent bank holding companies, First Midwest provides the full range of business and retail banking and wealth management services through approximately 100 offices located in communities in metropolitan Chicago, northwest Indiana, central and western Illinois, and eastern Iowa. First Midwest was recently recognized by the Chicago Tribune for the second straight year as one of the top 20 best places to work in Chicago among large employers. Additionally, Forbes has recognized First Midwest as one of America's Most Trustworthy Companies for 2012.

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, 2011 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, April 25, 2012 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. 10012568 beginning one hour after completion of the live call until 8:00 A.M. (ET) on May 2, 2012. 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)
March 31, 2012 December 31, 2011 March 31, 2011
Assets
Cash and due from banks $ 105,722 $ 123,354 $ 104,982
Interest-bearing deposits in other banks 380,651 518,176 421,478
Trading securities, at fair value 16,031 14,469 16,227
Securities available-for-sale, at fair value 1,183,975 1,013,006 1,057,758
Securities held-to-maturity, at amortized cost 56,319 60,458 81,218
Federal Home Loan Bank and Federal Reserve Bank stock, at cost 46,750 58,187 61,338
Loans, excluding covered loans 5,137,328 5,088,113 5,095,543
Covered loans 251,376 260,502 349,446
Allowance for loan losses (116,264 ) (119,462 ) (142,503 )
Net loans 5,272,440 5,229,153 5,302,486
OREO, excluding covered OREO 35,276 33,975 33,863
Covered OREO 16,990 23,455 21,543
Federal Deposit Insurance Corporation ("FDIC") indemnification asset 58,488 65,609 85,386
Premises, furniture, and equipment 132,865 134,977 138,119
Investment in bank-owned life insurance 206,304 206,235 197,889
Goodwill and other intangible assets 282,815 283,650 285,077
Accrued interest receivable and other assets 193,376 208,890 229,245
Total assets $ 7,988,002 $ 7,973,594 $ 8,036,609
Liabilities and Stockholders' Equity
Deposits
Transactional deposits $ 4,897,093 $ 4,820,058 $ 4,545,670
Time deposits 1,589,270 1,659,117 1,874,224
Total deposits 6,486,363 6,479,175 6,419,894
Borrowed funds 202,155 205,371 273,342
Senior and subordinated debt 231,106 252,153 137,746
Accrued interest payable and other liabilities 95,677 74,308 81,925
Total liabilities 7,015,301 7,011,007 6,912,907
Preferred stock - - 191,050
Common stock 858 858 858
Additional paid-in capital 413,742 428,001 422,405
Retained earnings 817,630 810,487 794,395
Accumulated other comprehensive loss, net of tax (10,919 ) (13,276 ) (24,373 )
Treasury stock, at cost (248,610 ) (263,483 ) (260,633 )
Total stockholders' equity 972,701 962,587 1,123,702
Total liabilities and stockholders' equity $ 7,988,002 $ 7,973,594 $ 8,036,609
Condensed Consolidated Statements of Income
Unaudited
(Amounts in thousands, except per share data)
Quarters Ended
March 31, 2012 December 31, 2011 March 31, 2011
Interest Income
Loans $ 61,491 $ 62,774 $ 62,917
Investment securities 8,934 8,313 9,865
Covered loans 4,202 6,787 7,822
Federal funds sold and other short- term investments 641 883 679
Total interest income 75,268 78,757 81,283
Interest Expense
Deposits 5,513 5,962 7,671
Borrowed funds 515 670 680
Senior and subordinated debt 4,058 3,047 2,286
Total interest expense 10,086 9,679 10,637
Net interest income 65,182 69,078 70,646
Provision for loan losses 18,210 21,902 19,492
Net interest income after provision for loan losses 46,972 47,176 51,154
Noninterest Income
Service charges on deposit accounts 8,660 9,957 8,144
Wealth management fees 5,392 5,052 5,053
Other service charges, commissions, and fees 3,520 3,877 3,977
Card-based fees 5,020 4,971 4,529
Total fee-based revenues 22,592 23,857 21,703
Securities (losses) gains, net (943 ) (110 ) 540
Trading gains, net 1,401 919 744
Other 1,639 1,969 1,230
Total noninterest income 24,689 26,635 24,217
Noninterest Expense
Salaries and employee benefits 34,050 35,220 32,818
OREO expense, net 1,864 2,965 3,931
Net occupancy and equipment expense 8,331 7,681 9,103
Technology and related costs 2,858 2,876 2,623
Professional services 5,629 8,026 5,119
FDIC premiums 1,719 1,758 2,725
Other 8,162 8,065 9,099
Total noninterest expense 62,613 66,591 65,418
Income before income tax expense (benefit) 9,048 7,220 9,953
Income tax expense (benefit) 1,156 296 (91 )
Net income 7,892 6,924 10,044
Preferred dividends - (3,027 ) (2,581 )
Net income applicable to non-vested restricted shares (139 ) (20 ) (137 )
Net income applicable to common shares $ 7,753 $ 3,877 $ 7,326
Diluted earnings per common share $ 0.11 $ 0.05 $ 0.10
Dividends declared per common share $ 0.01 $ 0.01 $ 0.01
Weighted average diluted common shares outstanding 73,505 73,382 73,151

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