Form 8-K FIRST MIDWEST BANCORP For: Jan 20

January 21, 2015 6:01 AM EST

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 
FORM 8-K
 
CURRENT REPORT


Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) January 20, 2015
 
 
 
 
First Midwest Bancorp, Inc.
(Exact name of registrant as specified in its charter)
 
 
 
 
Delaware 
(State or other jurisdiction
of Incorporation)
0-10967 
(Commission
File Number)
36-3161078 
(IRS Employer
Identification No.)
 
 
 
 
 
 
 
 
 
One Pierce Place, Suite 1500, Itasca, Illinois 
(Address of principal executive offices) 


60143 
(Zip Code)
 
 
 
 
(630) 875-7450 
(Registrant's telephone number, including area code) 


N/A 
(Former name or former address, if changed since last report)

 
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ]    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ]    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ]    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 






Item 2.02 Results of Operations and Financial Condition

On January 20, 2015, First Midwest Bancorp, Inc. (the "Company") issued a press release announcing its earnings results for the quarter and year ended December 31, 2014. This press release, dated January 20, 2015, is attached to this report as Exhibit 99.1.

Item 7.01 Regulation FD Disclosure

On January 21, 2015, the Company also made the information attached hereto as Exhibit 99.2 available via its website at www.firstmidwest.com/investorrelations.

The information set forth in this Current Report on Form 8-K (including the information in Exhibits 99.1 and 99.2 attached hereto) is being furnished to the Securities and Exchange Commission and is not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities under the Exchange Act. Such information shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits
(d)    Exhibits
99.1     Press Release issued by First Midwest Bancorp, Inc. dated January 20, 2015.
99.2     First Midwest Bancorp, Inc. Selected Financial Information.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
First Midwest Bancorp, Inc.
 
 
(Registrant)
 
 
 
 
 
 
Date:
January 21, 2015
/s/ NICHOLAS J. CHULOS
 
 
By: Nicholas J. Chulos
Executive Vice President, Corporate Secretary, and General Counsel
 
 






 
 
 
 
Exhibit 99.1
 
News Release
First Midwest Bancorp, Inc.
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
(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
 
 
 
 
TRADED:
NASDAQ Global Select Market
 
 
 
 
 
SYMBOL:
FMBI
 

FIRST MIDWEST BANCORP, INC. ANNOUNCES
2014 FOURTH QUARTER AND FULL YEAR RESULTS

Strong Core Earnings, Significantly Improved Asset Quality
Acquisitions Substantially Integrated

ITASCA, IL, January 20, 2015 - First Midwest Bancorp, Inc. (the Company or First Midwest) (NASDAQ NGS: FMBI), the holding company of First Midwest Bank (the Bank), today reported results of operations and financial condition for the fourth quarter of 2014. Net income for the fourth quarter of 2014 was $14.6 million, or $0.19 per share. This compares to $18.5 million, or $0.25 per share, for the third quarter of 2014 and $19.2 million, or $0.26 per share, for the fourth quarter of 2013. Excluding acquisition and integration related expenses, earnings per share was $0.27 for the fourth quarter of 2014 and $0.28 for the third quarter of 2014.

For the full year of 2014, the Company reported net income of $69.3 million, or $0.92 per share, compared to $79.3 million, or $1.06 per share, for the year ended December 31, 2013. Earnings per share was $1.03 for the year ended December 31, 2014, excluding acquisition and integration related expenses.

"Performance for the fourth quarter of 2014 was strong, benefiting from consistent, balanced business execution throughout the year," said Michael L. Scudder, President and Chief Executive Officer of First Midwest Bancorp, Inc. "Sales success across our business lines, combined with our acquisitions of Great Lakes Bank and the Popular Community Bank branches, significantly expanded and strengthened our balance sheet. Our acquisition of National Machine Tool added leasing capabilities and an experienced sales team to our line of commercial offerings. Importantly, our results for the year reflected balanced execution across all of our business lines, significantly improved credit metrics, and successful completion of three acquisitions during the second half of 2014."

Mr. Scudder continued, "As we enter 2015, our business momentum is building amid expectations of improving operating conditions and, ultimately, a transition to higher rates. As we navigate this environment, a talented and engaged team of colleagues combined with strong capital and core deposit foundations leave us well positioned for continued growth and enhanced shareholder value."




1




FOURTH QUARTER HIGHLIGHTS

Robust Operating Performance

"
Earned $0.27 per share, excluding acquisition and integration related expenses, compared to $0.26 for the fourth quarter of 2013.

"
Increased top-line revenue to $111 million, up 4% and 12% from September 30, 2014 and December 31, 2013, respectively.

"
Improved net interest margin to 3.76%, up 4 basis points from September 30, 2014 and 14 basis points from December 31, 2013.

"
Strong fee-based revenues of $29 million, consistent with the third quarter of 2014 and up 10% from the fourth quarter of 2013.

"
Increase of $14.5 million in noninterest expense from September 30, 2014 primarily due to higher acquisition, integration, and operating costs of the acquisitions, targeted remediation costs, and certain other transaction related expenses.

Strengthened Balance Sheet

"
Expanded total loans to nearly $7 billion at December 31, 2014, an increase of 3% from September 30, 2014 and 18% from December 31, 2013.

"
Increased average core transactional deposits 6% from September 30, 2014 and 15% from December 31, 2013.

Improved Credit and Capital

"
Reduced non-performing assets to loans plus OREO to 1.49%, down 27 basis points from September 30, 2014 and 64 basis points from December 31, 2013.

"
Decreased the fourth quarter of 2014 net charge-offs to average loans to 13 basis points, reflecting improvement in the underlying loan portfolio.

"
Grew Tier 1 common capital to risk-weighted assets to 9.54%, a 16 basis point increase from September 30, 2014.

"
Increased dividends per share to $0.31 for the year ended December 31, 2014, up 94% from the same period in 2013.

Significant Quarter Event

"
Completed the acquisition and operating system conversion of Great Lakes Financial Resources, Inc.


2




ACQUISITIONS

On August 8, 2014, the Bank completed the acquisition of the Chicago banking operations of Popular Community Bank ("Popular"). 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 acquired $550 million in loans and $732 million in deposits.

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.

On December 2, 2014, the Company completed the acquisition of the south suburban Chicago-based Great Lakes Financial Resources, Inc. ("Great Lakes"). As part of the transaction, the Company acquired seven full-service retail banking offices, one drive-up location, $223 million in loans, and $466 million in deposits on the date of acquisition.

The conversion and integration of these transactions were substantially complete as of December 31, 2014.



3




OPERATING PERFORMANCE

Net Interest Income and Margin Analysis
(Dollar amounts in thousands)
 
Quarters Ended
 
December 31, 2014
 
 
September 30, 2014
 
 
December 31, 2013
 
Average Balance
 
Interest
Earned/
Paid
 
Yield/
Rate
(%)
 
 
Average
Balance
 
Interest
Earned/
Paid
 
Yield/
Rate
(%)
 
 
Average
Balance
 
Interest
Earned/
Paid
 
Yield/
Rate
(%)
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other interest-earning assets
$
625,183

 
$
527

 
0.33
 
 
$
476,768

 
$
313

 
0.26

 
 
$
610,792

 
$
448

 
0.29

Trading securities
18,100

 
88

 
1.94
 
 
18,363

 
30

 
0.65

 
 
16,569

 
72

 
1.74

Investment securities (1)
1,095,446

 
9,904

 
3.62
 
 
1,067,742

 
9,659

 
3.62

 
 
1,211,868

 
10,582

 
3.49

Federal Home Loan Bank and
  Federal Reserve Bank stock
36,209

 
342

 
3.78
 
 
35,588

 
341

 
3.83

 
 
35,161

 
332

 
3.78

Loans (1)(2)
6,545,967

 
73,371

 
4.45
 
 
6,302,883

 
69,458

 
4.37

 
 
5,675,293

 
63,728

 
4.45

    Total interest-earning assets (1)
8,320,905

 
84,232

 
4.02
 
 
7,901,344

 
79,801

 
4.01

 
 
7,549,683

 
75,162

 
3.95

Cash and due from banks
126,317

 
 
 
 
 
 
126,279

 
 
 
 
 
 
123,128

 
 
 
 
Allowance for loan and covered
  loan losses
(74,686
)
 
 
 
 
 
 
(77,596
)
 
 
 
 
 
 
(91,860
)
 
 
 
 
Other assets
859,633

 
 
 
 
 
 
818,066

 
 
 
 
 
 
793,359

 
 
 
 
        Total assets
$
9,232,169

 
 
 
 
 
 
$
8,768,093

 
 
 
 
 
 
$
8,374,310

 
 
 
 
Liabilities and Stockholders Equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing transaction deposits
$
4,144,391

 
984

 
0.09
 
 
$
3,906,975

 
865

 
0.09

 
 
$
3,678,591

 
788

 
0.08

Time deposits
1,255,355

 
1,479

 
0.47
 
 
1,226,025

 
1,941

 
0.63

 
 
1,234,517

 
1,953

 
0.63

Borrowed funds
111,213

 
12

 
0.04
 
 
101,674

 
9

 
0.04

 
 
213,761

 
390

 
0.72

Senior and subordinated debt
194,137

 
3,015

 
6.16
 
 
191,013

 
3,016

 
6.26

 
 
207,162

 
3,301

 
6.32

    Total interest-bearing liabilities
5,705,096

 
5,490

 
0.38
 
 
5,425,687

 
5,831

 
0.43

 
 
5,334,031

 
6,432

 
0.48

Demand deposits
2,339,298

 
 
 
 
 
 
2,208,450

 
 
 
 
 
 
1,956,570

 
 
 
 
    Total funding sources
8,044,394

 
 
 
 
 
 
7,634,137

 
 
 
 
 
 
7,290,601

 
 
 
 
Other liabilities
115,093

 
 
 
 
 
 
83,075

 
 
 
 
 
 
87,250

 
 
 
 
Stockholders equity - common
1,072,682

 
 
 
 
 
 
1,050,881

 
 
 
 
 
 
996,459

 
 
 
 
        Total liabilities and
          stockholders equity
$
9,232,169

 
 
 
 
 
 
$
8,768,093

 
 
 
 
 
 
$
8,374,310

 
 
 
 
Net interest income/margin (1) 
 
 
$
78,742

 
3.76
 
 
 
 
$
73,970

 
3.72

 
 
 
 
$
68,730

 
3.62


(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. See the accompanying Supplemental Financial Information for details on the calculation of tax-equivalent net interest 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 fourth quarter of 2014, total average interest-earning assets rose $419.6 million and $771.2 million from the third quarter of 2014 and the fourth quarter of 2013, respectively, driven by loans acquired in the Popular and Great Lakes acquisitions during the second half of 2014 and solid organic loan growth over the course of the year.

Total average funding sources for the fourth quarter of 2014 increased $410.3 million from the third quarter of 2014 and $753.8 million from the fourth quarter of 2013. The rise in both prior periods resulted mainly from acquisition activity. The decline in borrowed funds from the fourth quarter of 2013 was due to the prepayment of $114.6 million of FHLB advances with a weighted-average rate of 1.08% during the second quarter of 2014, which is net of the yield earned on the cash used for the prepayment.

Tax-equivalent net interest margin for the fourth quarter of 2014 was 3.76%, a rise of 4 basis points from the third quarter of 2014 and 14 basis points from the fourth quarter of 2013. The Popular and Great Lakes acquisitions contributed to the increases, adding a greater proportion of higher yielding, fixed rate loans along with low cost deposits. In addition, net accretion resulting from the fair value adjustments on acquired assets and assumed liabilities contributed 8 basis points and 3 basis points to the tax-equivalent net interest margin in the fourth and third quarters of 2014, respectively. A decrease in the yield on covered interest-earning assets partially offset these increases. Certain loan hedging strategies and the prepayment of the FHLB advances contributed to the increase in tax-equivalent net interest margin compared to the fourth quarter of 2013.

4





Compared to the third quarter of 2014, tax-equivalent net interest income rose $4.8 million due primarily to the full quarter impact of the Popular acquisition, which included approximately $1.6 million of net accretion, and the December acquisition of Great Lakes. The $10.0 million increase in tax-equivalent net interest income compared to the fourth quarter of 2013 was mainly due to the acquisitions and loan growth, which was funded by a rise in core transactional deposits that also replaced higher costing time deposits and borrowed funds.

Noninterest Income Analysis
(Dollar amounts in thousands)
 
 
Quarters Ended
 
December 31, 2014
Percent Change From
 
 
December 31, 2014
 
September 30, 2014
 
December 31, 2013
 
September 30, 2014
 
December 31, 2013
Service charges on deposit accounts
 
$
10,015

 
$
9,902

 
$
9,259

 
1.1

 
8.2

Wealth management fees
 
6,744

 
6,721

 
6,202

 
0.3

 
8.7

Card-based fees
 
6,390

 
6,646

 
5,517

 
(3.9
)
 
15.8

Merchant servicing fees
 
2,703

 
2,932

 
2,585

 
(7.8
)
 
4.6

Mortgage banking income
 
812

 
1,125

 
1,055

 
(27.8
)
 
(23.0
)
Other service charges, commissions, and fees
 
2,700

 
2,334

 
2,094

 
15.7

 
28.9

Total fee-based revenues
 
29,364

 
29,660

 
26,712

 
(1.0
)
 
9.9

Net securities (losses) gains
 
(63
)
 
2,570

 
147

 
N/M

 
N/M

BOLI income
 
843

 
767

 
584

 
9.9

 
44.3

Other income
 
613

 
512

 
313

 
19.7

 
95.8

Net trading gains (losses) (1)
 
311

 
(356
)
 
1,057

 
N/M

 
(70.6
)
Gains on sales of properties
 


 
3,954

 


 
(100.0
)
 


Losses on early extinguishment of debt
 


 


 
(1,034
)
 


 
(100.0
)
Total noninterest income
 
$
31,068

 
$
37,107

 
$
27,779

 
(16.3
)
 
11.8


N/M - Not meaningful.

(1) Net trading gains (losses) 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 9.9% from the fourth quarter of 2013, reflecting growth across most categories. Higher levels of service charge volume, primarily from customers acquired in the Popular and Great Lakes transactions, drove the rise in service charges on deposit accounts. New customer relationships continued to drive the increase in wealth management fees. The increase in card-based fees reflects higher transaction volumes along with incentives from a renewed vendor contract.
 
Compared to the linked quarter, total fee-based revenues were consistent. Overall, increases in fee-based revenues due to the acquisitions were offset by lower levels of mortgage banking income, driven by a valuation adjustment relating to mortgage servicing rights, and the impact of a renewed vendor contract within card-based fees during the third quarter of 2014. The normal seasonal decline in merchant servicing fees was substantially offset by lower merchant card expense.

The rise in other service charges, commissions, and fees compared to both prior periods was driven primarily by gains realized on the sale of certain equipment leasing contracts. These sales were generated from a new commercial product offering introduced with the acquisition of National Machine Tool in the third quarter of 2014.

Total noninterest income of $31.1 million decreased 16.3% from the linked quarter and grew 11.8% from the fourth quarter of 2013. During the third quarter of 2014, the Company sold longer-duration corporate bonds out of the Company's securities portfolio at a pre-tax gain of $2.0 million and disposed of two branch properties, which generated pre-tax gains of $4.0 million. The Company repurchased and retired $23.3 million of 6.95% junior subordinated debentures during the fourth quarter of 2013, which resulted in a pre-tax loss of $1.0 million.


5




Noninterest Expense Analysis
(Dollar amounts in thousands)
 
 
Quarters Ended
 
December 31, 2014
Percent Change From
 
 
December 31, 2014
 
September 30, 2014
 
December 31, 2013
 
September 30,
2014
 
December 31, 2013
Salaries and employee benefits:
 
 
 
 
 
 
 
 
 
 
Salaries and wages
 
$
32,175

 
$
28,538

 
$
27,286

 
12.7

 
17.9

Nonqualified plan expense (1)
 
465

 
(386
)
 
1,305

 
N/M

 
(64.4
)
Retirement and other employee benefits
 
7,660

 
7,319

 
6,399

 
4.7

 
19.7

Total salaries and employee benefits
 
40,300

 
35,471

 
34,990

 
13.6

 
15.2

Net occupancy and equipment expense
 
9,479

 
8,639

 
7,910

 
9.7

 
19.8

Professional services
 
6,664

 
5,692

 
5,592

 
17.1

 
19.2

Technology and related costs
 
3,444

 
3,253

 
2,984

 
5.9

 
15.4

Merchant card expense
 
2,203

 
2,396

 
2,076

 
(8.1
)
 
6.1

Advertising and promotions
 
2,418

 
1,822

 
2,144

 
32.7

 
12.8

Net OREO expense
 
2,544

 
1,406

 
2,815

 
80.9

 
(9.6
)
Cardholder expenses
 
1,036

 
1,120

 
1,019

 
(7.5
)
 
1.7

Other expenses
 
7,446

 
6,766

 
5,264

 
10.1

 
41.5

Acquisition and integration related expenses
 
9,294

 
3,748

 


 
N/M

 
100.0

Total noninterest expense
 
$
84,828

 
$
70,313

 
$
64,794

 
20.6

 
30.9


N/M - Not meaningful.

(1) Nonqualified plan expense results from changes in the Companys obligation to participants under deferred compensation agreements and is substantially offset by earnings on the related assets included in noninterest income.

Excluding acquisition and integration related expenses, total noninterest expense for the fourth quarter of 2014 increased 13.5% from the third quarter of 2014 and 16.6% from the fourth quarter of 2013. The remaining increase from the third quarter of 2014 was due to a rise in operating costs attendant to Popular, National Machine Tool, and Great Lakes, additional staffing and higher salaries in response to growth and organizational needs, targeted remediation costs, and the timing of certain compensation and benefit accruals, impacted in part by the acquisitions.
Recurring costs associated with operating the newly acquired Popular, National Machine Tool, and Great Lakes locations of approximately $3.5 million and $2.0 million for the fourth and third quarters of 2014, respectively, were primarily concentrated in salaries and employee benefits, net occupancy and equipment expense, professional services, and other expenses. The conversion and integration of these transactions is substantially complete with certain remaining efficiencies to be implemented in the first half of 2015.
Compared to both prior periods, the rise in salaries and wages also reflects the timing of certain incentive compensation accruals, impacted by acquisition results, as well as additional staff and higher salaries in response to growth and organizational needs. Lower levels of deferred loan origination costs contributed to the variance from the third quarter of 2014.
Retirement and other employee benefits increased from the third quarter of 2014 and the fourth quarter of 2013 due to the timing of certain profit sharing expenses. A reduction in pension expense as a result of changes to the Companys defined benefit pension plan partially offset these increases compared to the fourth quarter of 2013.
Professional services were elevated from the third quarter of 2014 due to remediation costs on select significant credits, contributing to the improvements in credit quality. In addition, personnel recruitment costs increased in response to growth and organizational needs compared to both prior periods.
A $1.6 million valuation adjustment on an OREO property resulted in the rise in net OREO expense compared to the third quarter of 2014.
Other expenses were lower in the fourth quarter of 2013 due to a $770,000 reduction in the reserve for unfunded commitments.

6




LOAN PORTFOLIO AND ASSET QUALITY

Loan Portfolio Composition
(Dollar amounts in thousands)
 
 
As Of
 
December 31, 2014
Percent Change From
 
 
December 31, 2014
 
 
 
 
 
 
 
 
Legacy and Popular (1)
 
Great Lakes
 
Total
 
September 30, 2014 (1)
 
December 31, 2013
 
September 30, 2014
 
December 31, 2013
Corporate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and
  industrial
 
$
2,219,501

 
$
34,055

 
$
2,253,556

 
$
2,208,166

 
$
1,830,638

 
2.1

 
23.1

Agricultural
 
356,507

 
1,742

 
358,249

 
347,511

 
321,702

 
3.1

 
11.4

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office
 
421,306

 
73,331

 
494,637

 
437,222

 
459,202

 
13.1

 
7.7

Retail
 
440,787

 
11,438

 
452,225

 
454,178

 
392,576

 
(0.4
)
 
15.2

Industrial
 
528,200

 
3,317

 
531,517

 
531,122

 
501,907

 
0.1

 
5.9

Multi-family
 
553,190

 
11,231

 
564,421

 
559,689

 
332,873

 
0.8

 
69.6

Construction
 
196,387

 
7,849

 
204,236

 
193,445

 
186,197

 
5.6

 
9.7

Other commercial
  real estate
 
880,720

 
7,177

 
887,897

 
871,825

 
807,071

 
1.8

 
10.0

Total commercial
  real estate
 
3,020,590

 
114,343

 
3,134,933

 
3,047,481

 
2,679,826

 
2.9

 
17.0

Total corporate
  loans
 
5,596,598

 
150,140

 
5,746,738

 
5,603,158

 
4,832,166

 
2.6

 
18.9

Consumer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home equity
 
520,443

 
22,742

 
543,185

 
517,446

 
427,020

 
5.0

 
27.2

1-4 family mortgages
 
247,359

 
44,104

 
291,463

 
238,172

 
275,992

 
22.4

 
5.6

Installment
 
75,405

 
627

 
76,032

 
69,428

 
44,827

 
9.5

 
69.6

Total consumer
  loans
 
843,207

 
67,473

 
910,680

 
825,046

 
747,839

 
10.4

 
21.8

Covered loans
 
79,435

 


 
79,435

 
90,875

 
134,355

 
(12.6
)
 
(40.9
)
Total loans
 
$
6,519,240

 
$
217,613

 
$
6,736,853

 
$
6,519,079

 
$
5,714,360

 
3.3

 
17.9


(1) Loan balances include $500.7 million and $533.2 million in loans as of December 31, 2014 and September 30, 2014, respectively, that were acquired in the Popular business combination and are recorded at fair value as of the acquisition date.

Compared to September 30, 2014, total loans of $6.7 billion increased by 3.3%, driven primarily by the Great Lakes acquisition, which added $217.6 million of loans at December 31, 2014. In addition, growth in our legacy loans of 3.0% on an annualized basis from September 30, 2014 was offset by anticipated paydowns on certain loans acquired in the Popular transaction.

Total loans rose $1.0 billion, or 17.9%, from December 31, 2013. Excluding loans acquired in the Popular and Great Lakes acquisitions of $718.3 million and covered loans, total loans grew $359.1 million, or 6.4%, from December 31, 2013 due primarily to well-balanced growth distributed across the commercial and industrial, agricultural, multi-family, and consumer categories. Strong growth in the commercial and industrial and agricultural loan categories, excluding acquired and covered loans, of 17.4% and 10.8%, respectively, reflects the impact of greater resource investments and expansion into certain sector-based lending areas, such as agri-business, asset-based lending, and healthcare.




7




Asset Quality
(Dollar amounts in thousands)
 
 
As Of
 
December 31, 2014
Percent Change From
 
 
December 31, 2014
 
September 30,
2014
 
December 31, 2013
 
September 30,
2014
 
December 31, 2013
Asset quality (1)
 
 
 
 
 
 
 
 
 
 
Non-accrual loans
 
$
58,853

 
$
63,858

 
$
59,798

 
(7.8
)
 
(1.6
)
90 days or more past due loans
 
771

 
5,983

 
3,708

 
(87.1
)
 
(79.2
)
Total non-performing loans
 
59,624

 
69,841

 
63,506

 
(14.6
)
 
(6.1
)
Accruing troubled debt restructuring (TDRs)
 
3,704

 
5,449

 
23,770

 
(32.0
)
 
(84.4
)
OREO
 
25,779

 
29,165

 
32,473

 
(11.6
)
 
(20.6
)
Total non-performing assets
 
$
89,107

 
$
104,455

 
$
119,749

 
(14.7
)
 
(25.6
)
30-89 days past due loans
 
$
13,473

 
$
13,459

 
$
20,742

 
0.1

 
(35.0
)
 
 
 
 
 
 
 
 
 
 
 
Non-accrual loans to total loans
 
0.99
%
 
1.08
%
 
1.07
%
 

 
 
Non-performing loans to total loans
 
1.00
%
 
1.18
%
 
1.14
%
 
 
 
 
Non-performing assets to loans plus OREO
 
1.49
%
 
1.76
%
 
2.13
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for Credit Losses
 
 
 
 
 
 
 
 
 
 
Allowance for loan and covered loan losses
 
$
72,694

 
$
73,106

 
$
85,505

 
(0.6
)
 
(15.0
)
Reserve for unfunded commitments
 
1,816

 
1,616

 
1,616

 
12.4

 
12.4

Total allowance for credit losses
 
$
74,510

 
$
74,722

 
$
87,121

 
(0.3
)
 
(14.5
)
Allowance for credit losses to loans, excluding
  acquired loans
 
1.24
%
 
1.25
%
 
1.52
%
 
 
 
 
Allowance for credit losses to
  non-accrual loans (1)
 
114.33
%
 
103.47
%
 
124.69
%
 
 
 
 

(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.

Total non-performing loans, excluding acquired and covered loans, were $59.6 million at December 31, 2014, decreasing $10.2 million, or 14.6%, from September 30, 2014 and 6.1% from December 31, 2013. The improvement compared to the linked quarter was due primarily to a $2.3 million paydown of a non-accrual commercial real estate loan and the return of a $3.8 million past due commercial real estate loan relationship to current status.


8




Charge-Off Data
(Dollar amounts in thousands)
 
 
Quarters Ended
 
 
December 31, 2014
 
% of
Total
 
September 30, 2014
 
% of
Total
 
December 31, 2013
 
% of
Total
Net loan charge-offs (1):
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
1,217

 
58.8

 
$
9,047

 
56.7

 
$
2,528

 
47.5

Agricultural
 


 


 


 


 
(58
)
 
(1.1
)
Office, retail, and industrial
 
143

 
6.9

 
2,459

 
15.4

 
882

 
16.5

Multi-family
 
476

 
23.0

 
26

 
0.2

 
(10
)
 
(0.2
)
Construction
 
(6
)
 
(0.3
)
 
157

 
1.0

 
(934
)
 
(17.5
)
Other commercial real estate
 
(247
)
 
(11.9
)
 
1,255

 
7.9

 
776

 
14.6

Consumer
 
342

 
16.5

 
2,998

 
18.8

 
1,868

 
35.1

Covered
 
146

 
7.0

 
5

 


 
271

 
5.1

Net loan charge-offs
 
$
2,071

 
100.0

 
$
15,947

 
100.0

 
$
5,323

 
100.0

Net loan charge-offs to average loans,
  excluding acquired and covered loans, annualized:
 
 
 
 
 
 
 
 
 
 
Quarter-to-date
 
0.13
%
 
 
 
1.08
%
 
 
 
0.36
%
 
 
Year-to-date
 
0.56
%
 
 
 
0.70
%
 
 
 
0.48
%
 
 

(1) These amounts represent gross charge-offs, net of recoveries.

Net loan charge-offs for the fourth quarter of 2014 represents one of the lowest levels in over seven years. Continued progress in consumer delinquencies and a $1.3 million recovery on an other commercial real estate loan relationship contributed to the decrease compared to the third quarter of 2014. In addition, net loan charge-offs for the third quarter of 2014 were elevated due to the recognition of a $7.5 million loss on a commercial loan relationship, for which the Company continues to aggressively pursue all collection and other remedies.


9




DEPOSIT PORTFOLIO

Deposits  Average Balances
(Dollar amounts in thousands)
 
 
Quarters Ended
 
December 31, 2014
Percent Change From
 
 
December 31,
2014
 
September 30,
2014
 
December 31,
2013
 
September 30, 2014
 
December 31, 2013
Demand deposits
 
$
2,339,298

 
$
2,208,450

 
$
1,956,570

 
5.9
 
19.6
Savings deposits
 
1,306,388

 
1,231,700

 
1,126,737

 
6.1
 
15.9
NOW accounts
 
1,331,360

 
1,261,522

 
1,195,471

 
5.5
 
11.4
Money market accounts
 
1,506,643

 
1,413,753

 
1,356,383

 
6.6
 
11.1
Core transactional deposits
 
6,483,689

 
6,115,425

 
5,635,161

 
6.0
 
15.1
Time deposits
 
1,239,257

 
1,209,935

 
1,218,450

 
2.4
 
1.7
Brokered deposits
 
16,098

 
16,090

 
16,067

 

 
0.2
Total time deposits
 
1,255,355

 
1,226,025

 
1,234,517

 
2.4
 
1.7
Total deposits
 
$
7,739,044

 
$
7,341,450

 
$
6,869,678

 
5.4
 
12.7

Average core transactional deposits of $6.5 billion for the fourth quarter of 2014 increased 6.0% and 15.1% compared to the third quarter of 2014 and the fourth quarter of 2013, respectively. The rise was due primarily to deposits assumed in the Popular and Great Lakes acquisitions, further strengthening the Company's core transactional deposit base, led by an increase in average demand deposits of $382.7 million, or 19.6%, from December 31, 2013.


10





CAPITAL MANAGEMENT

Capital Ratios
(Dollar amounts in thousands)
 
 
December 31, 2014
 
September 30,
2014
 
December 31, 2013
 
Regulatory
Minimum
For
Well-
Capitalized
 
Excess Over
Required Minimums
at December 31, 2014
Bank regulatory capital ratios:
 
 
 
 
 
 
 
 
 
 
Total capital to risk-weighted assets
 
12.30
%
 
11.70
%
 
13.86
%
 
10.00
%
 
23
%
 
$
174,021

Tier 1 capital to risk-weighted assets
 
11.31
%
 
10.69
%
 
12.61
%
 
6.00
%
 
89
%
 
$
402,677

Tier 1 leverage to average assets
 
9.76
%
 
9.42
%
 
10.24
%
 
5.00
%
 
95
%
 
$
418,334

Company regulatory capital ratios:
 
 
 
 
 
 
 
 
 
 
 
 
Total capital to risk-weighted assets
 
11.23
%
 
10.94
%
 
12.39
%
 
N/A

 
N/A

 
N/A

Tier 1 capital to risk-weighted assets
 
10.18
%
 
9.86
%
 
10.91
%
 
N/A

 
N/A

 
N/A

Tier 1 leverage to average assets
 
9.03
%
 
8.93
%
 
9.18
%
 
N/A

 
N/A

 
N/A

Company tier 1 common capital to risk-weighted
  assets (1)(2)
 
9.54
%
 
9.38
%
 
10.37
%
 
N/A

 
N/A

 
N/A

Company tangible common equity ratios (1)(3):
 
 
 
 
 
 
 
 
 
 
Tangible common equity to tangible assets
 
8.41
%
 
8.33
%
 
9.09
%
 
N/A

 
N/A

 
N/A

Tangible common equity, excluding other
  comprehensive loss, to tangible assets
 
8.59
%
 
8.54
%
 
9.43
%
 
N/A

 
N/A

 
N/A

Tangible common equity to risk-weighted assets
 
9.73
%
 
9.57
%
 
10.67
%
 
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 managements view, Tier 1 common capital and TCE measures are meaningful to the Company, as well as analysts and investors, in assessing the Companys use of equity and in facilitating comparisons with competitors.

The Company's capital ratios increased from September 30, 2014, driven primarily by continued earnings and the $38.4 million of common stock issued as consideration for the Great Lakes acquisition. The decline in capital ratios compared to December 31, 2013 resulted from the addition of risk-weighted and average assets, including goodwill and other intangible assets, related to the Popular and Great Lakes acquisitions. These declines were partially offset by earnings and the increase in allowable deferred tax assets. The Bank's regulatory ratios exceeded all regulatory mandated ratios for characterization as "well-capitalized" as of December 31, 2014.

The Board of Directors approved a quarterly cash dividend of $0.08 per common share during the fourth quarter of 2014, consistent with the third quarter of 2014, and an increase compared to dividends of $0.07 per common share during the fourth quarter of 2013.


11




About the Company

First Midwest, with assets of approximately $9.4 billion, is the premier relationship-based financial institution in the Chicago 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, middle-market and retail banking and wealth management services through approximately 110 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 StudySM. 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 StudySM. The Study is based on 80,445 total responses measuring 21 providers in the Midwest region (Iowa, Illinois, Kansas, Missouri, Minnesota, and Wisconsin) 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), tier 1 common capital to risk-weighted assets, tangible common equity to tangible assets, tangible common equity, excluding other comprehensive loss, to tangible assets, and tangible common equity to risk-weighted assets. 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 certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by the use of words such as "may," "might," "will," "would," "should," "could," "expect," "plan," "intend," "anticipate," "believe," "estimate," "predict," "probable," "potential," "possible," "target," or "continue" and words of similar import. Forward-looking statements are not historical facts but instead express only managements beliefs regarding future results or events, many of which, by their nature, are inherently uncertain and outside of managements control. It is possible that actual results and events may differ, possibly materially, from the anticipated results or events indicated in these forward-looking statements. Forward-looking statements are not guarantees of future performance, and we caution you not to place undue reliance on these statements. Forward-looking statements are made only as of the date of this press release, and we undertake no obligation to update any forward-looking statements contained in this press release to reflect new information or events or conditions after the date hereof.

Forward-looking statements may be deemed to include, among other things, statements relating to our future financial performance, the performance of our loan or securities portfolio, the expected amount of future credit reserves or charge-offs, corporate strategies or objectives, anticipated trends in our business, regulatory developments, acquisition transactions, including estimated synergies, cost savings and financial benefits of pending or consummated transactions, and growth strategies, including possible future acquisitions. These statements are subject to certain risks, uncertainties and assumptions. For a discussion of these risks, uncertainties and assumptions, you should refer to the sections entitled "Risk Factors" and "Managements Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, as well as our subsequent filings made with the Securities and Exchange Commission ("SEC"). However, these risks and uncertainties are not exhaustive. Other sections of such reports describe additional factors that could adversely impact our business and financial performance.



12






Conference Call

A conference call to discuss the Companys results, outlook, and related matters will be held on Wednesday, January 21, 2015 at 10:00 AM (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 Companys website, www.firstmidwest.com/investorrelations. For those unable to listen to the live broadcast, a replay will be available on the Companys website or by dialing (877) 344-7529 (U.S. domestic) or (412) 317-0088 (International) conference I.D. 10058797 beginning one hour after completion of the live call until 9:00 A.M. (ET) on January 29, 2015. 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 Midwests website at www.firstmidwest.com/investorrelations.

13




Condensed Consolidated Statements of Financial Condition
Unaudited
(Amounts in thousands)
 
 
December 31, 2014
 
September 30, 2014
 
December 31, 2013
Assets
 
 
 
 
 
 
Cash and due from banks
 
$
117,315

 
$
125,977

 
$
110,417

Interest-bearing deposits in other banks
 
488,947

 
550,606

 
476,824

Trading securities, at fair value
 
17,460

 
17,928

 
17,317

Securities available-for-sale, at fair value
 
1,187,009

 
997,420

 
1,112,725

Securities held-to-maturity, at amortized cost
 
26,555

 
26,776

 
44,322

Federal Home Loan Bank and Federal Reserve Bank stock, at cost
 
37,558

 
35,588

 
35,161

Loans, excluding covered loans
 
6,657,418

 
6,428,204

 
5,580,005

Covered loans
 
79,435

 
90,875

 
134,355

Allowance for loan and covered loan losses
 
(72,694
)
 
(73,106
)
 
(85,505
)
Net loans
 
6,664,159

 
6,445,973

 
5,628,855

OREO, excluding covered OREO
 
26,898

 
29,165

 
32,473

Covered OREO
 
8,068

 
9,277

 
8,863

FDIC indemnification asset
 
8,452

 
8,699

 
16,585

Premises, furniture, and equipment
 
131,109

 
123,473

 
120,204

Investment in BOLI
 
206,498

 
195,270

 
193,167

Goodwill and other intangible assets
 
334,199

 
318,511

 
276,366

Accrued interest receivable and other assets
 
190,912

 
211,688

 
180,128

Total assets
 
$
9,445,139

 
$
9,096,351

 
$
8,253,407

Liabilities and Stockholders Equity
 
 
 
 
 
 
Noninterest-bearing deposits
 
$
2,301,757

 
2,295,679

 
1,911,602

Interest-bearing deposits
 
5,586,001

 
5,320,454

 
4,854,499

Total deposits
 
7,887,758

 
7,616,133

 
6,766,101

Borrowed funds
 
137,994

 
132,877

 
224,342

Senior and subordinated debt
 
200,869

 
191,028

 
190,932

Accrued interest payable and other liabilities
 
117,743

 
106,637

 
70,590

Total liabilities
 
8,344,364

 
8,046,675

 
7,251,965

Common stock
 
882

 
858

 
858

Additional paid-in capital
 
449,798

 
408,789

 
414,293

Retained earnings
 
899,516

 
891,129

 
853,740

Accumulated other comprehensive loss, net of tax
 
(15,855
)
 
(18,852
)
 
(26,792
)
Treasury stock, at cost
 
(233,566
)
 
(232,248
)
 
(240,657
)
Total stockholders equity
 
1,100,775

 
1,049,676

 
1,001,442

Total liabilities and stockholders equity
 
$
9,445,139

 
$
9,096,351

 
$
8,253,407


14




Condensed Consolidated Statements of Income
Unaudited
(Amounts in thousands, except per share data)
 
 
Quarters Ended
 
Years Ended
 
 
December 31, 2014
 
September 30,
2014
 
December 31, 2013
 
December 31, 2014
 
December 31, 2013
Interest Income
 
 
 
 
 
 
 
 
 
 
Loans, excluding covered loans
 
$
71,089

 
$
66,117

 
$
60,068

 
$
256,842

 
$
239,224

Covered loans
 
1,520

 
2,596

 
3,062

 
8,659

 
13,804

Investment securities
 
7,743

 
7,465

 
8,138

 
31,232

 
30,893

Other short-term investments
 
957

 
684

 
852

 
3,131

 
3,326

Total interest income
 
81,309

 
76,862

 
72,120

 
299,864

 
287,247

Interest Expense
 
 
 
 
 
 
 
 
 
 
Deposits
 
2,463

 
2,806

 
2,741

 
10,377

 
11,901

Borrowed funds
 
12

 
9

 
390

 
573

 
1,607

Senior and subordinated debt
 
3,015

 
3,016

 
3,301

 
12,062

 
13,607

Total interest expense
 
5,490

 
5,831

 
6,432

 
23,012

 
27,115

Net interest income
 
75,819

 
71,031

 
65,688

 
276,852

 
260,132

Provision for loan and covered loan losses
 
1,659

 
10,727

 


 
19,168

 
16,257

Net interest income after provision for
  loan and covered loan losses
 
74,160

 
60,304

 
65,688

 
257,684

 
243,875

Noninterest Income
 
 
 
 
 
 
 
 
 
 
Service charges on deposit accounts
 
10,015

 
9,902

 
9,259

 
36,910

 
36,526

Wealth management fees
 
6,744

 
6,721

 
6,202

 
26,474

 
24,185

Card-based fees
 
6,390

 
6,646

 
5,517

 
24,340

 
21,649

Mortgage banking income
 
812

 
1,125

 
1,055

 
4,011

 
5,306

Other service charges, commissions, and fees
 
5,403

 
5,266

 
4,679

 
19,346

 
18,616

Gains on sales of properties
 


 
3,954

 


 
3,954

 


Net securities (losses) gains
 
(63
)
 
2,570

 
147

 
8,097

 
34,164

BOLI income (loss)
 
843

 
767

 
584

 
2,873

 
(11,844
)
Other income
 
924

 
156

 
1,370

 
2,672

 
5,486

Loss on early extinguishment of debt
 


 


 
(1,034
)
 
(2,059
)
 
(1,034
)
Gain on termination of FHLB forward commitments
 


 


 


 


 
7,829

Total noninterest income
 
31,068

 
37,107

 
27,779

 
126,618

 
140,883

Noninterest Expense
 
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
 
40,300

 
35,471

 
34,990

 
143,823

 
138,750

Net occupancy and equipment expense
 
9,479

 
8,639

 
7,910

 
35,181

 
31,832

Professional services
 
6,664

 
5,692

 
5,592

 
23,436

 
21,922

Technology and related costs
 
3,444

 
3,253

 
2,984

 
12,875

 
11,335

Net OREO expense
 
2,544

 
1,406

 
2,815

 
7,075

 
8,547

Other expenses
 
13,103

 
12,104

 
10,503

 
47,564

 
44,351

Acquisition and integration related expenses
 
9,294

 
3,748

 


 
13,872

 


Total noninterest expense
 
84,828

 
70,313

 
64,794

 
283,826

 
256,737

Income before income tax expense
 
20,400

 
27,098

 
28,673

 
100,476

 
128,021

Income tax expense
 
5,807

 
8,549

 
9,508

 
31,170

 
48,715

Net income
 
14,593

 
18,549

 
19,165

 
69,306

 
79,306

Diluted earnings per common share
 
$
0.19

 
$
0.25

 
$
0.26

 
$
0.92

 
$
1.06

Dividends declared per common share
 
$
0.08

 
$
0.08

 
$
0.07

 
$
0.31

 
$
0.16

Weighted average diluted common shares
  outstanding
 
75,131

 
74,352

 
74,042

 
74,496

 
73,994


15





















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