ITASCA, IL
-- (Marketwired)
-- 10/21/14
First Midwest Bancorp, Inc. (the "Company" or "First Midwest") (NASDAQ: FMBI), the holding company of First Midwest Bank (the "Bank"), today reported results of operations and financial condition for the third quarter of 2014. Net income for the third quarter of 2014 was $18.5 million, or $0.25 per share. This compares to $18.5 million, or $0.25 per share, for the second quarter of 2014, and $29.3 million, or $0.39 per share, for the third quarter of 2013. Results for 2013 included the benefit of $0.15 per share, attributed to the sale of an equity investment, net of certain other treasury related actions.
"It was a strategically dynamic quarter for us," said Michael L. Scudder, President and Chief Executive Officer of First Midwest Bancorp, Inc. "Operating performance was solid, reflecting strong top-line revenue growth and improved operating efficiency. Our performance benefited from both the successful completion of the Popular Community Bank branch acquisition and multi-year efforts to dispose of certain selected branch properties. These benefits in turn partially were offset by acquisition and integration related costs as well as the impact of a singular, anomalous corporate credit loss. At its core, the quarter reflected continued loan and fee growth, balanced business investment, and improved operating leverage."
Mr. Scudder continued, "Announced in July, our acquisition of Great Lakes Financial Resources, Inc. remains on track with regulatory approval from the Federal Reserve in hand and a planned closing before year end. Targeted acquisitions together with organic business investment have added to a talented group of colleagues providing greater product and operational depth, while enhancing an already strong core deposit foundation. These efforts leave us well positioned for future performance and growth."
SELECT HIGHLIGHTS
Solid Operating Performance
- Increased earnings per share to $0.28, excluding acquisition and integration related expenses, up 9% from the second quarter of 2014.
- Expanded total loans to nearly $7 billion at September 30, 2014, an increase of 10% from June 30, 2014 and 16% from September 30, 2013.
- Increased top-line revenue to $107 million, up 8% and 7% from June 30, 2014 and September 30, 2013, respectively.
- Improved net interest margin to 3.72%, up 7 basis points from the second quarter of 2014 and 9 basis points from the third quarter of 2013.
- Realized fee-based revenues of $30 million, up 10% from the second quarter of 2014 and 7% from the third quarter of 2013.
- Improved efficiency ratio to 62.02%, excluding acquisition and integration related expenses, compared to 63.60% for the second quarter of 2014.
- Increased return on average tangible common equity to 11.73% for the third quarter of 2014, compared to 10.15% for the second quarter of 2014.
Credit and Capital
- Improved the ratio of non-accrual loans to total loans to 1.08% at September 30, 2014, a level 14% lower than September 30, 2013.
- Increased provision for credit losses by $5.4 million from the linked quarter to address a large corporate credit exposure.
- Paid dividends per share of $0.08, consistent with the second quarter of 2014 and up from $0.04 for the third quarter of 2013.
Significant Quarter Events
- Completed the acquisitions of the Chicago banking operations of Popular Community Bank and National Machine Tool Financial Corporation.
- Received regulatory approval from the Federal Reserve for the Great Lakes Financial Resources, Inc. acquisition.
- Realized pre-tax gains of $4 million from the disposition of two branch properties.
ACQUISITIONS
On July 7, 2014, the Company entered into a definitive agreement to acquire the south suburban Chicago-based Great Lakes Financial Resources, Inc. ("Great Lakes"), the holding company for Great Lakes Bank. As part of the acquisition, the Company will acquire eight locations, approximately $490 million in deposits, and $234 million in loans. The Company has received approval for this acquisition from the Federal Reserve, and the acquisition is expected to close before the end of 2014, subject to approval by the stockholders of Great Lakes and certain closing conditions.
On August 8, 2014, the Bank completed the acquisition of the Chicago banking operations of Banco Popular North America ("Popular"), doing business as Popular Community Bank, which is a subsidiary of Popular, Inc. The acquisition included Popular's twelve full-service retail banking offices and its small business and middle market commercial lending activities in the Chicago metropolitan area. On the date of acquisition, the Bank assumed $732 million in deposits and acquired $550 million in loans.
On September 26, 2014, the Bank completed the acquisition of National Machine Tool Financial Corporation ("National Machine Tool"). In business for more than 28 years and a customer of the Bank for more than 15 years, National Machine Tool provides equipment leasing and financing alternatives to traditional bank financing. The addition of equipment leasing to First Midwest's product offerings affords us the opportunity to leverage our sales platform to augment National Machine Tool's historical lease production of $40 million per year.
OPERATING PERFORMANCE
Net Interest Income and Margin Analysis
(Dollar amounts in thousands)
Quarters Ended
-------------------------------------------------------
September 30, 2014 June 30, 2014
--------------------------- ---------------------------
Interest Yield/ Interest Yield/
Average Earned/ Rate Average Earned/ Rate
Balance Paid (%) Balance Paid (%)
---------- -------- ------ ---------- -------- ------
Assets:
Other interest-
earning assets $ 476,768 $ 313 0.26 $ 532,900 $ 369 0.28
Trading securities 18,363 30 0.65 17,913 28 0.63
Investment
securities (1) 1,067,742 9,659 3.62 1,113,201 10,256 3.69
Federal Home Loan
Bank and Federal
Reserve Bank stock 35,588 341 3.83 35,517 348 3.92
Loans (1)(2) 6,302,883 69,458 4.37 5,902,953 63,901 4.34
---------- -------- ------ ---------- -------- ------
Total interest-
earning assets
(1) 7,901,344 79,801 4.01 7,602,484 74,902 3.95
-------- ------ -------- ------
Cash and due from
banks 126,279 117,108
Allowance for loan
and covered loan
losses (77,596) (79,071)
Other assets 818,066 776,148
---------- ----------
Total assets $8,768,093 $8,416,669
========== ==========
Liabilities and
Stockholders'
Equity:
Interest-bearing
transaction
deposits $3,906,975 865 0.09 $3,721,134 720 0.08
Time deposits 1,226,025 1,941 0.63 1,168,898 1,791 0.61
Borrowed funds 101,674 9 0.04 164,605 169 0.41
Senior and
subordinated debt 191,013 3,016 6.26 190,981 3,016 6.33
---------- -------- ------ ---------- -------- ------
Total interest-
bearing
liabilities 5,425,687 5,831 0.43 5,245,618 5,696 0.44
-------- ------ -------- ------
Demand deposits 2,208,450 2,069,781
---------- ----------
Total funding
sources 7,634,137 7,315,399
Other liabilities 83,075 66,681
Stockholders' equity
- common 1,050,881 1,034,589
Total
liabilities and
stockholders'
equity $8,768,093 $8,416,669
========== ==========
Net interest
income/margin (1) $ 73,970 3.72 $ 69,206 3.65
======== ====== ======== ======
Quarters Ended
--------------------------------
September 30, 2013
-------------------------------
Interest Yield/
Average Earned/ Rate
Balance Paid (%)
---------- ---------- --------
Assets:
Other interest-
earning assets $ 661,779 $ 469 0.28
Trading securities 15,543 29 0.75
Investment
securities (1) 1,250,158 10,199 3.26
Federal Home Loan
Bank and Federal
Reserve Bank stock 35,162 333 3.79
Loans (1)(2) 5,559,932 64,326 4.59
---------- ---------- --------
Total interest-
earning assets
(1) 7,522,574 75,356 3.98
---------- --------
Cash and due from
banks 127,847
Allowance for loan
and covered loan
losses (93,940)
Other assets 847,304
----------
Total assets $8,403,785
==========
Liabilities and
Stockholders'
Equity:
Interest-bearing
transaction
deposits $3,647,159 765 0.08
Time deposits 1,288,746 2,072 0.64
Borrowed funds 203,613 390 0.76
Senior and
subordinated debt 214,860 3,436 6.34
---------- ---------- --------
Total interest-
bearing
liabilities 5,354,378 6,663 0.49
---------- --------
Demand deposits 1,975,797
----------
Total funding
sources 7,330,175
Other liabilities 90,154
Stockholders' equity
- common 983,456
Total
liabilities and
stockholders'
equity $8,403,785
==========
Net interest
income/margin (1) $ 68,693 3.63
========== ========
(1) Interest income and yields on tax-exempt securities and loans are
presented on a tax-equivalent basis, assuming a federal income tax rate
of 35%. This non-GAAP financial measure assists management in comparing
revenue from both taxable and tax-exempt sources. The corresponding
income tax impact related to tax-exempt items is recorded in income tax
expense. These adjustments have no impact on net income.
(2) Includes loans acquired through Federal Deposit Insurance Corporation
("FDIC")-assisted transactions subject to loss sharing agreements
("covered loans") and a related FDIC indemnification asset.
For the third quarter of 2014, total average interest-earning assets increased $298.9 million and $378.8 million from the second quarter of 2014 and the third quarter of 2013, respectively. The increase compared to both prior periods was driven by loans from the Popular acquisition as well as organic loan growth.
Compared to both prior periods, the increase in total average interest-bearing liabilities resulted primarily from the Popular acquisition. In addition, the decline in borrowed funds was due to the second quarter of 2014 prepayment of $114.6 million of FHLB advances with a weighted-average rate of 1.08%, which is net of the yield earned on the cash used for the prepayment.
Tax-equivalent net interest margin for the current quarter was 3.72%, increasing 7 basis points from the second quarter of 2014 and 9 basis points from the third quarter of 2013. The Popular acquisition contributed approximately half of the improvement compared to both prior periods, adding a greater proportion of higher yielding, fixed rate loans along with low cost deposits. In addition, certain loan hedging strategies and an increase in the yield on covered interest-earning assets drove the higher margin.
Compared to the second quarter of 2014, tax-equivalent net interest income increased by $4.8 million primarily due to the Popular acquisition, which contributed $3.5 million of the increase. In addition, continued organic loan growth and the full quarter impact of the prepayment of the FHLB advances in the second quarter of 2014 drove the increase.
Noninterest Income Analysis
(Dollar amounts in thousands)
September 30, 2014
Quarters Ended Percent Change From
-------------------------------- -------------------
September September September
30, June 30, 30, June 30, 30,
2014 2014 2013 2014 2013
---------- -------- ---------- -------- ---------
Service charges on
deposit accounts $ 9,902 $ 8,973 $ 9,472 10.4 4.5
Wealth management
fees 6,721 6,552 6,018 2.6 11.7
Card-based fees 6,646 5,969 5,509 11.3 20.6
Merchant servicing
fees 2,932 2,916 2,915 0.5 0.6
Mortgage banking
income 1,125 959 1,273 17.3 (11.6)
Other service
charges,
commissions, and
fees 2,334 1,639 2,617 42.4 (10.8)
---------- -------- ---------- -------- ---------
Total fee-based
revenues 29,660 27,008 27,804 9.8 6.7
Gains on sales of
properties 3,954 -- -- 100.0 100.0
Net securities gains 2,570 4,517 33,801 (43.1) (92.4)
BOLI income 767 773 284 (0.8) N/M
Other income 512 423 800 21.0 (36.0)
Net trading (losses)
gains (1) (356) 531 882 N/M N/M
Loss on early
extinguishment of
debt -- (2,059) -- (100.0) --
BOLI modification
loss -- -- (13,312) -- (100.0)
Gain on termination
of FHLB forward
commitments -- -- 7,829 -- (100.0)
---------- -------- ---------- -------- ---------
Total noninterest
income $ 37,107 $ 31,193 $ 58,088 19.0 (36.1)
========== ======== ========== ======== =========
N/M - Not meaningful.
(1) Net trading (losses) 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 increased 9.8% compared to the linked-quarter, reflecting growth across all categories. Higher levels of service charges on deposit accounts were impacted by an increase in service charge volume from existing and new customers acquired in the Popular transaction. New customer relationships across all service offerings continued to drive the increase in wealth management fees. The increase in card-based fees reflects higher transaction volumes, as well as incentives from a renewed vendor contract. Fee income generated by sales of capital market products to commercial clients drove the increase in other service charges, commissions, and fees.
Compared to the third quarter of 2013, total fee-based revenues grew 6.7% due to growth in service charges on deposits accounts, wealth management fees, and card-based fees. Total noninterest income during the third quarter of 2013 was impacted by certain significant transactions, including a $34.0 million gain on the sale of an equity investment, a $7.8 million gain on the termination of two FHLB forward commitments, and a $13.3 million write-down of the cash surrender values of certain BOLI policies.
Total noninterest income of $37.1 million grew 19.0% from the second quarter of 2014. In the third quarter of 2014, we completed the disposition of two branch properties at pre-tax gains of $4.0 million as a part of multi-year efforts to optimize our retail distribution. In addition, we sold $9.3 million in longer-duration corporate bonds at a pre-tax gain of $2.0 million.
Noninterest Expense Analysis
(Dollar amounts in thousands)
September 30, 2014
Quarters Ended Percent Change From
-------------------------------- -------------------
September September September
30, June 30, 30, June 30, 30,
2014 2014 2013 2014 2013
---------- -------- ---------- -------- ---------
Salaries and employee
benefits:
Salaries and wages $ 28,972 $ 27,853 $ 27,254 4.0 6.3
Nonqualified plan
expense (1) (386) 550 1,003 N/M N/M
Retirement and
other employee
benefits 7,347 6,158 6,013 19.3 22.2
---------- -------- ---------- -------- ---------
Total salaries
and employee
benefits 35,933 34,561 34,270 4.0 4.9
---------- -------- ---------- -------- ---------
Net occupancy and
equipment expense 8,702 7,672 7,982 13.4 9.0
Professional services 7,098 6,517 5,517 8.9 28.7
Technology and
related costs 4,316 3,104 2,984 39.0 44.6
Merchant card expense 2,396 2,383 2,339 0.5 2.4
Advertising and
promotions 1,858 2,307 2,166 (19.5) (14.2)
Net OREO expense 1,406 1,569 2,849 (10.4) (50.6)
Cardholder expenses 1,120 1,081 1,031 3.6 8.6
Other expenses 7,484 5,823 5,564 28.5 34.5
---------- -------- ---------- -------- ---------
Total noninterest
expense $ 70,313 $ 65,017 $ 64,702 8.1 8.7
========== ======== ========== ======== =========
Efficiency ratio (2) 62.02% 63.60% 62.70%
N/M - Not meaningful.
(1) Nonqualified plan expense results from changes in the Company's
obligation to participants under deferred compensation agreements and is
substantially offset by earnings on the related assets included in
noninterest income.
(2) The efficiency ratio expresses noninterest expense, excluding OREO
expense, as a percentage of tax-equivalent net interest income plus
total fee-based revenues, other income, trading (losses) gains, and tax-
equivalent adjusted BOLI income. In addition, acquisition and
integration related expenses of $3.7 million and $830,000 are excluded
from the efficiency ratio for the third and second quarters of 2014,
respectively.
The efficiency ratio, excluding acquisition and integration related expenses, improved to 62.02% from 63.60% compared to the linked quarter. Total noninterest expense for the third quarter of 2014 was higher compared to the second quarter of 2014 and the third quarter of 2013 primarily as a result of acquisition and integration related costs, totaling $3.7 million for the third quarter of 2014 and $830,000 for the second quarter of 2014. In addition, recurring costs associated with operating the newly acquired Popular locations contributed to the increase. During the third quarter of 2014, the Company also recorded a $430,000 valuation adjustment relative to the closing of a banking facility.
LOAN PORTFOLIO AND ASSET QUALITY
Loan Portfolio Composition
(Dollar amounts in thousands)
As Of
-----------------------------------------------------------
September 30, 2014
---------------------------------
Acquired June 30, September 30,
Legacy (1) Total 2014 2013
----------- --------- ----------- ----------- -------------
Corporate
Commercial and
industrial $ 2,131,464 $ 76,702 $ 2,208,166 $ 2,073,018 $ 1,792,561
Agricultural 347,391 120 347,511 330,626 318,659
Commercial real
estate:
Office 404,870 32,352 437,222 444,956 449,067
Retail 383,209 70,969 454,178 377,427 384,787
Industrial 486,723 44,399 531,122 490,018 503,010
Multi-family 360,330 199,359 559,689 350,430 332,749
Construction 193,445 -- 193,445 195,109 175,172
Other
commercial
real estate 790,383 81,442 871,825 798,324 790,114
----------- --------- ----------- ----------- -------------
Total
commercial
real estate 2,618,960 428,521 3,047,481 2,656,264 2,634,899
----------- --------- ----------- ----------- -------------
Total
corporate
loans 5,097,815 505,343 5,603,158 5,059,908 4,746,119
----------- --------- ----------- ----------- -------------
Consumer
Home equity 494,975 22,471 517,446 485,085 377,015
1-4 family
mortgages 238,172 -- 238,172 241,156 286,333
Installment 64,024 5,404 69,428 57,308 39,462
----------- --------- ----------- ----------- -------------
Total
consumer
loans 797,171 27,875 825,046 783,549 702,810
----------- --------- ----------- ----------- -------------
Covered loans 90,875 -- 90,875 104,867 153,305
----------- --------- ----------- ----------- -------------
Total loans $ 5,985,861 $ 533,218 $ 6,519,079 $ 5,948,324 $ 5,602,234
=========== ========= =========== =========== =============
September 30, 2014
Percent Change From
-------------------------
June 30, September 30,
2014 2013
---------- -------------
Corporate
Commercial and
industrial 6.5 23.2
Agricultural 5.1 9.1
Commercial real
estate:
Office (1.7) (2.6)
Retail 20.3 18.0
Industrial 8.4 5.6
Multi-family 59.7 68.2
Construction (0.9) 10.4
Other
commercial
real estate 9.2 10.3
---------- -------------
Total
commercial
real estate 14.7 15.7
---------- -------------
Total
corporate
loans 10.7 18.1
---------- -------------
Consumer
Home equity 6.7 37.2
1-4 family
mortgages (1.2) (16.8)
Installment 21.1 75.9
---------- -------------
Total
consumer
loans 5.3 17.4
---------- -------------
Covered loans (13.3) (40.7)
---------- -------------
Total loans 9.6 16.4
========== =============
(1) Acquired loans consist of loans that were acquired in the Popular
business combination that are recorded at fair value as of the
acquisition date.
Compared to the linked quarter, the majority of the loan growth was related to the Popular acquisition, which added $533.2 million of loans at September 30, 2014, and solid performance from our legacy sales platform concentrated within our commercial and industrial and agricultural loan categories.
Total loans of $6.5 billion rose by $570.8 million, or 9.6%, from June 30, 2014 and $916.8 million, or 16.4%, from September 30, 2013. Total loans, excluding acquired loans, grew 2.5% on an annualized basis from June 30, 2014 and 6.9% from September 30, 2013.
In addition to the Popular loans, the year-over-year increase in total loans resulted from well-balanced growth distributed across the majority of categories. Strong growth in the commercial and industrial and agricultural loan categories reflects the impact of greater resource investments and expansion into certain sector-based lending areas, such as agri-business, asset-based lending, and healthcare.
Asset Quality
(Dollar amounts in thousands)
September 30, 2014
As Of Percent Change From
---------------------------------- --------------------
September September September
30, June 30, 30, June 30, 30,
2014 2014 2013 2014 2013
---------- ---------- ---------- --------- ---------
Asset quality (1)
Non-accrual loans $ 63,858 $ 66,728 $ 68,170 (4.3) (6.3)
90 days or more
past due loans 5,983 3,533 5,642 69.3 6.0
---------- ---------- ---------- --------- ---------
Total non-
performing
loans 69,841 70,261 73,812 (0.6) (5.4)
Accruing troubled
debt
restructurings
("TDRs") 5,449 5,697 24,329 (4.4) (77.6)
OREO 29,165 30,331 35,616 (3.8) (18.1)
---------- ---------- ---------- --------- ---------
Total non-
performing
assets $ 104,455 $ 106,289 $ 133,757 (1.7) (21.9)
========== ========== ========== ========= =========
30-89 days past
due loans $ 13,459 $ 24,167 $ 15,111 (44.3) (10.9)
Non-accrual loans
to total loans 1.08% 1.14% 1.25%
Non-performing
loans to total
loans 1.18% 1.20% 1.35%
Non-performing
assets to loans
plus OREO 1.76% 1.81% 2.44%
Allowance for
Credit Losses
Allowance for loan
and covered loan
losses $ 73,106 $ 78,326 $ 90,828 (6.7) (19.5)
Reserve for
unfunded
commitments 1,616 1,616 2,386 - (32.3)
---------- ---------- ---------- --------- ---------
Total allowance
for credit
losses $ 74,722 $ 79,942 $ 93,214 (6.5) (19.8)
========== ========== ========== ========= =========
Allowance for
credit losses to
loans, excluding
acquired loans 1.25% 1.34% 1.66%
Allowance for
credit losses to
non-accrual loans
(1) 103.47% 105.80% 117.59%
(1) Due to the impact of business combination accounting, which requires
acquired loans to be recorded at fair value as of the acquisition date,
and protection provided for under loss share agreements with the FDIC
("the FDIC Agreements"), acquired loans and covered loans and covered
OREO are excluded from these metrics.
Non-performing assets, excluding acquired and covered loans and covered OREO, decreased by $1.8 million from June 30, 2014 and $29.3 million, or 21.9%, from September 30, 2013. Lower levels of accruing TDRs and OREO contributed to the decline from September 30, 2013.
Charge-Off Data
(Dollar amounts in thousands)
Quarters Ended
--------------------------------------------------------
September September
30, % of June 30, % of 30, % of
2014 Total 2014 Total 2013 Total
---------- ------ ---------- ------ ---------- ------
Net loan charge-
offs (1):
Commercial and
industrial $ 9,047 56.7 $ 1,840 24.1 $ 2,057 25.5
Agricultural - - - - 141 1.8
Office, retail,
and industrial 2,459 15.4 3,221 42.1 956 11.9
Multi-family 26 0.2 265 3.5 112 1.4
Construction 157 1.0 232 3.0 410 5.1
Other commercial
real estate 1,255 7.9 472 6.2 639 7.9
Consumer 2,998 18.8 1,615 21.1 2,108 26.2
Covered 5 - 2 - 1,629 20.2
---------- ------ ---------- ------ ---------- ------
Total net loan
charge-offs $ 15,947 100.0 $ 7,647 100.0 $ 8,052 100.0
========== ====== ========== ====== ========== ======
Net loan charge-
offs to average
loans, excluding
acquired loans,
annualized:
Quarter-to-date 1.06% 0.52% 0.58%
Year-to-date 0.68% 0.49% 0.61%
(1) Amounts represent charge-offs, net of recoveries.
The linked quarter increase in charge-offs primarily relates to the recognition of a $7.5 million loss attributable to a longstanding commercial borrowing relationship. This loss emanated from reported accounting irregularities and the resulting impact on the borrower's adherence to customary debt covenants. The Company is aggressively pursuing all appropriate collection and other remedies. Exclusive of this aberrant circumstance, net charge-off levels approximated the linked and prior year quarters.
CAPITAL MANAGEMENT
Capital Ratios
(Dollar amounts in thousands)
Regulatory
Minimum Excess Over
For Required
September December September "Well- Minimums at
30, June 30, 31, 30, Capital- September 30,
2014 2014 2013 2013 ized" 2014
-------- -------- -------- -------- ----------- -------------
Bank regulatory
capital
ratios:
Total capital
to risk-
weighted
assets 11.70% 13.37% 13.86% 13.90% 10.00% 17% $125,043
Tier 1
capital to
risk-
weighted
assets 10.69% 12.20% 12.61% 12.65% 6.00% 78% $344,057
Tier 1
leverage to
average
assets 9.42% 10.37% 10.24% 10.02% 5.00% 88% $368,276
Company regulatory
capital ratios:
Total capital
to risk-
weighted
assets 10.94% 12.20% 12.39% 12.60% N/A N/A N/A
Tier 1
capital to
risk-
weighted
assets 9.86% 10.97% 10.91% 11.12% N/A N/A N/A
Tier 1
leverage to
average
assets 8.93% 9.61% 9.18% 9.21% N/A N/A N/A
Company tier 1
common capital
to risk-
weighted
assets (1)(2) 9.38% 10.45% 10.37% 10.23% N/A N/A N/A
Company
tangible
common equity
ratios (1)(3):
Tangible
common
equity to
tangible
assets 8.29% 9.52% 9.09% 8.61% N/A N/A N/A
Tangible
common
equity,
excluding
other
comprehensive
loss, to
tangible
assets 8.50% 9.71% 9.43% 8.93% N/A N/A N/A
Tangible
common
equity to
risk-
weighted
assets 9.52% 10.74% 10.67% 10.60% N/A N/A N/A
N/A - Not applicable.
(1) Ratio is not subject to formal Federal Reserve regulatory guidance.
(2) Excludes the impact of trust-preferred securities.
(3) Tangible common equity ("TCE") represents common stockholders' equity
less goodwill and identifiable intangible assets. In management's view,
Tier 1 common capital 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.
Overall, the Company's capital ratios decreased compared to the prior periods presented. The Popular acquisition drove this decrease due to the addition of risk-weighted assets and average assets, including goodwill and intangible assets, in the third quarter of 2014. The Bank's regulatory ratios exceeded all regulatory mandated ratios for characterization as "well-capitalized" as of September 30, 2014.
The Board of Directors approved a quarterly cash dividend of $0.08 per common share during the third quarter of 2014, which follows a dividend increase from $0.07 to $0.08 per common share during the second quarter of 2014.
About the Company
First Midwest, with assets of approximately $9.0 billion, is the premier relationship-based financial institution in the dynamic Chicagoland banking market. As one of Illinois' largest independent bank holding companies, First Midwest, through its subsidiary bank and other affiliates, provides a full range of business and retail banking and wealth management services through approximately 100 banking offices located in metropolitan Chicago, northwest Indiana, central and western Illinois, and eastern Iowa. First Midwest has been recognized by J.D. Power as having the "Highest Customer Satisfaction with Retail Banking in the Midwest Region*" according to the 2014 Retail Banking Satisfaction Study(SM). The Company website is www.firstmidwest.com.
* First Midwest Bank received the highest numerical score among retail banks in the Midwest region in the proprietary J.D. Power 2014 Retail Banking Satisfaction Study(SM). Study based on 80,445 total responses measuring 21 providers in the Midwest region (IA, IL, KS, MO, MN, WI) and measures opinions of consumers with their primary banking provider. Proprietary study results are based on experiences and perceptions of consumers surveyed January 2014. Individual experiences may vary. Visit JDPower.com.
Non-GAAP Financial Information
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 provides non-GAAP performance results, which the Company believes are useful because they assist investors in assessing the Company's operating performance. This includes, but is not limited to, earnings per share, excluding acquisition and integration related expenses, top-line revenue, tax-equivalent net interest income (including its individual components), the efficiency ratio, tier 1 common capital to risk-weighted assets, tangible common equity to tangible assets, tangible common equity, excluding other comprehensive loss, to tangible assets, tangible common equity to risk-weighted assets, and non-performing assets to tangible common equity and allowance for credit losses. Although intended to enhance investors' understanding of the Company's business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP.
Forward-Looking Statements
This press release may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, the expected completion date, financial benefits and other effects of the proposed merger of the Company and Great Lakes. Forward-looking statements can be identified by the use of the words "anticipate," "expect," "intend," "estimate," "target," and words of similar import. These statements are not historical facts but instead represent only the Company's beliefs regarding future results or events, many of which, by their nature, are inherently uncertain and outside of the Company's control. It is possible that actual results or events and the Company's financial condition may differ, possibly materially, from the anticipated results, events and financial condition indicated in these forward-looking statements. Factors that may cause such a difference include, but are not limited to, expected synergies, cost savings and other financial benefits of the proposed transaction between the Company and Great Lakes might not be realized within the expected timeframes or might be less than projected; the requisite stockholder and regulatory approvals for the proposed transaction between the Company and Great Lakes might not be obtained; credit and interest rate risks associated with the Company's and Great Lakes' respective businesses, customer borrowing, repayment, investment and deposit practices, and general economic conditions, either nationally or in the market areas in which the Company and Great Lakes operate or anticipate doing business, are less favorable than expected; customer and employee reactions to the proposed transaction between the Company and Great Lakes; new regulatory or legal requirements or obligations; and other risks and important factors that could affect the Company's future results identified in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and the risks and other factors identified in other reports filed with the Securities and Exchange Commission ("SEC"). 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.
Additional Information
The information contained herein does not constitute an offer to sell or a solicitation of an offer to buy any securities or a solicitation of any vote or approval.
The Company filed a registration statement on Form S-4 with the SEC in connection with the proposed merger of the Company and Great Lakes that includes a preliminary proxy statement of Great Lakes and a preliminary prospectus of the Company, as well as other relevant documents concerning the proposed transaction. Stockholders are advised to read the registration statement and proxy statement/prospectus regarding the proposed transaction and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they contain important information about the Company, Great Lakes and the proposed transaction. These documents and other documents relating to the merger filed by the Company can be obtained free of charge from the SEC's website at www.sec.gov. These documents also can be obtained free of charge by accessing the Company's website at www.firstmidwest.com under the tab "Investor Relations" and then under "SEC Filings." Alternatively, these documents can be obtained free of charge from the Company upon written request to First Midwest Bancorp, Inc., Attn: Corporate Secretary, One Pierce Place, Suite 1500, Itasca, Illinois 60143 or by calling (630) 875-7463, or from Great Lakes upon written request to Great Lakes Financial Resources, Inc., Attn: Thomas S. Agler, President, 4600 West Lincoln Highway, Matteson, Illinois 60443 or by calling (708) 283-5800.
Participants in the Great Lakes Transaction
The Company, Great Lakes and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Great Lakes stockholders in connection with the proposed transaction between the Company and Great Lakes under the rules of the SEC. Certain information regarding the interests of these participants, and a description of their direct and indirect interests, by security holdings or otherwise, may be obtained by reading the proxy statement/prospectus regarding the proposed transaction. Free copies of this document may be obtained as described in the preceding paragraph. Additional information about the Company and its directors and officers may be found in the definitive proxy statement of the Company relating to its 2014 Annual Meeting of Stockholders filed with the SEC on April 17, 2014. This definitive proxy statement can be obtained free of charge from the SEC's website at www.sec.gov.
Conference Call
A conference call to discuss the Company's results, outlook, and related matters will be held on Wednesday, October 22, 2014 at 10:00 A.M. (ET). Members of the public who would like to listen to the conference call should dial (877) 507-0639 (U.S. domestic) or (412) 317-6003 (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. 10053777 beginning one hour after completion of the live call until 9:00 A.M. (ET) on October 29, 2014. Please direct any questions regarding obtaining access to the conference call to First Midwest Bancorp, Inc. Investor Relations, via e-mail, at investor.relations@firstmidwest.com.
Accompanying Financial Statements and Tables
Accompanying this press release is the following unaudited financial information:
Condensed Consolidated Statements of Financial Condition
Condensed Consolidated Statements of Income
Press Release and Additional Information Available on Website
This press release, the accompanying financial statements and tables, and certain additional unaudited Selected Financial Information are available through the "Investor Relations" section of First Midwest's website at www.firstmidwest.com/investorrelations.
Condensed Consolidated Statements of Financial Condition
Unaudited
(Amounts in thousands)
September 30, June 30, December 31, September 30,
2014 2014 2013 2013
------------- ------------ ------------ -------------
Assets
Cash and due from
banks $ 125,977 $ 155,099 $ 110,417 $ 155,075
Interest-bearing
deposits in other
banks 550,606 322,874 476,824 744,163
Trading
securities, at
fair value 17,928 18,231 17,317 16,443
Securities
available-for-
sale, at fair
value 997,420 1,050,475 1,112,725 1,162,911
Securities held-
to-maturity, at
amortized cost 26,776 26,471 44,322 29,847
Federal Home Loan
Bank and Federal
Reserve Bank
stock, at cost 35,588 35,588 35,161 35,161
Loans, excluding
covered loans 6,428,204 5,843,457 5,580,005 5,448,929
Covered loans 90,875 104,867 134,355 153,305
Allowance for loan
and covered loan
losses (73,106) (78,326) (85,505) (90,828)
------------- ------------ ------------ -------------
Net loans 6,445,973 5,869,998 5,628,855 5,511,406
OREO, excluding
covered OREO 29,165 30,331 32,473 35,616
Covered OREO 9,277 9,825 8,863 10,477
FDIC
indemnification
asset 8,699 10,276 16,585 18,078
Premises,
furniture, and
equipment 123,473 118,305 120,204 118,664
Investment in BOLI 195,270 194,502 193,167 193,979
Goodwill and other
intangible assets 322,664 274,962 276,366 277,187
Accrued interest
receivable and
other assets 207,535 188,310 180,128 208,906
------------- ------------ ------------ -------------
Total assets $ 9,096,351 $ 8,305,247 $ 8,253,407 $ 8,517,913
============= ============ ============ =============
Liabilities and
Stockholders'
Equity
Noninterest-
bearing deposits $ 2,295,679 $ 2,025,666 $ 1,911,602 $ 2,020,956
Interest-bearing
deposits 5,320,454 4,869,584 4,854,499 4,982,252
------------- ------------ ------------ -------------
Total deposits 7,616,133 6,895,250 6,766,101 7,003,208
Borrowed funds 132,877 104,201 224,342 212,058
Senior and
subordinated debt 191,028 190,996 190,932 214,876
Accrued interest
payable and other
liabilities 106,637 75,362 70,590 101,046
------------- ------------ ------------ -------------
Total
liabilities 8,046,675 7,265,809 7,251,965 7,531,188
------------- ------------ ------------ -------------
Common stock 858 858 858 858
Additional paid-in
capital 408,789 407,895 414,293 412,677
Retained earnings 891,129 878,607 853,740 839,835
Accumulated other
comprehensive
loss, net of tax (18,852) (15,271) (26,792) (26,057)
Treasury stock, at
cost (232,248) (232,651) (240,657) (240,588)
------------- ------------ ------------ -------------
Total
stockholders'
equity 1,049,676 1,039,438 1,001,442 986,725
------------- ------------ ------------ -------------
Total
liabilities and
stockholders'
equity $ 9,096,351 $ 8,305,247 $ 8,253,407 $ 8,517,913
============= ============ ============ =============
Condensed Consolidated Statements of Income
Unaudited
(Amounts in thousands, except per share data)
Quarters Ended
-------------------------------------------
September 30, June 30, September 30,
2014 2014 2013
------------- ------------- -------------
Interest Income
Loans, excluding covered loans $ 66,117 $ 60,634 $ 60,614
Covered loans 2,596 2,605 3,142
Investment securities 7,465 8,019 7,742
Other short-term investments 684 745 831
------------- ------------- -------------
Total interest income 76,862 72,003 72,329
------------- ------------- -------------
Interest Expense
Deposits 2,806 2,511 2,837
Borrowed funds 9 169 390
Senior and subordinated debt 3,016 3,016 3,436
------------- ------------- -------------
Total interest expense 5,831 5,696 6,663
------------- ------------- -------------
Net interest income 71,031 66,307 65,666
Provision for loan and covered
loan losses 10,727 5,341 4,770
------------- ------------- -------------
Net interest income after
provision for loan and
covered loan losses 60,304 60,966 60,896
------------- ------------- -------------
Noninterest Income
Service charges on deposit
accounts 9,902 8,973 9,472
Wealth management fees 6,721 6,552 6,018
Card-based fees 6,646 5,969 5,509
Mortgage banking income 1,125 959 1,273
Other service charges,
commissions, and fees 5,266 4,555 5,532
Gains on sales of properties 3,954 -- --
Net securities gains 2,570 4,517 33,801
BOLI income (loss) 767 773 (13,028)
Other income 156 954 1,682
Loss on early extinguishment of
debt -- (2,059) --
Gain on termination of FHLB
forward commitments -- -- 7,829
------------- ------------- -------------
Total noninterest income 37,107 31,193 58,088
------------- ------------- -------------
Noninterest Expense
Salaries and employee benefits 35,933 34,561 34,270
Net occupancy and equipment
expense 8,702 7,672 7,982
Professional services 7,098 6,517 5,517
Technology and related costs 4,316 3,104 2,984
Net OREO expense 1,406 1,569 2,849
Other expenses 12,858 11,594 11,100
------------- ------------- -------------
Total noninterest expense 70,313 65,017 64,702
------------- ------------- -------------
Income before income tax
expense 27,098 27,142 54,282
Income tax expense 8,549 8,642 24,959
------------- ------------- -------------
Net income $ 18,549 $ 18,500 $ 29,323
============= ============= =============
Diluted earnings per common
share $ 0.25 $ 0.25 $ 0.39
Dividends declared per common
share $ 0.08 $ 0.08 $ 0.04
Weighted average diluted common
shares outstanding 74,352 74,333 74,034
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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