First Midwest Bancorp, Inc. Announces 2012 Fourth Quarter and

First Midwest Bancorp, Inc. Announces 2012 Fourth Quarter and Full Year Results  Significant Increase in Quarterly Earnings; Substantially Improved Credit Quality; Stable Net Interest Margin; Strong Fee-Based Revenue Growth  ITASCA, IL -- (Marketwire) -- 01/23/13 --  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 2012. Net income applicable to common shares for the fourth quarter of 2012 was $13.0 million, or $0.18 per share. This compares to a net loss applicable to common shares of $47.8 million, or $0.65 per share, for the third quarter of 2012 and net income applicable to common shares of $3.9 million, or $0.05 per share, for the fourth quarter of 2011.  For the full year of 2012, the Company had a net loss applicable to common shares of $20.7 million, or $0.28 per share. This compares to net income applicable to common shares of $25.4 million, or $0.35 per share, for the year ended December 31, 2011.   "2012 was a year of transition," said Michael L. Scudder, President and Chief Executive Officer of First Midwest Bancorp, Inc. "Through aggressive remediation, we met our goal of substantially reducing problem assets. While impactful to earnings, these steps greatly improved our credit risk profile. At the same time, core earnings remained solid in a tough business environment. Investments made to enhance and align our sales and operations teams contributed to diversified, underlying loan growth, significantly greater fee-based revenues, and balanced expense control."   Mr. Scudder continued, "As a result of these actions, we enter 2013 a much stronger company. Continued business momentum, lower credit costs, and control of spending will serve to strengthen earnings. While evolving regulatory expectations and low interest rates will present challenges, our strong capital base, augmented by improved earnings, leaves us well positioned to pursue opportunities for growth and return value to our shareholders."   SELECT HIGHLIGHTS  Operating Performance for the Fourth Quarter       --  Net income applicable to common shares of $13.0 million, or $0.18 per     share, compared to a net loss of $0.65 per share for the third quarter     of 2012, and net income of $0.05 per share for the fourth quarter of     2011. --  Fee-based revenues of $26.7 million, up 9.8% from the third quarter of     2012 and 12.0% from the fourth quarter of 2011. --  Net interest margin of 3.84%, stable compared to the third quarter of     2012. --  Total loans, excluding covered loans, of $5.2 billion, grew by $101.6     million from December 31, 2011.     Credit and Capital as of December 31, 2012       --  Non-accrual loans of $84.5 million declined 15.1% from September 30,     2012 and 54.9% from December 31, 2011. --  Allowance for credit losses to loans, including covered loans, of     1.91%, compared to 1.93% at September 30, 2012. --  Allowance for credit losses to non-accrual loans, excluding covered     loans, of 107%, up from 96% at September 30, 2012. --  Tier 1 common capital to risk-weighted assets of 9.33%, an increase of     40 basis points from September 30, 2012.     Significant Fourth Quarter Events       --  Completed bulk loan sales, resulting in a gain, less commissions and     other selling expenses, of $2.6 million. --  Repurchased $4.3 million of 6.95% junior subordinated debentures and     $12.0 million of 5.85% subordinated notes. --  Recognized as a Chicago Tribune Top Workplace for the third     consecutive year.     OPERATING PERFORMANCE                                                                                                          Operating Performance Highlights                                              (Dollar amounts in thousands)                                                                                                                                   Quarters Ended                Years Ended                          --------------------------------- ----------------------                      December   September   December   December    December                       31, 2012   30, 2012    31, 2011   31, 2012    31, 2011                      ---------- ----------  ---------- ----------  ----------  Net income (loss)  $   13,216 $  (48,527) $    6,924 $  (21,054) $   36,563  Net income (loss)                                                             applicable to                                                                common shares     $   13,022 $  (47,812) $    3,877 $  (20,748) $   25,437  Diluted earnings                                                              (loss) per common                                                            share             $     0.18 $    (0.65) $     0.05 $    (0.28) $     0.35  Return on average                                                             common equity           5.50%    (19.36%)      1.60%     (2.14%)      2.69% Return on average                                                             assets                  0.65%     (2.35%)      0.34%     (0.26%)      0.45% Net interest margin      3.84%      3.83%       3.95%      3.86%       4.04% Loans, excluding                                                              covered loans, at                                                            period end        $5,189,676 $5,218,345  $5,088,113 $5,189,676  $5,088,113  Average                                                                       transactional                                                                deposits (1)      $5,276,919 $5,247,485  $4,866,800 $5,107,966  $4,755,111  (1) Comprised of demand deposits and interest-bearing transactional              accounts.                                                                   SIGNIFICANT FOURTH QUARTER EVENTS   Loan Sales  During the fourth quarter of 2012, the Company disposed of $172.5 million in original carrying value of certain non-performing and performing potential problem loans through multiple bulk loan sales. These transactions resulted in proceeds of $94.5 million and a gain, less commissions and other selling expenses, of $2.6 million.   Retirement of Debt   During the fourth quarter of 2012, the Company repurchased and retired $4.3 million of 6.95% junior subordinated debentures at a premium of 3.0% and $12.0 million of 5.85% subordinated notes at a premium of 5.0%. These transactions resulted in the recognition of a pre-tax loss of $814,000 and will reduce future annual interest expense by approximately $1.0 million.                                                                                                                                                                                Pre-Tax, Pre-Provision Operating Earnings (1)                                        (Dollar amounts in thousands)                                                                                                                                     Quarters Ended              Years Ended                             ------------------------------- ---------------------                        December  September   December   December   December                          31, 2012  30, 2012    31, 2011   31, 2012   31, 2011                         -------- ----------  ---------- ---------  ----------  Income (loss) before                                                          income tax expense   $ 19,410 $  (85,520) $    7,220 $ (49,936) $   41,071  Provision for loan                                                            losses                  5,593    111,791      21,902   158,052      80,582                        -------- ----------  ---------- ---------  ----------    Pre-tax, pre-                                                                 provision earnings   25,003     26,271      29,122   108,116     121,653                        -------- ----------  ---------- ---------  ----------  Adjustments to Pre-                                                           Tax, Pre-Provision                                                           Earnings                                                                    Net securities gains                                                          (losses)                   88       (217)       (110)     (921)      2,410  Net losses on sales                                                           and valuation                                                                adjustments of other                                                         real estate owned                                                            ("OREO"), excess                                                             properties, assets                                                           held-for sale, and                                                           other                  (1,864)    (3,280)     (1,425)   (7,974)    (10,797) Gain, less related                                                            expenses, on bulk                                                            loan sales              2,639          -           -     2,639           -  Accelerated                                                                   amortization of FDIC                                                         indemnification asset  (2,705)    (4,000)          -    (6,705)          -  Gains on acquisitions,                                                        net of integration                                                           costs                    (588)     3,074       1,076     2,486       1,076  Losses on early                                                               extinguishment of                                                            debt                     (814)         -           -      (558)          -  Severance-related                                                             costs                       -       (840)     (2,000)   (1,155)     (2,269)                       -------- ----------  ---------- ---------  ----------    Total adjustments     (3,244)    (5,263)     (2,459)  (12,188)     (9,580)                       -------- ----------  ---------- ---------  ----------    Pre-tax, pre-                                                                 provision operating                                                          earnings           $ 28,247 $   31,534  $   31,581 $ 120,304  $  131,233                        ======== ==========  ========== =========  ==========                                                                               (1) The Company's accounting and reporting policies conform to U.S.              generally accepted accounting principles ("GAAP") and general practice       within the banking industry. As a supplement to GAAP, the Company            provided this non-GAAP performance result, which the Company believes is     useful because it assists investors in assessing the Company's operating     performance. Although it is intended to enhance investors' understanding     of the Company's business and performance, this non-GAAP financial           measure should not be considered an alternative to GAAP.                    Pre-tax, pre-provision operating earnings of $28.2 million for the fourth quarter of 2012 decreased from the third quarter of 2012 and the fourth quarter of 2011. These reductions were driven mainly by lower net interest income and higher noninterest expense, excluding certain non-operating items, which was partially offset by gains on mortgage loan sales and an increase in other fee-based revenues.   For the full year of 2012, pre-tax, pre-provision operating earnings declined $10.9 million compared to 2011, resulting primarily from a reduction in net interest income, and was partially mitigated by an increase in fee-based revenues, gains on mortgage loan sales, and the recognition of net trading income for 2012 compared to losses for 2011.   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, 2012                                                 -----------------------------------------                                                                     Yield/                                           Average        Interest       Rate                                            Balance      Earned/Paid       (%)                                         -------------  ------------- ------------ Assets:                                                                       Federal funds sold and other                                                   interest-earning assets            $     562,288  $         345         0.24 Trading securities                         15,597             94         2.41 Investment securities (1)               1,144,997         10,154         3.55 Federal Home Loan Bank and Federal                                             Reserve Bank stock                        47,232            349         2.96 Loans held-for-sale                        53,808            323         2.39 Loans, excluding covered loans (1)      5,160,576         62,192         4.79 Covered interest-earning assets (2)       248,971          3,975         6.35                                     -------------  ------------- ------------  Total interest-earning assets (1)      7,233,469         77,432         4.26                                                    ------------- ------------ Cash and due from banks                   122,328                             Allowance for loan losses                (103,302)                            Other assets                               886,748                                                                 -------------                              Total assets                       $   8,139,243                                                                 =============                             Liabilities and Stockholders'                                                  Equity:                                                                      Interest-bearing transaction                                                   deposits                           $   3,468,397            903         0.10 Time deposits                           1,447,918          2,832         0.78 Borrowed funds                            185,390            497         1.07 Senior and subordinated debt              214,764          3,445         6.38                                     -------------  ------------- ------------  Total interest-bearing liabilities     5,316,469          7,677         0.57                                                    ------------- ------------ Demand deposits                         1,808,522                                                                 -------------                              Total funding sources                  7,124,991                             Other liabilities                          73,077                             Stockholders' equity - common             941,175                             Stockholders' equity - preferred                -                                                                 -------------                              Total liabilities and stockholders'                                            equity                            $   8,139,243                                                                 =============                             Net interest income/margin (1)                     $      69,755         3.84                                                    ============= ============                                                                                                                                                                                                                Quarters Ended                                                 ----------------------------------------                                                September 30, 2012                                                ----------------------------------------                                                                    Yield/                                           Average       Interest       Rate                                            Balance     Earned/Paid       (%)                                         ------------- ------------- ------------ Assets:                                                                      Federal funds sold and other                                                  interest-earning assets            $     435,528 $         265         0.24 Trading securities                         15,389            25         0.65 Investment securities (1)               1,220,654        10,841         3.55 Federal Home Loan Bank and Federal                                            Reserve Bank stock                        47,111           341         2.90 Loans held-for-sale                             -             -            - Loans, excluding covered loans (1)      5,353,911        64,289         4.78 Covered interest-earning assets (2)       276,180         3,223         4.64                                     ------------- ------------- ------------  Total interest-earning assets (1)      7,348,773        78,984         4.28                                                   ------------- ------------ Cash and due from banks                   128,714                            Allowance for loan losses                (118,925)                           Other assets                              868,551                                                                -------------                             Total assets                       $   8,227,113                                                                =============                            Liabilities and Stockholders'                                                 Equity:                                                                     Interest-bearing transaction                                                  deposits                           $   3,394,675           898         0.11 Time deposits                           1,498,993         3,228         0.86 Borrowed funds                            189,835           507         1.06 Senior and subordinated debt              231,156         3,691         6.35                                     ------------- ------------- ------------  Total interest-bearing liabilities     5,314,659         8,324         0.62                                                   ------------- ------------ Demand deposits                         1,852,810                                                                -------------                             Total funding sources                  7,167,469                            Other liabilities                          77,062                            Stockholders' equity - common             982,582                            Stockholders' equity - preferred                -                                                                -------------                             Total liabilities and stockholders'                                           equity                            $   8,227,113                                                                =============                            Net interest income/margin (1)                    $      70,660         3.83                                                   ============= ============                                                                                                                                                                                                               Quarters Ended                                                 ----------------------------------------                                                 December 31, 2011                                                ----------------------------------------                                                                    Yield/                                           Average       Interest       Rate                                            Balance     Earned/Paid       (%)                                         ------------- ------------- ------------ Assets:                                                                      Federal funds sold and other                                                  interest-earning assets            $     718,631 $         450         0.25 Trading securities                         13,420            92         2.74 Investment securities (1)               1,069,844        11,224         4.20 Federal Home Loan Bank and Federal                                            Reserve Bank stock                        58,187           341         2.34 Loans held-for-sale                             -             -            - Loans, excluding covered loans (1)      5,085,792        63,202         4.93 Covered interest-earning assets (2)       343,479         6,787         7.84                                     ------------- ------------- ------------  Total interest-earning assets (1)      7,289,353        82,096         4.47                                                   ------------- ------------ Cash and due from banks                   116,166                            Allowance for loan losses                (133,824)                           Other assets                              870,808                                                                -------------                             Total assets                       $   8,142,503                                                                =============                            Liabilities and Stockholders'                                                 Equity:                                                                     Interest-bearing transaction                                                  deposits                           $   3,253,579         1,029         0.13 Time deposits                           1,688,971         4,933         1.16 Borrowed funds                            252,839           670         1.05 Senior and subordinated debt              187,488         3,047         6.45                                     ------------- ------------- ------------  Total interest-bearing liabilities     5,382,877         9,679         0.71                                                   ------------- ------------ Demand deposits                         1,613,221                                                                -------------                             Total funding sources                  6,996,098                            Other liabilities                          73,721                            Stockholders' equity - common             961,500                            Stockholders' equity - preferred          111,184                                                                -------------                             Total liabilities and stockholders'                                           equity                            $   8,142,503                                                                =============                            Net interest income/margin (1)                    $      72,417         3.95                                                   ============= ============                                                                              (1) Revenue from tax-exempt securities and investments that receive tax          credits is presented on a basis comparable to taxable securities and         investments. Consequently, interest income and yields are presented on a     tax-equivalent basis, assuming a federal income tax rate of 35%. This        non-GAAP financial measure assists management in assessing the               comparability of revenue arising from both taxable and tax-exempt            sources. The corresponding income tax impact related to tax-exempt items     is recorded within income tax expense. These adjustments have no impact      on net income.                                                           (2) Covered interest-earning assets consist of loans acquired through the        Company's Federal Deposit Insurance Corporation ("FDIC")-assisted            transactions subject to loss sharing agreements and the related FDIC         indemnification asset.                                                      For the fourth quarter of 2012, average interest-earning assets declined $115.3 million from the third quarter of 2012 and $55.9 million from the fourth quarter of 2011. The linked-quarter decline in average loans was impacted by the transfer of loans to held-for-sale at the end of the third quarter of 2012 and the accelerated resolution of certain credits in the fourth quarter of 2012. In addition, $37.1 million of mortgage loans outstanding at September 30, 2012 were sold during the fourth quarter of 2012. Compared to December 31, 2011, a reduction in federal funds sold and other interest-earning assets and covered interest-earning assets more than offset a rise in investment securities and increased loan balances.   Average funding sources for the fourth quarter of 2012 were $42.5 million lower than the third quarter of 2012 and up $128.9 million from the fourth quarter of 2011. Seasonal declines in public demand deposits primarily contributed to the decrease in average funding sources from the third quarter of 2012. Compared to the fourth quarter of 2011, the increase in average demand and interest-bearing transaction deposits reflects acquisition activity that occurred in December 2011 and August 2012.  Tax-equivalent net interest margin for the current quarter was 3.84%, remaining stable compared to the third quarter of 2012 and declining 11 basis points compared to the fourth quarter of 2011. The decrease compared to December 31, 2011 was driven by a decline in market interest rates, which contributed to lower yields earned on investment securities and loans, and 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 taken on expected future cash flows. Changes in the yield on covered interest-earning assets from the third quarter of 2012 and the fourth quarter of 2011 were driven by revised estimates of future cash flows and accelerated amortization of the FDIC indemnification asset. In addition, the yield for the fourth quarter of 2011 benefited from the resolution of certain loans where the cash proceeds exceeded estimates.                                                                                                                                                                                         Noninterest Income Analysis                                                 (Dollar amounts in thousands)                                                                                                                                                             December 31, 2012                                  Quarters Ended           Percent Change From                         ----------------------------- ------------------------                        December  September December   September    December                         31, 2012   30, 2012 31, 2011   30, 2012     31, 2011                        ---------- --------- -------- ------------ -----------  Service charges on                                                            deposit accounts    $    9,689 $   9,502 $  9,957          2.0        (2.7) Wealth management                                                             fees                     5,590     5,415    5,052          3.2        10.6  Other service                                                                 charges,                                                                     commissions, and                                                             fees                     6,177     4,187    3,877         47.5        59.3  Card-based fees           5,274     5,246    4,971          0.5         6.1                       ---------- --------- -------- ------------ -----------    Total fee-based                                                               revenues              26,730    24,350   23,857          9.8        12.0  Net trading gains (1)       116       685      919        (83.1)      (87.4) Bank-owned life                                                               insurance ("BOLI")                                                           and other income           815     1,027      893        (20.6)       (8.7)                      ---------- --------- -------- ------------ -----------    Total operating                                                               revenues              27,661    26,062   25,669          6.1         7.8  Net securities gains                                                          (losses)                    88      (217)    (110)         N/M         N/M  Gain on bulk loan                                                             sales                    5,153         -        -        100.0       100.0  Losses on early                                                               extinguishment of                                                            debt                      (814)        -        -       (100.0)     (100.0) Gains on acquisitions         -     3,289    1,076       (100.0)     (100.0)                      ---------- --------- -------- ------------ -----------    Total noninterest                                                             income            $   32,088 $  29,134 $ 26,635         10.1        20.5                       ========== ========= ======== ============ ===========                                                                               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 for the fourth quarter of 2012 grew 9.8% compared to the third quarter of 2012 and 12.0% from the fourth quarter of 2011. The increase in fee-based revenues from both prior periods presented was attributed primarily to gains on mortgage loan sales, an increase in service charges on business checking accounts, and higher debit card income. An increase in merchant fees driven by higher processing volumes also contributed to the growth compared to December 31, 2011.   As described in the "Significant Quarter Events" section, the Company completed bulk loan sales of certain non-performing and performing potential problem loans, which resulted in a gain, before commissions and other selling expenses, of $5.2 million. In addition, a pre-tax loss of $814,000 was recognized on the repurchase and retirement of junior subordinated debentures and subordinated notes during the fourth quarter of 2012.                                                                                                                                                                                         Noninterest Expense Analysis                                                (Dollar amounts in thousands)                                                                                                                                                             December 31, 2012                                Quarters Ended             Percent Change From                    ----------------------------------- -----------------------                    December   September    December   September    December                     31,2012     30,2012     31,2011     30,2012     31,2011                    ----------- ----------- ----------- ----------- -----------  Salaries and                                                                  wages          $    27,036 $    26,064 $    26,380         3.7         2.5  Nonqualified                                                                  plan expense                                                                 (1)                    205         817       1,208       (74.9)      (83.0) Retirement and                                                                other employee                                                               benefits             6,787       6,230       7,632         8.9       (11.1)                 ----------- ----------- ----------- ----------- -----------    Total                                                                         compensation                                                                 expense           34,028      33,111      35,220         2.8        (3.4)                 ----------- ----------- ----------- ----------- -----------  Net losses on                                                                 sales and                                                                    valuation                                                                    adjustments of                                                               OREO                    31       2,025       1,425       (98.5)      (97.8) Net OREO                                                                      operating                                                                    expense              1,294       1,183       1,540         9.4       (16.0)                 ----------- ----------- ----------- ----------- -----------    Total OREO                                                                    expense            1,325       3,208       2,965       (58.7)      (55.3)                 ----------- ----------- ----------- ----------- -----------  Loan remediation                                                              costs                5,654       3,206       4,846        76.4        16.7  Other                                                                         professional                                                                 services             4,761       3,459       3,180        37.6        49.7                  ----------- ----------- ----------- ----------- -----------    Total                                                                         professional                                                                 services          10,415       6,665       8,026        56.3        29.8                  ----------- ----------- ----------- ----------- -----------  Net occupancy                                                                 and equipment                                                                expense              8,747       8,108       7,681         7.9        13.9  Technology and                                                                related costs        3,231       2,906       2,876        11.2        12.3  FDIC premiums         1,763       1,785       1,758        (1.2)        0.3  Advertising and                                                               promotions           1,744       1,427       1,239        22.2        40.8  Merchant card                                                                 expense              2,192       2,272       1,849        (3.5)       18.6  Other expenses        7,457       6,641       4,977        12.3        49.8  Accelerated                                                                   amortization of                                                              FDIC                                                                         indemnification                                                              asset                2,705       4,000           -       (32.4)      100.0                  ----------- ----------- ----------- ----------- -----------    Total                                                                         noninterest                                                                  expense      $    73,607 $    70,123 $    66,591         5.0        10.5                  =========== =========== =========== =========== ===========                                                                               (1) Nonqualified plan expense results from changes in the Company's              obligation to participants under deferred compensation agreements.          Total noninterest expense for the fourth quarter of 2012 increased 5.0% compared to the third quarter of 2012 and 10.5% compared to the fourth quarter of 2011.   Salaries and wages increased from the third quarter of 2012 due to a decrease in deferred salaries resulting from lower new loan volume, short-term staffing c osts associated with the FDIC-assisted acquisition of Waukegan Savings Bank ("Waukegan Savings"), and higher short-term incentive compensation expense. This was partially mitigated by a reduction in general salaries expense from fewer full time employees.  For the quarter ended December 31, 2011, a $1.3 million correction of the 2010 actuarial pension expense calculation drove higher retirement and employee benefit expenses compared to December 31, 2012. The fourth quarter of 2012 also reflects an increase in post-employment benefits expense.   OREO expenses declined from both prior periods presented due to a gain on the sale of a vacant commercial lot during the fourth quarter of 2012. In addition, the elevated levels of valuation adjustments during the third quarter of 2012 resulted from declines in the values of one commercial property and one vacant land parcel.   Fourth quarter 2012 loan remediation costs were elevated due to expenses of $2.5 million related to the previously discussed bulk loan sales. This increase in expense was partially mitigated by declines in real estate taxes paid on non-performing loans in the fourth quarter of 2012.   Other professional services increased compared to the third quarter of 2012 and the fourth quarter of 2011 due to higher personnel recruitment expenses, the acceleration of certain capitalized costs, and increased attorney fees related to various legal proceedings.   Net occupancy and equipment expense increased from both prior periods presented driven by the timing of general improvements to facilities and equipment, operating expenses for former Waukegan Savings branches prior to conversion, and increased real estate tax expenses. These expenses were partially offset by lower utilities costs from mild weather conditions.   Higher technology and related costs for the fourth quarter of 2012 resulted from conversion expenses related to Waukegan Savings.   The accelerated amortization of the FDIC indemnification asset results from  an adjustment in the timing and amount of future cash flows expected to be received from the FDIC under the loss sharing agreements based on management's periodic estimates of future cash flows from covered loans. This charge benefited the yield on covered interest earning assets in the fourth quarter of 2012 and is expected to result in higher interest income on covered assets in future periods.   Valuation adjustments of $1.3 million on a former banking office transferred to OREO in the fourth quarter of 2012 contributed to the variance from both prior periods presented.   LOAN PORTFOLIO AND ASSET QUALITY                                                                                                            Loan Portfolio Composition                                                 (Dollar amounts in thousands)                                                                                                                                                                December 31, 2012                                                             Percent Change                                        As Of                       From                             ------------------------------------ ------------------                        December    September    December  September December                          31,          30,         31,        30,       31,                            2012        2012         2011       2012     2011                        ----------- ------------ ----------- --------- --------  Corporate:                                                                     Commercial and                                                                industrial       $ 1,631,474 $  1,610,169 $ 1,458,446       1.3     11.9    Agricultural          268,618      259,787     243,776       3.4     10.2    Commercial real                                                               estate:                                                                       Office              474,717      484,215     444,368      (2.0)     6.8      Retail              368,796      356,093     334,034       3.6     10.4      Industrial          489,678      490,023     520,680      (0.1)    (6.0)     Multi-family        285,481      309,509     288,336      (7.8)    (1.0)     Residential                                                                   construction        61,462       61,920     105,836      (0.7)   (41.9)     Commercial                                                                    construction       124,954      136,509     144,909      (8.5)   (13.8)     Other commercial                                                              real estate        773,121      780,712     888,146      (1.0)   (13.0)                     ----------- ------------ ----------- --------- --------        Total                                                                         commercial                                                                   real estate    2,578,209    2,618,981   2,726,309      (1.6)    (5.4)                     ----------- ------------ ----------- --------- --------          Total                                                                         corporate                                                                    loans        4,478,301    4,488,937   4,428,531      (0.2)     1.1                      ----------- ------------ ----------- --------- --------  Consumer:                                                                      Home equity loans     390,033      397,506     416,194      (1.9)    (6.3)   1-4 family                                                                    mortgages            282,948      292,908     201,099      (3.4)    40.7    Installment loans      38,394       38,994      42,289      (1.5)    (9.2)                     ----------- ------------ ----------- --------- --------          Total                                                                         consumer                                                                     loans          711,375      729,408     659,582      (2.5)     7.9                      ----------- ------------ ----------- --------- --------        Total loans,                                                                  excluding                                                                    covered loans  5,189,676    5,218,345   5,088,113      (0.5)     2.0  Covered loans           197,894      216,610     260,502      (8.6)   (24.0)                     ----------- ------------ ----------- --------- --------        Total loans   $ 5,387,570 $  5,434,955 $ 5,348,615      (0.9)     0.7                      =========== ============ =========== ========= ========     Total loans, excluding covered loans, of $5.2 billion declined modestly compared to September 30, 2012, as continued growth in the commercial and industrial ("C&I") and agricultural portfolios was more than offset by the accelerated resolution of certain credits. In addition, $37.1 million of mortgage loans outstanding at September 30, 2012 were sold during the fourth quarter of 2012.   Compared to December 31, 2011, total loans, excluding covered loans, increased $101.6 million, reflecting growth primarily in the C&I, agricultural, and 1-4 family portfolios. Loans acquired in the Waukegan Savings transaction during the third quarter of 2012 and continued origination efforts drove the rise in 1-4 family mortgages. During the previous twelve months, decreases in the construction portfolios were mostly driven by efforts to reduce lending exposure to less favorable categories. The completion of the bulk loan sales during the fourth quarter of 2012 resulted in the disposition of $172.5 million in original carrying value of certain non-performing and performing potential problem loans, which also contributed to declines across the loan portfolio.                                                                                                                                                                                     Asset Quality Indicators by Category                                             (Dollar amounts in thousands)                                                                                                                                              Performing Loans                                            --------------------------------------------------                                          Special                                                           Pass       Mention    Substandard     Total                              -----------  -----------  -----------  -----------   December 31, 2012                                                              Commercial and                                                                industrial           $ 1,558,932  $    37,833  $     8,768  $ 1,605,533     Agricultural              267,114          331            -      267,445     Commercial real                                                               estate:                                                                       Office, retail, and                                                           industrial           1,235,950       57,271       16,746    1,309,967       Multi-family            282,126        1,921            -      284,047       Residential                                                                   construction            33,392       11,870       11,588       56,850       Commercial                                                                    construction            95,567       14,340       14,174      124,081       Other commercial                                                              real estate            712,702       14,056       30,149      756,907                           -----------  -----------  -----------  -----------         Total commercial                                                              real estate        2,359,737       99,458       72,657    2,531,852                           -----------  -----------  -----------  -----------           Total corporate                                                               loans            4,185,783      137,622       81,425    4,404,830     Consumer loans            700,312            -            -      700,312                           -----------  -----------  -----------  -----------         Total loans       $ 4,886,095  $   137,622  $    81,425  $ 5,105,142                           ===========  ===========  ===========  ===========   Changes from:                                                                  September 30, 2012           (0.3%)       (4.9%)       14.4%        (0.3%)   December 31, 2011             8.6%       (50.2%)      (35.7%)        4.2%                                                                                                                                                                                                                                                                                                                                                       Asset Quality Indicators by Category                   (Dollar amounts in thousands)                                                                                                                                                                                             Non-accrual     Total                                 Loans        Loans                              -----------  -----------   December 31, 2012                                    Commercial and                                      industrial           $    25,941  $ 1,631,474     Agricultural                1,173      268,618     Commercial real                                     estate:                                             Office, retail, and                                 industrial              23,224    1,333,191       Multi-family              1,434      285,481       Residential                                         construction             4,612       61,462       Commercial                                          construction               873      124,954       Other commercial                                    real estate             16,214      773,121                           -----------  -----------         Total commercial                                    real estate           46,357    2,578,209                           -----------  -----------           Total corporate                                     loans               73,471    4,478,301     Consumer loans             11,063      711,375                           -----------  -----------         Total loans       $    84,534  $ 5,189,676                           ===========  ===========   Changes from:                                        September 30, 2012          (15.1%)       (0.5%)   December 31, 2011           (54.9%)        2.0%     The combination of special mention loans and substandard loans was consistent with September 30, 2012 and declined $184.2 million, or 45.7%, from December 31, 2011. The improvement from December 31, 2011 was driven by the completion of the bulk loan sales during the fourth quarter of 2012, in addition to ongoing remediation activities. As of December 31, 2012, special mention, substandard, and non-accrual loans totaled $303.6 million, compared to $577.8 million at December 31, 2011.                                                                                                                                                                                                Asset Quality                                                        (Dollar amounts in thousands)                                                                                                                                                             December 31, 2012                                     As Of                 Percent Change From                      -------------------------------- ------------------------                     December   September  December    September    December                      31, 2012   30, 2012   31, 2011    30, 2012     31, 2011                     ---------- ---------- ---------- ------------ -----------  Asset quality,                                                                excluding                                                                    covered loans                                                                and covered                                                                  OREO(1)                                                                     Non-accrual loans $   84,534 $   99,579 $  187,325        (15.1)      (54.9) 90 days or more                                                               past due loans        8,689     12,582      9,227        (30.9)       (5.8)                   ---------- ---------- ---------- ------------ -----------    Total non-                                                                    performing                                                                   loans              93,223    112,161    196,552        (16.9)      (52.6) Troubled debt                                                                 restructurings                                                               (still accruing                                                              interest)             6,867      6,391     17,864          7.4       (61.6) OREO                  39,953     36,487     33,975          9.5        17.6                    ---------- ---------- ---------- ------------ -----------    Total non-                                                                    performing                                                                   assets         $  140,043 $  155,039 $  248,391         (9.7)      (43.6)                   ========== ========== ========== ============ ===========  30-89 days past                                                               due loans        $   22,666 $   20,088 $   27,495         12.8       (17.6) Allowance for                                                                 credit losses    $   90,750 $   95,548 $  120,973         (5.0)      (25.0) Non-accrual loans                                                             to total loans         1.63%      1.91%      3.68%                          Non-performing                                                                loans to total                                                               loans                  1.80%      2.15%      3.86%                          Non-performing                                                                assets to loans                                                              plus OREO              2.68%      2.95%      4.85%                          Allowance for                                                                 credit losses to                                                             loans                  1.75%      1.83%      2.38%                          Allowance for                                                                 credit losses to                                                             non-accrual                                                                  loans                   107%        96%        65%                                                                                                       Allowance for                                                                 credit losses,                                                                including                                                                    covered loans    $  102,812 $  104,995 $  121,962         (2.1)      (15.7) Allowance for                                                                 credit losses to                                                             loans, including                                                             covered loans          1.91%      1.93%      2.28%                                                                                                       (1) Covered loans and covered OREO were acquired through transactions with       the FDIC and are subject to loss sharing agreements with the FDIC            whereby the Company is indemnified against the majority of any losses        incurred on these assets.                                                   Non-performing assets, excluding covered loans and covered OREO, were $140.0 million at December 31, 2012, decreasing $15.0 million from September 30, 2012 and $108.3 million from December 31, 2011.                                                                                                                                                                                                Charge-Off Data                                                       (Dollar amounts in thousands)                                                                                                                                                Quarters Ended                                            ----------------------------------------------------                         December   % of  September   % of  December   % of                           31, 2012  Total   30, 2012   Total 31, 2011   Total                          -------- ------- --------- ---------------- -------- Net loan charge-offs                                                          (1):                                                                          Commercial and                                                                industrial           $  1,778    28.4 $  41,781     33.4$  8,910     32.3   Agricultural              (177)   (2.8)    4,531      3.6     484      1.8   Office, retail, and                                                           industrial                 95     1.5    29,368     23.5   3,779     13.7   Multi-family                 9     0.1     2,755      2.2   4,803     17.4   Residential                                                                   construction              134     2.1     9,242      7.4   2,498      9.1   Commercial                                                                    construction              100     1.6    11,037      8.8   1,673      6.1   Other commercial real                                                         estate                  1,786    28.5    23,452     18.7   3,002     10.9   Consumer                 2,536    40.6     2,920      2.4   2,395      8.7                         -------- ------- --------- -------- ------- --------     Total net loan                                                                charge-offs,                                                                 excluding covered                                                            loans                 6,261   100.0   125,086    100.0  27,544    100.0                                  =======           ========         ========     Net covered loan                                                              charge-offs (1)       1,465               442            3,687                                  --------         ---------         --------                Total net loan                                                                charge-offs      $  7,726         $ 125,528         $ 31,231                                  ========         =========         ========          Net loan charge-offs to                                                       average loans,                                                               excluding covered                                                            loans, annualized:                                                            Quarter-to-date           0.48%             9.29%            2.15%           Year-to-date              3.32%             4.26%            1.84%                                                                                      (1) Amounts represent charge-offs, net of recoveries.                           Net loan charge-offs for the fourth quarter of 2012 were $7.7 million, down $117.8 million, or 93.8%, from the third quarter of 2012 and $23.5 million, or 75.3%, from December 31, 2011. The higher level of charge-offs in the third quarter of 2012 resulted from accelerated credit remediation actions taken by management for select credits.   CAPITAL MANAGEMENT                                                                                                                   Capital Ratios                                                        (Dollar amounts in thousands)                                                                                                                                                    Regulatory                                                                     Minimum      Excess Over                      December September December      For     Required Minimums                      31,      30,       31,      "Well-     at December 31,                      2012      2012     2011   Capitalized"        2012                         -------- --------- -------- ------------ ----------------- Regulatory capital                                                            ratios:                                                                       Total capital to                                                              risk-weighted                                                                assets            11.90%    11.65%   13.68%       10.00%     19% $120,412   Tier 1 capital                                                                to risk-                                                                     weighted assets   10.28%     9.92%   11.61%        6.00%     71% $271,569   Tier 1 leverage                                                               to average                                                                   assets             8.40%     8.13%    9.28%        5.00%     68% $264,032 Tier 1 common                                                                 capital to risk-                                                             weighted assets                                                              (1)                  9.33%     8.93%   10.26%     N/A (2) N/A (2)   N/A (2) Tangible common                                                               equity ratios                                                                (3):                                                                          Tangible common                                                               equity to                                                                    tangible assets    8.44%     8.26%    8.83%     N/A (2) N/A (2)   N/A (2)   Tangible common                                                               equity,                                                                      excluding other                                                              comprehensive                                                                loss, to                                                                     tangible assets    8.64%     8.38%    9.00%     N/A (2) N/A (2)   N/A (2)   Tangible common                                                               equity to risk-                                                              weighted assets   10.39%    10.12%   10.88%     N/A (2) N/A (2)   N/A (2) Non-performing                                                                assets to                                                                    tangible common                                                              equity and                                                                   allowance for                                                                credit losses       18.36%    20.50%   31.01%     N/A (2) N/A (2)   N/A (2)                                                                              (1) Excludes the impact of trust-preferred securities.                       (2) Ratio is not subject to formal Federal Reserve regulatory guidance.      (3) Tangible common equity ("TCE") represents common stockholders' equity        (i.e., total stockholders' equity less preferred stock) less goodwill        and identifiable intangible assets, net of related deferred tax              liabilities. Return on TCE measures the Company's earnings as a              percentage of TCE. In management's view, Tier 1 common and TCE measures      are meaningful to the Company, as well as analysts and investors, in         assessing the Company's use of equity and in facilitating comparisons        with competitors.                                                           The Company's regulatory capital ratios increased compared to the third quarter of 2012 due to increased earnings, which more than offset the impact of the repurchase and retirement of $16.3 million of junior subordinated debentures and subordinated notes.   As of December 31, 2012, the Company's regulatory ratios exceeded all regulatory mandated ratios for characterization as "well-capitalized." 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, 2011 and other reports filed with the Securities and Exchange Commission. Forward-looking statements represent management's best judgment as of the date hereof based on currently available information. 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 23, 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. 10022875 beginning one hour after completion of the live call until 9:00 A.M. (ET) on January 31, 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)                                                                                                                                          December 31,   September 30,  December 31,                                       2012           2012           2011                                       ------------  --------------  ------------  Assets                                                                       Cash and due from banks          $    149,420  $      124,447  $    123,354  Interest-bearing deposits in                                                  other banks                          566,846         393,927       518,176  Trading securities, at fair                                                   value                                 14,162          15,512        14,469  Securities available-for-sale,                                                at fair value                      1,082,403       1,191,582     1,013,006  Securities held-to-maturity, at                                               amortized cost                        34,295          41,944        60,458  Federal Home Loan Bank and                                                    Federal Reserve Bank stock, at                                               cost                                  47,232          47,232        58,187  Loans held-for-sale                         -          90,011         4,200  Loans, excluding covered loans      5,189,676       5,218,345     5,088,113  Covered loans                         197,894         216,610       260,502  Allowance for loan and covered                                                loan losses                          (99,446)       (102,445)     (119,462)                                  ------------  --------------  ------------      Net loans                       5,288,124       5,332,510     5,229,153                                   ------------  --------------  ------------  OREO, excluding covered OREO           39,953          36,487        33,975  Covered OREO                           13,123           8,729        23,455  FDIC indemnification asset             37,051          47,191        65,609  Premises, furniture, and                                                      equipment                            121,596         132,005       134,977  Investment in BOLI                    206,405         206,043       206,235  Goodwill and other intangible                                                 assets                               281,059         281,914       283,650  Accrued interest receivable and                                               other assets                         218,170         217,642       204,690                                   ------------  --------------  ------------      Total assets                 $  8,099,839  $    8,167,176  $  7,973,594                                   ============  ==============  ============  Liabilities and Stockholders'                                                 Equity                                                                      Deposits                                                                       Transactional deposits         $  5,272,307  $    5,253,658  $  4,820,058    Time deposits                     1,399,948       1,495,397     1,659,117                                   ------------  --------------  ------------      Total deposits                  6,672,255       6,749,055     6,479,175  Borrowed funds                        185,984         183,691       205,371  Senior and subordinated debt          214,779         231,171       252,153  Accrued interest payable and                                                  other liabilities                     85,928          69,824        74,308                                   ------------  --------------  ------------      Total liabilities               7,158,946       7,233,741     7,011,007                                   ------------  --------------  ------------  Common stock                              858             858           858  Additional paid-in capital            418,318         417,245       428,001  Retained earnings                     786,453         773,976       810,487  Accumulated other comprehensive                                               loss, net of tax                     (15,660)         (9,248)      (13,276) Treasury stock, at cost              (249,076)       (249,396)     (263,483)                                  ------------  --------------  ------------      Total stockholders' equity        940,893         933,435       962,587                                   ------------  --------------  ------------      Total liabilities and                                                         stockholders' equity        $  8,099,839  $    8,167,176  $  7,973,594                                   ============  ==============  ============                                                                                                                                                                                                                                                         Condensed Consolidated Statements of Income                                                   Unaudited                                                  (Amounts in thousands, except per share data)                                                                                                                            Quarters Ended               Years Ended                            -------------------------------- ---------------------                        December   September  December   December   December                         31, 2012   30, 2012   31, 2011   31, 2012   31, 2011                        ---------- ---------- ---------- ---------- ----------  Interest Income                                                              Loans                $   61,596 $   63,672 $   62,774 $  248,752 $  252,865  Investment                                                                    securities               7,517      8,058      8,313     32,923     36,659  Covered loans             3,975      3,223      6,787     15,873     28,904  Federal funds sold                                                            and other short-                                                             term investments         1,111        631        883      3,021      3,083                       ---------- ---------- ---------- ---------- ----------    Total interest                                                                income                74,199     75,584     78,757    300,569    321,511                       ---------- ---------- ---------- ---------- ----------  Interest Expense                                                             Deposits                  3,735      4,126      5,962     18,052     27,256  Borrowed funds              497        507        670      2,009      2,743  Senior and                                                                    subordinated debt        3,445      3,691      3,047     14,840      9,892                       ---------- ---------- ---------- ---------- ----------    Total interest                                                                expense                7,677      8,324      9,679     34,901     39,891                       ---------- ---------- ---------- ---------- ----------    Net interest                                                                  income                66,522     67,260     69,078    265,668    281,620  Provision for loan                                                            and covered loan                                                             losses                   5,593    111,791     21,902    158,052     80,582                       ---------- ---------- ---------- ---------- ----------    Net interest                                                                  income after                                                                 provision for                                                                loan and covered                                                             loan losses           60,929    (44,531)    47,176    107,616    201,038                       ---------- ---------- ---------- ---------- ----------  Noninterest Income                                                           Service charges on                                                            deposit accounts         9,689      9,502      9,957     36,699     37,879  Wealth management                                                             fees                     5,590      5,415      5,052     21,791     20,324  Other service                                                                 charges,                                                                     commissions, and                                                             fees                     6,177      4,187      3,877     17,981     16,386  Card-based fees           5,274      5,246      4,971     20,852     19,593                       ---------- ---------- ---------- ---------- ----------    Total fee-based                                                               revenues              26,730     24,350     23,857     97,323     94,182  Net securities gains                                                          (losses)                    88       (217)      (110)      (921)     2,410  Gain on bulk loan                                                             sales                    5,153          -          -      5,153          -  Gains on                                                                      acquisitions                 -      3,289      1,076      3,289      1,076  Net trading gains                                                             (losses)                   116        685        919      1,627       (691) Other                         1      1,027        893      3,477      4,960                       ---------- ---------- ---------- ---------- ----------    Total noninterest                                                             income                32,088     29,134     26,635    109,948    101,937                       ---------- ---------- ---------- ---------- ----------  Noninterest Expense                                                          Salaries and                                                                  employee benefits       34,028     33,111     35,220    130,755    128,774  Net OREO expense          1,325      3,208      2,965     10,521     16,293  Net occupancy and                                                             equipment expense        8,747      8,108      7,681     32,699     32,953  Professional                                                                  services                10,415      6,665      8,026     29,614     26,356  Technology and                                                                related costs            3,231      2,906      2,876     11,846     10,905  FDIC premiums             1,763      1,785      1,758      6,926      7,990  Accelerated                                                                   amortization of                                                              FDIC                                                                         indemnification                                                              asset                    2,705      4,000          -      6,705          -  Other                    11,393     10,340      8,065     38,434     38,633                       ---------- ---------- ---------- ---------- ----------    Total noninterest                                                             expense               73,607     70,123     66,591    267,500    261,904                       ---------- ---------- ---------- ---------- ----------  Income (loss) before                                                          income tax expense      19,410    (85,520)     7,220    (49,936)    41,071  Income tax expense                                                            (benefit)                6,194    (36,993)       296    (28,882)     4,508                       ---------- ---------- ---------- ---------- ----------    Net income (loss)      13,216    (48,527)     6,924    (21,054)    36,563  Preferred dividends           -          -     (3,027)         -    (10,776) Net (income) loss                                                             applicable to non-                                                           vested restricted                                                            shares                    (194)       715        (20)       306       (350)                      ---------- ---------- ---------- ---------- ----------    Net income (loss)                                                             applicable to                                                                common shares     $   13,022 $  (47,812)$    3,877 $  (20,748)$   25,437                       ========== ========== ========== ========== ==========    Diluted earnings                                                              (loss) per common                                                            share             $     0.18 $    (0.65)$     0.05 $    (0.28)$     0.35    Dividends declared                                                            per common share  $     0.01 $     0.01 $     0.01 $     0.04 $     0.04  Weighted average                                                              diluted common                                                               shares outstanding      73,758     73,742     73,382     73,666     73,289      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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