UPDATE 2-First Midwest posts surprise Q1 profit, shares rise

Wed Apr 21, 2010 12:28pm EDT

* Q1 EPS $0.08 vs loss estimate of $0.03/shr

* Provisions for loan losses fall 62 pct

* Net interest income more than triples

* Shares up 10 percent (Adds conference call details, analyst comment, share movement)

By Jochelle Mendonca

BANGALORE, April 21 (Reuters) - First Midwest Bancorp Inc (FMBI.O) posted a surprise first-quarter profit as the lender set aside less money to cover bad loans and was helped by a wider margin, sending its shares to a 52-week high.

On a post-earnings conference call with analysts, Chief Financial Officer Paul Clemens said the bank has positioned itself for margin expansion when interest rates go up later in the year.

Net interest margin -- the difference between what the bank pays on deposits and earns on loans -- stood at 4.28 percent, up 24 basis points from the previous quarter.

"They've had two consecutive quarters of improving margins. That's encouraging," Keefe, Bruyette and Woods analyst Christopher McGratty said.

He also pointed out the improving credit trends as a positive sign for the bank.

Provisions for loan losses fell 62 percent to $18.4 million from $48.4 million a year ago.

First Midwest also posted improved capital ratios on the back of a $196.7 million common equity raise.

Tangible common equity to tangible assets stood at 9.17 percent, up 288 basis points from the fourth quarter.

"We believe that they have the balance sheet in place to absorb any losses and also to pursue acquisitions in the Chicago area," McGratty said.

Net income available to common shares rose to $5.4 million, or 8 cents a share, from $3.1 million, or 7 cents per share, last year.

Analysts on average had expected a loss of 3 cents a share, excluding special items, according to Thomson Reuters I/B/E/S.

Net interest income more than tripled to $49.6 million from $15.8 million.

Shares of the Itasca, Illinois-based company rose as much as 10 percent to $16.18. They shed some gains to trade at $15.69, still up 7 percent, Wednesday mid-day on Nasdaq. (Reporting by Jochelle Mendonca in Bangalore; Editing by Gopakumar Warrier, Maju Samuel)

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