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CST: 13/11/2019 01:01:01   

First Midwest Bancorp, Inc. Announces Record Net Income for the Third Quarter of 2019

21 Days ago

CHICAGO, Oct. 22, 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 third quarter of 2019. Net income for the third quarter of 2019 was $54.5 million, or $0.49 per share, compared to $47.0 million, or $0.43 per share, for the second quarter of 2019, and $53.4 million, or $0.52 per share, for the third quarter of 2018.

Reported results for all periods were impacted by acquisition and integration related expenses and implementation costs related to the Company's Delivering Excellence initiative(1) ("Delivering Excellence"). In addition, the third quarter of  2018 was impacted by the revaluation of deferred tax assets. For additional detail on these adjustments, see the "Non-GAAP Financial Information" section presented later in this release.

Earnings per share ("EPS"), adjusted(2) was $0.52 for the third quarter of 2019, compared to $0.50 for the second quarter of 2019 and $0.46 for the third quarter of 2018.

SELECT THIRD QUARTER HIGHLIGHTS

  • Generated EPS of $0.49, compared to $0.43 for the second quarter of 2019 and $0.52 for the third quarter of 2018.
  • Increased EPS, adjusted(2) to $0.52, up 4% and 13% from the second quarter of 2019 and third quarter of 2018, respectively.
  • Grew loans to $13 billion, up 8%, annualized from June 30, 2019 and 16% from September 30, 2018.
  • Increased total average deposits to $13 billion, up 4% and 16% from the second quarter of 2019 and third quarter of 2018, respectively.
  • Expanded noninterest income to $43 million, up 11% from the second quarter of 2019 and 20% from the third quarter of 2018.
  • Grew net interest income modestly from the second quarter of 2019 and 14% from the third quarter of 2018.
  • Net interest margin decreased to 3.82%, reflective of the interest rate environment and balance sheet mix.
  • Consistent net loan charge-offs to average loans of 0.29%, reflective of the benign credit environment.
  • Controlled noninterest expense; reported an efficiency ratio(2) of 54%, improved from 55% and 56% in the second quarter of 2019 and third quarter of 2018, respectively.
  • Increased common equity Tier 1 capital to 10.18%, up 7 basis points from the second quarter of 2019 and 25 basis points from the third quarter of 2018; capital replenished to levels last achieved prior to 2019 acquisitions.
  • Announced the acquisition of Park Bank on August 28, 2019, with approximately $1.0 billion of assets, $700 million of loans, and $815 million of deposits.

"Performance for the quarter was strong, profiting from both growth and revenue diversity," said Michael L. Scudder, Chairman of the Board and Chief Executive Officer of the Company. "We closed the quarter with $18.0 billion of total assets, up 3% and 20% from last quarter and year, respectively.  Operating results were solid and resilient, with the benefits of growth, stronger fee-based revenues and continued efficiency offsetting margin pressures from today’s lower rate environment."

Mr. Scudder concluded, "As we navigate the challenges of an uncertain landscape, First Midwest remains centered on our strategic and business priorities. First and foremost, we remain focused on our clients as we work to deliver a superior experience through continued investment in colleagues, systems and efficiency. Second, we continue to expand and diversify our business as evidenced by our pending acquisition of Park Bank, which will see us grow in the Milwaukee and Southeast Wisconsin marketplace. Combined with a strong balance sheet, these efforts position us well as we strive to provide our shareholders with superior, long-term returns."

PENDING ACQUISITION

Park Bank

On August 27, 2019, the Company entered into a merger agreement to acquire Bankmanagers Corp. ("Bankmanagers"), the holding company for Park Bank, based in Milwaukee, Wisconsin. As of June 30, 2019, Bankmanagers had approximately $1.0 billion of assets, $815 million of deposits, and $700 million of loans. The merger agreement provides for a fixed exchange ratio of 29.9675 shares of Company common stock, plus $623.02 in cash, for each share of Bankmanagers common stock, subject to certain adjustments. As of the date of announcement, the overall transaction was valued at approximately $195 million. The transaction is subject to customary regulatory approvals, the approval of Bankmanagers’ shareholders, and the completion of various closing conditions, and is anticipated to close by January 2020.

(1) The Company initiated certain actions in connection with its Delivering Excellence initiative in the second quarter of 2018, demonstrating the Company's ongoing commitment to provide service excellence to its clients and maximizing both the efficiency and scalability of its operating platform.
(2) 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
  September 30, 2019     June 30, 2019     September 30, 2018
  Average Balance   Interest   Yield/
Rate
(%)
    Average
Balance
  Interest   Yield/
Rate
(%)
    Average
Balance
  Interest   Yield/
Rate
(%)
Assets                                      
Other interest-earning assets $ 283,178     $ 1,702     2.38       $ 210,322     $ 1,240     2.36       $ 162,646     $ 631     1.54  
Securities(1) 2,869,461     19,906     2.77       2,631,437     18,423     2.80       2,245,784     14,533     2.59  
Federal Home Loan Bank ("FHLB") and Federal Reserve Bank ("FRB") stock 108,735     831     3.06       87,815     757     3.45       83,273     734     3.53  
Loans(1) 12,539,541     160,756     5.09       12,022,470     158,442     5.29       10,980,916     134,768     4.87  
Total interest-earning assets(1) 15,800,915     183,195     4.60       14,952,044     178,862     4.80       13,472,619     150,666     4.44  
Cash and due from banks 224,127               215,464               196,382          
Allowance for loan losses (110,616 )             (108,698 )             (100,717 )        
Other assets 1,784,754               1,681,240               1,326,386          
Total assets $ 17,699,180               $ 16,740,050               $ 14,894,670          
Liabilities and Stockholders' Equity                                      
Savings deposits $ 2,056,128     308     0.06       $ 2,079,852     346     0.07       $ 2,003,928     364     0.07  
NOW accounts 2,483,176     3,462     0.55       2,261,103     2,776     0.49       2,164,018     2,151     0.39  
Money market deposits 2,080,274     4,111     0.78       1,907,766     3,041     0.64       1,772,821     1,522     0.34  
Time deposits 3,026,423     13,873     1.82       2,849,930     13,153     1.85       1,993,361     6,389     1.27  
Borrowed funds 1,369,079     5,639     1.63       1,025,351     4,459     1.74       980,421     3,927     1.59  
Senior and subordinated debt 233,642     3,783     6.42       220,756     3,595     6.53       195,526     3,152     6.40  
Total interest-bearing liabilities 11,248,722     31,176     1.10       10,344,758     27,370     1.06       9,110,075     17,505     0.76  
Demand deposits 3,800,569               3,835,567               3,624,520          
Total funding sources 15,049,291         0.82       14,180,325         0.77       12,734,595         0.55  
Other liabilities 322,610               318,156               250,745          
Stockholders' equity - common 2,327,279               2,241,569               1,909,330          
Total liabilities and stockholders' equity $ 17,699,180               $ 16,740,050               $ 14,894,670          
Tax-equivalent net interest income/margin(1)     152,019     3.82           151,492     4.06           133,161     3.92  
Tax-equivalent adjustment     (1,232 )             (1,180 )             (1,134 )    
Net interest income (GAAP)(1)     $ 150,787               $ 150,312               $ 132,027      
Impact of acquired loan accretion(1)     $ 9,244     0.23           $ 10,308     0.28           $ 4,565     0.13  
Tax-equivalent net interest income/margin, adjusted(1)     $ 142,775     3.59           $ 141,184     3.78           $ 128,596     3.79  
                                                         

(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 third quarter of 2019 was consistent with the second quarter of 2019 and up 14.2% compared to the third quarter of 2018. Compared to both prior periods, the impact of the acquisition of interest-earning assets from the Bridgeview Bancorp, Inc. ("Bridgeview") transaction that closed in the middle of the second quarter of 2019, security purchases, and loan growth was partially offset by higher cost of funds. In addition, net interest income for the third quarter of 2019 benefited from an increase in the number of days in the quarter compared to the second quarter of 2019, partially offset by lower acquired loan accretion. Compared to the third quarter of 2018, the rise in net interest income was also impacted by the acquisition of interest-earning assets from the Northern States Financial Corporation ("Northern States") transaction in the fourth quarter of 2018 and higher acquired loan accretion.

Acquired loan accretion contributed $9.2 million, $10.3 million, and $4.6 million to net interest income for the third quarter of 2019, the second quarter of 2019, and the third quarter of 2018, respectively.

Tax-equivalent net interest margin for the current quarter was 3.82%, decreasing 24 basis points from the second quarter of 2019 and 10 basis points from the third quarter of 2018. Excluding the impact of acquired loan accretion, tax-equivalent net interest margin was 3.59%, down 19 basis points from the second quarter of 2019 and 20 basis point from the third quarter of 2018. Tax-equivalent net interest margin, adjusted reflects the impact of lower market rates on loan yields compared to the second quarter of 2019, and compression related to the mix of interest-earning assets acquired in the Bridgeview transaction compared to the third quarter of 2018. In addition, the decrease compared to both prior periods was impacted by actions taken to reduce rate sensitivity and higher cost of funds.

For the third quarter of 2019, total average interest-earning assets rose by $848.9 million and $2.3 billion from the second quarter of 2019 and third quarter of 2018, respectively. The increase compared to both prior periods resulted primarily from the Bridgeview transaction in the second quarter of 2019, security purchases, and loan growth. In addition, the rise in average interest-earning assets compared to the third quarter of 2018 was impacted by the Northern States transaction.

Total average funding sources for the third quarter of 2019 increased by $869.0 million and $2.3 billion from the second quarter of 2019 and third quarter of 2018, respectively. The increase compared to both prior periods resulted primarily from the Bridgeview transaction in the second quarter of 2019, organic growth, and FHLB advances. In addition, the rise in average funding sources compared to the third quarter of 2018 was impacted by the Northern States transaction.

Noninterest Income Analysis
(Dollar amounts in thousands)

  Quarters Ended   September 30, 2019
Percent Change From
  September 30,
2019
  June 30,
 2019
  September 30,
2018
  June 30,
 2019
  September 30,
2018
Service charges on deposit accounts $ 13,024     $ 12,196     $ 12,378     6.8     5.2  
Wealth management fees 12,063     12,190     10,622     (1.0 )   13.6  
Card-based fees, net 4,694     4,549     4,123     3.2     13.8  
Capital market products income 4,161     2,154     1,936     93.2     114.9  
Mortgage banking income 3,066     1,901     1,657     61.3     85.0  
Merchant servicing fees, net 385     371     387     3.8     (0.5 )
Other service charges, commissions, and fees 2,638     2,412     2,399     9.4     10.0  
Total fee-based revenues 40,031     35,773     33,502     11.9     19.5  
Other income 2,920     2,753     2,164     6.1     34.9  
Total noninterest income $ 42,951     $ 38,526     $ 35,666     11.5     20.4  
                                   

Total noninterest income of $43.0 million was up 11.5% and 20.4% from the second quarter of 2019 and third quarter of 2018, respectively. The increase in service charges on deposit accounts and net card-based fees compared to both prior periods was due to services provided to customers acquired in the Bridgeview transaction, as well as seasonally higher volumes compared to the second quarter of 2019 and services provided to customers acquired in the Northern States transaction compared to the third quarter of 2018. Compared to the third quarter of 2018, growth in wealth management fees was driven primarily by customers acquired in the Northern Oak Wealth Management, Inc. ("Northern Oak") transaction completed during the first quarter of 2019.

Capital market products income increased in the third quarter of 2019 as a result of higher sales to corporate clients due to lower long-term rates.

Mortgage banking income for the third quarter of 2019 resulted from sales of $141.0 million of 1-4 family mortgage loans in the secondary market, compared to $93.5 million in the second quarter of 2019 and $61.3 million in the third quarter of 2018. Mortgage banking income is also impacted by changes in the fair value of mortgage servicing rights, which fluctuate from quarter to quarter.

Other income was elevated compared to the third quarter of 2018 due primarily to benefit settlements on bank-owned life insurance and higher fair value adjustments on equity securities.

Noninterest Expense Analysis
(Dollar amounts in thousands)

  Quarters Ended   September 30, 2019
Percent Change From
  September 30,
2019
  June 30,
 2019
  September 30,
2018
  June 30,
 2019
  September 30,
2018
Salaries and employee benefits:                  
Salaries and wages $ 50,686     $ 47,776     $ 44,067     6.1     15.0  
Retirement and other employee benefits 10,795     10,916     10,093     (1.1 )   7.0  
Total salaries and employee benefits 61,481     58,692     54,160     4.8     13.5  
Net occupancy and equipment expense 13,903     13,671     13,183     1.7     5.5  
Professional services 9,550     10,467     7,944     (8.8 )   20.2  
Technology and related costs 5,062     4,908     4,763     3.1     6.3  
Advertising and promotions 2,955     3,167     3,526     (6.7 )   (16.2 )
Net other real estate owned ("OREO") expense 381     294     (413 )   29.6     192.3  
Other expenses 11,432     12,987     11,015     (12.0 )   3.8  
Acquisition and integration related expenses 3,397     9,514     60     (64.3 )   N/M  
Delivering Excellence implementation costs 234     442     2,239     (47.1 )   (89.5 )
Total noninterest expense $ 108,395     $ 114,142     $ 96,477     (5.0 )   12.4  
Acquisition and integration related expenses (3,397 )   (9,514 )   (60 )   (64.3 )   N/M  
Delivering Excellence implementation costs (234 )   (442 )   (2,239 )   (47.1 )   (89.5 )
Total noninterest expense, adjusted(1) $ 104,764     $ 104,186     $ 94,178     0.6     11.2  
                                   

N/M – Not meaningful.

(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 5.0% from the second quarter of 2019 and increased 12.4% from the third quarter of 2018. Noninterest expense for all periods presented was impacted by acquisition and integration related expenses and costs related to implementation of the Delivering Excellence initiative. Excluding these items, noninterest expense for the third quarter of 2019 was $104.8 million, consistent with the second quarter of 2019 and up 11.2% from the third quarter of 2018.

Operating costs associated with the Bridgeview transaction completed during the middle of the second quarter of 2019 contributed to noninterest expense for the third quarter of 2019. In addition, operating costs associated with the Northern Oak and Northern States transactions contributed to the increase in noninterest expense compared to the third quarter of 2018. These costs primarily occurred in salaries and employee benefits, net occupancy and equipment expense, professional services, and other expenses.

Compared to both prior periods, the increase in salaries and employee benefits was also impacted by higher commissions resulting from sales of 1-4 family mortgage loans in the secondary market. In addition, salaries and employee benefits compared to the third quarter of 2018 rose due to merit increases. The decrease in professional services compared to the second quarter of 2019 was driven primarily by the timing of certain other professional fees and the increase compared to the third quarter of 2018 resulted from organizational growth. Advertising and promotions expense decreased compared to both prior periods due to the timing of certain costs related to marketing campaigns, as well as a contribution to the First Midwest Charitable Foundation in the third quarter of 2018. Net OREO expense for the third quarter of 2018 was impacted by higher levels of gains on sales of properties. The decrease in other expenses compared to the second quarter of 2019 was driven primarily by lower property valuation adjustments and a reduction in Federal Deposit Insurance Corporation premiums due to small bank assessment credits received.

Acquisition and integration related expenses for the third quarter of 2019 resulted primarily from the acquisition of Bridgeview and the pending acquisition of Park Bank. For the second quarter of 2019, acquisition and integration related expenses resulted primarily from the acquisition of Bridgeview.

Delivering Excellence implementation costs for all periods presented 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   September 30, 2019
Percent Change From
  September 30, 2019   June 30,
 2019
  September 30, 2018   June 30,
 2019
  September 30, 2018
Commercial and industrial $ 4,570,361     $ 4,524,401     $ 3,994,142     1.0     14.4  
Agricultural 417,740     430,589     432,220     (3.0 )   (3.4 )
Commercial real estate:                  
Office, retail, and industrial 1,892,877     1,936,577     1,782,757     (2.3 )   6.2  
Multi-family 817,444     787,155     698,611     3.8     17.0  
Construction 637,256     654,607     632,779     (2.7 )   0.7  
Other commercial real estate 1,425,292     1,447,673     1,348,831     (1.5 )   5.7  
Total commercial real estate 4,772,869     4,826,012     4,462,978     (1.1 )   6.9  
Total corporate loans 9,760,970     9,781,002     8,889,340     (0.2 )   9.8  
Home equity 833,955     874,686     853,887     (4.7 )   (2.3 )
1-4 family mortgages 1,686,967     1,391,814     888,797     21.2     89.8  
Installment 491,427     472,102     418,524     4.1     17.4  
Total consumer loans 3,012,349     2,738,602     2,161,208     10.0     39.4  
Total loans $ 12,773,319     $ 12,519,604     $ 11,050,548     2.0     15.6  
                                   

Total loans of $12.8 billion increased 8.0%, annualized from June 30, 2019 and by 15.6% from September 30, 2018. Excluding loans acquired in the Bridgeview and Northern States transactions as of September 30, 2019, total loans grew by 7.8% from September 30, 2018. In addition, total corporate loans compared to both prior periods benefited from growth in commercial and industrial loans, primarily within our sector-based lending and middle market business units, and multifamily loans. Strong production within commercial real estate loans was offset by the impact of 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 primarily from purchases of 1-4 family mortgages and organic growth.

Asset Quality
(Dollar amounts in thousands)

  As of   September 30, 2019
Percent Change From
  September 30,
2019
  June 30,
 2019
  September 30,
2018
  June 30,
 2019
  September 30,
2018
Asset quality                  
Non-accrual loans $ 77,692     $ 63,477     $ 64,766     22.4     20.0  
90 days or more past due loans, still accruing interest(1) 4,657     2,615     2,949     78.1     57.9  
Total non-performing loans 82,349     66,092     67,715     24.6     21.6  
Accruing troubled debt restructurings ("TDRs") 1,422     1,441     1,741     (1.3 )   (18.3 )
Foreclosed assets(2) 25,266     28,488     12,244     (11.3 )   106.4  
Total non-performing assets $ 109,037     $ 96,021     $ 81,700     13.6     33.5  
30-89 days past due loans(1) $ 46,171     $ 34,460     $ 46,257          
Non-accrual loans to total loans 0.61 %   0.51 %   0.59 %        
Non-performing loans to total loans 0.64 %   0.53 %   0.61 %        
Non-performing assets to total loans plus foreclosed assets 0.85 %   0.77 %   0.74 %        
Allowance for credit losses                  
Allowance for credit losses $ 110,228     $ 106,929     $ 100,925          
Allowance for credit losses to total loans(3) 0.86 %   0.85 %   0.91 %        
Allowance for credit losses to loans, excluding acquired loans 0.98 %   0.98 %   1.01 %        
Allowance for credit losses to non-accrual loans 141.88 %   168.45 %   155.83 %        
                         

(1) Purchased credit impaired loans with an accretable yield are considered current and are not included in past due loan totals.
(2) Foreclosed assets consists of OREO and other foreclosed assets acquired in partial or total satisfaction of defaulted loans. Other foreclosed assets are included in other assets in the Consolidated Statements of Financial Condition.
(3) 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 0.85% of total loans and foreclosed assets at September 30, 2019 compared to 0.77% and 0.74% at June 30, 2019 and September 30, 2018, respectively, reflective of normal fluctuations that occur on a quarterly basis. The increase in non-accrual loans from June 30, 2019 was driven primarily by the transfer of two corporate loan relationships to non-accrual during the third quarter of 2019, for which the Company has remediation plans in place. In addition, included in foreclosed assets as of September 30, 2019 and June 30, 2019 was $3.9 million and $6.2 million, respectively, of OREO acquired in the Bridgeview transaction.

The allowance for credit losses to total loans was 0.86% at September 30, 2019, compared to 0.85% at June 30, 2019 and 0.91% at September 30, 2018. The decrease compared to September 30, 2018 was driven primarily by loans acquired in the Bridgeview transaction, for which no allowance for credit losses was established at the time of acquisition in accordance with accounting guidance applicable to business combinations.

Charge-Off Data
 (Dollar amounts in thousands)

  Quarters Ended
  September 30,
2019
  % of
Total
  June 30,
 2019
  % of
Total
  September 30,
2018
  % of
Total
Net loan charge-offs(1)                      
Commercial and industrial $ 5,532     60.1     $ 4,600     49.3     $ 5,230     65.2  
Agricultural 439     4.8     658     7.0     631     7.9  
Office, retail, and industrial 219     2.4     1,454     15.6     596     7.4  
Multi-family (38 )   (0.4 )           1      
Construction (2 )       (10 )   (0.1 )   (4 )    
Other commercial real estate (43 )   (0.5 )   284     3.0     23     0.3  
Consumer 3,092     33.6     2,355     25.2     1,537     19.2  
Total net loan charge-offs $ 9,199     100.0     $ 9,341     100.0     $ 8,014     100.0  
Total recoveries included above $ 2,073         $ 2,083         $ 1,250      
Net loan charge-offs to average loans(1)(2)                      
Quarter-to-date 0.29 %       0.31 %       0.29 %    
Year-to-date 0.31 %       0.32 %       0.42 %    
                             

(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 0.29%, compared to 0.31% for the second quarter of 2019 and 0.29% for the third quarter of 2018.

DEPOSIT PORTFOLIO

Deposit Composition
(Dollar amounts in thousands)

  Average for the Quarters Ended   September 30, 2019
Percent Change From
  September 30,
2019
  June 30,
 2019
  September 30,
2018
  June 30,
 2019
  September 30,
2018
Demand deposits $ 3,800,569     $ 3,835,567     $ 3,624,520     (0.9 )   4.9  
Savings deposits 2,056,128     2,079,852     2,003,928     (1.1 )   2.6  
NOW accounts 2,483,176     2,261,103     2,164,018     9.8     14.7  
Money market accounts 2,080,274     1,907,766     1,772,821     9.0     17.3  
Core deposits 10,420,147     10,084,288     9,565,287     3.3     8.9  
Time deposits 3,026,423     2,849,930     1,993,361     6.2     51.8  
Total deposits $ 13,446,570     $ 12,934,218     $ 11,558,648     4.0     16.3  
                                   

Total average deposits were $13.4 billion for the third quarter of 2019, up 4.0% and 16.3% from the second quarter of 2019 and third quarter of 2018, respectively. The increase in total average deposits compared to both prior periods was driven primarily by deposits assumed in the Bridgeview transaction during the middle of the second quarter of 2019 and organic growth. In addition, growth in total average deposits was impacted by the normal seasonal increase in municipal deposits compared to the second quarter of 2019 and deposits assumed in the Northern States transaction, as well as various time deposit marketing initiatives compared to the third quarter of 2018.

CAPITAL MANAGEMENT

Capital Ratios

  As of
  September 30,
2019
  June 30,
 2019
  December 31,
 2018
  September 30,
2018
Company regulatory capital ratios:              
Total capital to risk-weighted assets 12.62 %   12.57 %   12.62 %   12.32 %
Tier 1 capital to risk-weighted assets 10.18 %   10.11 %   10.20 %   10.34 %
Common equity Tier 1 ("CET1") to risk-weighted assets 10.18 %   10.11 %   10.20 %   9.93 %
Tier 1 capital to average assets 8.67 %   8.96 %   8.90 %   9.10 %
Company tangible common equity ratios(1)(2):            
Tangible common equity to tangible assets 8.54 %   8.57 %   8.59 %   8.21 %
Tangible common equity, excluding accumulated other comprehensive income ("AOCI"), to tangible assets 8.50 %   8.59 %   8.95 %   8.74 %
Tangible common equity to risk-weighted assets 10.24 %   10.11 %   9.81 %   9.33 %
                       

(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.

Capital ratios were consistent compared to December 31, 2018 as strong earnings and deferred gains recognized due to the adoption of lease accounting guidance at the beginning of 2019 were offset by the Bridgeview and Northern Oak acquisitions, the impact of loan growth and securities purchases on risk-weighted assets, and stock repurchases. In addition, capital ratios compared to September 30, 2018 were impacted by the phase-out of Tier 1 treatment of the Company's trust-preferred securities and the Northern States transaction in the fourth quarter of 2018.

During the first quarter of 2019, the Company announced a new stock repurchase program that authorizes the Company to repurchase up to $180 million of its common stock. Stock repurchases under this program may be made from time to time on the open market or in privately negotiated transactions, at the discretion of the Company. The Company repurchased approximately 645,000 shares of its common stock at a total cost of $12.7 million during the third quarter of 2019. As of September 30, 2019, the Company had remaining authorization to purchase $146.1 million of its common stock.

The Board of Directors approved a quarterly cash dividend of $0.14 per common share during the third quarter of 2019, which follows an increase of 17% from the first quarter of 2019 and is a 27% increase from the third quarter of 2018. This dividend represents the 147th 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, October 23, 2019 at 11 A.M. (ET). Members of the public who would like to listen to the conference call should dial (877) 507-0639 (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. 10135664 beginning one hour after completion of the live call until 9:00 A.M. (ET) on November 6, 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 First Midwest's business, regulatory developments, the impact of federal income tax reform legislation, acquisition transactions, including First Midwest's proposed acquisition of Bankmanagers, estimated synergies, cost savings and financial benefits of announced and 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 (all periods), Delivering Excellence implementation costs (all periods), 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 Bankmanagers, First Midwest has filed a registration statement on Form S-4 (file no. 333-234242) with the SEC. The registration statement includes a proxy statement of Bankmanagers, which also constitutes a prospectus of First Midwest, that will be sent to Bankmanagers' shareholders. Investors and shareholders are advised to read the registration statement and proxy statement/prospectus because it contains important information about First Midwest, Bankmanagers, 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 Bankmanagers upon written request to Bankmanagers Corp., Attn: P. Michael Mahoney, President, 330 East Kilbourn Avenue, Milwaukee, Wisconsin 53202 or by calling (414) 466-8000.

Participants in this Transaction

First Midwest, Bankmanagers 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 Bankmanagers' shareholders 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 Bankmanagers 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 First Midwest

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 $18 billion of assets and $12 billion of assets under management. First Midwest's principal subsidiary, First Midwest Bank, and other affiliates provide a full range of commercial, treasury management, equipment leasing, consumer, wealth management, trust and private banking products and services through locations in metropolitan Chicago, southeast Wisconsin, northwest Indiana, central and western Illinois, and eastern Iowa. Visit First Midwest at www.firstmidwest.com.

CONTACTS:

Investors
Patrick S. Barrett
EVP, Chief Financial Officer
(708) 831-7231
pat.barrett@firstmidwest.com
            Media
Maurissa Kanter
SVP, Director of Corporate Communications
(708) 831-7345
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
  September 30,   June 30,   March 31,   December 31,   September 30,
  2019   2019   2019   2018   2018
Period-End Balance Sheet                  
Assets                  
Cash and due from banks $ 273,613     $ 199,684     $ 186,230     $ 211,189     $ 185,239  
Interest-bearing deposits in other banks 202,054     126,966     76,529     78,069     111,360  
Equity securities, at fair value 40,723     40,690     33,304     30,806     29,046  
Securities available-for-sale, at fair value 2,905,738     2,793,316     2,350,195     2,272,009     2,179,410  
Securities held-to-maturity, at amortized cost 22,566     23,277     12,842     10,176     12,673  
FHLB and FRB stock 112,845     109,466     85,790     80,302     87,728  
Loans:                  
Commercial and industrial 4,570,361     4,524,401     4,183,262     4,120,293     3,994,142  
Agricultural 417,740     430,589     438,461     430,928     432,220  
Commercial real estate:                  
Office, retail, and industrial 1,892,877     1,936,577     1,806,892     1,820,917     1,782,757  
Multi-family 817,444     787,155     752,943     764,185     698,611  
Construction 637,256     654,607     683,475     649,337     632,779  
Other commercial real estate 1,425,292     1,447,673     1,309,878     1,361,810     1,348,831  
Home equity 833,955     874,686     862,068     851,607     853,887  
1-4 family mortgages 1,686,967     1,391,814     1,086,264     1,017,181     888,797  
Installment 491,427     472,102     445,760     430,525     418,524  
Total loans 12,773,319     12,519,604     11,569,003     11,446,783     11,050,548  
Allowance for loan losses (109,028 )   (105,729 )   (103,579 )   (102,219 )   (99,925 )
Net loans 12,664,291     12,413,875     11,465,424     11,344,564     10,950,623  
OREO 12,428     15,313     10,818     12,821     12,244  
Premises, furniture, and equipment, net 147,064     148,347     131,014     132,502     126,389  
Investment in bank-owned life insurance ("BOLI") 297,610     297,118     295,899     296,733     284,074  
Goodwill and other intangible assets 876,219     878,802     808,852     790,744     751,248  
Accrued interest receivable and other assets 458,303     415,379     360,872     245,734     231,465  
Total assets $ 18,013,454     $ 17,462,233     $ 15,817,769     $ 15,505,649     $ 14,961,499  
Liabilities and Stockholders' Equity                  
Noninterest-bearing deposits $ 3,832,744     $ 3,748,316     $ 3,588,943     $ 3,642,989     $ 3,618,384  
Interest-bearing deposits 9,608,183     9,440,272     8,572,039     8,441,123     7,908,730  
Total deposits 13,440,927     13,188,588     12,160,982     12,084,112     11,527,114  
Borrowed funds 1,653,490     1,407,378     973,852     906,079     1,073,546  
Senior and subordinated debt 233,743     233,538     203,984     203,808     195,595  
Accrued interest payable and other liabilities 345,695     332,156     319,480     256,652     247,569  
Stockholders' equity 2,339,599     2,300,573     2,159,471     2,054,998     1,917,675  
Total liabilities and stockholders' equity $ 18,013,454     $ 17,462,233     $ 15,817,769     $ 15,505,649     $ 14,961,499  
Stockholders' equity, excluding AOCI $ 2,332,861     $ 2,303,383     $ 2,191,630     $ 2,107,510     $ 1,992,808  
Stockholders' equity, common 2,339,599     2,300,573     2,159,471     2,054,998     1,917,675  
                             


First Midwest Bancorp, Inc.          
Condensed Consolidated Statements of Income (Unaudited)
(Dollar amounts in thousands)
         
                             
  Quarters Ended     Nine Months Ended
  September 30,   June 30,   March 31,   December 31,   September 30,     September 30,   September 30,
  2019   2019   2019   2018   2018     2019   2018
Income Statement                            
Interest income $ 181,963     $ 177,682     $ 162,490     $ 159,527     $ 149,532       $ 522,135     $ 422,965  
Interest expense 31,176     27,370     23,466     20,898     17,505       82,012     44,972  
Net interest income 150,787     150,312     139,024     138,629     132,027       440,123     377,993  
Provision for loan losses 12,498     11,491     10,444     9,811     11,248       34,433     38,043  
Net interest income after provision for loan losses 138,289     138,821     128,580     128,818     120,779       405,690     339,950  
Noninterest Income                            
Service charges on deposit accounts 13,024     12,196     11,540     12,627     12,378       36,760     36,088  
Wealth management fees 12,063     12,190     11,600     10,951     10,622       35,853     32,561  
Card-based fees, net 4,694     4,549     4,378     4,574     4,123       13,621     12,450  
Capital market products income 4,161     2,154     1,279     1,408     1,936       7,594     6,313  
Mortgage banking income 3,066     1,901     1,004     1,304     1,657       5,971     5,790  
Merchant servicing fees, net 385     371     337     365     387       1,093     1,100  
Other service charges, commissions, and fees 2,638     2,412     2,274     2,353     2,399       7,324     7,072  
Total fee-based revenues 40,031     35,773     32,412     33,582     33,502       108,216     101,374  
Other income 2,920     2,753     2,494     2,880     2,164       8,167     6,756  
Total noninterest income 42,951     38,526     34,906     36,462     35,666       116,383     108,130  
Noninterest Expense                            
Salaries and employee benefits:                          
Salaries and wages 50,686     47,776     46,135     45,011     44,067       144,597     136,153  
Retirement and other employee benefits 10,795     10,916     11,238     10,378     10,093       32,949     32,726  
Total salaries and employee benefits 61,481     58,692     57,373     55,389     54,160       177,546     168,879  
Net occupancy and equipment expense 13,903     13,671     14,770     12,827     13,183       42,344     40,607  
Professional services 9,550     10,467     7,788     8,859     7,944       27,805     23,822  
Technology and related costs 5,062     4,908     4,596     4,849     4,763       14,566     14,371  
Advertising and promotions 2,955     3,167     2,372     2,011     3,526       8,494     7,237  
Net OREO expense 381     294     681     763     (413 )     1,356     399  
Other expenses 11,432     12,987     10,581     13,418     11,015       35,000     32,846  
Acquisition and integration related expenses 3,397     9,514     3,691     9,553     60       16,602     60  
Delivering Excellence implementation costs 234     442     258     3,159     2,239       934     17,254  
Total noninterest expense 108,395     114,142     102,110     110,828     96,477       324,647     305,475  
Income before income tax expense 72,845     63,205     61,376     54,452     59,968       197,426     142,605  
Income tax expense 18,300     16,191     15,318     13,044     6,616       49,809     26,143  
Net income $ 54,545     $ 47,014     $ 46,058     $ 41,408     $ 53,352       $ 147,617     $ 116,462  
Net income applicable to common shares $ 54,080     $ 46,625     $ 45,655     $ 41,088     $ 52,911       $ 146,360     $ 115,470  
Net income applicable to common shares, adjusted(1) 56,803     54,091     48,616     50,622     46,837       159,511     120,657  
                                           

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     Nine Months Ended
  September 30,   June 30,   March 31,   December 31,   September 30,     September 30,   September 30,
  2019   2019   2019   2018   2018     2019   2018
EPS                            
Basic EPS $ 0.49     $ 0.43     $ 0.43     $ 0.39     $ 0.52       $ 1.36     $ 1.13  
Diluted EPS $ 0.49     $ 0.43     $ 0.43     $ 0.39     $ 0.52       $ 1.36     $ 1.13  
Diluted EPS, adjusted(1) $ 0.52     $ 0.50     $ 0.46     $ 0.48     $ 0.46       $ 1.48     $ 1.18  
Common Stock and Related Per Common Share Data          
Book value $ 21.27     $ 20.80     $ 20.20     $ 19.32     $ 18.61       $ 21.27     $ 18.61  
Tangible book value $ 13.31     $ 12.86     $ 12.63     $ 11.88     $ 11.32       $ 13.31     $ 11.32  
Dividends declared per share $ 0.14     $ 0.14     $ 0.12     $ 0.12     $ 0.11       $ 0.40     $ 0.33  
Closing price at period end $ 19.48     $ 20.47     $ 20.46     $ 19.81     $ 26.59       $ 19.48     $ 26.59  
Closing price to book value 0.9     1.0     1.0     1.0     1.4       0.9     1.4  
Period end shares outstanding 109,970     110,589     106,900     106,375     103,058       109,970     103,058  
Period end treasury shares 10,441     9,818     8,775     9,297     9,301       10,441     9,301  
Common dividends $ 15,406     $ 15,503     $ 12,837     $ 12,774     $ 11,326       $ 43,746     $ 34,008  
Dividend payout ratio 28.57 %   32.56 %   27.91 %   30.77 %   21.15 %     29.41 %   29.20 %
Dividend payout ratio, adjusted(1) 26.92 %   28.00 %   26.09 %   25.00 %   23.91 %     27.03 %   27.97 %
Key Ratios/Data                            
Return on average common equity(2) 9.22 %   8.34 %   8.66 %   8.09 %   10.99 %     8.75 %   8.16 %
Return on average common equity, adjusted(1)(2) 9.68 %   9.68 %   9.22 %   9.97 %   9.73 %     9.54 %   8.53 %
Return on average tangible common equity(2) 15.36 %   13.83 %   14.41 %   13.42 %   18.60 %     14.55 %   14.03 %
Return on average tangible common equity, adjusted(1)(2) 16.10 %   15.95 %   15.31 %   16.42 %   16.51 %     15.80 %   14.64 %
Return on average assets(2) 1.22 %   1.13 %   1.19 %   1.06 %   1.42 %     1.18 %   1.07 %
Return on average assets, adjusted(1)(2) 1.28 %   1.31 %   1.27 %   1.30 %   1.26 %     1.29 %   1.12 %
Loans to deposits 95.03 %   94.93 %   95.13 %   94.73 %   95.87 %     95.03 %   95.87 %
Efficiency ratio(1) 53.54 %   54.67 %   55.69 %   55.25 %   56.03 %     54.60 %   58.81 %
Net interest margin(2)(3) 3.82 %   4.06 %   4.04 %   3.96 %   3.92 %     3.97 %   3.88 %
Yield on average interest-earning assets(2)(3) 4.60 %   4.80 %   4.72 %   4.56 %   4.44 %     4.70 %   4.34 %
Cost of funds(2)(4) 0.82 %   0.77 %   0.72 %   0.63 %   0.55 %     0.77 %   0.48 %
Net noninterest expense to average assets(2) 1.47 %   1.81 %   1.74 %   1.90 %   1.62 %     1.67 %   1.81 %
Effective income tax rate 25.12 %   25.62 %   24.96 %   23.96 %   11.03 %     25.23 %   18.33 %
Effective income tax rate, adjusted(1) 25.12 %   25.62 %   24.96 %   23.96 %   24.04 %     25.23 %   23.80 %
Capital Ratios                            
Total capital to risk-weighted assets(1) 12.62 %   12.57 %   12.91 %   12.62 %   12.32 %     12.62 %   12.32 %
Tier 1 capital to risk-weighted assets(1) 10.18 %   10.11 %   10.52 %   10.20 %   10.34 %     10.18 %   10.34 %
CET1 to risk-weighted assets(1) 10.18 %   10.11 %   10.52 %   10.20 %   9.93 %     10.18 %   9.93 %
Tier 1 capital to average assets(1) 8.67 %   8.96 %   9.28 %   8.90 %   9.10 %     8.67 %   9.10 %
Tangible common equity to tangible assets(1) 8.54 %   8.57 %   9.00 %   8.59 %   8.21 %     8.54 %   8.21 %
Tangible common equity, excluding AOCI, to tangible assets(1) 8.50 %   8.59 %   9.21 %   8.95 %   8.74 %     8.50 %   8.74 %
Tangible common equity to risk-weighted assets(1) 10.24 %   10.11 %   10.29 %   9.81 %   9.33 %     10.24 %   9.33 %
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     Nine Months Ended
  September 30,   June 30,   March 31,   December 31,   September 30,     September 30,   September 30,
  2019   2019   2019   2018   2018     2019   2018
Asset Quality Performance Data                          
Non-performing assets                            
Commercial and industrial $ 26,739     $ 19,809     $ 34,694     $ 33,507     $ 37,981       $ 26,739     $ 37,981  
Agricultural 6,242     6,712     2,359     1,564     2,104       6,242     2,104  
Commercial real estate:                            
Office, retail, and industrial 26,812     17,875     17,484     6,510     6,685       26,812     6,685  
Multi-family 2,152     5,322     2,959     3,107     3,184       2,152     3,184  
Construction 152     152         144     208       152     208  
Other commercial real estate 4,680     3,982     2,971     2,854     4,578       4,680     4,578  
Consumer 10,915     9,625     9,738     9,249     10,026       10,915     10,026  
Total non-accrual loans 77,692     63,477     70,205     56,935     64,766       77,692     64,766  
90 days or more past due loans, still accruing interest 4,657     2,615     8,446     8,282     2,949       4,657     2,949  
Total non-performing loans 82,349     66,092     78,651     65,217     67,715       82,349     67,715  
Accruing TDRs 1,422     1,441     1,844     1,866     1,741       1,422     1,741  
Foreclosed assets(5) 25,266     28,488     10,818     12,821     12,244       25,266     12,244  
Total non-performing assets $ 109,037     $ 96,021     $ 91,313     $ 79,904     $ 81,700       $ 109,037     $ 81,700  
30-89 days past due loans $ 46,171     $ 34,460     $ 45,764     $ 37,524     $ 46,257       $ 46,171     $ 46,257  
Allowance for credit losses                            
Allowance for loan losses $ 109,028     $ 105,729     $ 103,579     $ 102,219     $ 99,925       $ 109,028     $ 99,925  
Reserve for unfunded commitments 1,200     1,200     1,200     1,200     1,000       1,200     1,000  
Total allowance for credit losses $ 110,228     $ 106,929     $ 104,779     $ 103,419     $ 100,925       $ 110,228     $ 100,925  
Provision for loan losses $ 12,498     $ 11,491     $ 10,444     $ 9,811     $ 11,248       $ 34,433     $ 38,043  
Net charge-offs by category                            
Commercial and industrial $ 5,532     $ 4,600     $ 5,061     $ 5,558     $ 5,230       $ 15,193     $ 25,460  
Agricultural 439     658     89     71     631       1,186     2,442  
Commercial real estate:                            
Office, retail, and industrial 219     1,454     618     713     596       2,291     1,239  
Multi-family (38 )       339     (3 )   1       301     5  
Construction (2 )   (10 )       (99 )   (4 )     (12 )   (25 )
Other commercial real estate (43 )   284     189     (817 )   23       430     (305 )
Consumer 3,092     2,355     2,788     2,094     1,537       8,235     5,031  
Total net charge-offs $ 9,199     $ 9,341     $ 9,084     $ 7,517     $ 8,014       $ 27,624     $ 33,847  
Total recoveries included above $ 2,073     $ 2,083     $ 1,693     $ 2,810     $ 1,250       $ 5,849     $ 3,811  
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
  September 30,   June 30,   March 31,   December 31,   September 30,
  2019   2019   2019   2018   2018
Asset quality ratios                  
Non-accrual loans to total loans 0.61 %   0.51 %   0.61 %   0.50 %   0.59 %
Non-performing loans to total loans 0.64 %   0.53 %   0.68 %   0.57 %   0.61 %
Non-performing assets to total loans plus foreclosed assets 0.85 %   0.77 %   0.79 %   0.70 %   0.74 %
Non-performing assets to tangible common equity plus allowance for credit losses 6.93 %   6.28 %   6.27 %   5.84 %   6.45 %
Non-accrual loans to total assets 0.43 %   0.36 %   0.44 %   0.37 %   0.43 %
Allowance for credit losses and net charge-off ratios
Allowance for credit losses to total loans(6) 0.86 %   0.85 %   0.91 %   0.90 %   0.91 %
Allowance for credit losses to loans, excluding acquired loans 0.98 %   0.98 %   1.00 %   1.01 %   1.01 %
Allowance for credit losses to non-accrual loans 141.88 %   168.45 %   149.25 %   181.64 %   155.83 %
Allowance for credit losses to non-performing loans 133.85 %   161.79 %   133.22 %   158.58 %   149.04 %
Net charge-offs to average loans(2) 0.29 %   0.31 %   0.32 %   0.26 %   0.29 %
                             

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)   Foreclosed assets consists of OREO and other foreclosed assets acquired in partial or total satisfaction of defaulted loans. Other foreclosed assets are included in other assets in the Consolidated Statements of Financial Condition.
(6)   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     Nine Months Ended
  September 30,   June 30,   March 31,   December 31,   September 30,     September 30,   September 30,
  2019   2019   2019   2018   2018     2019   2018
EPS                            
Net income $ 54,545     $ 47,014     $ 46,058     $ 41,408     $ 53,352       $ 147,617     $ 116,462  
Net income applicable to non-vested restricted shares (465 )   (389 )   (403 )   (320 )   (441 )     (1,257 )   (992 )
Net income applicable to common shares 54,080     46,625     45,655     41,088     52,911       146,360     115,470  
Adjustments to net income:                            
Acquisition and integration related expenses 3,397     9,514     3,691     9,553     60       16,602     60  
Tax effect of acquisition and integration related expenses (849 )   (2,379 )   (923 )   (2,388 )   (15 )     (4,151 )   (15 )
Delivering Excellence implementation costs 234     442     258     3,159     2,239       934     17,254  
Tax effect of Delivering Excellence implementation costs (59 )   (111 )   (65 )   (790 )   (560 )     (234 )   (4,314 )
Income tax benefits                 (7,798 )         (7,798 )
Total adjustments to net income, net of tax 2,723     7,466     2,961     9,534     (6,074 )     13,151     5,187  
Net income applicable to common shares, adjusted(1) $ 56,803     $ 54,091     $ 48,616     $ 50,622     $ 46,837       $ 159,511     $ 120,657  
Weighted-average common shares outstanding:                          
Weighted-average common shares outstanding (basic) 109,281     108,467     105,770     105,116     102,178       107,852     102,087  
Dilutive effect of common stock equivalents                           5  
Weighted-average diluted common shares outstanding 109,281     108,467     105,770     105,116     102,178       107,852     102,092  
Basic EPS $ 0.49     $ 0.43     $ 0.43     $ 0.39     $ 0.52       $ 1.36     $ 1.13  
Diluted EPS $ 0.49     $ 0.43     $ 0.43     $ 0.39     $ 0.52       $ 1.36     $ 1.13  
Diluted EPS, adjusted(1) $ 0.52     $ 0.50     $ 0.46     $ 0.48     $ 0.46       $ 1.48     $ 1.18  
Anti-dilutive shares not included in the computation of diluted EPS                           36  
Dividend Payout Ratio                            
Dividends declared per share $ 0.14     $ 0.14     $ 0.12     $ 0.12     $ 0.11       $ 0.40     $ 0.33  
Dividend payout ratio 28.57 %   32.56 %   27.91 %   30.77 %   21.15 %     29.41 %   29.20 %
Dividend payout ratio, adjusted(1) 26.92 %   28.00 %   26.09 %   25.00 %   23.91 %     27.03 %   27.97 %
Effective Tax Rate                            
Income before income tax expense $ 72,845     $ 63,205     $ 61,376     $ 54,452     $ 59,968       $ 197,426     $ 142,605  
Income tax expense $ 18,300     $ 16,191     $ 15,318     $ 13,044     $ 6,616       $ 49,809     $ 26,143  
Income tax benefits                 7,798           7,798  
Income tax expense, adjusted $ 18,300     $ 16,191     $ 15,318     $ 13,044     $ 14,414       $ 49,809     $ 33,941  
Effective income tax rate 25.12 %   25.62 %   24.96 %   23.96 %   11.03 %     25.23 %   18.33 %
Effective income tax rate, adjusted 25.12 %   25.62 %   24.96 %   23.96 %   24.04 %     25.23 %   23.80 %
                             
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     Nine Months Ended
  September 30,   June 30,   March 31,   December 31,   September 30,     September 30,   September 30,
  2019   2019   2019   2018   2018     2019   2018
Return on Average Common and Tangible Common Equity                      
Net income applicable to common shares $ 54,080     $ 46,625     $ 45,655     $ 41,088     $ 52,911       $ 146,360     $ 115,470  
Intangibles amortization 2,750     2,624     2,363     2,077     1,772       7,737     5,368  
Tax effect of intangibles amortization (688 )   (656 )   (591 )   (519 )   (443 )     (1,934 )   (1,400 )
Net income applicable to common shares, excluding intangibles amortization 56,142     48,593     47,427     42,646     54,240       152,163     119,438  
Total adjustments to net income, net of tax(1) 2,723     7,466     2,961     9,534     (6,074 )     13,151     5,187  
Net income applicable to common shares, adjusted(1) $ 58,865     $ 56,059     $ 50,388     $ 52,180     $ 48,166       $ 165,314     $ 124,625  
Average stockholders' equity $ 2,327,279     $ 2,241,569     $ 2,138,281     $ 2,015,217     $ 1,909,330       $ 2,236,402     $ 1,891,290  
Less: average intangible assets (877,069 )   (832,263 )   (803,408 )   (754,495 )   (752,109 )     (837,850 )   (753,282 )
Average tangible common equity $ 1,450,210     $ 1,409,306     $ 1,334,873     $ 1,260,722     $ 1,157,221       $ 1,398,552     $ 1,138,008  
Return on average common equity(2) 9.22 %   8.34 %   8.66 %   8.09 %   10.99 %     8.75 %   8.16 %
Return on average common equity, adjusted(1)(2) 9.68 %   9.68 %   9.22 %   9.97 %   9.73 %     9.54 %   8.53 %
Return on average tangible common equity(2) 15.36 %   13.83 %   14.41 %   13.42 %   18.60 %     14.55 %   14.03 %
Return on average tangible common equity, adjusted(1)(2) 16.10 %   15.95 %   15.31 %   16.42 %   16.51 %     15.80 %   14.64 %
Return on Average Assets                      
Net income $ 54,545     $ 47,014     $ 46,058     $ 41,408     $ 53,352       $ 147,617     $ 116,462  
Total adjustments to net income, net of tax(1) 2,723     7,466     2,961     9,534     (6,074 )     13,151     5,187  
Net income, adjusted(1) $ 57,268     $ 54,480     $ 49,019     $ 50,942     $ 47,278       $ 160,768     $ 121,649  
Average assets $ 17,699,180     $ 16,740,050     $ 15,667,839     $ 15,503,399     $ 14,894,670       $ 16,709,797     $ 14,565,071  
Return on average assets(2) 1.22 %   1.13 %   1.19 %   1.06 %   1.42 %     1.18 %   1.07 %
Return on average assets, adjusted(1)(2) 1.28 %   1.31 %   1.27 %   1.30 %   1.26 %     1.29 %   1.12 %
Efficiency Ratio Calculation                          
Noninterest expense $ 108,395     $ 114,142     $ 102,110     $ 110,828     $ 96,477       $ 324,647     $ 305,475  
Less:                            
Net OREO expense (381 )   (294 )   (681 )   (763 )   413       (1,356 )   (399 )
Acquisition and integration related expenses (3,397 )   (9,514 )   (3,691 )   (9,553 )   (60 )     (16,602 )   (60 )
Delivering Excellence implementation costs (234 )   (442 )   (258 )   (3,159 )   (2,239 )     (934 )   (17,254 )
Total $ 104,383     $ 103,892     $ 97,480     $ 97,353     $ 94,591       $ 305,755     $ 287,762  
Tax-equivalent net interest income(3) $ 152,019     $ 151,492     $ 140,132     $ 139,755     $ 133,161       $ 443,643     $ 381,141  
Noninterest income 42,951     38,526     34,906     36,462     35,666       116,383     108,130  
Total $ 194,970     $ 190,018     $ 175,038     $ 176,217     $ 168,827       $ 560,026     $ 489,271  
Efficiency ratio 53.54 %   54.67 %   55.69 %   55.25 %   56.03 %     54.60 %   58.81 %
                             
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
  September 30,   June 30,   March 31,   December 31,   September 30,
  2019   2019   2019   2018   2018
Risk-Based Capital Data                  
Common stock $ 1,204     $ 1,204     $ 1,157     $ 1,157     $ 1,124  
Additional paid-in capital 1,208,030     1,205,396     1,103,991     1,114,580     1,028,635  
Retained earnings 1,343,895     1,304,756     1,273,245     1,192,767     1,164,133  
Treasury stock, at cost (220,268 )   (207,973 )   (186,763 )   (200,994 )   (201,084 )
Goodwill and other intangible assets, net of deferred tax liabilities (876,219 )   (878,802 )   (808,852 )   (790,744 )   (751,248 )
Disallowed DTAs (1,688 )   (2,804 )   (809 )   (1,334 )    
CET1 capital 1,454,954     1,421,777     1,381,969     1,315,432     1,241,560  
Trust-preferred securities                 50,690  
Other disallowed DTAs             (334 )    
Tier 1 capital 1,454,954     1,421,777     1,381,969     1,315,098     1,292,250  
Tier 2 capital 348,466     345,078     312,840     311,391     248,118  
Total capital $ 1,803,420     $ 1,766,855     $ 1,694,809     $ 1,626,489     $ 1,540,368  
Risk-weighted assets $ 14,294,011     $ 14,056,482     $ 13,131,237     $ 12,892,180     $ 12,500,342  
Adjusted average assets $ 16,787,720     $ 15,863,145     $ 14,891,534     $ 14,782,327     $ 14,202,776  
Total capital to risk-weighted assets 12.62 %   12.57 %   12.91 %   12.62 %   12.32 %
Tier 1 capital to risk-weighted assets 10.18 %   10.11 %   10.52 %   10.20 %   10.34 %
CET1 to risk-weighted assets 10.18 %   10.11 %   10.52 %   10.20 %   9.93 %
Tier 1 capital to average assets 8.67 %   8.96 %   9.28 %   8.90 %   9.10 %
Tangible Common Equity                  
Stockholders' equity $ 2,339,599     $ 2,300,573     $ 2,159,471     $ 2,054,998     $ 1,917,675  
Less: goodwill and other intangible assets (876,219 )   (878,802 )   (808,852 )   (790,744 )   (751,248 )
Tangible common equity 1,463,380     1,421,771     1,350,619     1,264,254     1,166,427  
Less: AOCI (6,738 )   2,810     32,159     52,512     75,133  
Tangible common equity, excluding AOCI $ 1,456,642     $ 1,424,581     $ 1,382,778     $ 1,316,766     $ 1,241,560  
Total assets $ 18,013,454     $ 17,462,233     $ 15,817,769     $ 15,505,649     $ 14,961,499  
Less: goodwill and other intangible assets (876,219 )   (878,802 )   (808,852 )   (790,744 )   (751,248 )
Tangible assets $ 17,137,235     $ 16,583,431     $ 15,008,917     $ 14,714,905     $ 14,210,251  
Tangible common equity to tangible assets 8.54 %   8.57 %   9.00 %   8.59 %   8.21 %
Tangible common equity, excluding AOCI, to tangible assets 8.50 %   8.59 %   9.21 %   8.95 %   8.74 %
Tangible common equity to risk-weighted assets 10.24 %   10.11 %   10.29 %   9.81 %   9.33 %
                   
                   

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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