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First Midwest Bancorp, Inc. Announces 2013 Fourth Quarter and Full Year Results

ECON, FMBI

Increased Earnings - Strong Loan Growth - Improved Asset Quality

ITASCA, IL--(Marketwired - Jan 21, 2014) - 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 fourth quarter of 2013. Net income applicable to common shares for the fourth quarter of 2013 was $18.9 million, or $0.26 per share, compared to net income applicable to common shares of $28.9 million, or $0.39 per share, for the third quarter of 2013 and $13.0 million, or $0.18 per share, for the fourth quarter of 2012.

For the full year of 2013, the Company reported net income applicable to common shares of $78.2 million, or $1.06 per share, compared to a net loss applicable to common shares of $20.7 million, or $0.28 per share, for the year ended December 31, 2012.

"First Midwest had a strong 2013, evidenced by significantly improved earnings, robust loan and fee growth as well as a dramatically enhanced credit profile," said Michael L. Scudder, President and Chief Executive Officer of First Midwest Bancorp, Inc. "Our lending and fee-based businesses performed extremely well throughout the year. Targeted investment in these businesses helped diversify our revenues and, when combined with substantially lower credit costs and tight expense control, offset the challenges of a difficult rate environment."

Mr. Scudder went on to say, "Loans outstanding increased by 8% over 2012, led by double digit growth in both commercial and agricultural lending. Notably, our fee-based revenues grew by some 10% on the strength of wealth management, mortgage, and commercial sales performance. As we closed 2013, both our agricultural lending and trust platforms now rank among the largest of Illinois-based financial institutions."

Mr. Scudder concluded, "Our business momentum remains solid and, when combined with our strong capital foundation and an improving economic outlook, leaves us well placed to grow and enhance shareholder value."

SELECT HIGHLIGHTS

Business Momentum

  • Increased earnings per share by 44% compared to the fourth quarter of 2012 and almost 500% compared to the year ended December 31, 2012.

  • Grew total loans, excluding covered loans, by 10% annualized from September 30, 2013 and 8% from December 31, 2012.

  • Maintained noninterest expense consistent with the third quarter and decreased by 12% from the fourth quarter of 2012.

  • Maintained net interest margin of 3.62% achieved in the third quarter.

  • Increased dividends per share to $0.07, up 75% from the third quarter and 600% from the fourth quarter of 2012.

Improving Credit and Strengthening Capital

  • Recorded 21% lower net loan charge-offs, excluding net covered loan charge-offs, compared to the third quarter, representing one of the lowest levels in over five years.

  • Decreased non-performing loans by $10 million, or 14%, from September 30, 2013 and $30 million, or 32%, from December 31, 2012.

  • Reduced performing potential problem loans by $31 million, or 17%, from September 30, 2013 and $63 million, or 29%, from December 31, 2012.

  • Grew Tier 1 common capital to risk-weighted assets to 10.37%, a 14 basis point improvement from September 30, 2013 and 104 basis point improvement from December 31, 2012.

  • Retired $23.3 million of 6.95% junior subordinated debentures at a premium of 4%, resulting in a pre-tax loss of $1.0 million, while lowering future annual interest expense by nearly $2 million.

OPERATING PERFORMANCE

 
 
Pre-Tax, Pre-Provision Operating Earnings (1)
(Dollar amounts in thousands)
 
    Quarters Ended   Years Ended
    December 31, 2013   September 30, 2013   December 31, 2012   December 31, 2013   December 31, 2012
Income (loss) before income tax expense   $ 28,673     $ 54,282     $ 19,410     $ 128,021     $ (49,936 )
Provision for loan and covered loan losses     -       4,770       5,593       16,257       158,052  
  Pre-tax, pre-provision earnings     28,673       59,052       25,003       144,278       108,116  
Adjustments to Pre-Tax, Pre-Provision Earnings                        
Net securities (gains) losses     (147 )     (33,801 )     (88 )     (34,164 )     921  
Net losses on sales and valuation adjustments of OREO, excess properties, asset held-for sale, and other     1,763       1,652       1,864       3,908       7,974  
Losses on early extinguishment of debt     1,034       -       814       1,034       558  
Severance-related costs     483       233       -       2,207       1,155  
BOLI modification loss     -       13,312       -       13,312       -  
Gain on termination of FHLB forward commitments     -       (7,829 )     -       (7,829 )     -  
Gain, less related expenses, on bulk loan sales     -       -       (2,639 )     -       (2,639 )
Adjusted amortization of FDIC indemnification asset     -       -       2,705       1,500       6,705  
Gains on acquisitions, net of integration costs     -       -       588       -       (2,486 )
  Total adjustments     3,133       (26,433 )     3,244       (20,032 )     12,188  
  Pre-tax, pre-provision operating earnings   $ 31,806     $ 32,619     $ 28,247     $ 124,246     $ 120,304  
                                           
(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 assessing 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 $31.8 million for the fourth quarter of 2013 decreased 2.5% from the third quarter of 2013 driven mainly by comparatively lower fee-based revenues. Compared to the fourth quarter of 2012, pre-tax, pre-provision operating earnings increased $3.6 million, or 12.6%, resulting primarily from lower noninterest expense, which was partially offset by a decrease in net interest income and noninterest income.

For the full year of 2013, pre-tax, pre-provision operating earnings rose $3.9 million compared to 2012 as a result of higher levels of wealth management fees, gains on mortgage loan sales, and fees from sales of capital market products to commercial clients, which more than offset a decrease in net interest 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
    December 31, 2013   September 30, 2013   December 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   $ 610,792     $ 448   0.29   $ 661,779     $ 469   0.28   $ 562,288     $ 345   0.24
Trading securities     16,569       72   1.74     15,543       29   0.75     15,597       94   2.41
Investment securities (1)     1,211,868       10,582   3.49     1,250,158       10,199   3.26     1,144,997       10,154   3.55
Federal Home Loan Bank and Federal Reserve Bank stock     35,161       332   3.78     35,162       333   3.79     47,232       349   2.96
Loans (1)(2)     5,675,293       63,728   4.45     5,559,932       64,326   4.59     5,463,355       66,490   4.84
  Total interest-earning assets (1)     7,549,683       75,162   3.95     7,522,574       75,356   3.98     7,233,469       77,432   4.26
Cash and due from banks     123,128                 127,847                 122,328            
Allowance for loan and covered loan losses     (91,860 )               (93,940 )               (103,302 )          
Other assets     793,359                 847,304                 886,748            
Total assets   $ 8,374,310               $ 8,403,785               $ 8,139,243            
                                                       
Liabilities and Stockholders' Equity:                                                
Interest-bearing transaction deposits   $ 3,678,591       788   0.08   $ 3,647,159       765   0.08   $ 3,468,397       903   0.10
Time deposits     1,234,517       1,953   0.63     1,288,746       2,072   0.64     1,447,918       2,832   0.78
Borrowed funds     213,761       390   0.72     203,613       390   0.76     185,390       497   1.07
Senior and subordinated debt     207,162       3,301   6.32     214,860       3,436   6.34     214,764       3,445   6.38
Total interest-bearing liabilities     5,334,031       6,432   0.48     5,354,378       6,663   0.49     5,316,469       7,677   0.57
Demand deposits     1,956,570                 1,975,797                 1,808,522            
Total funding sources     7,290,601                 7,330,175                 7,124,991            
Other liabilities     87,250                 90,154                 73,077            
Stockholders' equity - common     996,459                 983,456                 941,175            
  Total liabilities and stockholders' equity   $ 8,374,310               $ 8,403,785               $ 8,139,243            
Net interest income/margin (1)         $ 68,730   3.62         $ 68,693   3.63         $ 69,755   3.84
                                                 
                                                 
(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) This item includes covered interest-earning assets consisting 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 fourth quarter of 2013, average interest-earning assets rose $27.1 million from the third quarter of 2013 driven by growth in the loan portfolio, which was funded through other interest-earning assets and cash flows from maturing investment securities. Compared to December 31, 2012, average interest-earning assets grew $316.2 million from an increase in loans, investment securities, and other interest-earning assets.

Average funding sources for the fourth quarter of 2013 were $39.6 million lower than the third quarter of 2013 and $165.6 million higher than the fourth quarter of 2012. A reduction in time deposits and seasonal declines in public fund deposits, partially offset by higher levels of interest-bearing transaction deposits, accounted for the decrease in average funding sources from the third quarter of 2013. Compared to the fourth quarter of 2012, a 6.8% increase in average demand and interest-bearing transaction deposits more than offset lower levels of time deposits.

Tax-equivalent net interest margin for the current quarter was 3.62%, remaining stable compared to the third quarter of 2013 and declining 22 basis points compared to the fourth quarter of 2012. Loan yields declined on new and renewing loans compared to both prior periods presented as a result of greater customer preference for floating rate loans given the current low interest rate environment. The decrease in the loan yield during the fourth quarter was mitigated by a higher rate earned on certain investment securities. Additionally, an improved funding mix and lower rates paid on time deposits offset the decline in the loan yield compared to both prior periods presented.

 
 
Noninterest Income Analysis
(Dollar amounts in thousands)
 
    Quarters Ended   December 31, 2013
Percent Change From
    December 31, 2013   September 30, 2013   December 31, 2012   September 30, 2013   December 31, 2012
Service charges on deposit accounts   $ 9,259     $ 9,472     $ 9,689     (2.2 )   (4.4 )
Card-based fees     5,517       5,509       5,274     0.1     4.6  
Wealth management fees     6,202       6,018       5,590     3.1     10.9  
Mortgage banking income     1,055       1,273       2,329     (17.1 )   (54.7 )
Merchant servicing fees     2,585       2,915       2,727     (11.3 )   (5.2 )
Other service charges, commissions, and fees     2,094       2,617       1,121     (20.0 )   86.8  
  Total fee-based revenues     26,712       27,804       26,730     (3.9 )   (0.1 )
Net securities gains     147       33,801       88     (99.6 )   67.0  
BOLI income (loss)     584       (13,028 )     355     N/M   64.5  
Net trading gains (1)     1,057       882       116     19.8     N/M
Losses on early extinguishment of debt     (1,034 )     -       (814 )   N/M   27.0  
Other income     313       800       460     (60.9 )   (32.0 )
Gain on termination of FHLB forward commitments     -       7,829       -     N/M   -  
Gain on bulk loan sales     -       -       5,153     N/M   N/M
  Total noninterest income   $ 27,779     $ 58,088     $ 32,088     (52.2 )   (13.4 )
                                       
N/M - Not meaningful.
   
(1) 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 fee-based revenues declined 3.9% from the third quarter of 2013 primarily from decreases in fee income generated by sales of capital market products to commercial clients, gains on sales of mortgage loans, and merchant servicing fees. The reduction in merchant servicing fees was substantially offset by lower merchant card expense, reflecting the high volume, low margin nature of this service. These declines were partially mitigated by continued growth in wealth management fees.

Compared to the fourth quarter of 2012, total fee-based revenues remained stable. Growth in fee income generated by sales of capital market products to commercial clients and wealth management fees resulting from new customer relationships and improved market performance were offset by lower levels of mortgage banking income.

Total noninterest income comparisons to the prior quarter and fourth quarter of 2012 are impacted by significant nonrecurring transactions during these periods. During the third quarter of 2013, the Company recognized a $34.0 million gain on the sale of an equity investment, a $7.8 million gain on the termination of two FHLB forward commitments, and a $13.3 million charge related to an adjustment of the cash surrender values of certain BOLI policies. A $5.2 million gain on bulk loan sales was recognized in the fourth quarter of 2012.

During the fourth quarter of 2013, the Company repurchased and retired $23.3 million of 6.95% junior subordinated debentures, which resulted in a pre-tax loss of $1.0 million. This action will reduce future annual interest expense by $1.6 million.

 
 
Noninterest Expense Analysis
(Dollar amounts in thousands)
 
    Quarters Ended   December 31, 2013
Percent Change From
    December 31, 2013   September 30, 2013   December 31, 2012   September 30, 2013   December 31, 2012
Salaries and wages   $ 27,286   $ 27,254   $ 27,036   0.1     0.9  
Nonqualified plan expense (1)     1,305     1,003     205   30.1     N/M
Retirement and other employee benefits     6,399     6,013     6,787   6.4     (5.7 )
  Total compensation expense     34,990     34,270     34,028   2.1     2.8  
Net OREO expense     2,815     2,849     1,325   (1.2 )   N/M
Professional services     5,592     5,517     10,415   1.4     (46.3 )
Net occupancy and equipment expense     7,910     7,982     8,747   (0.9 )   (9.6 )
Technology and related costs     2,984     2,984     3,231   -     (7.6 )
FDIC premiums     1,258     1,734     1,763   (27.5 )   (28.6 )
Advertising and promotions     2,144     2,167     1,744   (1.1 )   22.9  
Merchant card expense     2,076     2,339     2,192   (11.2 )   (5.3 )
Cardholder expenses     1,019     1,030     935   (1.1 )   9.0  
Other expenses     4,006     3,830     6,522   4.6     (38.6 )
Adjusted amortization of FDIC indemnification asset     -     -     2,705   N/M   N/M
  Total noninterest expense   $ 64,794   $ 64,702   $ 73,607   0.1     (12.0 )
 
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 related assets included in noninterest income.
   
   

Total noninterest expense for the fourth quarter of 2013 was consistent with the third quarter of 2013 and decreased 12.0% compared to the fourth quarter of 2012.

The increase in retirement and other employee benefits from the quarter ended September 30, 2013 was driven by the timing of certain pension expense accruals. Compared to the fourth quarter of 2012, the decrease in retirement and other employee benefits resulted primarily from changes to the Company's defined benefit pension plan and a decrease in other employee benefit accruals.

The fourth quarter of 2012 reflects higher gains on sales of OREO properties compared to the fourth quarter of 2013, driving higher net OREO expense.

During the fourth quarter of 2012, professional services were elevated due primarily to expenses related to the completion of the bulk loan sales, higher personnel recruitment expenses, and the accelerated recognition of certain capitalized consulting costs.

The decline in net occupancy and equipment expense resulted from a decrease in real estate taxes compared to the fourth quarter of 2012.

FDIC premiums decreased compared to both prior periods presented from a lower assessment rate.

The increase in advertising and promotions expense from the fourth quarter of 2012 was driven by the launch of our "Bank with Momentum" branding campaign during the second quarter of 2013, and reflects the return to a more normalized level of expense.

The decline in other expenses from the fourth quarter of 2012 reflects a $770,000 reduction in the reserve for unfunded commitments in the fourth quarter of 2013. In addition, the fourth quarter of 2012 was elevated as a result of a $1.3 million valuation adjustment on a former banking office.

Based on management's current estimates of future cash flows on covered loans and OREO and expected reimbursements from the FDIC for covered losses, no adjusted amortization of the FDIC indemnification asset was required for the third and fourth quarters of 2013.

LOAN PORTFOLIO AND ASSET QUALITY

 
 
Loan Portfolio Composition
(Dollar amounts in thousands)
 
    As Of   December 31, 2013
Percent Change From
    December 31, 2013   September 30, 2013   December 31, 2012   September 30, 2013   December 31, 2012
Corporate                    
Commercial and industrial   $ 1,830,638   $ 1,792,561   $ 1,631,474   2.1     12.2  
Agricultural     321,702     318,659     268,618   1.0     19.8  
Commercial real estate:                          
  Office     459,202     449,067     474,717   2.3     (3.3 )
  Retail     392,576     384,787     368,796   2.0     6.4  
  Industrial     501,907     503,010     489,678   (0.2 )   2.5  
  Multi-family     332,873     332,749     285,481   -     16.6  
  Construction     186,197     175,172     186,416   6.3     (0.1 )
  Other commercial real estate     807,071     790,114     773,121   2.1     4.4  
    Total commercial real estate     2,679,826     2,634,899     2,578,209   1.7     3.9  
    Total corporate loans     4,832,166     4,746,119     4,478,301   1.8     7.9  
Consumer                          
Home equity     427,020     377,015     390,033   13.3     9.5  
1-4 family mortgages     275,992     286,333     282,948   (3.6 )   (2.5 )
Installment     44,827     39,462     38,394   13.6     16.8  
  Total consumer loans     747,839     702,810     711,375   6.4     5.1  
  Total loans, excluding covered loans     5,580,005     5,448,929     5,189,676   2.4     7.5  
Covered loans     134,355     153,305     197,894   (12.4 )   (32.1 )
  Total loans   $ 5,714,360   $ 5,602,234   $ 5,387,570   2.0     6.1  
                                 
                                 

Total loans, excluding covered loans, of $5.6 billion grew by $131.1 million from September 30, 2013. During the fourth quarter of 2013, the Company experienced strong annualized growth of nearly 10% across most corporate categories. In response to market conditions, the Company purchased $51.9 million of high-quality, shorter duration home equity loans and elected to sell $29.3 million of longer-term 1-4 family mortgages.

Compared to December 31, 2012, total loans, excluding covered loans, increased significantly by 7.5%, or $390.3 million. Year-over-year, the loan portfolio benefited from well-balanced growth reflecting credits of varying size and diverse geographic locations within our markets. The Company experienced strong growth in the commercial and industrial and agricultural loan categories, reflecting the impact of greater resource investments and expansion into specialized lending areas.

 
 
Asset Quality
(Dollar amounts in thousands)
 
    As Of   December 31, 2013
Percent Change From
 
    December 31, 2013   September 30, 2013   December 31, 2012   September 30, 2013   December 31, 2012
Asset quality, excluding covered
loans and covered OREO
                   
Non-accrual loans   $ 59,798     $ 68,170     $ 84,534     (12.3 )   (29.3 )
90 days or more past due loans     3,708       5,642       8,689     (34.3 )   (57.3 )
  Total non-performing loans     63,506       73,812       93,223     (14.0 )   (31.9 )
Accruing troubled debt restructurings ("TDRs")     23,770       24,329       6,867     (2.3 )   N/M
OREO     32,473       35,616       39,953     (8.8 )   (18.7 )
  Total non-performing assets   $ 119,749     $ 133,757     $ 140,043     (10.5 )   (14.5 )
30-89 days past due loans   $ 20,742     $ 15,111     $ 22,666     37.3     (8.5 )
Performing potential problem loans:                          
  Special mention   $ 77,564     $ 114,788     $ 137,622     (32.4 )   (43.6 )
  Substandard     78,390       72,439       80,977     8.2     (3.2 )
  Total performing potential problem loans (1)   $ 155,954     $ 187,227     $ 218,599     (16.7 )   (28.7 )
                           
Non-accrual loans to total loans     1.07 %     1.25 %     1.63 %        
Non-performing loans to total loans     1.14 %     1.35 %     1.80 %        
Non-performing assets to loans plus OREO     2.13 %     2.44 %     2.68 %        
Performing potential problem loans to total loans (1)     2.79 %     3.44 %     4.22 %        
                           
Allowance for Credit Losses                          
Allowance for loan losses   $ 72,946     $ 77,772     $ 87,384     (6.2 )   (16.5 )
Allowance for covered loan losses     12,559       13,056       12,062     (3.8 )   4.1  
  Total allowance for loan and covered loan losses     85,505       90,828       99,446     (5.9 )   (14.0 )
Reserve for unfunded commitments     1,616       2,386       3,366     (32.3 )   (52.0 )
  Total allowance for credit losses   $ 87,121     $ 93,214     $ 102,812     (6.5 )   (15.3 )
Allowance for credit losses to loans, including covered loans     1.52 %     1.66 %     1.91 %        
Allowance for credit losses to non-accrual loans, excluding covered loans     124.69 %     117.59 %     107.35 %        
 
N/M - Not meaningful.
 
(1)  Total performing potential problem loans excludes accruing TDRs of $2.8 million as of December 31, 2013, $18.6 million as of September 30, 2013, and $448,000 as of December 31, 2012.
   
   

Non-performing loans, excluding covered loans, were $63.5 million at December 31, 2013, decreasing 14.0% from September 30, 2013 and 31.9% from December 31, 2012. The reclassification of two corporate loan relationships totaling $19.3 million from non-accrual to accruing TDR status accounted for the majority of the year-over-year improvement. These loans continue to perform in accordance with their modified terms, which are at market rates, and are expected to move to the performing loan portfolio by the end of the first quarter of 2014.

Performing potential problem loans decreased 16.7% from September 30, 2013 and 28.7% from December 31, 2012 and are now at pre-recession levels.

 
 
Charge-Off Data
(Dollar amounts in thousands)
 
    Quarters Ended  
    December 31, 2013   % of
Total
  September 30, 2013     % of
Total
  December 31, 2012   % of
Total
Net loan charge-offs (1):                          
  Commercial and industrial   $ 2,528     50.0     $ 2,057       32.0   $ 1,778     28.4  
  Agricultural     (58 )   (1.1 )     141       2.2     (177 )   (2.8 )
  Office, retail, and industrial     882     17.4       956       14.9     95     1.5  
  Multi-family     (10 )   (0.2 )     112       1.7     9     0.1  
  Construction     (934 )   (18.5 )     410       6.4     234     3.7  
  Other commercial real estate     776     15.4       639       10.0     1,786     28.5  
  Consumer     1,868     37.0       2,108       32.8     2,536     40.6  
    Net loan charge-offs, excluding covered loans     5,052     100.0       6,423       100.0     6,261     100.0  
Net covered loan charge-offs (1)     271           1,629             1,465      
    Total net loan charge-offs   $ 5,323         $ 8,052           $ 7,726      
Net loan charge-offs to average loans, excluding covered loans, annualized:                                
Quarter-to-date     0.36 %         0.47 %           0.48 %    
Year-to-date     0.48 %         0.53 %           3.32 %    
   
(1) Amounts represent charge-offs, net of recoveries.
   
   

Excluding net covered loan charge-offs, net loan charge-offs for the fourth quarter of 2013 decreased 21.3% compared to the third quarter of 2013, representing one of the lowest levels of charge-offs in over five years.

CAPITAL MANAGEMENT

 
 
Capital Ratios
(Dollar amounts in thousands)
 
    December 31, 2013   September 30,
2013
  December 31,
2012
  September 30,
2012
  Regulatory
Minimum
For
"Well-
Capitalized"
  Excess Over
Required Minimums
at December 31, 2013
Regulatory capital ratios:                        
  Total capital to risk-weighted assets   12.39 %   12.60 %   11.90 %   11.65 %   10.00 %   24 %   $ 162,321
  Tier 1 capital to risk-weighted assets   10.91 %   11.12 %   10.28 %   9.92 %   6.00 %   82 %   $ 333,734
  Tier 1 leverage to average assets   9.18 %   9.21 %   8.40 %   8.13 %   5.00 %   84 %   $ 337,620
Tier 1 common capital to risk-weighted assets (1)   10.37 %   10.23 %   9.33 %   8.93 %   N/A   N/A     N/A
Tangible common equity ratios (2):                              
  Tangible common equity to tangible assets   9.09 %   8.61 %   8.44 %   8.26 %   N/A   N/A     N/A
  Tangible common equity, excluding other comprehensive loss, to tangible assets   9.43 %   8.93 %   8.64 %   8.38 %   N/A   N/A     N/A
  Tangible common equity to risk-weighted assets   10.67 %   10.60 %   10.39 %   10.12 %   N/A   N/A     N/A
Non-performing assets to tangible common equity and allowance for credit losses   14.74 %   16.66 %   18.36 %   20.50 %   N/A   N/A     N/A
 
N/A - Ratio is not subject to formal Federal Reserve regulatory guidance.
 
(1) Excludes the impact of trust-preferred securities.
   
(2) 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 decline in the Company's regulatory capital ratios compared to the third quarter of 2013 resulted from loan growth and the repurchase and retirement of $23.3 million of 6.95% junior subordinated debentures, which qualify as Tier 1 capital. This decrease was partially mitigated by retained earnings. The Company's regulatory ratios exceeded all regulatory mandated ratios for characterization as "well-capitalized" as of December 31, 2013.

The Board of Directors approved an increase in the quarterly cash dividend from $0.04 to $0.07 per common share during the fourth quarter of 2013, which followed a dividend increase from $0.01 to $0.04 per common share in the second quarter of 2013.

About the Company

First Midwest is the premier relationship-based financial institution in the dynamic Chicagoland banking market. As one of Illinois' largest independent bank holding companies, First Midwest provides a full range of business and retail banking and wealth management services through approximately 90 banking offices located in metropolitan Chicago, northwest Indiana, central and western Illinois, and eastern Iowa. The Company website is www.firstmidwest.com.

Forward-Looking Statements

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 results or 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 certain 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 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, January 22, 2014 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. 10039374 beginning one hour after completion of the live call until 9:00 A.M. (ET) on January 29, 2014. 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, 2013   September 30, 2013   December 31, 2012
Assets            
Cash and due from banks   $ 110,417     $ 155,075     $ 149,420  
Interest-bearing deposits in other banks     476,824       744,163       566,846  
Trading securities, at fair value     17,317       16,443       14,162  
Securities available-for-sale, at fair value     1,112,725       1,162,911       1,082,403  
Securities held-to-maturity, at amortized cost     44,322       29,847       34,295  
Federal Home Loan Bank and Federal Reserve Bank stock, at cost     35,161       35,161       47,232  
Loans, excluding covered loans     5,580,005       5,448,929       5,189,676  
Covered loans     134,355       153,305       197,894  
Allowance for loan and covered loan losses     (85,505 )     (90,828 )     (99,446 )
  Net loans     5,628,855       5,511,406       5,288,124  
OREO, excluding covered OREO     32,473       35,616       39,953  
Covered OREO     8,863       10,477       13,123  
FDIC indemnification asset     16,585       18,078       37,051  
Premises, furniture, and equipment     120,204       118,664       121,596  
Investment in BOLI     193,167       193,979       206,405  
Goodwill and other intangible assets     276,366       277,187       281,059  
Accrued interest receivable and other assets     180,128       208,906       218,170  
  Total assets   $ 8,253,407     $ 8,517,913     $ 8,099,839  
Liabilities and Stockholders' Equity                  
Noninterest-bearing deposits   $ 1,911,602       2,020,956       1,762,903  
Interest-bearing deposits     4,854,499       4,982,252       4,909,352  
  Total deposits     6,766,101       7,003,208       6,672,255  
Borrowed funds     224,342       212,058       185,984  
Senior and subordinated debt     190,932       214,876       214,779  
Accrued interest payable and other liabilities     70,590       101,046       85,928  
  Total liabilities     7,251,965       7,531,188       7,158,946  
Common stock     858       858       858  
Additional paid-in capital     414,293       412,677       418,318  
Retained earnings     853,740       839,835       786,453  
Accumulated other comprehensive loss, net of tax     (26,792 )     (26,057 )     (15,660 )
Treasury stock, at cost     (240,657 )     (240,588 )     (249,076 )
  Total stockholders' equity     1,001,442       986,725       940,893  
  Total liabilities and stockholders' equity   $ 8,253,407     $ 8,517,913     $ 8,099,839  
                           
                           
                           
Condensed Consolidated Statements of Income
Unaudited
(Amounts in thousands, except per share data)
 
    Quarters Ended   Years Ended
    December 31, 2013   September 30,
2013
  December 31, 2012   December 31, 2013   December 31, 2012
Interest Income                    
Loans, excluding covered loans   $ 60,068     $ 60,614     $ 61,596     $ 239,224     $ 248,752  
Covered loans     3,062       3,142       3,975       13,804       15,873  
Investment securities     8,138       7,742       7,517       30,893       32,923  
Other short-term investments     852       831       1,111       3,326       3,021  
  Total interest income     72,120       72,329       74,199       287,247       300,569  
Interest Expense                              
Deposits     2,741       2,837       3,735       11,901       18,052  
Borrowed funds     390       390       497       1,607       2,009  
Senior and subordinated debt     3,301       3,436       3,445       13,607       14,840  
  Total interest expense     6,432       6,663       7,677       27,115       34,901  
  Net interest income     65,688       65,666       66,522       260,132       265,668  
Provision for loan and covered loan losses     -       4,770       5,593       16,257       158,052  
  Net interest income after provision for loan and covered loan losses     65,688       60,896       60,929       243,875       107,616  
Noninterest Income                              
Service charges on deposit accounts     9,259       9,472       9,689       36,526       36,699  
Card-based fees     5,517       5,509       5,274       21,649       20,852  
Wealth management fees     6,202       6,018       5,590       24,185       21,791  
Mortgage banking income     1,055       1,273       2,329       5,306       2,689  
Merchant servicing fees     2,585       2,915       2,727       10,953       10,806  
Other service charges, commissions, and fees     2,094       2,617       1,121       7,663       4,486  
Net securities gains (losses)     147       33,801       88       34,164       (921 )
BOLI income (loss)     584       (13,028 )     355       (11,844 )     1,307  
Loss on early extinguishment of debt     (1,034 )     -       (814 )     (1,034 )     (558 )
Other income     1,370       1,682       576       5,486       4,355  
Gain on termination of FHLB forward commitments     -       7,829       -       7,829       -  
Gain on bulk loan sales     -       -       5,153       -       5,153  
Gain on FDIC-assisted acquisition     -       -       -       -       3,289  
  Total noninterest income     27,779       58,088       32,088       140,883       109,948  
Noninterest Expense                              
Salaries and employee benefits     34,990       34,270       34,028       138,750       130,755  
Net occupancy and equipment expense     7,910       7,982       8,747       31,832       32,699  
Technology and related costs     2,984       2,984       3,231       11,335       11,846  
Professional services     5,592       5,517       10,415       21,922       29,614  
Net OREO expense     2,815       2,849       1,325       8,547       10,521  
FDIC premiums     1,258       1,734       1,763       6,438       6,926  
Adjusted amortization of FDIC indemnification asset     -       -       2,705       1,500       6,705  
Other expenses     9,245       9,366       11,393       36,413       38,434  
  Total noninterest expense     64,794       64,702       73,607       256,737       267,500  
  Income (loss) before income tax expense     28,673       54,282       19,410       128,021       (49,936 )
  Income tax expense (benefit)     9,508       24,959       6,194       48,715       (28,882 )
  Net income (loss)     19,165       29,323       13,216       79,306       (21,054 )
Net (income) loss applicable to non-vestedrestricted shares     (260 )     (416 )     (194 )     (1,107 )     306  
  Net income (loss) applicable to common shares   $ 18,905     $ 28,907     $ 13,022     $ 78,199     $ (20,748 )
Diluted earnings (loss) per common share   $ 0.26     $ 0.39     $ 0.18     $ 1.06     $ (0.28 )
Dividends declared per common share   $ 0.07     $ 0.04     $ 0.01     $ 0.16     $ 0.04  
Weighted average diluted common shares outstanding     74,042       74,034       73,758       73,994       73,666  

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
(630) 875-7450
www.firstmidwest.com


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