3. First Midwest Bancorp

Company Profile

Shares of First Midwest Bancorp of Itasca, Ill. closed at $10.78 Thursday, returning 12% over the previous year.

The company has acquired three failed Illinois banks during this credit cycle through government-assisted transactions, including Palos Bank and Trust in August, Peotone Bank & Trust in April and First DuPage Bank in October 2009.

Income Statement

First Midwest essentially broke even for the third quarter, with net income applicable to common shareholders of $11 thousand, following second-quarter net income to common shareholders of $5.2 million, or 7 cents a share, and $773 thousand, or 2 cents a share, in the third quarter of 2009.

The third-quarter loss sprang from an increase in the provision for loan and leases losses to $33.6 million from $21.5 million the previous quarter, although the provision declined from $38 million a year earlier.

John Rodis maintained his buy rating on First Midwest following the earnings release, despite calling the results disappointing as "credit costs came in higher than expected" and pointing out that nonperforming assets would have risen 17% from the previous quarter if the company hadn't sold $30 million in nonperforming loans. Rodis lowered his 2011 earnings estimate for the company to 36 cents a share from 86 cents a share, and said that while he previously thought the company might achieve normalized earnings "in the range of $1.20 - $130 a share" in 2012, the "event is now pushed back some."

Balance Sheet

First Midwest had $8.4 million in total assets as of September 30 and owes $193 million in TARP money. According to SNL Financial, the tangible common equity ratio as of September 30 was 8.37%, and while Rodis termed the company's capital ratios "solid," he also said that his firm doesn't "expect the company to repay its TARP proceeds in the foreseeable future."

First Midwest raised $207 million in common equity in January through a public offering.

The company reported nonperforming assets - including nonaccrual loans, loans past due more than 90 days and repossessed real estate and excluding assets covered by the FDIC - of $283.5 million, or 3.39% of total assets as of September 30, compared to 3.41% the previous quarter and 4.52% a year earlier.

Net charge-offs during the third quarter totaled $34 million, or 4.39% of total loans, and reserves covered 2.81% of total loans as of September 30.

Stock Ratios

Shares trade for 1.2 times tangible book value according to SNL Financial and 10.3 times the consensus earnings estimate of $1.04 a share for 2012.

Analyst Ratings

Out of 11 analysts covering First Midwest Bancorp, four rate the shares a buy and the other seven all recommend investors hold the shares.

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