SOURCE: First Midwest Bancorp, Inc.

First Midwest Bancorp, Inc.

July 25, 2012 06:55 ET

First Midwest Bancorp, Inc. Announces 2012 Second Quarter Results

Improved Operating Earnings -- Strong Loan Growth -- Reduced Noninterest Expense -- Solid Capital

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

Operating Performance

  • Net income applicable to common shares of $6.3 million, or $0.09 per share, compared to $0.11 per share for first quarter 2012.

  • Pre-tax, pre-provision operating earnings of $32.0 million, up 11.9% from first quarter 2012.

  • Net interest margin of 3.88%, unchanged from first quarter 2012.

  • Noninterest expense of $61.2 million, down 2.3% from first quarter 2012.

  • Total loans, excluding covered loans, of $5.3 billion, up $160.7 million, or 12.5%, annualized growth from March 31, 2012, led by $100.5 million in commercial and industrial loan growth.

Credit and Capital

  • Non-performing loans of $206.7 million, or 3.90% of total loans, excluding covered loans, compared to 4.03% at March 31, 2012.

  • OREO of $28.3 million, excluding covered OREO, decreased $7.0 million from March 31, 2012 largely due to sales totaling $13.4 million with proceeds at 94% of carrying value.

  • Accruing restructured loans increased to $7.8 million, up $5.7 million from March 31, 2012.

  • Allowance for credit losses stable at $118.7 million, or 2.24% of total loans, excluding covered loans, with loan loss provision of $22.5 million compared to $18.2 million for first quarter 2012.

  • Tier 1 common capital to risk-weighted assets remained strong at 10.21% as of June 30, 2012.

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 second quarter 2012. Net income for the quarter was $6.4 million, before adjustments for non-vested restricted shares, with net income applicable to common shares of $6.3 million, or $0.09 per share. This compares to net income applicable to common shares of $7.8 million, or $0.11 per share, for first quarter 2012 and $8.0 million, or $0.11 per share, for second quarter 2011.

   
   
Operating Performance  
(Dollar amounts in thousands)  
   
    Quarters Ended  
    June 30,
2012
    March 31,
2012
    June 30,
2011
 
Net income   $ 6,365     $ 7,892     $ 10,653  
Net income applicable to common shares   $ 6,289     $ 7,753     $ 7,971  
Diluted earnings per common share   $ 0.09     $ 0.11     $ 0.11  
Return on average common equity     2.59 %     3.21 %     3.39 %
Return on average assets     0.32 %     0.40 %     0.52 %
Net interest margin     3.88 %     3.88 %     4.10 %
Efficiency ratio     60.56 %     64.62 %     60.49 %
Loans, excluding covered loans, at period end   $ 5,298,026     $ 5,137,328     $ 5,112,911  
Average transactional deposits (1)   $ 5,080,730     $ 4,823,339     $ 4,742,889  
   
(1) Comprised of demand deposits and interest-bearing transactional accounts.
   
   

SUMMARY UPDATE

"The quarter reflected continued, solid improvement in our underlying business, offset, in part, by higher provision for loan losses," said Michael L. Scudder, President and Chief Executive Officer of First Midwest Bancorp, Inc. "Operating earnings improved significantly from last quarter, benefitting from broad-based sales momentum as well as controlled spending. Prior investments in our business platforms, combined with realignment of our resources, helped drive meaningful growth in both lending and fee-based revenues in addition to lower operating costs."

Mr. Scudder continued, "Increases in both charge-offs and the provision for loan losses are indicative of our ongoing evaluation of our existing and potential problem loans and our remediation strategies consistent with our previously stated intention to make greater progress in reducing problem credits. Given the challenges these credits pose, we continue to evaluate all of our remediation strategies with a sharpened focus on the accelerated reduction of both existing and potential problem credits, thereby minimizing future credit costs over the longer term."

Mr. Scudder concluded, "The strength of our capital and operating earnings leaves us well positioned to meet the needs of our clients as we pursue opportunities for growth, react to evolving regulatory expectations, and transition to improved credit performance."

OPERATING PERFORMANCE

   
Pre-Tax, Pre-Provision Operating Earnings (1)  
(Dollar amounts in thousands)  
   
    Quarters Ended  
    June 30,
2012
    March 30,
2012
    June 30,
2011
 
Income before income tax   $ 7,126     $ 9,048     $ 13,373  
Provision for loan losses     22,458       18,210       18,763  
  Pre-tax, pre-provision earnings     29,584       27,258       32,136  
Adjustments to Pre-Tax, Pre-Provision Earnings (1)                        
Net securities gains (losses)     151       (943 )     1,531  
Gain on early extinguishment of debt     -       256       -  
Losses on sales and write-downs of other real estate owned ("OREO")     (2,527 )     (303 )     (3,423 )
Severance-related costs (2)     -       (315 )     -  
  Total adjustments     (2,376 )     (1,305 )     (1,892 )
  Pre-tax, pre-provision operating earnings (1)   $ 31,960     $ 28,563     $ 34,028  
   
(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.
   
   

Pre-tax, pre-provision operating earnings for second quarter 2012 increased $3.4 million from first quarter 2012 and decreased $2.1 million from second quarter 2011. The increase from first quarter 2012 resulted from an increase in net interest income and fee-based revenues and lower noninterest expense, excluding losses on sales and write-downs of OREO, primarily from lower salaries and employee benefits.

The decline in pre-tax, pre-provision operating earnings from second quarter 2011 is primarily attributed to a reduction in net interest income, reflecting the continued decline in covered interest-earning assets, lower yields earned on loans and investments, and the cost of additional senior debt, partially mitigated by the decline in rates paid on other interest-bearing liabilities.

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, 2012   March 31, 2012   June 30, 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   $ 432,036     $ 258   0.24   $ 449,788     $ 275   0.25   $ 566,315     $ 341   0.24
Trading securities     16,090       26   0.65     14,585       36   0.99     16,255       23   0.57
Investment
securities (1)
    1,238,767       11,172   3.61     1,163,338       11,734   4.03     1,150,221       12,933   4.50
Federal Home Loan Bank and Federal Reserve Bank stock     46,750       354   3.03     52,531       330   2.51     59,745       340   2.28
Loans, excluding covered loans (1)     5,213,944       62,559   4.83     5,089,286       61,983   4.90     5,108,234       63,521   4.99
Covered interest-earning assets (2)     297,141       4,473   6.05     318,569       4,202   5.31     420,108       7,655   7.31
  Total interest-earning assets (1)     7,244,728       78,842   4.37     7,088,097       78,560   4.45     7,320,878       84,813   4.64
Cash and due from banks     122,165                 109,717                 120,599            
Allowance for loan losses     (122,723 )               (123,667 )               (148,092 )          
Other assets     869,572                 883,044                 877,710            
  Total assets   $ 8,113,742               $ 7,957,191               $ 8,171,095            
Liabilities and Stockholders' Equity:                                                      
Interest-bearing transaction deposits   $ 3,282,876       913   0.11   $ 3,232,141       1,022   0.13   $ 3,277,451       1,590   0.19
Time deposits     1,548,410       3,765   0.98     1,621,926       4,491   1.11     1,813,164       5,379   1.19
Borrowed funds     195,934       490   1.01     203,548       515   1.02     262,525       687   1.05
Senior and subordinated debt     231,123       3,646   6.34     248,232       4,058   6.57     137,747       2,279   6.64
  Total interest-bearing liabilities     5,258,343       8,814   0.67     5,305,847       10,086   0.76     5,490,887       9,935   0.73
Demand deposits     1,797,854                 1,591,198                 1,465,438            
  Total funding sources     7,056,197                 6,897,045                 6,956,325            
Other liabilities     80,491                 89,778                 80,000            
Stockholders' equity - common     977,054                 970,368                 941,770            
Stockholders' equity - preferred     -                 -                 193,000            
  Total liabilities and stockholders' equity   $ 8,113,742               $ 7,957,191               $ 8,171,095            
Net interest income/margin (1)           $ 70,028   3.88           $ 68,474   3.88           $ 74,878   4.10
                                                       
   
(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 assists management in assessing 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 second quarter 2012 increased $156.6 million, or 2.2%, from first quarter 2012 and declined $76.2 million, or 1.0%, compared to second quarter 2011. Loan growth across several categories, particularly commercial and industrial ("C&I"), resulted in higher average loans, excluding covered loans, and drove the rise in interest-earning assets from first quarter 2012. The decrease from second quarter 2011 was due primarily to the continuing decline in covered interest-earning assets.

Average funding sources for second quarter 2012 were $159.2 million higher than first quarter 2012 and up $99.9 million from second quarter 2011. For second quarter 2012 compared to both prior periods, growth in demand deposits offset the decline in interest-bearing liabilities, which resulted in a more favorable product mix. In addition, the increase from first quarter 2012 also reflected seasonal growth in public fund balances.

The growth in average senior and subordinated debt for second quarter 2012 compared to second quarter 2011 is attributed to the issuance of $115.0 million in senior debt during the fourth quarter of 2011. Interest paid on the senior debt reduced net interest margin by 10 basis points for first and second quarter 2012.

Tax-equivalent net interest margin for second quarter 2012 was stable at 3.88% compared to first quarter 2012 and 22 basis points lower than second quarter 2011. The decrease from second quarter 2011 primarily reflects the impact of lower yields earned on investment securities and loans, resulting from a decline in market interest rates, and the cost of additional senior debt, partially offset by lower rates paid for other interest-bearing deposits.

Interest earned on covered loans is generally recognized through the accretion of the discount taken on expected future cash flows. The increase in the yield on covered interest-earning assets from first quarter 2012 was driven by adjustments for revised estimates of future cash flows. The yield decreased from second quarter 2011 due to adjustments in the prior period related to actual cash realized in excess of estimates upon final settlement of certain covered loans that were not experienced in the current quarter.

   
   
Noninterest Income Analysis  
(Dollar amounts in thousands)  
   
    Quarters Ended     June 30, 2012
Percent Change From
 
    June 30,
 2012
    March 31,
 2012
    June 30,
2011
    March 31,
2012
    June 30,
2011
 
Service charges on deposit accounts   $ 8,848     $ 8,660     $ 9,563     2.2     (7.5 )
Wealth management fees     5,394       5,392       5,237     0.0     3.0  
Other service charges, commissions, and fees     4,097       3,520       4,243     16.4     (3.4 )
Card-based fees     5,312       5,020       5,162     5.8     2.9  
  Total fee-based revenues     23,651       22,592       24,205     4.7     (2.3 )
Bank-owned life insurance ("BOLI") income     404       248       259     62.9     56.0  
Other income     406       1,135       501     (64.2 )   (19.0 )
  Total operating revenues     24,461       23,975       24,965     2.0     (2.0 )
Net trading (losses) gains (1)     (575 )     1,401       (2 )   N/M     N/M  
Net securities gains (losses)     151       (943 )     1,531     N/M     N/M  
Gain on early extinguishment of debt     -       256       -     N/M     N/M  
  Total noninterest income   $ 24,037     $ 24,689     $ 26,494     (2.6 )   (9.3 )
 
N/M - Not meaningful.
   
(1) Net trading (losses) gains result from changes in the fair value of diversified investment securities held in a grantor trust under deferred compensation agreements and are substantially offset by nonqualified plan expense for each period presented.
   
   

Fee-based revenues for second quarter 2012 grew 4.7% compared to first quarter 2012 and declined 2.3% compared to second quarter 2011. The increase in fee-based revenues from first quarter 2012 to second quarter 2012 was due to higher service charges on business accounts (included in service charges on deposit accounts) resulting from price increases and successful cross-selling initiatives. In addition, increased transaction volumes contributed to a rise in merchant fees (included in other service charges, commissions, and fees) and card-based fees.

The variance in fee-based revenues from second quarter 2011 to second quarter 2012 resulted from lower non-sufficient funds ("NSF") fees (included in service charges on deposit accounts) and was mitigated by increases in service charges on business accounts as discussed above and higher card-based fees from growth in the number of outstanding cards.

   
   
Noninterest Expense Analysis  
(Dollar amounts in thousands)  
   
    Quarters Ended   June 30, 2012
Percent Change From
 
    June 30,
 2012
    March 31,
 2012
    June 30,
2011
  March 31,
2012
    June 30,
2011
 
Salaries and wages   $ 24,446     $ 25,699     $ 25,436   (4.9 )   (3.9 )
Nonqualified plan expense (1)     (594 )     1,558       57   (138.1 )   N/M  
Retirement and other employee benefits     5,714       6,793       6,061   (15.9 )   (5.7 )
  Total compensation expense     29,566       34,050       31,554   (13.2 )   (6.3 )
Write-downs of OREO     1,824       690       1,523   164.3     19.8  
Net losses (gains) on sales of OREO     703       (387 )     1,900   (281.7 )   (63.0 )
Net OREO operating expense     1,597       1,561       1,800   2.3     (11.3 )
  Total OREO expense     4,124       1,864       5,223   121.2     (21.0 )
Loan remediation costs     3,594       2,788       2,878   28.9     24.9  
Other professional services     3,311       2,841       2,762   16.5     19.9  
  Total professional services     6,905       5,629       5,640   22.7     22.4  
Net occupancy and equipment expense     7,513       8,331       8,012   (9.8 )   (6.2 )
Technology and related costs     2,851       2,858       2,697   (0.2 )   5.7  
FDIC premiums     1,659       1,719       1,708   (3.5 )   (2.9 )
Advertising and promotions     1,032       870       1,378   18.6     (25.1 )
Other expenses     7,507       7,292       9,507   2.9     (21.0 )
  Total noninterest expense   $ 61,157     $ 62,613     $ 65,719   (2.3 )   (6.9 )
 
N/M - Not meaningful.
 
(1) Nonqualified plan expense results from changes in the Company's obligation to participants under deferred compensation agreements.
   
   

Total noninterest expense for second quarter 2012 declined 2.3% compared to first quarter 2012 and 6.9% compared to second quarter 2011.

Second quarter 2012 salaries and wages decreased by $1.3 million from first quarter 2012 and $1.0 million from second quarter 2011 due to the organizational realignment in fourth quarter 2011, resulting in the reduction of approximately 100 positions, and higher levels of deferred salaries from new loan growth, partially offset by annual merit increases. The decline in retirement and other employee benefits compared to first quarter 2012 and second quarter 2011 was impacted by the timing of certain benefit accruals.

The increase in OREO expenses from first quarter 2012 resulted from greater asset sales and write-downs related to the reappraisal of property values and alignment of underlying collateral values with remediation strategies.

Loan remediation costs were elevated in second quarter 2012 compared to both prior periods presented due to an increase in legal fees incurred to remediate problem credits and higher real estate taxes paid by the Company to preserve its rights to collateral associated with problems loans.

Compared to first quarter 2012, net occupancy expense decreased in the current period as a result of normal seasonal declines in certain maintenance and utilities costs. In addition, a decrease in real estate taxes contributed to lower net occupancy expense in second quarter 2012 compared to both prior periods presented.

LOAN PORTFOLIO AND ASSET QUALITY

   
Loan Portfolio Composition  
(Dollar amounts in thousands)  
   
    As Of   June 30, 2012
 Percent Change From
 
    June 30,
2012
  March 31,
2012
  June 30,
2011
  March 31,
2012
    June 30,
2011
 
Corporate:                              
  Commercial and industrial   $ 1,597,427   $ 1,496,966   $ 1,518,772   6.7     5.2  
  Agricultural     272,742     237,686     237,518   14.7     14.8  
  Commercial real estate:                              
    Office     495,901     480,288     415,654   3.3     19.3  
    Retail     375,078     371,258     324,977   1.0     15.4  
    Industrial     520,150     515,353     488,469   0.9     6.5  
    Multi-family     308,250     301,356     336,138   2.3     (8.3 )
    Residential construction     88,908     99,768     129,327   (10.9 )   (31.3 )
    Commercial construction     147,626     142,307     146,679   3.7     0.6  
    Other commercial real estate (1)     817,071     829,005     852,966   (1.4 )   (4.2 )
      Total commercial real estate     2,752,984     2,739,335     2,694,210   0.5     2.2  
        Total corporate loans     4,623,153     4,473,987     4,450,500   3.3     3.9  
Consumer:                              
  Home equity loans     398,428     406,367     429,923   (2.0 )   (7.3 )
  1-4 family mortgages     237,341     217,729     185,002   9.0     28.3  
  Installment loans     39,104     39,245     47,486   (0.4 )   (17.7 )
        Total consumer loans     674,873     663,341     662,411   1.7     1.9  
      Total loans, excluding covered loans     5,298,026     5,137,328     5,112,911   3.1     3.6  
Covered loans     230,047     251,376     314,942   (8.5 )   (27.0 )
      Total loans   $ 5,528,073   $ 5,388,704   $ 5,427,853   2.6     1.8  
   
(1) Approximately $50 million of loans as of June 30, 2011 were reclassified into other categories as of June 30, 2012, primarily office and retail commercial real estate.
   
   

Total loans, excluding covered loans, of $5.3 billion grew by $160.7 million from March 31, 2012 and $185.1 million from June 30, 2011, reflecting the impact of broader product offerings and expanded sales distribution within our markets. The Company experienced growth of 6.7% in C&I loans and 14.7% in agricultural lending from March 31, 2012. Continued efforts to reduce lending exposure to less favorable real estate categories contributed to the decline in the residential construction portfolio.

In addition to C&I loans and agricultural lending, the increase from June 30, 2011 to June 30, 2012 also benefitted from growth in the office, retail and industrial portfolio, and 1-4 family mortgages.

   
   
Asset Quality, Excluding Covered Loans and Covered OREO (1)  
(Dollar amounts in thousands)  
   
    As Of     June 30, 2012
Percent Change From
 
    June 30,
2012
    March 31,
2012
    June 30,
2011
    March 31,
2012
    June 30,
2011
 
Non-accrual loans   $ 198,508     $ 199,545     $ 177,495     (0.5 )   11.8  
90 days or more past due loans     8,192       7,674       6,502     6.8     26.0  
  Total non-performing loans     206,700       207,219       183,997     (0.3 )   12.3  
Troubled debt restructurings (still accruing interest) ("TDRs")     7,811       2,076       14,529     276.3     (46.2 )
OREO     28,309       35,276       24,407     (19.7 )   16.0  
  Total non-performing assets   $ 242,820     $ 244,571     $ 222,933     (0.7 )   8.9  
30-89 days past due loans   $ 23,597     $ 21,241     $ 30,424     11.1     (22.4 )
Allowance for credit losses   $ 118,682     $ 118,764     $ 139,831     (0.1 )   (15.1 )
Non-accrual loans to total loans     3.75 %     3.88 %     3.47 %            
Non-performing loans to total loans     3.90 %     4.03 %     3.60 %            
Non-performing assets to loans plus OREO     4.56 %     4.73 %     4.34 %            
Allowance for credit losses to loans     2.24 %     2.31 %     2.73 %            
Allowance for credit losses to non-accrual loans     60 %     60 %     79 %            
   
(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 $242.8 million at June 30, 2012, a reduction of $1.8 million from March 31, 2012. While non-accrual loans remained relatively consistent with the prior quarter, the mix of non-performing assets improved as TDRs increased $5.7 million.

During the quarter, management restructured $7.0 million of loans at market rates and terms incurring a loss of approximately $800,000. Management expects to reclassify these loans from restructured to performing in the first quarter of 2013, assuming continued performance. Also, during second quarter 2012, the Company sold $13.4 million of OREO with proceeds of approximately 94% of carrying value and recorded additional write-downs of $1.7 million related to updated appraisals and changes in strategies intended to accelerate disposition.

The Company increased the provision for loan losses from first quarter 2012 by $4.2 million, which maintained the allowance for credit losses at $118.7 million and supports management's ongoing assessment of credit quality.

 
 
Charge-off Data
(Dollar amounts in thousands)
 
    Quarters Ended
    June 30,
2012
    % of
Total
  March 31,
2012
    % of
Total
    June 30,
2011
    % of
Total
Net loan charge-offs (1):                                      
  Commercial and industrial   $ 5,871     27.8   $ 7,524     35.6     $ 5,585     28.2
  Agricultural     18     0.1     (50 )   (0.2 )     799     4.0
  Office, retail, and industrial     2,264     10.7     2,665     12.6       609     3.1
  Multi-family     312     1.5     9     -       6,652     33.6
  Residential construction     3,598     17.1     463     2.2       899     4.5
  Commercial construction     2,616     12.4     170     0.8       133     0.7
  Other commercial real estate     2,934     18.6     8,177     38.7       2,107     10.6
  Consumer     2,493     11.8     2,176     10.3       3,043     15.3
    Total net loan charge-offs, excluding covered loans     20,106     100.0     21,134     100.0       19,827     100.0
    Net covered loan charge-offs (1)     2,434           274             4,108      
      Total net loan charge-offs   $ 22,540         $ 21,408           $ 23,935      
Net loan charge-offs to average loans, excluding covered loans, annualized:                                      
  Quarter-to-date     1.55 %         1.67 %           1.56 %    
  Year-to-date     1.61 %         1.67 %           1.52 %    
   
(1) Amounts represent charge-offs, net of recoveries.
   
   

Approximately one-third of the charge-offs, excluding covered charge-offs, for the quarter was comprised of three construction credits and reflects the alignment of underlying collateral values with current appraisals and planned remediation strategies.

Management periodically revises its estimates of future cash flows from covered loans. Increases in cash flows are recognized prospectively in interest income. The present value of any decreases in expected cash flows, net of reimbursement from the FDIC, is recorded in the current period through a charge-off in the allowance for loan losses.

CAPITAL MANAGEMENT

   
Capital Ratios  
(Dollar amounts in thousands)  
   
    June 30,
2012
    December
31, 2011
    Regulatory
Minimum For
"Well-
Capitalized"
    Excess Over
Required Minimums
at June 30, 2012
 
Regulatory capital ratios:                        
  Total capital to risk-weighted assets   13.26 %   13.68 %   10.00 %   33 %   $ 208,744  
  Tier 1 capital to risk-weighted assets   11.21 %   11.61 %   6.00 %   87 %   $ 333,978  
  Tier 1 leverage to average assets   9.24 %   9.28 %   5.00 %   85 %   $ 329,882  
Tier 1 common capital to risk-weighted assets (1)   10.21 %   10.26 %   N/A (2)     N/A (2)       N/A (2)  
Tangible common equity ratios (3):                                
  Tangible common equity to tangible assets   8.91 %   8.83 %   N/A (2)     N/A (2)       N/A (2)  
  Tangible common equity, excluding other comprehensive loss, to tangible assets   9.06 %   9.00 %   N/A (2)     N/A (2)       N/A (2)  
  Tangible common equity to risk- weighted assets   10.87 %   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 TCE measures the Company's earnings as a percentage of TCE. In management's view, Tier 1 common and TCE 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 June 30, 2012 exceeded all regulatory mandated ratios for characterization as "well-capitalized."

In first quarter 2012, the Company repurchased and retired approximately $21 million out of a total of $84.7 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 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, July 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. 10015755 beginning one hour after completion of the live call until 9:00 A.M. (ET) on August 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)  
   
    June 30,
2012
    March 31,
2012
    December
31, 2011
    June 30,
2011
 
Assets                                
Cash and due from banks   $ 110,924     $ 105,722     $ 123,354     $ 110,159  
Interest-bearing deposits in other banks     367,238       380,651       518,176       601,310  
Trading securities, at fair value     15,314       16,031       14,469       16,230  
Securities available-for-sale, at fair value     1,174,931       1,183,975       1,013,006       1,009,873  
Securities held-to-maturity, at amortized cost     60,933       56,319       60,458       76,142  
Federal Home Loan Bank and Federal Reserve Bank stock, at cost     46,750       46,750       58,187       58,187  
Loans, excluding covered loans     5,298,026       5,137,328       5,088,113       5,112,911  
Covered loans     230,047       251,376       260,502       314,942  
Allowance for loan losses     (116,182 )     (116,264 )     (119,462 )     (137,331 )
  Net loans     5,411,891       5,272,440       5,229,153       5,290,522  
OREO, excluding covered OREO     28,309       35,276       33,975       24,407  
Covered OREO     9,136       16,990       23,455       14,583  
FDIC indemnification asset     58,302       58,488       65,609       95,752  
Premises, furniture, and equipment     133,638       132,865       134,977       131,952  
Investment in bank-owned life insurance     206,572       206,304       206,235       198,149  
Goodwill and other intangible assets     281,981       282,815       283,650       284,120  
Accrued interest receivable and other assets     193,436       193,376       208,890       218,005  
  Total assets   $ 8,099,355     $ 7,988,002     $ 7,973,594     $ 8,129,391  
Liabilities and Stockholders' Equity                                
Deposits                                
Transactional deposits   $ 5,121,261     $ 4,897,093     $ 4,820,058     $ 4,731,329  
Time deposits     1,506,482       1,589,270       1,659,117       1,764,220  
  Total deposits     6,627,743       6,486,363       6,479,175       6,495,549  
Borrowed funds     189,524       202,155       205,371       272,024  
Senior and subordinated debt     231,138       231,106       252,153       137,748  
Accrued interest payable and other liabilities     72,398       95,677       74,308       82,828  
  Total liabilities     7,120,803       7,015,301       7,011,007       6,988,149  
Preferred stock     -       -       -       191,220  
Common stock     858       858       858       858  
Additional paid-in capital     414,665       413,742       428,001       424,877  
Retained earnings     823,250       817,630       810,487       801,723  
Accumulated other comprehensive loss, net of tax     (11,867 )     (10,919 )     (13,276 )     (15,339 )
Treasury stock, at cost     (248,354 )     (248,610 )     (263,483 )     (262,097 )
  Total stockholders' equity     978,552       972,701       962,587       1,141,242  
  Total liabilities and stockholders' equity   $ 8,099,355     $ 7,988,002     $ 7,973,594     $ 8,129,391  
                                   
                                   
   
Condensed Consolidated Statements of Income  
Unaudited  
(Amounts in thousands, except per share data)  
   
    Quarters Ended  
    June 30,
2012
    March 31,
2012
    June 30,
2011
 
Interest Income                        
Loans   $ 61,993     $ 61,491     $ 63,089  
Investment securities     8,414       8,934       9,848  
Covered loans     4,473       4,202       7,655  
Federal funds sold and other short-term investments     638       641       704  
    Total interest income     75,518       75,268       81,296  
Interest Expense                        
Deposits     4,678       5,513       6,969  
Borrowed funds     490       515       687  
Senior and subordinated debt     3,646       4,058       2,279  
    Total interest expense     8,814       10,086       9,935  
    Net interest income     66,704       65,182       71,361  
Provision for loan losses     22,458       18,210       18,763  
    Net interest income after provision for loan losses     44,246       46,972       52,598  
Noninterest Income                        
Service charges on deposit accounts     8,848       8,660       9,563  
Wealth management fees     5,394       5,392       5,237  
Other service charges, commissions, and fees     4,097       3,520       4,243  
Card-based fees     5,312       5,020       5,162  
    Total fee-based revenues     23,651       22,592       24,205  
Net securities gains (losses)     151       (943 )     1,531  
Net trading (losses) gains     (575 )     1,401       (2 )
Other     810       1,639       760  
    Total noninterest income     24,037       24,689       26,494  
Noninterest Expense                        
Salaries and employee benefits     29,566       34,050       31,554  
OREO expense, net     4,124       1,864       5,223  
Net occupancy and equipment expense     7,513       8,331       8,012  
Technology and related costs     2,851       2,858       2,697  
Professional services     6,905       5,629       5,640  
FDIC premiums     1,659       1,719       1,708  
Other     8,539       8,162       10,885  
    Total noninterest expense     61,157       62,613       65,719  
Income before income tax expense     7,126       9,048       13,373  
Income tax expense     761       1,156       2,720  
    Net income     6,365       7,892       10,653  
Preferred dividends     -       -       (2,582 )
Net income applicable to non-vested restricted shares     (76 )     (139 )     (100 )
  Net income applicable to common shares   $ 6,289     $ 7,753     $ 7,971  
    Diluted earnings per common share   $ 0.09     $ 0.11     $ 0.11  
    Dividends declared per common share   $ 0.01     $ 0.01     $ 0.01  
Weighted average diluted common shares outstanding     73,659       73,505       73,259  
                         
                         

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