FIRST MIDWEST BANCORP INC - FORM 8-K - EX-99.1 - PRESS RELEASE

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8-K - FORM 8-K - FIRST MIDWEST BANCORP INC	d290125d8k.htm
EX-99.2 - FIRST MIDWEST BANCORP, INC. SELECTED FINANCIAL INFORMATION - FIRST MIDWEST BANCORP INC	d290125dex992.htm

Exhibit 99.1


		News Release

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

FOR IMMEDIATE RELEASE

CONTACT:	Paul F. Clemens EVP and Chief Financial Officer (630) 875-7347 paul.clemens@firstmidwest.com	James M. Roolf Senior Vice President (815) 774-2071 jim.roolf@firstmidwest.com

TRADED:	NASDAQ Global Select Market

SYMBOL:	FMBI

FIRST MIDWEST BANCORP, INC. ANNOUNCES 2011

FOURTH QUARTER AND FULL YEAR RESULTS

Improved Fourth Quarter and Full Year Earnings – Total Loans Stable – Robust Capital –

Proactive Credit Remediation – Organizational Realignment

Operating Performance

•

Net income applicable to common shares of $3.9 million, or $0.05 per share, compared to a net loss of $30.3 million, or $0.41 per share, for fourth quarter 2010 and net income of $6.3 million, or $0.09 per share, for third quarter 2011.

•

Net income applicable to common shares of $25.4 million, or $0.35 per share, for full year 2011 up $45.1 million from a net loss of $19.7 million, or $0.27 per share, for full year 2010.

•

Total loans, excluding covered loans, of $5.1 billion, stable compared to both December 31, 2010 and September 30, 2011, reflecting almost 5% annualized growth in commercial and industrial and owner-occupied other commercial real estate loans from September 30, 2011.

•

Fee-based revenues of $23.9 million, up 6.6% from fourth quarter 2010 and seasonally down 2.3% from third quarter 2011.

Credit and Capital

•

Non-accrual loans, excluding covered loans and covered OREO, of $187.3 million, declined 11.5% from December 31, 2010 and up 9.4% from September 30, 2011.

•

Tier 1 common capital to risk-weighted assets of 10.26% as of December 31, 2011 compared to 9.81% at December 31, 2010 and 10.29% at September 30, 2011.

Significant Fourth Quarter Events

•

Organizational realignment, reflecting the elimination of some 100 positions, resulted in severance-related costs of $2.0 million.

•

Redeemed $193.0 million of TARP preferred shares and the related common stock warrant.

•

Acquired $106.7 million in deposits resulting in a gain of $1.1 million.

•

Recognized for second consecutive year in the Top 20 “Best Places to Work” in Chicago.

ITASCA, IL, January 25, 2012 – Today First Midwest Bancorp, Inc. (the “Company” or “First Midwest”) (NASDAQ NGS: FMBI), the holding company of First Midwest Bank (the “Bank”), reported results of operations and financial condition for fourth quarter and full year 2011. Net income for the quarter was $6.9 million, before adjustments for preferred dividends and non-vested restricted shares, with net income of $3.9 million, or $0.05 per share, applicable to common shares after such adjustments. This compares to a net loss of $28.2 million and a net loss applicable to common shares of $30.3 million, or $0.41 per share, for fourth quarter 2010 and net income of $8.9 million and net income applicable to common shares of $6.3 million, or $0.09 per share, for third quarter 2011.

For full year 2011, net income was $36.6 million, before adjustments for preferred dividends and non-vested restricted shares, with net income of $25.4 million, or $0.35 per share, applicable to common shares after such adjustments. This compares to a net loss of $9.7 million and a net loss applicable to common shares of $19.7 million, or $0.27 per share, for full year 2010.


	Quarters Ended									Years Ended
	December 31, 2011			September 30, 2011			December 31, 2010			December 31, 2011			December 31, 2010
	(Dollar amounts in thousands)
Operating Performance
Net income (loss)	$	6,924		$	8,942		$	(28,159	)	$	36,563		$	(9,684	)
Net income (loss) applicable to common shares	$	3,877		$	6,263		$	(30,327	)	$	25,437		$	(19,717	)
Diluted earnings (loss) per common share	$	0.05		$	0.09		$	(0.41	)	$	0.35		$	(0.27	)
Return on average common equity		1.60	%		2.60	%		(12.49	%)		2.69	%		(2.06	%)
Return on average assets		0.34	%		0.43	%		(1.34	%)		0.45	%		(0.12	%)
Pre-tax, pre-provision operating earnings ⁽¹⁾	$	31,581		$	33,112		$	34,998		$	129,853		$	136,406
Net interest margin		3.95	%		3.97	%		4.02	%		4.04	%		4.13	%
Efficiency ratio		64.76	%		60.57	%		59.08	%		62.12	%		58.84	%
Loans, including covered loans, at period end	$	5,348,615		$	5,394,241		$	5,472,289		$	5,348,615		$	5,472,289
Loans, excluding covered loans, at period end	$	5,088,113		$	5,104,494		$	5,100,560		$	5,088,113		$	5,100,560
Average transactional deposits ⁽²⁾	$	4,866,776		$	4,876,261		$	4,590,489		$	4,755,111		$	4,322,136

⁽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 has provided this non-GAAP performance result. The Company believes that this non-GAAP financial measure is useful because it allows investors to assess the Company’s operating performance. Although this non-GAAP financial measure 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. A reconciliation of this measure to GAAP is presented on the following page.

⁽²⁾	Comprised of demand deposits and interest-bearing transactional accounts.

SUMMARY UPDATE

“I am very pleased with our overall performance for the year and in a very active fourth quarter,” said Michael L. Scudder, President and Chief Executive Officer of First Midwest Bancorp, Inc. “The results for the quarter and the year reflect both a return to profitability as well as the steady advancement of our strategic priorities.”

Mr. Scudder went on to say, “Net income improved by $45 million from 2010, as we benefited from continued, solid earnings and substantially lower credit costs. In a challenged business environment, consistent sales focus helped us to hold loan balances steady as we significantly reduced our exposure to troubled real estate lending categories. At the same time, transactional deposit growth has helped our margins remain near 4%, and our fee-based revenues expand. Our overall credit metrics are greatly improved from 2010 and, most notably, with actions taken during the quarter, we have reduced potential non-performing credits by almost 30% during this same period.”

Mr. Scudder closed, “Over the course of 2011, we significantly invested in our business, aligning our sales resources to areas of growth and opportunity. Concurrently, we have and will continue to implement operating efficiencies as we transition to an improved credit environment and better leverage our operating systems and processes. With TARP behind us and economic recovery progressing, we are well positioned to pursue opportunities for growth, navigate the changing regulatory landscape, and, most importantly, help our clients achieve financial success in 2012.”

REPAYMENT OF TARP

In November 2011, the Company redeemed all of the $193.0 million Series B preferred stock issued to the United States Department of the Treasury (the “Treasury”) under the U.S. government’s Troubled Asset Relief Program (“TARP”), which resulted in the acceleration of $1.5 million in discount accretion. The Company funded the redemption through a combination of existing liquid assets and proceeds from the completion of a $115.0 million senior debt offering. The notes, which have an interest rate of 5.875%, payable semi-annually, will mature in November 2016.

In a related transaction, the Company redeemed the Treasury’s associated warrant to purchase up to 1,305,230 shares of the Company’s common stock. In December 2011, the Company paid $900,000 to the Treasury to redeem the warrant, which concluded the Company’s participation in TARP.

DEPOSIT ACQUISITION

In December 2011, the Company completed the purchase of certain Chicago-market deposits from Old National Bank of Evansville, Indiana (“Old National”). The transaction included $106.7 million in deposits (comprised of $70.6 million in transactional deposits and $36.1 in time deposits) and one banking facility located in our Chicago market. As a result of the transaction, the Company recorded a net gain of $1.1 million.

OPERATING PERFORMANCE

Pre-Tax, Pre-Provision Operating Earnings ⁽¹⁾

(Dollar amounts in thousands)


	Quarters Ended									Years Ended
	December 31, 2011			September 30, 2011			December 31, 2010			December 31, 2011			December 31, 2010
Income (loss) before income tax	$	7,220		$	10,525		$	(53,225	)	$	41,071		$	(38,228	)
Provision for loan losses		21,902			20,425			73,897			80,582			147,349

Pre-tax, pre-provision earnings		29,122			30,950			20,672			121,653			109,121

*Adjustments to Pre-Tax, Pre-Provision Earnings*
Securities (losses) gains, net		(110	)		449			1,662			2,410			12,216
Gain on Federal Deposit Insurance Corporation (“FDIC”)-assisted transaction		—			—			—			—			4,303
Gain on acquisition of deposits		1,076			—			—			1,076			—
Losses on sales and write-downs of OREO		(1,425	)		(2,611	)		(15,412	)		(9,686	)		(40,480	)
Integration costs associated with FDIC- assisted transactions		—			—			(576	)		—			(3,324	)
Severance-related costs		(2,000	)		—			—			(2,000	)		—

Total adjustments		(2,459	)		(2,162	)		(14,326	)		(8,200	)		(27,285	)

Pre-tax, pre-provision operating earnings ⁽¹⁾	$	31,581		$	33,112		$	34,998		$	129,853		$	136,406

⁽¹⁾

The Company’s accounting and reporting policies conform to GAAP and general practice within the banking industry. As a supplement to GAAP, the Company has provided this non-GAAP performance result. The Company believes that this non-GAAP financial measure is useful because it allows investors to assess the Company’s operating performance. Although this non-GAAP financial measure 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 decreased by $3.4 million from fourth quarter 2010 to fourth quarter 2011 driven by a decline in net interest income, which is discussed in the Net Interest Income and Margin Analysis section, and a $1.3 million correction of a 2010 actuarial pension expense calculation related to the valuation of future early retirement benefits, which was recorded in fourth quarter 2011.

Compared to third quarter 2011, pre-tax, pre-provision operating earnings were down $1.5 million due primarily to the correction of the 2010 actuarial pension expense calculation.

For full year 2011, pre-tax, pre-provision operating earnings were down $6.6 million, or 4.8%, compared to 2010 as a result of higher loan remediation costs, increased salaries related to the expansion of commercial, retail, and wealth management sales staff, and the correction of the 2010 actuarial pension expense calculation, partially offset by a $7.4 million increase in fee-based revenues.

A more detailed 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, 2011							September 30, 2011							December 31, 2010
	Average Balance			Interest		Yield/ Rate (%)		Average Balance			Interest		Yield/ Rate (%)		Average Balance			Interest		Yield/ Rate (%)
Assets:
Federal funds sold and other short-term investments investments	$	718,631		$	450		0.25	$	741,782		$	463		0.25	$	595,509		$	386		0.26
Trading securities		13,420			92		2.74		16,248			23		0.57		13,882			99		2.85
Investment securities ⁽¹⁾		1,069,844			11,224		4.20		1,057,075			11,604		4.39		1,139,127			13,568		4.76
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank stock		58,187			341		2.34		58,187			331		2.28		61,703			347		2.25
Loans, excluding covered loans ⁽¹⁾		5,085,792			63,202		4.93		5,136,130			64,509		4.98		5,155,416			64,387		4.95
Covered interest-earning assets ⁽²⁾		343,479			6,787		7.84		387,635			6,640		6.80		480,612			7,431		6.13

Total loans		5,429,271			69,989		5.11		5,523,765			71,149		5.11		5,636,028			71,818		5.06

Total interest-earning assets ⁽¹⁾		7,289,353			82,096		4.47		7,397,057			83,570		4.49		7,446,249			86,218		4.60

Cash and due from banks		116,166							120,624							128,919
Allowance for loan losses		(133,824	)						(143,443	)						(157,145	)
Other assets		870,808							855,542							896,611

Total assets	$	8,142,503						$	8,229,780						$	8,314,634

Liabilities and Stockholders’ Equity:
Interest-bearing transaction deposits	$	3,253,555			1,029		0.13	$	3,306,590			1,361		0.16	$	3,242,301			1,930		0.24
Time deposits		1,688,995			4,933		1.16		1,731,413			5,293		1.21		2,069,389			5,977		1.15
Borrowed funds		252,839			670		1.05		262,001			706		1.07		281,050			711		1.00
Senior and subordinated debt		187,488			3,047		6.45		137,749			2,280		6.57		137,743			2,279		6.56

Total interest-bearing liabilities		5,382,877			9,679		0.71		5,437,753			9,640		0.70		5,730,483			10,897		0.75

Demand deposits		1,613,221							1,569,671							1,348,188

Total funding sources		6,996,098							7,007,424							7,078,671
Other liabilities		73,721							73,808							79,700
Stockholders’ equity—common		961,500							955,548							963,263
Stockholders’ equity—preferred		111,184							193,000							193,000

Total liabilities and stockholders’ equity	$	8,142,503						$	8,229,780						$	8,314,634

Net interest income/margin ⁽¹⁾				$	72,417		3.95				$	73,930		3.97				$	75,321		4.02

⁽¹⁾	Interest income and yields are presented on a tax-equivalent basis, assuming a federal income tax rate of 35%.

⁽²⁾	Covered interest-earning assets consist of loans acquired through the Company’s FDIC-assisted transactions and the related FDIC indemnification asset.

Average interest-earning assets for fourth quarter 2011 decreased $156.9 million, or 2.1%, from fourth quarter 2010 and $107.7 million, or 1.5%, compared to third quarter 2011. The decline for both periods was due to a decline in average loans and covered interest-earning assets.

Average funding sources for fourth quarter 2011 was $82.6 million, or 1.2%, lower than fourth quarter 2010 and $11.3 million, or 0.2%, lower than third quarter 2011. The declines for both periods resulted from a drop in average time deposits. However, demand deposits increased from both prior periods presented, including approximately $23 million of average deposits acquired in a December 2011 transaction, which resulted in a more favorable product mix.

The growth in average senior and subordinated debt for fourth quarter 2011 compared to both the prior year and prior quarter periods reflects the issuance of senior debt, which was used to redeem the Series B preferred stock issued to the Treasury. Interest paid on the new senior debt reduced net interest margin by 4 basis points.

Tax-equivalent net interest margin for fourth quarter 2011 was 3.95%, a decline of 7 basis points from fourth quarter 2010 and 2 basis points from third quarter 2011. The drop from the prior year was primarily due to the impact of lower average loans and deposits invested in low-yielding short-term investments. The linked-quarter variance was due to funding costs associated with the new senior debt.

Interest earned on covered loans is generally recognized through the accretion of the discount taken on expected future cash flows. The increase in the yields on covered interest-earning assets for the 2011 periods compared to 2010 was due to adjustments in accretable income based upon (i) revised cash flow estimates subsequent to acquisition and (ii) actual cash realized in excess of estimates upon final settlement of certain covered loans.

Noninterest Income Analysis

(Dollar amounts in thousands)


	Quarters Ended									December 31, 2011 Percent Change From
	December 31, 2011			September 30, 2011			December 31, 2010			September 30, 2011			December 31, 2010
Service charges on deposit accounts	$	9,957		$	10,215		$	9,202			(2.5	)		8.2
Trust and investment advisory fees		4,044			3,946			4,040			2.5			0.1
Other service charges, commissions, and fees		4,885			5,325			4,506			(8.3	)		8.4
Card-based fees		4,971			4,931			4,640			0.8			7.1

Total fee-based revenues		23,857			24,417			22,388			(2.3	)		6.6
Bank-owned life insurance (“BOLI”) income		241			1,479			696			(83.7	)		(65.4	)
Other income		652			598			451			9.0			44.6

Total operating revenues		24,750			26,494			23,535			(6.6	)		5.2
Trading gains (losses), net		919			(2,352	)		970			N/M			N/M
Gains on securities sales, net		649			626			1,718			N/M			N/M
Securities impairment losses		(759	)		(177	)		(56	)		N/M			N/M
Gain on acquisition of deposits		1,076			—			—			N/M			N/M

Total noninterest income	$	26,635		$	24,591		$	26,167			8.3			1.8

N/M – Not meaningful.

Fee-based revenues for fourth quarter 2011 grew 6.6% compared to fourth quarter 2010 and declined 2.3% compared to third quarter 2011, reflecting normal seasonality. For full year 2011, fee-based revenues grew by $7.4 million, or 8.6%.

BOLI income decreased for fourth quarter 2011 compared to both prior periods presented as the Company received benefit settlements of $1.2 million during third quarter 2011 and $417,000 during fourth quarter 2010.

Trading gains (losses), net result from the change in fair value of diversified asset securities held in a grantor trust under deferred compensation agreements. These net trading gains (losses) are substantially offset by an adjustment to salaries and wages for each period presented.

Noninterest Expense Analysis

(Dollar amounts in thousands)


	Quarters Ended						December 31, 2011 Percent Change From
	December 31, 2011		September 30, 2011		December 31, 2010		September 30, 2011			December 31, 2010
Salaries and wages ⁽¹⁾	$	27,588	$	22,957	$	26,517		20.2			4.0
Retirement and other employee benefits⁽¹⁾⁽²⁾		7,632		6,225		4,511		22.6			69.2

Total compensation expense		35,220		29,182		31,028		20.7			13.5

Write-downs of OREO		476		674		11,957		(29.4	)		(96.0	)
Losses on sales of OREO, net		949		1,937		3,455		(51.0	)		(72.5	)
OREO operating expense, net		1,540		1,563		2,408		(1.5	)		(36.0	)

Total OREO expense		2,965		4,174		17,820		(29.0	)		(83.4	)

Loan remediation costs		4,846		4,638		2,330		4.5			108.0
Other professional services ⁽¹⁾		3,180		2,933		2,194		8.4			44.9

Total professional services		8,026		7,571		4,524		6.0			77.4

Net occupancy and equipment expense		7,681		8,157		7,916		(5.8	)		(3.0	)
Technology and related costs		2,876		2,709		3,209		6.2			(10.4	)
FDIC premiums		1,758		1,799		2,967		(2.3	)		(40.7	)
Advertising and promotions		1,239		2,502		1,637		(50.5	)		(24.3	)
Other expenses		6,826		8,082		7,973		(15.5	)		(14.4	)

Total noninterest expense	$	66,591	$	64,176	$	77,074		3.8			(13.6	)

⁽¹⁾	In fourth quarter 2011, the Company recorded a $2.0 million charge for severance-related costs from an organizational realignment that included $1.6 million in salaries and wages, $96,000 in retirement and other employee benefits, and $274,000 in other professional services.

⁽²⁾	Retirement and other employee benefits include the $1.3 million correction of a 2010 actuarial pension expense calculation related to the valuation of future early retirement benefits.

Total noninterest expense for fourth quarter 2011 declined 13.6% from fourth quarter 2010 and increased 3.8% compared to third quarter 2011.

Fourth quarter 2011 salaries and wages increased by $4.6 million compared to third quarter 2011 as a result of a $3.9 million variance related to changes in the fair value of trading securities held on behalf of plan participants and the compensation costs from an organizational realignment, partially offset by reductions in short-term incentive and share-based compensation. The organizational realignment reduced some 100 positions across the Company. Specifically, about 50 open positions were closed and another 50 filled positions were eliminated.

The $1.3 million correction of the 2010 actuarial pension expense calculation drove the increase in retirement and other employee benefits from third quarter 2011 to fourth quarter 2011.

The increase in retirement and other employee benefits from fourth quarter 2010 to fourth quarter 2011 was impacted by higher profit sharing expense, employee insurance, and payroll taxes attributed to increased sales staff, and the correction of the 2010 actuarial pension expense calculation.

OREO expenses for fourth quarter 2011 declined 83.4% from fourth quarter 2010 and 29.0% from third quarter 2011 due to continued remediation efforts. Fourth quarter 2010 OREO expenses were elevated due to higher levels of write-downs and losses on sales of OREO and related operating expenses.

An increase in real estate taxes paid to preserve our rights to collateral associated with problem loans, as well as higher legal fees incurred to remediate problem credits, drove higher levels of loan remediation costs compared to both prior periods presented.

FDIC premiums decreased compared to fourth quarter 2010 primarily due to a change in regulatory requirements for calculating the premium.

LOAN PORTFOLIO AND ASSET QUALITY

Loan Portfolio Composition

(Dollar amounts in thousands)


	As Of						December 31, 2011 Percent Change From
	December 31, 2011		September 30, 2011		December 31, 2010		September 30, 2011			December 31, 2010
Corporate:
Commercial and industrial	$	1,458,446	$	1,476,034	$	1,465,903		(1.2	)		(0.5	)
Agricultural		243,776		250,436		227,756		(2.7	)		7.0
Commercial real estate:
Office		444,368		440,641		396,836		0.8			12.0
Retail		334,034		330,160		328,751		1.2			1.6
Industrial		520,680		492,514		478,026		5.7			8.9
Multi-family		288,336		317,313		349,862		(9.1	)		(17.6	)
Residential construction		105,836		116,283		174,690		(9.0	)		(39.4	)
Commercial construction		144,909		145,889		164,472		(0.7	)		(11.9	)
Other commercial real estate		888,146		877,241		856,357		1.2			3.7

Total commercial real estate		2,726,309		2,720,041		2,748,994		0.2			(0.8	)

Total corporate loans		4,428,531		4,446,511		4,442,653		(0.4	)		(0.3	)

Consumer:
Home equity loans		416,194		424,986		445,243		(2.1	)		(6.5	)
1-4 family mortgages		201,099		189,587		160,890		6.1			25.0
Installment loans		42,289		43,410		51,774		(2.6	)		(18.3	)

Total consumer loans		659,582		657,983		657,907		0.2			0.3

Total loans, excluding covered loans		5,088,113		5,104,494		5,100,560		(0.3	)		(0.2	)
Covered loans		260,502		289,747		371,729		(10.1	)		(29.9	)

Total loans	$	5,348,615	$	5,394,241	$	5,472,289		(0.8	)		(2.3	)

A lower balance of covered loans acquired through the Company’s previous FDIC-assisted transactions drove the decline in total loans of $123.7 million, or 2.3%, from December 31, 2010 to December 31, 2011.

Total loans, excluding covered loans, as of December 31, 2011 were stable compared to December 31, 2010. The office, retail, and industrial and other commercial real estate portfolios exhibited 6.2% growth during this period, substantially in the form of owner-occupied business relationships. Offsetting this progress, efforts to reduce lending exposure to more troubled real estate categories contributed to declines in the multi-family and construction loan portfolios.

Total loans, including covered loans, of $5.3 billion as of December 31, 2011 were consistent with September 30, 2011. Annualized growth of 10% in office, retail, and industrial and other commercial real estate loans was offset by a decline in the commercial and industrial, multi-family, and residential construction loan portfolios as well as a decline in covered loans. Approximately two-thirds of the growth in office, retail, and industrial loans represents owner-occupied credits.

Asset Quality, Excluding Covered Loans and Covered OREO ⁽¹⁾

(Dollar amounts in thousands)


	As Of									December 31, 2011 Percent Change From
	December 31, 2011			September 30, 2011			December 31, 2010			September 30, 2011			December 31, 2010
Non-accrual loans ⁽²⁾	$	187,325		$	171,189		$	211,782			9.4			(11.5	)
90 days or more past due loans		9,227			6,008			4,244			53.6			117.4

Total non-performing loans		196,552			177,197			216,026			10.9			(9.0	)
Troubled debt restructurings (still accruing interest)		17,864			7,033			22,371			154.0			(20.1	)
Other real estate owned		33,975			23,863			31,069			42.4			9.4

Total non-performing assets	$	248,391		$	208,093		$	269,466			19.4			(7.8	)

30-89 days past due loans	$	27,495		$	34,061		$	23,646			(19.3	)		16.3
Allowance for credit losses	$	121,962		$	131,291		$	145,072			(7.1	)		(15.9	)

Non-accrual loans to total loans		3.68	%		3.35	%		4.15	%
Non-performing loans to total loans		3.86	%		3.47	%		4.24	%
Non-performing assets to loans plus OREO		4.85	%		4.06	%		5.25	%
Allowance for credit losses to loans		2.40	%		2.57	%		2.84	%
Allowance for credit losses to non-performing loans		62	%		74	%		67	%

⁽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.

⁽²⁾	Includes $15.8 million in troubled debt restructurings with non-accrual status as of December 31, 2011.

Non-performing assets, excluding covered loans and covered OREO, were $248.4 million at December 31, 2011, dropping $21.1 million, or 7.8%, from December 31, 2010 and increasing $40.3 million, or 19.4%, from September 30, 2011. The reduction in non-performing assets from December 31, 2010 to December 31, 2011 was largely due to management’s remediation activities. During the year ended December 31, 2011, the Company had gross reductions of non-performing assets totaling $110.8 million, consisting of $80.3 million in non-accrual loans that were sold, paid off, or transferred to held-for-sale and $30.5 million in OREO properties that were sold.

The linked quarter increase in non-performing assets was largely attributed to two borrower relationships aggregating $48.0 million. After careful monitoring of borrower financial condition, these credits, both of which were performing in accordance with contractual terms, were positioned for accelerated resolution in an effort to mitigate loss exposure. In one circumstance, a commercial borrowing relationship totaling $33.9 million was transferred to non-accrual. In the other situation, a performing $14.1 million multi-family credit was modified in a troubled debt restructuring. In combination, these actions resulted in charge-offs totaling $7.0 million during the fourth quarter.

Potential non-performing loans, consisting of special mention and substandard loans, totaled $403.2 million as of December 31, 2011, down $152.7 million, or 27.5%, from $556.0 million as of December 31, 2010 and $91.6 million, or 18.5%, from $494.8 million as of September 30, 2011. The declines from both periods presented reflect management’s progress in remediating problem loans and the overall improvement in the quality of the loan portfolio.

Charge-off Data

(Dollar amounts in thousands)


	Quarters Ended
	December 31, 2011			% of Total		September 30, 2011			% of Total		December 31, 2010			% of Total
Net loans charged-off:
Commercial and industrial	$	8,910			32.3	$	10,165			36.4	$	10,198			13.9
Agricultural		484			1.8		177			0.6		125			0.2
Office, retail, and industrial		3,779			13.7		2,543			9.1		2,888			4.0
Multi-family		4,803			17.4		2,170			7.8		1,206			1.7
Residential construction		2,498			9.1		2,250			8.1		35,935			49.3
Commercial construction		1,673			6.1		4,115			14.7		7,743			10.6
Other commercial real estate		3,002			10.9		4,421			15.8		12,202			16.7
Consumer		2,395			8.7		2,100			7.5		2,612			3.6

Total net loans charged-off, excluding covered loans		27,544			100.0		27,941			100.0		72,909			100.0

Net charge-offs on covered loans		3,687					1,024					935

Total net charge-offs	$	31,231				$	28,965				$	73,844

Net loan charge-offs to average loans, excluding covered loans, annualized:
Quarter-to-date		2.15	%				2.16	%				5.61	%
Year-to-date		1.84	%				1.73	%				2.80	%

Net charge-offs for fourth quarter 2011, excluding charge-offs related to covered loans, were $27.5 million, down 62.2% from $72.9 million for fourth quarter 2010 and relatively flat compared to $27.9 million for third quarter 2011. The elevated level of charge-offs for fourth quarter 2010 related to a shift in disposition strategy primarily for certain construction loans to more aggressively pursue disposition.

CAPITAL MANAGEMENT

Capital Ratios

(Dollar amounts in thousands)


	December 31, 2011			September 30, 2011			December 31, 2010			Regulatory Minimum For “Well- Capitalized			Excess Over Required Minimums at December 31, 2011
Regulatory capital ratios:
Total capital to risk-weighted assets		13.68	%		16.81	%		16.27	%		10.00	%		37	%	$	229,842
Tier 1 capital to risk-weighted assets		11.61	%		14.74	%		14.20	%		6.00	%		94	%	$	350,392
Tier 1 leverage to average assets		9.28	%		11.64	%		11.21	%		5.00	%		86	%	$	334,181

Regulatory capital ratios, excluding preferred stock⁽¹⁾:
Total capital to risk-weighted assets		13.68	%		13.72	%		13.21	%		10.00	%		37	%	$	229,842
Tier 1 capital to risk-weighted assets		11.61	%		11.65	%		11.15	%		6.00	%		94	%	$	350,392
Tier 1 leverage to average assets		9.28	%		9.20	%		8.80	%		5.00	%		86	%	$	334,181
Tier 1 common capital to risk- weighted assets ⁽²⁾ ⁽³⁾		10.26	%		10.29	%		9.81	%		N/A	⁽³⁾		N/A	⁽³⁾		N/A	⁽³⁾

Tangible common equity ratios:
Tangible common equity to tangible assets		8.83	%		8.35	%		8.06	%		N/A	⁽³⁾		N/A	⁽³⁾		N/A	⁽³⁾
Tangible common equity, excluding other comprehensive loss, to tangible assets		9.00	%		8.49	%		8.41	%		N/A	⁽³⁾		N/A	⁽³⁾		N/A	⁽³⁾
Tangible common equity to risk- weighted assets		10.88	%		10.83	%		10.02	%		N/A	⁽³⁾		N/A	⁽³⁾		N/A	⁽³⁾

⁽¹⁾	These ratios exclude the impact of $193.0 million in preferred stock issued to the Treasury.

⁽²⁾	Excludes the impact of preferred shares and trust-preferred securities.

⁽³⁾	Ratio is not subject to formal Federal Reserve regulatory guidance.

The Company’s regulatory ratios as of December 31, 2011 exceeded all regulatory mandated ratios for characterization as “well-capitalized.”

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 100 offices located in communities in metropolitan Chicago, northwest Indiana, central and western Illinois, and eastern Iowa. First Midwest was recently recognized as having the “Highest Customer Satisfaction with Retail Banking in the Midwest” according to the J.D. Power and Associates 2011 Retail Banking Satisfaction Study^SM. The Bank was also recognized by the Chicago Tribune for the second straight year as one of the top 20 best places to work in Chicago among large employers.

Safe Harbor Statement

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.

Conference Call

A conference call to discuss the Company’s results, outlook, and related matters will be held on Wednesday, January 25, 2012 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, 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. 10008878 beginning one hour after completion of the live call until 8:00 A.M. (ET) on February 1, 2012. 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, 2011			September 30, 2011			December 31, 2010
*Assets*
Cash and due from banks	$	123,354		$	116,003		$	102,495
Interest-bearing deposits in other banks		518,176			946,330			483,281
Trading securities, at fair value		14,469			13,308			15,282
Securities available-for-sale, at fair value		1,013,006			970,430			1,057,802
Securities held-to-maturity, at amortized cost		60,458			74,375			81,320
Federal Home Loan Bank and Federal Reserve Bank stock, at cost		58,187			58,187			61,338
Loans, excluding covered loans		5,088,113			5,104,494			5,100,560
Covered loans		260,502			289,747			371,729
Allowance for loan losses		(119,462	)		(128,791	)		(142,572	)

Net loans		5,229,153			5,265,450			5,329,717

Other real estate owned (“OREO”), excluding covered OREO		33,975			23,863			31,069
Covered OREO		23,455			21,594			22,370
Federal Deposit Insurance Corporation (“FDIC”) indemnification asset		65,609			63,508			95,899
Premises, furniture, and equipment		134,977			132,425			140,907
Investment in bank-owned life insurance		206,235			205,886			197,644
Goodwill and other intangible assets		283,650			283,163			286,033
Accrued interest receivable and other assets		208,890			205,652			233,145

Total assets	$	7,973,594		$	8,380,174		$	8,138,302

*Liabilities and Stockholders’ Equity*
Deposits
Transactional deposits	$	4,820,058		$	4,899,216		$	4,519,492
Time deposits		1,659,117			1,727,392			1,991,984

Total deposits		6,479,175			6,626,608			6,511,476
Borrowed funds		205,371			386,429			303,974
Senior and subordinated debt		252,153			137,751			137,744
Accrued interest payable and other liabilities		74,308			76,953			73,063

Total liabilities		7,011,007			7,227,741			7,026,257

Preferred stock		—			191,393			190,882
Common stock		858			858			858
Additional paid-in capital		428,001			425,647			437,550
Retained earnings		810,487			807,857			787,678
Accumulated other comprehensive loss, net of tax		(13,276	)		(11,413	)		(27,739	)
Treasury stock, at cost		(263,483	)		(261,909	)		(277,184	)

Total stockholders’ equity		962,587			1,152,433			1,112,045

Total liabilities and stockholders’ equity	$	7,973,594		$	8,380,174		$	8,138,302

Condensed Consolidated Statements of Income

Unaudited

(Amounts in thousands, except per share data)


	Quarters Ended									Years Ended
	December 31, 2011			September 30, 2011			December 31, 2010			December 31, 2011			December 31, 2010
*Interest Income*
Loans	$	62,774		$	64,085		$	63,983		$	252,865		$	259,318
Investment securities		8,313			8,633			10,230			36,659			49,801
Covered loans		6,787			6,640			7,431			28,904			17,285
Federal funds sold and other short- term investments		883			817			832			3,083			2,463

Total interest income		78,757			80,175			82,476			321,511			328,867

Interest Expense
Deposits		5,962			6,654			7,907			27,256			37,127
Borrowed funds		670			706			711			2,743			3,267
Senior and subordinated debt		3,047			2,280			2,279			9,892			9,124

Total interest expense		9,679			9,640			10,897			39,891			49,518

Net interest income		69,078			70,535			71,579			281,620			279,349
Provision for loan losses		21,902			20,425			73,897			80,582			147,349

Net interest income after provision for loan losses		47,176			50,110			(2,318	)		201,038			132,000

*Noninterest Income*
Service charges on deposit accounts		9,957			10,215			9,202			37,879			35,884
Trust and investment advisory fees		4,044			3,946			4,040			16,224			15,063
Other service charges, commissions, and fees		4,885			5,325			4,506			20,486			18,238
Card-based fees		4,971			4,931			4,640			19,593			17,577

Total fee-based revenues		23,857			24,417			22,388			94,182			86,762
Bank-owned life insurance income		241			1,479			696			2,231			1,560
Securities (losses) gains, net		(110	)		449			1,662			2,410			12,216
Other		2,647			(1,754	)		1,421			3,114			8,013

Total noninterest income		26,635			24,591			26,167			101,937			108,551

*Noninterest Expense*
Salaries and employee benefits		35,220			29,182			31,028			128,774			114,378
OREO expense, net		2,965			4,174			17,820			16,293			50,034
Net occupancy and equipment expense		7,681			8,157			7,916			32,953			32,218
Technology and related costs		2,876			2,709			3,209			10,905			11,070
Professional services		8,026			7,571			4,524			26,356			22,903
FDIC premiums		1,758			1,799			2,967			7,990			10,880
Other		8,065			10,584			9,610			38,633			37,296

Total noninterest expense		66,591			64,176			77,074			261,904			278,779

Income (loss) before income tax expense (benefit)		7,220			10,525			(53,225	)		41,071			(38,228	)
Income tax expense (benefit)		296			1,583			(25,066	)		4,508			(28,544	)

Net income (loss)		6,924			8,942			(28,159	)		36,563			(9,684	)
Preferred dividends		(3,027	)		(2,586	)		(2,579	)		(10,776	)		(10,299	)
Net (income) loss applicable to non-vested restricted shares		(20	)		(93	)		411			(350	)		266

Net income (loss) applicable to common shares	$	3,877		$	6,263		$	(30,327	)	$	25,437		$	(19,717	)

Diluted earnings (loss) per common share	$	0.05		$	0.09		$	(0.41	)	$	0.35		$	(0.27	)
Dividends declared per common share	$	0.01		$	0.01		$	0.01			0.04			0.04
Weighted average diluted common shares outstanding		73,382			73,361			73,085			73,289			72,422

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FIRST MIDWEST BANCORP INC Reports