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CST: 23/09/2020 13:08:36   

First Midwest Bancorp, Inc. Announces 2019 First Quarter Results

518 Days ago

CHICAGO, April 23, 2019 (GLOBE NEWSWIRE) -- First Midwest Bancorp, Inc. (the "Company" or "First Midwest"), the holding company of First Midwest Bank (the "Bank"), today reported results of operations and financial condition for the first quarter of 2019. Net income for the first quarter of 2019 was $46.1 million, or $0.43 per share, compared to $41.4 million, or $0.39 per share, for the fourth quarter of 2018, and $33.5 million, or $0.33 per share, for the first quarter of 2018.

Reported results for the first quarter of 2019 and fourth quarter of 2018 were impacted by acquisition and integration related expenses and implementation costs related to the Company's Delivering Excellence initiative ("Delivering Excellence"). For additional detail on these adjustments, see the "Non-GAAP Financial Information" section presented later in this release.

Earnings per share ("EPS"), adjusted(1) was $0.46 for the first quarter of 2019, compared to $0.48 for the fourth quarter of 2018 and $0.33 for the first quarter of 2018.

SELECT FIRST QUARTER HIGHLIGHTS

  • Increased EPS to $0.43 compared to $0.39 and $0.33 for the fourth and first quarters of 2018, respectively. 
    -- Generated EPS, adjusted(1) of $0.46, seasonally down 4% from the fourth quarter of 2018 and up 39% from the first quarter of 2018. 
    -- 
    Produced returns on average tangible common equity, adjusted(1) of 15.3% for the first quarter of 2019, down 111 basis points and up 281 basis points from the fourth and first quarters of 2018, respectively.
  • Expanded net interest income and margin to $139 million and 4.04%, up 8 basis points from the fourth quarter of 2018 and 24 basis points from the first quarter of 2018.
  • Controlled noninterest expense, reported an efficiency ratio(1) of 56%, consistent with the fourth quarter of 2018 and down from 61% in the first quarter of 2018.
  • Grew loans to $12 billion, up 4%, annualized from December 31, 2018 and 8% from March 31, 2018.
  • Increased total average deposits to $12 billion, up 10% from the first quarter of 2018.
  • Increased common equity Tier 1 capital to 10.52%, up 32 basis points from the fourth quarter of 2018 and 87 basis points from the first quarter of 2018.
  • Completed the acquisition of Northern Oak Wealth Management, Inc, on January 16, 2019, adding approximately $800 million of assets under management.
  • Announced a share repurchase program authorizing the Company to repurchase up to $180 million of its common stock.

"We had a solid start to the year, reflecting significant growth in earnings from a year ago," said Michael L. Scudder, Chairman of the Board and Chief Executive Officer of the Company. "Operating performance benefitted from strong earning asset growth, higher interest rates, and stable core funding and, in turn, improved interest margins and our already solid operating efficiency. Sales activity remained active, with quarterly comparisons largely reflective of both normal seasonality and the impact of market volatility on certain fee-based businesses."

Mr. Scudder continued, "We remain well-positioned for continued growth and expansion. Our acquisition of Bridgeview Bank will close in May, adding $1.3 billion of assets and a strong team of colleagues to our presence in metro Chicago. At the same time, Northern Oak Wealth Management, which we acquired in January, will further augment our commercial and private banking expansion into the Milwaukee marketplace. The strength of our earnings and balance sheet continue to provide flexibility as we manage our capital and consider opportunities for further business expansion."

ACQUISITIONS

Completed

Northern Oak Wealth Management, Inc.

On January 16, 2019, the Company completed its acquisition of Northern Oak Wealth Management, Inc. ("Northern Oak"), a registered investment adviser based in Milwaukee, Wisconsin with approximately $800 million of assets under management at closing.

Pending

Bridgeview Bancorp, Inc.

On December 6, 2018, the Company entered into a merger agreement to acquire Bridgeview Bancorp, Inc. ("Bridgeview"), the holding company for Bridgeview Bank Group. With the acquisition, the Company would acquire 13 banking offices located across greater Chicagoland. As of December 31, 2018, Bridgeview had approximately $1.3 billion of assets, $1.0 billion of deposits, and $800 million of loans, excluding Bridgeview's mortgage division, which the Company is not acquiring. The merger agreement provides for a fixed exchange ratio of 0.2767 shares of Company common stock, plus $1.79 in cash, for each share of Bridgeview common stock, subject to certain adjustments. We anticipate issuing approximately 4.7 million shares at closing. As of the date of announcement, the overall transaction was valued at approximately $145 million. The acquisition is subject to the approval of Bridgeview’s stockholders and the completion of various closing conditions, and is anticipated to close in May 9, 2019.

(1) These metrics are non-GAAP financial measures. For details on the calculation of these metrics, see the sections titled "Non-GAAP Financial Information" and "Non-GAAP Reconciliations" presented later in this release.

OPERATING PERFORMANCE

Net Interest Income and Margin Analysis
(Dollar amounts in thousands)

  Quarters Ended
  March 31, 2019     December 31, 2018     March 31, 2018
  Average
Balance
  Interest   Yield/
Rate
(%)
    Average
Balance
  Interest   Yield/
Rate
(%)
    Average
Balance
  Interest   Yield/
Rate
(%)
Assets                                      
Other interest-earning assets $ 125,615     $ 728     2.35       $ 145,436     $ 476     1.30       $ 112,137     $ 423     1.53  
Securities(1) 2,371,692     16,387     2.76       2,359,083     15,907     2.70       2,063,223     12,141     2.35  
Federal Home Loan Bank ("FHLB") and
  Federal Reserve Bank ("FRB") stock
79,821     952     4.77       85,427     709     3.32       76,883     438     2.28  
Loans(1) 11,458,233     145,531     5.15       11,408,062     143,561     4.99       10,499,283     119,318     4.61  
Total interest-earning assets(1) 14,035,361     163,598     4.72       13,998,008     160,653     4.56       12,751,526     132,320     4.20  
Cash and due from banks 202,101               211,312               181,797          
Allowance for loan losses (107,520 )             (104,681 )             (99,234 )        
Other assets 1,537,897               1,398,760               1,352,964          
Total assets $ 15,667,839               $ 15,503,399               $ 14,187,053          
Liabilities and Stockholders' Equity                                      
Savings deposits $ 2,037,831     346     0.07       $ 2,044,312     358     0.07       $ 2,015,679     368     0.07  
NOW accounts 2,083,366     2,162     0.42       2,128,722     1,895     0.35       1,992,672     1,048     0.21  
Money market deposits 1,809,234     2,349     0.53       1,831,311     1,990     0.43       1,814,057     824     0.18  
Time deposits 2,647,316     11,745     1.80       2,311,453     8,894     1.53       1,735,155     3,939     0.92  
Borrowed funds 877,995     3,551     1.64       1,031,249     4,469     1.72       858,297     3,479     1.64  
Senior and subordinated debt 203,899     3,313     6.59       204,030     3,292     6.40       195,243     3,124     6.49  
Total interest-bearing liabilities 9,659,641     23,466     0.99       9,551,077     20,898     0.87       8,611,103     12,782     0.60  
Demand deposits 3,587,480               3,685,806               3,466,832          
Total funding sources 13,247,121         0.72       13,236,883         0.63       12,077,935         0.43  
Other liabilities 282,437               251,299               235,699          
Stockholders' equity - common 2,138,281               2,015,217               1,873,419          
Total liabilities and
  stockholders' equity
$ 15,667,839               $ 15,503,399               $ 14,187,053          
Tax-equivalent net interest
  income/margin(1)
    140,132     4.04           139,755     3.96           119,538     3.80  
Tax-equivalent adjustment     (1,108 )             (1,126 )             (975 )    
Net interest income (GAAP)(1)     $ 139,024               $ 138,629               $ 118,563      
Impact of acquired loan accretion(1)     $ 6,369     0.18           $ 5,426     0.15           $ 5,112     0.16  
Tax-equivalent net interest income/
  margin, adjusted(1)
    $ 133,763     3.86           $ 134,329     3.81           $ 114,426     3.64  

(1)  Interest income and yields on tax-exempt securities and loans are presented on a tax-equivalent basis, assuming a federal income tax rate of 21%. The corresponding income tax impact related to tax-exempt items is recorded in income tax expense. These adjustments have no impact on net income. See the "Non-GAAP Financial Information" section presented later in this release for a discussion of this non-GAAP financial measure.

Net interest income for the first quarter of 2019 was consistent with the fourth quarter of 2018 and up 17.3% compared to the first quarter of 2018. Compared to the fourth quarter of 2018, the impact of higher rates and acquired loan accretion was offset by higher funding costs and fewer days in the quarter. The rise in net interest income compared to the first quarter of 2018 resulted primarily from the acquisition of interest-earning assets from the Northern States Financial Corporation ("Northern States") transaction in the fourth quarter of 2018, higher interest rates, growth in loans and securities, and higher acquired loan accretion, partially offset by higher cost of funds.

Acquired loan accretion contributed $6.4 million, $5.4 million, and $5.1 million to net interest income for the first quarter of 2019, the fourth quarter of 2018, and the first quarter of 2018, respectively.

Tax-equivalent net interest margin for the current quarter was 4.04%, increasing by 8 basis points from the fourth quarter of 2018 and 24 basis points from the first quarter of 2018. Compared to both prior periods, the benefit of higher interest rates more than offset the rise in funding costs. In addition, tax-equivalent net interest margin was impacted by a 3 basis point and 2 basis point increase in acquired loan accretion compared to the fourth and first quarters of 2018, respectively.

For the first quarter of 2019, total average interest-earning assets were consistent with the fourth quarter of 2018 and rose by $1.3 billion from the first quarter of 2018. The increase compared to the first quarter of 2018 resulted primarily from the Northern States transaction, organic loan growth, and security purchases.

Total average funding sources for the first quarter of 2019 were consistent with the fourth quarter of 2018 and increased by $1.2 billion from the first quarter of 2018. The increase compared to the first quarter of 2018 resulted primarily from the Northern States transaction and time deposits.

Noninterest Income Analysis
(Dollar amounts in thousands)

    Quarters Ended   March 31, 2019 
Percent Change From
    March 31,
2019
  December 31,
 2018
  March 31,
2018
  December 31,
 2018
  March 31,
2018
Service charges on deposit accounts   $ 11,540     $ 12,627     $ 11,652     (8.6 )   (1.0 )
Wealth management fees   11,600     10,951     10,958     5.9     5.9  
Card-based fees, net   4,378     4,574     3,933     (4.3 )   11.3  
Capital market products income   1,279     1,408     1,558     (9.2 )   (17.9 )
Mortgage banking income   1,004     1,304     2,397     (23.0 )   (58.1 )
Merchant servicing fees, net   337     365     330     (7.7 )   2.1  
Other service charges, commissions, and fees   2,274     2,353     2,218     (3.4 )   2.5  
Total fee-based revenues   32,412     33,582     33,046     (3.5 )   (1.9 )
Other income   2,494     2,880     2,471     (13.4 )   0.9  
Total noninterest income   $ 34,906     $ 36,462     $ 35,517     (4.3 )   (1.7 )
                                     

Total noninterest income of $34.9 million was down 4.3% and 1.7% from the fourth and first quarters of 2018, respectively. Overall, noninterest income for the first quarter of 2019 was impacted by seasonality and market volatility, which were partially offset by services provided to customers acquired in the Northern Oak transaction. The decrease in service charges on deposit accounts and net card-based fees compared to the fourth quarter of 2018 was due primarily to seasonality. The rise in net card-based fees compared to the first quarter of 2018 resulted from higher transaction volumes and services provided to customers acquired in the Northern States transaction. Compared to both prior periods, the increase in wealth management fees was driven primarily by customers acquired in the Northern Oak transaction.

Capital market products income decreased compared to both prior periods, and fluctuates from quarter to quarter based on the size and frequency of sales to corporate clients.

The decrease in mortgage banking income compared to both prior periods resulted primarily from a reduction in the fair value of mortgage servicing rights during the first quarter of 2019. The change in the fair value of mortgage servicing rights fluctuates from quarter to quarter, and resulted in a decrease to mortgage banking income of $400,000 compared to the fourth quarter of 2018 and $1.1 million compared to the first quarter of 2018.

Other income was elevated in the fourth quarter of 2018 due primarily to higher fair value adjustments on equity securities and other miscellaneous items.

Noninterest Expense Analysis
(Dollar amounts in thousands)

    Quarters Ended   March 31, 2019 
Percent Change From
    March 31,
2019
  December 31,
 2018
  March 31,
2018
  December 31,
 2018
  March 31,
2018
Salaries and employee benefits:                    
Salaries and wages   $ 46,135     $ 45,011     $ 45,830     2.5     0.7  
Retirement and other employee benefits   11,238     10,378     10,957     8.3     2.6  
Total salaries and employee benefits   57,373     55,389     56,787     3.6     1.0  
Net occupancy and equipment expense   14,770     12,827     13,773     15.1     7.2  
Professional services   7,788     8,859     7,580     (12.1 )   2.7  
Technology and related costs   4,596     4,849     4,771     (5.2 )   (3.7 )
Advertising and promotions   2,372     2,011     1,650     18.0     43.8  
Net other real estate owned ("OREO") expense   681     763     1,068     (10.7 )   (36.2 )
Other expenses   10,581     13,418     9,953     (21.1 )   6.3  
Acquisition and integration related expenses   3,691     9,553         (61.4 )   100.0  
Delivering Excellence implementation costs   258     3,159         (91.8 )   100.0  
Total noninterest expense   $ 102,110     $ 110,828     $ 95,582     (7.9 )   6.8  
Acquisition and integration related expenses   (3,691 )   (9,553 )       (61.4 )   (100.0 )
Delivering Excellence implementation costs   (258 )   (3,159 )       (91.8 )   (100.0 )
Total noninterest expense, adjusted(1)   $ 98,161     $ 98,116     $ 95,582         2.7  
                                     

(1) See the "Non-GAAP Financial Information" section presented later in this release for a discussion of this non-GAAP financial measure.

Total noninterest expense decreased by 7.9% from the fourth quarter of 2018 and increased by 6.8% from the first quarter of 2018. During the first quarter of 2019 and fourth quarter of 2018, noninterest expense was impacted by acquisition and integration related expenses and costs related to the implementation of the Delivering Excellence initiative. Excluding these items, noninterest expense for the first quarter of 2019 was $98.2 million, consistent with the fourth quarter of 2018 and up 2.7% from first quarter of 2018.

Compared to the fourth quarter of 2018, the increase in salaries and employee benefits was driven primarily by merit increases, payroll tax timing, and lower levels of deferred loan salaries, partially offset by ongoing benefits of the Delivering Excellence initiative. The decrease in professional services from the fourth quarter of 2018 was driven by lower loan remediation and legal fees.

Net occupancy and equipment expense increased compared to both prior periods due to the adoption of lease accounting guidance at the beginning of the first quarter of 2019. Upon adoption of this guidance, a deferred gain that resulted from a prior sale-leaseback transaction is no longer included as a reduction in net occupancy and equipment expense in the amount of approximately $1.5 million on a quarterly basis. In addition, higher costs related to winter weather conditions contributed to the rise in net occupancy and equipment expense from the fourth quarter of 2018. Advertising and promotions expense increased from both prior periods due to higher costs related to marketing campaigns.

The decrease in net OREO expense compared to the first quarter of 2018 was due mainly to higher levels of gains on sales of properties and a reduction in operating expenses.

Other expenses were elevated in the fourth quarter of 2018 due primarily to property valuation adjustments, the reserve for unfunded commitments, and other miscellaneous expenses.

Acquisition and integration related expenses for the first quarter of 2019 resulted from the acquisition of Northern States and Northern Oak and the pending acquisition of Bridgeview. For the fourth quarter of 2018, acquisition and integration related expenses resulted from the acquisition of Northern States.

Delivering Excellence implementation costs for the first quarter of 2019 and the fourth quarter of 2018 resulted from certain actions initiated by the Company in connection with its Delivering Excellence initiative and include property valuation adjustments on locations identified for closure, employee severance, and general restructuring and advisory services.

LOAN PORTFOLIO AND ASSET QUALITY

Loan Portfolio Composition
(Dollar amounts in thousands)

    As of   March 31, 2019
Percent Change From
    March 31, 2019   December 31,
2018
  March 31, 2018   December 31,
2018
  March 31, 2018
Commercial and industrial   $ 4,183,262     $ 4,120,293     $ 3,659,066     1.5     14.3  
Agricultural   438,461     430,928     435,734     1.7     0.6  
Commercial real estate:                    
Office, retail, and industrial   1,806,892     1,820,917     1,931,202     (0.8 )   (6.4 )
Multi-family   752,943     764,185     695,830     (1.5 )   8.2  
Construction   683,475     649,337     585,766     5.3     16.7  
Other commercial real estate   1,309,878     1,361,810     1,363,238     (3.8 )   (3.9 )
Total commercial real estate   4,553,188     4,596,249     4,576,036     (0.9 )   (0.5 )
Total corporate loans   9,174,911     9,147,470     8,670,836     0.3     5.8  
Home equity   862,068     851,607     881,534     1.2     (2.2 )
1-4 family mortgages   1,086,264     1,017,181     798,902     6.8     36.0  
Installment   445,760     430,525     325,502     3.5     36.9  
Total consumer loans   2,394,092     2,299,313     2,005,938     4.1     19.4  
Total loans   $ 11,569,003     $ 11,446,783     $ 10,676,774     1.1     8.4  
                                     

Total loans of $11.6 billion increased by 4.3%, annualized from December 31, 2018 and by 8.4% from March 31, 2018. The increase in loans compared to March 31, 2018 benefitted from the Northern States transaction. Compared to both prior periods, growth in commercial and industrial loans, primarily within our sector-based lending, drove the rise in total corporate loans. The rise in construction loans compared to both prior periods was due to new loan originations and line draws on existing credits. The overall decline in office, retail, and industrial and other commercial real estate loans compared to both prior periods resulted primarily from the decision of certain customers to opportunistically sell their commercial business or investment real estate properties, as well as refinancing with non-bank lenders and real estate investors.

Growth in consumer loans compared to both prior periods resulted from purchases of shorter-duration home equity loans and 1-4 family mortgages and organic growth. Compared to March 31, 2018, growth in consumer loans also benefited from the purchase of installment loans.

Asset Quality
(Dollar amounts in thousands)

    As of   March 31, 2019 
Percent Change From
    March 31,
2019
  December 31,
 2018
  March 31,
2018
  December 31,
 2018
  March 31,
2018
Asset quality                    
Non-accrual loans   $ 70,205     $ 56,935     $ 75,015     23.3     (6.4 )
90 days or more past due loans, still accruing
  interest(1)
  8,446     8,282     4,633     2.0     82.3  
Total non-performing loans   78,651     65,217     79,648     20.6     (1.3 )
Accruing troubled debt restructurings
  ("TDRs")
  1,844     1,866     1,778     (1.2 )   3.7  
OREO   10,818     12,821     17,472     (15.6 )   (38.1 )
Total non-performing assets   $ 91,313     $ 79,904     $ 98,898     14.3     (7.7 )
30-89 days past due loans(1)   $ 45,764     $ 37,524     $ 42,573          
Non-accrual loans to total loans   0.61 %   0.50 %   0.70 %        
Non-performing loans to total loans   0.68 %   0.57 %   0.75 %        
Non-performing assets to total loans plus
  OREO
  0.79 %   0.70 %   0.92 %        
Allowance for credit losses                                
Allowance for credit losses   $ 104,779     $ 103,419     $ 95,854          
Allowance for credit losses to total loans(2)   0.91 %   0.90 %   0.90 %        
Allowance for credit losses to loans, excluding
  acquired loans
  1.00 %   1.01 %   1.01 %        
Allowance for credit losses to non-accrual
  loans
  149.25 %   181.64 %   127.78 %        

(1) Purchased credit impaired loans with an accretable yield are considered current and are not included in past due loan totals.

(2) This ratio includes acquired loans that are recorded at fair value through an acquisition adjustment, which incorporates credit risk as of the acquisition date with no allowance for credit losses being established at that time. As the acquisition adjustment is accreted into income over future periods, an allowance for credit losses on acquired loans is established as necessary to reflect credit deterioration.

Total non-performing assets represented 0.79% of total loans and OREO at March 31, 2019 compared to 0.70% and 0.92% at December 31, 2018 and March 31, 2018, respectively, reflective of normal fluctuations that can occur on a quarterly basis. The decline in OREO compared to March 31, 2018 resulted from sales of OREO properties.

The allowance for credit losses to total loans was 0.91% at March 31, 2019, consistent with December 31, 2018 and March 31, 2018.

Charge-Off Data
 (Dollar amounts in thousands)

    Quarters Ended
    March 31,
2019
  % of
Total
  December 31,
 2018
  % of
Total
  March 31,
2018
  % of
Total
Net loan charge-offs(1)                        
Commercial and industrial   $ 5,061     55.7     $ 5,558     73.9     $ 13,149     81.9  
Agricultural   89     1.0     71     0.9     983     6.1  
Office, retail, and industrial   618     6.8     713     9.5     364     2.3  
Multi-family   339     3.7     (3 )            
Construction           (99 )   (1.3 )   (13 )   (0.1 )
Other commercial real estate   189     2.1     (817 )   (10.9 )   30     0.2  
Consumer   2,788     30.7     2,094     27.9     1,543     9.6  
Total net loan charge-offs   $ 9,084     100.0     $ 7,517     100.0     $ 16,056     100.0  
Total recoveries included above   $ 1,693         $ 2,810         $ 1,029      
Net loan charge-offs to average loans(1)(2):                        
Quarter-to-date(1)   0.32 %       0.26 %       0.62 %    

(1) Amounts represent charge-offs, net of recoveries.

(2) Annualized based on the actual number of days for each period presented.

Net loan charge-offs to average loans, annualized were 0.32%, compared to 0.26% for the fourth quarter of 2018 and 0.62% for the first quarter of 2018. Net loan charge-offs were elevated in the first quarter of 2018 due to losses on two corporate loan relationships based upon circumstances unique to these borrowers.

DEPOSIT PORTFOLIO

Deposit Composition
(Dollar amounts in thousands)

    Average for the Quarters Ended   March 31, 2019 
Percent Change From
    March 31,
2019
  December 31,
 2018
  March 31,
2018
  December 31,
 2018
  March 31,
2018
Demand deposits   $ 3,587,480     $ 3,685,806     $ 3,466,832     (2.7 )   3.5  
Savings deposits   2,037,831     2,044,312     2,015,679     (0.3 )   1.1  
NOW accounts   2,083,366     2,128,722     1,992,672     (2.1 )   4.6  
Money market accounts   1,809,234     1,831,311     1,814,057     (1.2 )   (0.3 )
Core deposits   9,517,911     9,690,151     9,289,240     (1.8 )   2.5  
Time deposits   2,647,316     2,311,453     1,735,155     14.5     52.6  
Total deposits   $ 12,165,227     $ 12,001,604     $ 11,024,395     1.4     10.3  
                                     

Total average deposits were $12.2 billion for the first quarter of 2019, up 1.4% and 10.3% from the fourth and first quarters of 2018, respectively. The decrease in average core deposits compared to the fourth quarter of 2018 resulted primarily from the normal seasonal decline in commercial and municipal deposits. Compared to the first quarter of 2018, the rise in total average core deposits was driven by deposits acquired in the Northern States transaction. The increase in average time deposits compared to both prior periods resulted from the continued success of time deposit marketing initiatives.

CAPITAL MANAGEMENT

Capital Ratios

    As of
    March 31,
2019
  December 31,
 2018
  March 31,
2018
Company regulatory capital ratios:            
Total capital to risk-weighted assets   12.91 %   12.62 %   12.07 %
Tier 1 capital to risk-weighted assets   10.52 %   10.20 %   10.07 %
Common equity Tier 1 ("CET1") to risk-weighted assets   10.52 %   10.20 %   9.65 %
Tier 1 capital to average assets   9.28 %   8.90 %   9.07 %
Company tangible common equity ratios(1)(2):                  
Tangible common equity to tangible assets   9.00 %   8.59 %   8.18 %
Tangible common equity, excluding accumulated other comprehensive
  income ("AOCI"), to tangible assets
  9.21 %   8.95 %   8.60 %
Tangible common equity to risk-weighted assets   10.29 %   9.81 %   9.18 %

(1) These ratios are not subject to formal Federal Reserve regulatory guidance.

(2) Tangible common equity ("TCE") represents common stockholders' equity less goodwill and identifiable intangible assets. For details of the calculation of these ratios, see the sections titled, "Non-GAAP Financial Information" and "Non-GAAP Reconciliations" presented later in this release.

Compared to both prior periods, the increase in capital ratios resulted primarily from strong earnings and the approximately 25 basis point impact, or $47.3 million, of deferred gains, net of tax, which resulted from the adoption of lease accounting guidance at the beginning of the first quarter of 2019. These increases were partially offset by the Northern Oak acquisition and the impact of loan growth and securities purchases on risk-weighted assets. Compared to March 31, 2018, capital ratio increases were also partially offset by the Northern States acquisition. In addition, Tier 1 capital ratios compared to March 31, 2018 were impacted by the phase-out of Tier 1 treatment of the Company's trust-preferred securities in the fourth quarter of 2018.

The Board of Directors approved a quarterly cash dividend of $0.12 per common share during the first quarter of 2019, which follows a dividend increase from $0.11 to $0.12 per common share during the fourth quarter of 2018. This dividend represents the 145th consecutive cash dividend paid by the Company since its inception in 1983.

Conference Call

A conference call to discuss the Company's results, outlook, and related matters will be held on Wednesday, April 24, 2019 at 11 A.M. (ET). Members of the public who would like to listen to the conference call should dial (877) 507-6039 (U.S. domestic) or (412) 317-6003 (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. 10130490 beginning one hour after completion of the live call until 9:00 A.M. (ET) on May 8, 2019. 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.

Press Release, Presentation Materials, and Additional Information Available on Website

This press release, the presentation materials to be discussed during the conference call, and the accompanying unaudited Selected Financial Information are available through the "Investor Relations" section of First Midwest's website at www.firstmidwest.com/investorrelations.

Forward-Looking Statements

This press release, as well as any oral statements made by or on behalf of First Midwest, may contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by the use of words such as "may," "might," "will," "would," "should," "could," "expect," "plan," "intend," "anticipate," "believe," "estimate," "outlook," "predict," "project," "probable," "potential," "possible," "target," "continue," "look forward," or "assume" and words of similar import. Forward-looking statements are not historical facts or guarantees of future performance but instead express only management's beliefs regarding future results or events, many of which, by their nature, are inherently uncertain and outside of management's control. It is possible that actual results and events may differ, possibly materially, from the anticipated results or events indicated in these forward-looking statements. First Midwest cautions you not to place undue reliance on these statements. Forward-looking statements speak only as of the date made, and First Midwest undertakes no obligation to update any forward-looking statements.

Forward-looking statements may be deemed to include, among other things, statements relating to First Midwest's future financial performance, including the related outlook for 2019, the performance of First Midwest's loan or securities portfolio, the expected amount of future credit reserves or charge-offs, corporate strategies or objectives, including the impact of certain actions and initiatives, First Midwest's Delivering Excellence initiative, including costs and benefits associated therewith and the timing thereof, anticipated trends in our business, regulatory developments, the impact of federal income tax reform legislation, acquisition transactions, including First Midwest's proposed acquisition of Bridgeview, estimated synergies, cost savings and financial benefits of completed transactions, and growth strategies, including possible future acquisitions. These statements are subject to certain risks, uncertainties and assumptions, including those discussed under the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in First Midwest's Annual Report on Form 10-K for the year ended December 31, 2018, and in First Midwest's subsequent filings made with the Securities and Exchange Commission ("SEC"). These risks and uncertainties are not exhaustive, and other sections of these reports describe additional factors that could adversely impact First Midwest's business and financial performance.

Non-GAAP Financial Information

The Company's accounting and reporting policies conform to U.S. generally accepted accounting principles ("GAAP") and general practices within the banking industry. As a supplement to GAAP, the Company provides non-GAAP performance results, which the Company believes are useful because they assist investors in assessing the Company's operating performance. These non-GAAP financial measures include EPS, adjusted, the efficiency ratio, return on average assets, adjusted, tax-equivalent net interest income (including its individual components), tax-equivalent net interest margin, tax-equivalent net interest margin, adjusted, noninterest expense, adjusted, effective income tax rate, adjusted, tangible common equity to tangible assets, tangible common equity, excluding AOCI, to tangible assets, tangible common equity to risk-weighted assets, return on average common equity, adjusted, return on average tangible common equity, and return on average tangible common equity, adjusted.

The Company presents EPS, the efficiency ratio, return on average assets, return on average common equity, and return on average tangible common equity, all adjusted for certain significant transactions. These transactions include acquisition and integration related expenses associated with completed and pending acquisitions (third and fourth quarters of 2018 and first quarter of 2019), Delivering Excellence implementation costs (second, third and fourth quarters of 2018 and first quarter of 2019), and certain income tax benefits resulting from tax reform (third quarter of 2018). Management believes excluding these transactions from EPS, the efficiency ratio, return on average assets, return on average common equity, and return on average tangible common equity may be useful in assessing the Company's underlying operational performance since these transactions do not pertain to its core business operations and their exclusion may facilitate better comparability between periods. Management believes that excluding acquisition and integration related expenses from these metrics may be useful to the Company, as well as analysts and investors, since these expenses can vary significantly based on the size, type, and structure of each acquisition. Additionally, management believes excluding these transactions from these metrics may enhance comparability for peer comparison purposes.

The Company presents noninterest expense, adjusted, which excludes acquisition and integration related expenses and Delivering Excellence implementation costs. In addition, the Company presents the effective income tax rate, adjusted, which excludes certain income tax benefits aligned with tax reform. Management believes that excluding these items from noninterest expense and the effective income tax rate may be useful in assessing the Company’s underlying operational performance as these items either do not pertain to its core business operations or their exclusion may facilitate better comparability between periods and for peer comparison purposes.

The tax-equivalent adjustment to net interest income and net interest margin recognizes the income tax savings when comparing taxable and tax-exempt assets. Interest income and yields on tax-exempt securities and loans are presented using the current federal income tax rate of 21%. Management believes that it is standard practice in the banking industry to present net interest income and net interest margin on a fully tax-equivalent basis and that it may enhance comparability for peer comparison purposes. In addition, management believes that presenting tax-equivalent net interest margin, adjusted, may enhance comparability for peer comparison purposes and is useful to the Company, as well as analysts and investors, since acquired loan accretion income may fluctuate based on the size of each acquisition, as well as from period to period.

In management's view, tangible common equity measures are capital adequacy metrics that may be meaningful to the Company, as well as analysts and investors, in assessing the Company's use of equity and in facilitating comparisons with peers. These non-GAAP measures are valuable indicators of a financial institution's capital strength since they eliminate intangible assets from stockholders' equity and retain the effect of accumulated other comprehensive loss in stockholders' equity.

Although intended to enhance investors' understanding of the Company's business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. In addition, these non-GAAP financial measures may differ from those used by other financial institutions to assess their business and performance. See the previously provided tables and the following reconciliations in the "Non-GAAP Reconciliations" section for details on the calculation of these measures to the extent presented herein.

Additional Information

The information contained herein does not constitute an offer to sell or a solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed merger of First Midwest and Bridgeview, First Midwest has filed a registration statement on Form S-4 (333-229674) with the SEC. The registration statement includes a proxy statement of Bridgeview, which also constitutes a prospectus of First Midwest, that has been sent to Bridgeview stockholders. Investors and stockholders are advised to read the registration statement and proxy statement/prospectus because it contains important information about First Midwest, Bridgeview and the proposed transaction. This document and other documents relating to the transaction filed by First Midwest can be obtained free of charge from the SEC’s website at www.sec.gov. These documents also can be obtained free of charge by accessing First Midwest’s website at www.firstmidwest.com under the tab “Investor Relations” and then under “SEC Filings.” Alternatively, these documents can be obtained free of charge from First Midwest upon written request to First Midwest Bancorp, Inc., Attn: Corporate Secretary, 8750 West Bryn Mawr Avenue, Suite 1300, Chicago, Illinois 60631 or by calling (708) 831-7483, or from Bridgeview upon written request to Bridgeview Bancorp, Inc., Attn: Chief Financial Officer, 4753 North Broadway, Chicago, Illinois 60640 or by calling (708) 594-7400.

Participants in this Transaction

First Midwest, Bridgeview and certain of their respective directors and executive officers may be deemed under the rules of the SEC to be participants in the solicitation of proxies from Bridgeview stockholders in connection with the proposed transaction. Certain information regarding the interests of these participants and a description of their direct and indirect interests, by security holdings or otherwise, is included in the proxy statement/prospectus regarding the proposed Bridgeview transaction. Additional information about First Midwest and its directors and certain of its officers may be found in First Midwest’s definitive proxy statement relating to its 2019 Annual Meeting of Stockholders filed with the SEC on April 4, 2019 and First Midwest’s annual report on Form 10-K for the year ended December 31, 2018 filed with the SEC on March 1, 2019. The definitive proxy statement and annual report can be obtained free of charge from the SEC’s website at www.sec.gov.

About the Company

First Midwest (NASDAQ: FMBI) is a relationship-focused financial institution and one of the largest independent publicly-traded bank holding companies based on assets headquartered in Chicago and the Midwest, with approximately $16 billion in assets and $12 billion in trust assets under management. First Midwest's principal subsidiary, First Midwest Bank, and other affiliates provide a full range of commercial, treasury management, equipment leasing, retail, wealth management, trust and private banking products and services through locations in metropolitan Chicago, northwest Indiana, central and western Illinois, and eastern Iowa. Visit First Midwest at www.firstmidwest.com.

Contacts

Investors: Patrick S. Barrett
Media: Maurissa Kanter
  EVP and Chief Financial Officer    SVP, Director of Corporate Communications
  (708) 831-7231   (708) 831-7345
  pat.barrett@firstmidwest.com    maurissa.kanter@firstmidwest.com 


Accompanying Unaudited Selected Financial Information

First Midwest Bancorp, Inc.
Consolidated Statements of Financial Condition (Unaudited)
(Dollar amounts in thousands)
   
  As of
  March 31,   December 31,   September 30,   June 30,   March 31,
  2019   2018   2018   2018   2018
Period-End Balance Sheet                  
Assets                  
Cash and due from banks $ 186,230     $ 211,189     $ 185,239     $ 181,482     $ 150,138  
Interest-bearing deposits in other banks 76,529     78,069     111,360     192,785     84,898  
Equity securities, at fair value 33,304     30,806     29,046     28,441     28,513  
Securities available-for-sale, at fair value 2,350,195     2,272,009     2,179,410     2,142,865     2,040,950  
Securities held-to-maturity, at amortized cost 12,842     10,176     12,673     13,042     13,400  
FHLB and FRB stock 85,790     80,302     87,728     82,778     80,508  
Loans:                  
Commercial and industrial 4,183,262     4,120,293     3,994,142     3,844,067     3,659,066  
Agricultural 438,461     430,928     432,220     433,175     435,734  
Commercial real estate:                  
Office, retail, and industrial 1,806,892     1,820,917     1,782,757     1,834,918     1,931,202  
Multi-family 752,943     764,185     698,611     703,091     695,830  
Construction 683,475     649,337     632,779     633,601     585,766  
Other commercial real estate 1,309,878     1,361,810     1,348,831     1,337,396     1,363,238  
Home equity 862,068     851,607     853,887     847,903     881,534  
1-4 family mortgages 1,086,264     1,017,181     888,797     880,181     798,902  
Installment 445,760     430,525     418,524     377,233     325,502  
Total loans 11,569,003     11,446,783     11,050,548     10,891,565     10,676,774  
Allowance for loan losses (103,579 )   (102,219 )   (99,925 )   (96,691 )   (94,854 )
Net loans 11,465,424     11,344,564     10,950,623     10,794,874     10,581,920  
OREO 10,818     12,821     12,244     12,892     17,472  
Premises, furniture, and equipment, net 131,014     132,502     126,389     127,024     126,348  
Investment in bank-owned life insurance ("BOLI") 295,899     296,733     284,074     282,664     281,285  
Goodwill and other intangible assets 808,852     790,744     751,248     753,020     754,814  
Accrued interest receivable and other assets 360,872     245,734     231,465     206,209     219,725  
Total assets $ 15,817,769     $ 15,505,649     $ 14,961,499     $ 14,818,076     $ 14,379,971  
Liabilities and Stockholders' Equity                  
Noninterest-bearing deposits $ 3,588,943     $ 3,642,989     $ 3,618,384     $ 3,667,847     $ 3,527,081  
Interest-bearing deposits 8,572,039     8,441,123     7,908,730     7,824,416     7,618,941  
Total deposits 12,160,982     12,084,112     11,527,114     11,492,263     11,146,022  
Borrowed funds 973,852     906,079     1,073,546     981,044     950,688  
Senior and subordinated debt 203,984     203,808     195,595     195,453     195,312  
Accrued interest payable and other liabilities 319,480     256,652     247,569     265,753     218,662  
Stockholders' equity 2,159,471     2,054,998     1,917,675     1,883,563     1,869,287  
Total liabilities and stockholders' equity $ 15,817,769     $ 15,505,649     $ 14,961,499     $ 14,818,076     $ 14,379,971  
Stockholders' equity, excluding AOCI $ 2,191,630     $ 2,107,510     $ 1,992,808     $ 1,947,963     $ 1,926,818  
Stockholders' equity, common 2,159,471     2,054,998     1,917,675     1,883,563     1,869,287  


First Midwest Bancorp, Inc.
Condensed Consolidated Statements of Income (Unaudited)
(Dollar amounts in thousands)
                   
  Quarters Ended
  March 31,   December 31,   September 30,   June 30,   March 31,
  2019   2018   2018   2018   2018
Income Statement                  
Interest income $ 162,490     $ 159,527     $ 149,532     $ 142,088     $ 131,345  
Interest expense 23,466     20,898     17,505     14,685     12,782  
Net interest income 139,024     138,629     132,027     127,403     118,563  
Provision for loan losses 10,444     9,811     11,248     11,614     15,181  
Net interest income after provision for loan losses 128,580     128,818     120,779     115,789     103,382  
Noninterest Income                  
Service charges on deposit accounts 11,540     12,627     12,378     12,058     11,652  
Wealth management fees 11,600     10,951     10,622     10,981     10,958  
Card-based fees, net 4,378     4,574     4,123     4,394     3,933  
Capital market products income 1,279     1,408     1,936     2,819     1,558  
Mortgage banking income 1,004     1,304     1,657     1,736     2,397  
Merchant servicing fees, net 337     365     387     383     330  
Other service charges, commissions, and fees 2,274     2,353     2,399     2,455     2,218  
Total fee-based revenues 32,412     33,582     33,502     34,826     33,046  
Other income 2,494     2,880     2,164     2,121     2,471  
Net securities gains (losses)                  
Total noninterest income 34,906     36,462     35,666     36,947     35,517  
Noninterest Expense                  
Salaries and employee benefits:                
Salaries and wages 46,135     45,011     44,067     46,256     45,830  
Retirement and other employee benefits 11,238     10,378     10,093     11,676     10,957  
Total salaries and employee benefits 57,373     55,389     54,160     57,932     56,787  
Net occupancy and equipment expense 14,770     12,827     13,183     13,651     13,773  
Professional services 7,788     8,859     7,944     8,298     7,580  
Technology and related costs 4,596     4,849     4,763     4,837     4,771  
Advertising and promotions 2,372     2,011     3,526     2,061     1,650  
Net OREO expense 681     763     (413 )   (256 )   1,068  
Other expenses 10,581     13,418     11,015     11,878     9,953  
Acquisition and integration related expenses 3,691     9,553     60          
Delivering Excellence implementation costs 258     3,159     2,239     15,015      
Total noninterest expense 102,110     110,828     96,477     113,416     95,582  
Income before income tax expense 61,376     54,452     59,968     39,320     43,317  
Income tax expense 15,318     13,044     6,616     9,720     9,807  
Net income $ 46,058     $ 41,408     $ 53,352     $ 29,600     $ 33,510  
Net income applicable to common shares $ 45,655     $ 41,088     $ 52,911     $ 29,360     $ 33,199  
Net income applicable to common shares, adjusted(1) 48,616     50,622     46,837     40,621     33,199  

Footnotes to Condensed Consolidated Statements of Income
(1)         See the "Non-GAAP Reconciliations" section for the detailed calculation.


First Midwest Bancorp, Inc.
Selected Financial Information (Unaudited)
(Amounts in thousands, except per share data)
                   
  As of or for the
  Quarters Ended
  March 31,   December 31,   September 30,   June 30,   March 31,
  2019   2018   2018   2018   2018
EPS                  
Basic EPS $ 0.43     $ 0.39     $ 0.52     $ 0.29     $ 0.33  
Diluted EPS $ 0.43     $ 0.39     $ 0.52     $ 0.29     $ 0.33  
Diluted EPS, adjusted(1) $ 0.46     $ 0.48     $ 0.46     $ 0.40     $ 0.33  
Common Stock and Related Per Common Share Data
Book value $ 20.20     $ 19.32     $ 18.61     $ 18.28     $ 18.13  
Tangible book value $ 12.63     $ 11.88     $ 11.32     $ 10.97     $ 10.81  
Dividends declared per share $ 0.12     $ 0.12     $ 0.11     $ 0.11     $ 0.11  
Closing price at period end $ 20.46     $ 19.81     $ 26.59     $ 25.47     $ 24.59  
Closing price to book value 1.0     1.0     1.4     1.4     1.4  
Period end shares outstanding 106,900     106,375     103,058     103,059     103,092  
Period end treasury shares 8,775     9,297     9,301     9,297     9,261  
Common dividends $ 12,837     $ 12,774     $ 11,326     $ 11,333     $ 11,349  
Key Ratios/Data                  
Return on average common equity(2) 8.66 %   8.09 %   10.99 %   6.23 %   7.19 %
Return on average common equity, adjusted(1)(2) 9.22 %   9.97 %   9.73 %   8.62 %   7.19 %
Return on average tangible common equity(2) 14.41 %   13.42 %   18.60 %   10.83 %   12.50 %
Return on average tangible common equity, adjusted(1)(2) 15.31 %   16.42 %   16.51 %   14.81 %   12.50 %
Return on average assets(2) 1.19 %   1.06 %   1.42 %   0.81 %   0.96 %
Return on average assets, adjusted(1)(2) 1.27 %   1.30 %   1.26 %   1.12 %   0.96 %
Loans to deposits 95.13 %   94.73 %   95.87 %   94.77 %   95.79 %
Efficiency ratio(1) 55.69 %   55.25 %   56.03 %   59.65 %   60.96 %
Net interest margin(2)(3) 4.04 %   3.96 %   3.92 %   3.91 %   3.80 %
Yield on average interest-earning assets(2)(3) 4.72 %   4.56 %   4.44 %   4.35 %   4.20 %
Cost of funds(2)(4) 0.72 %   0.63 %   0.55 %   0.47 %   0.43 %
Net noninterest expense to average assets(2) 1.74 %   1.90 %   1.62 %   2.10 %   1.72 %
Effective income tax rate 24.96 %   23.96 %   11.03 %   24.72 %   22.64 %
Effective income tax rate, adjusted(1) 24.96 %   23.96 %   24.04 %   24.72 %   22.64 %
Capital Ratios                                      
Total capital to risk-weighted assets(1) 12.91 %   12.62 %   12.32 %   12.07 %   12.07 %
Tier 1 capital to risk-weighted assets(1) 10.52 %   10.20 %   10.34 %   10.09 %   10.07 %
CET1 to risk-weighted assets(1) 10.52 %   10.20 %   9.93 %   9.68 %   9.65 %
Tier 1 capital to average assets(1) 9.28 %   8.90 %   9.10 %   8.95 %   9.07 %
Tangible common equity to tangible assets(1) 9.00 %   8.59 %   8.21 %   8.04 %   8.18 %
Tangible common equity, excluding AOCI, to tangible
  assets(1)
9.21 %   8.95 %   8.74 %   8.50 %   8.60 %
Tangible common equity to risk -weighted assets(1) 10.29 %   9.81 %   9.33 %   9.16 %   9.18 %
Note: Selected Financial Information footnotes are located at the end of this section.


First Midwest Bancorp, Inc.
Selected Financial Information (Unaudited)
(Amounts in thousands, except per share data)
                   
  As of or for the
  Quarters Ended
  March 31,   December 31,   September 30,   June 30,   March 31,
  2019   2018   2018   2018   2018
Asset Quality Performance Data                
Non-performing assets                  
Commercial and industrial $ 34,694     $ 33,507     $ 37,981     $ 22,672     $ 43,974  
Agricultural 2,359     1,564     2,104     2,992     4,086  
Commercial real estate:                  
Office, retail, and industrial 17,484     6,510     6,685     9,007     12,342  
Multi-family 2,959     3,107     3,184     3,551     144  
Construction     144     208     208     208  
Other commercial real estate 2,971     2,854     4,578     5,288     4,088  
Consumer 9,738     9,249     10,026     9,757     10,173  
Total non-accrual loans 70,205     56,935     64,766     53,475     75,015  
90 days or more past due loans, still accruing interest 8,446     8,282     2,949     7,954     4,633  
Total non-performing loans 78,651     65,217     67,715     61,429     79,648  
Accruing TDRs 1,844     1,866     1,741     1,760     1,778  
OREO 10,818     12,821     12,244     12,892     17,472  
Total non-performing assets $ 91,313     $ 79,904     $ 81,700     $ 76,081     $ 98,898  
30-89 days past due loans $ 45,764     $ 37,524     $ 46,257     $ 39,171     $ 42,573  
Allowance for credit losses                  
Allowance for loan losses $ 103,579     $ 102,219     $ 99,925     $ 96,691     $ 94,854  
Reserve for unfunded commitments 1,200     1,200     1,000     1,000     1,000  
Total allowance for credit losses $ 104,779     $ 103,419     $ 100,925     $ 97,691     $ 95,854  
Provision for loan losses $ 10,444     $ 9,811     $ 11,248     $ 11,614     $ 15,181  
Net charge-offs by category                  
Commercial and industrial $ 5,061     $ 5,558     $ 5,230     $ 7,081     $ 13,149  
Agricultural 89     71     631     828     983  
Commercial real estate:                  
Office, retail, and industrial 618     713     596     279     364  
Multi-family 339     (3 )   1     4      
Construction     (99 )   (4 )   (8 )   (13 )
Other commercial real estate 189     (817 )   23     (358 )   30  
Consumer 2,788     2,094     1,537     1,951     1,543  
Total net charge-offs $ 9,084     $ 7,517     $ 8,014     $ 9,777     $ 16,056  
Total recoveries included above $ 1,693     $ 2,810     $ 1,250     $ 1,532     $ 1,029  
Note: Selected Financial Information footnotes are located at the end of this section.


First Midwest Bancorp, Inc.
Selected Financial Information (Unaudited)
                     
    As of or for the
    Quarters Ended
    March 31,   December 31,   September 30,   June 30,   March 31,
    2019   2018   2018   2018   2018
Asset quality ratios                    
Non-accrual loans to total loans   0.61 %   0.50 %   0.59 %   0.49 %   0.70 %
Non-performing loans to total loans   0.68 %   0.57 %   0.61 %   0.56 %   0.75 %
Non-performing assets to total loans plus OREO   0.79 %   0.70 %   0.74 %   0.70 %   0.92 %
Non-performing assets to tangible common equity plus allowance
  for credit losses
  6.27 %   5.84 %   6.45 %   6.19 %   8.17 %
Non-accrual loans to total assets   0.44 %   0.37 %   0.43 %   0.36 %   0.52 %
Allowance for credit losses and net charge-off ratios                              
Allowance for credit losses to total loans(5)   0.91 %   0.90 %   0.91 %   0.90 %   0.90 %
Allowance for credit losses to loans, excluding acquired loans   1.00 %   1.01 %   1.01 %   1.00 %   1.01 %
Allowance for credit losses to non-accrual loans   149.25 %   181.64 %   155.83 %   182.69 %   127.78 %
Allowance for credit losses to non-performing loans   133.22 %   158.58 %   149.04 %   159.03 %   120.35 %
Net charge-offs to average loans(2)   0.32 %   0.26 %   0.29 %   0.36 %   0.62 %

Footnotes to Selected Financial Information
(1) See the "Non-GAAP Reconciliations" section for the detailed calculation.
(2) Annualized based on the actual number of days for each period presented.
(3) Presented on a tax-equivalent basis, assuming the applicable federal income tax rate of 21%.
(4) Cost of funds expresses total interest expense as a percentage of total average funding sources. 
(5) This ratio includes acquired loans that are recorded at fair value through an acquisition adjustment, which incorporates credit risk, as of the acquisition date with no allowance for credit losses being established at that time. As the acquisition adjustment is accreted into income over future periods, an allowance for credit losses is established on acquired loans as necessary to reflect credit deterioration.


First Midwest Bancorp, Inc.
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
                   
  Quarters Ended
  March 31,   December 31,   September 30,   June 30,   March 31,
  2019   2018   2018   2018   2018
EPS                  
Net income $ 46,058     $ 41,408     $ 53,352     $ 29,600     $ 33,510  
Net income applicable to non-vested restricted shares (403 )   (320 )   (441 )   (240 )   (311 )
Net income applicable to common shares 45,655     41,088     52,911     29,360     33,199  
Adjustments to net income:                  
Acquisition and integration related expenses 3,691     9,553     60          
Tax effect of acquisition and integration related expenses (923 )   (2,388 )   (15 )        
Delivering Excellence implementation costs 258     3,159     2,239     15,015      
Tax effect of Delivering Excellence implementation costs (65 )   (790 )   (560 )   (3,754 )    
Income tax benefits(1)         (7,798 )        
Total adjustments to net income, net of tax 2,961     9,534     (6,074 )   11,261      
Net income applicable to common shares, adjusted(1) $ 48,616     $ 50,622     $ 46,837     $ 40,621     $ 33,199  
Weighted-average common shares outstanding:                
Weighted-average common shares outstanding (basic) 105,770     105,116     102,178     102,159     101,922  
Dilutive effect of common stock equivalents                 16  
Weighted-average diluted common shares outstanding 105,770     105,116     102,178     102,159     101,938  
Basic EPS $ 0.43     $ 0.39     $ 0.52     $ 0.29     $ 0.33  
Diluted EPS $ 0.43     $ 0.39     $ 0.52     $ 0.29     $ 0.33  
Diluted EPS, adjusted(1) $ 0.46     $ 0.48     $ 0.46     $ 0.40     $ 0.33  
Anti-dilutive shares not included in the computation of diluted EPS                 110  
Effective Tax Rate                  
Income before income tax expense $ 61,376     $ 54,452     $ 59,968     $ 39,320     $ 43,317  
Income tax expense $ 15,318     $ 13,044     $ 6,616     $ 9,720     $ 9,807  
Income tax benefits $     $     $ 7,798     $     $  
Income tax expense, adjusted $ 15,318     $ 13,044     $ 14,414     $ 9,720     $ 9,807  
Effective income tax rate 24.96 %   23.96 %   11.03 %   24.72 %   22.64 %
Effective income tax rate, adjusted 24.96 %   23.96 %   24.04 %   24.72 %   22.64 %
                   
Note: Non-GAAP Reconciliations footnotes are located at the end of this section.


First Midwest Bancorp, Inc.
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
                   
  As of or for the
  Quarters Ended
  March 31,   December 31,   September 30,   June 30,   March 31,
  2019   2018   2018   2018   2018
Return on Average Common and Tangible Common Equity            
Net income applicable to common shares $ 45,655     $ 41,088     $ 52,911     $ 29,360     $ 33,199  
Intangibles amortization 2,363     2,077     1,772     1,794     1,802  
Tax effect of intangibles amortization (591 )   (519 )   (443 )   (449 )   (508 )
Net income applicable to common shares, excluding
  intangibles amortization
47,427     42,646     54,240     30,705     34,493  
Total adjustments to net income, net of tax(1) 2,961     9,534     (6,074 )   11,261      
Net income applicable to common shares, adjusted(1) $ 50,388     $ 52,180     $ 48,166     $ 41,966     $ 34,493  
Average stockholders' equity $ 2,138,281     $ 2,015,217     $ 1,909,330     $ 1,890,727     $ 1,873,419  
Less: average intangible assets (803,408 )   (754,495 )   (752,109 )   (753,887 )   (753,870 )
Average tangible common equity $ 1,334,873     $ 1,260,722     $ 1,157,221     $ 1,136,840     $ 1,119,549  
Return on average common equity(2) 8.66 %   8.09 %   10.99 %   6.23 %   7.19 %
Return on average common equity, adjusted(1)(2) 9.22 %   9.97 %   9.73 %   8.62 %   7.19 %
Return on average tangible common equity(2) 14.41 %   13.42 %   18.60 %   10.83 %   12.50 %
Return on average tangible common equity, adjusted(1)(2) 15.31 %   16.42 %   16.51 %   14.81 %   12.50 %
Return on Average Assets                                      
Net income $ 46,058     $ 41,408     $ 53,352     $ 29,600     $ 33,510  
Total adjustments to net income, net of tax(1) 2,961     9,534     (6,074 )   11,261      
Net income, adjusted(1) $ 49,019     $ 50,942     $ 47,278     $ 40,861     $ 33,510  
Average assets $ 15,667,839     $ 15,503,399     $ 14,894,670     $ 14,605,715     $ 14,187,053  
Return on average assets(2) 1.19 %   1.06 %   1.42 %   0.81 %   0.96 %
Return on average assets, adjusted(1)(2) 1.27 %   1.30 %   1.26 %   1.12 %   0.96 %
Efficiency Ratio Calculation                                      
Noninterest expense $ 102,110     $ 110,828     $ 96,477     $ 113,416     $ 95,582  
Less:                                      
Net OREO expense (681 )   (763 )   413     256     (1,068 )
Acquisition and integration related expenses (3,691 )   (9,553 )   (60 )        
Delivering Excellence implementation costs (258 )   (3,159 )   (2,239 )   (15,015 )    
Total $ 97,480     $ 97,353     $ 94,591     $ 98,657     $ 94,514  
Tax-equivalent net interest income(3) $ 140,132     $ 139,755     $ 133,161     $ 128,442     $ 119,538  
Noninterest income 34,906     36,462     35,666     36,947     35,517  
Total $ 175,038     $ 176,217     $ 168,827     $ 165,389     $ 155,055  
Efficiency ratio 55.69 %   55.25 %   56.03 %   59.65 %   60.96 %
                   
Note: Non-GAAP Reconciliations footnotes are located at the end of this section.


First Midwest Bancorp, Inc
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
                   
  As of or for the
  Quarters Ended
  March 31,   December 31,   September 30,   June 30,   March 31,
  2019   2018   2018   2018   2018
Risk-Based Capital Data                  
Common stock $ 1,157     $ 1,157     $ 1,124     $ 1,124     $ 1,123  
Additional paid-in capital 1,103,991     1,114,580     1,028,635     1,025,703     1,021,923  
Retained earnings 1,273,245     1,192,767     1,164,133     1,122,107     1,103,840  
Treasury stock, at cost (186,763 )   (200,994 )   (201,084 )   (200,971 )   (200,068 )
Goodwill and other intangible assets, net of deferred tax liabilities (808,852 )   (790,744 )   (751,248 )   (753,020 )   (754,814 )
Disallowed DTAs (809 )   (1,334 )       (389 )   (522 )
CET1 capital 1,381,969     1,315,432     1,241,560     1,194,554     1,171,482  
Trust-preferred securities         50,690     50,690     50,690  
Other disallowed DTAs     (334 )       (97 )   (131 )
Tier 1 capital 1,381,969     1,315,098     1,292,250     1,245,147     1,222,041  
Tier 2 capital 312,840     311,391     248,118     244,795     242,870  
Total capital $ 1,694,809     $ 1,626,489     $ 1,540,368     $ 1,489,942     $ 1,464,911  
Risk-weighted assets $ 13,131,237     $ 12,892,180     $ 12,500,342     $ 12,345,200     $ 12,135,662  
Adjusted average assets $ 14,891,534     $ 14,782,327     $ 14,202,776     $ 13,907,100     $ 13,472,294  
Total capital to risk-weighted assets 12.91 %   12.62 %   12.32 %   12.07 %   12.07 %
Tier 1 capital to risk-weighted assets 10.52 %   10.20 %   10.34 %   10.09 %   10.07 %
CET1 to risk-weighted assets 10.52 %   10.20 %   9.93 %   9.68 %   9.65 %
Tier 1 capital to average assets 9.28 %   8.90 %   9.10 %   8.95 %   9.07 %
Tangible Common Equity                  
Stockholders' equity $ 2,159,471     $ 2,054,998     $ 1,917,675     $ 1,883,563     $ 1,869,287  
Less: goodwill and other intangible assets (808,852 )   (790,744 )   (751,248 )   (753,020 )   (754,814 )
Tangible common equity 1,350,619     1,264,254     1,166,427     1,130,543     1,114,473  
Less: AOCI 32,159     52,512     75,133     64,400     57,531  
Tangible common equity, excluding AOCI $ 1,382,778     $ 1,316,766     $ 1,241,560     $ 1,194,943     $ 1,172,004  
Total assets $ 15,817,769     $ 15,505,649     $ 14,961,499     $ 14,818,076     $ 14,379,971  
Less: goodwill and other intangible assets (808,852 )   (790,744 )   (751,248 )   (753,020 )   (754,814 )
Tangible assets $ 15,008,917     $ 14,714,905     $ 14,210,251     $ 14,065,056     $ 13,625,157  
Tangible common equity to tangible assets 9.00 %   8.59 %   8.21 %   8.04 %   8.18 %
Tangible common equity, excluding AOCI, to tangible assets 9.21 %   8.95 %   8.74 %   8.50 %   8.60 %
Tangible common equity to risk-weighted assets 10.29 %   9.81 %   9.33 %   9.16 %   9.18 %
                   

Footnotes to Non-GAAP Reconciliations
(1) Adjustments to net income for each period presented are detailed in the EPS non-GAAP reconciliation above. For additional discussion of adjustments, see the "Non-GAAP Financial Information" section.
(2) Annualized based on the actual number of days for each period presented.
(3) Presented on a tax-equivalent basis, assuming the applicable federal income tax rate of 21%.

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