FMBI - First Midwest Bancorp Inc. Announces 2019 Second Quarter Results

July, 23 2019 05:35 PM First Midwest Bancorp Inc.

CHICAGO, July 23, 2019 (GLOBE NEWSWIRE) -- First Midwest Bancorp, Inc. (the "Company" or "First Midwest"), the holding company of First Midwest Bank (the "Bank"), today reported results of operations and financial condition for the second quarter of 2019. Net income for the second quarter of 2019 was $47.0 million, or $0.43 per share, compared to $46.1 million, or $0.43 per share, for the first quarter of 2019, and $29.6 million, or $0.29 per share, for the second quarter of 2018.

Reported results for all periods were impacted by implementation costs related to the Company's Delivering Excellence initiative⁽¹⁾ ("Delivering Excellence"). In addition, the second and first quarters of 2019 were impacted by acquisition and integration related expenses. 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 $0.50 for the second quarter of 2019, compared to $0.46 for the first quarter of 2019 and $0.40 for the second quarter of 2018.

SELECT SECOND QUARTER HIGHLIGHTS

Generated EPS of $0.43, consistent with the first quarter of 2019 and up from $0.29 for the second quarter of 2018.
-- Increased EPS, adjusted⁽²⁾ to $0.50, up 9% and 25% from the first quarter of 2019 and second quarter of 2018, respectively.
-- Produced returns on average tangible common equity, adjusted⁽²⁾ of 16.0% for the second quarter of 2019, up 64 basis points and 114 basis points from the first quarter of 2019 and second quarter of 2018, respectively.
Grew loans to $13 billion, up 8% from March 31, 2019 and 15% from June 30, 2018.
Increased total average deposits to $13 billion, up 6% and 14% from the first quarter of 2019 and second quarter of 2018, respectively.
Expanded net interest income to $150 million, up 8% from the first quarter of 2019 and 18% from the second quarter of 2018.
Increased noninterest income to $39 million, up 10% from the first quarter of 2019 and 4% from the second quarter of 2018.
Controlled noninterest expense; reported an efficiency ratio⁽²⁾ of 55%, down from 56% and 60% in the first quarter of 2019 and second quarter of 2018, respectively.
Completed the acquisition of Bridgeview Bancorp, Inc. on May 9, 2019, adding approximately $1.2 billion of assets, $700 million of loans, and $1.0 billion of deposits, net of fair value adjustments.
Repurchased approximately 1 million shares of our common stock at a cost of $21 million.

"It was a strong quarter, reflecting successful execution on a number of business fronts," said Michael L. Scudder, Chairman of the Board and Chief Executive Officer of the Company. "We closed the quarter with $17.5 billion of total assets, up 10% and 18% from the last quarter and a year ago and aided by our mid-May acquisition of Bridgeview Bank. Operating performance was again solid, benefiting from asset growth, improved fee income and continued operating efficiency."

Mr. Scudder concluded, "First Midwest remains well-positioned as we navigate an evolving landscape. Recent acquisitions have greatly expanded our distribution and top 10 market share in metro Chicago. Combined with an engaged team, ongoing investment in our business and our strong capital foundation, we continue to pursue opportunities for growth, revenue diversification and market expansion. As always, we do so with an unwavering commitment to the financial success of our clients and drive to provide our shareholders with superior, long-term returns."

ACQUISITION

Bridgeview Bancorp, Inc.

On May 9, 2019, the Company completed its acquisition of Bridgeview Bancorp, Inc. ("Bridgeview"), the holding company for Bridgeview Bank Group. At closing, the Company acquired 13 banking offices located across greater Chicagoland, and added approximately $1.2 billion of assets, $1.0 billion of deposits, and $700 million of loans, net of fair value adjustments. The merger consideration totaled $135.4 million and consisted of 4.7 million shares of Company stock and $37.1 million of cash. All Bridgeview operating systems were converted to our operating platform during the second quarter of 2019.

STOCK REPURCHASES

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 1.0 million shares of its common stock at a total cost of $21.2 million during the second quarter of 2019.

⁽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

June 30, 2019


March 31, 2019


June 30, 2018

Average Balance

Interest

Yield/ Rate (%)


Average Balance

Interest

Yield/ Rate (%)


Average Balance

Interest

Yield/ Rate (%)
Assets



















Other interest-earning assets
$
210,322


$
1,240


2.36



$
125,615


$
728


2.35



$
147,996


$
519


1.41

Securities⁽¹⁾
2,631,437


18,423


2.80



2,371,692


16,387


2.76



2,165,091


13,322


2.46

Federal Home Loan Bank ("FHLB") and Federal Reserve Bank ("FRB") stock
87,815


757


3.45



79,821


952


4.77



80,038


864


4.32

Loans⁽¹⁾
12,022,470


158,442


5.29



11,458,233


145,531


5.15



10,788,285


128,422


4.77

Total interest-earning assets⁽¹⁾
14,952,044


178,862


4.80



14,035,361


163,598


4.72



13,181,410


143,127


4.35

Cash and due from banks
215,464







202,101







197,025





Allowance for loan losses
(108,698
)






(107,520
)






(99,469
)




Other assets
1,681,240







1,537,897







1,326,749





Total assets
$
16,740,050







$
15,667,839







$
14,605,715





Liabilities and Stockholders' Equity



















Savings deposits
$
2,079,852


346


0.07



$
2,037,831


346


0.07



$
2,060,066


373


0.07

NOW accounts
2,261,103


2,776


0.49



2,083,366


2,162


0.42



2,065,530


1,472


0.29

Money market deposits
1,907,766


3,041


0.64



1,809,234


2,349


0.53



1,759,313


1,073


0.24

Time deposits
2,849,930


13,153


1.85



2,647,316


11,745


1.80



1,871,666


5,114


1.10

Borrowed funds
1,025,351


4,459


1.74



877,995


3,551


1.64



913,902


3,513


1.54

Senior and subordinated debt
220,756


3,595


6.53



203,899


3,313


6.59



195,385


3,140


6.45

Total interest-bearing liabilities
10,344,758


27,370


1.06



9,659,641


23,466


0.99



8,865,862


14,685


0.66

Demand deposits
3,835,567







3,587,480







3,621,645





Total funding sources
14,180,325




0.77



13,247,121




0.72



12,487,507




0.47

Other liabilities
318,156







282,437







227,481





Stockholders' equity - common
2,241,569







2,138,281







1,890,727





Total liabilities and stockholders' equity
$
16,740,050







$
15,667,839







$
14,605,715





Tax-equivalent net interest income/margin⁽¹⁾


151,492


4.06





140,132


4.04





128,442


3.91

Tax-equivalent adjustment


(1,180
)






(1,108
)






(1,039
)


Net interest income (GAAP)⁽¹⁾


$
150,312







$
139,024







$
127,403



Impact of acquired loan accretion⁽¹⁾


$
10,308


0.28





$
6,369


0.18





$
4,445


0.14

Tax-equivalent net interest income/ margin, adjusted⁽¹⁾


$
141,184


3.78





$
133,763


3.86





$
123,997


3.77

⁽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 second quarter of 2019 was up 8.1% and 18.0% compared to the first quarter of 2019 and second quarter of 2018, respectively. The rise in net interest income from both prior periods resulted primarily from the acquisition of interest-earning assets from the Bridgeview transaction in the second quarter of 2019, higher acquired loan accretion, security purchases, and loan growth, partially offset by higher cost of funds. In addition, net interest income for the second quarter of 2019 benefited from an increase in the number of days in the quarter compared to the first quarter of 2019. Compared to the second 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 interest rates.

Acquired loan accretion contributed $10.3 million, $6.4 million, and $4.4 million to net interest income for the second quarter of 2019, the first quarter of 2019, and the second quarter of 2018, respectively.

Tax-equivalent net interest margin for the current quarter was 4.06%, increasing 2 basis points from the first quarter of 2019 and 15 basis points from the second quarter of 2018. Excluding the impact of acquired loan accretion, tax-equivalent net interest margin was 3.78%, down 8 basis points from the first quarter of 2019 and up one basis point from the second quarter of 2018. The decrease in tax-equivalent net interest margin, adjusted compared to the first quarter of 2019 was impacted by compression related to the mix of interest-earning assets acquired in the Bridgeview transaction, actions taken to reduce rate sensitivity, and higher cost of funds. These items were more than offset by higher interest rates compared to the second quarter of 2018.

For the second quarter of 2019, total average interest-earning assets rose by $916.7 million and $1.8 billion from the first quarter of 2019 and second 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 second quarter of 2018 was impacted by the Northern States transaction.

Total average funding sources for the second quarter of 2019 increased by $933.2 million and $1.7 billion from the first quarter of 2019 and second quarter of 2018, respectively. The increase compared to both prior periods resulted primarily from the Bridgeview transaction in the second quarter of 2019 and organic growth. In addition, the rise in average funding sources compared to the second quarter of 2018 was impacted by the Northern States transaction.

Noninterest Income Analysis
(Dollar amounts in thousands)



Quarters Ended

June 30, 2019 Percent Change From


June 30, 2019

March 31, 2019

June 30, 2018

March 31, 2019

June 30, 2018
Service charges on deposit accounts

$
12,196


$
11,540


$
12,058


5.7


1.1

Wealth management fees

12,190


11,600


10,981


5.1


11.0

Card-based fees, net

4,549


4,378


4,394


3.9


3.5

Capital market products income

2,154


1,279


2,819


68.4


(23.6
)
Mortgage banking income

1,901


1,004


1,736


89.3


9.5

Merchant servicing fees, net

371


337


383


10.1


(3.1
)
Other service charges, commissions, and fees

2,412


2,274


2,455


6.1


(1.8
)
Total fee-based revenues

35,773


32,412


34,826


10.4


2.7

Other income

2,753


2,494


2,121


10.4


29.8

Total noninterest income

$
38,526


$
34,906


$
36,947


10.4


4.3

Total noninterest income of $38.5 million was up 10.4% and 4.3% from the first quarter of 2019 and second quarter of 2018, respectively. The increase in service charges on deposit accounts and net card-based fees compared to the first quarter of 2019 was due to seasonally higher volumes and services provided to customers acquired in the Bridgeview transaction. The increase in wealth management fees from the first quarter of 2019 resulted primarily from the positive impact of market rates. Compared to the second quarter of 2018, the increase 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 fluctuates from quarter to quarter based on the size and frequency of sales to corporate clients.

Mortgage banking income for the second quarter of 2019 resulted from sales of $93.5 million of 1-4 family mortgage loans in the secondary market, compared to $57.5 million in the first quarter of 2019 and $64.3 million in the second quarter of 2018. Mortgage banking income is also impacted by fluctuations in the fair value of mortgage servicing rights, which resulted in a decrease to mortgage banking income of $600,000 compared to the second quarter of 2018.

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

Noninterest Expense Analysis
(Dollar amounts in thousands)



Quarters Ended

June 30, 2019 Percent Change From


June 30, 2019

March 31, 2019

June 30, 2018

March 31, 2019

June 30, 2018
Salaries and employee benefits:










Salaries and wages

$
47,776


$
46,135


$
46,256


3.6


3.3

Retirement and other employee benefits

10,916


11,238


11,676


(2.9
)

(6.5
)
Total salaries and employee benefits

58,692


57,373


57,932


2.3


1.3

Net occupancy and equipment expense

13,671


14,770


13,651


(7.4
)

0.1

Professional services

10,467


7,788


8,298


34.4


26.1

Technology and related costs

4,908


4,596


4,837


6.8


1.5

Advertising and promotions

3,167


2,372


2,061


33.5


53.7

Net other real estate owned ("OREO") expense

294


681


(256
)

(56.8
)

(214.8
)
Other expenses

12,987


10,581


11,878


22.7


9.3

Acquisition and integration related expenses

9,514


3,691


—


157.8


100.0

Delivering Excellence implementation costs

442


258


15,015


71.3


(97.1
)
Total noninterest expense

$
114,142


$
102,110


$
113,416


11.8


0.6

Acquisition and integration related expenses

(9,514
)

(3,691
)

—


157.8


(100.0
)
Delivering Excellence implementation costs

(442
)

(258
)

(15,015
)

71.3


(97.1
)
Total noninterest expense, adjusted⁽¹⁾

$
104,186


$
98,161


$
98,401


6.1


5.9

⁽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 increased 11.8% from the first quarter of 2019 and was consistent with the second quarter of 2018. Noninterest expense for all periods presented was impacted by costs related to implementation of the Delivering Excellence initiative. In addition, the second and first quarters of 2019 were impacted by acquisition and integration related expenses. Excluding these items, noninterest expense for the second quarter of 2019 was $104.2 million, up 6.1% and 5.9% from the first quarter of 2019 and second quarter of 2018, respectively.

Operating costs associated with the Bridgeview transaction contributed to noninterest expense for the second 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 second quarter of 2018. These costs primarily occurred in salaries and employee benefits, net occupancy and equipment expense, professional services, and other expenses.

Compared to the second quarter of 2018, the increase in salaries and employee benefits was also impacted by merit increases, which was more than offset by the ongoing benefits of the Delivering Excellence initiative and lower pension expense. Net occupancy and equipment expense was elevated in the first quarter of 2019 due to higher costs related to winter weather conditions. The increase in professional services from both prior periods was driven mainly by the timing of certain other professional fees associated with organizational growth and higher loan remediation costs and legal fees. Compared to both prior periods, the rise in advertising and promotions expense resulted from higher costs related to marketing campaigns. Net OREO expense for the second quarter of 2018 was impacted by higher levels of operating income. The rise in other expenses compared to the first quarter of 2019 was due to property valuation adjustments and other miscellaneous expenses.

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



June 30, 2019 Percent Change From


June 30, 2019

March 31, 2019

June 30, 2018

March 31, 2019

June 30, 2018
Commercial and industrial

$
4,524,401


$
4,183,262


$
3,844,067


8.2


17.7

Agricultural

430,589


438,461


433,175


(1.8
)

(0.6
)
Commercial real estate:










Office, retail, and industrial

1,936,577


1,806,892


1,834,918


7.2


5.5

Multi-family

787,155


752,943


703,091


4.5


12.0

Construction

654,607


683,475


633,601


(4.2
)

3.3

Other commercial real estate

1,447,673


1,309,878


1,337,396


10.5


8.2

Total commercial real estate

4,826,012


4,553,188


4,509,006


6.0


7.0

Total corporate loans

9,781,002


9,174,911


8,786,248


6.6


11.3

Home equity

874,686


862,068


847,903


1.5


3.2

1-4 family mortgages

1,391,814


1,086,264


880,181


28.1


58.1

Installment

472,102


445,760


377,233


5.9


25.1

Total consumer loans

2,738,602


2,394,092


2,105,317


14.4


30.1

Total loans

$
12,519,604


$
11,569,003


$
10,891,565


8.2


14.9

Loan growth in all categories was positively impacted by the Bridgeview acquisition in the second quarter of 2019, which totaled $692.6 million as of June 30, 2019. Excluding these loans, total loans grew 8.9% annualized from March 31, 2019 and 8.6% from June 30, 2018. In addition, compared to both prior periods, growth in commercial and industrial loans, primarily within our sector-based lending and middle market business units, contributed to the rise in total corporate loans. Commercial real estate loans compared to both prior periods were also impacted by 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, which more than offset originations. The increase in loans compared to June 30, 2018 also benefitted from the Northern States transaction during the fourth quarter of 2018.

Growth in consumer loans compared to both prior periods resulted primarily from purchases of 1-4 family mortgages and organic growth. Compared to June 30, 2018, growth in consumer loans also benefited from the purchase of installment loans.

Asset Quality
(Dollar amounts in thousands)



As of

June 30, 2019 Percent Change From


June 30, 2019

March 31, 2019

June 30, 2018

March 31, 2019

June 30, 2018
Asset quality










Non-accrual loans

$
63,477


$
70,205


$
53,475


(9.6
)

18.7

90 days or more past due loans, still accruing interest⁽¹⁾

2,615


8,446


7,954


(69.0
)

(67.1
)
Total non-performing loans

66,092


78,651


61,429


(16.0
)

7.6

Accruing troubled debt restructurings ("TDRs")

1,441


1,844


1,760


(21.9
)

(18.1
)
Foreclosed assets⁽²⁾

28,488


10,818


12,892


163.3


121.0

Total non-performing assets

$
96,021


$
91,313


$
76,081


5.2


26.2

30-89 days past due loans⁽¹⁾

$
34,460


$
45,764


$
39,171





Non-accrual loans to total loans

0.51
%

0.61
%

0.49
%




Non-performing loans to total loans

0.53
%

0.68
%

0.56
%




Non-performing assets to total loans plus foreclosed assets

0.77
%

0.79
%

0.70
%




Allowance for credit losses










Allowance for credit losses

$
106,929


$
104,779


$
97,691





Allowance for credit losses to total loans⁽³⁾

0.85
%

0.91
%

0.90
%




Allowance for credit losses to loans, excluding acquired loans

0.98
%

1.00
%

1.00
%




Allowance for credit losses to non-accrual loans

168.45
%

149.25
%

182.69
%

⁽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 0.77% of total loans and foreclosed assets at June 30, 2019 compared to 0.79% and 0.70% at March 31, 2019 and June 30, 2018, respectively, reflective of normal fluctuations that can occur on a quarterly basis. The decrease in non-accrual loans from March 31, 2019 was driven primarily by the transfer of one corporate loan relationship to foreclosed assets during the second quarter of 2019, for which the Company has remediation plans in place. In addition, included in foreclosed assets as of June 30, 2019 was $6.2 million of OREO acquired in the Bridgeview transaction.

The allowance for credit losses to total loans was 0.85% at June 30, 2019, down from 0.91% at March 31, 2019 and 0.90% at June 30, 2018 driven primarily by loans acquired in the Bridgeview transaction, for which no allowance for credit losses was established at the time of acquisition.

Charge-Off Data
(Dollar amounts in thousands)



Quarters Ended


June 30, 2019

% of Total

March 31, 2019

% of Total

June 30, 2018

% of Total
Net loan charge-offs⁽¹⁾












Commercial and industrial

$
4,600


49.3


$
5,061


55.7


$
7,081


72.4

Agricultural

658


7.0


89


1.0


828


8.5

Office, retail, and industrial

1,454


15.6


618


6.8


279


2.9

Multi-family

—


—


339


3.7


4


—

Construction

(10
)

(0.1
)

—


—


(8
)

(0.1
)
Other commercial real estate

284


3.0


189


2.1


(358
)

(3.7
)
Consumer

2,355


25.2


2,788


30.7


1,951


20.0

Total net loan charge-offs

$
9,341


100.0


$
9,084


100.0


$
9,777


100.0

Total recoveries included above

$
2,083




$
1,693




$
1,532



Net loan charge-offs to average loans⁽¹⁾⁽²⁾












Quarter-to-date

0.31
%



0.32
%



0.36
%


Year-to-date

0.32
%



0.32
%



0.49
%

⁽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 0.31%, compared to 0.32% for the first quarter of 2019 and 0.36% for the second quarter of 2018.

DEPOSIT PORTFOLIO

Deposit Composition
(Dollar amounts in thousands)



Average for the Quarters Ended

June 30, 2019 Percent Change From


June 30, 2019

March 31, 2019

June 30, 2018

March 31, 2019

June 30, 2018
Demand deposits

$
3,835,567


$
3,587,480


$
3,621,645


6.9


5.9

Savings deposits

2,079,852


2,037,831


2,060,066


2.1


1.0

NOW accounts

2,261,103


2,083,366


2,065,530


8.5


9.5

Money market accounts

1,907,766


1,809,234


1,759,313


5.4


8.4

Core deposits

10,084,288


9,517,911


9,506,554


6.0


6.1

Time deposits

2,849,930


2,647,316


1,871,666


7.7


52.3

Total deposits

$
12,934,218


$
12,165,227


$
11,378,220


6.3


13.7

Total average deposits were $12.9 billion for the second quarter of 2019, up 6.3% and 13.7% from the first quarter of 2019 and second quarter of 2018, respectively. The increase in total average deposits compared to both prior periods was driven by $566.6 million of total average deposits assumed in the Bridgeview transaction and organic growth. Compared to the first quarter of 2019, the rise in total average deposits was also impacted by the normal seasonal increase in municipal deposits. In addition, growth in total average deposits compared to the second quarter of 2018 was impacted by deposits assumed in the Northern States transaction and various time deposit marketing initiatives.

CAPITAL MANAGEMENT

Capital Ratios



As of


June 30, 2019

March 31, 2019

December 31, 2018

June 30, 2018
Company regulatory capital ratios:








Total capital to risk-weighted assets

12.57
%

12.91
%

12.62
%

12.07
%
Tier 1 capital to risk-weighted assets

10.11
%

10.52
%

10.20
%

10.09
%
Common equity Tier 1 ("CET1") to risk-weighted assets

10.11
%

10.52
%

10.20
%

9.68
%
Tier 1 capital to average assets

8.96
%

9.28
%

8.90
%

8.95
%
Company tangible common equity ratios^(1)(2):






Tangible common equity to tangible assets

8.57
%

9.00
%

8.59
%

8.04
%
Tangible common equity, excluding accumulated other comprehensive income ("AOCI"), to tangible assets

8.59
%

9.21
%

8.95
%

8.50
%
Tangible common equity to risk-weighted assets

10.11
%

10.29
%

9.81
%

9.16
%

⁽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 June 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.

The Board of Directors approved a quarterly cash dividend of $0.14 per common share during the second quarter of 2019, which is an increase of 17% from the first quarter of 2019 and 27% from the second quarter of 2018. This dividend represents the 146^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, July 24, 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. 10133117 beginning one hour after completion of the live call until 9:00 A.M. (ET) on August 7, 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 estimated synergies, cost savings and financial benefits of completed transactions, and growth strategies, including possible future acquisitions. These statements are subject to certain risks, uncertainties and assumptions, including those discussed under the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in First Midwest's Annual Report on Form 10-K for the year ended December 31, 2018, and in First Midwest's subsequent filings made with the Securities and Exchange Commission ("SEC"). These risks and uncertainties are not exhaustive, and other sections of these reports describe additional factors that could adversely impact First Midwest's business and financial performance.

Non-GAAP Financial Information

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

The Company presents EPS, the efficiency ratio, return on average assets, return on average common equity, and return on average tangible common equity, all adjusted for certain significant transactions. These transactions include acquisition and integration related expenses associated with completed and pending acquisitions (third and fourth quarters of 2018 and first and second quarters of 2019), 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.

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 $17.5 billion of assets and $12 billion in trust assets under management. First Midwest's principal subsidiary, First Midwest Bank, and other affiliates provide a full range of commercial, treasury management, equipment leasing, consumer, wealth management, trust and private banking products and services through locations in metropolitan Chicago, northwest Indiana, southeast Wisconsin, 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

June 30,

March 31,

December 31,

September 30,

June 30,

2019

2019

2018

2018

2018
Period-End Balance Sheet









*Assets*









Cash and due from banks
$
199,684


$
186,230


$
211,189


$
185,239


$
181,482

Interest-bearing deposits in other banks
126,966


76,529


78,069


111,360


192,785

Equity securities, at fair value
40,690


33,304


30,806


29,046


28,441

Securities available-for-sale, at fair value
2,793,316


2,350,195


2,272,009


2,179,410


2,142,865

Securities held-to-maturity, at amortized cost
23,277


12,842


10,176


12,673


13,042

FHLB and FRB stock
109,466


85,790


80,302


87,728


82,778

Loans:









Commercial and industrial
4,524,401


4,183,262


4,120,293


3,994,142


3,844,067

Agricultural
430,589


438,461


430,928


432,220


433,175

Commercial real estate:









Office, retail, and industrial
1,936,577


1,806,892


1,820,917


1,782,757


1,834,918

Multi-family
787,155


752,943


764,185


698,611


703,091

Construction
654,607


683,475


649,337


632,779


633,601

Other commercial real estate
1,447,673


1,309,878


1,361,810


1,348,831


1,337,396

Home equity
874,686


862,068


851,607


853,887


847,903

1-4 family mortgages
1,391,814


1,086,264


1,017,181


888,797


880,181

Installment
472,102


445,760


430,525


418,524


377,233

Total loans
12,519,604


11,569,003


11,446,783


11,050,548


10,891,565

Allowance for loan losses
(105,729
)

(103,579
)

(102,219
)

(99,925
)

(96,691
)
Net loans
12,413,875


11,465,424


11,344,564


10,950,623


10,794,874

OREO
15,313


10,818


12,821


12,244


12,892

Premises, furniture, and equipment, net
148,347


131,014


132,502


126,389


127,024

Investment in bank-owned life insurance ("BOLI")
297,118


295,899


296,733


284,074


282,664

Goodwill and other intangible assets
878,802


808,852


790,744


751,248


753,020

Accrued interest receivable and other assets
415,379


360,872


245,734


231,465


206,209

Total assets
$
17,462,233


$
15,817,769


$
15,505,649


$
14,961,499


$
14,818,076

*Liabilities and Stockholders' Equity*









Noninterest-bearing deposits
$
3,748,316


$
3,588,943


$
3,642,989


$
3,618,384


$
3,667,847

Interest-bearing deposits
9,440,272


8,572,039


8,441,123


7,908,730


7,824,416

Total deposits
13,188,588


12,160,982


12,084,112


11,527,114


11,492,263

Borrowed funds
1,407,378


973,852


906,079


1,073,546


981,044

Senior and subordinated debt
233,538


203,984


203,808


195,595


195,453

Accrued interest payable and other liabilities
332,156


319,480


256,652


247,569


265,753

Stockholders' equity
2,300,573


2,159,471


2,054,998


1,917,675


1,883,563

Total liabilities and stockholders' equity
$
17,462,233


$
15,817,769


$
15,505,649


$
14,961,499


$
14,818,076

Stockholders' equity, excluding AOCI
$
2,303,383


$
2,191,630


$
2,107,510


$
1,992,808


$
1,947,963

Stockholders' equity, common
2,300,573


2,159,471


2,054,998


1,917,675


1,883,563

First Midwest Bancorp, Inc.





Condensed Consolidated Statements of Income (Unaudited) (Dollar amounts in thousands)





















Quarters Ended


Six Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,


June 30,

June 30,

2019

2019

2018

2018

2018


2019

2018
Income Statement














Interest income
$
177,682


$
162,490


$
159,527


$
149,532


$
142,088



$
340,172


$
273,433

Interest expense
27,370


23,466


20,898


17,505


14,685



50,836


27,467

Net interest income
150,312


139,024


138,629


132,027


127,403



289,336


245,966

Provision for loan losses
11,491


10,444


9,811


11,248


11,614



21,935


26,795

Net interest income after provision for loan losses
138,821


128,580


128,818


120,779


115,789



267,401


219,171

Noninterest Income














Service charges on deposit accounts
12,196


11,540


12,627


12,378


12,058



23,736


23,710

Wealth management fees
12,190


11,600


10,951


10,622


10,981



23,790


21,939

Card-based fees, net
4,549


4,378


4,574


4,123


4,394



8,927


8,327

Capital market products income
2,154


1,279


1,408


1,936


2,819



3,433


4,377

Mortgage banking income
1,901


1,004


1,304


1,657


1,736



2,905


4,133

Merchant servicing fees, net
371


337


365


387


383



708


713

Other service charges, commissions, and fees
2,412


2,274


2,353


2,399


2,455



4,686


4,673

Total fee-based revenues
35,773


32,412


33,582


33,502


34,826



68,185


67,872

Other income
2,753


2,494


2,880


2,164


2,121



5,247


4,592

Total noninterest income
38,526


34,906


36,462


35,666


36,947



73,432


72,464

Noninterest Expense














Salaries and employee benefits:













Salaries and wages
47,776


46,135


45,011


44,067


46,256



93,911


92,086

Retirement and other employee benefits
10,916


11,238


10,378


10,093


11,676



22,154


22,633

Total salaries and employee benefits
58,692


57,373


55,389


54,160


57,932



116,065


114,719

Net occupancy and equipment expense
13,671


14,770


12,827


13,183


13,651



28,441


27,424

Professional services
10,467


7,788


8,859


7,944


8,298



18,255


15,878

Technology and related costs
4,908


4,596


4,849


4,763


4,837



9,504


9,608

Advertising and promotions
3,167


2,372


2,011


3,526


2,061



5,539


3,711

Net OREO expense
294


681


763


(413
)

(256
)


975


812

Other expenses
12,987


10,581


13,418


11,015


11,878



23,568


21,831

Acquisition and integration related expenses
9,514


3,691


9,553


60


—



13,205


—

Delivering Excellence implementation costs
442


258


3,159


2,239


15,015



700


15,015

Total noninterest expense
114,142


102,110


110,828


96,477


113,416



216,252


208,998

Income before income tax expense
63,205


61,376


54,452


59,968


39,320



124,581


82,637

Income tax expense
16,191


15,318


13,044


6,616


9,720



31,509


19,527

Net income
$
47,014


$
46,058


$
41,408


$
53,352


$
29,600



$
93,072


$
63,110

Net income applicable to common shares
$
46,625


$
45,655


$
41,088


$
52,911


$
29,360



$
92,280


$
62,559

Net income applicable to common shares, adjusted⁽¹⁾
54,091


48,616


50,622


46,837


40,621



102,709


73,820

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


Six Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,


June 30,

June 30,

2019

2019

2018

2018

2018


2019

2018
EPS














Basic EPS
$
0.43


$
0.43


$
0.39


$
0.52


$
0.29



$
0.86


$
0.61

Diluted EPS
$
0.43


$
0.43


$
0.39


$
0.52


$
0.29



$
0.86


$
0.61

Diluted EPS, adjusted⁽¹⁾
$
0.50


$
0.46


$
0.48


$
0.46


$
0.40



$
0.96


$
0.72

Common Stock and Related Per Common Share Data





Book value
$
20.80


$
20.20


$
19.32


$
18.61


$
18.28



$
20.80


$
18.28

Tangible book value
$
12.86


$
12.63


$
11.88


$
11.32


$
10.97



$
12.86


$
10.97

Dividends declared per share
$
0.14


$
0.12


$
0.12


$
0.11


$
0.11



$
0.26


$
0.22

Closing price at period end
$
20.47


$
20.46


$
19.81


$
26.59


$
25.47



$
20.47


$
25.47

Closing price to book value
1.0


1.0


1.0


1.4


1.4



1.0


1.4

Period end shares outstanding
110,589


106,900


106,375


103,058


103,059



110,589


103,059

Period end treasury shares
9,818


8,775


9,297


9,301


9,297



9,818


9,297

Common dividends
$
15,503


$
12,837


$
12,774


$
11,326


$
11,333



$
28,340


$
22,682

Dividend payout ratio
32.56
%

27.91
%

30.77
%

21.15
%

37.93
%


30.23
%

36.07
%
Dividend payout ratio, adjusted⁽¹⁾
28.00
%

26.09
%

25.00
%

23.91
%

27.50
%


27.08
%

30.56
%
Key Ratios/Data














Return on average common equity⁽²⁾
8.34
%

8.66
%

8.09
%

10.99
%

6.23
%


8.50
%

6.70
%
Return on average common equity, adjusted⁽¹⁾⁽²⁾
9.68
%

9.22
%

9.97
%

9.73
%

8.62
%


9.46
%

7.91
%
Return on average tangible common equity⁽²⁾
13.83
%

14.41
%

13.42
%

18.60
%

10.83
%


14.11
%

11.65
%
Return on average tangible common equity, adjusted⁽¹⁾⁽²⁾
15.95
%

15.31
%

16.42
%

16.51
%

14.81
%


15.64
%

13.67
%
Return on average assets⁽²⁾
1.13
%

1.19
%

1.06
%

1.42
%

0.81
%


1.16
%

0.88
%
Return on average assets, adjusted⁽¹⁾⁽²⁾
1.31
%

1.27
%

1.30
%

1.26
%

1.12
%


1.29
%

1.04
%
Loans to deposits
94.93
%

95.13
%

94.73
%

95.87
%

94.77
%


94.93
%

94.77
%
Efficiency ratio⁽¹⁾
54.67
%

55.69
%

55.25
%

56.03
%

59.65
%


55.16
%

60.28
%
Net interest margin⁽²⁾⁽³⁾
4.06
%

4.04
%

3.96
%

3.92
%

3.91
%


4.05
%

3.85
%
Yield on average interest-earning assets⁽²⁾⁽³⁾
4.80
%

4.72
%

4.56
%

4.44
%

4.35
%


4.76
%

4.28
%
Cost of funds⁽²⁾⁽⁴⁾
0.77
%

0.72
%

0.63
%

0.55
%

0.47
%


0.75
%

0.45
%
Net noninterest expense to average assets⁽²⁾
1.81
%

1.74
%

1.90
%

1.62
%

2.10
%


1.78
%

1.91
%
Effective income tax rate
25.62
%

24.96
%

23.96
%

11.03
%

24.72
%


25.29
%

23.63
%
Effective income tax rate, adjusted⁽¹⁾
25.62
%

24.96
%

23.96
%

24.04
%

24.72
%


25.29
%

23.63
%
Capital Ratios














Total capital to risk-weighted assets⁽¹⁾
12.57
%

12.91
%

12.62
%

12.32
%

12.07
%


12.57
%

12.07
%
Tier 1 capital to risk-weighted assets⁽¹⁾
10.11
%

10.52
%

10.20
%

10.34
%

10.09
%


10.11
%

10.09
%
CET1 to risk-weighted assets⁽¹⁾
10.11
%

10.52
%

10.20
%

9.93
%

9.68
%


10.11
%

9.68
%
Tier 1 capital to average assets⁽¹⁾
8.96
%

9.28
%

8.90
%

9.10
%

8.95
%


8.96
%

8.95
%
Tangible common equity to tangible assets⁽¹⁾
8.57
%

9.00
%

8.59
%

8.21
%

8.04
%


8.57
%

8.04
%
Tangible common equity, excluding AOCI, to tangible assets⁽¹⁾
8.59
%

9.21
%

8.95
%

8.74
%

8.50
%


8.59
%

8.50
%
Tangible common equity to risk -weighted assets⁽¹⁾
10.11
%

10.29
%

9.81
%

9.33
%

9.16
%


10.11
%

9.16
%
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


Six Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,


June 30,

June 30,

2019

2019

2018

2018

2018


2019

2018
Asset Quality Performance Data













*Non-performing assets*














Commercial and industrial
$
19,809


$
34,694


$
33,507


$
37,981


$
22,672



$
19,809


$
22,672

Agricultural
6,712


2,359


1,564


2,104


2,992



6,712


2,992

Commercial real estate:














Office, retail, and industrial
17,875


17,484


6,510


6,685


9,007



17,875


9,007

Multi-family
5,322


2,959


3,107


3,184


3,551



5,322


3,551

Construction
152


—


144


208


208



152


208

Other commercial real estate
3,982


2,971


2,854


4,578


5,288



3,982


5,288

Consumer
9,625


9,738


9,249


10,026


9,757



9,625


9,757

Total non-accrual loans
63,477


70,205


56,935


64,766


53,475



63,477


53,475

90 days or more past due loans, still accruing interest
2,615


8,446


8,282


2,949


7,954



2,615


7,954

Total non-performing loans
66,092


78,651


65,217


67,715


61,429



66,092


61,429

Accruing TDRs
1,441


1,844


1,866


1,741


1,760



1,441


1,760

Foreclosed assets⁽⁵⁾
28,488


10,818


12,821


12,244


12,892



28,488


12,892

Total non-performing assets
$
96,021


$
91,313


$
79,904


$
81,700


$
76,081



$
96,021


$
76,081

30-89 days past due loans
$
34,460


$
45,764


$
37,524


$
46,257


$
39,171



$
34,460


$
39,171

*Allowance for credit losses*














Allowance for loan losses
$
105,729


$
103,579


$
102,219


$
99,925


$
96,691



$
105,729


$
96,691

Reserve for unfunded commitments
1,200


1,200


1,200


1,000


1,000



1,200


1,000

Total allowance for credit losses
$
106,929


$
104,779


$
103,419


$
100,925


$
97,691



$
106,929


$
97,691

Provision for loan losses
$
11,491


$
10,444


$
9,811


$
11,248


$
11,614



$
21,935


$
26,795

*Net charge-offs by category*














Commercial and industrial
$
4,600


$
5,061


$
5,558


$
5,230


$
7,081



$
9,661


$
20,230

Agricultural
658


89


71


631


828



747


1,811

Commercial real estate:














Office, retail, and industrial
1,454


618


713


596


279



2,072


643

Multi-family
—


339


(3
)

1


4



339


4

Construction
(10
)

—


(99
)

(4
)

(8
)


(10
)

(21
)
Other commercial real estate
284


189


(817
)

23


(358
)


473


(328
)
Consumer
2,355


2,788


2,094


1,537


1,951



5,143


3,494

Total net charge-offs
$
9,341


$
9,084


$
7,517


$
8,014


$
9,777



$
18,425


$
25,833

Total recoveries included above
$
2,083


$
1,693


$
2,810


$
1,250


$
1,532



$
3,776


$
2,561

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


June 30,

March 31,

December 31,

September 30,

June 30,


2019

2019

2018

2018

2018
*Asset quality ratios*










Non-accrual loans to total loans

0.51
%

0.61
%

0.50
%

0.59
%

0.49
%
Non-performing loans to total loans

0.53
%

0.68
%

0.57
%

0.61
%

0.56
%
Non-performing assets to total loans plus foreclosed assets

0.77
%

0.79
%

0.70
%

0.74
%

0.70
%
Non-performing assets to tangible common equity plus allowance for credit losses

6.28
%

6.27
%

5.84
%

6.45
%

6.19
%
Non-accrual loans to total assets

0.36
%

0.44
%

0.37
%

0.43
%

0.36
%
*Allowance for credit losses and net charge-off ratios*
Allowance for credit losses to total loans⁽⁶⁾

0.85
%

0.91
%

0.90
%

0.91
%

0.90
%
Allowance for credit losses to loans, excluding acquired loans

0.98
%

1.00
%

1.01
%

1.01
%

1.00
%
Allowance for credit losses to non-accrual loans

168.45
%

149.25
%

181.64
%

155.83
%

182.69
%
Allowance for credit losses to non-performing loans

161.79
%

133.22
%

158.58
%

149.04
%

159.03
%
Net charge-offs to average loans⁽²⁾

0.31
%

0.32
%

0.26
%

0.29
%

0.36
%

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


Six Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,


June 30,

June 30,

2019

2019

2018

2018

2018


2019

2018
EPS














Net income
$
47,014


$
46,058


$
41,408


$
53,352


$
29,600



$
93,072


$
63,110

Net income applicable to non -vested restricted shares
(389
)

(403
)

(320
)

(441
)

(240
)


(792
)

(551
)
Net income applicable to common shares
46,625


45,655


41,088


52,911


29,360



92,280


62,559

Adjustments to net income:














Acquisition and integration related expenses
9,514


3,691


9,553


60


—



13,205


—

Tax effect of acquisition and integration related expenses
(2,379
)

(923
)

(2,388
)

(15
)

—



(3,301
)

—

Delivering Excellence implementation costs
442


258


3,159


2,239


15,015



700


15,015

Tax effect of Delivering Excellence implementation costs
(111
)

(65
)

(790
)

(560
)

(3,754
)


(175
)

(3,754
)
Income tax benefits
—


—


—


(7,798
)

—



—


—

Total adjustments to net income, net of tax
7,466


2,961


9,534


(6,074
)

11,261



10,429


11,261

Net income applicable to common shares, adjusted⁽¹⁾
$
54,091


$
48,616


$
50,622


$
46,837


$
40,621



$
102,709


$
73,820

Weighted-average common shares outstanding:













Weighted-average common shares outstanding (basic)
108,467


105,770


105,116


102,178


102,159



107,126


102,041

Dilutive effect of common stock equivalents
—


—


—


—


—



—


8

Weighted-average diluted common shares outstanding
108,467


105,770


105,116


102,178


102,159



107,126


102,049

Basic EPS
$
0.43


$
0.43


$
0.39


$
0.52


$
0.29



$
0.86


$
0.61

Diluted EPS
$
0.43


$
0.43


$
0.39


$
0.52


$
0.29



$
0.86


$
0.61

Diluted EPS, adjusted⁽¹⁾
$
0.50


$
0.46


$
0.48


$
0.46


$
0.40



$
0.96


$
0.72

Anti-dilutive shares not included in the computation of diluted EPS
—


—


—


—


—



—


54

Dividend Payout Ratio














Dividends declared per share
$
0.14


$
0.12


$
0.12


$
0.11


$
0.11



$
0.26


$
0.22

Dividend payout ratio
32.56
%

27.91
%

30.77
%

21.15
%

37.93
%


30.23
%

36.07
%
Dividend payout ratio, adjusted⁽¹⁾
28.00
%

26.09
%

25.00
%

23.91
%

27.50
%


27.08
%

30.56
%
Effective Tax Rate














Income before income tax expense
$
63,205


$
61,376


$
54,452


$
59,968


$
39,320



$
124,581


$
82,637

Income tax expense
$
16,191


$
15,318


$
13,044


$
6,616


$
9,720



$
31,509


$
19,527

Income tax benefits
—


—


—


7,798


—



—


—

Income tax expense, adjusted
$
16,191


$
15,318


$
13,044


$
14,414


$
9,720



$
31,509


$
19,527

Effective income tax rate
25.62
%

24.96
%

23.96
%

11.03
%

24.72
%


25.29
%

23.63
%
Effective income tax rate, adjusted
25.62
%

24.96
%

23.96
%

24.04
%

24.72
%


25.29
%

23.63
%















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


Six Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,


June 30,

June 30,

2019

2019

2018

2018

2018


2019

2018
Return on Average Common and Tangible Common Equity











Net income applicable to common shares
$
46,625


$
45,655


$
41,088


$
52,911


$
29,360



$
92,280


$
62,559

Intangibles amortization
2,624


2,363


2,077


1,772


1,794



4,987


3,596

Tax effect of intangibles amortization
(656
)

(591
)

(519
)

(443
)

(449
)


(1,247
)

(957
)
Net income applicable to common shares, excluding intangibles amortization
48,593


47,427


42,646


54,240


30,705



96,020


65,198

Total adjustments to net income, net of tax⁽¹⁾
7,466


2,961


9,534


(6,074
)

11,261



10,429


11,261

Net income applicable to common shares, adjusted⁽¹⁾
$
56,059


$
50,388


$
52,180


$
48,166


$
41,966



$
106,449


$
76,459

Average stockholders' equity
$
2,241,569


$
2,138,281


$
2,015,217


$
1,909,330


$
1,890,727



$
2,190,210


$
1,882,121

Less: average intangible assets
(832,263
)

(803,408
)

(754,495
)

(752,109
)

(753,887
)


(817,915
)

(753,879
)
Average tangible common equity
$
1,409,306


$
1,334,873


$
1,260,722


$
1,157,221


$
1,136,840



$
1,372,295


$
1,128,242

Return on average common equity⁽²⁾
8.34
%

8.66
%

8.09
%

10.99
%

6.23
%


8.50
%

6.70
%
Return on average common equity, adjusted⁽¹⁾⁽²⁾
9.68
%

9.22
%

9.97
%

9.73
%

8.62
%


9.46
%

7.91
%
Return on average tangible common equity⁽²⁾
13.83
%

14.41
%

13.42
%

18.60
%

10.83
%


14.11
%

11.65
%
Return on average tangible common equity, adjusted⁽¹⁾⁽²⁾
15.95
%

15.31
%

16.42
%

16.51
%

14.81
%


15.64
%

13.67
%
Return on Average Assets











Net income
$
47,014


$
46,058


$
41,408


$
53,352


$
29,600



$
93,072


$
63,110

Total adjustments to net income, net of tax⁽¹⁾
7,466


2,961


9,534


(6,074
)

11,261



10,429


11,261

Net income, adjusted⁽¹⁾
$
54,480


$
49,019


$
50,942


$
47,278


$
40,861



$
103,501


$
74,371

Average assets
$
16,740,050


$
15,667,839


$
15,503,399


$
14,894,670


$
14,605,715



$
16,206,906


$
14,397,540

Return on average assets⁽²⁾
1.13
%

1.19
%

1.06
%

1.42
%

0.81
%


1.16
%

0.88
%
Return on average assets, adjusted⁽¹⁾⁽²⁾
1.31
%

1.27
%

1.30
%

1.26
%

1.12
%


1.29
%

1.04
%
Efficiency Ratio Calculation













Noninterest expense
$
114,142


$
102,110


$
110,828


$
96,477


$
113,416



$
216,252


$
208,998

Less:














Net OREO expense
(294
)

(681
)

(763
)

413


256



(975
)

(812
)
Acquisition and integration related expenses
(9,514
)

(3,691
)

(9,553
)

(60
)

—



(13,205
)

—

Delivering Excellence implementation costs
(442
)

(258
)

(3,159
)

(2,239
)

(15,015
)


(700
)

(15,015
)
Total
$
103,892


$
97,480


$
97,353


$
94,591


$
98,657



$
201,372


$
193,171

Tax-equivalent net interest income⁽³⁾
$
151,492


$
140,132


$
139,755


$
133,161


$
128,442



$
291,624


$
247,980

Noninterest income
38,526


34,906


36,462


35,666


36,947



73,432


72,464

Total
$
190,018


$
175,038


$
176,217


$
168,827


$
165,389



$
365,056


$
320,444

Efficiency ratio
54.67
%

55.69
%

55.25
%

56.03
%

59.65
%


55.16
%

60.28
%















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

June 30,

March 31,

December 31,

September 30,

June 30,

2019

2019

2018

2018

2018
Risk-Based Capital Data









Common stock
$
1,204


$
1,157


$
1,157


$
1,124


$
1,124

Additional paid-in capital
1,205,396


1,103,991


1,114,580


1,028,635


1,025,703

Retained earnings
1,304,756


1,273,245


1,192,767


1,164,133


1,122,107

Treasury stock, at cost
(207,973
)

(186,763
)

(200,994
)

(201,084
)

(200,971
)
Goodwill and other intangible assets, net of deferred tax liabilities
(878,802
)

(808,852
)

(790,744
)

(751,248
)

(753,020
)
Disallowed DTAs
(2,804
)

(809
)

(1,334
)

—


(389
)
CET1 capital
1,421,777


1,381,969


1,315,432


1,241,560


1,194,554

Trust-preferred securities
—


—


—


50,690


50,690

Other disallowed DTAs
—


—


(334
)

—


(97
)
Tier 1 capital
1,421,777


1,381,969


1,315,098


1,292,250


1,245,147

Tier 2 capital
345,078


312,840


311,391


248,118


244,795

Total capital
$
1,766,855


$
1,694,809


$
1,626,489


$
1,540,368


$
1,489,942

Risk-weighted assets
$
14,056,482


$
13,131,237


$
12,892,180


$
12,500,342


$
12,345,200

Adjusted average assets
$
15,863,145


$
14,891,534


$
14,782,327


$
14,202,776


$
13,907,100

Total capital to risk-weighted assets
12.57
%

12.91
%

12.62
%

12.32
%

12.07
%
Tier 1 capital to risk-weighted assets
10.11
%

10.52
%

10.20
%

10.34
%

10.09
%
CET1 to risk-weighted assets
10.11
%

10.52
%

10.20
%

9.93
%

9.68
%
Tier 1 capital to average assets
8.96
%

9.28
%

8.90
%

9.10
%

8.95
%
Tangible Common Equity









Stockholders' equity
$
2,300,573


$
2,159,471


$
2,054,998


$
1,917,675


$
1,883,563

Less: goodwill and other intangible assets
(878,802
)

(808,852
)

(790,744
)

(751,248
)

(753,020
)
Tangible common equity
1,421,771


1,350,619


1,264,254


1,166,427


1,130,543

Less: AOCI
2,810


32,159


52,512


75,133


64,400

Tangible common equity, excluding AOCI
$
1,424,581


$
1,382,778


$
1,316,766


$
1,241,560


$
1,194,943

Total assets
$
17,462,233


$
15,817,769


$
15,505,649


$
14,961,499


$
14,818,076

Less: goodwill and other intangible assets
(878,802
)

(808,852
)

(790,744
)

(751,248
)

(753,020
)
Tangible assets
$
16,583,431


$
15,008,917


$
14,714,905


$
14,210,251


$
14,065,056

Tangible common equity to tangible assets
8.57
%

9.00
%

8.59
%

8.21
%

8.04
%
Tangible common equity, excluding AOCI, to tangible assets
8.59
%

9.21
%

8.95
%

8.74
%

8.50
%
Tangible common equity to risk-weighted assets
10.11
%

10.29
%

9.81
%

9.33
%

9.16
%

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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