SOURCE: First Midwest Bancorp, Inc.

First Midwest Bancorp, Inc.

January 20, 2015 19:36 ET

First Midwest Bancorp, Inc. Announces 2014 Fourth Quarter and Full Year Results

Strong Core Earnings, Significantly Improved Asset Quality, Acquisitions Substantially Integrated

ITASCA, IL--(Marketwired - Jan 20, 2015) - First Midwest Bancorp, Inc. (the "Company" or "First Midwest") (NASDAQ: FMBI), the holding company of First Midwest Bank (the "Bank"), today reported results of operations and financial condition for the fourth quarter of 2014. Net income for the fourth quarter of 2014 was $14.6 million, or $0.19 per share. This compares to $18.5 million, or $0.25 per share, for the third quarter of 2014 and $19.2 million, or $0.26 per share, for the fourth quarter of 2013. Excluding acquisition and integration related expenses, earnings per share was $0.27 for the fourth quarter of 2014 and $0.28 for the third quarter of 2014.

For the full year of 2014, the Company reported net income of $69.3 million, or $0.92 per share, compared to $79.3 million, or $1.06 per share, for the year ended December 31, 2013. Earnings per share was $1.03 for the year ended December 31, 2014, excluding acquisition and integration related expenses.

"Performance for the fourth quarter of 2014 was strong, benefiting from consistent, balanced business execution throughout the year," said Michael L. Scudder, President and Chief Executive Officer of First Midwest Bancorp, Inc. "Sales success across our business lines, combined with our acquisitions of Great Lakes Bank and the Popular Community Bank branches, significantly expanded and strengthened our balance sheet. Our acquisition of National Machine Tool added leasing capabilities and an experienced sales team to our line of commercial offerings. Importantly, our results for the year reflected balanced execution across all of our business lines, significantly improved credit metrics, and successful completion of three acquisitions during the second half of 2014."

Mr. Scudder continued, "As we enter 2015, our business momentum is building amid expectations of improving operating conditions and, ultimately, a transition to higher rates. As we navigate this environment, a talented and engaged team of colleagues combined with strong capital and core deposit foundations leave us well positioned for continued growth and enhanced shareholder value."

FOURTH QUARTER HIGHLIGHTS

Robust Operating Performance

  • Earned $0.27 per share, excluding acquisition and integration related expenses, compared to $0.26 for the fourth quarter of 2013.

  • Increased top-line revenue to $111 million, up 4% and 12% from September 30, 2014 and December 31, 2013, respectively.

  • Improved net interest margin to 3.76%, up 4 basis points from September 30, 2014 and 14 basis points from December 31, 2013.

  • Strong fee-based revenues of $29 million, consistent with the third quarter of 2014 and up 10% from the fourth quarter of 2013.

  • Increase of $14.5 million in noninterest expense from September 30, 2014 primarily due to higher acquisition, integration, and operating costs of the acquisitions, targeted remediation costs, and certain other transaction related expenses.

Strengthened Balance Sheet

  • Expanded total loans to nearly $7 billion at December 31, 2014, an increase of 3% from September 30, 2014 and 18% from December 31, 2013.

  • Increased average core transactional deposits 6% from September 30, 2014 and 15% from December 31, 2013.

Improved Credit and Capital

  • Reduced non-performing assets to loans plus OREO to 1.49%, down 27 basis points from September 30, 2014 and 64 basis points from December 31, 2013.

  • Decreased the fourth quarter of 2014 net charge-offs to average loans to 13 basis points, reflecting improvement in the underlying loan portfolio.

  • Grew Tier 1 common capital to risk-weighted assets to 9.54%, a 16 basis point increase from September 30, 2014.

  • Increased dividends per share to $0.31 for the year ended December 31, 2014, up 94% from the same period in 2013.

Significant Quarter Event

  • Completed the acquisition and operating system conversion of Great Lakes Financial Resources, Inc.

ACQUISITIONS

On August 8, 2014, the Bank completed the acquisition of the Chicago banking operations of Popular Community Bank ("Popular"). The acquisition included Popular's twelve full-service retail banking offices and its small business and middle market commercial lending activities in the Chicago metropolitan area. On the date of acquisition, the Bank acquired $550 million in loans and $732 million in deposits.

On September 26, 2014, the Bank completed the acquisition of National Machine Tool Financial Corporation ("National Machine Tool"). In business for more than 28 years and a customer of the Bank for more than 15 years, National Machine Tool provides equipment leasing and financing alternatives to traditional bank financing.

On December 2, 2014, the Company completed the acquisition of the south suburban Chicago-based Great Lakes Financial Resources, Inc. ("Great Lakes"). As part of the transaction, the Company acquired seven full-service retail banking offices, one drive-up location, $223 million in loans, and $466 million in deposits on the date of acquisition.

The conversion and integration of these transactions were substantially complete as of December 31, 2014.

OPERATING PERFORMANCE

 
Net Interest Income and Margin Analysis
(Dollar amounts in thousands)
 
    Quarters Ended
    December 31, 2014   September 30, 2014   December 31, 2013
    Average Balance     Interest
Earned/
Paid
  Yield/
Rate
(%)
  Average
Balance
    Interest
Earned/
Paid
  Yield/
Rate
(%)
  Average
Balance
    Interest
Earned/
Paid
  Yield/
Rate
(%)
Assets:                                                      
Other interest-earning assets   $ 625,183     $ 527   0.33   $ 476,768     $ 313   0.26   $ 610,792     $ 448   0.29
Trading securities     18,100       88   1.94     18,363       30   0.65     16,569       72   1.74
Investment securities (1)     1,095,446       9,904   3.62     1,067,742       9,659   3.62     1,211,868       10,582   3.49
Federal Home Loan Bank and Federal Reserve Bank stock     36,209       342   3.78     35,588       341   3.83     35,161       332   3.78
Loans (1)(2)     6,545,967       73,371   4.45     6,302,883       69,458   4.37     5,675,293       63,728   4.45
  Total interest-earning assets (1)     8,320,905       84,232   4.02     7,901,344       79,801   4.01     7,549,683       75,162   3.95
Cash and due from banks     126,317                 126,279                 123,128            
Allowance for loan and covered loan losses     (74,686 )               (77,596 )               (91,860 )          
Other assets     859,633                 818,066                 793,359            
    Total assets   $ 9,232,169               $ 8,768,093               $ 8,374,310            
Liabilities and Stockholders' Equity:                                                      
Interest-bearing transaction deposits   $ 4,144,391       984   0.09   $ 3,906,975       865   0.09   $ 3,678,591       788   0.08
Time deposits     1,255,355       1,479   0.47     1,226,025       1,941   0.63     1,234,517       1,953   0.63
Borrowed funds     111,213       12   0.04     101,674       9   0.04     213,761       390   0.72
Senior and subordinated debt     194,137       3,015   6.16     191,013       3,016   6.26     207,162       3,301   6.32
  Total interest-bearing liabilities     5,705,096       5,490   0.38     5,425,687       5,831   0.43     5,334,031       6,432   0.48
Demand deposits     2,339,298                 2,208,450                 1,956,570            
  Total funding sources     8,044,394                 7,634,137                 7,290,601            
Other liabilities     115,093                 83,075                 87,250            
Stockholders' equity - common     1,072,682                 1,050,881                 996,459            
    Total liabilities and stockholders' equity   $ 9,232,169               $ 8,768,093               $ 8,374,310            
Net interest income/margin (1)           $ 78,742   3.76           $ 73,970   3.72           $ 68,730   3.62
                                                       
(1) Interest income and yields on tax-exempt securities and loans are presented on a tax-equivalent basis, assuming a federal income tax rate of 35%. This non-GAAP financial measure assists management in comparing revenue from both taxable and tax-exempt sources. The corresponding income tax impact related to tax-exempt items is recorded in income tax expense. These adjustments have no impact on net income. See the accompanying Supplemental Financial Information for details on the calculation of tax-equivalent net interest income.
   
(2) Includes loans acquired through Federal Deposit Insurance Corporation ("FDIC")-assisted transactions subject to loss sharing agreements ("covered loans") and a related FDIC indemnification asset.
   

For the fourth quarter of 2014, total average interest-earning assets rose $419.6 million and $771.2 million from the third quarter of 2014 and the fourth quarter of 2013, respectively, driven by loans acquired in the Popular and Great Lakes acquisitions during the second half of 2014 and solid organic loan growth over the course of the year.

Total average funding sources for the fourth quarter of 2014 increased $410.3 million from the third quarter of 2014 and $753.8 million from the fourth quarter of 2013. The rise in both prior periods resulted mainly from acquisition activity. The decline in borrowed funds from the fourth quarter of 2013 was due to the prepayment of $114.6 million of FHLB advances with a weighted-average rate of 1.08% during the second quarter of 2014, which is net of the yield earned on the cash used for the prepayment.

Tax-equivalent net interest margin for the fourth quarter of 2014 was 3.76%, a rise of 4 basis points from the third quarter of 2014 and 14 basis points from the fourth quarter of 2013. The Popular and Great Lakes acquisitions contributed to the increases, adding a greater proportion of higher yielding, fixed rate loans along with low cost deposits. In addition, net accretion resulting from the fair value adjustments on acquired assets and assumed liabilities contributed 8 basis points and 3 basis points to the tax-equivalent net interest margin in the fourth and third quarters of 2014, respectively. A decrease in the yield on covered interest-earning assets partially offset these increases. Certain loan hedging strategies and the prepayment of the FHLB advances contributed to the increase in tax-equivalent net interest margin compared to the fourth quarter of 2013.

Compared to the third quarter of 2014, tax-equivalent net interest income rose $4.8 million due primarily to the full quarter impact of the Popular acquisition, which included approximately $1.6 million of net accretion, and the December acquisition of Great Lakes. The $10.0 million increase in tax-equivalent net interest income compared to the fourth quarter of 2013 was mainly due to the acquisitions and loan growth, which was funded by a rise in core transactional deposits that also replaced higher costing time deposits and borrowed funds.

   
Noninterest Income Analysis  
(Dollar amounts in thousands)  
   
    Quarters Ended     December 31, 2014
Percent Change From
 
    December 31, 2014     September 30, 2014     December 31, 2013     September 30, 2014     December 31, 2013  
Service charges on deposit accounts   $ 10,015     $ 9,902     $ 9,259     1.1     8.2  
Wealth management fees     6,744       6,721       6,202     0.3     8.7  
Card-based fees     6,390       6,646       5,517     (3.9 )   15.8  
Merchant servicing fees     2,703       2,932       2,585     (7.8 )   4.6  
Mortgage banking income     812       1,125       1,055     (27.8 )   (23.0 )
Other service charges, commissions, and fees     2,700       2,334       2,094     15.7     28.9  
  Total fee-based revenues     29,364       29,660       26,712     (1.0 )   9.9  
Net securities (losses) gains     (63 )     2,570       147     N/M     N/M  
BOLI income     843       767       584     9.9     44.3  
Other income     613       512       313     19.7     95.8  
Net trading gains (losses) (1)     311       (356 )     1,057     N/M     (70.6 )
Gains on sales of properties     -       3,954       -     (100.0 )   -  
Losses on early extinguishment of debt     -       -       (1,034 )   -     (100.0 )
    Total noninterest income   $ 31,068     $ 37,107     $ 27,779     (16.3 )   11.8  
                                         
N/M - Not meaningful.
   
(1) Net trading gains (losses) 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.
   

Total fee-based revenues increased 9.9% from the fourth quarter of 2013, reflecting growth across most categories. Higher levels of service charge volume, primarily from customers acquired in the Popular and Great Lakes transactions, drove the rise in service charges on deposit accounts. New customer relationships continued to drive the increase in wealth management fees. The increase in card-based fees reflects higher transaction volumes along with incentives from a renewed vendor contract.

Compared to the linked quarter, total fee-based revenues were consistent. Overall, increases in fee-based revenues due to the acquisitions were offset by lower levels of mortgage banking income, driven by a valuation adjustment relating to mortgage servicing rights, and the impact of a renewed vendor contract within card-based fees during the third quarter of 2014. The normal seasonal decline in merchant servicing fees was substantially offset by lower merchant card expense.

The rise in other service charges, commissions, and fees compared to both prior periods was driven primarily by gains realized on the sale of certain equipment leasing contracts. These sales were generated from a new commercial product offering introduced with the acquisition of National Machine Tool in the third quarter of 2014.

Total noninterest income of $31.1 million decreased 16.3% from the linked quarter and grew 11.8% from the fourth quarter of 2013. During the third quarter of 2014, the Company sold longer-duration corporate bonds out of the Company's securities portfolio at a pre-tax gain of $2.0 million and disposed of two branch properties, which generated pre-tax gains of $4.0 million. The Company repurchased and retired $23.3 million of 6.95% junior subordinated debentures during the fourth quarter of 2013, which resulted in a pre-tax loss of $1.0 million.

   
Noninterest Expense Analysis  
(Dollar amounts in thousands)  
   
    Quarters Ended   December 31, 2014
Percent Change From
 
    December 31, 2014   September 30, 2014     December 31, 2013   September 30,
2014
    December 31, 2013  
Salaries and employee benefits:                                
  Salaries and wages   $ 32,175   $ 28,538     $ 27,286   12.7     17.9  
  Nonqualified plan expense (1)     465     (386 )     1,305   N/M     (64.4 )
  Retirement and other employee benefits     7,660     7,319       6,399   4.7     19.7  
    Total salaries and employee benefits     40,300     35,471       34,990   13.6     15.2  
Net occupancy and equipment expense     9,479     8,639       7,910   9.7     19.8  
Professional services     6,664     5,692       5,592   17.1     19.2  
Technology and related costs     3,444     3,253       2,984   5.9     15.4  
Merchant card expense     2,203     2,396       2,076   (8.1 )   6.1  
Advertising and promotions     2,418     1,822       2,144   32.7     12.8  
Net OREO expense     2,544     1,406       2,815   80.9     (9.6 )
Cardholder expenses     1,036     1,120       1,019   (7.5 )   1.7  
Other expenses     7,446     6,766       5,264   10.1     41.5  
Acquisition and integration related expenses     9,294     3,748       -   N/M     100.0  
      Total noninterest expense   $ 84,828   $ 70,313     $ 64,794   20.6     30.9  
                                       
N/M - Not meaningful.
   
(1) Nonqualified plan expense results from changes in the Company's obligation to participants under deferred compensation agreements and is substantially offset by earnings on the related assets included in noninterest income.
   

Excluding acquisition and integration related expenses, total noninterest expense for the fourth quarter of 2014 increased 13.5% from the third quarter of 2014 and 16.6% from the fourth quarter of 2013. The remaining increase from the third quarter of 2014 was due to a rise in operating costs attendant to Popular, National Machine Tool, and Great Lakes, additional staffing and higher salaries in response to growth and organizational needs, targeted remediation costs, and the timing of certain compensation and benefit accruals, impacted in part by the acquisitions.

Recurring costs associated with operating the newly acquired Popular, National Machine Tool, and Great Lakes locations of approximately $3.5 million and $2.0 million for the fourth and third quarters of 2014, respectively, were primarily concentrated in salaries and employee benefits, net occupancy and equipment expense, professional services, and other expenses. The conversion and integration of these transactions is substantially complete with certain remaining efficiencies to be implemented in the first half of 2015.

Compared to both prior periods, the rise in salaries and wages also reflects the timing of certain incentive compensation accruals, impacted by acquisition results, as well as additional staff and higher salaries in response to growth and organizational needs. Lower levels of deferred loan origination costs contributed to the variance from the third quarter of 2014.

Retirement and other employee benefits increased from the third quarter of 2014 and the fourth quarter of 2013 due to the timing of certain profit sharing expenses. A reduction in pension expense as a result of changes to the Company's defined benefit pension plan partially offset these increases compared to the fourth quarter of 2013.

Professional services were elevated from the third quarter of 2014 due to remediation costs on select significant credits, contributing to the improvements in credit quality. In addition, personnel recruitment costs increased in response to growth and organizational needs compared to both prior periods.

A $1.6 million valuation adjustment on an OREO property resulted in the rise in net OREO expense compared to the third quarter of 2014.

Other expenses were lower in the fourth quarter of 2013 due to a $770,000 reduction in the reserve for unfunded commitments.

LOAN PORTFOLIO AND ASSET QUALITY

   
Loan Portfolio Composition  
(Dollar amounts in thousands)  
   
    As Of   December 31, 2014
Percent Change From
 
    December 31, 2014              
    Legacy and Popular (1)   Great Lakes   Total   September 30, 2014 (1)   December 31, 2013   September 30, 2014     December 31, 2013  
Corporate                                          
Commercial and industrial   $ 2,219,501   $ 34,055   $ 2,253,556   $ 2,208,166   $ 1,830,638   2.1     23.1  
Agricultural     356,507     1,742     358,249     347,511     321,702   3.1     11.4  
Commercial real estate:                                          
  Office     421,306     73,331     494,637     437,222     459,202   13.1     7.7  
  Retail     440,787     11,438     452,225     454,178     392,576   (0.4 )   15.2  
  Industrial     528,200     3,317     531,517     531,122     501,907   0.1     5.9  
  Multi-family     553,190     11,231     564,421     559,689     332,873   0.8     69.6  
  Construction     196,387     7,849     204,236     193,445     186,197   5.6     9.7  
  Other commercial real estate     880,720     7,177     887,897     871,825     807,071   1.8     10.0  
    Total commercial real estate     3,020,590     114,343     3,134,933     3,047,481     2,679,826   2.9     17.0  
    Total corporate loans     5,596,598     150,140     5,746,738     5,603,158     4,832,166   2.6     18.9  
Consumer                                          
Home equity     520,443     22,742     543,185     517,446     427,020   5.0     27.2  
1-4 family mortgages     247,359     44,104     291,463     238,172     275,992   22.4     5.6  
Installment     75,405     627     76,032     69,428     44,827   9.5     69.6  
    Total consumer loans     843,207     67,473     910,680     825,046     747,839   10.4     21.8  
Covered loans     79,435     -     79,435     90,875     134,355   (12.6 )   (40.9 )
    Total loans   $ 6,519,240   $ 217,613   $ 6,736,853   $ 6,519,079   $ 5,714,360   3.3     17.9  
                                               
(1) Loan balances include $500.7 million and $533.2 million in loans as of December 31, 2014 and September 30, 2014, respectively, that were acquired in the Popular business combination and are recorded at fair value as of the acquisition date.

Compared to September 30, 2014, total loans of $6.7 billion increased by 3.3%, driven primarily by the Great Lakes acquisition, which added $217.6 million of loans at December 31, 2014. In addition, growth in our legacy loans of 3.0% on an annualized basis from September 30, 2014 was offset by anticipated paydowns on certain loans acquired in the Popular transaction.

Total loans rose $1.0 billion, or 17.9%, from December 31, 2013. Excluding loans acquired in the Popular and Great Lakes acquisitions of $718.3 million and covered loans, total loans grew $359.1 million, or 6.4%, from December 31, 2013 due primarily to well-balanced growth distributed across the commercial and industrial, agricultural, multi-family, and consumer categories. Strong growth in the commercial and industrial and agricultural loan categories, excluding acquired and covered loans, of 17.4% and 10.8%, respectively, reflects the impact of greater resource investments and expansion into certain sector-based lending areas, such as agri-business, asset-based lending, and healthcare.

   
Asset Quality  
(Dollar amounts in thousands)  
   
    As Of     December 31, 2014
Percent Change From
 
    December 31, 2014     September 30,
2014
    December 31, 2013     September 30,
2014
    December 31, 2013  
Asset quality (1)                                    
Non-accrual loans   $ 58,853     $ 63,858     $ 59,798     (7.8 )   (1.6 )
90 days or more past due loans     771       5,983       3,708     (87.1 )   (79.2 )
  Total non-performing loans     59,624       69,841       63,506     (14.6 )   (6.1 )
Accruing troubled debt restructuring ("TDRs")     3,704       5,449       23,770     (32.0 )   (84.4 )
OREO     25,779       29,165       32,473     (11.6 )   (20.6 )
  Total non-performing assets   $ 89,107     $ 104,455     $ 119,749     (14.7 )   (25.6 )
30-89 days past due loans   $ 13,473     $ 13,459     $ 20,742     0.1     (35.0 )
                                     
Non-accrual loans to total loans     0.99 %     1.08 %     1.07 %            
Non-performing loans to total loans     1.00 %     1.18 %     1.14 %            
Non-performing assets to loans plus OREO     1.49 %     1.76 %     2.13 %            
                                     
Allowance for Credit Losses                                    
Allowance for loan and covered loan losses   $ 72,694     $ 73,106     $ 85,505     (0.6 )   (15.0 )
Reserve for unfunded commitments     1,816       1,616       1,616     12.4     12.4  
  Total allowance for credit losses   $ 74,510     $ 74,722     $ 87,121     (0.3 )   (14.5 )
Allowance for credit losses to loans, excluding acquired loans     1.24 %     1.25 %     1.52 %            
Allowance for credit losses to non-accrual loans (1)     114.33 %     103.47 %     124.69 %            
   
(1) Due to the impact of business combination accounting, which requires acquired loans to be recorded at fair value as of the acquisition date, and protection provided for under loss share agreements with the FDIC ("the FDIC Agreements"), acquired loans and covered loans and covered OREO are excluded from these metrics.
   

Total non-performing loans, excluding acquired and covered loans, were $59.6 million at December 31, 2014, decreasing $10.2 million, or 14.6%, from September 30, 2014 and 6.1% from December 31, 2013. The improvement compared to the linked quarter was due primarily to a $2.3 million paydown of a non-accrual commercial real estate loan and the return of a $3.8 million past due commercial real estate loan relationship to current status.

   
Charge-Off Data  
(Dollar amounts in thousands)  
   
    Quarters Ended  
    December 31, 2014     % of
Total
  September 30, 2014   % of
Total
  December 31, 2013     % of
Total
 
Net loan charge-offs (1):                                    
  Commercial and industrial   $ 1,217     58.8   $ 9,047   56.7   $ 2,528     47.5  
  Agricultural     --     --     --   --     (58 )   (1.1 )
  Office, retail, and industrial     143     6.9     2,459   15.4     882     16.5  
  Multi-family     476     23.0     26   0.2     (10 )   (0.2 )
  Construction     (6 )   (0.3 )   157   1.0     (934 )   (17.5 )
  Other commercial real estate     (247 )   (11.9 )   1,255   7.9     776     14.6  
  Consumer     342     16.5     2,998   18.8     1,868     35.1  
  Covered     146     7.0     5   --     271     5.1  
    Net loan charge-offs   $ 2,071     100.0   $ 15,947   100.0   $ 5,323     100.0  
Net loan charge-offs to average loans, excluding acquired and covered loans, annualized:                                    
Quarter-to-date     0.13 %         1.08 %       0.36 %      
Year-to-date     0.56 %         0.70 %       0.48 %      
 
(1) These amounts represent gross charge-offs, net of recoveries.
 

Net loan charge-offs for the fourth quarter of 2014 represents one of the lowest levels in over seven years. Continued progress in consumer delinquencies and a $1.3 million recovery on an other commercial real estate loan relationship contributed to the decrease compared to the third quarter of 2014. In addition, net loan charge-offs for the third quarter of 2014 were elevated due to the recognition of a $7.5 million loss on a commercial loan relationship, for which the Company continues to aggressively pursue all collection and other remedies.

DEPOSIT PORTFOLIO

 
Deposits - Average Balances
(Dollar amounts in thousands)
 
    Quarters Ended   December 31, 2014
Percent Change From
    December 31, 2014   September 30, 2014   December 31, 2013   September 30, 2014   December 31, 2013
Demand deposits   $ 2,339,298   $ 2,208,450   $ 1,956,570   5.9   19.6
Savings deposits     1,306,388     1,231,700     1,126,737   6.1   15.9
NOW accounts     1,331,360     1,261,522     1,195,471   5.5   11.4
Money market accounts     1,506,643     1,413,753     1,356,383   6.6   11.1
  Core transactional deposits     6,483,689     6,115,425     5,635,161   6.0   15.1
Time deposits     1,239,257     1,209,935     1,218,450   2.4   1.7
Brokered deposits     16,098     16,090     16,067   --   0.2
  Total time deposits     1,255,355     1,226,025     1,234,517   2.4   1.7
    Total deposits   $ 7,739,044   $ 7,341,450   $ 6,869,678   5.4   12.7
                           

Average core transactional deposits of $6.5 billion for the fourth quarter of 2014 increased 6.0% and 15.1% compared to the third quarter of 2014 and the fourth quarter of 2013, respectively. The rise was due primarily to deposits assumed in the Popular and Great Lakes acquisitions, further strengthening the Company's core transactional deposit base, led by an increase in average demand deposits of $382.7 million, or 19.6%, from December 31, 2013.

CAPITAL MANAGEMENT

 
Capital Ratios
(Dollar amounts in thousands)
 
    December 31, 2014     September 30, 2014     December 31, 2013     Regulatory
Minimum
For
"Well-
Capitalized"
    Excess Over
Required Minimums
at December 31, 2014
Bank regulatory capital ratios:                            
  Total capital to risk-weighted assets   12.30 %   11.70 %   13.86 %   10.00 %   23 %   $ 174,021
  Tier 1 capital to risk-weighted assets   11.31 %   10.69 %   12.61 %   6.00 %   89 %   $ 402,677
  Tier 1 leverage to average assets   9.76 %   9.42 %   10.24 %   5.00 %   95 %   $ 418,334
Company regulatory capital ratios:                                    
  Total capital to risk-weighted assets   11.23 %   10.94 %   12.39 %   N/A     N/A       N/A
  Tier 1 capital to risk-weighted assets   10.18 %   9.86 %   10.91 %   N/A     N/A       N/A
  Tier 1 leverage to average assets   9.03 %   8.93 %   9.18 %   N/A     N/A       N/A
Company tier 1 common capital to risk-weighted assets (1)(2)   9.54 %   9.38 %   10.37 %   N/A     N/A       N/A
Company tangible common equity ratios (1)(3):                                    
  Tangible common equity to tangible assets   8.41 %   8.33 %   9.09 %   N/A     N/A       N/A
  Tangible common equity, excluding other comprehensive loss, to tangible assets   8.59 %   8.54 %   9.43 %   N/A     N/A       N/A
  Tangible common equity to risk-weighted assets   9.73 %   9.57 %   10.67 %   N/A     N/A       N/A
 
N/A - Not applicable.
     
(1)   Ratio is not subject to formal Federal Reserve regulatory guidance.
(2)   Excludes the impact of trust-preferred securities.
(3)   Tangible common equity ("TCE") represents common stockholders' equity less goodwill and identifiable intangible assets. In management's view, Tier 1 common capital 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 capital ratios increased from September 30, 2014, driven primarily by continued earnings and the $38.4 million of common stock issued as consideration for the Great Lakes acquisition. The decline in capital ratios compared to December 31, 2013 resulted from the addition of risk-weighted and average assets, including goodwill and other intangible assets, related to the Popular and Great Lakes acquisitions. These declines were partially offset by earnings and the increase in allowable deferred tax assets. The Bank's regulatory ratios exceeded all regulatory mandated ratios for characterization as "well-capitalized" as of December 31, 2014.

The Board of Directors approved a quarterly cash dividend of $0.08 per common share during the fourth quarter of 2014, consistent with the third quarter of 2014, and an increase compared to dividends of $0.07 per common share during the fourth quarter of 2013.

About the Company

First Midwest, with assets of approximately $9.4 billion, is the premier relationship-based financial institution in the Chicago banking market. As one of Illinois' largest independent bank holding companies, First Midwest, through its subsidiary bank and other affiliates, provides a full range of business, middle-market and retail banking and wealth management services through approximately 110 banking offices located in metropolitan Chicago, northwest Indiana, central and western Illinois, and eastern Iowa. First Midwest has been recognized by J.D. Power as having the "Highest Customer Satisfaction with Retail Banking in the Midwest Region*" according to the 2014 Retail Banking Satisfaction Study(SM). The Company website is www.firstmidwest.com.

* First Midwest Bank received the highest numerical score among retail banks in the Midwest region in the proprietary J.D. Power 2014 Retail Banking Satisfaction Study(SM). The Study is based on 80,445 total responses measuring 21 providers in the Midwest region (Iowa, Illinois, Kansas, Missouri, Minnesota, and Wisconsin) and measures opinions of consumers with their primary banking provider. Proprietary study results are based on experiences and perceptions of consumers surveyed January 2014. Individual experiences may vary. Visit JDPower.com.

Non-GAAP Financial Information

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 provides non-GAAP performance results, which the Company believes are useful because they assist investors in assessing the Company's operating performance. This includes, but is not limited to, earnings per share, excluding acquisition and integration related expenses, top-line revenue, tax-equivalent net interest income (including its individual components), tier 1 common capital to risk-weighted assets, tangible common equity to tangible assets, tangible common equity, excluding other comprehensive loss, to tangible assets, and tangible common equity to risk-weighted assets. Although intended to enhance investors' understanding of the Company's business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP.

Forward-Looking Statements

This press release may contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by the use of words such as "may," "might," "will," "would," "should," "could," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," "probable," "potential," "possible," "target," or "continue" and words of similar import. Forward-looking statements are not historical facts but instead express only management's beliefs regarding future results or events, many of which, by their nature, are inherently uncertain and outside of management's control. It is possible that actual results and events may differ, possibly materially, from the anticipated results or events indicated in these forward-looking statements. Forward-looking statements are not guarantees of future performance, and we caution you not to place undue reliance on these statements. Forward-looking statements are made only as of the date of this press release, and we undertake no obligation to update any forward-looking statements contained in this press release to reflect new information or events or conditions after the date hereof.

Forward-looking statements may be deemed to include, among other things, statements relating to our future financial performance, the performance of our loan or securities portfolio, the expected amount of future credit reserves or charge-offs, corporate strategies or objectives, anticipated trends in our business, regulatory developments, acquisition transactions, including estimated synergies, cost savings and financial benefits of pending or consummated transactions, and growth strategies, including possible future acquisitions. These statements are subject to certain risks, uncertainties and assumptions. For a discussion of these risks, uncertainties and assumptions, you should refer to the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, as well as our subsequent filings made with the Securities and Exchange Commission ("SEC"). However, these risks and uncertainties are not exhaustive. Other sections of such reports describe additional factors that could adversely impact our business and financial performance.

Conference Call

A conference call to discuss the Company's results, outlook, and related matters will be held on Wednesday, January 21, 2015 at 10:00 AM (ET). Members of the public who would like to listen to the conference call should dial (877) 507-0639 (U.S. domestic) or (412) 317-6003 (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. 10058797 beginning one hour after completion of the live call until 9:00 A.M. (ET) on January 29, 2015. 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)  
   
    December 31, 2014     September 30, 2014     December 31, 2013  
Assets                        
Cash and due from banks   $ 117,315     $ 125,977     $ 110,417  
Interest-bearing deposits in other banks     488,947       550,606       476,824  
Trading securities, at fair value     17,460       17,928       17,317  
Securities available-for-sale, at fair value     1,187,009       997,420       1,112,725  
Securities held-to-maturity, at amortized cost     26,555       26,776       44,322  
Federal Home Loan Bank and Federal Reserve Bank stock, at cost     37,558       35,588       35,161  
Loans, excluding covered loans     6,657,418       6,428,204       5,580,005  
Covered loans     79,435       90,875       134,355  
Allowance for loan and covered loan losses     (72,694 )     (73,106 )     (85,505 )
  Net loans     6,664,159       6,445,973       5,628,855  
OREO, excluding covered OREO     26,898       29,165       32,473  
Covered OREO     8,068       9,277       8,863  
FDIC indemnification asset     8,452       8,699       16,585  
Premises, furniture, and equipment     131,109       123,473       120,204  
Investment in BOLI     206,498       195,270       193,167  
Goodwill and other intangible assets     334,199       318,511       276,366  
Accrued interest receivable and other assets     190,912       211,688       180,128  
  Total assets   $ 9,445,139     $ 9,096,351     $ 8,253,407  
Liabilities and Stockholders' Equity                        
Noninterest-bearing deposits   $ 2,301,757       2,295,679       1,911,602  
Interest-bearing deposits     5,586,001       5,320,454       4,854,499  
  Total deposits     7,887,758       7,616,133       6,766,101  
Borrowed funds     137,994       132,877       224,342  
Senior and subordinated debt     200,869       191,028       190,932  
Accrued interest payable and other liabilities     117,743       106,637       70,590  
  Total liabilities     8,344,364       8,046,675       7,251,965  
Common stock     882       858       858  
Additional paid-in capital     449,798       408,789       414,293  
Retained earnings     899,516       891,129       853,740  
Accumulated other comprehensive loss, net of tax     (15,855 )     (18,852 )     (26,792 )
Treasury stock, at cost     (233,566 )     (232,248 )     (240,657 )
  Total stockholders' equity     1,100,775       1,049,676       1,001,442  
  Total liabilities and stockholders' equity   $ 9,445,139     $ 9,096,351     $ 8,253,407  
                           
                           
                           
Condensed Consolidated Statements of Income  
Unaudited  
(Amounts in thousands, except per share data)  
   
  Quarters Ended   Years Ended  
  December 31, 2014   September 30, 2014   December 31, 2013   December 31, 2014   December 31, 2013  
Interest Income                              
Loans, excluding covered loans $ 71,089   $ 66,117   $ 60,068   $ 256,842   $ 239,224  
Covered loans   1,520     2,596     3,062     8,659     13,804  
Investment securities   7,743     7,465     8,138     31,232     30,893  
Other short-term investments   957     684     852     3,131     3,326  
  Total interest income   81,309     76,862     72,120     299,864     287,247  
Interest Expense                              
Deposits   2,463     2,806     2,741     10,377     11,901  
Borrowed funds   12     9     390     573     1,607  
Senior and subordinated debt   3,015     3,016     3,301     12,062     13,607  
  Total interest expense   5,490     5,831     6,432     23,012     27,115  
  Net interest income   75,819     71,031     65,688     276,852     260,132  
Provision for loan and covered loan losses   1,659     10,727     --     19,168     16,257  
  Net interest income after provision for loan and covered loan losses   74,160     60,304     65,688     257,684     243,875  
Noninterest Income                              
Service charges on deposit accounts   10,015     9,902     9,259     36,910     36,526  
Wealth management fees   6,744     6,721     6,202     26,474     24,185  
Card-based fees   6,390     6,646     5,517     24,340     21,649  
Mortgage banking income   812     1,125     1,055     4,011     5,306  
Other service charges, commissions, and fees   5,403     5,266     4,679     19,346     18,616  
Gains on sales of properties   --     3,954     --     3,954     --  
Net securities (losses) gains   (63 )   2,570     147     8,097     34,164  
BOLI income (loss)   843     767     584     2,873     (11,844 )
Other income   924     156     1,370     2,672     5,486  
Loss on early extinguishment of debt   --     --     (1,034 )   (2,059 )   (1,034 )
Gain on termination of FHLB forward commitments   --     --     --     --     7,829  
  Total noninterest income   31,068     37,107     27,779     126,618     140,883  
Noninterest Expense                              
Salaries and employee benefits   40,300     35,471     34,990     143,823     138,750  
Net occupancy and equipment expense   9,479     8,639     7,910     35,181     31,832  
Professional services   6,664     5,692     5,592     23,436     21,922  
Technology and related costs   3,444     3,253     2,984     12,875     11,335  
Net OREO expense   2,544     1,406     2,815     7,075     8,547  
Other expenses   13,103     12,104     10,503     47,564     44,351  
Acquisition and integration related expenses   9,294     3,748     --     13,872     --  
  Total noninterest expense   84,828     70,313     64,794     283,826     256,737  
  Income before income tax expense   20,400     27,098     28,673     100,476     128,021  
  Income tax expense   5,807     8,549     9,508     31,170     48,715  
  Net income   14,593     18,549     19,165     69,306     79,306  
Diluted earnings per common share $ 0.19   $ 0.25   $ 0.26   $ 0.92   $ 1.06  
Dividends declared per common share $ 0.08   $ 0.08   $ 0.07   $ 0.31   $ 0.16  
Weighted average diluted common shares outstanding   75,131     74,352     74,042     74,496     73,994  
                               

Contact Information

  • CONTACT:
    Paul F. Clemens
    (Investors)
    EVP and Chief Financial Officer
    (630) 875-7347
    paul.clemens@firstmidwest.com

    James M. Roolf
    (Media)
    SVP and Corporate Relations Officer
    (630) 875-7533
    jim.roolf@firstmidwest.com

    First Midwest Bancorp, Inc.
    One Pierce Place, Suite 1500
    Itasca, Illinois 60143-9768