SOURCE: First Midwest Bancorp, Inc.

January 24, 2007 06:55 ET

First Midwest Reports Strong Full Year and Fourth Quarter Results

ITASCA, IL -- (MARKET WIRE) -- January 24, 2007 --

--  Record Net Income of $117.2 million, Up 15.7% vs. 2005
--  ROAA of 1.42% and ROAE of 16.9% for Full Year 2006
--  EPS of $0.63 for 4Q06, Up 28.6% vs. 4Q05
--  Loan Growth of 16.3% vs. 4Q05
--  Net Interest Margin of 3.57% for 4Q06 vs. 3.69% for 3Q06
--  Nonperforming Assets Decreased 12.1% vs. 3Q06
First Midwest Bancorp, Inc. ("First Midwest") (NASDAQ: FMBI) today reported net income for fourth quarter ended December 31, 2006 of $31.5 million, up 39.3% as compared to $22.6 million in fourth quarter 2005. First Midwest's net income for full year 2006 was $117.2 million, up 15.7% as compared to $101.4 million in 2005. Earnings per diluted share was $0.63 for fourth quarter ended December 31, 2006 and $2.37 for full year 2006, as compared to $0.49 for fourth quarter 2005 and $2.21 for full year 2005.

Performance for fourth quarter 2006 reflects certain counter balancing events:

--  Net realized securities gains of $3.4 million, or $0.04 per diluted
    share for fourth quarter 2006 as compared to net realized securities losses
    of $6.2 million, or $0.08 per diluted share, for fourth quarter 2005.
--  A $1.1 million increase in loan loss provisioning as compared to
    fourth quarter 2005, or $0.01 per diluted share, due in part to a $1.3
    million charge related to a single, purchased commercial lease.
--  The recognition of stock option expense of $650 thousand, or $0.01 per
    diluted share, in fourth quarter 2006 pursuant to the adoption of SFAS No.
    123R, "Share-Based Payment," on January 1, 2006.
--  The absence of employee severance costs in fourth quarter 2006 as
    compared to $679,000, or $0.01 per diluted share, in fourth quarter 2005.
    
Performance for full year 2006 reflects the following counter balancing events:
--  Net realized securities gains of $4.3 million, or $0.06 per diluted
    share in 2006 as compared to net realized securities losses of $3.3
    million, or $0.04 per diluted share, in 2005.
--  The negative impact of integration and related costs totaling $3.0
    million, or $0.04 per diluted share, recorded in the second quarter of 2006
    specific to the Bank Calumet acquisition.
--  Stock option expense of $2.8 million, or $0.04 per diluted share, in
    2006 recognized pursuant to the adoption of FAS 123R on January 1, 2006.
    
Fourth quarter 2006 performance resulted in an annualized return on average assets of 1.47%, as compared to 1.25% for fourth quarter 2005, and an annualized return on average equity of 16.4%, as compared to 16.6% for fourth quarter 2005.

"Our performance in 2006 reflects the cross-currents outlined above. All of this activity was accomplished in perhaps the most challenging interest rate environment on record," said First Midwest President and Chief Executive Officer John O'Meara.

"The successful acquisition and integration of Bank Calumet significantly increased our total assets and importantly expanded our suburban Chicago distribution network by over 40%. In addition to the benefits of Bank Calumet, our sales platform continues to perform at a high level, producing year over year growth in corporate lending, trust and asset management, and fee-based revenues. At the same time our planned reduction in the relative size of our securities portfolio is on track."

Earnings Guidance

O'Meara concluded, "The headwinds of the current interest rate and competitive environment continues to hamper earnings expansion in 2007 for both ourselves and the industry at large, primarily through margin compaction. In such an environment, the strength of our above-peer profitability, balance sheet, sales platform, and credit culture affords First Midwest opportunities to successfully weather this environment, while remaining focused on the long-term success of the Company. In 2007 solid corporate loan growth, low credit costs, increased fee-based revenues, diligent expense management, and the prudent administration of our securities portfolio are expected to continue to mitigate margin pressures. We currently expect full year diluted earnings per share to be in the range of $ 2.41 to $2.51."

Net Interest Margin

First Midwest's net interest income was $62.8 million for fourth quarter 2006, up 5.8% from $59.3 million for fourth quarter 2005. This increase was driven by a $1.0 billion increase in average interest-earning assets as compared to fourth quarter 2005, which was primarily due to the acquisition of Bank Calumet on March 31, 2006. Net interest margin for fourth quarter 2006 was 3.57%, down 12 basis points from third quarter 2006, reflecting the combined impact of the inverted interest rate yield curve on interest-earning asset yields and increased deposit and borrowing costs.

Securities Portfolio Activity

Total securities as of December 31, 2006 were $2.5 billion, down from $2.7 billion as of September 30, 2006, as proceeds received from mortgage-backed securities cash flows and the sale of municipal securities were not fully reinvested given the narrow spread between asset yields and funding costs available in the marketplace. In addition, fourth quarter 2006 market conditions afforded the opportunity to sell approximately $50 million of tax exempt municipal securities yielding, on a tax-equivalent basis, 7.43%, and realize a gain of $3.3 million. As of December 31, 2006, total municipal securities were $1.1 billion and reflected an unrealized $4.4 million in appreciation affording further balance sheet flexibility in 2007.

Increases in Loan Growth and Funding

Total loans grew to $5.0 billion as of December 31, 2006, an increase of 16.3% from December 31, 2005. This growth was due primarily to the addition of $676.4 million of loans acquired as part of the acquisition of Bank Calumet. Total loans as of December 31, 2006 declined $60.6 million, or 1.2%, as compared to September 30, 2006, reflecting lower consumer and corporate loan balances. Consumer loans declined $29.0 million on a linked quarter basis, primarily due to continued run off of the Company's indirect auto portfolio. Corporate loans declined $31.6 million, due to lower commercial and commercial real estate balances. While corporate sales activity was brisk throughout the quarter, large payoffs resulting from completed interim financing projects dampened outstandings.

Average deposits for fourth quarter 2006 totaled $6.2 billion, an increase of 20.0%, as compared to fourth quarter 2005, primarily as a result of deposits obtained through the acquisition of Bank Calumet. As compared to third quarter 2006, average deposits for fourth quarter 2006 declined $52.7 million, as growth in time deposit and savings account levels were offset by lower NOW and money market account balances, resulting primarily from seasonal declines in public fund deposits.

Noninterest Income and Expense

First Midwest's total noninterest income for fourth quarter 2006 was $29.7 million as compared to $14.4 million for fourth quarter 2005. Noninterest income for fourth quarter 2006 included $3.4 million in securities gains, and fourth quarter 2005 included $6.2 million in securities losses. The remaining components of noninterest income totaled $26.3 million for fourth quarter 2006, an increase of 27.8% as compared to fourth quarter 2005, reflecting higher fee-based revenues and revenue from corporate owned life insurance. In fourth quarter 2006, fee-based revenues totaled $23.3 million, an increase of $4.9 million or 26.4%, as compared to fourth quarter 2005, with approximately $3.4 million of this increase attributable to the acquisition of Bank Calumet, and the remainder reflecting higher service charges on deposit accounts and card-based revenues.

Total noninterest expense for fourth quarter 2006 was $47.8 million, up from $42.6 million in fourth quarter 2005. The majority of this increase is attributable to higher salaries, employee benefits, professional services, and occupancy expenses resulting from the acquisition of Bank Calumet.

First Midwest's efficiency ratio was 49.6% for fourth quarter 2006, as compared to 49.8% for fourth quarter 2005.

Stable Credit Quality

First Midwest's overall credit quality remained solid during fourth quarter 2006, with nonperforming assets as of December 31, 2006 totaling $18.9 million, down 12.1% as compared to $21.5 million at September 30, 2006. As of December 31, 2006, nonperforming assets, including foreclosed real estate, represented 0.38% of total loans plus foreclosed real estate, as compared to 0.35% as of December 31, 2005 and 0.42% as of September 30, 2006.

Net charge-offs for fourth quarter 2006 totaled $3.9 million and included a $1.3 million charge related to a single, purchased commercial lease. Net charge offs represented 0.30% of average loans for fourth quarter 2006, as compared to 0.25% for fourth quarter 2005 and 0.21% for third quarter 2006. Provisioning for loan losses for fourth quarter 2006 fully covered net charge-offs. As of December 31, 2006, the reserve for loan losses stood at 1.25% of total loans, as compared to 1.31% as of December 31, 2005 and 1.23% as of September 30, 2006 and represented 384.8% of nonperforming loans.

Solid Capital Management

As of December 31, 2006, First Midwest's Total Risk Based Capital ratio was 12.2%, compared to 11.8% as of December 31, 2005. The Tier 1 Risk Based Capital ratio was 9.6% as compared to 10.7% as of December 31, 2005. First Midwest's Tier 1 Leverage Ratio was 7.3% as compared to 8.2% as of December 31, 2005.

First Midwest's tangible capital ratio, which represents the ratio of stockholders' equity to total assets excluding intangible assets, stood at 5.62%, down from 6.30% as of December 31, 2005. The acquisition of Bank Calumet on March 31, 2006 reduced the tangible capital ratio by 55 basis points as a result of the net impact of the additional goodwill and other intangible assets acquired and common shares issued. In addition, a negative $8.6 million adjustment to equity decreased the tangible capital ratio by 10 basis points. This adjustment resulted from the adoption of SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans," effective December 31, 2006.

In 2006, First Midwest elected to suspend its stock repurchase program, as it rebuilds tangible capital following the acquisition of Bank Calumet. With 2.1 million shares remaining under its existing authorization, First Midwest may reinstate its repurchase program in 2007, with the pace and timing of repurchase activity, if any, dependent upon market conditions and other factors.

About First Midwest

First Midwest is the premier relationship-based banking franchise in the growing Chicagoland banking market. As one of the Chicago metropolitan area's largest independent bank holding companies, First Midwest provides the full range of both business and retail banking and trust and investment management services through 102 offices located in 63 communities, primarily in metropolitan Chicago. First Midwest was the only bank named by Chicago magazine as one of the 25 best places to work in Chicago.

Safe Harbor Statement

Safe Harbor Statement under the Private Securities Act of 1995: Statements in this news release that are forward-looking statements are subject to various risks and uncertainties concerning specific factors described in First Midwest Bancorp's 2005 Form 10-K and other filings with the U.S. Securities and Exchange Commission. Such information contained herein represents management's best judgment as of the date hereof based on information currently available. First Midwest does not intend to update this information and disclaims any legal obligation to the contrary. Historical information is not necessarily indicative of future performance.

Accompanying Financial Statements and Tables

Accompanying this press release is the following unaudited financial information:

--  Operating Highlights, Balance Sheet Highlights and Stock Performance
    Data (1 page)
--  Condensed Consolidated Statements of Condition (1 page)
--  Condensed Consolidated Statements of Income (1 page)
--  Selected Quarterly Data and Asset Quality Data (1 page)
Press Release and Additional Information Available on Website

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

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



Operating Highlights
Unaudited                    Quarters Ended               Years Ended
                     -------------------------------  --------------------
(Amounts in
 thousands except    Dec. 31,   Sept. 30,  Dec. 31,   Dec. 31,   Dec. 31,
 per share data)       2006       2006       2005       2006       2005
                     ---------  ---------  ---------  ---------  ---------
Net income           $  31,528  $  31,215  $  22,630  $ 117,246  $ 101,377
Diluted earnings per
 share               $    0.63  $    0.62  $    0.49  $    2.37  $    2.21
Return on average
 equity                  16.40%     17.09%     16.58%     16.87%     18.83%
Return on average
 assets                   1.47%      1.44%      1.25%      1.42%      1.44%
Net interest margin       3.57%      3.69%      3.79%      3.67%      3.87%
Efficiency ratio         49.55%     49.06%     49.76%     50.53%     49.44%



Balance Sheet Highlights

Unaudited                                        Quarters Ended
                                     --------------------------------------
(Amounts in thousands except per       Dec. 31,     Sept. 30,    Dec. 31,
 share data)                             2006         2006         2005
                                     ------------ ------------ ------------
Total assets                         $  8,441,526 $  8,596,864 $  7,210,151
Total loans                             5,008,944    5,069,554    4,306,191
Total deposits                          6,167,216    6,229,390    5,147,832
Stockholders’ equity                      751,014      745,869      544,068
Book value per share                 $      15.01 $      14.92 $      11.99
Period end shares outstanding              50,025       50,001       45,387



Stock Performance Data
Unaudited                                         Quarters Ended
                                        ----------------------------------
                                         Dec. 31,    Sept. 30,    Dec. 31,
                                           2006        2006        2005
                                        ----------  ----------  ----------
Market Price:
  Quarter End                           $    38.68  $    37.89  $    35.06
  High                                  $    39.52  $    38.89  $    39.25
  Low                                   $    36.62  $    34.42  $    34.66
Quarter end price to book value                2.6x        2.5x        2.9x
Quarter end price to 2006 earnings            16.3x       15.5x        N/A
Dividends declared per share            $    0.295  $    0.275  $    0.275



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



Condensed Consolidated Statements of Condition
                                                        December 31,
                                                --------------------------
(Amounts in thousands)                              2006          2005
                                                ------------  ------------
                                                Unaudited (1)    Audited
Assets
Cash and due from banks                         $    209,825  $    157,070
Funds sold and other short-term investments            9,841         5,908
Securities available for sale                      2,442,674     2,286,630
Securities held to maturity, at amortized cost        91,380        56,772
Loans                                              5,008,944     4,306,191
Reserve for loan losses                              (62,370)      (56,393)
                                                ------------  ------------
  Net loans                                        4,946,574     4,249,798
                                                ------------  ------------
Premises, furniture, and equipment                   126,677        95,345
Investment in corporate owned life insurance         196,598       156,441
Goodwill and other intangible assets                 292,658        95,997
Accrued interest receivable and other assets         125,299       106,190
                                                ------------  ------------
  Total assets                                  $  8,441,526  $  7,210,151
                                                ------------  ------------

Liabilities and Stockholders' Equity
Deposits                                        $  6,167,216  $  5,147,832
Borrowed funds                                     1,182,268     1,294,532
Long-term debt                                       228,674       130,092
Accrued interest payable and other liabilities       112,354        93,627
                                                ------------  ------------
  Total liabilities                                7,690,512     6,666,083
                                                ------------  ------------
Common stock                                             613           569
Additional paid-in capital                           205,044        60,760
Retained earnings                                    823,787       762,575
Accumulated other comprehensive loss                 (15,288)       (8,284)
Treasury stock, at cost                             (263,142)     (271,552)
                                                ------------  ------------
  Total stockholders' equity                         751,014       544,068
                                                ------------  ------------
  Total liabilities and stockholders' equity    $  8,441,526  $  7,210,151
                                                ------------  ------------

(1) While unaudited, the 2006 Condensed Consolidated Statement of Condition
    has been prepared in accordance with U.S. generally accepted accounting
    principles and is derived from the 2006 financial statements upon which
    Ernst & Young LLP, First Midwest's independent external auditor, will
    issue an audit opinion upon completion of their audit procedures.


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


Condensed Consolidated Statements of Income

                              Quarters Ended             Years Ended
                               December 31,              December 31,
(Amounts in thousands   ------------------------  -------------------------
 except per share data)    2006         2005         2006         2005
                        -----------  -----------  -----------  -----------
                        Unaudited(1) Unaudited(1) Unaudited(2)   Audited

Interest Income
Loans                   $    94,183  $    73,503  $   352,939  $   266,925
Securities                   31,076       26,412      122,909       99,404
Other                           138          115          561          371
                        -----------  -----------  -----------  -----------
   Total interest
    income                  125,397      100,030      476,409      366,700
                        -----------  -----------  -----------  -----------
Interest Expense
Deposits                     42,769       26,174      148,118       86,675
Borrowed funds               16,105       12,363       62,974       35,834
Long-term debt                3,760        2,144       13,458        8,341
                        -----------  -----------  -----------  -----------
   Total interest
     expense                 62,634       40,681      224,550      130,850
                        -----------  -----------  -----------  -----------
   Net interest income       62,763       59,349      251,859      235,850
Provision for loan
 losses                       3,865        2,780       10,229        8,930
                        -----------  -----------  -----------  -----------
   Net interest income
    after provision for
    loan losses              58,898       56,569      241,630      226,920
                        -----------  -----------  -----------  -----------
Noninterest Income
Service charges on
 deposit accounts            10,594        8,308       40,036       30,199
Trust and investment
 management fees              3,666        3,059       14,269       12,593
Other service charges,
 commissions, and fees        5,362        4,479       20,135       17,572
Card-based fees               3,712        2,615       13,777       10,207
                        -----------  -----------  -----------  -----------
   Subtotal, fee-based
    revenues                 23,334       18,461       88,217       70,571
                        -----------  -----------  -----------  -----------
Corporate owned life
 insurance income             1,966        1,437        7,616        5,163
Security gains, net           3,371       (6,152)       4,269       (3,315)
Other                           982          664        3,181        2,193
                        -----------  -----------  -----------  -----------
   Total noninterest
    income                   29,653       14,410      103,283       74,612
                        -----------  -----------  -----------  -----------
Noninterest Expense
Salaries and employee
 benefits                    26,507       23,991      106,201       95,179
Net occupancy expense         5,007        4,340       20,153       16,618
Equipment expense             2,740        2,117       10,227        8,555
Technology and related
 costs                        1,532        1,513        6,584        5,677
Other                        12,009       10,617       49,450       39,674
                        -----------  -----------  -----------  -----------
   Total noninterest
    expense                  47,795       42,578      192,615      165,703
                        -----------  -----------  -----------  -----------
Income before taxes          40,756       28,401      152,298      135,829
Income tax expense            9,228        5,771       35,052       34,452
                        -----------  -----------  -----------  -----------
   Net Income           $    31,528  $    22,630  $   117,246  $   101,377
                        -----------  -----------  -----------  -----------
   Diluted Earnings
    Per Share           $      0.63  $      0.49  $      2.37  $      2.21
                        -----------  -----------  -----------  -----------
   Dividends Declared
    Per Share           $     0.295  $     0.275  $     1.120  $     1.015
                        -----------  -----------  -----------  -----------
   Weighted Average
    Diluted Shares
    Outstanding              50,392       45,753       49,469       45,893
                        -----------  -----------  -----------  -----------

(1) While unaudited, the Condensed Consolidated Statements of Income for
    the quarters ended December 31, 2006 and 2005 have been prepared in
    accordance with U.S. generally accepted accounting principles and are
    derived from quarterly financial statements.
(2) While unaudited, the Condensed Consolidated Statement of Income for the
    year ended December 31, 2006 has been prepared in accordance with U.S.
    generally accepted accounting principles and is derived from the 2006
    financial statements upon which Ernst & Young LLP, First Midwest’s
    independent external auditor, will issue an audit opinion upon
    completion of their audit procedures.


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


Selected Quarterly Data
Unaudited
(Amounts in         Year to Date                Quarters Ended
thousands except ----------------- ---------------------------------------
per share data) 12/31/06 12/31/05 12/31/06 9/30/06 6/30/06 3/31/06 12/31/05
                 -------- -------- ------- ------- ------- ------- -------
Net interest
 income          $251,859 $235,850 $62,763 $65,673 $65,958 $57,465 $59,349
Provision for
 loan losses       10,229    8,930   3,865   2,715   2,059   1,590   2,780
Noninterest
 income           103,283   74,612  29,653  26,991  25,267  21,372  14,410
Noninterest
 expense          192,615  165,703  47,795  49,118  51,990  43,712  42,578
Net income        117,246  101,377  31,528  31,215  28,735  25,768  22,630
Diluted earnings
 per share       $   2.37 $   2.21 $  0.63 $  0.62 $  0.57 $  0.55 $  0.49
Return on average
 equity             16.87%   18.83%  16.40%  17.09%  16.50%  17.64%  16.58%
Return on average
 assets              1.42%    1.44%   1.47%   1.44%   1.33%   1.44%   1.25%
Net interest
 margin              3.67%    3.87%   3.57%   3.69%   3.70%   3.76%   3.79%
Efficiency ratio    50.53%   49.44%  49.55%  49.06%  52.12%  51.51%  49.76%
                 -------- -------- ------- ------- ------- ------- -------
Period end shares
 outstanding       50,025   45,387  50,025  50,001  49,925  49,866  45,387
Book value per
 share           $  15.01 $  11.99 $ 15.01 $ 14.92 $ 13.92 $ 13.81 $ 11.99
Dividends
 declared
 per share       $  1.120 $  1.015 $ 0.295 $ 0.275 $ 0.275 $ 0.275 $ 0.275
                 -------- -------- ------- ------- ------- ------- -------


Asset Quality Data
Unaudited           Year to Date                Quarters Ended
(Amounts in      ----------------- ---------------------------------------
 thousands)     12/31/06 12/31/05 12/31/06 9/30/06 6/30/06 3/31/06 12/31/05
                 -------- -------- ------- ------- ------- ------- -------
Nonaccrual loans $ 16,209 $ 11,990 $16,209 $17,459 $15,447 $17,178 $11,990
Foreclosed real
 estate             2,727    2,878   2,727   4,088   4,195   4,033   2,878
Loans past due 90
 days and still
 accruing          12,810    8,958  12,810  11,296  14,185  10,693   8,958
                 -------- -------- ------- ------- ------- ------- -------
Nonperforming
 loans to loans      0.32%    0.28%   0.32%   0.34%   0.31%   0.34%   0.28%
Nonperforming
 assets to loans
 plus foreclosed
 real estate         0.38%    0.35%   0.38%   0.42%   0.39%   0.42%   0.35%
Nonperforming
 assets plus
 loans past due
 90 days to loans
 plus foreclosed
 real estate         0.63%    0.55%   0.63%   0.65%   0.67%   0.63%   0.55%
Reserve for loan
 losses to loans     1.25%    1.31%   1.25%   1.23%   1.24%   1.24%   1.31%
Reserve for loan
 losses to
 nonperforming
 loans                385%     470%    385%    357%    404%    363%    470%
                 -------- -------- ------- ------- ------- ------- -------
Provision for
 loan losses     $ 10,229 $  8,930 $ 3,865 $ 2,715 $ 2,059 $ 1,590 $ 2,780
Net loan
 charge-offs       10,187    9,255   3,865   2,704   2,053   1,565   2,670
                 -------- -------- ------- ------- ------- ------- -------
Net loan
 charge-offs to
 average loans       0.21%    0.22%   0.30%   0.21%   0.16%   0.15%   0.25%
                 -------- -------- ------- ------- ------- ------- -------

Contact Information

  • CONTACT:
    Michael L. Scudder
    EVP, Chief Financial Officer
    (630) 875-7283
    www.firstmidwest.com

    First Midwest Bancorp
    One Pierce Place, Suite 1500
    Itasca, Illinois 60143-9768
    (630) 875-7450