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FMBI > SEC Filings for FMBI > Form 10-Q on 9-Nov-2012All Recent SEC Filings

Show all filings for FIRST MIDWEST BANCORP INC | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for FIRST MIDWEST BANCORP INC


9-Nov-2012

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

The following discussion and analysis is intended to address the significant factors affecting our results of operations and financial condition for the quarters and nine-month periods ended September 30, 2012 and 2011. When we use the terms "First Midwest," the "Company," "we," "us," and "our," we mean First Midwest Bancorp, Inc., a Delaware Corporation, and its consolidated subsidiaries. When we use the term "Bank," we are referring to our wholly owned banking subsidiary, First Midwest Bank. For your reference, a glossary of certain terms is presented on page 3 of this Form 10-Q. Management's discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying notes presented elsewhere in this report, as well as in our 2011 Annual Report on Form 10-K ("2011 10-K"). Results of operations for the quarter and nine months ended September 30, 2012 are not necessarily indicative of future results.

Our banking network is located primarily in suburban metropolitan Chicago with additional locations in northwest Indiana, central and western Illinois, and eastern Iowa. We provide a full range of business and retail banking and wealth management services through approximately 100 banking offices. Our primary sources of revenue are net interest income and fees from financial services provided to our customers. Our largest expenses include interest expense, compensation expense, and various other noninterest expense items.

Our results of operations are affected by various factors, many of which are beyond our control, including interest rates, general economic conditions (nationally and in our service areas), business spending, consumer confidence, certain seasonal factors, legislative and regulatory changes, and changes in real estate and securities markets. Our management evaluates performance using a variety of qualitative and quantitative metrics. The primary quantitative metrics used by management include:

Pre-Tax, Pre-Provision Operating Earnings - Pre-tax, pre-provision operating earnings, a non-GAAP financial measure, reflects our operating performance before the effects of credit-related charges, securities gains, losses, and impairments, and certain unusual, infrequent, or non-recurring revenues and expenses. We believe this metric is useful because it helps investors to assess the Company's operating performance. A reconciliation of pre-tax, pre-provision operating earnings to GAAP can be found in Table 1.

Net Interest Income - Net interest income, our primary source of revenue, equals the difference between interest income and fees earned on interest-earning assets and interest expense incurred on interest-bearing liabilities.

Net Interest Margin - Net interest margin equals net interest income divided by total average interest-earning assets.

Noninterest Income - Noninterest income is the income we earn from fee-based revenues, BOLI and other income, and non-operating revenues.

Asset Quality - Asset quality represents an estimation of the quality of our loan portfolio, including an assessment of the credit risk related to existing and potential loss exposure, and can be evaluated using a number of quantitative measures, such as non-performing loans to total loans.

Regulatory Capital - Our regulatory capital is classified in one of the following two tiers: (i) Tier 1 capital consists of common equity, retained earnings, qualifying non-cumulative perpetual preferred stock, and qualifying trust-preferred securities, less goodwill and most intangible assets and (ii) Tier 2 capital includes qualifying subordinated debt and the allowance for credit losses, subject to limitations.

Unless otherwise stated, all earnings per common share data included in this section and throughout the remainder of this discussion are presented on a diluted basis.


PERFORMANCE OVERVIEW

                                    Table 1
                            Selected Financial Data
         (Dollar and share amounts in thousands, except per share data)

                                        Quarters Ended            Nine Months Ended
                                        September 30,               September 30,
                                      2012          2011         2012          2011
Operating Results
Interest income                    $    75,584   $   80,175   $   226,370   $   242,754
Interest expense                       (8,324)      (9,640)      (27,224)      (30,212)
  Net interest income                   67,260       70,535       199,146       212,542
Fee-based revenues                      24,350       24,417        70,593        70,325
Other noninterest income                 1,712        (275)         4,731         2,457
Noninterest expense, excluding
certain non-operating
 noninterest expense items            (62,003)     (61,412)     (182,628)     (185,672)
  Pre-tax, pre-provision
operating earnings (1)                  31,319       33,265        91,842        99,652
Provision for loan and covered
loan losses                          (111,791)     (20,425)     (152,459)      (58,680)
Net (losses) gains on securities
sales                                    (217)          626         1,133         2,697
Securities impairment losses                 -        (177)       (2,142)         (177)
Gain on FDIC-assisted
transaction                              3,289            -         3,289             -
Gain on early extinguishment of
debt                                         -            -           256             -
Valuation adjustments of OREO          (1,410)        (674)       (3,924)       (3,309)
Net losses on sales of OREO              (615)      (1,937)         (931)       (4,952)
Valuation adjustments of assets
held-for-sale                          (1,255)         (75)       (1,255)       (1,111)
Accelerated accretion of FDIC
indemnification asset                  (4,000)            -       (4,000)             -
Severance-related costs                  (840)         (78)       (1,155)         (269)
  Income before income tax            (85,520)       10,525      (69,346)        33,851
Income tax benefit (expense)            36,993      (1,583)        35,076       (4,212)
  Net (loss) income                   (48,527)        8,942      (34,270)        29,639
Preferred dividends and
accretion on preferred stock                 -      (2,586)             -       (7,749)
Net loss (income) applicable to
non-vested restricted shares               715         (93)           500         (330)
Net (loss) income applicable to
common shares                      $  (47,812)   $    6,263   $  (33,770)   $    21,560
Weighted average diluted shares
outstanding                             73,742       73,361        73,636        73,258
Diluted (loss) earnings per
common share                       $    (0.65)   $     0.09   $    (0.46)   $      0.29
Performance Ratios (2)
Return on average common equity       (19.36%)        2.60%       (4.62%)         3.06%
Return on average assets               (2.35%)        0.43%       (0.57%)         0.49%
Net interest margin - tax
equivalent                               3.83%        3.97%         3.86%         4.07%
Efficiency ratio                        69.04%       60.57%        64.78%        61.25%

N/M - Not meaningful.

(1) Our accounting and reporting policies conform to GAAP and general practice within the banking industry. As a supplement to GAAP, we provided this non-GAAP performance result, which we believe is useful because it assists investors in assessing our operating performance. Although it is intended to enhance investors' understanding of our business and performance, this non-GAAP financial measure should not be considered an alternative to GAAP and may not be comparable to similar non-GAAP measures used by other companies.

(2) All ratios are presented on an annualized basis.


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