3rd Quarter on Target - Nine Months Up 5.0%
HIGHLIGHTS:
- EPS of $.45 Equal to Consensus
- Balance Sheet Restructuring Losses of $3.6 Million (or $.05 Per Diluted
Share) offset Prior Quarter Security Gains of $3.3 Million
- Continued Sound Asset Quality
- CoVest Acquisition & Streator Branch Divestiture Progressing on Track
ITASCA, Ill., Oct. 22 /PRNewswire-FirstCall/ -- First Midwest Bancorp,
Inc. ("First Midwest") (Nasdaq: FMBI) today reported net income of
$21.2 million for third quarter 2003, or $.45 per diluted share, as compared
to 2002's third quarter of $22.7 million, or $.47 per diluted share.
Performance for third quarter 2003 resulted in an annualized return on average
assets of 1.33%, as compared to 1.50% for third quarter 2002, and an
annualized return on average equity of 16.7%, as compared to 18.5% for third
quarter 2002. Third quarter 2003 results included $3.6 million in losses
attributed to the early retirement of debt and sale of securities,
representing $.05 per diluted share on an after tax basis. Adjusting for the
after tax impact of these losses on third quarter 2003 performance, earnings
per diluted share increased 6.4% over 2002's third quarter. On a linked-
quarter basis, third quarter 2003 earnings per diluted share of $.45 followed
second quarter 2003 performance of $.53 per diluted share, which included
$3.3 million in gains realized from the sale of securities.
For the first nine months of 2003, net income increased 5.0% on a per
diluted share basis to $68.6 million, or $1.46 per diluted share, as compared
to 2002's $67.7 million, or $1.39 per diluted share. Performance for the
first nine months of 2003 resulted in an annualized return on average assets
of 1.48% as compared to 1.54% for the same period of 2002 and an annualized
return on average equity of 18.2% as compared to 19.1% for the 2002 period.
"First Midwest had another solid operating quarter," said John O'Meara,
First Midwest's President and Chief Executive Officer. "We remain encouraged
by our ongoing sound asset quality, improving fee income and continuing tight
control of expenses. In addition, and as previously indicated, we acted
conservatively to manage our balance sheet by exiting higher costing FHLB
advances and selling underperforming securities. The losses of $3.6 million,
representing $.05 per diluted share on an after tax basis, offset $3.3 million
in gains realized from the sales of securities in the second quarter of 2003.
As a result of the balance sheet restructuring completed in the second and
third quarters as well as that anticipated in the fourth quarter, we expect
First Midwest's net interest margin to increase in the near future."
"We are optimistic about our fourth quarter 2003 performance," O'Meara
said. "Continued earnings growth for the quarter will depend on maintaining
favorable trends in asset quality and fee growth and a continuing focus on
expense management. Given the solid earnings performance of First Midwest for
the first nine months of 2003 and our ability to further restructure the
balance sheet, we are comfortable offering full year 2003 diluted earnings per
share guidance of approximately $1.97, representing 6% growth over full year
2002."
Acquisition of CoVest Bancshares, Inc.
On September 11, 2003, First Midwest announced the execution of a
definitive agreement to acquire CoVest Bancshares, Inc. in a cash transaction
totaling approximately $102.5 million. CoVest is a bank holding company with
assets of $624 million and three full-service offices located in the northwest
suburbs of Chicago and complements First Midwest's recent opening of its
O'Hare Financial Center. The transaction is expected to be accretive to First
Midwest's 2004 operating performance by an estimated $.06 per diluted share.
First Midwest anticipates the merger to be completed in late fourth
quarter 2003, subject to customary closing conditions, including regulatory
approvals and approval by CoVest's stockholders. Applications to all
governing regulatory bodies have been filed and integration planning is
proceeding rapidly. First Midwest expects CoVest to schedule a stockholder
meeting in early December to approve the transaction.
Sale of Streator Branches
On July 18, 2003, First Midwest announced the signing of a definitive
agreement to sell to First National Bank of Ottawa, Ottawa, Illinois two
branches in rural Streator, Illinois, representing $70 million in deposits and
$12 million in loans. Regulatory approval has been received, and First
Midwest expects to complete the sale during fourth quarter 2003. The exact
amount of consideration received from the sale will be finalized at closing,
but is expected to result in a pre-tax gain on sale of approximately
$4.8 million. First Midwest anticipates that the gain will be offset by costs
incurred during fourth quarter 2003 to initiate further balance sheet
restructuring and certain nonrecurring expenses due to the acquisition of
CoVest.
Balance Sheet Restructuring Activities
During the second and third quarter of 2003, First Midwest elected to
pursue certain balance sheet restructuring strategies as a result of the
historically low interest rate environment and expectation for higher interest
rates. First Midwest designed these strategies to use the unrealized
appreciation in its $2.3 billion securities portfolio to reduce its exposure
to rising rates and help stabilize future net interest income performance.
With net security gains offsetting debt extinguishment losses, First Midwest
sold available-for-sale securities of approximately $120 million, retired or
refinanced Federal Home Loan Bank advances of $210 million and reinvested
approximately $235 million of security cash flows in shorter-duration
instruments. The securities that First Midwest sold represented assets that
were underperforming or perceived to underperform in a higher interest rate
environment. The redeployed Federal Home Loan Bank advances represented
shorter maturity, higher costing liabilities. At the same time, through
pricing and promotion, First Midwest attracted approximately $125 million in
core transactional deposits, which should be of longer duration. Although its
third quarter margin declined, in part, by reinvesting securities proceeds in
the lower interest rate environment and incurring the interim cost of
promoting the transactional deposits, First Midwest expects that the extending
of the duration of its liabilities should help net interest income stabilize
and then expand as interest rates rise. First Midwest has approximately
$56 million in unrealized security gains in its security portfolio as of
September 30, 2003 and expects to realize a fourth quarter 2003 gain of
$4.8 million from the sale of its Streator branches. As a result, First
Midwest will continue to evaluate opportunities to reduce its exposure to
rising interest rates through security sales and shorter-duration
reinvestments and the retirement and redeployment of wholesale borrowings in
fourth quarter 2003.
Net Interest Margin
Net interest income decreased 6.2% to $52 million for third quarter 2003,
as compared to $55.5 million for 2002's third quarter. Net interest margin
for third quarter 2003 was 3.90%, down from 4.26% for third quarter 2002 and
4.01% for second quarter 2003. This margin contraction reflects the impact of
the Federal Reserve's 25 basis point reduction in the Federal Funds rate on
June 25, 2003, the continued repricing of earning assets in the low interest
rate environment and the acceleration of cash flows due to refinance-related
prepayments on mortgage-backed securities. Given the balance sheet
restructuring initiated to date and the expectation of slower mortgage
prepayment speeds, management believes that margins have reached their lowest
level and should begin to improve in subsequent quarters.
Loan Growth and Funding
First Midwest's total loans at September 30, 2003 increased 2.6% from
September 30, 2002. All loan categories experienced growth, except 1-4 family
real estate and indirect consumer lending. On a linked-quarter basis, total
loans were relatively unchanged, as growth in commercial real estate and
direct consumer offset declines in indirect consumer and real estate 1-4
lending. Although the pace of commercial loan growth slowed during third
quarter 2003, commercial loans outstanding as of September 30, 2003 increased
by 9.8% from December 31, 2002 and 7.8% from September 30, 2002.
Total average deposits for third quarter 2003 increased 5.4% from third
quarter 2002 and increased 4.7% on a linked-quarter basis. Average core
transactional balances (demand, savings, money market, and NOW accounts) grew
14.6% or $367 million, from third quarter 2002 as a result of customer
liquidity preferences, targeted promotional pricing and the second quarter
2003 acquisition of a $106 million branch from The Northern Trust Company.
For these same periods, average time deposits decreased from third quarter
2002 by $135.8 million or 7.8%.
Noninterest Income and Expense
Total noninterest income decreased by 6.6% to $15.8 million, a decrease of
$1.1 million for third quarter 2003 from the same period in 2002. Noninterest
income for the first nine months of 2003 increased to $54.8 million,
representing a 10.8% increase from the same 2002 period. Noninterest income
for third quarter 2003 included debt retirement and security losses of
$3.6 million and was partly offset by the receipt in this quarter of
$1.1 million of proceeds from the sale in 2000 and eventual liquidation of a
demutualized carrier of corporate owned life insurance. Excluding the
liquidation proceeds of $1.1 million and losses of $3.6 million, noninterest
income increased by 8.6%, or $1.4 million, as compared to third quarter 2002.
Total noninterest expense for third quarter 2003 was $37.6 million,
representing a decrease of $.6 million, or 1.5%, as compared to third quarter
2002. Total noninterest expense for the first nine months of 2003 was
$112.3 million, essentially unchanged from the same period in 2002.
The efficiency ratio improved to 48.8% for third quarter 2003, as compared
to 49.1% for 2002's third quarter. The improvement resulted from continued
cost control and higher noninterest income, excluding losses from the sale of
securities and retirement of debt.
Credit Quality
First Midwest's overall credit quality remains sound. Nonperforming loans
at September 30, 2003 represented .53% of loans, up from .48% at June 30, 2003
and a historical low of .29% for the same quarter of 2002. Nonperforming
assets totaled $22.5 million at September 30, 2003, up $1.2 million from
$21.3 million at June 30, 2003. Loans past due 90 days and still accruing
decreased by $.9 million, or 16%, on a linked-quarter basis.
Net charge-offs for third quarter 2003 were .30% of average loans and
improved from .34% for third quarter 2002 and up from a cyclical low of
.17% for second quarter 2003. Third quarter 2003 provisions for loan losses
fully covered net charge-offs. As a result, First Midwest maintained the
ratio of the reserve for loan losses to total loans as of September 30, 2003
at 1.41%, unchanged from the level as of year-end 2002. The reserve for loan
losses at September 30, 2003 represented 263% of nonperforming loans.
First Midwest continues to have virtually no credit exposure to such high
profile sectors as energy, cable, telecommunications, and airlines.
Participations in either shared national credits or syndicated loans represent
negligible portions of overall credit outstandings.
Capital Management
First Midwest's Total Risk Based Capital and Tier 1 Risk Based Capital
ratios at quarter end 2003 were 10.55% and 9.48%, respectively, exceeding the
minimum "well capitalized" levels for regulatory purposes of 10.0% and 6.0%,
respectively. First Midwest's Tier 1 Leverage Ratio as of such date was
7.02%, exceeding the regulatory minimum range of 3.0% - 5.0% required to be
considered a "well capitalized" institution.
During third quarter 2003, First Midwest repurchased 52,300 shares at an
average price of $29.59 per share, down from repurchase levels of 667,000 and
123,100 for first and second quarters of 2003, respectively. First Midwest
expects to continue to run its share repurchase program, but the pace of
repurchase will continue to be influenced by the expected rate of return of
other capital investment alternatives. As of September 30, 2003,
approximately 1.6 million shares remained under First Midwest's existing
repurchase authorization.
About the Company
First Midwest is the premier relationship-based banking franchise in the
wealthy and growing suburban Chicago banking markets. As the largest
independent bank holding company and one of the overall largest banking
companies in the Chicago metropolitan area, First Midwest provides the full
range of both business and retail banking, trust and investment management
services through approximately 70 offices located in more than 40 communities,
primarily in northern Illinois.
Safe Harbor Statement
Safe Harbor Statement under the Private Securities Act of 1995: Statements
in this news release that are forward-looking statements are subject to
various risks and uncertainties concerning specific factors described in First
Midwest Bancorp's 2002 Form 10-K and other filings with the U.S. Securities
and Exchange Commission. Such information contained herein represents
management's best judgment as of the date hereof based on information
currently available. First Midwest does not intend to update this information
and disclaims any legal obligation to the contrary. Historical information is
not necessarily indicative of future performance.
Accompanying Financial Statements and Tables
Accompanying this press release is the following unaudited financial
information:
-- Operating Highlights, Balance Sheet Highlights and Stock Performance
Data (1 page)
-- Condensed Consolidated Statements of Condition (1 page)
-- Condensed Consolidated Statements of Income (1 page)
-- Selected Quarterly Data and Asset Quality (1 page)
Press Release and Additional Information Available on Website
This press release, the accompanying financial statements and tables and
certain additional unaudited selected financial information (totaling 3 pages)
are available through the "Investor Relations" section of First Midwest's
website at http://www.firstmidwest.com .
First Midwest Bancorp, Inc. Press Release Dated October 22, 2003
Operating Highlights Quarters Ended Nine Months Ended
Unaudited September 30, September 30,
(Amounts in thousands 2003 2002 2003 2002
except per share data)
Net income $21,202 $22,679 $68,579 $67,684
Diluted earnings per
share $0.45 $0.47 $1.46 $1.39
Return on average equity 16.73% 18.46% 18.17% 19.14%
Return on average assets 1.33% 1.50% 1.48% 1.54%
Net interest margin 3.90% 4.26% 3.99% 4.34%
Efficiency ratio 48.72% 49.08% 49.26% 48.51%
Balance Sheet Highlights
Unaudited
(Amounts in thousands Sept. 30, Sept. 30,
except per share data) 2003 2002
Total assets $6,299,237 $6,073,530
Total loans 3,488,212 3,398,393
Total deposits 4,466,519 4,259,762
Stockholders' equity 509,153 497,336
Book value per share $10.94 $10.44
Period end shares outstanding 46,551 47,616
Stock Performance Data Quarters Ended Nine Months Ended
Unaudited September 30, September 30,
2003 2002 2003 2002
Market Price:
Quarter End $29.71 $26.86 $29.71 $26.86
High $31.45 $30.13 $31.45 $32.16
Low $28.53 $23.34 $24.89 $23.34
Quarter end price to
book value 2.7 x 2.6 x 2.7 x 2.6 x
Quarter end price to
consensus estimated
2003 earnings 15.1 x N/A 15.1 x N/A
Dividends declared per
share $0.19 $0.17 $0.57 $0.51
First Midwest Bancorp, Inc. Press Release Dated October 22, 2003
Condensed Consolidated Statements of Condition
Unaudited(A) September 30,
(Amounts in thousands) 2003 2002
Assets
Cash and due from banks $185,387 $179,391
Funds sold and other short-term
investments 19,314 20,706
Securities available for sale 2,195,138 2,158,670
Securities held to maturity, at
amortized cost 62,469 59,275
Loans 3,488,212 3,398,393
Reserve for loan losses (49,164) (47,919)
Net loans 3,439,048 3,350,474
Premises, furniture and equipment 83,298 80,636
Investment in corporate owned life
insurance 145,067 139,902
Accrued interest receivable and
other assets 169,516 84,476
Total assets $6,299,237 $6,073,530
Liabilities and Stockholders' Equity
Deposits $4,466,519 $4,259,762
Borrowed funds 1,169,921 1,238,846
Accrued interest payable and other
liabilities 153,644 77,586
Total liabilities 5,790,084 5,576,194
Common stock 569 569
Additional paid-in capital 69,045 71,124
Retained earnings 636,192 580,707
Accumulated other comprehensive
income 33,757 46,887
Treasury stock, at cost (230,410) (201,951)
Total stockholders' equity 509,153 497,336
Total liabilities and
stockholders' equity $6,299,237 $6,073,530
(A) While unaudited, the Condensed Consolidated Statements of Condition
have been prepared in accordance with accounting principles generally
accepted in the United States and, as of September 30, 2002, are
derived from quarterly financial statements on which Ernst & Young
LLP, First Midwest's independent external auditor, has rendered a
Quarterly Review Report; Ernst & Young is currently in the process of
completing their Quarterly Review Report for the quarter ended
September 30, 2003.
First Midwest Bancorp, Inc. Press Release Dated October 22, 2003
Condensed Consolidated Statements
of Income Quarters Ended Nine Months Ended
Unaudited(A) September 30, September 30,
(Amounts in thousands except per 2003 2002 2003 2002
share data)
Interest Income
Loans $49,659 $56,209 $151,574 $169,865
Securities 21,238 26,830 66,887 81,027
Other 412 220 938 551
Total interest income 71,309 83,259 219,399 251,443
Interest Expense
Deposits 13,713 20,074 43,090 63,931
Borrowed funds 5,589 7,727 19,517 21,511
Total interest expense 19,302 27,801 62,607 85,442
Net interest income 52,007 55,458 156,792 166,001
Provision for Loan Losses 2,660 3,020 7,730 11,175
Net interest income after
provision for loan losses 49,347 52,438 149,062 154,826
Noninterest Income
Service charges on deposit accounts 7,296 6,439 20,655 18,414
Trust and investment management
fees 2,762 2,543 8,083 7,802
Other service charges, commissions,
and fees 5,662 4,501 15,575 13,252
Corporate owned life insurance
income 1,183 1,831 3,705 5,268
(Losses) gains on available for
sale securities (615) 9 2,786 33
(Losses) on early extinguishment of
debt (3,007) - (3,007) -
Other 2,491 1,566 6,954 4,644
Total noninterest income 15,772 16,889 54,751 49,413
Noninterest Expense
Salaries and employee benefits 21,618 21,017 63,043 60,793
Occupancy expenses 3,652 3,682 10,964 10,795
Equipment expenses 2,068 1,956 5,873 5,810
Technology and related costs 2,169 2,448 7,014 7,465
Other 8,044 9,003 25,449 27,493
Total noninterest expense 37,551 38,106 112,343 112,356
Income before taxes 27,568 31,221 91,470 91,883
Income tax expense 6,366 8,542 22,891 24,199
Net Income $21,202 $22,679 $68,579 $67,684
Diluted Earnings Per Share $0.45 $0.47 $1.46 $1.39
Dividends Declared Per Share $0.19 $0.17 $0.57 $0.51
Weighted Average Diluted Shares
Outstanding 46,890 48,146 46,995 48,652
(A) While unaudited, the Condensed Consolidated Statements of Income have
been prepared in accordance with accounting principles generally
accepted in the United States and, for the quarter and nine months
ended September 30, 2002, are derived from quarterly financial
statements on which Ernst & Young LLP, First Midwest's independent
external auditor, has rendered a Quarterly Review Report; Ernst &
Young is currently in the process of completing their Quarterly
Review Report for the quarter and nine months ended September 30,
2003.
First Midwest Bancorp, Inc. Press Release Dated October 22, 2003
Selected Quarterly Data
Unaudited
(Amounts in thousands except per Year to Date
share data) 9/30/03 9/30/02
Net interest income $156,792 $166,001
Provision for loan losses 7,730 11,175
Noninterest income 54,751 49,413
Noninterest expense 112,343 112,356
Net income 68,579 67,684
Diluted earnings per share $1.46 $1.39
Return on average equity 18.17% 19.14%
Return on average assets 1.48% 1.54%
Net interest margin 3.99% 4.34%
Efficiency ratio 49.26% 48.51%
Period end shares outstanding 46,551 47,616
Book value per share $10.94 $10.44
Dividends declared per share $0.57 $0.51
First Midwest Bancorp, Inc. Press Release Dated October 22, 2003
Selected Quarterly Data
Unaudited
(Amounts in thousands except Quarters Ended
per share data) 9/30/03 6/30/03 3/31/03 12/31/02 9/30/02
Net interest income $52,007 $52,644 $52,141 $52,753 $55,458
Provision for loan losses 2,660 2,540 2,530 4,235 3,020
Noninterest income 15,772 21,215 17,764 17,578 16,889
Noninterest expense 37,551 37,954 36,838 35,696 38,106
Net income 21,202 24,647 22,730 22,466 22,679
Diluted earnings per share $0.45 $0.53 $0.48 $0.47 $0.47
Return on average equity 16.73% 19.40% 18.39% 17.92% 18.46%
Return on average assets 1.33% 1.59% 1.53% 1.49% 1.50%
Net interest margin 3.90% 4.01% 4.06% 4.10% 4.26%
Efficiency ratio 48.72% 49.92% 49.16% 47.24% 49.08%
Period end shares outstanding 46,551 46,534 46,582 47,206 47,616
Book value per share $10.94 $10.92 $10.58 $10.42 $10.44
Dividends declared per share $0.19 $0.19 $0.19 $0.19 $0.17
First Midwest Bancorp, Inc. Press Release Dated October 22, 2003
Asset Quality
Unaudited Year to Date
(Amounts in thousands) 9/30/03 9/30/02
Nonaccrual loans $11,442 $9,988
Restructured loans 7,219 -
Total Nonperforming loans $18,661 $9,988
Foreclosed real estate 3,842 2,972
Loans past due 90 days and still
accruing 4,806 9,820
Nonperforming loans to loans 0.53% 0.29%
Nonperforming assets to loans
plus foreclosed real estate 0.64% 0.38%
Reserve for loan losses to loans 1.41% 1.41%
Reserve for loan losses to
nonperforming loans 263% 480%
Provision for loan losses $7,730 $11,175
Net loan charge-offs 6,495 11,001
Net loan charge-offs to average loans 0.25% 0.44%
First Midwest Bancorp, Inc. Press Release Dated October 22, 2003
Asset Quality
Unaudited Quarters Ended
(Amounts in thousands) 9/30/03 6/30/03 3/31/03 12/31/02 9/30/02
Nonaccrual loans $11,442 $9,423 $13,596 $12,525 $9,988
Restructured loans 7,219 7,328 - - -
Total Nonperforming loans $18,661 $16,751 $13,596 $12,525 $9,988
Foreclosed real estate 3,842 4,576 4,044 5,496 2,972
Loans past due 90 days and
still accruing 4,806 5,723 7,497 3,307 9,820
Nonperforming loans to loans 0.53% 0.48% 0.40% 0.37% 0.29%
Nonperforming assets to loans
plus foreclosed real estate 0.64% 0.61% 0.51% 0.53% 0.38%
Reserve for loan losses to
loans 1.41% 1.40% 1.40% 1.41% 1.41%
Reserve for loan losses to
nonperforming loans 263% 293% 353% 383% 480%
Provision for loan losses $2,660 $2,540 $2,530 $4,235 $3,020
Net loan charge-offs 2,620 1,436 2,439 4,225 2,919
Net loan charge-offs to
average loans 0.30% 0.17% 0.29% 0.49% 0.34%
SOURCE First Midwest Bancorp, Inc.
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Related links:
http://www.firstmidwest.com
CONTACT:
Michael L. Scudder, EVP, Chief Financial
Officer, +1-630-875-7283, or Steven H. Shapiro, EVP, Corporate
Secretary, +1-630-875-7345, both of First Midwest Bancorp, Inc.
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