3. First Midwest Bancorp

Shares of First Midwest Bancorp of Itasca, Ill. closed at $12.38 Friday, down 13% from a year earlier.

The company had $8 billion in total assets as of March 31, and has expanded with three acquisition of failed banks over the past two years with assistance from the Federal Deposit insurance Corp., including Palos Bank & Trust of Palos Heights, Ill. in August, Peotone Bank & Trust of Peotone, Ill. in April 2010, and First DuPage Bank of Westmont, Ill., in October 2009.

First Midwest is one of two Chicago area banks mentioned in January as possible targets by John Rodis, who was then covering the company for Howe Barnes Hoefer & Arnett. Rodis cited "scarcity value" for acquirers seeking an entrance into the Chicago Market. More recently, the analyst told TheStreet that First Midwest and MBFI were longer-term targets, as they are looking to continue to expand through FDIC deals over the short term, and "neither management team really wants to sell."

The company is also included on KBW's Potential Buyers Who Could Become Sellers List, with Chris McGratty rating the shares at "market perform," with a $13 price target.

The company owes $193 million in TARP money.

Sterne Agee analyst Kenneth James has called Chicago a "stressed market poised for consolidation," and estimated that First Midwest's takeout value would be "$15-$16 per share, with TARP and likely Chicago credit marks weighing somewhat on the valuation."

First Midwest reported first-quarter net income applicable to common shares of $7.5 million, or 10 cents a share, increasing from $5.4 million, or 8 cents a share, a year earlier. The provision for loan losses for the first quarter was $19.5 million, increasing from 18.4 million in the first quarter of 2010.

The company reported that nonperforming assets made up 2.98% of total assets as of March 31, improving from 3.84% a year earlier. The first-quarter ratio of net charge-offs to average loans was 1.46%, and loan loss reserves appeared more than adequate, covering 2.66% of total loans.

The shares trade for 15 times the consensus 2012 earnings estimate of 83 cents a share, and for 1.4 times tangible book value, according to SNL Financial..

Two of the 12 analysts covering First Midwest, four rate the shares a buy, seven have neutral ratings and one analyst recommends selling the shares.

Following the first-quarter earnings release, Kenneth James said the shares were "near fair value absent more fervent M&A speculation."

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