Market Overview

First Midwest Bancorp, Inc. Announces 2017 Third Quarter Results

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ITASCA, Ill., Oct. 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 third quarter of 2017. Net income for the third quarter of 2017 was $38.2 million, or $0.37 per share, compared to $35.0 million, or $0.34 per share, for the second quarter of 2017, and $28.4 million, or $0.35 per share, for the third 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 (all periods presented) and the net gain on the sale-leaseback transaction (third quarter of 2016). Excluding these certain significant transactions, earnings per share (1) was $0.37 for the third quarter of 2017, compared to $0.35 for the second quarter of 2017 and $0.32 for the third quarter of 2016.

SELECT THIRD QUARTER HIGHLIGHTS

  • Increased earnings per share to $0.37, up 6% from the third quarter of 2016 and 9% from the second quarter of 2017.
  • Expanded net interest income to $120 million, up 32% from the third quarter of 2016 and 2% from the second quarter of 2017.
  • Increased net interest margin to 3.86%, up from 3.60% for the third quarter of 2016 and down from 3.88% for the second quarter of 2017. Excluding acquired loan accretion, net interest margin (1) grew 2 basis points to 3.62% from the second quarter of 2017.
  • Improved efficiency ratio (1) to 59%, down from 61% for the third quarter of 2016 and consistent with the second quarter of 2017.
  • Grew loans to $10.4 billion, up 27% from September 30, 2016 and 6% annualized from June 30, 2017.
  • Decreased non-performing assets to total loans plus OREO to 0.86%, down 10 basis points from September 30, 2016 and 21 basis points from June 30, 2017.
  • Third quarter earnings was positively impacted by $0.02 due to securities gains resulting from the opportunistic repositioning of the securities portfolio and $0.02 due to a net benefit reflecting changes in Illinois tax rates.

"Performance for the quarter was both solid and active," said Michael L. Scudder, President and Chief Executive Officer of the Company. "Earnings per share increased to $0.37, up 9% from the prior quarter. Underlying business performance was steady, marked by increased lending and stable margins as well as comparatively higher credit provisioning. The quarter further reflected the anticipated loss of interchange revenue, legislatively required because of our growth over $10 billion in assets. The quarter also benefited from securities gains, as we modestly repositioned our portfolio, as well as certain tax benefits emanating from changes in Illinois' corporate tax levels."

Mr. Scudder concluded, "As we look forward, expectations for higher interest rates and improved operating conditions are high but, as yet, difficult to fully gauge. As we navigate this environment, the strength of our balance sheet and team leaves us well-positioned to both grow and drive operational efficiency. Our focus remains centered on helping our clients achieve financial success and the long-term interests of our stockholders."

(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
  September 30, 2017     June 30, 2017     September 30, 2016
  Average Balance   Interest   Yield/
Rate
(%)
    Average
Balance
  Interest   Yield/
Rate
(%)
    Average
Balance
  Interest   Yield/
Rate
(%)
Assets:                                      
Other interest-earning assets $ 237,727     $ 793     1.32       $ 262,206     $ 686     1.05       $ 282,101     $ 472     0.67  
Securities (1) 1,961,382     11,586     2.36       1,983,341     11,482     2.32       1,896,195     10,752     2.27  
Federal Home Loan Bank ("FHLB") and
  Federal Reserve Bank ("FRB") stock
67,605     312     1.85       57,073     441     3.09       51,451     261     2.03  
Loans (1) 10,277,420     119,267     4.60       10,064,119     115,949     4.62       8,067,900     88,500     4.36  
Total interest-earning assets (1) 12,544,134     131,958     4.18       12,366,739     128,558     4.17       10,297,647     99,985     3.87  
Cash and due from banks 194,149               188,886               150,467          
Allowance for loan losses (99,249 )             (92,152 )             (84,088 )        
Other assets 1,516,732               1,497,370               958,299          
Total assets $ 14,155,766               $ 13,960,843               $ 11,322,325          
Liabilities and Stockholders' Equity:                                      
Savings deposits $ 2,040,609     391     0.08       $ 2,072,343     394     0.08       $ 1,655,604     298     0.07  
NOW accounts 2,039,593     809     0.16       2,010,152     663     0.13       1,754,330     338     0.08  
Money market deposits 1,928,962     700     0.14       1,942,672     648     0.13       1,680,886     450     0.11  
Time deposits 1,559,966     2,469     0.63       1,538,845     2,024     0.53       1,248,425     1,434     0.46  
Borrowed funds 648,275     2,544     1.56       553,046     2,099     1.52       605,177     1,782     1.17  
Senior and subordinated debt 194,961     3,110     6.33       194,819     3,105     6.39       166,101     2,632     6.30  
Total interest-bearing liabilities 8,412,366     10,023     0.47       8,311,877     8,933     0.43       7,110,523     6,934     0.39  
Demand deposits 3,574,012               3,538,049               2,806,851          
Total funding sources 11,986,378               11,849,926               9,917,374          
Other liabilities 313,741               280,381               143,249          
Stockholders' equity - common 1,855,647               1,830,536               1,261,702          
Total liabilities and
  stockholders' equity
$ 14,155,766               $ 13,960,843               $ 11,322,325          
Tax-equivalent net interest
  income/margin (1)
    121,935     3.86           119,625     3.88           93,051     3.60  
Tax-equivalent adjustment     (2,042 )             (2,042 )             (2,079 )    
Net interest income (GAAP) (1)     $ 119,893               $ 117,583               $ 90,972      
Impact of acquired loan accretion (1)     $ 7,581     0.24           $ 8,757     0.28           $ 4,555     0.18  
Tax-equivalent net interest income/
  margin, excluding the impact of
  acquired loan accretion (1)
    $ 114,354     3.62           $ 110,868     3.60           $ 88,496     3.42  
 
(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. See the "Non-GAAP Financial Information" section presented later in this release for a discussion of this non-GAAP financial measure.

Net interest income increased by 2.0% from the second quarter of 2017 and 31.8% compared to the third quarter of 2016. The rise in net interest income compared to the second quarter of 2017 resulted primarily from higher interest rates and loan growth, partially offset by a decrease in acquired loan accretion. Compared to the third 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 $7.6 million, $8.8 million, and $4.6 million to net interest income for the third quarter of 2017, the second quarter of 2017, and the third quarter of 2016, respectively.

Tax-equivalent net interest margin for the current quarter was 3.86%, consistent with the second quarter of 2017 and increasing by 26 basis points from the third quarter of 2016. Compared to the second quarter of 2017, tax-equivalent net interest margin reflected the negative impact of lower loan fees and a 4 basis point decrease in acquired loan accretion, largely offset by the positive impact of higher interest rates. The increase in tax-equivalent net interest margin compared to the third quarter of 2016 was due to a 6 basis point increase in acquired loan accretion combined with the positive impact of higher interest rates. The cost of total average interest-bearing liabilities increased 4 basis points and 8 basis points from the second quarter of 2017 and third quarter of 2016, respectively, as a result of higher interest rates.

For the third quarter of 2017, total average interest-earning assets rose by $177.4 million from the second quarter of 2017 and $2.2 billion from the third quarter of 2016. The increase compared to the second quarter of 2017 resulted from loan growth while the increase from the third quarter of 2016 reflected the impact of the Standard transaction, loan growth, and securities purchases.

Total average funding sources increased by $136.5 million from the second quarter of 2017 and $2.1 billion from the third quarter of 2016. The increase compared to the second quarter of 2017 resulted from an increase in FHLB advances. Compared to the third quarter of 2016, the rise in average funding sources was primarily impacted by deposits acquired in the Standard transaction.

Fee-based Revenues and Total Noninterest Income Analysis
(Dollar amounts in thousands)
 
    Quarters Ended   September 30, 2017
Percent Change From
    September 30,
 2017
  June 30,
 2017
  September 30,
 2016
  June 30,
 2017
  September 30,
 2016
Service charges on deposit accounts   $ 12,561     $ 12,153     $ 10,708     3.4     17.3  
Wealth management fees   10,169     10,525     8,495     (3.4 )   19.7  
Card-based fees   5,992     8,832     7,332     (32.2 )   (18.3 )
Merchant servicing fees   2,237     3,197     3,319     (30.0 )   (32.6 )
Mortgage banking income   2,246     1,645     3,394     36.5     (33.8 )
Capital market products income   2,592     2,217     2,916     16.9     (11.1 )
Other service charges, commissions, and fees   2,508     2,659     2,302     (5.7 )   8.9  
Total fee-based revenues   38,305     41,228     38,466     (7.1 )   (0.4 )
Net gain on sale-leaseback transaction           5,509         (100.0 )
Net securities gains   3,197     284     187     1,025.7     1,609.6  
Other income   1,846     3,433     1,691     (46.2 )   9.2  
Total noninterest income   $ 43,348     $ 44,945     $ 45,853     (3.6 )   (5.5 )

Total fee-based revenues of $38.3 million decreased by $2.9 million, or 7.1%, compared to the second quarter of 2017 and were consistent with the third quarter of 2016. The decrease in card-based fees compared to both prior periods resulted primarily from the reduction in interchange revenue as the impact of the Durbin Amendment of the Dodd-Frank Act ("Durbin") became effective in the third quarter of 2017. Compared to the third quarter of 2016, the negative impact of Durbin was offset by increased revenues across most categories due to the Standard transaction, combined with increased wealth management fees from the Premier Asset Management LLC ("Premier") transaction.

Compared to the second quarter of 2017, the rise in service charges on deposit accounts was due to seasonally higher activity. The decline in merchant servicing fees reflected lower customer volumes, virtually offset by the decline in merchant card expense included in noninterest expense for each period presented.

Mortgage banking income resulted primarily from sales of $72.1 million of 1-4 family mortgage loans in the secondary market during the third quarter of 2017, compared to $59.5 million in the second quarter of 2017 and $107.3 million in the third quarter of 2016.

During the third quarter of 2016, the Company completed a sale-leaseback transaction of 55 branches that resulted in a pre-tax gain of $88.0 million, net of transaction related expenses, of which $5.5 million was immediately recognized and the remaining $82.5 million was deferred.

Net securities gains of $3.2 million were recognized during the third quarter of 2017 as a result of the opportunistic repositioning of the securities portfolio in light of current market conditions.

Other income in the second quarter of 2017 was impacted by net gains from the disposition of vacant branch properties and other miscellaneous items.

Noninterest Expense Analysis
(Dollar amounts in thousands)
 
    Quarters Ended   September 30, 2017
Percent Change From
    September 30,
 2017
  June 30,
 2017
  September 30,
 2016
  June 30,
 2017
  September 30,
 2016
Salaries and employee benefits:                    
Salaries and wages   $ 45,219     $ 44,194     $ 37,872     2.3     19.4  
Retirement and other employee benefits   10,419     10,381     8,500     0.4     22.6  
Total salaries and employee benefits   55,638     54,575     46,372     1.9     20.0  
Net occupancy and equipment expense   12,115     12,485     10,755     (3.0 )   12.6  
Professional services   8,498     9,112     6,772     (6.7 )   25.5  
Technology and related costs   4,505     4,485     3,881     0.4     16.1  
Merchant card expense   1,737     2,632     2,857     (34.0 )   (39.2 )
Advertising and promotions   1,852     1,693     1,941     9.4     (4.6 )
Cardholder expenses   1,962     1,682     1,515     16.6     29.5  
Net other real estate owned ("OREO") expense   657     1,631     313     (59.7 )   109.9  
Other expenses   9,842     10,282     7,310     (4.3 )   34.6  
Total noninterest expense excluding
  certain significant transactions (1)
  96,806     98,577     81,716     (1.8 )   18.5  
Acquisition and integration related expenses   384     1,174     1,172     (67.3 )   (67.2 )
Total noninterest expense   $ 97,190     $ 99,751     $ 82,888     (2.6 )   17.3  
 
(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 2.6% compared to the second quarter of 2017 and increased by 17.3% compared to the third quarter of 2016. Compared to the second quarter of 2017, the increase in salaries and employee benefits was driven primarily by higher staffing levels. Professional services decreased compared to the second quarter of 2017 as a result of lower loan remediation costs. The decline in merchant card expense is in-line with the decrease in merchant servicing fees included in noninterest income for each period presented. Net OREO expense decreased from the second quarter of 2017 due primarily to lower valuation adjustments.

Compared to the third quarter of 2016, the increase in total noninterest expense 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 were impacted by certain costs associated with organizational growth. In addition, other expenses increased compared to the third quarter of 2016 due to a reduction in the reserve for unfunded commitments during the third quarter of 2016.

Acquisition and integration related expenses for the second and third quarters of 2017 resulted from the acquisitions of Standard and Premier completed during the first quarter of 2017. For the third 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.

INCOME TAXES

The Company's effective tax rate for the third quarter of 2017 was 31.7%, compared to 35.9% for the second quarter of 2017, and 35.4% for the third quarter of 2016. Compared to both prior periods, the effective tax rate was impacted by the net benefit of changes in Illinois tax rates, which included a $2.8 million deferred tax asset benefit, partly offset by an increase in state income tax expense.

LOAN PORTFOLIO AND ASSET QUALITY

Loan Portfolio Composition
(Dollar amounts in thousands)
 
    As of   September 30, 2017
Percent Change From
    September 30,
 2017
  June 30,
 2017
  September 30,
 2016
  June 30,
 2017
  September 30,
 2016
Commercial and industrial   $ 3,462,612     $ 3,410,748     $ 2,849,399     1.5     21.5  
Agricultural   437,721     433,424     409,571     1.0     6.9  
Commercial real estate:                    
Office, retail, and industrial   1,960,367     1,983,802     1,537,181     (1.2 )   27.5  
Multi-family   711,101     681,032     625,324     4.4     13.7  
Construction   545,666     543,892     401,857     0.3     35.8  
Other commercial real estate   1,391,241     1,383,937     971,030     0.5     43.3  
Total commercial real estate   4,608,375     4,592,663     3,535,392     0.3     30.3  
Total corporate loans   8,508,708     8,436,835     6,794,362     0.9     25.2  
Home equity   847,209     865,656     748,571     (2.1 )   13.2  
1-4 family mortgages   711,607     614,818     396,819     15.7     79.3  
Installment   322,768     314,850     232,030     2.5     39.1  
Total consumer loans   1,881,584     1,795,324     1,377,420     4.8     36.6  
Total loans   $ 10,390,292     $ 10,232,159     $ 8,171,782     1.5     27.1  

Total loans of $10.4 billion increased by 6.1%, annualized, from June 30, 2017, and 27.1% from September 30, 2016. Excluding loans acquired in the Standard transaction, total loans grew by 8.4% from September 30, 2016. Compared to both prior periods, growth in commercial and industrial loans, primarily within our sector-based lending businesses, and multi-family loans contributed to the rise in total loans. Construction loans increased compared to September 30, 2016, driven primarily by select commercial projects for which permanent financing is expected upon their completion. The addition of consumer loans contributed to the increase in total loans compared to both prior periods.

Asset Quality
(Dollar amounts in thousands)
 
    As of   September 30, 2017
Percent Change From
    September 30,
 2017
  June 30,
 2017
  September 30,
 2016
  June 30,
 2017
  September 30,
 2016
Asset quality                    
Non-accrual loans   $ 65,176     $ 79,196     $ 44,289     (17.7 )   47.2  
90 days or more past due loans, still accruing
  interest (1)
  2,839     2,059     4,318     37.9     (34.3 )
Total non-performing loans   68,015     81,255     48,607     (16.3 )   39.9  
Accruing troubled debt restructurings
  ("TDRs")
  1,813     2,029     2,368     (10.6 )   (23.4 )
OREO   19,873     26,493     28,049     (25.0 )   (29.1 )
Total non-performing assets   $ 89,701     $ 109,777     $ 79,024     (18.3 )   13.5  
30-89 days past due loans (1)   $ 28,868     $ 19,081     $ 26,140          
                     
Non-accrual loans to total loans   0.63 %   0.77 %   0.54 %        
Non-performing loans to total loans   0.65 %   0.79 %   0.59 %        
Non-performing assets to total loans plus
  OREO
  0.86 %   1.07 %   0.96 %        
Allowance for credit losses                    
Allowance for loan losses   $ 94,814     $ 92,371     $ 85,308          
Reserve for unfunded commitments   1,000     1,000     1,000          
Total allowance for credit losses   $ 95,814     $ 93,371     $ 86,308          
Allowance for credit losses to total loans (2)   0.92 %   0.91 %   1.06 %        
Allowance for credit losses to loans, excluding
  acquired loans
  1.09 %   1.10 %   1.13 %        
Allowance for credit losses to non-accrual
  loans
  147.01 %   117.90 %   194.87 %        
 
(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 0.86% of total loans and OREO at September 30, 2017, down from 1.07% at June 30, 2017 and 0.96% at September 30, 2016. Total OREO includes $5.9 million and $6.9 million as of September 30, 2017 and June 30, 2017, respectively, that was acquired in the Standard transaction during the first quarter of 2017.

Non-performing assets decreased $20.1 million from June 30, 2017 due primarily to charge-offs on two corporate loan relationships originally identified as non-accrual in the second quarter of 2017, as well as the sale of an OREO property.


Charge-Off Data
 (Dollar amounts in thousands)
 
    Quarters Ended
 
  September 30,
 2017
  % of
Total
  June 30,
 2017
  % of
Total
  September 30,
 2016
  % of
Total
Net loan charge-offs (1):                        
Commercial and industrial   $ 8,237     107.4     $ 1,721     42.7     $ 1,145     23.9  
Agricultural           836     20.7          
Office, retail, and industrial   (1,811 )   (23.6 )   (8 )   (0.2 )   2,151     44.9  
Multi-family   (2 )       (6 )   (0.2 )   (69 )   (1.4 )
Construction   (25 )   (0.3 )   27     0.7     (9 )   (0.2 )
Other commercial real estate   (19 )   (0.2 )   228     5.7     415     8.6  
Consumer   1,286     16.7     1,233     30.6     1,162     24.2  
Total net loan charge-offs   $ 7,666     100.0     $ 4,031     100.0     $ 4,795     100.0  
Total recoveries included above   $ 2,900         $ 828         $ 1,155      
Net loan charge-offs to average
  loans, annualized:
                       
Quarter-to-date   0.30 %       0.16 %       0.24 %    
Year-to-date   0.19 %       0.14 %       0.24 %    
 
(1) Amounts represent charge-offs, net of recoveries.


Net loan charge-offs to average loans, annualized were 0.30%, up from 0.16% and 0.24% for the second quarter of 2017 and the third quarter of 2016, respectively. Included within the third quarter of 2017 were charge-offs related to two corporate credits identified in the second quarter of 2017, partially offset by a large recovery on a single commercial real estate loan.

DEPOSIT PORTFOLIO

Deposit Composition
(Dollar amounts in thousands)
 
    Average for the Quarters Ended   September 30, 2017
Percent Change From
    September 30,
 2017
  June 30,
 2017
  September 30,
 2016
  June 30,
 2017
  September 30,
 2016
Demand deposits   $ 3,574,012     $ 3,538,049     $ 2,806,851     1.0     27.3  
Savings deposits   2,040,609     2,072,343     1,655,604     (1.5 )   23.3  
NOW accounts   2,039,593     2,010,152     1,754,330     1.5     16.3  
Money market accounts   1,928,962     1,942,672     1,680,886     (0.7 )   14.8  
Core deposits   9,583,176     9,563,216     7,897,671     0.2     21.3  
Time deposits   1,559,966     1,538,845     1,248,425     1.4     25.0  
Total deposits   $ 11,143,142     $ 11,102,061     $ 9,146,096     0.4     21.8  

Average core deposits of $9.6 billion for the third quarter of 2017 were consistent with the second quarter of 2017 and increased by 21.3% compared to the third quarter of 2016. The rise in average core deposits compared to the third quarter of 2016 was driven primarily by deposits assumed in the Standard transaction, which contributed $1.6 billion to average core deposits in the third quarter of 2017. 

CAPITAL MANAGEMENT

Capital Ratios
 
    As of
    September 30,
 2017
  June 30,
 2017
  December 31,
 2016
  September 30,
 2016
Company regulatory capital ratios:
Total capital to risk-weighted assets   11.79 %   11.69 %   12.23 %   12.25 %
Tier 1 capital to risk-weighted assets   9.83 %   9.71 %   9.90 %   9.89 %
Common equity Tier 1 ("CET1") to risk-weighted assets   9.42 %   9.30 %   9.39 %   9.38 %
Tier 1 capital to average assets   9.04 %   8.93 %   8.99 %   8.90 %
Company tangible common equity ratios (1)(2):            
Tangible common equity to tangible assets   8.25 %   8.20 %   8.05 %   8.04 %
Tangible common equity, excluding accumulated other comprehensive
  income ("AOCI"), to tangible assets
  8.53 %   8.48 %   8.42 %   8.16 %
Tangible common equity to risk-weighted assets   9.02 %   8.90 %   8.88 %   9.13 %
 
(1) These ratios are not subject to formal Federal Reserve regulatory guidance.
(2) Tangible common equity ("TCE") represents common stockholders' equity less goodwill and identifiable intangible assets. For details of the calculation of these ratios, see the sections titled, "Non-GAAP Financial Information" and "Non-GAAP Reconciliations" presented later in this release.

The Company's regulatory capital ratios improved compared to June 30, 2017 as a result of an increase in retained earnings, offset partly by the impact of loan growth on risk-weighted assets. Total capital and Tier 1 capital to risk-weighted assets ratios decreased compared to December 31, 2016 and September 30, 2016 due to the Standard and Premier acquisitions.

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

Conference Call

A conference call to discuss the Company's results, outlook, and related matters will be held on Wednesday, October 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 ID 10112793 beginning one hour after completion of the live call until 9:00 A.M. (ET) on November 8, 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 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 a 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 is 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 based on the size of each acquisition, as well as from period to period.

In management's view, tangible common equity measures are capital adequacy metrics 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 over $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, treasury management, 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.

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


Accompanying Unaudited Selected Financial Information 

First Midwest Bancorp, Inc.  
Consolidated Statements of Financial Condition (Unaudited)
(Dollar amounts in thousands)
 
   
  As of
  September 30,
2017
  June 30,
2017
  March 31,
2017
  December 31,
2016
  September 30,
2016
Period-End Balance Sheet                                      
Assets                                      
Cash and due from banks $ 174,147     $ 181,171     $ 174,268     $ 155,055     $ 139,538  
Interest-bearing deposits in other banks 252,753     103,181     74,892     107,093     362,153  
Trading securities, at fair value 20,425     19,545     19,130     17,920     18,351  
Securities available-for-sale, at fair value 1,732,984     1,908,248     1,937,124     1,919,450     1,964,030  
Securities held-to-maturity, at amortized cost 14,638     17,353     17,742     22,291     20,337  
FHLB and FRB stock 69,708     66,333     46,306     59,131     53,506  
Loans:                  
Commercial and industrial 3,462,612     3,410,748     3,370,780     2,827,658     2,849,399  
Agricultural 437,721     433,424     422,784     389,496     409,571  
Commercial real estate:                  
Office, retail, and industrial 1,960,367     1,983,802     1,988,979     1,581,967     1,537,181  
Multi-family 711,101     681,032     671,710     614,052     625,324  
Construction 545,666     543,892     568,460     451,540     401,857  
Other commercial real estate 1,391,241     1,383,937     1,357,781     979,528     971,030  
Home equity 847,209     865,656     880,667     747,983     748,571  
1-4 family mortgages 711,607     614,818     540,148     423,922     396,819  
Installment 322,768     314,850     253,061     237,999     232,030  
Total loans 10,390,292     10,232,159     10,054,370     8,254,145     8,171,782  
Allowance for loan losses (94,814 )   (92,371 )   (88,163 )   (86,083 )   (85,308 )
Net loans 10,295,478     10,139,788     9,966,207     8,168,062     8,086,474  
OREO 19,873     26,493     29,140     26,083     28,049  
Premises, furniture, and equipment, net 131,295     135,745     140,653     82,577     82,443  
Investment in bank-owned life insurance ("BOLI") 279,639     278,353     276,960     219,746     219,064  
Goodwill and other intangible assets 750,436     752,413     754,621     366,876     367,961  
Accrued interest receivable and other assets 525,766     340,517     336,428     278,271     236,291  
Total assets $ 14,267,142     $ 13,969,140     $ 13,773,471     $ 11,422,555     $ 11,578,197  
Liabilities and Stockholders' Equity                  
Noninterest-bearing deposits $ 3,580,922     $ 3,525,905     $ 3,492,987     $ 2,766,748     $ 2,766,265  
Interest-bearing deposits 7,627,575     7,473,815     7,463,554     6,061,855     6,339,839  
Total deposits 11,208,497     10,999,720     10,956,541     8,828,603     9,106,104  
Borrowed funds 700,536     639,333     547,923     879,008     639,539  
Senior and subordinated debt 195,028     194,886     194,745     194,603     309,444  
Accrued interest payable and other liabilities 297,951     298,358     269,529     263,261     253,846  
Stockholders' equity 1,865,130     1,836,843     1,804,733     1,257,080     1,269,264  
Total liabilities and stockholders' equity $ 14,267,142     $ 13,969,140     $ 13,773,471     $ 11,422,555     $ 11,578,197  
Stockholders' equity, excluding accumulated other
  comprehensive income ("AOCI")
$ 1,903,166     $ 1,873,410     $ 1,844,997     $ 1,297,990     $ 1,282,666  
Stockholders' equity, common 1,865,130     1,836,843     1,804,733     1,257,080     1,269,264  


First Midwest Bancorp, Inc.
Condensed Consolidated Statements of Income (Unaudited)
(Dollar amounts in thousands)
 
  Quarters Ended      Nine Months Ended
  September 30,
2017
  June 30,
2017
  March 31,
2017
  December 31,
2016
   September 30,
2016
    September 30,
2017
  September 30,
2016
Income Statement                                                        
Interest income $ 129,916     $ 126,516     $ 123,699     $ 96,328     $ 97,906       $ 380,131     $ 282,004  
Interest expense 10,023     8,933     8,502     8,304     6,934       27,458     20,337  
Net interest income 119,893     117,583     115,197     88,024     90,972       352,673     261,667  
Provision for loan losses 10,109     8,239     4,918     5,307     9,998       23,266     25,676  
Net interest income after
  provision for loan losses
109,784     109,344     110,279     82,717     80,974       329,407     235,991  
Noninterest Income                            
Service charges on deposit
  accounts
12,561     12,153     11,365     10,315     10,708       36,079     30,350  
Wealth management fees 10,169     10,525     9,660     8,375     8,495       30,354     24,696  
Card-based fees 5,992     8,832     8,116     7,462     7,332       22,940     21,642  
Merchant servicing fees 2,237     3,197     3,135     3,016     3,319       8,569     9,517  
Mortgage banking income 2,246     1,645     1,888     3,537     3,394       5,779     6,625  
Capital market products
  income
2,592     2,217     1,376     1,827     2,916       6,185     8,197  
Other service charges,
  commissions, and fees
2,508     2,659     2,307     2,575     2,302       7,474     6,967  
Total fee-based revenues 38,305     41,228     37,847     37,107     38,466       117,380     107,994  
Net securities gains 3,197     284         323     187       3,481     1,097  
Net gain on sale-leaseback
  transaction
                5,509           5,509  
Other income 1,846     3,433     2,104     2,281     1,691       7,383     5,001  
Total noninterest income 43,348     44,945     39,951     39,711     45,853       128,244     119,601  
Noninterest Expense                            
Salaries and employee
  benefits:
                           
Salaries and wages 45,219     44,194     44,890     39,257     37,872       134,303     112,084  
Retirement and other
  employee benefits
10,419     10,381     10,882     8,160     8,500       31,682     25,149  
Total salaries and
  employee benefits
55,638     54,575     55,772     47,417     46,372       165,985     137,233  
Net occupancy and
  equipment expense
12,115     12,485     12,325     10,774     10,755       36,925     30,380  
Professional services 8,498     9,112     8,463     7,138     6,772       26,073     17,984  
Technology and related costs 4,505     4,485     4,433     3,514     3,881       13,423     11,251  
Merchant card expense 1,737     2,632     2,585     2,603     2,857       6,954     8,179  
Advertising and promotions 1,852     1,693     1,066     2,330     1,941       4,611     5,457  
Cardholder expenses 1,962     1,682     1,764     1,426     1,515       5,408     4,386  
Net OREO expense 657     1,631     1,700     925     313       3,988     2,099  
Other expenses 9,842     10,282     9,969     8,050     7,310       30,093     23,052  
Acquisition and integration
  related expenses
384     1,174     18,565     7,542     1,172       20,123     6,810  
Lease cancellation fee             950                
Total noninterest expense 97,190     99,751     116,642     92,669     82,888       313,583     246,831  
Income before income tax
  expense
55,942     54,538     33,588     29,759     43,939       144,068     108,761  
Income tax expense 17,707     19,588     10,733     9,041     15,537       48,028     37,130  
Net income $ 38,235     $ 34,950     $ 22,855     $ 20,718     $ 28,402       $ 96,040     $ 71,631  
Net income applicable to
  common shares
$ 37,895     $ 34,614     $ 22,621     $ 20,501     $ 28,078       $ 95,130     $ 70,805  
Net income applicable to
  common shares, excluding
  certain significant
  transactions (1)
$ 38,125     $ 35,318     $ 33,760     $ 25,596     $ 25,476       $ 107,204     $ 71,586  
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     Nine Months Ended
  September 30, 2017   June 30, 2017   March 31, 2017   December 31, 2016   September 30, 2016     September 30, 2017   September 30, 2016
Earnings Per Share                                                        
Basic earnings per common
  share ("EPS")
$ 0.37     $ 0.34     $ 0.23     $ 0.25     $ 0.35       $ 0.94     $ 0.89  
Diluted EPS $ 0.37     $ 0.34     $ 0.23     $ 0.25     $ 0.35       $ 0.94     $ 0.89  
Diluted EPS, excluding certain
  significant transactions (1) (6)
$ 0.37     $ 0.35     $ 0.34     $ 0.32     $ 0.32       $ 1.06     $ 0.90  
Common Stock and Related Per Common Share Data          
Book value $ 18.16     $ 17.88     $ 17.56     $ 15.46     $ 15.61       $ 18.16     $ 15.61  
Tangible book value $ 10.85     $ 10.55     $ 10.22     $ 10.95     $ 11.08       $ 10.85     $ 11.08  
Dividends declared per share $ 0.10     $ 0.10     $ 0.09     $ 0.09     $ 0.09       $ 0.29     $ 0.27  
Closing price at period end $ 23.42     $ 23.31     $ 23.68     $ 25.23     $ 19.36       $ 23.42     $ 19.36  
Closing price to book value 1.3     1.3     1.3     1.6     1.2       1.3     1.2  
Period end shares outstanding 102,722     102,741     102,757     81,325     81,324       102,722     81,324  
Period end treasury shares 9,626     9,604     9,586     9,959     9,957       9,626     9,957  
Common dividends $ 10,411     $ 10,256     $ 9,126     $ 7,315     $ 7,408       $ 29,793     $ 21,876  
Key Ratios/Data                            
Return on average common
  equity (2)
8.10 %   7.58 %   5.20 %   6.42 %   8.85 %     7.00 %   7.72 %
Return on average tangible
  common equity (2)
14.03 %   13.37 %   9.53 %   9.35 %   12.85 %     12.40 %   11.27 %
Return on average tangible
  common equity, excluding
  certain significant
  transactions (1) (2) (6)
14.11 %   13.64 %   13.99 %   11.60 %   11.69 %     13.91 %   11.39 %
Return on average assets (2) 1.07 %   1.00 %   0.68 %   0.72 %   1.00 %     0.92 %   0.89 %
Return on average assets,
  excluding certain significant
  transactions (1) (2) (6)
1.08 %   1.02 %   1.01 %   0.90 %   0.91 %     1.04 %   0.90 %
Loans to deposits 92.70 %   93.02 %   91.77 %   93.49 %   89.74 %     92.70 %   89.74 %
Efficiency ratio (1) 58.97 %   58.67 %   60.98 %   63.98 %   60.83 %     59.52 %   62.12 %
Net interest margin (3) 3.86 %   3.88 %   3.89 %   3.44 %   3.60 %     3.88 %   3.66 %
Yield on average interest-earning
  assets (3)
4.18 %   4.17 %   4.17 %   3.76 %   3.87 %     4.17 %   3.94 %
Cost of funds (4) 0.33 %   0.30 %   0.30 %   0.33 %   0.28 %     0.31 %   0.29 %
Net noninterest expense to
  average assets
1.60 %   1.58 %   2.27 %   1.86 %   1.50 %     1.81 %   1.66 %
Effective income tax rate 31.65 %   35.92 %   31.95 %   30.38 %   35.36 %     33.34 %   34.14 %
Capital Ratios                            
Total capital to risk-weighted
  assets (1)
11.79 %   11.69 %   11.48 %   12.23 %   12.25 %     11.79 %   12.25 %
Tier 1 capital to risk-weighted
  assets (1)
9.83 %   9.71 %   9.53 %   9.90 %   9.89 %     9.83 %   9.89 %
CET1 to risk-weighted assets (1) 9.42 %   9.30 %   9.11 %   9.39 %   9.38 %     9.42 %   9.38 %
Tier 1 capital to average assets (1) 9.04 %   8.93 %   8.89 %   8.99 %   8.90 %     9.04 %   8.90 %
Tangible common equity to
  tangible assets (1)
8.25 %   8.20 %   8.07 %   8.05 %   8.04 %     8.25 %   8.04 %
Tangible common equity,
  excluding AOCI, to tangible
  assets (1)
8.53 %   8.48 %   8.38 %   8.42 %   8.16 %     8.53 %   8.16 %
Tangible common equity to
  risk-weighted assets (1)
9.02 %   8.90 %   8.68 %   8.88 %   9.13 %     9.02 %   9.13 %
Note: Selected Financial Information footnotes are located at the end of this section.          


First Midwest Bancorp, Inc.
Selected Financial Information (Unaudited)
(Amounts in thousands, except per share data)
 
  As of or for the
  Quarters Ended     Nine Months Ended
  September 30,
2017
  June 30,
2017
  March 31,
2017
  December 31,
2016
  September 30,
2016
    September 30,
2017
  September 30,
2016
Asset Quality Performance Data                                                        
Non-performing assets                                                        
Commercial and industrial $ 41,504     $ 51,400     $ 21,514     $ 29,938     $ 13,823       $ 41,504     $ 13,823  
Agricultural 380     387     1,283     181     184       380     184  
Commercial real estate:                            
Office, retail, and industrial 12,221     15,031     19,505     17,277     17,670       12,221     17,670  
Multi-family 153     158     163     311     316       153     316  
Construction 146     197     198     286     287       146     287  
Other commercial real estate 2,239     3,736     3,858     2,892     3,361       2,239     3,361  
Consumer 8,533     8,287     7,773     8,404     8,648       8,533     8,648  
Total non-accrual loans 65,176     79,196     54,294     59,289     44,289       65,176     44,289  
90 days or more past due loans,
  still accruing interest
2,839     2,059     2,633     5,009     4,318       2,839     4,318  
Total non-performing loans 68,015     81,255     56,927     64,298     48,607       68,015     48,607  
Accruing TDRs 1,813     2,029     2,112     2,291     2,368       1,813     2,368  
OREO 19,873     26,493     29,140     26,083     28,049       19,873     28,049  
Total non-performing assets $ 89,701     $ 109,777     $ 88,179     $ 92,672     $ 79,024       $ 89,701     $ 79,024  
30-89 days past due loans $ 28,868     $ 19,081     $ 23,641     $ 21,043     $ 26,140       $ 28,868     $ 26,140  
Allowance for credit losses                            
Allowance for loan losses $ 94,814     $ 92,371     $ 88,163     $ 86,083     $ 85,308       $ 94,814     $ 85,308  
Reserve for unfunded 
  commitments
1,000     1,000     1,000     1,000     1,000       1,000     1,000  
Total allowance for credit
  losses
$ 95,814     $ 93,371     $ 89,163     $ 87,083     $ 86,308       $ 95,814     $ 86,308  
Provision for loan losses $ 10,109     $ 8,239     $ 4,918     $ 5,307     $ 9,998       $ 23,266     $ 25,676  
Net charge-offs by category                            
Commercial and industrial $ 8,237     $ 1,721     $ 1,894     $ 3,540     $ 1,145       $ 11,852     $ 3,991  
Agricultural     836     514               1,350      
Commercial real estate:                            
Office, retail, and industrial (1,811 )   (8 )   (848 )   165     2,151       (2,667 )   4,205  
Multi-family (2 )   (6 )   (28 )   17     (69 )     (36 )   193  
Construction (25 )   27     (222 )   (12 )   (9 )     (220 )   90  
Other commercial real estate (19 )   228     307     (111 )   415       516     2,519  
Consumer 1,286     1,233     1,221     933     1,162       3,740     3,000  
Total net charge-offs $ 7,666     $ 4,031     $ 2,838     $ 4,532     $ 4,795       $ 14,535     $ 13,998  
Total recoveries included above $ 2,900     $ 828     $ 3,440     $ 1,489     $ 1,155       $ 7,168     $ 3,274  
Note: Selected Financial Information footnotes are located at the end of this section.          


First Midwest Bancorp, Inc.
Selected Financial Information (Unaudited)
                     
    As of or for the
    Quarters Ended
    September 30,   June 30,   March 31,   December 31,   September 30,
    2017   2017   2017   2016   2016
Asset Quality ratios                    
Non-accrual loans to total loans   0.63 %   0.77 %   0.54 %   0.72 %   0.54 %
Non-performing loans to total loans   0.65 %   0.79 %   0.57 %   0.78 %   0.59 %
Non-performing assets to total loans plus OREO   0.86 %   1.07 %   0.87 %   1.12 %   0.96 %
Non-performing assets to tangible common equity plus allowance
  for credit losses
  7.41 %   9.32 %   7.74 %   9.48 %   8.00 %
Non-accrual loans to total assets   0.46 %   0.57 %   0.39 %   0.52 %   0.38 %
Allowance for credit losses and net charge-off ratios
Allowance for credit losses to total loans (5)   0.92 %   0.91 %   0.89 %   1.06 %   1.06 %
Allowance for credit losses to loans, excluding acquired loans   1.09 %   1.10 %   1.11 %   1.11 %   1.13 %
Allowance for credit losses to non-accrual loans   147.01 %   117.90 %   164.22 %   146.88 %   194.87 %
Allowance for credit losses to non-performing loans   140.87 %   114.91 %   156.63 %   135.44 %   177.56 %
Net charge-offs to average loans (2)   0.30 %   0.16 %   0.12 %   0.22 %   0.24 %
Footnotes to Selected Financial Information
(1)  See the Non-GAAP Reconciliations section for the detailed calculation.
(2)  Annualized based on the actual number of days for each period presented.
(3)  Presented on a tax-equivalent basis, assuming a federal income tax rate of 35%.
(4)  Cost of funds expresses total interest expense as a percentage of average total funding sources.
(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 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     Nine Months Ended
  September 30,
2017
  June 30,
2017
  March 31,
2017
  December 31,
2016
  September 30,
2016
    September 30,
2017
  September 30,
2016
Earnings Per Share                                                        
Net income $ 38,235     $ 34,950     $ 22,855     $ 20,718     $ 28,402       $ 96,040     $ 71,631  
Net income applicable to non-
  vested restricted shares
(340 )   (336 )   (234 )   (217 )   (324 )     (910 )   (826 )
Net income applicable to
  common shares
37,895     34,614     22,621     20,501     28,078       95,130     70,805  
Acquisition and integration
  related expenses
384     1,174     18,565     7,542     1,172       20,123     6,810  
Tax effect of acquisition and
  integration related expenses
(154 )   (470 )   (7,426 )   (3,017 )   (469 )     (8,049 )   (2,724 )
Lease cancellation fee             950                
Tax effect of lease cancellation
  fee
            (380 )              
Net gain on sale-leaseback
  transaction
                (5,509 )         (5,509 )
Tax effect of net gain on sale-
  leaseback transaction
                2,204           2,204  
Net income applicable to
  common shares, excluding
  certain significant
  transactions (1)
$ 38,125     $ 35,318     $ 33,760     $ 25,596     $ 25,476       $ 107,204     $ 71,586  


Weighted-average common shares outstanding:                          
Weighted-average common
  shares outstanding (basic)
101,752     101,743     100,411     80,415     80,396       101,307     79,589  
Dilutive effect of common
  stock equivalents
20     20     21     15     13       20     13  
Weighted-average diluted
  common shares
  outstanding
101,772     101,763     100,432     80,430     80,409       101,327     79,602  
Basic EPS $ 0.37     $ 0.34     $ 0.23     $ 0.25     $ 0.35       $ 0.94     $ 0.89  
Diluted EPS $ 0.37     $ 0.34     $ 0.23     $ 0.25     $ 0.35       $ 0.94     $ 0.89  
Diluted EPS, excluding certain
  significant transactions (1)
$ 0.37     $ 0.35     $ 0.34     $ 0.32     $ 0.32       $ 1.06     $ 0.90  
Anti-dilutive shares not included
  in the computation of diluted
  EPS
190     195     343     445     454       242     510  
Efficiency Ratio Calculation                            
Noninterest expense $ 97,190     $ 99,751     $ 116,642     $ 92,669     $ 82,888       $ 313,583     $ 246,831  
Less:                            
Net OREO expense (657 )   (1,631 )   (1,700 )   (925 )   (313 )     (3,988 )   (2,099 )
Acquisition and integration
  related expenses
(384 )   (1,174 )   (18,565 )   (7,542 )   (1,172 )     (20,123 )   (6,810 )
Lease cancellation fee             (950 )              
Total $ 96,149     $ 96,946     $ 96,377     $ 83,252     $ 81,403       $ 289,472     $ 237,922  
Tax-equivalent net interest
  income (2)
$ 121,935     $ 119,625     $ 117,251     $ 90,088     $ 93,051       $ 358,811     $ 268,246  
Fee-based revenues 38,305     41,228     37,847     37,107     38,466       117,380     107,994  
Add:                            
Other income, excluding
  BOLI income
422     2,022     844     1,310     762       3,288     2,325  
BOLI 1,424     1,411     1,260     971     929       4,095     2,676  
Tax-equivalent adjustment
  of BOLI
949     941     840     647     619       2,730     1,784  
Total $ 163,035     $ 165,227     $ 158,042     $ 130,123     $ 133,827       $ 486,304     $ 383,025  
Efficiency ratio 58.97 %   58.67 %   60.98 %   63.98 %   60.83 %     59.52 %   62.12 %
                             
Note: Non-GAAP Reconciliations footnotes are located at the end of this section.          


First Midwest Bancorp, Inc.
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
 
  As of or for the
  Quarters Ended     Nine Months Ended
  September 30,
2017
  June 30,
2017
  March 31,
2017
  December 31,
2016
  September 30,
2016
    September 30,
2017
  September 30,
2016
Risk-Based Capital Data                                                        
Common stock $ 1,123     $ 1,123     $ 1,123     $ 913     $ 913       $ 1,123     $ 913  
Additional paid-in capital 1,029,002     1,025,607     1,022,417     498,937     496,918       1,029,002     496,918  
Retained earnings 1,082,921     1,056,072     1,030,403     1,016,674     1,003,271       1,082,921     1,003,271  
Treasury stock, at cost (209,880 )   (209,392 )   (208,946 )   (218,534 )   (218,436 )     (209,880 )   (218,436 )
Goodwill and other intangible
  assets, net of deferred tax
  liabilities
(738,645 )   (740,236 )   (742,012 )   (356,477 )   (357,079 )     (738,645 )   (357,079 )
Disallowed deferred tax assets (275 )   (472 )   (1,150 )   (198 )   (383 )     (275 )   (383 )
CET1 capital 1,164,246     1,132,702     1,101,835     941,315     925,204       1,164,246     925,204  
Trust-preferred securities 50,690     50,690     50,690     50,690     50,690       50,690     50,690  
Other disallowed deferred tax
  assets
(69 )   (118 )   (287 )   (132 )   (255 )     (69 )   (255 )
Tier 1 capital 1,214,867     1,183,274     1,152,238     991,873     975,639       1,214,867     975,639  
Tier 2 capital 242,652     240,121     235,825     233,656     232,792       242,652     232,792  
Total capital $ 1,457,519     $ 1,423,395     $ 1,388,063     $ 1,225,529     $ 1,208,431       $ 1,457,519     $ 1,208,431  
Risk-weighted assets $ 12,362,833     $ 12,180,416     $ 12,095,592     $ 10,019,434     $ 9,867,406       $ 12,362,833     $ 9,867,406  
Adjusted average assets $ 13,439,744     $ 13,245,499     $ 12,965,450     $ 11,036,835     $ 10,959,119       $ 13,439,744     $ 10,959,119  
Total capital to risk-weighted
  assets
11.79 %   11.69 %   11.48 %   12.23 %   12.25 %     11.79 %   12.25 %
Tier 1 capital to risk-weighted
  assets
9.83 %   9.71 %   9.53 %   9.90 %   9.89 %     9.83 %   9.89 %
CET1 to risk-weighted assets 9.42 %   9.30 %   9.11 %   9.39 %   9.38 %     9.42 %   9.38 %
Tier 1 capital to average assets 9.04 %   8.93 %   8.89 %   8.99 %   8.90 %     9.04 %   8.90 %
Tangible Common Equity                            
Stockholders' equity $ 1,865,130     $ 1,836,843     $ 1,804,733     $ 1,257,080     $ 1,269,264       $ 1,865,130     $ 1,269,264  
Less: goodwill and other
  intangible assets
(750,436 )   (752,413 )   (754,621 )   (366,876 )   (367,961 )     (750,436 )   (367,961 )
Tangible common equity 1,114,694     1,084,430     1,050,112     890,204     901,303       1,114,694     901,303  
Less: AOCI 38,036     36,567     40,264     40,910     13,402       38,036     13,402  
Tangible common equity,
  excluding AOCI
$ 1,152,730     $ 1,120,997     $ 1,090,376     $ 931,114     $ 914,705       $ 1,152,730     $ 914,705  
Total assets $ 14,267,142     $ 13,969,140     $ 13,773,471     $ 11,422,555     $ 11,578,197       $ 14,267,142     $ 11,578,197  
Less: goodwill and other
  intangible assets
(750,436 )   (752,413 )   (754,621 )   (366,876 )   (367,961 )     (750,436 )   (367,961 )
Tangible assets $ 13,516,706     $ 13,216,727     $ 13,018,850     $ 11,055,679     $ 11,210,236       $ 13,516,706     $ 11,210,236  
Tangible common equity to
  tangible assets
8.25 %   8.20 %   8.07 %   8.05 %   8.04 %     8.25 %   8.04 %
Tangible common equity,
  excluding AOCI, to tangible
  assets
8.53 %   8.48 %   8.38 %   8.42 %   8.16 %     8.53 %   8.16 %
Tangible common equity to risk-
  weighted assets
9.02
%   8.90 %   8.68 %   8.88 %   9.13 %     9.02 %   9.13 %
                             
Note: Non-GAAP Reconciliations footnotes are located at the end of this section.          


First Midwest Bancorp, Inc.
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
 
  As of or for the
  Quarters Ended     Nine Months Ended
  September 30,
2017
  June 30,
2017
  March 31,
2017
  December 31,
2016
  September 30,
2016
    September 30,
2017
  September 30,
2016
Return on Average Common and Tangible Common Equity
Net income applicable to
  common shares
$ 37,895     $ 34,614     $ 22,621     $ 20,501     $ 28,078       $ 95,130     $ 70,805  
Intangibles amortization 1,931     2,163     1,965     1,207     1,245       6,059     3,475  
Tax effect of intangibles
  amortization
(772 )   (865 )   (786 )   (483 )   (498 )     (2,424 )   (1,390 )
Net income applicable to
  common shares, excluding
  intangibles amortization
39,054     35,912     23,800     21,225     28,825       98,765     72,890  
Acquisition and integration
  related expenses
384     1,174     18,565     7,542     1,172       20,123     6,810  
Tax effect of acquisition and
  integration related expenses
(154 )   (470 )   (7,426 )   (3,017 )   (469 )     (8,049 )   (2,724 )
Lease cancellation fee             950                
Tax effect of lease cancellation
  fee
            (380 )              
Net gain on sale-leaseback
  transaction
                (5,509 )         (5,509 )
Tax effect of net gain on sale-
  leaseback transaction
                2,204           2,204  
Net income applicable to
  common shares, excluding
  intangibles amortization
  and certain significant
  transactions (1)
$ 39,284     $ 36,616     $ 34,939     $ 26,320     $ 26,223       $ 110,839     $ 73,671  
Average stockholders' equity $ 1,855,647     $ 1,830,536     $ 1,763,538     $ 1,269,993     $ 1,261,702       1,816,911     $ 1,225,396  
Less: average intangible assets (751,366 )   (753,521 )   (750,589 )   (367,328 )   (369,281 )     (751,828 )   (361,697 )
Average tangible common
  equity
$ 1,104,281     $ 1,077,015     $ 1,012,949     $ 902,665     $ 892,421       $ 1,065,083     $ 863,699  
Return on average common
  equity (3)
8.10 %   7.58 %   5.20 %   6.42 %   8.85 %     7.00 %   7.72 %
Return on average tangible
  common equity (3)
14.03 %   13.37 %   9.53 %   9.35 %   12.85 %     12.40 %   11.27 %
Return on average tangible
  common equity, excluding
  certain significant
  transactions (1) (3)
14.11 %   13.64 %   13.99 %   11.60 %   11.69 %     13.91 %   11.39 %
Return on Average Assets                      
Net income $ 38,235     $ 34,950     $ 22,855     $ 20,718     $ 28,402       $ 96,040     $ 71,631  
Acquisition and integration
  related expenses
384     1,174     18,565     7,542     1,172       20,123     6,810  
Tax effect of acquisition and
  integration related expenses
(154 )   (470 )   (7,426 )   (3,017 )   (469 )     (8,049 )   (2,724 )
Lease cancellation fee             950                
Tax effect of lease cancellation
  fee
            (380 )              
Net gain on sale-leaseback
  transaction
                (5,509 )         (5,509 )
Tax effect of net gain on sale-
  leaseback transaction
                2,204           2,204  
Net income, excluding
  certain significant
  transactions (1)
$ 38,465     $ 35,654     $ 33,994     $ 25,813     $ 25,800       $ 108,114     $ 72,412  
Average assets $ 14,155,766     $ 13,960,843     $ 13,673,125     $ 11,380,108     $ 11,322,325       $ 13,931,679     $ 10,784,532  
Return on average assets (3) 1.07 %   1.00 %   0.68 %   0.72 %   1.00 %     0.92 %   0.89 %
Return on average assets,
  excluding certain significant 
  transactions (1) (3)
1.08 %   1.02 %   1.01 %   0.90 %   0.91 %     1.04 %   0.90 %
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, assuming a federal income tax rate of 35%.
(3)  Annualized based on the actual number of days for each period presented.

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