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FMBI > SEC Filings for FMBI > Form 10-Q on 10-May-2013All 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


10-May-2013

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 ended March 31, 2013 and 2012. 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 2012 Annual Report on Form 10-K ("2012 10-K"). The results of operations for the quarter ended March 31, 2013 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 95 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, local and national economic conditions, 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 operating 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, 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
                                                 March 31,
                                             2013         2012      % Change
Operating Results
Interest income                           $   71,045   $   75,268     (5.6%)
Interest expense                             (7,197)     (10,086)    (28.6%)
  Net interest income                         63,848       65,182     (2.0%)
Operating revenue                             26,539       23,975      10.7%
Other noninterest income, excluding
certain non-operating noninterest
 income items                                  1,036        1,401    (26.1%)
Noninterest expense, excluding certain
non-operating noninterest
 expense items                              (62,303)     (61,995)       0.5%
  Pre-tax, pre-provision operating
earnings (1)                                  29,120       28,563       2.0%
Provision for loan and covered loan
losses                                       (5,674)     (18,210)    (68.8%)
Net losses on securities sales                     -        (206)        N/M
Securities impairment losses                       -        (737)        N/M
Gain on early extinguishment of debt               -          256        N/M
OREO valuation adjustments                     (567)        (690)    (17.8%)
Net (losses) gains on OREO sales               (214)          387        N/M
Adjusted amortization of FDIC
indemnification asset                          (750)            -        N/M
Severance-related costs                        (980)        (315)        N/M
  Income before income tax                    20,935        9,048        N/M
Income tax expense                           (6,293)      (1,156)        N/M
  Net income                                  14,642        7,892      85.5%
Net income applicable to non-vested
restricted shares                              (212)        (139)      52.5%
Net income applicable to common shares    $   14,430   $    7,753      86.1%

Weighted average diluted shares
outstanding                                   73,874       73,505
Diluted earnings per common share         $     0.20   $     0.11
Performance Ratios (2)
Return on average common equity                6.17%        3.21%
Return on average assets                       0.74%        0.40%
Net interest margin - tax equivalent           3.77%        3.88%
Efficiency ratio                              66.50%       64.62%

N/M - Not meaningful.

(1) Our accounting and reporting policies conform to GAAP and general practices 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 evaluating our operating 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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