New York, July 02, 2012 -- Moody's Investors Service downgraded the long-term ratings of First
Midwest Bancorp, Inc. and its subsidiaries. First
Midwest Bancorp, Inc.'s senior debt rating was downgraded
to Baa2 from Baa1. The lead bank, First Midwest Bank,
had its standalone bank financial strength rating (BFSR)/baseline credit
assessment (BCA) downgraded to C-/baa1 from C/a3, and its
long-term deposit rating downgraded to Baa1 from A3. The
bank's Prime-2 short-term rating was affirmed. Following
the rating action, the outlook on all ratings is stable.
First Midwest Bancorp, Inc. and its subsidiaries are collectively
referred to hereafter as 'First Midwest'.
RATINGS RATIONALE
The one-notch downgrade of First Midwest's long-term
ratings reflects the bank's weaker asset quality and profitability
performance relative to similarly-rated peers. Moody's
said this is largely a function of First Midwest's commercial real
estate (CRE) concentration. At March 31, 2012, First
Midwest's non-owner occupied CRE exposure was a high 295%
of Tier 1 common. Moody's added that the CRE portfolio is
geographically concentrated in the comparatively weak suburban Chicago
market.
At March 31, 2012, First Midwest's nonperforming assets
(NPAs), which include accruing restructured loans but exclude FDIC-covered
assets, represented 4.7% of loans plus other real
estate owned compared to 3.1% for the C/a3 rating peer group
median. Management recently indicated that the aggressive remediation
of problem assets remains a strategic priority. Moody's views
this strategy positively, especially given the bank's strong
capital position. Moody's also noted the ongoing improvement
in First Midwest's CRE loan composition, with riskier construction
and land loans now accounting for about 5% of total loans.
Nonetheless, given First Midwest's concentrated exposure to
the soft Chicago CRE market, its rating is better positioned at
its new level.
First Midwest's core profitability is another area of relative weakness,
with pre-provision income to risk-weighted assets of less
than 2% in 2011 and the first quarter of 2012. Given the
low interest rate environment, lackluster loan demand, and
a highly competitive Chicago market, Moody's does not expect
significant improvement in First Midwest's profitability metrics
in the near term.
Moody's noted that the stable outlook on First Midwest's ratings is supported
by several key areas of strength. First, its capital position
is strong with a Tier 1 common ratio of 10.4% at March 31,
2012. The bank's capital position was bolstered by a common
equity raise in early 2010 and internal capital generation through earnings
since the first quarter of 2011. Additionally, the bank benefits
from its solid core deposit base in suburban Chicago. Finally,
First Midwest maintains a sound holding company liquidity profile.
First Midwest Bancorp, Inc. is headquartered in Itasca,
Illinois and reported assets of $8 billion at March 31, 2012.
The methodology used in these ratings was Moody's Consolidated Global
Bank Rating Methodology published in June 2012. Please see the
Credit Policy page on www.moodys.com for a copy of this
methodology.
Downgrades:
..Issuer: First Midwest Bancorp, Inc.
....Issuer Rating, Downgraded to Baa2
from Baa1
....Subordinate Regular Bond/Debenture,
Downgraded to Baa3 from Baa2
..Issuer: First Midwest Bank
....Bank Financial Strength Rating,
Downgraded to C- from C
....Issuer Rating, Downgraded to Baa1
from A3
....Senior Unsecured Deposit Rating,
Downgraded to Baa1 from A3
....OSO Senior Unsecured OSO Rating,
Downgraded to Baa1 from A3
..Issuer: First Midwest Capital Trust I
....Pref. Stock Preferred Stock,
Downgraded to Ba1 from Baa3
Outlook Actions:
..Issuer: First Midwest Bancorp, Inc.
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: First Midwest Bank
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: First Midwest Capital Trust I
....Outlook, Changed To Stable From
Rating Under Review
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU is endorsed by Moody's Investors
Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's office
that has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
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are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
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Joseph B Pucella
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
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Robert Franklyn Young
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 212-553-0376
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Releasing Office:
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Moody's downgrades First Midwest's ratings (senior to Baa2); outlook stable
