First Midwest Bancorp (FMBI) in Itasca, Ill., reported a third-quarter loss after it too steps to resolve $223 million of nonperforming and potentially problem loans.
The $8.2 billion-asset company posted a loss of $47.8 million, compared with a profit of $6.3 million for a year earlier.
In a news release late Tuesday, the company said it transferred $171 million of problem or potentially problem loans to held-for-sale status and expects to dispose of them through wholesale loan transactions to be completed in the fourth quarter. Roughly 65% of the loans transferred were commercial real estate ,with the remainder predominately in the commercial and industrial portfolio.
The remaining $52.4 million of loans were either nonperforming loans that were resolved through foreclosure and the underlying collateral was transferred to other real estate owned or performing loans, which were transferred to nonaccrual status for future restructuring.
"Such actions were undertaken only after careful analysis of the potential costs and benefits, contrasting the impact of continuing the workout process for these assets versus their accelerated resolution,” Michael L. Scudder, First Midwest’s president and chief executive of First Midwest, said in a news release. “These actions represent an immediate and meaningful step toward the achievement of our stated goals of improving our credit risk profile and producing reliable and attractive returns for our shareholders."
First Midwest’s decision to resolve the $223 million of loans resulted in chargeoffs of $99 million. Total net chargeoffs for the quarter were $125.5 million, up 333% from a year ago. The company’s provision for loan losses totaled $111.8 million, more than five times higher than a year earlier.
First Midwest recorded net interest income of $67.3 million, down almost 5% from a year earlier. Noninterest income rose 18%, to $29.1 million, year over year.
During the quarter, the company acquired substantially all the assets of the failed Waukegan Savings Bank. This generated a pre-tax gain of $3.3 million.
First Midwest’s shares were trading at $12.29 Wednesday morning, down more than 3% from Friday’s closing price.