ITASCA, IL — (Marketwire) — 07/27/11 — First Midwest Bancorp, Inc. (the “Company” or “First Midwest”) (NASDAQ: FMBI)
Today First Midwest Bancorp, Inc. (the “Company” or “First Midwest”) (NASDAQ: FMBI), the holding company of First Midwest Bank, reported results of operations and financial condition for second quarter 2011. Net income for the quarter was $10.8 million, before adjustments for preferred dividends and non-vested restricted shares, with net income of $8.1 million, or $0.11 per share, applicable to common shareholders after such adjustments. This compares to net income of $10.2 million and net income applicable to common shareholders of $7.5 million, or $0.10 per share, for first quarter 2011 and net income of $7.8 million and net income applicable to common shareholders of $5.2 million, or $0.07 per share, for second quarter 2010.
“Our second quarter performance reflects continued improvement on a number of business fronts,” said Michael L. Scudder, President and Chief Executive Officer of First Midwest Bancorp, Inc. “Overall earnings increased on the strength of solid margins, enhanced fee revenues, and controlled expenses. Sales activity remains robust, reflecting active lending, growth in lower cost, core deposit funding, and advancement in trust and investment management and card-based lines of business. We continue to make progress in reducing the level of problem credits, having reduced non-performing assets by some 20% since the start of the year.”
Mr. Scudder further commented, “With ample liquidity and a strong capital position, we are well positioned to benefit as economic and operating conditions stabilize and demand for credit grows.”
The increase in core operating earnings from first quarter 2011 resulted from a rise in all fee-based categories and higher net interest income, primarily due to a reduction in interest expense paid on time deposits. Second quarter 2011 was relatively unchanged compared to second quarter 2010, as higher net interest income and fee-based revenues offset higher noninterest expense, excluding losses recognized on OREO. Further discussion of net interest income and noninterest income and expense is presented in later sections of this release.
Average interest-earning assets for second quarter 2011 increased $89.2 million, or 1.2%, from first quarter 2011. The quarter-over-quarter improvement in average interest-earning assets was driven by a rise in average short-term investments stemming from the normal seasonal increase in public fund deposits. The Company is maintaining an elevated level of short-term assets as it manages its liquidity in the current low-yield environment.
Average interest-earning assets for second quarter 2011 rose $294.7 million, or 4.2%, from second quarter 2010. This increase was due primarily to the addition of covered interest-earning assets and the investment of deposits acquired in the Company-s FDIC-assisted transactions in short-term investments, partially offset by reductions in loans resulting from sales, paydowns, and charge-offs.
Average funding sources for second quarter 2011 grew $66.9 million, or 1.0%, from first quarter 2011. The rise in core transactional deposits from first quarter 2011 to second quarter 2011 resulted from seasonal increases in public funds balances. This increase was partially offset by a $124.7 million, or 6.4%, decline in average time deposits, primarily public time deposits.
Average funding sources increased $262.1 million, or 3.9%, from second quarter 2010 to second quarter 2011. The growth during this period resulted from a $284.3 million, or 24.1%, rise in average demand deposits partially offset by a $103.0 million, or 5.4%, decline in average time deposits. The addition of core transactional deposits reflected ongoing sales efforts, customers- liquidity preferences in today-s low interest rate environment, and the acquisition of deposits through the Company-s FDIC-assisted transactions.
Tax-equivalent net interest margin for second quarter 2011 was 4.10%, a decline of 5 basis points from first quarter 2011 and 11 basis points from second quarter 2010, primarily reflecting the impact of the growth in deposits invested in short-term investments. The reduction in margin resulted from declines in the average yield on interest-earning assets, partially offset by declines in the average rate paid for interest-bearing liabilities.
Interest earned on covered loans is generally recognized through the accretion of the discount taken on expected future cash flows. The Company realized actual cash flows in excess of estimates upon final settlement of certain covered loans, resulting in additional interest of $1.1 million for second quarter 2011 and $954,000 for first quarter 2011. This additional income is included in interest on covered interest-earning assets in the table above and increased net interest margin by 6 basis points for second quarter 2011 and 5 basis points for first quarter 2011.
Fee-based revenues for second quarter 2011 rose 11.5% from first quarter 2011 and 10.6% compared to second quarter 2010 with increases in all categories for both periods, except for trust and investment advisory fees, which were consistent with first quarter 2011.
The rise in service charges for both periods was due primarily to a combination of higher volume NSF fees and market-driven pricing increases. The increase from first quarter 2011 to second quarter 2011 was also influenced by normal seasonality.
An increase in trust assets under management drove the rise in trust and investment advisory fees from second quarter 2010 to second quarter 2011. During this period, trust assets under management grew 13.0% from $4.0 billion to $4.5 billion. Approximately $400 million of this growth was derived equally from improved equity market performance and new sales results, with the remaining $100 million resulting from the addition of managed assets acquired in an FDIC-assisted transaction.
Increased merchant fees led to the increase in other service charges, commissions, and fees from both prior periods presented. The year-over-year increase in merchant fees was due primarily to a 25% volume increase resulting from customers acquired in an FDIC-assisted transaction.
The Company experienced a continued favorable variance in card-based fees for both periods, which was attributed to both volume and transaction rates. Volume increases were due to a higher number of transactions and an increase in the average purchase per transaction.
Total noninterest expense for second quarter 2011 was relatively unchanged compared to first quarter 2011 and decreased 3.0% from second quarter 2010.
OREO expenses were elevated in 2010 due to higher levels of write-downs and losses on sales of OREO and related operating expenses. Excluding OREO losses, total noninterest expense was down 1.4% for the current quarter compared to first quarter 2011 and up 5.9% from the same period last year.
The increase in salaries and wages from second quarter 2010 to second quarter 2011 resulted primarily from additional staff employed through the Palos Bank & Trust acquisition in August 2010, the expansion of commercial sales staff, and annual merit increases. The variances in employee benefits for the periods presented were impacted by the timing of certain benefit accruals.
FDIC premiums decreased compared to first quarter 2011 and second quarter 2010, primarily due to a change in regulatory requirements for calculating the premium. Specifically, the insurance premium assessment base was revised from all domestic deposits to the average of total assets less tangible equity.
High snow removal costs in first quarter 2011 resulted in increased net occupancy expense for that period, accounting for the decrease from first quarter 2011 to second quarter 2011. An increase in the rates charged for property taxes as well as property taxes associated with branches acquired through the Company-s FDIC-assisted transactions resulted in an increase in net occupancy and equipment expense from second quarter 2010.
Advertising and promotions expense was down from the same period in the prior year. Second quarter 2010 advertising costs included costs to implement a new consumer overdraft program and one-time expenses incurred in response to FDIC-assisted transaction activity in the Chicago banking market.
The increases in second quarter 2011 other noninterest expense from first quarter 2011 and second quarter 2010 were due primarily to higher cardholder expenses driven by higher transaction volumes and miscellaneous losses.
Income tax expense was $2.8 million for second quarter 2011, increasing from $30,000 for first quarter 2011 and $139,000 for second quarter 2010. The increases resulted primarily from an increase in pre-tax income in second quarter 2011 over that of the prior periods and a $1.6 million state tax benefit recorded in first quarter 2011 related to the write-up of state deferred tax assets.
Total loans, including covered loans, of $5.4 billion as of June 30, 2011 remained relatively unchanged from March 31, 2011. Annualized growth of 6.8% in commercial and industrial loans was substantially offset by a decline in the construction loan portfolios.
Total loans increased $54.6 million, or 1.0%, from June 30, 2010 to June 30, 2011. The growth was driven by the addition of covered loans acquired through the Company-s FDIC-assisted transactions, which more than offset declines in the construction loan portfolios.
Non-performing assets, excluding covered loans and covered OREO, were $222.9 million at June 30, 2011, decreasing $16.8 million, or 7.0%, from March 31, 2011 and $46.5 million, or 17.3%, from December 31, 2010. The reductions were substantially due to remediation activities, dispositions, and charge-offs partially offset by loans downgraded to non-accrual status.
Net charge-offs for second quarter 2011, excluding charge-offs related to covered loans, were $19.8 million, compared to $18.5 million for first quarter 2011 and $20.2 million for second quarter 2010. Higher charge-offs on multi-family loans were mostly offset by lower charge-offs on residential construction loans. The charge-offs on multi-family loans were largely driven by three loan relationships.
Charge-offs related to covered loans for second quarter 2011, as well as the other quarters shown, reflect the decline in cash flows of certain acquired loans, net of the reimbursement from the FDIC under loss sharing arrangements. The comparative increase reflects the initial re-estimation of the present value of loans acquired in the Palos Bank & Trust acquisition in August 2010. Management performs such remeasurements of cash flows periodically, and any declines, net of loss share, are reflected as charge-offs in the period of remeasurement. Conversely, any increases in estimated cash flows, net of loss share, are recorded through prospective yield adjustments over the remaining lives of the specific loans. To date, increases in estimated cash flows have exceeded declines, and such increases will be reflected in higher margins in future periods. Overall, the total portfolio of covered loans has experienced a net increase in estimated cash flows since acquisition and continues to perform better than originally expected.
All regulatory mandated ratios for characterization as “well-capitalized” were exceeded as of June 30, 2011. The improvement from March 31, 2011 was driven by net income increasing capital.
First Midwest is the premier relationship-based banking franchise in the growing Chicagoland banking market. As one of the Chicago metropolitan area-s largest independent bank holding companies, First Midwest provides the full range of both business and retail banking and trust and investment management services through some 100 offices located primarily in metropolitan Chicago. First Midwest was recently recognized by the Chicago Tribune as one of the top 20 best places to work in Chicago among large employers. First Midwest Bank received the highest numerical score among retail banks in the Midwest region in the proprietary J.D. Power and Associates 2011 Retail Banking Satisfaction Study (SM). The study was based on 51,620 total responses measuring 27 providers in the Midwest region (IA, IL, KS, MO, MN, and WI) and measures opinions of consumers with their primary banking provider. These proprietary study results are based on experiences and perceptions of consumers surveyed in January 2011. Visit for further information.
This press release contains “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, 2010 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. Except as required by law, the Company undertakes no duty to update the contents of this press release after the date hereof.
A conference call to discuss the Company-s results, outlook, and related matters will be held on Wednesday, July 27, 2011 at 10:00 A.M. (ET). Members of the public who would like to listen to the conference call should dial (877) 317-6789 (U.S. domestic) or (412) 317-6789 (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, . 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. 10001491 beginning one hour after completion of the live call until 9:00 A.M. (ET) on August 4, 2011. Please direct any questions regarding obtaining access to the conference call to First Midwest Bancorp, Inc. Investor Relations, via e-mail, at .
Accompanying this press release is the following unaudited financial information:
Condensed Consolidated Statements of Financial Condition
Condensed Consolidated Statements of Income
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 .
Chief Financial Officer
(630) 875-7347
First Midwest Bancorp, Inc.
One Pierce Place, Suite 1500
Itasca, Illinois 60143
(630) 875-7450