Jul. 25--First Midwest Bancorp Inc., parent of First Midwest Bank, reported a smaller second-quarter profit than the previous period because of mounting losses on uncollectible loans and foreclosed properties.

The Itasca, Ill.-based bank holding company said it turned a $2.7 million profit in the quarter ending June 30, down from $5.7 million in the first quarter ending March 31, and from $27 million in the second quarter of 2008. Net income applicable to common shares was $63,000, or 0 cents per share, in the second quarter, down from $3.2 million, or 7 cents per share, in the first quarter.

Michael Scudder, president and chief executive officer of First Midwest Bancorp, said in a news release the company's performance is solid and benefits from strong net interest margins, an increasing core deposit base and operating efficiencies. But the company absorbed a significant increase in expenses from losses on loans and costs related to cleaning up its balance sheet, he said.

Other real estate owned more than doubled to $68.9 million in the second quarter compared to the first quarter. First Midwest said this was driven by real estate collateral obtained through deeds in lieu of foreclosure. The bank also increased its loan-loss reserves to 2.4 percent of total loans, up from 2.15 percent a quarter earlier.

There was a drop in nonaccrual loans plus loans 90 days or more past due and still accruing interest to 4.6 percent, or $245.1 million, of total loans in the second quarter, compared to 4.78 percent, or $257.5 million, on March 31.

First Midwest had a $16.2-million drop between the first and second quarter in loans between 30 and 89 days past due, and Scudder said the company has proactively addressed early-stage loan delinquencies, and the company is better positioning itself to reduce unprofitable assets.

Loans in residential construction accounted for 50 percent of the June 30 total. Total loans as of June 30 were $5.32 billion, down $64.6 million from March 31.

Average core deposits for the second quarter were $3.74 billion, up 8.7 percent from the first quarter. Fee-based revenues were $21.2 million for the second quarter, up $1.1 million compared to the earlier quarter.

First Midwest reported a risk-based capital ratio of 15.21 percent and 12.17 percent excluding preferred stock, which is above the Federal Deposit Insurance Corp.'s 10 percent "well capitalized" designation.

In December, First Midwest Bank, which bought Bank Calumet, received $193 million in funds from the U.S. Treasury Department Troubled Asset Relief Program.

First Midwest has 101 offices for business and retail banking and trust and investment management services across Northwest Indiana, Illinois and Iowa.

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