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First Midwest Bancorp, Inc. Announces 2016 Fourth Quarter and Full Year Results

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ITASCA, Ill., Jan. 24, 2017 (GLOBE NEWSWIRE) -- First Midwest Bancorp, Inc. (the "Company" or "First Midwest") (NASDAQ: FMBI), the holding company of First Midwest Bank (the "Bank"), today reported results of operations and financial condition for the fourth quarter and full year of 2016. Net income for the fourth quarter of 2016 was $20.7 million, or $0.25 per share, compared to $28.4 million, or $0.35 per share, for the third quarter of 2016, and $16.3 million, or $0.21 per share, for the fourth quarter of 2015.

Reported results included the following certain significant transactions: acquisition and integration related expenses associated with completed and pending acquisitions (all periods presented), the lease cancellation fee recognized as a result of the Company's planned 2018 corporate headquarters relocation (fourth quarter of 2016), the net gain on the sale-leaseback transaction (third quarter of 2016), and property valuation adjustments related to strategic branch initiatives (fourth quarter of 2015).

Excluding these certain significant transactions, earnings per share (1) was $0.32 for the fourth quarter of 2016, consistent with $0.32 the third quarter of 2016, and increased 10% compared to $0.29 for the fourth quarter of 2015.

FOURTH QUARTER HIGHLIGHTS

  • Generated earnings per share (1) of $0.32; up 10% from the fourth quarter of 2015, and consistent with a strong third quarter of 2016, excluding certain significant transactions.

  • Grew total loans 4% annualized from September 30, 2016.

  • Repaid $115 million of maturing senior notes with proceeds generated from the issuance of $150 million in subordinated notes late in the third quarter of 2016; absorbed approximately $1.5 million in overlapping interest costs.

  • Completed the acquisition of Standard Bancshares, Inc. on January 6, 2017, adding $1.9 billion in loans and $2.1 billion in deposits; absorbed $7.5 million in acquisition and integration related expenses in the fourth quarter of 2016.

  • Announced the decision to relocate corporate headquarters and consolidate certain centralized commercial sales platforms in 2018; absorbed approximately $1.0 million in lease cancellation fees.

FULL YEAR HIGHLIGHTS

  • Grew earnings per share to $1.14, up 9% from 2015.

  • Increased fee-based revenues 14% from 2015.

  • Expanded total loans 15% from 2015.

  • Increased average core deposits 11% from 2015.

"Strong performance in 2016 was capped by solid fourth quarter results, reflecting balanced business execution against a backdrop of substantial growth," said Michael L. Scudder, President and Chief Executive Officer. "Away from certain integration and organizational costs attendant to this growth, earnings per share improved 10% and 8% for the quarter and full year versus a year ago. This performance benefited from consistent sales success across major business lines as well as our acquisition of NI Bancshares Corporation in March of 2016. Further, we were very pleased to close on our acquisition of Standard Bancshares, Inc., a $2.3 billion asset financial institution, on January 6, 2017.  As a result, we begin 2017 with $14 billion in assets, 40% larger than we began 2016, and having greatly strengthened our place as the premier commercial bank in metro Chicago."

Mr. Scudder concluded, "Our performance momentum is building amid optimism for improved operating conditions and a transition to higher rates. Continued focus on investing in our colleagues and infrastructure combined with our strong balance sheet leave us well positioned to capitalize on this momentum and operate as a larger more diverse company.  As we do so, we remain centered on those actions which help our clients to achieve financial success, enhance the value of our franchise and inure to the long-term benefit of our shareholders."

(1) Earnings per share, excluding certain significant transactions, is a Non-GAAP financial measure. For details on the calculation, see the sections titled "Non-GAAP Financial Information" and "Non-GAAP Reconciliations" presented later in this release.

SIGNIFICANT RECENT EVENTS

Acquisition

Standard Bancshares, Inc.

On January 6, 2017, the Company completed its acquisition of Standard Bancshares, Inc. ("Standard"), the holding company for Standard Bank and Trust Company. With the acquisition, the Company acquired 35 banking offices located primarily in the southwest Chicago suburbs and adjacent markets in northwest Indiana, and added approximately $2.1 billion in deposits and $1.9 billion in loans. The merger consideration totaled $570.6 million and consisted of 21,057,085 shares of Company common stock and $47.1 million in cash. Operating systems are expected to be converted in the first quarter of 2017.

Headquarters Relocation to Chicago's Dynamic O'Hare Airport Corridor

On January 3, 2017, the Company announced its plan to relocate its corporate headquarters in early 2018 to Chicago's dynamic O'Hare airport corridor from its current location in Itasca, Illinois. The new headquarters, located at Triangle Plaza at 8750 W. Bryn Mawr Avenue, is expected to offer greater accessibility and collaboration opportunities for the Company's colleagues and a larger space to accommodate future growth. The Company recognized a $950,000 lease cancellation fee during the fourth quarter of 2016 as a result of its planned move.

OPERATING PERFORMANCE

Net Interest Income and Margin Analysis
(Dollar amounts in thousands)
 
  Quarters Ended
  December 31, 2016     September 30, 2016     December 31, 2015
  Average
Balance
  Interest
Earned/
Paid
  Yield/
Rate
(%)
    Average
Balance
  Interest
Earned/
Paid
  Yield/
Rate
(%)
    Average
Balance
  Interest
Earned/
Paid
  Yield/
Rate
(%)
Assets:                                      
Other interest-earning assets  $ 177,974     $ 362     0.81       $ 282,101     $ 472     0.67       $ 587,112     $ 530     0.36  
Securities (1)  2,016,588     11,088     2.20       1,896,195     10,752     2.27       1,260,167     9,855     3.13  
Federal Home Loan Bank ("FHLB") and
  Federal Reserve Bank ("FRB") stock 
54,093     421     3.11       51,451     261     2.03       38,926     371     3.81  
Loans (1)(2)  8,177,036     86,520     4.21       8,067,900     88,500     4.36       7,013,586     76,405     4.32  
Total interest-earning assets (1)  10,425,691     98,391     3.76       10,297,647     99,985     3.87       8,899,791     87,161     3.89  
Cash and due from banks  145,807               150,467               131,589          
Allowance for loan losses  (89,401 )             (84,088 )             (74,823 )        
Other assets  898,011               958,299               865,873          
Total assets $ 11,380,108               $ 11,322,325               $ 9,822,430          
Liabilities and Stockholders' Equity:                                      
Interest-bearing core deposits (3)  $ 4,971,630     1,049     0.08       $ 5,090,820     1,086     0.08       $ 4,471,645     930     0.08  
Time deposits  1,213,048     1,426     0.47       1,248,425     1,434     0.46       1,152,895     1,341     0.46  
Borrowed funds  617,975     1,716     1.10       605,177     1,782     1.17       167,120     1,250     2.97  
Senior and subordinated debt  259,531     4,112     6.30       166,101     2,632     6.30       201,168     3,134     6.18  
Total interest-bearing liabilities 7,062,184     8,303     0.47       7,110,523     6,934     0.39       5,992,828     6,655     0.44  
Demand deposits (3)  2,803,016               2,806,851               2,560,604          
Total funding sources  9,865,200               9,917,374               8,553,432          
Other liabilities 244,915               143,249               114,492          
Stockholders' equity - common 1,269,993               1,261,702               1,154,506          
Total liabilities and
  stockholders' equity 
$ 11,380,108               $ 11,322,325               $ 9,822,430          
Tax-equivalent net interest
  income/margin (1) 
    90,088     3.44           93,051     3.60           80,506     3.59  
Tax-equivalent adjustment     (2,064 )             (2,079 )             (2,494 )    
Net interest income (GAAP)      $ 88,024               $ 90,972               $ 78,012      
 
(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 35%. The corresponding income tax impact related to tax-exempt items is recorded in income tax expense. These adjustments have no impact on net income. For details on the calculation of tax-equivalent net interest income, see the sections titled, "Non-GAAP Financial Information" and "Non-GAAP Reconciliations" presented later in this release.
(2) Includes loans acquired through Federal Deposit Insurance Corporation ("FDIC")-assisted transactions subject to loss sharing agreements ("covered loans"), which totaled $23.3 million at December 31, 2016, $24.3 million at September 30, 2016, and $30.8 million at December 31, 2015.
(3) See the Deposit Composition table presented later in this release for average balance detail by category.

Net interest income decreased by 3.2% from the third quarter of 2016 and increased by 12.8% compared to the fourth quarter of 2015. Compared to the third quarter of 2016, the decrease in net interest income resulted mainly from lower acquired loan accretion and higher funding costs related to the issuance of $150.0 million of subordinated notes late in the third quarter of 2016 and the subsequent repayment of $115.0 million of maturing senior notes late in the fourth quarter of 2016. The increase in net interest income compared to the fourth quarter of 2015 was driven primarily by organic loan growth and the acquisition of interest-earning assets from the NI Bancshares Corporation ("NI Bancshares") transaction, partially offset by higher senior and subordinated debt costs.

Acquired loan accretion contributed $1.8 million, $3.8 million, and $1.3 million to net interest income for the fourth quarter of 2016, the third quarter of 2016, and the fourth quarter of 2015, respectively.

Tax-equivalent net interest margin for the current quarter was 3.44%, decreasing 16 basis points from the third quarter of 2016 and 15 basis points from the fourth quarter of 2015. The decrease in tax-equivalent net interest margin compared to the third quarter of 2016 was due primarily to the decline in acquired loan accretion, temporarily higher funding costs related to the timing of the issuance of the aforementioned subordinated notes and the subsequent repayment of the maturing senior notes, and certain leveraging strategies initiated during the second half of 2016 in anticipation of additional liquidity from the January of 2017 closing of the Standard acquisition. Compared to the fourth quarter of 2015, the decline in net interest margin resulted primarily from organic growth in floating rate loans and higher senior and subordinated debt costs.

For the fourth quarter of 2016, total average interest-earning assets rose $128.0 million from the third quarter of 2016 and $1.5 billion from the fourth quarter of 2015. The increase from both prior periods presented resulted from organic loan growth and security purchases. In addition, the rise in average interest-earning assets compared to the fourth quarter of 2015 was impacted by interest-earning assets acquired in the NI Bancshares transaction late in the first quarter of 2016 and the Peoples Bancorp, Inc. ("Peoples") transaction late in the fourth quarter of 2015.

Average funding sources decreased by $52.2 million from the third quarter of 2016 and increased $1.3 billion from the fourth quarter of 2015. Compared to the third quarter of 2016, average funding sources were impacted by the normal seasonal reduction in interest-bearing core deposits, partly offset by the issuance of $150.0 million of subordinated notes late in the third quarter of 2016 in connection with the repayment of $115.0 million of maturing senior notes late in the fourth quarter of 2016. Deposits acquired in the NI Bancshares and Peoples transactions and the addition of $740.1 million of FHLB advances contributed to the increase in average funding sources compared to the fourth quarter of 2015.

Fee-based Revenues and Total Noninterest Income Analysis
(Dollar amounts in thousands)
 
    Quarters Ended   December 31, 2016
Percent Change From
    December 31,
 2016
  September 30,
 2016
  December 31,
 2015
  September 30,
 2016
  December 31,
 2015
Service charges on deposit accounts    $ 10,315     $ 10,708     $ 10,303     (3.7 )   0.1  
Wealth management fees    8,375     8,495     7,493     (1.4 )   11.8  
Card-based fees    7,462     7,332     6,761     1.8     10.4  
Merchant servicing fees    3,016     3,319     2,929     (9.1 )   3.0  
Mortgage banking income    3,537     3,394     1,777     4.2     99.0  
Other service charges, commissions, and fees   4,402     5,218     4,664     (15.6 )   (5.6 )
Total fee-based revenues    37,107     38,466     33,927     (3.5 )   9.4  
Net securities gains    323     187     822     72.7     (60.7 )
Net gain on sale-leaseback transaction       5,509         (100.0 )    
Other income    2,281     1,691     1,729     34.9     31.9  
Total noninterest income    $ 39,711     $ 45,853     $ 36,478     (13.4 )   8.9  

Total fee-based revenues of $37.1 million decreased by 3.5% from the third quarter of 2016 and grew by 9.4% compared to the fourth quarter of 2015. The decrease in fee-based revenues from the third quarter of 2016 was driven primarily by a seasonal decline in service charges on deposit accounts and lower sales of capital market products to commercial clients within other service charges, commissions, and fees. Mortgage banking income for the fourth quarter of 2016 resulted from sales of $85.3 million of 1-4 family mortgage loans in the secondary market, compared to $107.3 million in the third quarter of 2016 and $51.4 million in the fourth quarter of 2015. In addition, mortgage banking income for the fourth quarter of 2016 was positively impacted by changes in the fair value of mortgage servicing rights, which fluctuate from quarter to quarter.

Compared to the fourth quarter of 2015, services provided to customers acquired in the NI Bancshares transaction contributed to the majority of the increase in wealth management fees. The rise in card-based fees compared to the fourth quarter of 2015 resulted from higher transaction volumes and services provided to customers acquired in the NI Bancshares transaction.

Total noninterest income of $39.7 million grew 8.9% from the fourth quarter of 2015 and decreased 13.4% from the third quarter of 2016. Other income for the fourth quarter of 2016 includes a net gain of $630,000 from the disposition of a branch property. For the third quarter of 2016, total noninterest income benefitted from a $5.5 million gain recognized as a result of the Company's sale-leaseback transaction.

Noninterest Expense Analysis
(Dollar amounts in thousands)
 
    Quarters Ended   December 31, 2016
Percent Change From
    December 31,
 2016
  September 30,
 2016
  December 31,
 2015
  September 30,
 2016
  December 31,
 2015
Salaries and employee benefits:                    
Salaries and wages    $ 39,257     $ 37,872     $ 34,295     3.7     14.5  
Retirement and other employee benefits    8,160     8,500     8,925     (4.0 )   (8.6 )
Total salaries and employee benefits    47,417     46,372     43,220     2.3     9.7  
Net occupancy and equipment expense    10,774     10,755     9,256     0.2     16.4  
Professional services   7,138     6,772     6,117     5.4     16.7  
Technology and related costs    3,514     3,881     3,694     (9.5 )   (4.9 )
Merchant card expense    2,603     2,857     2,495     (8.9 )   4.3  
Advertising and promotions    2,330     1,941     2,211     20.0     5.4  
Cardholder expenses   1,426     1,515     1,329     (5.9 )   7.3  
Net other real estate owned ("OREO")
  expense 
  925     313     926     195.5     (0.1 )
Other expenses   8,050     7,310     7,525     10.1     7.0  
Total noninterest expense, excluding
certain significant transactions (1)
  84,177     81,716     76,773     3.0     9.6  
Acquisition and integration related expenses   7,542     1,172     1,389     543.5     443.0  
Lease cancellation fee   950             100.0     100.0  
Property valuation adjustments            8,581         (100.0 )
Total noninterest expense    $ 92,669     $ 82,888     $ 86,743     11.8     6.8  
 
(1) Total noninterest expense, excluding certain significant transactions, is a Non-GAAP metric. See the Non-GAAP Financial Information discussion for detail.

Total noninterest expense increased by 11.8% and 6.8% compared to the third quarter of 2016 and the fourth quarter of 2015, respectively. Excluding certain significant transactions, total noninterest expense increased by 3.0% from the third quarter of 2016 and 9.6% from the fourth quarter of 2015.

Compared to the third quarter of 2016, approximately half of the increase in salaries and wages was due to the rise in the Company's stock price, which resulted in higher expenses related to the Company's nonqualified retirement plan, and timing of certain compensation accruals. The rise in advertising and promotions expense from the third quarter of 2016 resulted from the timing of certain advertising costs. Net OREO expense increased from the third quarter of 2016 due primarily to a higher level of valuation adjustments. For the third quarter of 2016, a $400,000 reduction in the reserve for unfunded commitments resulted in lower other expenses compared to the fourth quarter of 2016.

Operating costs associated with the NI Bancshares and Peoples transactions contributed nearly two thirds of the increase in total noninterest expense, excluding certain significant transactions, from the fourth quarter of 2015. These costs primarily occurred within salaries and employee benefits, net occupancy and equipment expense, professional services, advertising and promotions, and other expenses. In addition, compensation costs associated with merit increases, investments in additional talent to support organizational growth, and higher loan remediation costs contributed to the rise compared to the fourth quarter of 2015.

During the fourth quarter of 2016, a lease cancellation fee of $950,000 was recognized as a result of the Company's planned 2018 corporate headquarters relocation.

Property valuation adjustments of $8.6 million were recognized during the fourth quarter of 2015 on twelve closed branches and seven parcels of land as part of the Company's strategic branch initiatives.

LOAN PORTFOLIO AND ASSET QUALITY
 
Loan Portfolio Composition
(Dollar amounts in thousands)
 
    As of   December 31, 2016
Percent Change From
    December 31,
 2016
  September 30,
 2016
  December 31,
 2015
  September 30,
 2016
  December 31,
 2015
Commercial and industrial   $ 2,827,658     $ 2,849,399     $ 2,524,726     (0.8 )   12.0  
Agricultural    389,496     409,571     387,440     (4.9 )   0.5  
Commercial real estate:                    
Office, retail, and industrial    1,581,827     1,537,038     1,395,454     2.9     13.4  
Multi-family   614,034     625,305     528,324     (1.8 )   16.2  
Construction   451,540     401,857     216,882     12.4     108.2  
Other commercial real estate    979,359     970,855     931,190     0.9     5.2  
Total commercial real estate    3,626,760     3,535,055     3,071,850     2.6     18.1  
Total corporate loans   6,843,914     6,794,025     5,984,016     0.7     14.4  
Home equity    732,604     733,260     653,468     (0.1 )   12.1  
1-4 family mortgages    416,354     388,145     355,854     7.3     17.0  
Installment   237,999     232,030     137,602     2.6     73.0  
Total consumer loans   1,386,957     1,353,435     1,146,924     2.5     20.9  
Covered loans    23,274     24,322     30,775     (4.3 )   (24.4 )
Total loans   $ 8,254,145     $ 8,171,782     $ 7,161,715     1.0     15.3  

Total loans grew by 4.0% on an annualized basis from September 30, 2016, and 15.3% from December 31, 2015 including loans acquired in the NI Bancshares transaction of $279.7 million, or 11.3% excluding these acquired loans. Compared to the third quarter of 2016, the increase in loans was driven primarily by commercial real estate and 1-4 family mortgages. The rise in construction loans compared to both prior periods was driven primarily by select commercial projects for which permanent financing is expected upon their completion.

Compared to the fourth quarter of 2015, the increase in commercial and industrial loans resulted primarily from broad-based increases within our middle market and sector-based lending business units. Office, retail, and industrial and multi-family loans increased compared to the fourth quarter of 2015 due to organic growth. The rise in consumer loans compared to the fourth quarter of 2015 resulted from the continued expansion of mortgage and installment loans and the addition of shorter-duration, floating rate home equity loans.

Asset Quality
(Dollar amounts in thousands)
 
    As of
    December 31,
 2016
  September 30,
 2016
  December 31,
 2015
Asset Quality, Excluding Covered
  Loans and Covered OREO
           
Non-accrual loans    $ 58,810     $ 43,797     $ 28,875  
90 days or more past due loans, still accruing interest   4,876     4,318     2,883  
Total non-performing loans    63,686     48,115     31,758  
Accruing troubled debt restructurings ("TDRs")   2,291     2,368     2,743  
OREO    26,020     27,986     27,349  
Total non-performing assets   $ 91,997     $ 78,469     $ 61,850  
30-89 days past due loans   $ 20,125     $ 25,849     $ 16,329  
Non-accrual loans to total loans   0.71 %   0.54 %   0.40 %
Non-performing loans to total loans   0.77 %   0.59 %   0.45 %
Non-performing assets to total loans plus OREO    1.11 %   0.96 %   0.86 %
Allowance for Credit Losses            
Allowance for loan losses    $ 86,083     $ 85,308     $ 73,630  
Reserve for unfunded commitments    1,000     1,000     1,225  
Total allowance for credit losses   $ 87,083     $ 86,308     $ 74,855  
Allowance for credit losses to total loans (1)    1.06 %   1.06 %   1.05 %
Allowance for credit losses to loans, excluding acquired loans   1.11 %   1.13 %   1.11 %
Allowance for credit losses to non-accrual loans, excluding covered loans   146.51 %   194.11 %   253.57 %
 
(1) 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 as necessary to reflect credit deterioration.

Total non-performing assets represented 1.11% of total loans and OREO at December 31, 2016, compared to 0.96% at September 30, 2016 and 0.86% at December 31, 2015. Non-accrual loans increased by $15.0 million from September 30, 2016, due primarily to the transfer of a single corporate relationship to non-accrual status during the fourth quarter of 2016. The Company has recorded the expected loss and implemented a remediation plan associated with this credit.

Charge-Off Data
 (Dollar amounts in thousands)
 
    Quarters Ended   Years Ended
    December 31,
 2016
  September 30,
 2016
  December 31,
 2015
  December 31,
2016
  December 31,
2015
Net Loan Charge-offs (1):                    
Commercial and industrial   $ 3,402     $ 1,145     $ 1,781     $ 7,393     $ 13,312  
Agricultural                     
Office, retail, and industrial   165     2,151     267     4,370     2,420  
Multi-family   17     (69 )   (27 )   210     530  
Construction   (12 )   (9 )   105     78     (214 )
Other commercial real estate    (111 )   415     110     2,408     650  
Consumer    933     1,162     1,134     3,931     3,004  
Covered    138             140     514  
Total net loan charge-offs   $ 4,532     $ 4,795     $ 3,370     $ 18,530     $ 20,216  
                     
Net loan charge-offs to average loans   0.22 %   0.24 %   0.19 %   0.24 %   0.29 %
 
(1) Amounts represent charge-offs, net of recoveries.



DEPOSIT PORTFOLIO
 
Deposit Composition
(Dollar amounts in thousands)
 
    Average for Quarters Ended   December 31, 2016
Percent Change From
    December 31,
 2016
  September 30,
 2016
  December 31,
 2015
  September 30,
2016
  December 31,
2015
Demand deposits    $ 2,803,016     $ 2,806,851     $ 2,560,604     (0.1 )   9.5  
Savings deposits    1,633,010     1,655,604     1,483,962     (1.4 )   10.0  
NOW accounts    1,715,228     1,754,330     1,411,425     (2.2 )   21.5  
Money market accounts   1,623,392     1,680,886     1,576,258     (3.4 )   3.0  
Core deposits   7,774,646     7,897,671     7,032,249     (1.6 )   10.6  
Time deposits    1,213,048     1,248,425     1,152,895     (2.8 )   5.2  
Total deposits    $ 8,987,694     $ 9,146,096     $ 8,185,144     (1.7 )   9.8  

Average core deposits were $7.8 billion for the fourth quarter of 2016 compared to $7.9 billion and $7.0 billion for the third quarter of 2016 and fourth quarter of 2015, respectively. The slight decrease in core deposits compared to the third quarter of 2016 resulted from a normal seasonal decline in average municipal deposits. Compared to the fourth quarter of 2015, the rise in average core deposits reflects the impact of the $500.5 million of core deposits assumed in the NI Bancshares and Peoples transactions and organic growth.

CAPITAL MANAGEMENT
 
Capital Ratios
 
    As of
    December 31,
 2016
  September 30,
 2016
  December 31,
 2015
Company regulatory capital ratios :
Total capital to risk-weighted assets    12.23 %   12.25 %   11.15 %
Tier 1 capital to risk-weighted assets    9.90 %   9.89 %   10.28 %
Common equity Tier 1 ("CET1") to risk-weighted assets   9.39 %   9.38 %   9.73 %
Tier 1 capital to average assets    8.99 %   8.90 %   9.40 %
Company tangible common equity ratios (1)(2):        
Tangible common equity to tangible assets    8.05 %   8.04 %   8.59 %
Tangible common equity, excluding accumulated other
  comprehensive income ("AOCI"), to tangible assets 
  8.42 %   8.16 %   8.89 %
Tangible common equity to risk-weighted assets    8.88 %   9.13 %   9.29 %
 
(1)  These ratios are not subject to formal Federal Reserve regulatory guidance.
 
(2)  Tangible common equity 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.

Overall, the Company's regulatory capital ratios modestly improved compared to September 30, 2016. The reduction in the Company's Tier 1 and CET1 capital ratios compared to December 31, 2015 resulted mainly from the impact of the NI Bancshares transaction in the first quarter of 2016. The increase in total capital to risk-weighted assets compared to December 31, 2015 resulted primarily from the issuance of $150.0 million of subordinated notes during the third quarter of 2016, which more than offset the impact of the NI Bancshares transaction.

The Board of Directors approved a quarterly cash dividend of $0.09 per common share during the fourth quarter of 2016, which is consistent with the third quarter of 2016. The dividend increased from $0.08 to $0.09 per common share during the first quarter of 2015.

Conference Call

A conference call to discuss the Company's results, outlook, and related matters will be held on Wednesday, January 25, 2017 at 11:00 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. 10099063 beginning one hour after completion of the live call until 9:00 A.M. (ET) on February 1, 2017. 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 and Additional Information Available on Website

This press release 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 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," "predict," "probable," "potential," "possible," "target," "continue," "look forward," or "assume" and words of similar import. Forward-looking statements are not historical facts 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. Forward-looking statements are not guarantees of future performance, and First Midwest cautions you not to place undue reliance on these statements. Forward-looking statements are made only as of the date of this press release, and First Midwest undertakes no obligation to update any forward-looking statements contained in this press release to reflect new information or events or conditions after the date hereof.

Forward-looking statements may be deemed to include, among other things, statements relating to our future financial performance, the performance of our loan or securities portfolio, the expected amount of future credit reserves or charge-offs, corporate strategies or objectives, anticipated trends in our business, regulatory developments, acquisition transactions, including estimated synergies, cost savings and financial benefits of pending or consummated transactions, including First Midwest's acquisition of Standard Bancshares, Inc., and growth strategies, including possible future acquisitions. These statements are subject to certain risks, uncertainties and assumptions. For a discussion of these risks, uncertainties and assumptions, you should refer to the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2015, as well as our subsequent filings made with the Securities and Exchange Commission. However, these risks and uncertainties are not exhaustive. Other sections of such reports describe additional factors that could adversely impact our 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 earnings per share ("EPS"), excluding certain significant transactions, the efficiency ratio, total non-interest expense, excluding certain significant transactions, return on average assets, excluding certain significant transactions, tax-equivalent net interest income (including its individual components), tax-equivalent net interest margin, tangible common equity to tangible assets, tangible common equity, excluding accumulated other comprehensive loss, to tangible assets, tangible common equity to risk-weighted assets, return on average tangible common equity, and return on average tangible common equity, excluding certain significant transactions.

The Company presents EPS, the efficiency ratio, total noninterest expense, return on average assets, and return on average tangible common equity, all excluding certain significant transactions. All of these metrics exclude acquisition and integration related expenses, the net gain on the sale-leaseback transaction, the lease cancellation fee, and property valuation adjustments. Management believes excluding these transactions from EPS, the efficiency ratio, total noninterest expense, return on average assets, and return on average tangible common equity are useful in assessing the Company's underlying operational performance since these transactions do not pertain to its core business operations and their exclusion facilitates better comparability between periods. Management believes that excluding acquisition and integration related expenses from these metrics is 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 enhances comparability 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 and assumes a 35% tax rate. 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 enhances comparability for peer comparison purposes.

In management's view, tangible common equity measures are capital adequacy metrics 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. 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 the Company

First Midwest is a relationship-based financial institution and one of the largest independent publicly-traded bank holding companies based on assets headquartered in the Midwest, with approximately $14 billion in assets and $8.5 billion in trust assets under management. First Midwest's principal subsidiary, First Midwest Bank, and other affiliates provide a full range of commercial, leasing, retail, wealth management, trust and private banking products and services through over 130 locations in metropolitan Chicago, northwest Indiana, central and western Illinois, and eastern Iowa. First Midwest's common stock is traded on the NASDAQ Stock Market under the symbol FMBI. First Midwest's website is www.firstmidwest.com.

Accompanying Unaudited Selected Financial Information

First Midwest Bancorp, Inc.
Consolidated Statements of Financial Condition (Unaudited)
(Dollar amounts in thousands)
     
    As of
    December 31,   September 30,   June 30,   March 31,   December 31,
    2016   2016   2016   2016   2015
Period-End Balance Sheet                    
Assets                    
Cash and due from banks   $ 155,055     $ 139,538     $ 149,957     $ 135,049     $ 114,587  
Interest-bearing deposits in other banks   107,093     362,153     105,432     171,312     266,615  
Trading securities, at fair value    17,920     18,351     17,693     17,408     16,894  
Securities available-for-sale, at fair value    1,919,450     1,964,030     1,773,759     1,625,579     1,306,636  
Securities held-to-maturity, at amortized cost   22,291     20,337     20,672     21,051     23,152  
FHLB and FRB stock    59,131     53,506     44,506     40,916     39,306  
Loans:                    
Commercial and industrial    2,827,658     2,849,399     2,699,742     2,634,391     2,524,726  
Agricultural   389,496     409,571     401,858     422,231     387,440  
Commercial real estate:                    
Office, retail, and industrial    1,581,827     1,537,038     1,529,675     1,566,395     1,395,454  
Multi-family   614,034     625,305     587,104     562,065     528,324  
Construction   451,540     401,857     371,016     260,743     216,882  
Other commercial real estate    979,359     970,855     1,000,655     1,060,302     931,190  
Home equity   732,604     733,260     722,881     683,171     653,468  
1-4 family mortgages   416,354     388,145     415,581     390,887     355,854  
Installment    237,999     232,030     223,845     213,979     137,602  
Covered loans    23,274     24,322     27,180     28,391     30,775  
Total loans    8,254,145     8,171,782     7,979,537     7,822,555     7,161,715  
 Allowance for loan losses   (86,083 )   (85,308 )   (80,105 )   (77,150 )   (73,630 )
Net loans    8,168,062     8,086,474     7,899,432     7,745,405     7,088,085  
OREO    26,083     28,049     29,990     29,649     27,782  
Premises, furniture, and equipment, net    82,577     82,443     140,554     141,323     122,278  
Investment in BOLI   219,746     219,064     218,133     218,873     209,601  
Goodwill and other intangible assets    366,876     367,961     369,962     369,979     339,277  
Accrued interest receivable and other assets    278,271     236,291     225,720     212,378     178,463  
Total assets    $ 11,422,555     $ 11,578,197     $ 10,995,810     $ 10,728,922     $ 9,732,676  
Liabilities and Stockholders' Equity                    
Noninterest-bearing deposits   $ 2,766,748     $ 2,766,265     $ 2,683,495     $ 2,627,530     $ 2,414,454  
Interest-bearing deposits   6,061,855     6,339,839     6,287,821     6,153,288     5,683,284  
Total deposits   8,828,603     9,106,104     8,971,316     8,780,818     8,097,738  
Borrowed funds   879,008     639,539     449,744     387,411     165,096  
Senior and subordinated debt    194,603     309,444     162,876     201,293     201,208  
Accrued interest payable and other liabilities    263,261     253,846     160,985     134,835     122,366  
Stockholders' equity    1,257,080     1,269,264     1,250,889     1,224,565     1,146,268  
Total liabilities and stockholders' equity   $ 11,422,555     $ 11,578,197     $ 10,995,810     $ 10,728,922     $ 9,732,676  
Stockholders' equity, excluding AOCI   $ 1,297,990     $ 1,282,666     $ 1,259,692     $ 1,239,606     $ 1,174,657  
Stockholders' equity, common    1,257,080     1,269,264     1,250,889     1,224,565     1,146,268  


First Midwest Bancorp, Inc.
Condensed Consolidated Statements of Income (Unaudited)
(Dollar amounts in thousands)
                               
    Quarters Ended     Years Ended
    December 31,   September 30,   June 30,   March 31,   December 31,     December 31,   December 31,
    2016   2016   2016   2016   2015     2016   2015
Income Statement                              
Interest income   $ 96,328     $ 97,906     $ 96,550     $ 87,548     $ 84,667       $ 378,332     $ 335,984  
Interest expense    8,304     6,934     6,569     6,834     6,655       28,641     24,386  
Net interest income   88,024     90,972     89,981     80,714     78,012       349,691     311,598  
Provision for loan losses    5,307     9,998     8,085     7,593     4,500       30,983     21,152  
Net interest income after
  provision for loan losses
  82,717     80,974     81,896     73,121     73,512       318,708     290,446  
Noninterest Income                              
Service charges on deposit
  accounts 
  10,315     10,708     10,169     9,473     10,303       40,665     39,979  
Wealth management fees   8,375     8,495     8,642     7,559     7,493       33,071     29,162  
Card-based fees   7,462     7,332     7,592     6,718     6,761       29,104     26,984  
Merchant servicing fees   3,016     3,319     3,170     3,028     2,929       12,533     11,739  
Mortgage banking income   3,537     3,394     1,863     1,368     1,777       10,162     5,741  
Other service charges,
  commissions, and fees
  4,402     5,218     4,498     5,448     4,664       19,566     13,654  
Total fee-based revenues    37,107     38,466     35,934     33,594     33,927       145,101     127,259  
Net securities gains    323     187     23     887     822       1,420     2,373  
Net gain on sale-leaseback 
  transaction 
      5,509                   5,509      
Other income   2,281     1,691     1,865     1,445     1,729       7,282     6,949  
Total noninterest income    39,711     45,853     37,822     35,926     36,478       159,312     136,581  
Noninterest Expense                              
Salaries and employee
  benefits:
                             
Salaries and wages    39,257     37,872     37,916     36,296     34,295       151,341     133,739  
Retirement and other
  employee benefits
  8,160     8,500     8,351     8,298     8,925       33,309     31,852  
Total salaries and
  employee benefits
  47,417     46,372     46,267     44,594     43,220       184,650     165,591  
Net occupancy and
  equipment expense 
  10,774     10,755     9,928     9,697     9,256       41,154     38,720  
Professional services   7,138     6,772     5,292     5,920     6,117       25,122     22,720  
Technology and related costs    3,514     3,881     3,669     3,701     3,694       14,765     14,581  
Merchant card expense    2,603     2,857     2,724     2,598     2,495       10,782     9,886  
Advertising and promotions   2,330     1,941     1,927     1,589     2,211       7,787     7,606  
Cardholder expenses    1,426     1,515     1,512     1,359     1,329       5,812     5,243  
Net OREO expense    925     313     1,122     664     926       3,024     5,281  
Other expenses    8,050     7,310     8,295     7,447     7,525       31,102     27,618  
Acquisition and integration
  related expenses 
  7,542     1,172     618     5,020     1,389       14,352     1,389  
Lease cancellation fee    950                       950      
Property valuation adjustments                   8,581           8,581  
Total noninterest expense   92,669     82,888     81,354     82,589     86,743       339,500     307,216  
Income before income
  tax expense 
  29,759     43,939     38,364     26,458     23,247       138,520     119,811  
Income tax expense    9,041     15,537     13,097     8,496     6,923       46,171     37,747  
Net income    $ 20,718     $ 28,402     $ 25,267     $ 17,962     $ 16,324       $ 92,349     $ 82,064  
Net income applicable to
  common shares 
  $ 20,501     $ 28,078     $ 24,977     $ 17,750     $ 16,145       $ 91,306     $ 81,182  
Net income applicable to
  common shares, excluding
  certain significant
  transactions (1) 
  $ 25,596     $ 25,476     $ 25,348     $ 20,762     $ 22,127       $ 97,182     $ 87,164  
Footnotes to Condensed Consolidated Statements of Income
(1) Certain significant transactions include acquisition and integration related expenses associated with completed and pending acquisitions, the lease cancellation fee
recognized as a result of the Company's planned 2018 corporate headquarters relocation, the net gain on the sale-leaseback transaction, and property valuation adjustments
related to strategic branch initiatives.


First Midwest Bancorp, Inc.
Selected Financial Information (Unaudited)
(Amounts in thousands, except per share data)
                               
    As of or for the
    Quarters Ended     Years Ended
    December 31,   September 30,   June 30,   March 31,   December 31,     December 31,   December 31,
    2016   2016   2016   2016   2015     2016   2015
Earnings Per Share                              
Basic EPS (1)    $ 0.25     $ 0.35     $ 0.31     $ 0.23     $ 0.21       $ 1.14     $ 1.05  
Diluted EPS (1)    $ 0.25     $ 0.35     $ 0.31     $ 0.23     $ 0.21       $ 1.14     $ 1.05  
Diluted EPS, excluding
  certain significant
  transactions (1)(6)
  $ 0.32     $ 0.32     $ 0.32     $ 0.27     $ 0.29       $ 1.22     $ 1.13  
Common Stock and Related Per Common Share Data          
Book value   $ 15.46     $ 15.61     $ 15.38     $ 15.06     $ 14.70       $ 15.46     $ 14.70  
Tangible book value   $ 10.95     $ 11.08     $ 10.83     $ 10.51     $ 10.35       $ 10.95     $ 10.35  
Dividends declared per share   $ 0.09     $ 0.09     $ 0.09     $ 0.09     $ 0.09       $ 0.36     $ 0.36  
Closing price at period end    $ 25.23     $ 19.36     $ 17.56     $ 18.02     $ 18.43       $ 25.23     $ 18.43  
Closing price to book value   1.6     1.2     1.1     1.2     1.3       1.6     1.3  
Period end shares outstanding    81,325     81,324     81,312     81,298     77,952       81,325     77,952  
Period end treasury shares    9,959     9,957     9,965     9,976     10,276       9,959     10,276  
Common dividends    $ 7,315     $ 7,408     $ 7,240     $ 7,228     $ 7,017       $ 29,191     $ 28,064  
Key Ratios/Data                              
Return on average common
  equity (1)(2)
  6.42 %   8.85 %   8.13 %   6.06 %   5.55 %     7.38 %   7.17 %
Return on average tangible
  common equity (1)(2)
  9.35 %   12.85 %   11.94 %   8.87 %   8.06 %     10.77 %   10.44 %
Return on average tangible
  common equity, excluding
  certain significant
  transactions (1)(2)(6)
  11.60 %   11.69 %   12.11 %   10.32 %   10.94 %     11.45 %   11.19 %
Return on average assets (2)    0.72 %   1.00 %   0.93 %   0.72 %   0.66 %     0.84 %   0.85 %
Return on average assets,
  excluding certain significant
  transactions (1)(2)(6)
  0.90 %   0.91 %   0.94 %   0.84 %   0.90 %     0.90 %   0.91 %
Loans to deposits    93.49 %   89.74 %   88.94 %   89.09 %   88.44 %     93.49 %   88.44 %
Efficiency ratio (1)    63.98 %   60.83 %   60.98 %   64.82 %   64.95 %     62.59 %   63.57 %
Net interest margin (3)    3.44 %   3.60 %   3.72 %   3.66 %   3.59 %     3.60 %   3.68 %
Yield on average interest-earning
  assets (3) 
  3.76 %   3.87 %   3.99 %   3.96 %   3.89 %     3.89 %   3.95 %
Cost of funds    0.47 %   0.39 %   0.39 %   0.44 %   0.44 %     0.42 %   0.41 %
Net noninterest expense to
  average assets
  1.86 %   1.50 %   1.61 %   1.90 %   2.08 %     1.71 %   1.79 %
Effective income tax rate    30.38 %   35.36 %   34.14 %   32.11 %   29.78 %     33.33 %   31.51 %
Capital Ratios                              
Total capital to risk-weighted
  assets (1) 
  12.23 %   12.25 %   10.68 %   10.64 %   11.15 %     12.23 %   11.15 %
Tier 1 capital to risk-weighted
  assets (1) 
  9.90 %   9.89 %   9.83 %   9.81 %   10.28 %     9.90 %   10.28 %
CET1 to risk-weighted assets (1)    9.39 %   9.38 %   9.32 %   9.30 %   9.73 %     9.39 %   9.73 %
Tier 1 capital to average assets (1)    8.99 %   8.90 %   8.94 %   9.56 %   9.40 %     8.99 %   9.40 %
Tangible common equity to
  tangible assets (1) 
  8.05 %   8.04 %   8.29 %   8.25 %   8.59 %     8.05 %   8.59 %
Tangible common equity,
  excluding AOCI, to tangible
  assets (1) 
  8.42 %   8.16 %   8.37 %   8.39 %   8.89 %     8.42 %   8.89 %
Tangible common equity to risk-
  weighted assets (1) 
  8.88 %   9.13 %   9.14 %   9.04 %   9.29 %     8.88 %   9.29 %
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     Years Ended
    December 31,   September 30,   June 30,   March 31,   December 31,     December 31,   December 31,
    2016   2016   2016   2016   2015     2016   2015
Asset Quality Performance Data                          
Non-performing assets (4)                              
Commercial and industrial   $ 29,938     $ 13,823     $ 6,303     $ 5,364     $ 5,587       $ 29,938     $ 5,587  
Agricultural    181     184     475     295     355       181     355  
Commercial real estate:                              
Office, retail, and industrial   17,277     17,670     16,815     10,910     6,875       17,277     6,875  
Multi-family    311     316     321     410     796       311     796  
Construction    286     287     360     778     905       286     905  
Other commercial real estate   2,892     3,361     4,797     5,555     5,611       2,892     5,611  
Consumer    7,925     8,156     7,788     8,071     8,746       7,925     8,746  
Total non-accrual loans    58,810     43,797     36,859     31,383     28,875       58,810     28,875  
90 days or more past due loans,
  still accruing interest
  4,876     4,318     5,406     5,483     2,883       4,876     2,883  
Total non-performing loans   63,686     48,115     42,265     36,866     31,758       63,686     31,758  
Accruing TDRs    2,291     2,368     2,491     2,702     2,743       2,291     2,743  
OREO    26,020     27,986     29,452     29,238     27,349       26,020     27,349  
Total non-performing assets   $ 91,997     $ 78,469     $ 74,208     $ 68,806     $ 61,850       $ 91,997     $ 61,850  
30-89 days past due loans (4)    $ 20,125     $ 25,849     $ 22,770     $ 29,826     $ 16,329       $ 20,125     $ 16,329  
Allowance for credit losses                              
Allowance for loan losses    $ 85,165     $ 84,016     $ 78,711     $ 75,582     $ 71,992       $ 85,165     $ 71,992  
Allowance for covered loan
  losses 
  918     1,292     1,394     1,568     1,638       918     1,638  
Reserve for unfunded
  commitments 
  1,000     1,000     1,400     1,225     1,225       1,000     1,225  
Total allowance for credit
  losses
  $ 87,083     $ 86,308     $ 81,505     $ 78,375     $ 74,855       $ 87,083     $ 74,855  
Provision for loan losses    $ 5,307     $ 9,998     $ 8,085     $ 7,593     $ 4,500       $ 30,983     $ 21,152  
Net charge-offs by category                              
Commercial and industrial   $ 3,402     $ 1,145     $ 1,450     $ 1,396     $ 1,781       $ 7,393     $ 13,312  
Agricultural                               
Commercial real estate:                              
Office, retail, and industrial   165     2,151     1,633     421     267       4,370     2,420  
Multi-family    17     (69 )   83     179     (27 )     210     530  
Construction    (12 )   (9 )   (12 )   111     105       78     (214 )
Other commercial real estate   (111 )   415     810     1,294     110       2,408     650  
Consumer    933     1,162     1,164     672     1,134       3,931     3,004  
Covered    138         2               140     514  
Total net charge-offs   4,532     4,795     5,130     4,073     3,370       18,530     20,216  
Total recoveries included above    $ 1,489     $ 1,155     $ 1,003     $ 1,116     $ 1,031       $ 4,763     $ 6,701  
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
    December 31,   September 30,   June 30,   March 31,   December 31,
    2016   2016   2016   2016   2015
Asset Quality ratios (4)                    
Non-accrual loans to total loans   0.71 %   0.54 %   0.46 %   0.40 %   0.40 %
Non-performing loans to total loans   0.77 %   0.59 %   0.53 %   0.47 %   0.45 %
Non-performing assets to total loans plus OREO    1.11 %   0.96 %   0.93 %   0.88 %   0.86 %
Non-performing assets to tangible common equity plus allowance for credit losses    9.42 %   7.96 %   7.72 %   7.39 %   7.03 %
Non-accrual loans to total assets    0.52 %   0.38 %   0.34 %   0.29 %   0.30 %
Allowance for credit losses and net charge-off ratios
Allowance for credit losses to total loans (5)    1.06 %   1.06 %   1.02 %   1.00 %   1.05 %
Allowance for credit losses to loans, excluding acquired loans   1.11 %   1.13 %   1.11 %   1.11 %   1.11 %
Allowance for credit losses to non-accrual loans (4)    146.51 %   194.11 %   217.34 %   244.74 %   253.57 %
Allowance for credit losses to non-performing loans (4)    135.30 %   176.69 %   189.54 %   208.34 %   230.55 %
Net charge-offs to average loans (2)    0.22 %   0.24 %   0.26 %   0.22 %   0.19 %
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, which reflects federal and state tax benefits.
(4) Excludes covered loans and covered OREO.
(5) This ratio includes acquired loans that are recorded at fair value through an acquisition adjustment, which incorporates credit risk as of the acquisition date with no allowance for credit losses being established at that time. As the acquisition adjustment is accreted into income over future periods, an allowance for credit losses is established on acquired loans as necessary to reflect credit deterioration.
(6) Certain significant transactions include acquisition and integration related expenses associated with completed and pending acquisitions, the lease cancellation fee recognized as a result of the Company's planned 2018 corporate headquarters relocation, the net gain on the sale-leaseback transaction, and property valuation adjustments related to strategic branch initiatives.


First Midwest Bancorp, Inc.
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
                             
  Quarters Ended     Years Ended
  December 31,   September 30,   June 30,   March 31,   December 31,     December 31,   December 31,
  2016   2016   2016   2016   2015     2016   2015
Earnings Per Share                            
Net income $ 20,718     $ 28,402     $ 25,267     $ 17,962     $ 16,324       $ 92,349     $ 82,064  
Net income applicable to non-
  vested restricted shares
(217 )   (324 )   (290 )   (212 )   (179 )     (1,043 )   (882 )
Net income applicable to
  common shares 
20,501     28,078     24,977     17,750     16,145       91,306     81,182  
Acquisition and integration
  related expenses
7,542     1,172     618     5,020     1,389       14,352     1,389  
Tax effect of acquisition and
  integration related expenses 
(3,017 )   (469 )   (247 )   (2,008 )   (556 )     (5,741 )   (556 )
Lease cancellation fee  950                       950      
Tax effect of lease cancellation
  fee 
(380 )                     (380 )    
Net gain on sale-leaseback 
  transaction 
    (5,509 )                 (5,509 )    
Tax effect of net gain on sale-
  leaseback transaction
    2,204                   2,204      
Property valuation adjustments                 8,581           8,581  
Tax effect of property valuation
  adjustments 
                (3,432 )         (3,432 )
Net income applicable to
  common shares, excluding
  certain significant
  transactions (1) 
$ 25,596     $ 25,476     $ 25,348     $ 20,762     $ 22,127       $ 97,182     $ 87,164  
Weighted-average common shares outstanding:                          
Weighted-average common
  shares outstanding (basic) 
80,415     80,396     80,383     77,980     77,121       79,797     77,059  
Dilutive effect of common
  stock equivalents
15     13     13     12     13       13     13  
Weighted-average diluted
  common shares
  outstanding
80,430     80,409     80,396     77,992     77,134       79,810     77,072  
Basic EPS  $ 0.25     $ 0.35     $ 0.31     $ 0.23     $ 0.21       $ 1.14     $ 1.05  
Diluted EPS  $ 0.25     $ 0.35     $ 0.31     $ 0.23     $ 0.21       $ 1.14     $ 1.05  
Diluted EPS, excluding certain
  significant transactions (1)
$ 0.32     $ 0.32     $ 0.32     $ 0.27     $ 0.29       $ 1.22     $ 1.13  
Anti-dilutive shares not included
  in the computation of diluted EPS 
445     454     469     608     735       494     800  
Efficiency Ratio Calculation                            
Noninterest expense $ 92,669     $ 82,888     $ 81,354     $ 82,589     $ 86,743       $ 339,500     $ 307,216  
Less:                            
Net OREO expense  (925 )   (313 )   (1,122 )   (664 )   (926 )     (3,024 )   (5,281 )
Acquisition and integration
  related expenses
(7,542 )   (1,172 )   (618 )   (5,020 )   (1,389 )     (14,352 )   (1,389 )
Lease cancellation fee (950 )                     (950 )    
Property valuation
  adjustments 
                (8,581 )         (8,581 )
Total  $ 83,252     $ 81,403     $ 79,614     $ 76,905     $ 75,847       $ 321,174     $ 291,965  
Tax-equivalent net interest
  income (2) 
$ 90,088     $ 93,051     $ 92,174     $ 83,021     $ 80,506       $ 358,334     $ 322,277  
Fee-based revenues  37,107     38,466     35,934     33,594     33,927       145,101     127,259  
Add:                            
Other income, excluding
  BOLI income
1,310     762     984     579     807       3,635     2,764  
BOLI Income  971     929     881     866     922       3,647     4,185  
Tax-equivalent adjustment of BOLI  647     619     587     577     615       2,431     2,790  
Total  $ 130,123     $ 133,827     $ 130,560     $ 118,637     $ 116,777       $ 513,148     $ 459,275  
Efficiency ratio  63.98 %   60.83 %   60.98 %   64.82 %   64.95 %     62.59 %   63.57 %
                             
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     Years Ended
    December 31,   September 30,   June 30,   March 31,   December 31,     December 31,   December 31,
    2016   2016   2016   2016   2015     2016   2015
Tax-Equivalent Net Interest Income                          
Net interest income   $ 88,024     $ 90,972     $ 89,981     $ 80,714     $ 78,012       $ 349,691     $ 311,598  
Tax-equivalent adjustment   2,064     2,079     2,193     2,307     2,494       8,643     10,679  
Tax-equivalent net interest
  income (2) 
  $ 90,088     $ 93,051     $ 92,174     $ 83,021     $ 80,506       $ 358,334     $ 322,277  
Risk-Based Capital Data                              
Common stock   $ 913     $ 913     $ 913     $ 913     $ 882       $ 913     $ 882  
Additional paid-in capital    498,937     496,918     495,159     493,153     446,672       498,937     446,672  
Retained earnings    1,016,674     1,003,271     982,277     964,250     953,516       1,016,674     953,516  
Treasury stock, at cost    (218,534 )   (218,436 )   (218,657 )   (218,710 )   (226,413 )     (218,534 )   (226,413 )
Goodwill and other intangible
  assets, net of deferred tax
  liabilities
  (356,477 )   (357,079 )   (358,582 )   (357,895 )   (327,115 )     (356,477 )   (327,115 )
Disallowed deferred tax assets   (198 )   (383 )   (2,263 )   (2,956 )   (1,902 )     (198 )   (1,902 )
CET1 capital    941,315     925,204     898,847     878,755     845,640       941,315     845,640  
Trust preferred securities   50,690     50,690     50,690     50,690     50,690       50,690     50,690  
Other disallowed deferred tax
  assets
  (132 )   (255 )   (1,508 )   (1,970 )   (2,868 )     (132 )   (2,868 )
Tier 1 capital    991,873     975,639     948,029     927,475     893,462       991,873     893,462  
Tier 2 capital    233,656     232,792     81,505     78,375     74,855       233,656     74,855  
Total capital    $ 1,225,529     $ 1,208,431     $ 1,029,534     $ 1,005,850     $ 968,317       $ 1,225,529     $ 968,317  
Risk-weighted assets   $ 10,019,434     $ 9,867,406     $ 9,641,953     $ 9,452,551     $ 8,687,864       $ 10,019,434     $ 8,687,864  
Adjusted average assets   $ 11,036,835     $ 10,959,119     $ 10,608,085     $ 9,700,671     $ 9,501,087       $ 11,036,835     $ 9,501,087  
Total capital to risk-weighted
  assets
  12.23 %   12.25 %   10.68 %   10.64 %   11.15 %     12.23 %   11.15 %
Tier 1 capital to risk-weighted
  assets
  9.90 %   9.89 %   9.83 %   9.81 %   10.28 %     9.90 %   10.28 %
CET1 to risk-weighted assets   9.39 %   9.38 %   9.32 %   9.30 %   9.73 %     9.39 %   9.73 %
Tier 1 capital to average assets   8.99 %   8.90 %   8.94 %   9.56 %   9.40 %     8.99 %   9.40 %
Tangible Common Equity                              
Stockholders' equity    $ 1,257,080     $ 1,269,264     $ 1,250,889     $ 1,224,565     $ 1,146,268       $ 1,257,080     $ 1,146,268  
Less: goodwill and other
  intangible assets
  (366,876 )   (367,961 )   (369,962 )   (369,979 )   (339,277 )     (366,876 )   (339,277 )
Tangible common equity    890,204     901,303     880,927     854,586     806,991       890,204     806,991  
Less: AOCI    40,910     13,402     8,803     15,041     28,389       40,910     28,389  
Tangible common equity,
  excluding AOCI
  $ 931,114     $ 914,705     $ 889,730     $ 869,627     $ 835,380       $ 931,114     $ 835,380  
Total assets   $ 11,422,555     $ 11,578,197     $ 10,995,810     $ 10,728,922     $ 9,732,676       $ 11,422,555     $ 9,732,676  
Less: goodwill and other
  intangible assets
  (366,876 )   (367,961 )   (369,962 )   (369,979 )   (339,277 )     (366,876 )   (339,277 )
Tangible assets   $ 11,055,679     $ 11,210,236     $ 10,625,848     $ 10,358,943     $ 9,393,399       $ 11,055,679     $ 9,393,399  
Tangible common equity to
  tangible assets
  8.05 %   8.04 %   8.29 %   8.25 %   8.59 %     8.05 %   8.59 %
Tangible common equity,
  excluding AOCI, to tangible
  assets
  8.42 %   8.16 %   8.37 %   8.39 %   8.89 %     8.42 %   8.89 %
Tangible common equity to risk-
  weighted assets
  8.88 %   9.13 %   9.14 %   9.04 %   9.29 %     8.88 %   9.29 %
                               
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     Years Ended
    December 31,   September 30,   June 30,   March 31,   December 31,     December 31,   December 31,
    2016   2016   2016   2016   2015     2016   2015
Return on Average Common and Tangible Common Equity                      
Net income applicable to
  common shares 
  $ 20,501     $ 28,078     $ 24,977     $ 17,750     $ 16,145       $ 91,306     $ 81,182  
Intangibles amortization    1,207     1,245     1,245     985     971       4,682     3,920  
Tax effect of intangibles
  amortization 
  (483 )   (498 )   (498 )   (394 )   (388 )     (1,873 )   (1,568 )
Net income applicable to
  common shares, excluding
  intangibles amortization 
  21,225     28,825     25,724     18,341     16,728       94,115     83,534  
Acquisition and integration
  related expenses
  7,542     1,172     618     5,020     1,389       14,352     1,389  
Tax effect of acquisition and
  integration related expenses
  (3,017 )   (469 )   (247 )   (2,008 )   (556 )     (5,741 )   (556 )
Lease cancellation fee   950                       950      
Tax effect of lease cancellation
  fee
  (380 )                     (380 )    
Net gain on sale-leaseback 
  transaction
      (5,509 )                 (5,509 )    
Tax effect of net gain on sale-
  leaseback transaction
      2,204                   2,204      
Property valuation adjustments                   8,581           8,581  
Tax effect of property valuation
  adjustments 
                  (3,432 )         (3,432 )
Net income applicable to
  common shares, excluding
  certain significant
  transactions (1)
  $ 26,320     $ 26,223     $ 26,095     $ 21,353     $ 22,710       $ 99,991     $ 89,516  
Average stockholders' equity    $ 1,269,993     $ 1,261,702     $ 1,235,497     $ 1,178,588     $ 1,154,506       $ 1,236,606     $ 1,132,058  
Less: average intangible assets   (367,328 )   (369,281 )   (369,177 )   (346,549 )   (331,013 )     (363,112 )   (332,269 )
Average tangible common
  equity 
  $ 902,665     $ 892,421     $ 866,320     $ 832,039     $ 823,493       $ 873,494     $ 799,789  
Return on average common
  equity (3) 
  6.42 %   8.85 %   8.13 %   6.06 %   5.55 %     7.38 %   7.17 %
Return on average tangible
  common equity (3) 
  9.35 %   12.85 %   11.94 %   8.87 %   8.06 %     10.77 %   10.44 %
Return on average tangible
  common equity, excluding
  certain significant
  transactions (1)(3)
  11.60 %   11.69 %   12.11 %   10.32 %   10.94 %     11.45 %   11.19 %
Return on Average Assets                      
Net Income    $ 20,718     $ 28,402     $ 25,267     $ 17,962     $ 16,324       $ 92,349     $ 82,064  
Acquisition and integration
  related expenses
  7,542     1,172     618     5,020     1,389       14,352     1,389  
Tax effect of acquisition and
  integration related expenses
  (3,017 )   (469 )   (247 )   (2,008 )   (556 )     (5,741 )   (556 )
Lease cancellation fee   950                       950      
Tax effect of lease cancellation
  fee
  (380 )                     (380 )    
Net gain on sale-leaseback 
  transaction
      (5,509 )                 (5,509 )    
Tax effect of net gain on sale-
  leaseback transaction
      2,204                   2,204      
Property valuation adjustments                    8,581           8,581  
Tax effect of property valuation
  adjustments 
                  (3,432 )         (3,432 )
Net income, excluding certain
  significant transactions (1) 
  $ 25,813     $ 25,800     $ 25,638     $ 20,974     $ 22,306       $ 98,225     $ 88,046  
Average assets   $ 11,380,108     $ 11,322,325     $ 10,968,516     $ 10,056,845     $ 9,822,430       $ 10,934,240     $ 9,702,051  
Return on average assets (3)    0.72 %   1.00 %   0.93 %   0.72 %   0.66 %     0.84 %   0.85 %
Return on average assets,
  excluding certain significant
  transactions (1)(3)
  0.90 %   0.91 %   0.94 %   0.84 %   0.90 %     0.90 %   0.91 %
 
Footnotes to Non-GAAP Reconciliations
(1) Certain significant transactions include acquisition and integration related expenses associated with completed and pending acquisitions, the lease cancellation fee recognized as a result of the Company's planned 2018 corporate headquarters relocation, the net gain on the sale-leaseback transaction, and property valuation adjustments related to strategic branch initiatives.
(2) Presented on a tax-equivalent basis, which reflects federal and state tax benefits.
(3) Annualized based on the actual number of days for each period presented.


 

Contact Information

Investors:
Patrick S. Barrett
EVP, Chief Financial Officer
(630) 875-7273
pat.barrett@firstmidwest.com

Media:
James M. Roolf
SVP and Corporate Relations Officer 
(630) 875-7533 
jim.roolf@firstmidwest.com

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