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

October, 22 2019 05:40 PM First Midwest Bancorp Inc.

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 147^th 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%.

Company Name:	First Midwest Bancorp Inc.
Stock Symbol:	FMBI
Market:	NASDAQ
Website:	firstmidwest.com

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