First Midwest profit jumps after acquisitions

First Midwest Bank's branch in Logan Square, Chicago.

By Yimian Wu

Helped by recent acquisitions, First Midwest Bancorp Inc. posted solid first quarter earnings with improved expense control and net interest margin. Shares went up 3 cents to $17.44.

In the first quarter ended March 31, the Itasca-based bank holding company earned $19.9 million, or 26 cents per diluted share, a 12 percent increase from $17.7 million, or 24 cents per diluted share, in the same quarter of 2014. The Bloomberg consensus estimate was 26.4 cents.

First Midwest increased its quarterly dividend 1 cent to 9 cents per share.

Net interest income totaled $76.8 million in the quarter, up 20.5 percent. Interest-earning assets increased primarily because of the loans acquired last quarter and purchases of investment securities. Total funding sources including deposits and debt increased about $1 billion due to the acquisition activity.

Non-interest income went up 14 percent to $31.3 million, with an 8.6 percent increase in wealth management fees and a 15.6 percent increase in service charges on deposit accounts, benefiting from new customers acquired.

In 2014, the bank completed the acquisitions of the Chicago-area banking operations of Banco Popular North America, equipment lessor National Machine Tool Financial Corp., and south suburban Great Lakes Financial Resources Inc.

The tax-equivalent interest margin for the quarter was 3.79 percent, compared with 3.61 percent in the same quarter last year. The efficiency ratio, a measure of expenses to revenues, improved to 64 percent.

John Rodis, senior analyst at FIG Partners, said that the improving efficiency ratio “has a great deal to do with the acquisitions” and he believes there will be some room for further improvement.

Despite three substantial charge-offs that pushed the total net charge-offs to $8.3 million, the company’s loan quality showed positive signs. Total non-performing assets decreased 23 percent to $82 million from $105 million in the same quarter in 2014. The  allowance for credit losses decreased 11.5 percent to $72.8 million.

During the conference call, officers said the three large charge-offs were in three distinctive circumstances, easing analysts’ concerns that they were concentrated in the same industry. Also, officers expected this year’s allowance for loan losses to decline to about half or less than what it was last year.

Rodis said that the company “had a good handling of its loans” despite the three charge-offs, as the biggest had been identified in the third quarter last year.

Photo at top: First Midwest Bank’s branch in Logan Square, Chicago.(Yimian Wu/Medil)