Welcome Stockholders
2
2012 Stockholders Meeting
May 16, 2012
Welcome And Opening Remarks
Michael L. Scudder
President and CEO
4
Items Of Business
I. Election of Directors
II. Advisory Vote on Appointment of Independent
Auditors
Auditors
III. Advisory Vote on Executive Compensation
IV. Advisory Vote on Frequency of Advisory
Approval of Executive Compensation
Approval of Executive Compensation
5
• March 23, 2012 Record Date
• Certified List of Stockholders
• No Stockholder Nominations or Proposals Filed
Matters Of Record
Items Of Business
7
Continuing Directors
Serving Until 2013
Serving Until 2013
Brother James Gaffney, FSC
President
Lewis University
(Leading Catholic and Lasallian University)
Director Since: 1998
Committee(s): Advisory, Compensation
and Nominating and
Corporate Governance
and Nominating and
Corporate Governance
Michael L. Scudder
President and CEO
First Midwest Bancorp, Inc.
Director Since: 2008
Committee(s): Advisory
J. Stephen Vanderwoude
Retired Chairman and CEO
Madison River Communications
(Operator of Rural Telephone Companies)
Director Since: 1991
Committee(s): Advisory, Compensation
and Nominating and
Corporate Governance
and Nominating and
Corporate Governance
Patrick J. McDonnell
President and CEO
The McDonnell Company LLC
(Business Consulting Company)
Director Since: 2002
Committee(s): Audit and Nominating and
Corporate Governance
Corporate Governance
John L. Sterling
President and Owner
Sterling Lumber Company
(Hardwood Lumber Supplier and Distributor)
Director Since: 1998
Committee(s): Compensation
8
Continuing Directors
Serving Until 2014
Serving Until 2014
John F. Chlebowski, Jr.
Retired President and CEO
Lakeshore Operating Partners, LLC
(Bulk Liquid Distribution Firm)
Director Since: 2007
Committee(s): Advisory and Audit
Peter J. Henseler
Vice Chairman
TOMY International
(Designer and Marketer of Toys and
Infant Products)
Director Since: 2011
Committee(s): Compensation
Michael J. Small
President and CEO
Gogo, Inc.
(Airborne Communications Service Provider)
Director Since: 2010
Committee(s): Audit and Nominating and
Corporate Governance
Corporate Governance
Phupinder S. Gill
CEO
CME Group, Inc.
(Global Derivatives Marketplace and Exchange)
Director Since: 2010
Committee(s): Compensation
Ellen A. Rudnick
Executive Director
Polsky Center for Entrepreneurship
University of Chicago Booth School of Business
(Graduate School of Business)
Director Since: 2005
Committee(s): Advisory, Audit and
Nominating and
Corporate Governance
Nominating and
Corporate Governance
9
Vote For Director Nominees
To Serve Until 2015
To Serve Until 2015
Barbara A. Boigegrain
General Secretary and CEO
General Board of Pension and Health Benefits
Of The United Methodist Church
(Pension, Health and Welfare Benefit Trustee
and Administrator)
Director Since: 2008
Committee(s): Compensation
Robert P. O’Meara
Chairman of the Board
First Midwest Bancorp, Inc.
Director Since: 1982
Committee(s): Advisory
Advisory Vote To Appoint
Ernst & Young LLP
As Independent Auditors
Advisory Vote To Approve
Executive Compensation
Advisory Vote To Approve
Frequency of Advisory Approval of
Executive Compensation
Results
Adjournment
Management Presentation
16
Management Presentation
Michael L. Scudder
•Operating & Strategic Overview
Paul F. Clemens
•Operating Performance
Mark G. Sander
•Strategy Execution
Michael L. Scudder
•Closing Remarks
17
Forward Looking Statements
This presentation may contain, and during this presentation our management may
make statements that may constitute “forward-looking statements” within the meaning
of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are not historical facts but instead represent only our
beliefs regarding future events, many of which, by their nature, are inherently uncertain
and outside our control. Forward-looking statements include, among other things,
statements regarding our financial performance, business prospects, future growth and
operating strategies, objectives and results. Actual results, performance or
developments could differ materially from those expressed or implied by these forward-
looking statements. Important factors that could cause actual results to differ from
those in the forward-looking statements include, among others, those discussed in our
Annual Report on Form 10-K and other reports filed with the Securities and Exchange
Commission, copies of which will be made available upon request. With the exception
of fiscal year end information previously included in our Annual Report on Form 10-K,
the information contained herein is unaudited. Except as required by law, we
undertake no duty to update the contents of this presentation after the date of this
presentation.
make statements that may constitute “forward-looking statements” within the meaning
of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are not historical facts but instead represent only our
beliefs regarding future events, many of which, by their nature, are inherently uncertain
and outside our control. Forward-looking statements include, among other things,
statements regarding our financial performance, business prospects, future growth and
operating strategies, objectives and results. Actual results, performance or
developments could differ materially from those expressed or implied by these forward-
looking statements. Important factors that could cause actual results to differ from
those in the forward-looking statements include, among others, those discussed in our
Annual Report on Form 10-K and other reports filed with the Securities and Exchange
Commission, copies of which will be made available upon request. With the exception
of fiscal year end information previously included in our Annual Report on Form 10-K,
the information contained herein is unaudited. Except as required by law, we
undertake no duty to update the contents of this presentation after the date of this
presentation.
18
Non-GAAP Disclaimer
This presentation contains GAAP financial measures and, where management
believes it to be helpful in understanding the Company’s results of operations or
financial position, non-GAAP financial measures. Where non-GAAP financial
measures are used, the most directly comparable GAAP financial measure, as
well as the reconciliation to the most directly comparable GAAP financial measure
can be found in the Company’s current quarter earnings release or Quarterly
Report on Form 10-Q which can be found on the Company’s website at
www.firstmidwest.com/secfilings. Non-GAAP financial measures in this
presentation include core operating earnings and pre-tax, pre-provision return on
risk weighted average assets. Both of these measures are useful in
understanding the performance and trends of the Company’s core franchise over
time without respect to investment securities gains/losses, taxes, provisions
expense and OREO losses, each of which can significantly vary from quarter to
quarter, and therefore may distort the Company’s underlying performance.
believes it to be helpful in understanding the Company’s results of operations or
financial position, non-GAAP financial measures. Where non-GAAP financial
measures are used, the most directly comparable GAAP financial measure, as
well as the reconciliation to the most directly comparable GAAP financial measure
can be found in the Company’s current quarter earnings release or Quarterly
Report on Form 10-Q which can be found on the Company’s website at
www.firstmidwest.com/secfilings. Non-GAAP financial measures in this
presentation include core operating earnings and pre-tax, pre-provision return on
risk weighted average assets. Both of these measures are useful in
understanding the performance and trends of the Company’s core franchise over
time without respect to investment securities gains/losses, taxes, provisions
expense and OREO losses, each of which can significantly vary from quarter to
quarter, and therefore may distort the Company’s underlying performance.
19
• $8.0 Billion Assets
• $8.0 Billion Assets
– $6.5 Billion Deposits
– $6.5 Billion Deposits
• Strong, Low Cost Core Deposits
• Strong, Low Cost Core Deposits
• 75% Transactional
• 75% Transactional
– $5.4 Billion Loans
– $5.4 Billion Loans
• IL’s Largest Ag Lender
• IL’s Largest Ag Lender
– $5.5 Billion Trust Assets
– $5.5 Billion Trust Assets
• IL’s 4th Largest Bank Asset Manager
• IL’s 4th Largest Bank Asset Manager
• Full Retail And Commercial
Product Line
Product Line
• Full Retail And Commercial
Product Line
Product Line
– Organized Around Clients And
Markets
Markets
– Organized Around Clients And
Markets
Markets
– 240,000 Retail And 26,000
Commercial Relationships
Commercial Relationships
– 240,000 Retail And 26,000
Commercial Relationships
Commercial Relationships
1 Information as of 3/31/12
A Premier Community Bank1
20
In Premier Markets
• 70 Plus Years Of
Community Banking
Community Banking
• Headquartered In Suburban
Chicago
Chicago
– #8 Suburban Market Share
• Retail Banking Platform 1
– Approximately 100 Locations
– $73 Million Average
Deposits/Branch
Deposits/Branch
– Over 1,800 Employees
1 As of 12/31/11
21
Mission Statement
We are in the business of helping clients achieve financial success
throughout their economic life. We do so by focusing on the broad range of their
financial needs and delivering quality services that truly fulfill those needs.
throughout their economic life. We do so by focusing on the broad range of their
financial needs and delivering quality services that truly fulfill those needs.
We believe that only if each of us, those dealing directly with clients as well as
those who support client contact people, assumes personal responsibility
for the financial success of every client we come in contact with, will
their success be assured.
those who support client contact people, assumes personal responsibility
for the financial success of every client we come in contact with, will
their success be assured.
We further believe that in fulfilling clients’ financial needs we are creating significant
value for them while at the same time creating value for ourselves and the company.
value for them while at the same time creating value for ourselves and the company.
The financial success of our clients, thusly, will define our
success as well as the company.
success as well as the company.
Our Core Values Provide Direction
22
23
•Economy and Business Climate
•Banking Industry - Expectations & Perspectives
•Strategic & Performance Highlights
Operating Environment &
Strategic Overview
Strategic Overview
24
Economic Environment
• Positive Signs Emerging, Still Fragile
• Consumer Spending and Housing Stronger
• Employment Uneven
• European Instability, U.S. Elections Creating Uncertainty
• Concerns Remain as to Sustainability
Overall Economy on Better Footing
Continued Low Rate Environment
25
Consumer /
Investor
Protection
Investor
Protection
Mortgage
Deposit
Products
Capital
• Trickle Down Regardless
• More Mortgage Rules
• Simplify Standards
• Higher Delivery Costs
• Eliminates Brokers
• Overdraft Processing
• Interchange Fee Limits
• Fee Pressures
• Relook At Product Mix
• Basel III
• Stress Testing
• Risk Management
• Elevated Capital
Key Legislative Elements
• Creation of CFPB
Regulatory Environment
Impact On Us
• Fair Lending, Increased Scrutiny
26
Impacting The Industry
Higher Cost and Lower Margin Pressuring
Earnings As Credit Improves
Earnings As Credit Improves
27
Market Opportunities
• Environment Creates Opportunities
• Expansion
• Efficiency
• Within Chicago Market
- 37 Failures Since Start Of 2009
- 35 Institutions ($24 Billion) With Texas Ratio > 100%
• Consolidation Expected
• Well Positioned To Benefit
- Strong Capital, Solid Reputation
- Experienced Team
- 4 Transactions, $1 Billion Since 2008
28
Our Priorities
2011 and Beyond
•Lower Nonperforming Assets
•Proactive, Responsible Liquidation
•Diversify and Strengthen Lending
•Grow Core Deposits and Revenue Sources
•Maximize Efficiency
•Returned TARP
•Strengthen Earnings, Dividend Capacity
•Assess Alternative Capital Uses, M&A
Credit Remediation
& Liquidation
& Liquidation
Strengthen Core
Business
Business
Prudent Capital
Management
29
Path To Repayment of TARP
2008 to 2011
2008 to 2011
•Non-performing Assets Down 30% from Peak
•Construction Exposure Reduced by 72%
•Altered Balance Sheet Mix, Retained Earnings
•Subordinated and Trust Preferred Debt Repurchase
•Raised Common Equity and Senior Debt
•Acquired $900 Million in Deposits
•Resources Aligned and Expanded Markets
•Maintained Customer and Employee Services
Improvement in Credit
Quality
Quality
Active Capital
Management
Management
Strengthened Our
Business
Business
Actions Aligned with Shareholder Interests
30
Organizational Alignment
2011 and 2012
2011 and 2012
• Mark Sander, Chief Operating Officer
• Thomas Prame, Director of Retail Banking
• Kevin Moffitt, Chief Risk Officer
• Sales and Support Teams
• Wealth Management, Commercial Sales
• Expanded Market Reach
• Mortgage and Niche Development
• Retail Product Design, Branch Delivery
People
Alignment
Product & Distribution
Enhancing and Allocating Resources
To Areas of Growth
31
2010 2011 2012 2013 2014
Paul F. Clemens
First Midwest Bancorp, Inc.
Executive Vice President & CFO
Operating Performance
33
• Organizational Realignment (4Q11, 1Q12)
• Elimination Of 140 Positions
• Severance-Related Costs Of $2.5 Million
• Annualized Savings of $7 Million
• Redeemed $193 Million Of TARP Preferred (4Q11)
• One-time Charge $1.5 Million
• Eliminates Preferred Dividends Of $10.3 Million Annually
• Acquired $107 Million In Deposits (4Q11)
• $70 Million Of Core Deposits
• Gain Of $1.1 Million
Performance Highlights
34
2011 Operating Results
Margin Pressure Offset by
Lower Credit Costs
|
|
December 31
|
|
|
|
Key Operating Metrics
|
2011
|
2010
|
Improved
|
|
Net Income (Loss)
|
$ 25.4
|
$ (19.7)
|
NM
|
|
Core Operating Earnings
|
$129.9
|
$136.4
|
(5%)
|
|
Loan Loss Provision
|
$ 80.6
|
$147.3
|
45%
|
|
Net Interest Margin
|
4.04%
|
4.13%
|
(2%)
|
|
Efficiency Ratio
|
62.1%
|
58.8%
|
(6%)
|
35
2011 Operating Results
Stronger Liquidity and Capital,
Credit Improved, Sustained Lending
Credit Improved, Sustained Lending
1 Includes covered loans and OREO
2 Excludes covered loans
|
|
December 31
|
|
|
|
Other Key Metrics
|
2011
|
2010
|
Improved
|
|
Transactional Deposits,
Average |
$4,755
|
$4,322
|
10%
|
|
Loans, Period End1
|
$5,349
|
$5,472
|
(2%)
|
|
Non-Performing Assets2
|
$248.4
|
$269.5
|
8%
|
|
Loan Charge-Offs
|
$103.7
|
$147.1
|
30%
|
|
Tier 1 Common Capital
|
10.26%
|
9.81%
|
5%
|
36
Operating Results, 1Q 2012
Net Income Up,
Margin Impacted By Debt and Liquidity
|
|
First Quarter
|
|
|
|
Key Operating Metrics
|
2012
|
2011
|
Improved
|
|
Net Income
|
$7.8
|
$7.3
|
7%
|
|
Core Operating Earnings
|
$28.6
|
$31.1
|
(8%)
|
|
Loan Loss Provision
|
$18.2
|
$19.5
|
7%
|
|
Net Interest Margin
|
3.88%
|
4.15%
|
(7%)
|
|
Efficiency Ratio
|
64.6%
|
62.7%
|
(3%)
|
37
Operating Results, 1Q 2012
|
|
First Quarter
|
|
|
|
Other Key Metrics
|
2012
|
2011
|
Improved
|
|
Average Earning Assets
|
$7,088
|
$7,232
|
(2%)
|
|
Cash and Equivalents
|
$486
|
$526
|
(8%)
|
|
Transactional Deposits,
Average |
$4,823
|
$4,528
|
7%
|
|
Loans, Period End
|
$5,389
|
$5,445
|
(1%)
|
|
Tier 1 Common Capital
|
10.38%
|
9.96%
|
4%
|
Significant Liquidity And Capital,
Ability to Benefit as Conditions Stabilize
38
Core Business Is Strong
Pre-Tax, Pre-Provision Earnings / RWA
Efficiency Ratio
Mark G. Sander
First Midwest Bancorp, Inc.
Senior Executive Vice President
&
First Midwest Bank
President & COO
Strategy Execution
40
Non-Performing Assets
Improved Metrics, Progress Impacted By
Slow Recovery, Softened Real Estate Market
Chicago Peer
National Peer
41
Focus Remains on Disposition
of Problem Assets
of Problem Assets
|
Short Term Mid-Term Long-Term
|
Holding Period
• Actively Driving Problem Assets Lower
• Market Impacted by Illiquidity and Inventory
• Cycle to Date Losses in Line with Peers
Higher
Higher
Lower
Lower
42
Strengthening Our Business
Delivering On Multiple Fronts
1. Asset Formation
3. Efficiency
2. Fee Income/Deposits
4. Investment In Core
• Focused and Enhanced Sales
• New Mortgage Platform
• Asset-Based and Other Niches
• Wealth and Treasury Management
• Core Deposit Growth
• Reduction in Costs
• Performance Management
• Strategic Distribution
• Internet And ATM Platform
• Strengthen Brand
43
Loan Portfolio
EXCEL SOURCE range
$C$4:$F$12 copied at 13-
Jan-11 05:12:53:
FMBICS\2011
Presentations\January -
Earnings
Presentation\Excel\Credit
Data.xlsx (YoY Change)
$C$4:$F$12 copied at 13-
Jan-11 05:12:53:
FMBICS\2011
Presentations\January -
Earnings
Presentation\Excel\Credit
Data.xlsx (YoY Change)
|
|
12/31/08
|
3/31/12
|
|
||
|
|
$
|
%
|
$
|
%
|
Change
|
|
Commercial and Industrial
|
$ 1,707
|
32%
|
$ 1,735
|
32%
|
2%
|
|
Construction
|
866
|
17%
|
242
|
5%
|
(72%)
|
|
Commercial Real Estate
|
2,041
|
38%
|
2,497
|
46%
|
22%
|
|
Consumer
|
746
|
13%
|
664
|
12%
|
(11%)
|
|
Covered
|
--
|
--
|
251
|
5%
|
NM
|
|
Total Loans
|
$ 5,360
|
100%
|
$ 5,389
|
100%
|
1%
|
Serving Markets, Diversifying Mix
47% Owner Occupied Real Estate
44
Changing Loan Trajectory
Expanding Our Sales and Footprint:
•Enhancing Existing Teams
•Chicago Loop, Du Page Markets
•Asset Based and Other Niches
•Mortgage Platform
45
Wealth Management
• Revenues Up 34% Since
2008
2008
• $5.5 Billion in Trust Assets
• 4th Largest Bank Asset
Manager in IL
Manager in IL
46
Expanding Our Reach
Over 1,000 ATMs Locally and 43,000 Nationally
Available to Clients at No Cost
47
• Colleagues
– Enhanced Sales
– Talent Development
• Delivery Channels
– Retail Branch Network
– Internet and Mobile Banking
– Commercial, Treasury Management
– Wealth Management
• Client Relationships
Building Our Business
Michael L. Scudder
First Midwest Bancorp, Inc.
President & CEO
Closing Remarks
49
2012 Is A Year Of Transition
• Economic Conditions Improving, but Fragile
• Regulatory and Capital Requirements Evolving
• Credit Improving, Remediation Uneven
• Aligning Resources With Growth and Opportunity
Positioning For Long Term Success
50
As We Evolve to “New” Normal
Shareholder
Value
Value
Priorities Remain Same
51
Well Capitalized
Significant Capital, Provides Flexibility
|
First Midwest Ratios
|
FM Actual
|
Well
Capitalized |
Excess
Capital |
Excess %
|
|
Total Risk-Based Ratio
|
13.47%
|
10.00%
|
$217,431
|
35%
|
|
Tier 1 Risk-Based
|
11.41%
|
6.00%
|
$338,648
|
90%
|
|
Tier 1 Leverage Ratio
|
9.38%
|
5.00%
|
$333,423
|
88%
|
52
Capital Management Priority
Emphasis on Return to
“Normalized” Capital
Requirements
Uses
• Stronger Earnings
• Reduced Credit Risk
• Regulatory Clarity
• Growth
• Dividend
• Repurchase
• M & A
53
|
|
Price Change %
|
Market
Price to: Value to:
|
|||
|
|
FY
2011 |
Jan- March
2012 |
2012
Estimate |
Tang
Book Value |
Core
Deposits |
|
FMBI
|
(12.1)
|
2.7
|
16.0x
|
1.3x
|
3.5x
|
|
Peers
|
|
|
|
|
|
|
Chicago
|
(14.2)
|
30.1
|
19.7x
|
1.2x
|
2.5
|
|
National
|
(5.9)
|
13.5
|
14.8x
|
1.5x
|
6.7
|
|
SNL Midwestern
Banks (72) |
(7.5)
|
14.0
|
13.1x
|
1.2x
|
2.2
|
Market Valuation
As of March 31, 2012
As of March 31, 2012
Source: SNL
Markets Volatile, Valuing Growth and Credit Quality
Execution Drives Improvement
Execution Drives Improvement
54
• Road to “New Normal” Uneven
• We Have Advantages That Create Opportunities
• Strong Core Deposit
• Engaged and Enhanced Workforce
• Good Markets, Growing Opportunities
• Significant Capital and Liquidity
Well Positioned, Have to Stay Focused
and Invest In Ourselves
In Closing
55
56
Chicago Peers - Means collectively the companies with the ticker symbol MBFI, WTFC, PVTB, and TAYC.
Core Deposit - Includes demand, savings and NOW accounts.
Core Operating Earnings - Means the Company’s pre-tax pre-provision operating earnings for the stated period, which reflect the
Company’s operating performance before the effects of credit-related charges and other unusual, infrequent, or non-recurring revenues and
expenses. This is a non-GAAP financial measure.
Company’s operating performance before the effects of credit-related charges and other unusual, infrequent, or non-recurring revenues and
expenses. This is a non-GAAP financial measure.
Covered Loans or Assets - Means loans or assets which the Company acquired via an FDIC-assisted transaction.
National Peers - Means collectively the companies with the ticker symbol SRCE, CHFC, CRBC, FCF, FMER, MBFI, ONB, PNFP, PVTB,
PFS, STSA, SUSQ, UMBF, UMPQ, VLY, TAYC, TCBI, TRMK, WSBC, WTFC.
PFS, STSA, SUSQ, UMBF, UMPQ, VLY, TAYC, TCBI, TRMK, WSBC, WTFC.
Net Interest Income - Means the difference between interest income and fees earned on interest-earning assets and interest expense
incurred on interest-bearing liabilities, presented on a tax-equivalent basis, assuming a federal income tax rate of 35%.
incurred on interest-bearing liabilities, presented on a tax-equivalent basis, assuming a federal income tax rate of 35%.
Non-Performing Assets - Means non-accrual loans (the majority of which are past due), loans 90 days or more past due and still accruing
interest and OREO.
interest and OREO.
SNL Midwestern Banks - Means 72 Midwest based banks
Tier 1 Common Capital - Means tier 1 capital, less trust preferred securities, divided by risk based assets.
Note:
• Unless otherwise indicated, all dollar amounts used in this presentation are in millions except per share information.
• Unless otherwise indicated, all loan information includes Covered Loans.
• Peer information source for this presentation from SNL.
Certain Terms Used In this Presentation