Market Overview

First Midwest Bancorp, Inc. Announces 2017 Second Quarter Results

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ITASCA, Ill., July 25, 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 second quarter of 2017. Net income for the second quarter of 2017 was $35.0 million, or $0.34 per share. This compares to $22.9 million, or $0.23 per share, for the first quarter of 2017, and $25.3 million, or $0.31 per share, for the second quarter of 2016.

Reported results for all periods presented were impacted by certain significant transactions, which include acquisition and integration related expenses associated with completed and pending acquisitions. Excluding these certain significant transactions, earnings per share (1) was $0.35 for the second quarter of 2017, compared to $0.34 for the first quarter of 2017 and $0.32 for the second quarter of 2016.

SELECT SECOND QUARTER HIGHLIGHTS

  • Increased earnings per share to $0.35, up 9% from the second quarter of 2016 and 3%, or 12% annualized, from the first quarter of 2017, excluding certain significant transactions (1).

  • Improved return on average tangible common equity to 13.37%, up from 11.94% for the second quarter of 2016.

  • Grew loans to $10.2 billion, up 28% from June 30, 2016 and 7% annualized from March 31, 2017.

  • Expanded net interest income to $118 million, up 31% from the second quarter of 2016 and 2% from the first quarter of 2017.

  • Increased net interest margin to 3.88%, up from 3.72% for the second quarter of 2016 and consistent with 3.89% for the first quarter of 2017. Excluding acquired loan accretion, net interest margin (1) grew 9 basis points to 3.60% from the first quarter of 2017.

  • Grew fee-based revenues to $41 million, an increase of 15% from the second quarter of 2016 and 9% from the first quarter of 2017.

  • Improved efficiency ratio (1) to 59%, down from 61% for both the second quarter of 2016 and the first quarter of 2017.

  • Increased dividends per share to $0.10, up 11% from the second quarter of 2016 and the first quarter of 2017.

"Performance for the quarter was strong, reflective of balanced delivery across our business," said Michael L. Scudder, President and Chief Executive Officer of the Company. "Earnings per share of $0.34 stood 10% higher from a year ago, benefiting from the expected revenue growth and improved operating efficiency accompanying our successful acquisition of Standard Bancshares in early January. Lending activity was solid, with late quarter closings providing added earnings momentum. At the same time, targeted efforts to expand and diversify our fee-based revenues are also evident, up 9% compared to last quarter."

Mr. Scudder concluded, "As we look ahead, we continue to navigate the backdrop of a more favorable rate environment as well as elevated market competition. As we do so, our focus remains centered on those actions that accrue to the long-term benefit of our shareholders – helping our clients to achieve financial success."

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

OPERATING PERFORMANCE

Net Interest Income and Margin Analysis
(Dollar amounts in thousands)
 
  Quarters Ended
  June 30, 2017     March 31, 2017     June 30, 2016
  Average
Balance
  Interest   Yield/
Rate
(%)
    Average
Balance
  Interest   Yield/
Rate
(%)
    Average
Balance
  Interest   Yield/
Rate
(%)
Assets:                                      
Other interest-earning asset $ 262,206     $ 686     1.05       $ 215,915     $ 441     0.83       $ 300,945     $ 426     0.57  
Securities (1) 1,983,341     11,482     2.32       2,021,157     11,535     2.28       1,721,781     10,636     2.47  
Federal Home Loan Bank ("FHLB") and
  Federal Reserve Bank ("FRB") stock
57,073     441     3.09       54,219     368     2.71       42,561     200     1.88  
Loans (1) 10,064,119     115,949     4.62       9,920,513     113,409     4.64       7,883,806     87,481     4.46  
Total interest-earning assets (1) 12,366,739     128,558     4.17       12,211,804     125,753     4.17       9,949,093     98,743     3.99  
Cash and due from banks 188,886               176,953               154,693          
Allowance for loan losses (92,152 )             (89,065 )             (80,561 )        
Other assets 1,497,370               1,373,433               945,291          
Total assets $ 13,960,843               $ 13,673,125               $ 10,968,516          
Liabilities and Stockholders' Equity:                                      
Interest-bearing core deposits (2) $ 6,025,167     1,705     0.11       $ 5,837,150     1,497     0.10       $ 4,941,779     991     0.08  
Time deposits 1,538,845     2,024     0.53       1,515,597     1,712     0.46       1,277,694     1,491     0.47  
Borrowed funds 553,046     2,099     1.52       734,091     2,194     1.21       461,363     1,499     1.31  
Senior and subordinated debt 194,819     3,105     6.39       194,677     3,099     6.46       162,836     2,588     6.39  
Total interest-bearing liabilities 8,311,877     8,933     0.43       8,281,515     8,502     0.42       6,843,672     6,569     0.39  
Demand deposits (2) 3,538,049               3,355,674               2,771,813          
Total funding sources 11,849,926               11,637,189               9,615,485          
Other liabilities 280,381               272,398               117,534          
Stockholders' equity - common 1,830,536               1,763,538               1,235,497          
Total liabilities and
  stockholders' equity
$ 13,960,843               $ 13,673,125               $ 10,968,516          
Tax-equivalent net interest
  income/margin (1)
    119,625     3.88           117,251     3.89           92,174     3.72  
Tax-equivalent adjustment     (2,042 )             (2,054 )             (2,193 )    
Net interest income (GAAP) (1)     $ 117,583               $ 115,197               $ 89,981      
Impact of acquired loan accretion (1)     $ 8,757     0.28           $ 11,345     0.38           $ 4,927     0.20  
Tax-equivalent net interest income/
  margin, excluding the impact of
  acquired loan accretion (1)
    $ 110,868     3.60           $ 105,906     3.51           $ 87,247     3.52  
 
(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 further details on the calculation of tax-equivalent net interest income/margin, net interest income (GAAP), and tax-equivalent net interest income/margin, excluding the impact of acquired loan accretion, see the sections titled "Non-GAAP Financial Information" and "Non-GAAP Reconciliations" presented later in this release.
(2) See the Deposit Composition table presented later in this release for average balance detail by category.
 

Net interest income increased by 2.1% from the first quarter of 2017 and 30.7% compared to the second quarter of 2016. The rise in net interest income compared to the first quarter of 2017 resulted primarily from higher interest rates and loan growth, partially offset by a decrease in acquired loan accretion. Compared to the second quarter of 2016, higher interest rates, combined with loan growth and the acquisition of interest-earning assets and acquired loan accretion from the Standard Bancshares, Inc. ("Standard") transaction early in the first quarter of 2017, contributed to the increase in net interest income.

Acquired loan accretion contributed $8.8 million, $11.3 million, and $4.9 million to net interest income for the second quarter of 2017, the first quarter of 2017, and the second quarter of 2016, respectively.

Tax-equivalent net interest margin for the current quarter was 3.88%, consistent with the first quarter of 2017 and increasing by 16 basis points from the second quarter of 2016. Tax-equivalent net interest margin compared to the first quarter of 2017 was impacted by a 10 basis point decrease in acquired loan accretion, which was mostly offset by the positive impact of higher interest rates. The cost of total average interest-bearing liabilities was consistent with the first quarter of 2017. The increase in tax-equivalent net interest margin compared to the second quarter of 2016 was driven primarily by an 8 basis point increase in acquired loan accretion and higher interest rates.

For the second quarter of 2017, total average interest-earning assets rose by $154.9 million from the first quarter of 2017 and $2.4 billion from the second quarter of 2016. The increase compared to the first quarter of 2017 resulted from loan growth while the increase from the second quarter of 2016 reflected the impact of the Standard transaction, loan growth, and security purchases.

Total average funding sources increased by $212.7 million from the first quarter of 2017 and $2.2 billion from the second quarter of 2016. The increase compared to the first quarter of 2017 resulted from growth in core deposits which was partially offset by a decrease in FHLB advances. Compared to the second quarter of 2016, the rise in average funding sources was impacted by deposits acquired in the Standard transaction and the addition of FHLB advances.

Fee-based Revenues and Total Noninterest Income Analysis
(Dollar amounts in thousands)
 
    Quarters Ended   June 30, 2017
Percent Change From
    June 30,
 2017
  March 31,
 2017
  June 30,
 2016
  March 31,
 2017
  June 30,
 2016
Service charges on deposit accounts   $ 12,153     $ 11,365     $ 10,169     6.9     19.5  
Wealth management fees   10,525     9,660     8,642     9.0     21.8  
Card-based fees   8,832     8,116     7,592     8.8     16.3  
Merchant servicing fees   3,197     3,135     3,170     2.0     0.9  
Mortgage banking income   1,645     1,888     1,863     (12.9 )   (11.7 )
Capital market products income   2,217     1,376     2,066     61.1     7.3  
Other service charges, commissions, and fees   2,659     2,307     2,432     15.3     9.3  
Total fee-based revenues   41,228     37,847     35,934     8.9     14.7  
Net securities gains   284         23         N/M  
Other income   3,433     2,104     1,865     63.2     84.1  
Total noninterest income   $ 44,945     $ 39,951     $ 37,822     12.5     18.8  
 
N/M - Not meaningful.
 

Total fee-based revenues of $41.2 million grew by $3.4 million, or 8.9%, compared to the first quarter of 2017 and by $5.3 million, or 14.7%, compared to the second quarter of 2016. The increase in fee-based revenues compared to the second quarter of 2016 resulted primarily from services provided to customers acquired in the Standard and Premier Asset Management LLC ("Premier") transactions completed in the first quarter of 2017.

Compared to the first quarter of 2017, the increase in service charges on deposit accounts was impacted by growth and seasonality in treasury management services and other consumer deposit transactions. The increase in wealth management fees benefited from the full quarter impact of the Premier acquisition completed late in the first quarter of 2017. The rise in card-based fees from the first quarter of 2017 reflects seasonally higher transaction volumes.

Mortgage banking income resulted primarily from sales of $59.5 million of 1-4 family mortgage loans in the secondary market during the second quarter of 2017, compared to $54.6 million in the first quarter of 2017 and $52.1 million in the second quarter of 2016. In addition, mortgage banking income for the second quarter of 2017 was impacted by a decrease in the fair value of mortgage servicing rights, which fluctuate from quarter to quarter. Growth in capital market products income for the second quarter of 2017 compared to both prior periods was driven by increased sales to commercial clients.

Total noninterest income of $44.9 million grew 12.5% and 18.8% from the first quarter of 2017 and the second quarter of 2016, respectively. Other income increased in the second quarter of 2017 due to net gains from the disposition of branch properties and other miscellaneous items.

Noninterest Expense Analysis
(Dollar amounts in thousands)
 
    Quarters Ended   June 30, 2017
Percent Change From
    June 30,
 2017
  March 31,
 2017
  June 30,
 2016
  March 31,
 2017
  June 30,
 2016
Salaries and employee benefits:                    
Salaries and wages   $ 44,194     $ 44,890     $ 37,916     (1.6 )   16.6  
Retirement and other employee benefits   10,381     10,882     8,351     (4.6 )   24.3  
Total salaries and employee benefits   54,575     55,772     46,267     (2.1 )   18.0  
Net occupancy and equipment expense   12,485     12,325     9,928     1.3     25.8  
Professional services   9,112     8,463     5,292     7.7     72.2  
Technology and related costs   4,485     4,433     3,669     1.2     22.2  
Merchant card expense   2,632     2,585     2,724     1.8     (3.4 )
Advertising and promotions   1,693     1,066     1,927     58.8     (12.1 )
Cardholder expenses   1,682     1,764     1,512     (4.6 )   11.2  
Net other real estate owned ("OREO") expense   1,631     1,700     1,122     (4.1 )   45.4  
Other expenses   10,282     9,969     8,295     3.1     24.0  
Total noninterest expense excluding
  certain significant transactions (1)
  98,577     98,077     80,736     0.5     22.1  
Acquisition and integration related expenses   1,174     18,565     618     (93.7 )   90.0  
Total noninterest expense   $ 99,751     $ 116,642     $ 81,354     (14.5 )   22.6  
 
(1) Total noninterest expense, excluding certain significant transactions, is a non-GAAP financial measure. See the Non-GAAP Financial Information discussion for detail.
 

Total noninterest expense decreased by 14.5% compared to the first quarter of 2017 and increased by 22.6% compared to the second quarter of 2016. Excluding certain significant transactions, total noninterest expense was consistent with the first quarter of 2017 and increased by 22.1% compared to the second quarter of 2016.

The decrease in salaries and employee benefits compared to the first quarter of 2017 was driven primarily by higher levels of deferred salaries due to loan growth and a reduction in other salaries and benefits that fluctuate with organizational needs. Professional services increased compared to the first quarter of 2017 as a result of certain costs associated with organizational growth. The increase in advertising and promotions expense compared to the first quarter of 2017 resulted from the timing of certain advertising costs.

Compared to the second quarter of 2016, the increase in total noninterest expense, excluding certain significant transactions, largely resulted from operating costs associated with the Standard and Premier transactions, which impacted most expense categories. In addition, compensation costs associated with merit increases and investments in additional talent to support growth contributed to the rise in salaries and employee benefits. Professional services was impacted by higher loan remediation expenses and certain costs associated with organizational growth. The increase in net OREO expense compared to the second quarter of 2016 resulted primarily from higher valuation adjustments.

Acquisition and integration related expenses for the first and second quarters of 2017 resulted from the acquisitions of Standard and Premier completed during the first quarter of 2017. For the second quarter of 2016, acquisition and integration related expenses resulted from the acquisition of NI Bancshares Corporation completed during the first quarter of 2016. These expenses fluctuate based on the size and timing of each transaction.

LOAN PORTFOLIO AND ASSET QUALITY

Loan Portfolio Composition
(Dollar amounts in thousands)
 
    As of   June 30, 2017
Percent Change From
    June 30,
 2017
  March 31,
 2017
  June 30,
 2016
  March 31,
 2017
  June 30,
 2016
Commercial and industrial   $ 3,410,748     $ 3,370,780     $ 2,699,742     1.2     26.3  
Agricultural   433,424     422,784     401,858     2.5     7.9  
Commercial real estate:                    
Office, retail, and industrial   1,983,802     1,988,979     1,529,811     (0.3 )   29.7  
Multi-family   681,032     671,710     587,123     1.4     16.0  
Construction   543,892     568,460     371,016     (4.3 )   46.6  
Other commercial real estate   1,383,937     1,357,781     1,000,829     1.9     38.3  
Total commercial real estate   4,592,663     4,586,930     3,488,779     0.1     31.6  
Total corporate loans   8,436,835     8,380,494     6,590,379     0.7     28.0  
Home equity   865,656     880,667     738,263     (1.7 )   17.3  
1-4 family mortgages   614,818     540,148     427,050     13.8     44.0  
Installment   314,850     253,061     223,845     24.4     40.7  
Total consumer loans   1,795,324     1,673,876     1,389,158     7.3     29.2  
Total loans   $ 10,232,159     $ 10,054,370     $ 7,979,537     1.8     28.2  
 

Total loans of $10.2 billion increased by 7.1% annualized, from March 31, 2017, and 28.2% from June 30, 2016. Excluding loans acquired in the Standard transaction of $1.6 billion as of June 30, 2017, total loans grew by 8.1% from June 30, 2016. The addition of 1-4 family mortgages and installment loans contributed to the increase in total loans compared to both prior periods. Growth in consumer loans was also impacted by the addition of shorter-duration, floating rate home equity loans compared to June 30, 2016.

Compared to both prior periods, growth in commercial and industrial loans, primarily within our sector-based lending business units, and multi-family loans contributed to the rise in total loans. Construction loans increased compared to June 30, 2016, driven primarily by select commercial projects for which permanent financing is expected upon their completion.

Asset Quality
(Dollar amounts in thousands)
 
    As of   June 30, 2017
Percent Change From
    June 30,
 2017
  March 31,
 2017
  June 30,
 2016
  March 31,
 2017
  June 30,
 2016
Asset quality                    
Non-accrual loans   $ 79,196     $ 54,294     $ 37,312     45.9     112.3  
90 days or more past due loans, still accruing
  interest (1)
  2,059     2,633     5,406     (21.8 )   (61.9 )
Total non-performing loans   81,255     56,927     42,718     42.7     90.2  
Accruing troubled debt restructurings
  ("TDRs")
  2,029     2,112     2,491     (3.9 )   (18.5 )
OREO   26,493     29,140     29,990     (9.1 )   (11.7 )
Total non-performing assets   $ 109,777     $ 88,179     $ 75,199     24.5     46.0  
30-89 days past due loans (1)   $ 19,081     $ 23,641     $ 23,380          
                     
Non-accrual loans to total loans   0.77 %   0.54 %   0.47 %        
Non-performing loans to total loans   0.79 %   0.57 %   0.54 %        
Non-performing assets to total loans plus
  OREO (2)
  1.07 %   0.87 %   0.94 %        
Allowance for credit losses                                
Allowance for loan losses   $ 92,371     $ 88,163     $ 80,105          
Reserve for unfunded commitments   1,000     1,000     1,400          
Total allowance for credit losses.   $ 93,371     $ 89,163     $ 81,505          
Allowance for credit losses to total loans (2)   0.91 %   0.89 %   1.02 %        
Allowance for credit losses to loans, excluding
  acquired loans
  1.10 %   1.11 %   1.11 %        
Allowance for credit losses to non-accrual
  loans
  117.90 %   164.22 %   218.44 %        
 
(1) Purchased credit impaired loans with an accretable yield are considered current and are not included in past due loan totals.
 
(2) This ratio includes acquired loans that are recorded at fair value through an acquisition adjustment, which incorporates credit risk as of the acquisition date with no allowance for credit losses being established at that time. As the acquisition adjustment is accreted into income over future periods, an allowance for credit losses on acquired loans is established as necessary to reflect credit deterioration.
 

Total non-performing assets represented 1.07% of total loans and OREO at June 30, 2017, up from 0.87% at March 31, 2017 and 0.94% at June 30, 2016. Total OREO includes $6.9 million and $8.4 million as of June 30, 2017 and March 31, 2017, respectively, that was acquired in the Standard transaction during the first quarter of 2017.

Non-accrual loans increased by $24.9 million from March 31, 2017, due primarily to the transfer of two loan relationships from corporate performing potential problem loans to non-accrual status during the second quarter of 2017, driven by operating pressures unique to these borrowers. The Company has established specific reserves and implemented remediation plans associated with these borrowers.

Charge-Off Data
(Dollar amounts in thousands)
 
    Quarters Ended
    June 30,
 2017
  % of
Total
  March 31,
 2017
  % of
Total
  June 30,
 2016
  % of
Total
Net loan charge-offs (1):                        
Commercial and industrial   $ 1,721     42.7     $ 1,894     66.8     $ 1,450     28.3  
Agricultural   836     20.7     514     18.1          
Office, retail, and industrial   (8 )   (0.2 )   (848 )   (29.9 )   1,633     31.8  
Multi-family   (6 )   (0.2 )   (28 )   (1.0 )   83     1.6  
Construction   27     0.7     (222 )   (7.8 )   (12 )   (0.2 )
Other commercial real estate   228     5.7     307     10.8     810     15.8  
Consumer   1,233     30.6     1,221     43.0     1,166     22.7  
Total net loan charge-offs   $ 4,031     100.0     $ 2,838     100.0     $ 5,130     100.0  
Total recoveries included above   $ 828         $ 3,440         $ 1,003      
Net loan charge-offs to average
  loans, annualized:
                       
Quarter-to-date   0.16 %       0.12 %       0.26 %    
Year-to-date   0.14 %       0.12 %       0.24 %    
 
(1) Amounts represent charge-offs, net of recoveries.
 

Net loan charge-offs to average loans, annualized were 0.16%, up from 0.12% for the first quarter of 2017 and down from 0.26% for the second quarter of 2016.

DEPOSIT PORTFOLIO

Deposit Composition
(Dollar amounts in thousands)
 
    Average for the Quarters Ended   June 30, 2017
Percent Change From
    June 30,
 2017
  March 31,
 2017
  June 30,
 2016
  March 31,
 2017
  June 30,
 2016
Demand deposits   $ 3,538,049     $ 3,355,674     $ 2,771,813     5.4     27.6  
Savings deposits   2,072,343     2,029,631     1,655,566     2.1     25.2  
NOW accounts   2,010,152     1,916,816     1,615,677     4.9     24.4  
Money market accounts   1,942,672     1,890,703     1,670,536     2.7     16.3  
Core deposits   9,563,216     9,192,824     7,713,592     4.0     24.0  
Time deposits   1,538,845     1,515,597     1,277,694     1.5     20.4  
Total deposits   $ 11,102,061     $ 10,708,421     $ 8,991,286     3.7     23.5  
 

Average core deposits of $9.6 billion for the second quarter of 2017 increased by 4.0% and 24.0% compared to the first quarter of 2017 and second quarter of 2016, respectively. The rise in average core deposits compared to the first quarter of 2017 resulted primarily from the seasonal increase in average municipal deposits of nearly $220.0 million and organic growth. Compared to the second quarter of 2016, the rise in average core deposits was primarily driven by deposits assumed in the Standard transaction which contributed $1.6 billion to average core deposits in the second quarter of 2017.

CAPITAL MANAGEMENT

Capital Ratios
 
    As of
    June 30,
 2017
  March 31,
 2017
  December 31,
 2016
  June 30,
 2016
Company regulatory capital ratios:
Total capital to risk-weighted assets   11.69 %   11.48 %   12.23 %   10.68 %
Tier 1 capital to risk-weighted assets   9.71 %   9.53 %   9.90 %   9.83 %
Common equity Tier 1 ("CET1") to risk-weighted assets   9.30 %   9.11 %   9.39 %   9.32 %
Tier 1 capital to average assets   8.93 %   8.89 %   8.99 %   8.94 %
Company tangible common equity ratios (1)(2):                        
Tangible common equity to tangible assets   8.20 %   8.07 %   8.05 %   8.29 %
Tangible common equity, excluding accumulated other comprehensive
  income ("AOCI"), to tangible assets
  8.48 %   8.38 %   8.42 %   8.37 %
Tangible common equity to risk-weighted assets   8.90 %   8.68 %   8.88 %   9.14 %
 
(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-GAPP Reconciliations" presented later in this release.
 

The Company's regulatory capital ratios improved compared to March 31, 2017 as a result of an increase in retained earnings, offset partly by the impact of loan growth on risk-weighted assets. Overall, the Company's regulatory capital ratios decreased compared to December 31, 2016 and June 30, 2016 due to the Standard and Premier acquisitions. The issuance of $150.0 million of subordinated notes during the second half of 2016 more than offset the impact of these acquisitions and drove the increase in total capital to risk-weighted assets compared to June 30, 2016.

The Board of Directors approved a quarterly cash dividend of $0.10 per common share during the second quarter of 2017, an increase from $0.09 per common share during the first quarter of 2017.

Conference Call

A conference call to discuss the Company's results, outlook, and related matters will be held on Wednesday, July 26, 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 ID 10110139 beginning one hour after completion of the live call until 9:00 A.M. (ET) on August 9, 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, 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 titled "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, 2016, 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 noninterest 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, tax-equivalent net interest margin, excluding the impact of acquired loan accretion, 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. Certain significant transactions include acquisition and integration related expenses (all periods presented), a net gain related to a sale-leaseback transaction (third quarter of 2016), and the lease cancellation fee (fourth quarter of 2016). 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 addition, management believes that the tax-equivalent net interest margin, excluding the impact of acquired loan accretion, enhances comparability for peer comparison purposes and is useful to the Company, as well as analysts and investors, since acquired loan accretion income may fluctuate significantly based on the size of each acquisition.

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-focused 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 $10 billion in trust assets under management. First Midwest's principal subsidiary, First Midwest Bank, and other affiliates provide a full range of commercial, equipment 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
  June 30,   March 31,   December 31,   September 30,   June 30,
  2017   2017   2016   2016   2016
Period-End Balance Sheet                  
Assets                  
Cash and due from banks $ 181,171     $ 174,268     $ 155,055     $ 139,538     $ 149,957  
Interest-bearing deposits in other banks 103,181     74,892     107,093     362,153     105,432  
Trading securities, at fair value 19,545     19,130     17,920     18,351     17,693  
Securities available-for-sale, at fair value 1,908,248     1,937,124     1,919,450     1,964,030     1,773,759  
Securities held-to-maturity, at amortized cost 17,353     17,742     22,291     20,337     20,672  
FHLB and FRB stock 66,333     46,306     59,131     53,506     44,506  
Loans:                  
Commercial and industrial 3,410,748     3,370,780     2,827,658     2,849,399     2,699,742  
Agricultural 433,424     422,784     389,496     409,571     401,858  
Commercial real estate:                  
Office, retail, and industrial 1,983,802     1,988,979     1,581,967     1,537,181     1,529,811  
Multi-family 681,032     671,710     614,052     625,324     587,123  
Construction 543,892     568,460     451,540     401,857     371,016  
Other commercial real estate 1,383,937     1,357,781     979,528     971,030     1,000,829  
Home equity 865,656     880,667     747,983     748,571     738,263  
1-4 family mortgages 614,818     540,148     423,922     396,819     427,050  
Installment 314,850     253,061     237,999     232,030     223,845  
Total loans 10,232,159     10,054,370     8,254,145     8,171,782     7,979,537  
Allowance for loan losses (92,371 )   (88,163 )   (86,083 )   (85,308 )   (80,105 )
Net loans 10,139,788     9,966,207     8,168,062     8,086,474     7,899,432  
OREO 26,493     29,140     26,083     28,049     29,990  
Premises, furniture, and equipment, net 135,745     140,653     82,577     82,443     140,554  
Investment in bank-owned life insurance ("BOLI") 278,353     276,960     219,746     219,064     218,133  
Goodwill and other intangible assets 752,413     754,621     366,876     367,961     369,962  
Accrued interest receivable and other assets 340,517     336,428     278,271     236,291     225,720  
Total assets $ 13,969,140     $ 13,773,471     $ 11,422,555     $ 11,578,197     $ 10,995,810  
Liabilities and Stockholders' Equity                  
Noninterest-bearing deposits $ 3,525,905     $ 3,492,987     $ 2,766,748     $ 2,766,265     $ 2,683,495  
Interest-bearing deposits 7,473,815     7,463,554     6,061,855     6,339,839     6,287,821  
Total deposits 10,999,720     10,956,541     8,828,603     9,106,104     8,971,316  
Borrowed funds 639,333     547,923     879,008     639,539     449,744  
Senior and subordinated debt 194,886     194,745     194,603     309,444     162,876  
Accrued interest payable and other liabilities 298,358     269,529     263,261     253,846     160,985  
Stockholders' equity 1,836,843     1,804,733     1,257,080     1,269,264     1,250,889  
Total liabilities and stockholders' equity $ 13,969,140     $ 13,773,471     $ 11,422,555     $ 11,578,197     $ 10,995,810  
Stockholders' equity, excluding accumulated other
  comprehensive income ("AOCI")
$ 1,873,410     $ 1,844,997     $ 1,297,990     $ 1,282,666     $ 1,259,692  
Stockholders' equity, common 1,836,843     1,804,733     1,257,080     1,269,264     1,250,889  
                             


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,
  2017   2017   2016   2016   2016     2017   2016
Income Statement                            
Interest income $ 126,516     $ 123,699     $ 96,328     $ 97,906     $ 96,550       $ 250,215     $ 184,098  
Interest expense 8,933     8,502     8,304     6,934     6,569       17,435     13,403  
Net interest income 117,583     115,197     88,024     90,972     89,981       232,780     170,695  
Provision for loan losses 8,239     4,918     5,307     9,998     8,085       13,157     15,678  
Net interest income after
  provision for loan losses
109,344     110,279     82,717     80,974     81,896       219,623     155,017  
Noninterest Income                            
Service charges on deposit
  accounts
12,153     11,365     10,315     10,708     10,169       23,518     19,642  
Wealth management fees 10,525     9,660     8,375     8,495     8,642       20,185     16,201  
Card-based fees 8,832     8,116     7,462     7,332     7,592       16,948     14,310  
Merchant servicing fees 3,197     3,135     3,016     3,319     3,170       6,332     6,198  
Mortgage banking income 1,645     1,888     3,537     3,394     1,863       3,533     3,231  
Capital market products
  income
2,217     1,376     1,827     2,916     2,066       3,593     5,281  
Other service charges,
  commissions, and fees
2,659     2,307     2,575     2,302     2,432       4,966     4,665  
Total fee-based revenues 41,228     37,847     37,107     38,466     35,934       79,075     69,528  
Net securities gains 284         323     187     23       284     910  
Net gain on sale-leaseback
  transaction
            5,509                
Other income 3,433     2,104     2,281     1,691     1,865       5,537     3,310  
Total noninterest income 44,945     39,951     39,711     45,853     37,822       84,896     73,748  
Noninterest Expense                            
Salaries and employee
  benefits:
                           
Salaries and wages 44,194     44,890     39,257     37,872     37,916       89,084     74,212  
Retirement and other
  employee benefits
10,381     10,882     8,160     8,500     8,351       21,263     16,649  
Total salaries and
  employee benefits
54,575     55,772     47,417     46,372     46,267       110,347     90,861  
Net occupancy and
  equipment expense
12,485     12,325     10,774     10,755     9,928       24,810     19,625  
Professional services 9,112     8,463     7,138     6,772     5,292       17,575     11,212  
Technology and related costs 4,485     4,433     3,514     3,881     3,669       8,918     7,370  
Merchant card expense 2,632     2,585     2,603     2,857     2,724       5,217     5,322  
Advertising and promotions 1,693     1,066     2,330     1,941     1,927       2,759     3,516  
Cardholder expenses 1,682     1,764     1,426     1,515     1,512       3,446     2,871  
Net OREO expense 1,631     1,700     925     313     1,122       3,331     1,786  
Other expenses 10,282     9,969     8,050     7,310     8,295       20,251     15,742  
Acquisition and integration
  related expenses
1,174     18,565     7,542     1,172     618       19,739     5,638  
Lease cancellation fee         950                    
Total noninterest expense 99,751     116,642     92,669     82,888     81,354       216,393     163,943  
Income before income tax
  expense
54,538     33,588     29,759     43,939     38,364       88,126     64,822  
Income tax expense 19,588     10,733     9,041     15,537     13,097       30,321     21,593  
Net income $ 34,950     $ 22,855     $ 20,718     $ 28,402     $ 25,267       $ 57,805     $ 43,229  
Net income applicable to
  common shares
$ 34,614     $ 22,621     $ 20,501     $ 28,078     $ 24,977       $ 57,235     $ 42,727  
Net income applicable to
  common shares, excluding
  certain significant
  transactions (1)
$ 35,318     $ 33,760     $ 25,596     $ 25,476     $ 25,348       $ 69,078     $ 46,110  
Footnotes to Condensed Consolidated Statements of Income
(1) Certain significant transactions that are recorded in various periods presented 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, and a net gain on a sale-leaseback transaction.
 


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,
  2017   2017   2016   2016   2016     2017   2016
Earnings Per Share                            
Basic earnings per common
  share ("EPS")
$ 0.34     $ 0.23     $ 0.25     $ 0.35     $ 0.31       $ 0.57     $ 0.54  
Diluted EPS $ 0.34     $ 0.23     $ 0.25     $ 0.35     $ 0.31       $ 0.57     $ 0.54  
Diluted EPS, excluding certain
  significant transactions (1) (5)
$ 0.35     $ 0.34     $ 0.32     $ 0.32     $ 0.32       $ 0.68     $ 0.58  
Common Stock and Related Per Common Share Data          
Book value $ 17.88     $ 17.56     $ 15.46     $ 15.61     $ 15.38       $ 17.88     $ 15.38  
Tangible book value $ 10.55     $ 10.22     $ 10.95     $ 11.08     $ 10.83       $ 10.55     $ 10.83  
Dividends declared per share $ 0.10     $ 0.09     $ 0.09     $ 0.09     $ 0.09       $ 0.19     $ 0.18  
Closing price at period end $ 23.31     $ 23.68     $ 25.23     $ 19.36     $ 17.56       $ 23.31     $ 17.56  
Closing price to book value 1.3     1.3     1.6     1.2     1.1       1.3     1.1  
Period end shares outstanding 102,741     102,757     81,325     81,324     81,312       102,741     81,312  
Period end treasury shares 9,604     9,586     9,959     9,957     9,965       9,604     9,965  
Common dividends $ 9,281     $ 9,126     $ 7,315     $ 7,408     $ 7,240       $ 18,407     $ 14,468  
Key Ratios/Data                                                        
Return on average common
  equity (2)
7.58 %   5.20 %   6.42 %   8.85 %   8.13 %     6.42 %   7.12 %
Return on average tangible
  common equity (2)
13.37 %   9.53 %   9.35 %   12.85 %   11.94 %     11.52 %   10.44 %
Return on average tangible
  common equity, excluding
  certain significant
  transactions (1) (2) (5)
13.64 %   13.99 %   11.60 %   11.69 %   12.11 %     13.81 %   11.24 %
Return on average assets (2) 1.00 %   0.68 %   0.72 %   1.00 %   0.93 %     0.84 %   0.83 %
Return on average assets,
  excluding certain significant
  transactions (1) (2) (5)
1.02 %   1.01 %   0.90 %   0.91 %   0.94 %     1.02 %   0.89 %
Loans to deposits 93.02 %   91.77 %   93.49 %   89.74 %   88.94 %     93.02 %   88.94 %
Efficiency ratio (1) 58.67 %   60.98 %   63.98 %   60.83 %   60.98 %     59.80 %   62.81 %
Net interest margin (3) 3.88 %   3.89 %   3.44 %   3.60 %   3.72 %     3.88 %   3.69 %
Yield on average interest-earning
  assets (3)
4.17 %   4.17 %   3.76 %   3.87 %   3.99 %     4.17 %   3.97 %
Cost of funds 0.43 %   0.42 %   0.47 %   0.39 %   0.39 %     0.42 %   0.41 %
Net noninterest expense to
  average assets
1.58 %   2.27 %   1.86 %   1.50 %   1.61 %     1.92 %   1.75 %
Effective income tax rate 35.92 %   31.95 %   30.38 %   35.36 %   34.14 %     34.41 %   33.31 %
Capital Ratios                                                        
Total capital to risk-weighted
  assets (1)
11.69 %   11.48 %   12.23 %   12.25 %   10.68 %     11.69 %   10.68 %
Tier 1 capital to risk-weighted
  assets (1)
9.71 %   9.53 %   9.90 %   9.89 %   9.83 %     9.71 %   9.83 %
CET1 to risk-weighted assets (1) 9.30 %   9.11 %   9.39 %   9.38 %   9.32 %     9.30 %   9.32 %
Tier 1 capital to average assets (1) 8.93 %   8.89 %   8.99 %   8.90 %   8.94 %     8.93 %   8.94 %
Tangible common equity to
  tangible assets (1)
8.20 %   8.07 %   8.05 %   8.04 %   8.29 %     8.20 %   8.29 %
Tangible common equity,
  excluding AOCI, to tangible
  assets (1)
8.48 %   8.38 %   8.42 %   8.16 %   8.37 %     8.48 %   8.37 %
Tangible common equity to
  risk-weighted assets (1)
8.90 %   8.68 %   8.88 %   9.13 %   9.14 %     8.90 %   9.14 %
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,
  2017   2017   2016   2016   2016     2017   2016
Asset Quality Performance Data                                
Non-performing assets                            
Commercial and industrial $ 51,400     $ 21,514     $ 29,938     $ 13,823     $ 6,303       $ 51,400     $ 6,303  
Agricultural 387     1,283     181     184     475       387     475  
Commercial real estate:                            
Office, retail, and industrial 15,031     19,505     17,277     17,670     16,815       15,031     16,815  
Multi-family 158     163     311     316     321       158     321  
Construction 197     198     286     287     360       197     360  
Other commercial real estate 3,736     3,858     2,892     3,361     4,797       3,736     4,797  
Consumer 8,287     7,773     8,404     8,648     8,241       8,287     8,241  
Total non-accrual loans 79,196     54,294     59,289     44,289     37,312       79,196     37,312  
90 days or more past due loans,
  still accruing interest
2,059     2,633     5,009     4,318     5,406       2,059     5,406  
Total non-performing loans 81,255     56,927     64,298     48,607     42,718       81,255     42,718  
Accruing TDRs 2,029     2,112     2,291     2,368     2,491       2,029     2,491  
OREO 26,493     29,140     26,083     28,049     29,990       26,493     29,990  
Total non-performing assets $ 109,777     $ 88,179     $ 92,672     $ 79,024     $ 75,199       $ 109,777     $ 75,199  
30-89 days past due loans $ 19,081     $ 23,641     $ 21,043     $ 26,140     $ 23,380       $ 19,081     $ 23,380  
Allowance for credit losses                            
Allowance for loan losses $ 92,371     $ 88,163     $ 86,083     $ 85,308     $ 80,105       $ 92,371     $ 80,105  
Reserve for unfunded 
  commitments
1,000     1,000     1,000     1,000     1,400       1,000     1,400  
Total allowance for credit
  losses
$ 93,371     $ 89,163     $ 87,083     $ 86,308     $ 81,505       $ 93,371     $ 81,505  
Provision for loan losses $ 8,239     $ 4,918     $ 5,307     $ 9,998     $ 8,085       $ 13,157     $ 15,678  
Net charge-offs by category                            
Commercial and industrial $ 1,721     $ 1,894     $ 3,540     $ 1,145     $ 1,450       $ 3,615     $ 2,846  
Agricultural 836     514                   1,350      
Commercial real estate:                            
Office, retail, and industrial (8 )   (848 )   165     2,151     1,633       (856 )   2,054  
Multi-family (6 )   (28 )   17     (69 )   83       (34 )   262  
Construction 27     (222 )   (12 )   (9 )   (12 )     (195 )   99  
Other commercial real estate 228     307     (111 )   415     810       535     2,104  
Consumer 1,233     1,221     933     1,162     1,166       2,454     1,838  
Total net charge-offs $ 4,031     $ 2,838     $ 4,532     $ 4,795     $ 5,130       $ 6,869     $ 9,203  
Total recoveries included above $ 828     $ 3,440     $ 1,489     $ 1,155     $ 1,003       $ 4,268     $ 2,119  
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
    June 30,   March 31,   December 31,   September 30,   June 30,
    2017   2017   2016   2016   2016
Asset Quality ratios                    
Non-accrual loans to total loans   0.77 %   0.54 %   0.72 %   0.54 %   0.47 %
Non-performing loans to total loans   0.79 %   0.57 %   0.78 %   0.59 %   0.54 %
Non-performing assets to total loans plus OREO   1.07 %   0.87 %   1.12 %   0.96 %   0.94 %
Non-performing assets to tangible common equity plus allowance
  for credit losses
  9.32 %   7.74 %   9.48 %   8.00 %   7.81 %
Non-accrual loans to total assets   0.57 %   0.39 %   0.52 %   0.38 %   0.34 %
Allowance for credit losses and net charge-off ratios                              
Allowance for credit losses to total loans (4)   0.91 %   0.89 %   1.06 %   1.06 %   1.02 %
Allowance for credit losses to loans, excluding acquired loans   1.10 %   1.11 %   1.11 %   1.13 %   1.11 %
Allowance for credit losses to non-accrual loans   117.90 %   164.22 %   146.88 %   194.87 %   218.44 %
Allowance for credit losses to non-performing loans   114.91 %   156.63 %   135.44 %   177.56 %   190.80 %
Net charge-offs to average loans (2)   0.16 %   0.12 %   0.22 %   0.24 %   0.26 %
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) 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.
(5) Certain significant transactions that are recorded in various periods presented 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, and a net gain on a sale-leaseback transaction.
 


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,
  2017   2017   2016   2016   2016     2017   2016
Earnings Per Share                            
Net income $ 34,950     $ 22,855     $ 20,718     $ 28,402     $ 25,267       $ 57,805     $ 43,229  
Net income applicable to non-
  vested restricted shares
(336 )   (234 )   (217 )   (324 )   (290 )     (570 )   (502 )
Net income applicable to
  common shares
34,614     22,621     20,501     28,078     24,977       57,235     42,727  
Acquisition and integration
  related expenses
1,174     18,565     7,542     1,172     618       19,739     5,638  
Tax effect of acquisition and
  integration related expenses
(470 )   (7,426 )   (3,017 )   (469 )   (247 )     (7,896 )   (2,255 )
Lease cancellation fee         950                    
Tax effect of lease cancellation
  fee
        (380 )                  
Net gain on sale-leaseback
  transaction
            (5,509 )              
Tax effect of net gain on sale-
  leaseback transaction
            2,204                
Net income applicable to
  common shares, excluding
  certain significant
  transactions (1)
$ 35,318     $ 33,760     $ 25,596     $ 25,476     $ 25,348       $ 69,078     $ 46,110  
Weighted-average common shares outstanding:                          
Weighted-average common
  shares outstanding (basic)
101,743     100,411     80,415     80,396     80,383       101,081     79,182  
Dilutive effect of common
  stock equivalents
20     21     15     13     13       20     12  
Weighted-average diluted
  common shares
  outstanding
101,763     100,432     80,430     80,409     80,396       101,101     79,194  
Basic EPS $ 0.34     $ 0.23     $ 0.25     $ 0.35     $ 0.31       $ 0.57     $ 0.54  
Diluted EPS $ 0.34     $ 0.23     $ 0.25     $ 0.35     $ 0.31       $ 0.57     $ 0.54  
Diluted EPS, excluding certain
  significant transactions (1)
$ 0.35     $ 0.34     $ 0.32     $ 0.32     $ 0.32       $ 0.68     $ 0.58  
Anti-dilutive shares not included
  in the computation of diluted
  EPS
195     343     445     454     469       269     539  
Efficiency Ratio Calculation                            
Noninterest expense $ 99,751     $ 116,642     $ 92,669     $ 82,888     $ 81,354       $ 216,393     $ 163,943  
Less:                            
Net OREO expense (1,631 )   (1,700 )   (925 )   (313 )   (1,122 )     (3,331 )   (1,786 )
Acquisition and integration
  related expenses
(1,174 )   (18,565 )   (7,542 )   (1,172 )   (618 )     (19,739 )   (5,638 )
Lease cancellation fee         (950 )                  
Total $ 96,946     $ 96,377     $ 83,252     $ 81,403     $ 79,614       $ 193,323     $ 156,519  
Tax-equivalent net interest
  income (2)
$ 119,625     $ 117,251     $ 90,088     $ 93,051     $ 92,174       $ 236,876     $ 175,195  
Fee-based revenues 41,228     37,847     37,107     38,466     35,934       79,075     69,528  
Add:                            
Other income, excluding
  BOLI income
2,022     844     1,310     762     984       2,866     1,563  
BOLI 1,411     1,260     971     929     881       2,671     1,747  
Tax-equivalent adjustment
  of BOLI
941     840     647     619     587       1,781     1,165  
Total $ 165,227     $ 158,042     $ 130,123     $ 133,827     $ 130,560       $ 323,269     $ 249,198  
Efficiency ratio 58.67 %   60.98 %   63.98 %   60.83 %   60.98 %     59.80 %   62.81 %
                             
Note: Non-GAAP Reconciliations footnotes are located at the end of this section.          
           


First Midwest Bancorp, Inc.
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
                             
  As of or for the
  Quarters Ended     Six Months Ended
  June 30,   March 31,   December 31,   September 30,   June 30,     June 30,   June 30,
  2017   2017   2016   2016   2016     2017   2016
Tax-Equivalent Net Interest Income                                
Net interest income $ 117,583     $ 115,197     $ 88,024     $ 90,972     $ 89,981       $ 232,780     $ 170,695  
Tax-equivalent adjustment 2,042     2,054     2,064     2,079     2,193       4,096     4,500  
Tax-equivalent net interest
  income (2)
119,625     117,251     90,088     93,051     92,174       236,876     175,195  
Less: acquired loan accretion (8,757 )   (11,345 )   (2,663 )   (4,555 )   (4,927 )     (20,102 )   (7,350 )
Tax-equivalent net interest
  income, excluding the
  impact of acquired loan
  accretion
$ 110,868     $ 105,906     $ 87,425     $ 88,496     $ 87,247       $ 216,774     $ 167,845  
Average interest-earning assets $ 12,366,739     $ 12,211,804     $ 10,425,691     $ 10,297,647     $ 9,949,093       $ 12,289,700     $ 9,536,003  
Net interest margin (GAAP) 3.81 %   3.83 %   3.36 %   3.51 %   3.64 %     3.82 %   3.60 %
Tax-equivalent net interest
  margin
3.88 %   3.89 %   3.44 %   3.60 %   3.72 %     3.88 %   3.69 %
Tax-equivalent net interest
  margin, excluding the impact of
  acquired loan accretion
3.60 %   3.51 %   3.34 %   3.42 %   3.52 %     3.55 %   3.54 %
Risk-Based Capital Data                                                        
Common stock $ 1,123     $ 1,123     $ 913     $ 913     $ 913       $ 1,123     $ 913  
Additional paid-in capital 1,025,607     1,022,417     498,937     496,918     495,159       1,025,607     495,159  
Retained earnings 1,056,072     1,030,403     1,016,674     1,003,271     982,277       1,056,072     982,277  
Treasury stock, at cost (209,392 )   (208,946 )   (218,534 )   (218,436 )   (218,657 )     (209,392 )   (218,657 )
Goodwill and other intangible
  assets, net of deferred tax
  liabilities
(740,236 )   (742,012 )   (356,477 )   (357,079 )   (358,582 )     (740,236 )   (358,582 )
Disallowed deferred tax assets (472 )   (1,150 )   (198 )   (383 )   (2,263 )     (472 )   (2,263 )
CET1 capital 1,132,702     1,101,835     941,315     925,204     898,847       1,132,702     898,847  
Trust-preferred securities 50,690     50,690     50,690     50,690     50,690       50,690     50,690  
Other disallowed deferred tax
  assets
(118 )   (287 )   (132 )   (255 )   (1,508 )     (118 )   (1,508 )
Tier 1 capital 1,183,274     1,152,238     991,873     975,639     948,029       1,183,274     948,029  
Tier 2 capital 240,121     235,825     233,656     232,792     81,505       240,121     81,505  
Total capital $ 1,423,395     $ 1,388,063     $ 1,225,529     $ 1,208,431     $ 1,029,534       $ 1,423,395     $ 1,029,534  
Risk-weighted assets $ 12,180,416     $ 12,095,592     $ 10,019,434     $ 9,867,406     $ 9,641,953       $ 12,180,416     $ 9,641,953  
Adjusted average assets $ 13,245,499     $ 12,965,450     $ 11,036,835     $ 10,959,119     $ 10,608,085       $ 13,245,499     $ 10,608,085  
Total capital to risk-weighted
  assets
11.69 %   11.48 %   12.23 %   12.25 %   10.68 %     11.69 %   10.68 %
Tier 1 capital to risk-weighted
  assets
9.71 %   9.53 %   9.90 %   9.89 %   9.83 %     9.71 %   9.83 %
CET1 to risk-weighted assets 9.30 %   9.11 %   9.39 %   9.38 %   9.32 %     9.30 %   9.32 %
Tier 1 capital to average assets 8.93 %   8.89 %   8.99 %   8.90 %   8.94 %     8.93 %   8.94 %
Tangible Common Equity                            
Stockholders' equity $ 1,836,843     $ 1,804,733     $ 1,257,080     $ 1,269,264     $ 1,250,889       $ 1,836,843     $ 1,250,889  
Less: goodwill and other
  intangible assets
(752,413 )   (754,621 )   (366,876 )   (367,961 )   (369,962 )     (752,413 )   (369,962 )
Tangible common equity 1,084,430     1,050,112     890,204     901,303     880,927       1,084,430     880,927  
Less: AOCI 36,567     40,264     40,910     13,402     8,803       36,567     8,803  
Tangible common equity,
  excluding AOCI
$ 1,120,997     $ 1,090,376     $ 931,114     $ 914,705     $ 889,730       $ 1,120,997     $ 889,730  
Total assets $ 13,969,140     $ 13,773,471     $ 11,422,555     $ 11,578,197     $ 10,995,810       $ 13,969,140     $ 10,995,810  
Less: goodwill and other
  intangible assets
(752,413 )   (754,621 )   (366,876 )   (367,961 )   (369,962 )     (752,413 )   (369,962 )
Tangible assets $ 13,216,727     $ 13,018,850     $ 11,055,679     $ 11,210,236     $ 10,625,848       $ 13,216,727     $ 10,625,848  
Tangible common equity to
  tangible assets
8.20 %   8.07 %   8.05 %   8.04 %   8.29 %     8.20 %   8.29 %
Tangible common equity,
  excluding AOCI, to tangible
  assets
8.48 %   8.38 %   8.42 %   8.16 %   8.37 %     8.48 %   8.37 %
Tangible common equity to risk-
  weighted assets
8.90 %   8.68 %   8.88 %   9.13 %   9.14 %     8.90 %   9.14 %
                             
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,
  2017   2017   2016   2016   2016     2017   2016
Return on Average Common and Tangible Common Equity                      
Net income applicable to
  common shares
$ 34,614     $ 22,621     $ 20,501     $ 28,078     $ 24,977       $ 57,235     $ 42,727  
Intangibles amortization 2,163     1,965     1,207     1,245     1,245       4,128     2,230  
Tax effect of intangibles
  amortization
(865 )   (786 )   (483 )   (498 )   (498 )     (1,651 )   (892 )
Net income applicable to
  common shares, excluding
  intangibles amortization
35,912     23,800     21,225     28,825     25,724       59,712     44,065  
Acquisition and integration
  related expenses
1,174     18,565     7,542     1,172     618       19,739     5,638  
Tax effect of acquisition and
  integration related expenses
(470 )   (7,426 )   (3,017 )   (469 )   (247 )     (7,896 )   (2,255 )
Lease cancellation fee         950                    
Tax effect of lease cancellation
  fee
        (380 )                  
Net gain on sale-leaseback
  transaction
            (5,509 )              
Tax effect of net gain on sale-
  leaseback transaction
            2,204                
Net income applicable to
  common shares, excluding
  intangibles amortization
  and certain significant
  transactions (1)
$ 36,616     $ 34,939     $ 26,320     $ 26,223     $ 26,095       $ 71,555     $ 47,448  
Average stockholders' equity $ 1,830,536     $ 1,763,538     $ 1,269,993     $ 1,261,702     $ 1,235,497       1,797,222     $ 1,207,043  
Less: average intangible assets (753,521 )   (750,589 )   (367,328 )   (369,281 )   (369,177 )     (752,063 )   (357,863 )
Average tangible common
  equity
$ 1,077,015     $ 1,012,949     $ 902,665     $ 892,421     $ 866,320       $ 1,045,159     $ 849,180  
Return on average common
  equity (3)
7.58 %   5.20 %   6.42 %   8.85 %   8.13 %     6.42 %   7.12 %
Return on average tangible
  common equity (3)
13.37 %   9.53 %   9.35 %   12.85 %   11.94 %     11.52 %   10.44 %
Return on average tangible
  common equity, excluding
  certain significant
  transactions (1) (3)
13.64 %   13.99 %   11.60 %   11.69 %   12.11 %     13.81 %   11.24 %
Return on Average Assets                      
Net income $ 34,950     $ 22,855     $ 20,718     $ 28,402     $ 25,267       $ 57,805     $ 43,229  
Acquisition and integration
  related expenses
1,174     18,565     7,542     1,172     618       19,739     5,638  
Tax effect of acquisition and
  integration related expenses
(470 )   (7,426 )   (3,017 )   (469 )   (247 )     (7,896 )   (2,255 )
Lease cancellation fee         950                    
Tax effect of lease cancellation
  fee
        (380 )                  
Net gain on sale-leaseback
  transaction
            (5,509 )              
Tax effect of net gain on sale-
  leaseback transaction
            2,204                
Net income, excluding
  certain significant
  transactions (1)
$ 35,654     $ 33,994     $ 25,813     $ 25,800     $ 25,638       $ 69,648     $ 46,612  
Average assets $ 13,960,843     $ 13,673,125     $ 11,380,108     $ 11,322,325     $ 10,968,516       $ 13,817,779     $ 10,512,680  
Return on average assets (3) 1.00 %   0.68 %   0.72 %   1.00 %   0.93 %     0.84 %   0.83 %
Return on average assets,
  excluding certain significant 
  transactions (1) (3)
1.02 %   1.01 %   0.90 %   0.91 %   0.94 %     1.02 %   0.89 %
Footnotes to Non-GAAP Reconciliations
(1) Certain significant transactions that are recorded in various periods presented 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, and a net gain on a sale-leaseback transaction.
(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, Corporate Relations Officer 
(630) 875-7533 
jim.roolf@firstmidwest.com

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