First Midwest Bancorp, Inc. Announces 2013 First Quarter Results

Significant Earnings Growth -- Lower Credit Costs; Higher Total Revenues -- Strong Capital

Marketwired

ITASCA, IL--(Marketwired - Apr 24, 2013) - 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 the first quarter of 2013. Net income applicable to common shares for the first quarter of 2013 was $14.4 million, or $0.20 per share. This compares to $13.0 million, or $0.18 per share, for the fourth quarter of 2012 and $7.8 million, or $0.11 per share, for the first quarter of 2012.

"Performance for the quarter benefited from significant improvement in our credit risk profile and solid line of business momentum," said Michael L. Scudder, President and Chief Executive Officer of First Midwest Bancorp, Inc. "As expected, our wealth management and mortgage sales teams continue to drive stronger revenue growth and serve as an important offset to the revenue headwinds created by the current low interest rate environment. Loan balances remained steady, reflecting both historical seasonality and solid, disciplined growth in corporate lending."

Mr. Scudder concluded, "As we look ahead, low interest rates and evolving regulatory expectations will continue to present performance challenges for our industry. At the same time, our strong capital base and improved earnings profile leave us well positioned to navigate these headwinds, pursue opportunities for growth, and return value to our shareholders."

SELECT HIGHLIGHTS

Growing Earnings

  • Earnings per share improved to $0.20, up 82% from the first quarter of 2012 and 11% from the fourth quarter of 2012.

  • Total loans remained stable at $5.2 billion compared to December 31, 2012 with annualized C&I growth of 7% largely offset by mortgage loan sales.

  • Year-over-year, total loans increased 4% after adjusting for the 2012 bulk loan sales.

  • Operating revenues increased to $26.5 million, up 11% from the first quarter of 2012, reflecting strong growth in mortgage banking income and wealth management fees.

  • Noninterest expense totaled $63.8 million, excluding severance-related costs of $1.0 million, up 2% from the first quarter of 2012.

Improving Credit and Strengthening Capital

  • Net loan charge-offs, excluding covered loan charge-offs, totaled $6.8 million, down from $21.1 million for the first quarter of 2012 and consistent with the fourth quarter of 2012.

  • Non-performing assets decreased 41% to $143.5 million compared to March 31, 2012 and were stable compared to December 31, 2012.

  • Performing potential problem loans declined to 3.9% of total loans, down 43% and 7% from March 31, 2012 and December 31, 2012, respectively.

  • Tier 1 common capital to risk-weighted assets remained strong at 9.62% as of March 31, 2013, a 29 basis point improvement from December 31, 2012.

OPERATING PERFORMANCE

 
Operating Performance Highlights
 (Dollar amounts in thousands)
 
    Quarters Ended  
    March 31,
2013
    December 31,
2012
    March 31,
2012
 
Net income   $ 14,642     $ 13,216     $ 7,892  
Net income applicable to common shares   $ 14,430     $ 13,022     $ 7,753  
Diluted earnings per common share   $ 0.20     $ 0.18     $ 0.11  
Return on average common equity     6.17 %     5.50 %     3.21 %
Return on average assets     0.74 %     0.65 %     0.40 %
Net interest margin     3.77 %     3.84 %     3.88 %
Efficiency ratio     66.50 %     74.02 %     64.62 %
Loans, excluding covered loans, at period end   $ 5,175,271     $ 5,189,676     $ 5,137,328  
Average transactional deposits (1)   $ 5,244,755     $ 5,276,919     $ 4,823,339  
Average assets   $ 8,071,301     $ 8,139,243     $ 7,957,191  
Average equity   $ 948,060     $ 941,175     $ 970,368  
                         
(1)   Comprised of demand deposits and interest-bearing transactional accounts.
     
     
 
Pre-Tax, Pre-Provision Operating Earnings (1) 
(Dollar amounts in thousands)
 
    Quarters Ended  
    March 31,
2013
  December 31,
2012
    March 31,
2012
 
Income before income tax expense   $ 20,935   $ 19,410     $ 9,048  
Adjustments:                      
  Provision for loan and covered loan losses     5,674     5,593       18,210  
  Net securities (gains) losses     -     (88 )     943  
  Net losses on sales and valuation adjustments of other real estate owned ("OREO"), excess properties, assets held-for sale, and other.     781     1,864       303  
  Gain, less related expenses, on bulk loan sales     -     (2,639 )     -  
  Adjusted amortization of FDIC indemnification asset     750     2,705       -  
  Acquisition integration costs     -     588       -  
  Losses (gains) on early extinguishment of debt     -     814       (256 )
  Severance-related costs     980     -       315  
    Pre-tax, pre-provision operating earnings   $ 29,120   $ 28,247     $ 28,563  
                           
(1)   The Company's accounting and reporting policies conform to U.S. generally accepted accounting principles ("GAAP") and general practices 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 evaluating the Company's operating performance. This non-GAAP financial measure should not be considered an alternative to GAAP.
     
     

Pre-tax, pre-provision operating earnings of $29.1 million for the first quarter of 2013 increased 2.0% and 3.1% from the first and fourth quarters of 2012, respectively. Compared to the quarter ended March 31, 2012, the increase resulted primarily from growth in mortgage banking income and wealth management fees, which more than offset the decline in net interest income.

For the quarter ended December 31, 2012, the increase in pre-tax, pre-provision operating earnings resulted from a reduction in noninterest expense, primarily from lower loan remediation costs and personnel recruitment expenses, which was offset by the decrease in net interest income and noninterest income.

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    
    March 31, 2013   December 31, 2012   March 31, 2012
      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   $ 584,170   $ 434   0.30   $ 562,288   $ 345   0.24   $ 449,788   $ 275   0.25
Trading securities     14,357     36   1.00     15,597     94   2.41     14,585     36   0.99
Investment securities (1)     1,175,063     9,940   3.38     1,144,997     10,154   3.55     1,163,338     11,734   4.03
Federal Home Loan Bank and Federal Reserve Bank stock     47,232     339   2.87     47,232     349   2.96     52,531     330   2.51
Loans held-for-sale     -     -   -     53,808     323   2.39     -     -   -
Loans, excluding covered loans (1)     5,148,343     60,001   4.73     5,160,576     62,192   4.79     5,089,286     61,983   4.90
Covered interest-earning assets (2)     223,691     3,449   6.25     248,971     3,975   6.35     318,569     4,202   5.31
  Total interest-earning assets (1)     7,192,856     74,199   4.18     7,233,469     77,432   4.26     7,088,097     78,560   4.45
Cash and due from banks     110,073               122,328               109,717          
Allowance for loan and covered loan losses     (99,086)               (103,302)               (123,667)          
Other assets     867,458               886,748               883,044          
  Total assets   $ 8,071,301             $ 8,139,243             $ 7,957,191          
Liabilities and Stockholders' Equity:                                                
Interest-bearing transaction deposits   $ 3,503,930     892   0.10   $ 3,468,397     903   0.10   $ 3,232,141     1,022   0.13
Time deposits     1,374,529     2,428   0.72     1,447,918     2,832   0.78     1,621,926     4,491   1.11
Borrowed funds     199,891     442   0.90     185,390     497   1.07     203,548     515   1.02
Senior and subordinated debt     214,796     3,435   6.49     214,764     3,445   6.38     248,232     4,058   6.57
  Total interest-bearing liabilities     5,293,146     7,197   0.55     5,316,469     7,677   0.57     5,305,847     10,086   0.76
Demand deposits     1,740,825               1,808,522               1,591,198          
  Total funding sources     7,033,971               7,124,991               6,897,045          
Other liabilities     89,270               73,077               89,778          
Stockholders' equity - common     948,060               941,175               970,368          
  Total liabilities and stockholders' equity   $ 8,071,301             $ 8,139,243             $ 7,957,191          
Net interest income/margin (1)         $ 67,002   3.77         $ 69,755   3.84         $ 68,474   3.88
                                                 
 (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 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 subject to loss sharing agreements and the related FDIC indemnification asset.
     
     

For the first quarter of 2013, average interest-earning assets increased $104.8 million from the first quarter of 2012 and declined $40.6 million from the fourth quarter of 2012. Compared to the first quarter of 2012, growth in the loan portfolio, primarily in the commercial and industrial ("C&I"), agricultural, and 1-4 family categories, was offset by the disposal of $172.5 million of original carrying value of certain non-performing and performing potential problem loans through bulk loan sales ("the bulk loan sales") completed during the fourth quarter of 2012. This loan growth, coupled with the rise in investment securities and other interest-earning assets, more than mitigated the decrease in covered interest-earning assets.

The decrease in average interest-earning assets from the fourth quarter of 2012 was partially driven by a reduction in loans held-for-sale and the sale of $41.9 million of mortgage loans outstanding at December 31, 2012. This decline was mitigated by the reinvestment of excess cash into the investment securities portfolio.

Average funding sources for the first quarter of 2013 were up $136.9 million from the first quarter of 2012 and were $91.0 million lower than the fourth quarter of 2012. For the first quarter of 2013 compared to the prior year period, growth in demand deposits more than offset the slight decline in interest-bearing liabilities. Compared to the fourth quarter of 2012, declines in time deposits and demand deposits primarily contributed to the variance.

Tax-equivalent net interest margin for the current quarter was 3.77%, declining 7 basis points compared to the fourth quarter of 2012 and 11 basis points from the first quarter of 2012. These decreases were driven by the continued repricing of maturing investment securities and loans at lower interest rates, which was mitigated by a reduction in rates paid on retail time deposits.

Interest earned on covered assets is generally recognized through the accretion of the discount on expected future cash flows. The change in the yield on covered interest-earning assets from the first quarter of 2012 was driven by revised estimates of future cash flows and the impact of adjusted amortization of the FDIC indemnification asset. The decline in yield from the fourth quarter of 2012 resulted from early pay-offs, downgrades of certain covered loans to non-accrual status, and transfers to OREO during the first quarter of 2013.

 
 
Noninterest Income Analysis
(Dollar amounts in thousands)
    Quarters Ended     March 31, 2013
Percent Change From
 
    March 31,
2013
  December 31,
2012
    March 31,
2012
    December 31,
2012
    March 31,
2012
 
Service charges on deposit accounts   $ 8,677   $ 9,689     $ 8,660     (10.4 )   0.2  
Card-based fees     5,076     5,274       5,020     (3.8 )   1.1  
Wealth management fees     5,839     5,590       5,392     4.5     8.3  
Mortgage banking income     1,966     2,102       -     (6.5 )   N/M  
Merchant servicing fees     2,554     2,727       2,322     (6.3 )   10.0  
Other service charges, commissions, and fees     1,646     1,348       1,198     22.1     37.4  
Other income (1)     781     815       1,383     (4.2 )   (43.5 )
  Total operating revenues     26,539     27,545       23,975     (3.7 )   10.7  
Net trading gains (2)     1,036     116       1,401     N/M     (26.1 )
Net securities gains (losses)     -     88       (943 )   N/M     N/M  
Gain on bulk loan sales     -     5,153       -     N/M     N/M  
(Losses) gains on early extinguishment of debt (1)     -     (814 )     256     N/M     N/M  
  Total noninterest income   $ 27,575   $ 32,088     $ 24,689     (14.1 )   11.7  
                                     
N/M - Not meaningful.
 
(1)   These line items are included in other income in the Condensed Consolidated Statements of Income.
(2)   Net trading 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.
     
     

Total noninterest income for the first quarter of 2013 increased 11.7% compared to the first quarter of 2012 and declined 14.1% compared to the fourth quarter of 2012. Excluding the $5.2 million gain on the bulk loan sales during the fourth quarter of 2012, noninterest income increased 2.4% from the prior quarter.

Compared to the first quarter of 2012, total operating revenues increased 10.7%, attributed mainly to a rise in wealth management fees, gains on the sale of $54.0 million of mortgage loans, and fee income generated from interest rate derivative transactions.

Total operating revenues for the first quarter of 2013 declined 3.7% compared to the fourth quarter of 2012, resulting from a decrease in card-based fees and seasonally lower volumes of non-sufficient funds fees, service charges on business accounts, and merchant servicing fees.

 
 
Noninterest Expense Analysis
(Dollar amounts in thousands)
 
    Quarters Ended   March 31, 2013
Percent Change From
 
    March 31,
2013
  December 31,
2012
  March 31,
2012
  December 31,
2012
    March 31,
2012
 
Salaries and wages (1)(3)   $ 27,839   $ 27,036   $ 25,699   3.0     8.3  
Nonqualified plan expense (2)(3)     1,124     205     1,558   N/M     (27.9 )
Retirement and other employee benefits (1)     7,606     6,787     6,793   12.1     12.0  
  Total compensation expense     36,569     34,028     34,050   7.5     7.4  
Net losses on OREO sales and valuation adjustments     781     31     303   N/M     N/M  
Net OREO operating expense     1,018     1,294     1,561   (21.3 )   (34.8 )
  Net OREO expense     1,799     1,325     1,864   35.8     (3.5 )
Loan remediation costs     2,139     5,654     2,788   (62.2 )   (23.3 )
Other professional services (1)     3,079     4,761     2,841   (35.3 )   8.4  
  Total professional services     5,218     10,415     5,629   (49.9 )   (7.3 )
Net occupancy and equipment expense     8,147     8,747     8,331   (6.9 )   (2.2 )
Technology and related costs     2,483     3,231     2,858   (23.2 )   (13.1 )
FDIC premiums     1,742     1,763     1,719   (1.2 )   1.3  
Advertising and promotions (4)     1,410     1,744     870   (19.2 )   62.1  
Merchant card expense (4)     2,044     2,192     1,796   (6.8 )   13.8  
Cardholder expenses (4)     929     935     1,042   (0.6 )   (10.8 )
Adjusted amortization of FDIC indemnification asset     750     2,705     -   (72.3 )   N/M  
Other expenses (4)     3,723     6,522     4,454   (42.9 )   (16.4 )
  Total noninterest expense   $ 64,814   $ 73,607   $ 62,613   (11.9 )   3.5  
                                 
N/M - Not meaningful.
 
(1)   In the first quarter of 2013, the Company recorded a $980,000 charge for severance-related costs that included $811,000 in salaries and wages, $64,000 in retirement and other employee benefits, and $105,000 in other professional services.
(2)   Nonqualified plan expense results from changes in the Company's obligation to participants under deferred compensation agreements.
(3)   These expenses are included in salaries and wages in the Condensed Consolidated Statements of Income.
(4)   These expenses are included in other expenses in the Condensed Consolidated Statements of Income.
     
     

Total noninterest expense for the first quarter of 2013 increased 3.5% compared to the first quarter of 2012 and declined by 11.9% compared to the fourth quarter of 2012. Excluding severance-related costs recorded in the first quarter of 2013, noninterest expense increased 2.5% from the first quarter of 2012.

First quarter 2013 salaries and wages increased from both prior periods presented due to severance expense of $811,000, along with annual merit increases and an increase in incentive compensation, which was slightly offset by a decrease in deferred salaries.

Retirement and other employee benefits increased compared to both prior periods from higher pension expense. A rise in FICA taxes also contributed to the variance compared to December 31, 2012.

The linked-quarter increase in OREO expenses resulted primarily from losses on sales of OREO properties in the first quarter of 2013 compared to gains on sales during the fourth quarter of 2012. This increase was partially offset by a reduction in real estate tax expense for the first three months of 2013.

Fourth quarter 2012 loan remediation costs were elevated due to expenses of $2.5 million related to the bulk loan sales and higher real estate taxes paid to preserve the Company's rights to collateral associated with problem loans. Compared to the first quarter of 2012, loan remediation costs decreased 23.3%. Improved credit quality driven by management's accelerated credit remediation actions in the third and fourth quarters of 2012 resulted in lower legal expenses and appraisal costs related to performing potential problem loans. In addition, the positive variance was also impacted by lower servicing costs for our covered loan portfolio.

Other professional services decreased compared to the fourth quarter of 2012 due primarily to a reduction in personnel recruitment expenses and a decline in legal fees.

Technology and related costs for the fourth quarter of 2012 were elevated from conversion expenses related to the integration of a bank acquired during the third quarter of 2012 in an FDIC-assisted transaction.

Adjusted amortization of the FDIC indemnification asset results from changes in the timing and amount of future cash flows expected to be received from the FDIC under loss sharing agreements based on management's periodic estimates of future cash flows on covered loans.

For the fourth quarter of 2012, other expenses were elevated from a $1.3 million valuation adjustment on a former banking office transferred to OREO. In addition, other expenses declined compared to both prior periods presented due to a $500,000 reduction in the reserve for unfunded commitments during the first quarter of 2013.

LOAN PORTFOLIO AND ASSET QUALITY

 
 
 
Loan Portfolio Composition
(Dollar amounts in thousands)
 
    As Of   March 31, 2013
Percent Change From
 
    March 31,
2013
  December 31,
2012
  March 31,
2012
  December 31,
2012
    March 31,
2012
 
Corporate:                              
  Commercial and industrial   $ 1,659,872   $ 1,631,474   $ 1,496,966   1.7     10.9  
  Agricultural     274,991     268,618     237,686   2.4     15.7  
  Commercial real estate:                              
    Office     465,279     474,717     480,288   (2.0 )   (3.1 )
    Retail     385,413     368,796     371,258   4.5     3.8  
    Industrial     493,564     489,678     515,353   0.8     (4.2 )
    Multi-family     298,117     285,481     301,356   4.4     (1.1 )
    Residential construction     54,032     61,462     99,768   (12.1 )   (45.8 )
    Commercial construction     122,210     124,954     142,307   (2.2 )   (14.1 )
    Other commercial real estate     743,076     773,121     829,005   (3.9 )   (10.4 )
      Total commercial real estate     2,561,691     2,578,209     2,739,335   (0.6 )   (6.5 )
        Total corporate loans     4,496,554     4,478,301     4,473,987   0.4     0.5  
Consumer:                              
  Home equity loans     379,352     390,033     406,367   (2.7 )   (6.6 )
  1-4 family mortgages     263,286     282,948     217,729   (6.9 )   20.9  
  Installment loans     36,079     38,394     39,245   (6.0 )   (8.1 )
        Total consumer loans     678,717     711,375     663,341   (4.6 )   2.3  
      Total loans, excluding covered loans     5,175,271     5,189,676     5,137,328   (0.3 )   0.7  
Covered loans     186,687     197,894     251,376   (5.7 )   (25.7 )
      Total loans   $ 5,361,958   $ 5,387,570   $ 5,388,704   (0.5 )   (0.5 )
                                     
                                     

Total loans, excluding covered loans, of $5.2 billion remained stable compared to December 31, 2012. The Company experienced annualized growth of 7.0% in C&I loans, 9.5% in agricultural lending, and 17.7% in multi-family loans from December 31, 2012, which was offset by declines in the residential construction and other commercial real estate portfolios.

During the first quarter of 2013, $41.9 million of mortgage loans outstanding at December 31, 2012 were sold, which contributed to the decrease in the consumer portfolio. We continue to generate solid new mortgage volume, reflecting the expansion of our mortgage lending sales force that began in the second quarter of 2012.

Compared to March 31, 2012, total loans, excluding covered loans, increased 4.1% after adjusting for the 2012 bulk loan sales. In addition to growth in C&I loans and agricultural lending, the year-over-year increase was impacted by a rise in the 1-4 family portfolio from loans acquired in an FDIC-assisted transaction during the third quarter of 2012 and from new volume due to focused origination efforts.

Compared to both prior periods presented, strong growth in the C&I, agricultural, retail, and multi-family loan categories benefitted from our targeted portfolio distribution efforts. In addition, sales personnel have been focused on expansion into specialized lending areas, such as agribusiness and asset-based lending, which contributed to the increases.

   
   
Asset Quality  
(Dollar amounts in thousands)  
   
    As Of     March 31, 2013
Percent Change From
 
    March 31,
2013
    December 31,
2012
    March 31,
2012
    December 31,
2012
    March 31,
2012
 
Asset quality, excluding covered
loans and covered OREO
                                   
Non-accrual loans   $ 95,397     $ 84,534     $ 199,545     12.9     (52.2 )
90 days or more past due loans     5,552       8,689       7,674     (36.1 )   (27.7 )
    Total non-performing loans     100,949       93,223       207,219     8.3     (51.3 )
Troubled debt restructurings (still accruing interest)     2,587       6,867       2,076     (62.3 )   24.6  
OREO     39,994       39,953       35,276     0.1     13.4  
    Total non-performing assets   $ 143,530     $ 140,043     $ 244,571     2.5     (41.3 )
30-89 days past due loans   $ 22,222     $ 22,666     $ 21,241     (2.0 )   4.6  
Performing potential problem loans:                                    
  Special mention   $ 121,789     $ 137,622     $ 234,055     (11.5 )   (48.0 )
  Substandard     82,170       81,425       123,316     0.9     (33.4 )
    Total potential problem loans   $ 203,959     $ 219,047     $ 357,371     (6.9 )   (42.9 )
Non-accrual loans to total loans     1.84 %     1.63 %     3.88 %            
Non-performing loans to total loans     1.95 %     1.80 %     4.03 %            
Non-performing assets to loans plus OREO     2.75 %     2.68 %     4.73 %            
Potential problem loans to total loans     3.94 %     4.22 %     6.96 %            
Allowance for Credit Losses                                    
Allowance for loan losses, excluding covered loans   $ 85,364     $ 87,384     $ 115,271     (2.3 )   (25.9 )
Allowance for covered loan losses     12,227       12,062       993     1.4     N/M  
    Total allowance for loan and covered loan losses     97,591       99,446       116,264     (1.9 )   (16.1 )
Reserve for unfunded commitments     2,866       3,366       2,500     (14.9 )   14.6  
    Total allowance for credit losses   $ 100,457     $ 102,812     $ 118,764     (2.3 )   (15.4 )
Allowance for credit losses to loans, excluding covered loans     1.70 %     1.75 %     2.29 %            
Allowance for credit losses to non-accrual loans, excluding covered loans     92 %     107 %     59 %            
                                     
N/M - Not meaningful.                                
                                     
                                     

Non-performing assets, excluding covered loans and covered OREO, were $143.5 million at March 31, 2013, decreasing $101.0 million, or 41.3%, from March 31, 2012. Compared to March 31, 2012, the significant decline in non-performing assets and potential problem loans resulted from management's accelerated credit remediation activities, including the bulk loan sales during the fourth quarter of 2012.

Non-accrual loans increased $10.9 million from December 31, 2012, primarily from the transfer of five credit relationships to non-accrual during the first quarter of 2013. Total potential problem loans declined 6.9% compared to December 31, 2012, with improvement across the majority of corporate loan categories.

 
 
Charge-Off Data
(Dollar amounts in thousands)
 
    Quarters Ended
    March 31,
2013
  % of
Total
  December 31,
2012
  % of
Total
  March 31,
2012
  % of
Total
Net loan charge-offs (1):                              
  Commercial and industrial   $ 897   13.1   $ 1,778   28.4   $ 7,524   35.6
  Agricultural     90   1.3     (177)   (2.8)     (50)   (0.2)
  Office, retail, and industrial     1,260   18.5     95   1.5     2,665   12.6
  Multi-family     160   2.3     9   0.1     9   0.0
  Residential construction     565   8.3     134   2.1     463   2.2
  Commercial construction     (2)   0.0     100   1.6     170   0.8
  Other commercial real estate     1,604   23.5     1,786   28.5     8,177   38.7
  Consumer     2,257   33.0     2,536   40.6     2,176   10.3
    Total net loan charge-offs, excluding covered loans     6,831   100.0     6,261   100.0     21,134   100.0
    Net covered loan charge-offs (1)     698         1,465         274    
        Total net loan charge-offs   $ 7,529       $ 7,726       $ 21,408    
Net loan charge-offs to average loans, excluding covered loans, annualized:                              
  Quarter-to-date     0.54%         0.48%         1.67%    
  Year-to-date     0.54%         3.32%         1.67%    
                                 
                                 

Net loan charge-offs for the first quarter of 2013 were $7.6 million, decreasing 64.8% from the first quarter of 2012 and 2.5% from the fourth quarter of 2012. The decline in charge-offs compared to the first quarter of 2012 reflected improved credit quality due to management's accelerated credit remediation actions, including the bulk loan sales.

CAPITAL MANAGEMENT

 
 
Capital Ratios
(Dollar amounts in thousands)
 
    March 31,
2013
    December 31,
2012
    March 31,
2012
    Regulatory
Minimum
For
"Well-
Capitalized"
    Excess Over
Required Minimums
at March 31, 2013
Regulatory capital ratios:                            
  Total capital to risk-weighted assets   12.05 %   11.90 %   13.47 %   10.00 %   20 %   $ 131,048
  Tier 1 capital to risk-weighted assets   10.55 %   10.28 %   11.41 %   6.00 %   75 %   $ 291,389
  Tier 1 leverage to average assets   8.75 %   8.40 %   9.38 %   5.00 %   75 %   $ 289,558
Tier 1 common capital to risk-weighted assets (1)   9.62 %   9.33 %   10.38 %   N/A (2)     N/A (2)       N/A (2)
 Tangible common equity ratios (3):                                    
  Tangible common equity to tangible assets   8.66 %   8.44 %   8.95 %   N/A (2)     N/A (2)       N/A (2)
  Tangible common equity, excluding other comprehensive loss, to tangible assets   8.88 %   8.64 %   9.10 %   N/A (2)     N/A (2)       N/A (2)
  Tangible common equity to risk-weighted assets   10.52 %   10.39 %   11.01 %   N/A (2)     N/A (2)       N/A (2)
Non-performing assets to tangible common equity and allowance for credit losses   18.55 %   18.36 %   30.24 %   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 less goodwill and identifiable intangible assets. 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 exceeded all regulatory mandated ratios for characterization as "well-capitalized" as of March 31, 2013. 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 95 offices located in communities in metropolitan Chicago, northwest Indiana, central and western Illinois, and eastern Iowa. First Midwest has been recognized by the Chicago Tribune as one of Chicago's Top Workplaces for the third consecutive year by being named a National Standard Top Workplace. Additionally, Forbes has recognized First Midwest as one of America's Most Trustworthy Companies for 2012.

Safe Harbor Statement

This press release may contain "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, 2012 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. The Company undertakes no duty to update any forward-looking statements contained in this press release after the date hereof.

Conference Call

A conference call to discuss the Company's results, outlook, and related matters will be held on Wednesday, April 24, 2013 at 10:00 AM (ET). Members of the public who would like to listen to the conference call should dial (888) 317-6016 (U.S. domestic) or (412) 317-6016 (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. 10027318 beginning one hour after completion of the live call until 9:00 A.M. (ET) on May 1, 2013. Please direct any questions regarding obtaining access to the conference call to First Midwest Bancorp, Inc. Investor Relations, via e-mail, at investor.relations@firstmidwest.com.

Accompanying Financial Statements and Tables

Accompanying this press release is the following unaudited financial information:

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

Press Release and Additional Information Available on Website

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

 
 
 
Condensed Consolidated Statements of Financial Condition
Unaudited
(Amounts in thousands)
 
    March 31,
2013
    December 31,
2012
    March 31,
2012
 
Assets                        
Cash and due from banks   $ 95,983     $ 149,420     $ 105,722  
Interest-bearing deposits in other banks     457,333       566,846       380,651  
Trading securities, at fair value     15,544       14,162       16,031  
Securities available-for-sale, at fair value     1,246,679       1,082,403       1,183,975  
Securities held-to-maturity, at amortized cost     31,443       34,295       56,319  
Federal Home Loan Bank and Federal Reserve Bank stock, at cost     47,232       47,232       46,750  
Loans, excluding covered loans     5,175,271       5,189,676       5,137,328  
Covered loans     186,687       197,894       251,376  
Allowance for loan and covered loan losses     (97,591 )     (99,446 )     (116,264 )
  Net loans     5,264,367       5,288,124       5,272,440  
OREO, excluding covered OREO     39,994       39,953       35,276  
Covered OREO     14,774       13,123       16,990  
FDIC indemnification asset     28,958       37,051       58,488  
Premises, furniture, and equipment     118,617       121,596       132,865  
Investment in BOLI     206,706       206,405       206,304  
Goodwill and other intangible assets     280,240       281,059       282,815  
Accrued interest receivable and other assets     207,949       218,170       193,376  
  Total assets   $ 8,055,819     $ 8,099,839     $ 7,988,002  
Liabilities and Stockholders' Equity                        
Deposits                        
  Transactional deposits   $ 5,251,715     $ 5,272,307     $ 4,897,093  
  Time deposits     1,349,080       1,399,948       1,589,270  
    Total deposits     6,600,795       6,672,255       6,486,363  
  Borrowed funds     208,854       185,984       202,155  
  Senior and subordinated debt     214,811       214,779       231,106  
  Accrued interest payable and other liabilities     77,908       85,928       95,677  
    Total liabilities     7,102,368       7,158,946       7,015,301  
Common stock     858       858       858  
Additional paid-in capital     409,077       418,318       413,742  
Retained earnings     800,343       786,453       817,630  
Accumulated other comprehensive loss, net of tax     (16,889 )     (15,660 )     (10,919 )
Treasury stock, at cost     (239,938 )     (249,076 )     (248,610 )
  Total stockholders' equity     953,451       940,893       972,701  
  Total liabilities and stockholders' equity   $ 8,055,819     $ 8,099,839     $ 7,988,002  
                           
                           
                           
Condensed Consolidated Statements of Income
Unaudited
(Amounts in thousands, except per share data)
 
    Quarters Ended  
    March 31,
2013
    December 31,
2012
    March 31,
2012
 
Interest Income                        
  Loans   $ 59,431     $ 61,596     $ 61,491  
  Covered loans     3,449       3,975       4,202  
  Investment securities     7,356       7,517       8,934  
  Other short-term investments     809       1,111       641  
    Total interest income     71,045       74,199       75,268  
Interest Expense                        
  Deposits     3,320       3,735       5,513  
  Borrowed funds     442       497       515  
  Senior and subordinated debt     3,435       3,445       4,058  
    Total interest expense     7,197       7,677       10,086  
    Net interest income     63,848       66,522       65,182  
  Provision for loan and covered loan losses     5,674       5,593       18,210  
    Net interest income after provision for loan and covered loan losses     58,174       60,929       46,972  
Noninterest Income                        
  Service charges on deposit accounts     8,677       9,689       8,660  
  Card-based fees     5,076       5,274       5,020  
  Wealth management fees     5,839       5,590       5,392  
  Mortgage banking income     1,966       2,102       -  
  Merchant servicing fees     2,554       2,727       2,322  
  Other service charges, commissions, and fees     1,646       1,348       1,198  
  Other income     781       1       1,639  
  Net trading gains     1,036       116       1,401  
  Net securities gains (losses)     -       88       (943 )
  Gain on bulk loan sales     -       5,153       -  
    Total noninterest income     27,575       32,088       24,689  
Noninterest Expense                        
  Salaries and wages     28,963       27,241       27,257  
  Retirement and other employee benefits     7,606       6,787       6,793  
  Net occupancy and equipment expense     8,147       8,747       8,331  
  Technology and related costs     2,483       3,231       2,858  
  Professional services     5,218       10,415       5,629  
  Net OREO expense     1,799       1,325       1,864  
  FDIC premiums     1,742       1,763       1,719  
  Adjusted amortization of FDIC indemnification asset     750       2,705       -  
  Other expenses     8,106       11,393       8,162  
    Total noninterest expense     64,814       73,607       62,613  
  Income before income tax expense     20,935       19,410       9,048  
  Income tax expense     6,293       6,194       1,156  
    Net income     14,642       13,216       7,892  
  Net income applicable to non-vested restricted shares     (212 )     (194 )     (139 )
    Net income applicable to common shares   $ 14,430     $ 13,022     $ 7,753  
    Diluted earnings per common share   $ 0.20     $ 0.18     $ 0.11  
    Dividends declared per common share   $ 0.01     $ 0.01     $ 0.01  
  Weighted average diluted common shares outstanding     73,874       73,758       73,505  
                           
                           
Contact:
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

TRADED: NASDAQ Global Select Market
SYMBOL: FMBI

First Midwest Bancorp, Inc.
One Pierce Place, Suite 1500
Itasca, Illinois 60143-9768
(630) 875-7450
www.firstmidwest.com
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