The analyst also said that First Midwest's "capital levels remained solid," with a tangible common equity ratio of 8.9%. The company reported a June 30 tangible book value of $9.30 a share, and Rodis said that "if FMBI does choose to do some sort of bulk loan sale we believe the ultimate hit to tangible book value (TBV) will be manageable in the 5% area," based on the assumption that the company "sells $200- 300 million in non-performing loans (which is ~ half the current level of non-accruals + potential problem loans) and takes an additional hit of $0.10-0.20 on the dollar ($1.00)." Rodis believes "the after-tax impact on TBV would be ~ $0.25-0.50 per share," on a bulk loan sale of roughly $250 million.
Rodis rates First Midwest "Outperform," with a $12 price target, and estimates the company will report earnings of 45 cents a share for all of 2012,not factoring in a potential loan sale, followed by 2013 EPS of 85 cents. The shares trade for 1.3 times tangible book value and the analyst said "we believe a lot of the bad news is already built into the stock."
First Midwest's shares closed at $11.59, returning 15% year-to-date, following a 12% decline during 2011.
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