First Midwest Bancorp, Inc. Announces 2011 Fourth Quarter and Full Year Results

ITASCA, IL--(Marketwire - Jan 25, 2012) - First Midwest Bancorp, Inc. (the "Company" or "First Midwest") (NASDAQ: FMBI)

Operating Performance

• Net income applicable to common shares of $3.9 million, or $0.05 per share, compared to a net loss of $30.3 million, or $0.41 per share, for fourth quarter 2010 and net income of $6.3 million, or $0.09 per share, for third quarter 2011.
• Net income applicable to common shares of $25.4 million, or $0.35 per share, for full year 2011 up $45.1 million from a net loss of $19.7 million, or $0.27 per share, for full year 2010.
• Total loans, excluding covered loans, of $5.1 billion, stable compared to both December 31, 2010 and September 30, 2011, reflecting almost 5% annualized growth in commercial and industrial and owner-occupied other commercial real estate loans from September 30, 2011.
• Fee-based revenues of $23.9 million, up 6.6% from fourth quarter 2010 and seasonally down 2.3% from third quarter 2011.

Credit and Capital

• Non-accrual loans, excluding covered loans and covered OREO, of $187.3 million, declined 11.5% from December 31, 2010 and up 9.4% from September 30, 2011.
• Tier 1 common capital to risk-weighted assets of 10.26% as of December 31, 2011 compared to 9.81% at December 31, 2010 and 10.29% at September 30, 2011.

Significant Fourth Quarter Events

• Organizational realignment, reflecting the elimination of some 100 positions, resulted in severance-related costs of $2.0 million.
• Redeemed $193.0 million of TARP preferred shares and the related common stock warrant.
• Acquired $106.7 million in deposits resulting in a gain of $1.1 million.
• Recognized for second consecutive year in the Top 20 "Best Places to Work" in Chicago.

Today First Midwest Bancorp, Inc. (the "Company" or "First Midwest") (NASDAQ: FMBI), the holding company of First Midwest Bank (the "Bank"), reported results of operations and financial condition for fourth quarter and full year 2011. Net income for the quarter was $6.9 million, before adjustments for preferred dividends and non-vested restricted shares, with net income of $3.9 million, or $0.05 per share, applicable to common shares after such adjustments. This compares to a net loss of $28.2 million and a net loss applicable to common shares of $30.3 million, or $0.41 per share, for fourth quarter 2010 and net income of $8.9 million and net income applicable to common shares of $6.3 million, or $0.09 per share, for third quarter 2011.

For full year 2011, net income was $36.6 million, before adjustments for preferred dividends and non-vested restricted shares, with net income of $25.4 million, or $0.35 per share, applicable to common shares after such adjustments. This compares to a net loss of $9.7 million and a net loss applicable to common shares of $19.7 million, or $0.27 per share, for full year 2010.

		Quarters Ended												Years Ended
		December 31, 2011				September 30, 2011				December 31, 2010				December 31, 2011				December 31, 2010
Operating Performance		(Dollar amounts in thousands)
Net income (loss)		$	6,924			$	8,942			$	(28,159	)		$	36,563			$	(9,684	)
Net income (loss) applicable to common shares		$	3,877			$	6,263			$	(30,327	)		$	25,437			$	(19,717	)
Diluted earnings (loss) per common share		$	0.05			$	0.09			$	(0.41	)		$	0.35			$	(0.27	)
Return on average common equity			1.60	%			2.60	%			(12.49	%)			2.69	%			(2.06	%)
Return on average assets			0.34	%			0.43	%			(1.34	%)			0.45	%			(0.12	%)
Pre-tax, pre-provision operating earnings (1)		$	31,581			$	33,112			$	34,998			$	129,853			$	136,406
Net interest margin			3.95	%			3.97	%			4.02	%			4.04	%			4.13	%
Efficiency ratio			64.76	%			60.57	%			59.08	%			62.12	%			58.84	%
Loans, including covered loans, at period end		$	5,348,615			$	5,394,241			$	5,472,289			$	5,348,615			$	5,472,289
Loans, excluding covered loans, at period end		$	5,088,113			$	5,104,494			$	5,100,560			$	5,088,113			$	5,100,560
Average transactional deposits (2)		$	4,866,776			$	4,876,261			$	4,590,489			$	4,755,111			$	4,322,136

(1)	The Company's accounting and reporting policies conform to U.S. generally accepted accounting principles ("GAAP") and general practice within the banking industry. As a supplement to GAAP, the Company has provided this non-GAAP performance result. The Company believes that this non-GAAP financial measure is useful because it allows investors to assess the Company's operating performance. Although this non-GAAP financial measure is intended to enhance investors' understanding of the Company's business and performance, this non-GAAP financial measure should not be considered an alternative to GAAP. A reconciliation of this measure to GAAP is presented on the following page.
(2)	Comprised of demand deposits and interest-bearing transactional accounts.

SUMMARY UPDATE

"I am very pleased with our overall performance for the year and in a very active fourth quarter," said Michael L. Scudder, President and Chief Executive Officer of First Midwest Bancorp, Inc. "The results for the quarter and the year reflect both a return to profitability as well as the steady advancement of our strategic priorities."

Mr. Scudder went on to say, "Net income improved by $45 million from 2010, as we benefited from continued, solid earnings and substantially lower credit costs. In a challenged business environment, consistent sales focus helped us to hold loan balances steady as we significantly reduced our exposure to troubled real estate lending categories. At the same time, transactional deposit growth has helped our margins remain near 4%, and our fee-based revenues expand. Our overall credit metrics are greatly improved from 2010 and, most notably, with actions taken during the quarter, we have reduced potential non-performing credits by almost 30% during this same period."

Mr. Scudder closed, "Over the course of 2011, we significantly invested in our business, aligning our sales resources to areas of growth and opportunity. Concurrently, we have and will continue to implement operating efficiencies as we transition to an improved credit environment and better leverage our operating systems and processes. With TARP behind us and economic recovery progressing, we are well positioned to pursue opportunities for growth, navigate the changing regulatory landscape, and, most importantly, help our clients achieve financial success in 2012."

REPAYMENT OF TARP

In November 2011, the Company redeemed all of the $193.0 million Series B preferred stock issued to the United States Department of the Treasury (the "Treasury") under the U.S. government's Troubled Asset Relief Program ("TARP"), which resulted in the acceleration of $1.5 million in discount accretion. The Company funded the redemption through a combination of existing liquid assets and proceeds from the completion of a $115.0 million senior debt offering. The notes, which have an interest rate of 5.875%, payable semi-annually, will mature in November 2016.

In a related transaction, the Company redeemed the Treasury's associated warrant to purchase up to 1,305,230 shares of the Company's common stock. In December 2011, the Company paid $900,000 to the Treasury to redeem the warrant, which concluded the Company's participation in TARP.

DEPOSIT ACQUISITION

In December 2011, the Company completed the purchase of certain Chicago-market deposits from Old National Bank of Evansville, Indiana ("Old National"). The transaction included $106.7 million in deposits (comprised of $70.6 million in transactional deposits and $36.1 in time deposits) and one banking facility located in our Chicago market. As a result of the transaction, the Company recorded a net gain of $1.1 million.

OPERATING PERFORMANCE

Pre-Tax, Pre-Provision Operating Earnings (1)
(Dollar amounts in thousands)
			Quarters Ended												Years Ended
			December 31, 2011				September 30, 2011				December 31, 2010				December 31, 2011				December 31, 2010
Income (loss) before income tax			$	7,220			$	10,525			$	(53,225	)		$	41,071			$	(38,228	)
Provision for loan losses				21,902				20,425				73,897				80,582				147,349
	Pre-tax, pre-provision earnings			29,122				30,950				20,672				121,653				109,121
Adjustments to Pre-Tax, Pre-Provision Earnings
Securities (losses) gains, net				(110	)			449				1,662				2,410				12,216
Gain on Federal Deposit InsuranceCorporation ("FDIC")-assisted transaction				-				-				-				-				4,303
Gain on acquisition of deposits				1,076				-				-				1,076				-
Losses on sales and write-downs of OREO				(1,425	)			(2,611	)			(15,412	)			(9,686	)			(40,480	)
Integration costs associated with FDIC-assisted transactions				-				-				(576	)			-				(3,324	)
Severance-related costs				(2,000	)			-				-				(2,000	)			-
	Total adjustments			(2,459	)			(2,162	)			(14,326	)			(8,200	)			(27,285	)
	Pre-tax, pre-provision operating earnings (1)		$	31,581			$	33,112			$	34,998			$	129,853			$	136,406

(1)	The Company's accounting and reporting policies conform to GAAP and general practice within the banking industry. As a supplement to GAAP, the Company has provided this non-GAAP performance result. The Company believes that this non-GAAP financial measure is useful because it allows investors to assess the Company's operating performance. Although this non-GAAP financial measure is intended to enhance investors' understanding of the Company's business and performance, this non-GAAP financial measure should not be considered an alternative to GAAP.

Pre-tax, pre-provision operating earnings decreased by $3.4 million from fourth quarter 2010 to fourth quarter 2011 driven by a decline in net interest income, which is discussed in the Net Interest Income and Margin Analysis section, and a $1.3 million correction of a 2010 actuarial pension expense calculation related to the valuation of future early retirement benefits, which was recorded in fourth quarter 2011.

Compared to third quarter 2011, pre-tax, pre-provision operating earnings were down $1.5 million due primarily to the correction of the 2010 actuarial pension expense calculation.

For full year 2011, pre-tax, pre-provision operating earnings were down $6.6 million, or 4.8%, compared to 2010 as a result of higher loan remediation costs, increased salaries related to the expansion of commercial, retail, and wealth management sales staff, and the correction of the 2010 actuarial pension expense calculation, partially offset by a $7.4 million increase in fee-based revenues.

A more detailed discussion of net interest income and noninterest income and expense is presented in later sections of this release.

Net Interest Income and Margin Analysis

(Dollar amounts in thousands)

				Quarters Ended
				December 31, 2011										September 30, 2011										December 31, 2010
				Average Balance				Interest			Yield/ Rate (%)			Average Balance				Interest			Yield/ Rate (%)			Average Balance				Interest			Yield/ Rate (%)
Assets:
Federal funds sold and othershort-term investments				$	718,631			$	450		0.25			$	741,782			$	463		0.25			$	595,509			$	386		0.26
Trading securities					13,420				92		2.74				16,248				23		0.57				13,882				99		2.85
Investment securities (1)					1,069,844				11,224		4.20				1,057,075				11,604		4.39				1,139,127				13,568		4.76
Federal Home Loan Bank ("FHLB")and Federal Reserve Bank stock					58,187				341		2.34				58,187				331		2.28				61,703				347		2.25
Loans, excluding covered loans (1)					5,085,792				63,202		4.93				5,136,130				64,509		4.98				5,155,416				64,387		4.95
Covered interest-earning assets (2)					343,479				6,787		7.84				387,635				6,640		6.80				480,612				7,431		6.13
	Total loans				5,429,271				69,989		5.11				5,523,765				71,149		5.11				5,636,028				71,818		5.06
		Total interest-earning assets (1)			7,289,353				82,096		4.47				7,397,057				83,570		4.49				7,446,249				86,218		4.60
Cash and due from banks					116,166										120,624										128,919
Allowance for loan losses					(133,824	)									(143,443	)									(157,145	)
Other assets					870,808										855,542										896,611
		Total assets		$	8,142,503									$	8,229,780									$	8,314,634
Liabilities and Stockholders' Equity:
Interest-bearing transaction deposits				$	3,253,555				1,029		0.13			$	3,306,590				1,361		0.16			$	3,242,301				1,930		0.24
Time deposits					1,688,995				4,933		1.16				1,731,413				5,293		1.21				2,069,389				5,977		1.15
Borrowed funds					252,839				670		1.05				262,001				706		1.07				281,050				711		1.00
Senior and subordinated debt					187,488				3,047		6.45				137,749				2,280		6.57				137,743				2,279		6.56
	Total interest-bearing liabilities				5,382,877				9,679		0.71				5,437,753				9,640		0.70				5,730,483				10,897		0.75
Demand deposits					1,613,221										1,569,671										1,348,188
	Total funding sources				6,996,098										7,007,424										7,078,671
Other liabilities					73,721										73,808										79,700
Stockholders' equity - common					961,500										955,548										963,263
Stockholders' equity - preferred					111,184										193,000										193,000
		Total liabilities and stockholders' equity		$	8,142,503									$	8,229,780									$	8,314,634
Net interest income/margin (1)								$	72,417		3.95							$	73,930		3.97							$	75,321		4.02

(1)	Interest income and yields are presented on a tax-equivalent basis, assuming a federal income tax rate of 35%.
(2)	Covered interest-earning assets consist of loans acquired through the Company's FDIC-assisted transactions and the related FDIC indemnification asset.

Average interest-earning assets for fourth quarter 2011 decreased $156.9 million, or 2.1%, from fourth quarter 2010 and $107.7 million, or 1.5%, compared to third quarter 2011. The decline for both periods was due to a decline in average loans and covered interest-earning assets.

Average funding sources for fourth quarter 2011 was $82.6 million, or 1.2%, lower than fourth quarter 2010 and $11.3 million, or 0.2%, lower than third quarter 2011. The declines for both periods resulted from a drop in average time deposits. However, demand deposits increased from both prior periods presented, including approximately $23 million of average deposits acquired in a December 2011 transaction, which resulted in a more favorable product mix.

The growth in average senior and subordinated debt for fourth quarter 2011 compared to both the prior year and prior quarter periods reflects the issuance of senior debt, which was used to redeem the Series B preferred stock issued to the Treasury. Interest paid on the new senior debt reduced net interest margin by 4 basis points.

Tax-equivalent net interest margin for fourth quarter 2011 was 3.95%, a decline of 7 basis points from fourth quarter 2010 and 2 basis points from third quarter 2011. The drop from the prior year was primarily due to the impact of lower average loans and deposits invested in low-yielding short-term investments. The linked-quarter variance was due to funding costs associated with the new senior debt.

Interest earned on covered loans is generally recognized through the accretion of the discount taken on expected future cash flows. The increase in the yields on covered interest-earning assets for the 2011 periods compared to 2010 was due to adjustments in accretable income based upon (i) revised cash flow estimates subsequent to acquisition and (ii) actual cash realized in excess of estimates upon final settlement of certain covered loans.

Noninterest Income Analysis
(Dollar amounts in thousands)
			Quarters Ended												December 31, 2011 Percent Change From
			December 31, 2011				September 30, 2011				December 31, 2010				September 30, 2011			December 31, 2010
Service charges on deposit accounts			$	9,957			$	10,215			$	9,202			(2.5	)		8.2
Trust and investment advisory fees				4,044				3,946				4,040			2.5			0.1
Other service charges, commissions, and fees				4,885				5,325				4,506			(8.3	)		8.4
Card-based fees				4,971				4,931				4,640			0.8			7.1
	Total fee-based revenues			23,857				24,417				22,388			(2.3	)		6.6
Bank-owned life insurance ("BOLI") income				241				1,479				696			(83.7	)		(65.4	)
Other income				652				598				451			9.0			44.6
	Total operating revenues			24,750				26,494				23,535			(6.6	)		5.2
Trading gains (losses), net				919				(2,352	)			970			N/M			N/M
Gains on securities sales, net				649				626				1,718			N/M			N/M
Securities impairment losses				(759	)			(177	)			(56	)		N/M			N/M
Gain on acquisition of deposits				1,076				-				-			N/M			N/M
	Total noninterest income		$	26,635			$	24,591			$	26,167			8.3			1.8

N/M - Not meaningful.

Fee-based revenues for fourth quarter 2011 grew 6.6% compared to fourth quarter 2010 and declined 2.3% compared to third quarter 2011, reflecting normal seasonality. For full year 2011, fee-based revenues grew by $7.4 million, or 8.6%.

BOLI income decreased for fourth quarter 2011 compared to both prior periods presented as the Company received benefit settlements of $1.2 million during third quarter 2011 and $417,000 during fourth quarter 2010.

Trading gains (losses), net result from the change in fair value of diversified asset securities held in a grantor trust under deferred compensation agreements. These net trading gains (losses) are substantially offset by an adjustment to salaries and wages for each period presented.

Noninterest Expense Analysis
(Dollar amounts in thousands)
				Quarters Ended									December 31, 2011 Percent Change From
				December 31, 2011			September 30, 2011			December 31, 2010			September 30, 2011			December 31, 2010
Salaries and wages (1)				$	27,588		$	22,957		$	26,517		20.2			4.0
Retirement and other employee benefits(1)(2)					7,632			6,225			4,511		22.6			69.2
	Total compensation expense				35,220			29,182			31,028		20.7			13.5
Write-downs of OREO					476			674			11,957		(29.4	)		(96.0	)
Losses on sales of OREO, net					949			1,937			3,455		(51.0	)		(72.5	)
OREO operating expense, net					1,540			1,563			2,408		(1.5	)		(36.0	)
		Total OREO expense			2,965			4,174			17,820		(29.0	)		(83.4	)
Loan remediation costs					4,846			4,638			2,330		4.5			108.0
Other professional services (1)					3,180			2,933			2,194		8.4			44.9
		Total professional services			8,026			7,571			4,524		6.0			77.4
Net occupancy and equipment expense					7,681			8,157			7,916		(5.8	)		(3.0	)
Technology and related costs					2,876			2,709			3,209		6.2			(10.4	)
FDIC premiums					1,758			1,799			2,967		(2.3	)		(40.7	)
Advertising and promotions					1,239			2,502			1,637		(50.5	)		(24.3	)
Other expenses					6,826			8,082			7,973		(15.5	)		(14.4	)
		Total noninterest expense		$	66,591		$	64,176		$	77,074		3.8			(13.6	)

(1)	In fourth quarter 2011, the Company recorded a $2.0 million charge for severance-related costs from an organizational realignment that included $1.6 million in salaries and wages, $96,000 in retirement and other employee benefits, and $274,000 in other professional services.
(2)	Retirement and other employee benefits include the $1.3 million correction of a 2010 actuarial pension expense calculation related to the valuation of future early retirement benefits.

Total noninterest expense for fourth quarter 2011 declined 13.6% from fourth quarter 2010 and increased 3.8% compared to third quarter 2011.

Fourth quarter 2011 salaries and wages increased by $4.6 million compared to third quarter 2011 as a result of a $3.9 million variance related to changes in the fair value of trading securities held on behalf of plan participants and the compensation costs from an organizational realignment, partially offset by reductions in short-term incentive and share-based compensation. The organizational realignment reduced some 100 positions across the Company. Specifically, about 50 open positions were closed and another 50 filled positions were eliminated.

The $1.3 million correction of the 2010 actuarial pension expense calculation drove the increase in retirement and other employee benefits from third quarter 2011 to fourth quarter 2011.

The increase in retirement and other employee benefits from fourth quarter 2010 to fourth quarter 2011 was impacted by higher profit sharing expense, employee insurance, and payroll taxes attributed to increased sales staff, and the correction of the 2010 actuarial pension expense calculation.

OREO expenses for fourth quarter 2011 declined 83.4% from fourth quarter 2010 and 29.0% from third quarter 2011 due to continued remediation efforts. Fourth quarter 2010 OREO expenses were elevated due to higher levels of write-downs and losses on sales of OREO and related operating expenses.

An increase in real estate taxes paid to preserve our rights to collateral associated with problem loans, as well as higher legal fees incurred to remediate problem credits, drove higher levels of loan remediation costs compared to both prior periods presented.

FDIC premiums decreased compared to fourth quarter 2010 primarily due to a change in regulatory requirements for calculating the premium.

LOAN PORTFOLIO AND ASSET QUALITY

Loan Portfolio Composition
(Dollar amounts in thousands)
						As Of									December 31, 2011 Percent Change From
						December 31, 2011			September 30, 2011			December 31, 2010			September 30, 2011			December 31, 2010
Corporate:
	Commercial and industrial					$	1,458,446		$	1,476,034		$	1,465,903		(1.2	)		(0.5	)
	Agricultural						243,776			250,436			227,756		(2.7	)		7.0
	Commercial real estate:
		Office					444,368			440,641			396,836		0.8			12.0
		Retail					334,034			330,160			328,751		1.2			1.6
		Industrial					520,680			492,514			478,026		5.7			8.9
		Multi-family					288,336			317,313			349,862		(9.1	)		(17.6	)
		Residential construction					105,836			116,283			174,690		(9.0	)		(39.4	)
		Commercial construction					144,909			145,889			164,472		(0.7	)		(11.9	)
		Other commercial real estate					888,146			877,241			856,357		1.2			3.7
			Total commercial real estate				2,726,309			2,720,041			2,748,994		0.2			(0.8	)
				Total corporate loans			4,428,531			4,446,511			4,442,653		(0.4	)		(0.3	)
Consumer:
	Home equity loans						416,194			424,986			445,243		(2.1	)		(6.5	)
	1-4 family mortgages						201,099			189,587			160,890		6.1			25.0
	Installment loans						42,289			43,410			51,774		(2.6	)		(18.3	)
				Total consumer loans			659,582			657,983			657,907		0.2			0.3
			Total loans, excluding covered loans				5,088,113			5,104,494			5,100,560		(0.3	)		(0.2	)
Covered loans							260,502			289,747			371,729		(10.1	)		(29.9	)
			Total loans			$	5,348,615		$	5,394,241		$	5,472,289		(0.8	)		(2.3	)

A lower balance of covered loans acquired through the Company's previous FDIC-assisted transactions drove the decline in total loans of $123.7 million, or 2.3%, from December 31, 2010 to December 31, 2011.

Total loans, excluding covered loans, as of December 31, 2011 were stable compared to December 31, 2010. The office, retail, and industrial and other commercial real estate portfolios exhibited 6.2% growth during this period, substantially in the form of owner-occupied business relationships. Offsetting this progress, efforts to reduce lending exposure to more troubled real estate categories contributed to declines in the multi-family and construction loan portfolios.

Total loans, including covered loans, of $5.3 billion as of December 31, 2011 were consistent with September 30, 2011. Annualized growth of 10% in office, retail, and industrial and other commercial real estate loans was offset by a decline in the commercial and industrial, multi-family, and residential construction loan portfolios as well as a decline in covered loans. Approximately two-thirds of the growth in office, retail, and industrial loans represents owner-occupied credits.

Asset Quality, Excluding Covered Loans and Covered OREO (1)
(Dollar amounts in thousands)
			As Of												December 31, 2011 Percent Change From
			December 31, 2011				September 30, 2011				December 31, 2010				September 30, 2011			December 31, 2010
Non-accrual loans (2)			$	187,325			$	171,189			$	211,782			9.4			(11.5	)
90 days or more past due loans				9,227				6,008				4,244			53.6			117.4
	Total non-performing loans			196,552				177,197				216,026			10.9			(9.0	)
Troubled debt restructurings (still accruing interest)				17,864				7,033				22,371			154.0			(20.1	)
Other real estate owned				33,975				23,863				31,069			42.4			9.4
	Total non-performing assets		$	248,391			$	208,093			$	269,466			19.4			(7.8	)
30-89 days past due loans			$	27,495			$	34,061			$	23,646			(19.3	)		16.3
Allowance for credit losses			$	121,962			$	131,291			$	145,072			(7.1	)		(15.9	)
Non-accrual loans to total loans				3.68	%			3.35	%			4.15	%
Non-performing loans to total loans				3.86	%			3.47	%			4.24	%
Non-performing assets to loans plus OREO				4.85	%			4.06	%			5.25	%
Allowance for credit losses to loans				2.40	%			2.57	%			2.84	%
Allowance for credit losses to non-performing loans				62	%			74	%			67	%

(1)		Covered loans and covered OREO were acquired through transactions with the FDIC and are subject to loss sharing agreements with the FDIC whereby the Company is indemnified against the majority of any losses incurred on these assets.
(2)		Includes $15.8 million in troubled debt restructurings with non-accrual status as of December 31, 2011.

Non-performing assets, excluding covered loans and covered OREO, were $248.4 million at December 31, 2011, dropping $21.1 million, or 7.8%, from December 31, 2010 and increasing $40.3 million, or 19.4%, from September 30, 2011. The reduction in non-performing assets from December 31, 2010 to December 31, 2011 was largely due to management's remediation activities. During the year ended December 31, 2011, the Company had gross reductions of non-performing assets totaling $110.8 million, consisting of $80.3 million in non-accrual loans that were sold, paid off, or transferred to held-for-sale and $30.5 million in OREO properties that were sold.

The linked quarter increase in non-performing assets was largely attributed to two borrower relationships aggregating $48.0 million. After careful monitoring of borrower financial condition, these credits, both of which were performing in accordance with contractual terms, were positioned for accelerated resolution in an effort to mitigate loss exposure. In one circumstance, a commercial borrowing relationship totaling $33.9 million was transferred to non-accrual. In the other situation, a performing $14.1 million multi-family credit was modified in a troubled debt restructuring. In combination, these actions resulted in charge-offs totaling $7.0 million during the fourth quarter.

Potential non-performing loans, consisting of special mention and substandard loans, totaled $403.2 million as of December 31, 2011, down $152.7 million, or 27.5%, from $556.0 million as of December 31, 2010 and $91.6 million, or 18.5%, from $494.8 million as of September 30, 2011. The declines from both periods presented reflect management's progress in remediating problem loans and the overall improvement in the quality of the loan portfolio.

Charge-off Data
(Dollar amounts in thousands)
				Quarters Ended
				December 31, 2011			% of Total		September 30, 2011			% of Total		December 31, 2010			% of Total
Net loans charged-off:
	Commercial and industrial			$	8,910		32.3		$	10,165		36.4		$	10,198		13.9
	Agricultural				484		1.8			177		0.6			125		0.2
	Office, retail, and industrial				3,779		13.7			2,543		9.1			2,888		4.0
	Multi-family				4,803		17.4			2,170		7.8			1,206		1.7
	Residential construction				2,498		9.1			2,250		8.1			35,935		49.3
	Commercial construction				1,673		6.1			4,115		14.7			7,743		10.6
	Other commercial real estate				3,002		10.9			4,421		15.8			12,202		16.7
	Consumer				2,395		8.7			2,100		7.5			2,612		3.6
		Total net loans charged-off, excluding covered loans			27,544		100.0			27,941		100.0			72,909		100.0
		Net charge-offs on covered loans			3,687					1,024					935
			Total net charge-offs	$	31,231				$	28,965				$	73,844
Net loan charge-offs to average loans, excluding covered loans, annualized:
	Quarter-to-date				2.15	%				2.16	%				5.61	%
	Year-to-date				1.84	%				1.73	%				2.80	%

Net charge-offs for fourth quarter 2011, excluding charge-offs related to covered loans, were $27.5 million, down 62.2% from $72.9 million for fourth quarter 2010 and relatively flat compared to $27.9 million for third quarter 2011. The elevated level of charge-offs for fourth quarter 2010 related to a shift in disposition strategy primarily for certain construction loans to more aggressively pursue disposition.

CAPITAL MANAGEMENT

Capital Ratios
(Dollar amounts in thousands)
			December 31, 2011		September 30, 2011		December 31, 2010		Regulatory Minimum For "Well- Capitalized			Excess Over Required Minimums at December 31, 2011
Regulatory capital ratios:
	Total capital to risk-weighted assets		13.68%		16.81%		16.27%		10.00%			37%		$	229,842
	Tier 1 capital to risk-weighted assets		11.61%		14.74%		14.20%		6.00%			94%		$	350,392
	Tier 1 leverage to average assets		9.28%		11.64%		11.21%		5.00%			86%		$	334,181
Regulatory capital ratios, excluding preferred stock (1):
	Total capital to risk-weighted assets		13.68%		13.72%		13.21%		10.00%			37%		$	229,842
	Tier 1 capital to risk-weighted assets		11.61%		11.65%		11.15%		6.00%			94%		$	350,392
	Tier 1 leverage to average assets		9.28%		9.20%		8.80%		5.00%			86%		$	334,181
	Tier 1 common capital to risk-weighted assets (2)(3)		10.26%		10.29%		9.81%		N/A(3)			N/A(3)			N/A(3)
Tangible common equity ratios:
	Tangible common equity to tangible assets		8.83%		8.35%		8.06%		N/A(3)			N/A(3)			N/A(3)
	Tangible common equity, excluding other comprehensive loss, to tangible assets		9.00%		8.49%		8.41%		N/A(3)			N/A(3)			N/A(3)
	Tangible common equity to risk- weighted assets		10.88%		10.83%		10.02%		N/A(3)			N/A(3)			N/A(3)

(1)		These ratios exclude the impact of $193.0 million in preferred stock issued to the Treasury.
(2)		Excludes the impact of preferred shares and trust-preferred securities.
(3)		Ratio is not subject to formal Federal Reserve regulatory guidance.

The Company's regulatory ratios as of December 31, 2011 exceeded all regulatory mandated ratios for characterization as "well-capitalized."

About the Company

First Midwest is the premier relationship-based banking franchise in the dynamic Chicagoland banking market. As one of the Chicago metropolitan area's largest independent bank holding companies, First Midwest provides the full range of business and retail banking and wealth management services through approximately 100 offices located in communities in metropolitan Chicago, northwest Indiana, central and western Illinois, and eastern Iowa. First Midwest was recently recognized as having the "Highest Customer Satisfaction with Retail Banking in the Midwest" according to the J.D. Power and Associates 2011 Retail Banking Satisfaction Study(SM). The Bank was also recognized by the Chicago Tribune for the second straight year as one of the top 20 best places to work in Chicago among large employers.

Safe Harbor Statement

This press release contains "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not historical facts but instead represent only the Company's beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside of the Company's control. It is possible that actual results and the Company's financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. For a discussion of some of the risks and important factors that could affect the Company's future results, see "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010 and other reports filed with the Securities and Exchange Commission. Forward-looking statements represent management's best judgment as of the date hereof based on currently available information. Except as required by law, the Company undertakes no duty to update the contents of this press release after the date hereof.

Conference Call

A conference call to discuss the Company's results, outlook, and related matters will be held on Wednesday, January 25, 2012 at 10:00 A.M. (ET). Members of the public who would like to listen to the conference call should dial (877) 317-6789 (U.S. domestic) or (412) 317-6789 (international) and ask for the First Midwest Bancorp, Inc. Earnings Conference Call. The number should be dialed 10 to 15 minutes prior to the start of the conference call. There is no charge to access the call. The conference call will also be accessible as an audio webcast through the Investor Relations section of the Company's website, www.firstmidwest.com/investorrelations. For those unable to listen to the live broadcast, a replay will be available on the Company's website or by dialing (877) 344-7529 (U.S. domestic) or (412) 317-0088 (international) conference I.D. 10008878 beginning one hour after completion of the live call until 8:00 A.M. (ET) on February 1, 2012. Please direct any questions regarding obtaining access to the conference call to First Midwest Bancorp, Inc. Investor Relations, via e-mail, at investor.relations@firstmidwest.com.

Accompanying Financial Statements and Tables

Accompanying this press release is the following unaudited financial information:

• Condensed Consolidated Statements of Financial Condition
• Condensed Consolidated Statements of Income

Press Release and Additional Information Available on Website

This press release, the accompanying financial statements and tables, and certain additional unaudited Selected Financial Information are available through the "Investor Relations" section of First Midwest's website at www.firstmidwest.com/investorrelations.

Condensed Consolidated Statements of Financial Condition
Unaudited
(Amounts in thousands)
				December 31, 2011				September 30, 2011				December 31, 2010
Assets
Cash and due from banks				$	123,354			$	116,003			$	102,495
Interest-bearing deposits in other banks					518,176				946,330				483,281
Trading securities, at fair value					14,469				13,308				15,282
Securities available-for-sale, at fair value					1,013,006				970,430				1,057,802
Securities held-to-maturity, at amortized cost					60,458				74,375				81,320
Federal Home Loan Bank and Federal Reserve Bank stock, at cost					58,187				58,187				61,338
Loans, excluding covered loans					5,088,113				5,104,494				5,100,560
Covered loans					260,502				289,747				371,729
Allowance for loan losses					(119,462	)			(128,791	)			(142,572	)
	Net loans				5,229,153				5,265,450				5,329,717
Other real estate owned ("OREO"), excluding covered OREO					33,975				23,863				31,069
Covered OREO					23,455				21,594				22,370
Federal Deposit Insurance Corporation ("FDIC") indemnification asset					65,609				63,508				95,899
Premises, furniture, and equipment					134,977				132,425				140,907
Investment in bank-owned life insurance					206,235				205,886				197,644
Goodwill and other intangible assets					283,650				283,163				286,033
Accrued interest receivable and other assets					208,890				205,652				233,145
	Total assets			$	7,973,594			$	8,380,174			$	8,138,302
Liabilities and Stockholders' Equity
Deposits
	Transactional deposits			$	4,820,058			$	4,899,216			$	4,519,492
	Time deposits				1,659,117				1,727,392				1,991,984
		Total deposits			6,479,175				6,626,608				6,511,476
Borrowed funds					205,371				386,429				303,974
Senior and subordinated debt					252,153				137,751				137,744
Accrued interest payable and other liabilities					74,308				76,953				73,063
		Total liabilities			7,011,007				7,227,741				7,026,257
Preferred stock					-				191,393				190,882
Common stock					858				858				858
Additional paid-in capital					428,001				425,647				437,550
Retained earnings					810,487				807,857				787,678
Accumulated other comprehensive loss, net of tax					(13,276	)			(11,413	)			(27,739	)
Treasury stock, at cost					(263,483	)			(261,909	)			(277,184	)
		Total stockholders' equity			962,587				1,152,433				1,112,045
		Total liabilities and stockholders' equity		$	7,973,594			$	8,380,174			$	8,138,302

Condensed Consolidated Statements of Income
Unaudited
(Amounts in thousands, except per share data)
				Quarters Ended												Years Ended
				December 31, 2011				September 30, 2011				December 31, 2010				December 31, 2011				December 31, 2010
Interest Income
Loans				$	62,774			$	64,085			$	63,983			$	252,865			$	259,318
Investment securities					8,313				8,633				10,230				36,659				49,801
Covered loans					6,787				6,640				7,431				28,904				17,285
Federal funds sold and other short-term investments					883				817				832				3,083				2,463
	Total interest income				78,757				80,175				82,476				321,511				328,867
Interest Expense
Deposits					5,962				6,654				7,907				27,256				37,127
Borrowed funds					670				706				711				2,743				3,267
Senior and subordinated debt					3,047				2,280				2,279				9,892				9,124
	Total interest expense				9,679				9,640				10,897				39,891				49,518
	Net interest income				69,078				70,535				71,579				281,620				279,349
Provision for loan losses					21,902				20,425				73,897				80,582				147,349
	Net interest income after provision for loan losses				47,176				50,110				(2,318	)			201,038				132,000
Noninterest Income
Service charges on deposit accounts					9,957				10,215				9,202				37,879				35,884
Trust and investment advisory fees					4,044				3,946				4,040				16,224				15,063
Other service charges, commissions, and fees					4,885				5,325				4,506				20,486				18,238
Card-based fees					4,971				4,931				4,640				19,593				17,577
	Total fee-based revenues				23,857				24,417				22,388				94,182				86,762
Bank-owned life insurance income					241				1,479				696				2,231				1,560
Securities (losses) gains, net					(110	)			449				1,662				2,410				12,216
Other					2,647				(1,754	)			1,421				3,114				8,013
	Total noninterest income				26,635				24,591				26,167				101,937				108,551
Noninterest Expense
Salaries and employee benefits					35,220				29,182				31,028				128,774				114,378
OREO expense, net					2,965				4,174				17,820				16,293				50,034
Net occupancy and equipment expense					7,681				8,157				7,916				32,953				32,218
Technology and related costs					2,876				2,709				3,209				10,905				11,070
Professional services					8,026				7,571				4,524				26,356				22,903
FDIC premiums					1,758				1,799				2,967				7,990				10,880
Other					8,065				10,584				9,610				38,633				37,296
	Total noninterest expense				66,591				64,176				77,074				261,904				278,779
Income (loss) before income tax expense (benefit)					7,220				10,525				(53,225	)			41,071				(38,228	)
Income tax expense (benefit)					296				1,583				(25,066	)			4,508				(28,544	)
	Net income (loss)				6,924				8,942				(28,159	)			36,563				(9,684	)
Preferred dividends					(3,027	)			(2,586	)			(2,579	)			(10,776	)			(10,299	)
Net (income) loss applicable to non-vested restricted shares					(20	)			(93	)			411				(350	)			266
	Net income (loss) applicable to common shares			$	3,877			$	6,263			$	(30,327	)		$	25,437			$	(19,717	)
		Diluted earnings (loss) per common share		$	0.05			$	0.09			$	(0.41	)		$	0.35			$	(0.27	)
		Dividends declared per common share		$	0.01			$	0.01			$	0.01			$	0.04			$	0.04
Weighted average diluted common shares outstanding					73,382				73,361				73,085				73,289				72,422