09:22:34 EDT Fri 29 Mar 2024
Enter Symbol
or Name
USA
CA



First Midwest Bancorp, Inc. Announces 2018 Third Quarter Results

2018-10-23 17:30 ET - News Release

CHICAGO, Oct. 23, 2018 (GLOBE NEWSWIRE) -- First Midwest Bancorp, Inc. (the "Company" or "First Midwest") (NASDAQ NGS: FMBI), the holding company of First Midwest Bank (the "Bank"), today reported results of operations and financial condition for the third quarter of 2018. Net income for the third quarter of 2018 was $53.4 million, or $0.52 per share, compared to $29.6 million, or $0.29 per share, for the second quarter of 2018, and $38.2 million, or $0.37 per share, for the third quarter of 2017.

Reported results for the third quarter of 2018 were impacted by certain income tax benefits aligned with federal income tax reform legislation ("tax reform"). In addition, both the third and second quarters of 2018 were impacted by implementation costs related to the Company's Delivering Excellence initiative ("Delivering Excellence") and reported results for the third quarter of 2017 were impacted by the revaluation of deferred tax assets ("DTAs"), certain actions related to the securities portfolio, and acquisition and integration related expenses. For additional detail on these adjustments, see the "Non-GAAP Financial Information" section presented later in this release.

Earnings per share ("EPS"), adjusted(1) was $0.46 for the third quarter of 2018, compared to $0.40 for the second quarter of 2018 and $0.33 for the third quarter of 2017.

SELECT THIRD QUARTER HIGHLIGHTS

  • Generated EPS of $0.52 compared to $0.29 and $0.37 for the second quarter of 2018 and third quarter of 2017, respectively, includes $0.08 due to certain income tax benefits and $0.02 due to Delivering Excellence implementation costs.
      ° Increased EPS, adjusted(1) to $0.46, up 15% from the second quarter of 2018 and 39% from the third quarter of 2017.
      ° Produced returns on average tangible common equity, adjusted(1) of 16.5% for the third quarter of 2018, up 170 basis points and 410 basis points from the second quarter of 2018 and third quarter of 2017, respectively.
  • Grew loans to $11 billion, up 6%, annualized, from June 30, 2018 and 6% from September 30, 2017.
  • Increased total average deposits to $11.6 billion, up 2% from the second quarter of 2018 and 4% from the third quarter of 2017.
  • Expanded net interest income and margin to $132 million and 3.92%, respectively, up 4%and 1 basis point from the second quarter of 2018 and 10% and 6 basis points from the third quarter of 2017.
  • Improved efficiency ratio(1) to 56%, down from 60% in the second quarter of 2018 and 59% in the third quarter of 2017.
  • Reduced net charge-offs to average loans, annualized, to 29 basis points, down from 36 basis points for the second quarter of 2018 and 30 basis points for the third quarter of 2017.
  • Increased common equity Tier 1 capital to 9.93%, up 25 basis points from the second quarter of 2018 and 51 basis points from the third quarter of 2017.
  • Completed the acquisition of Northern States Financial Corporation on October 12, 2018, subsequent to the third quarter of 2018, adding approximately $550 million in total assets and $465 million of deposits, of which 75% were core deposits.

"Operating performance for the quarter was strong, reflecting successful execution on multiple business fronts," said Michael L. Scudder, Chairman of the Board, President, and Chief Executive Officer of the Company. "Our solid commercial loan production, the benefits of earning asset growth and higher interest rates on margins, controlled spending and tax reform resulted in comparative improvement in our underlying operating performance of 15% and 39% compared to the prior quarter and a year ago, respectively. Additionally, performance for the quarter was aided by a net $0.06 per share, largely due to the recognition of certain income tax benefits modestly offset by costs attendant to our Delivering Excellence initiative."

Mr. Scudder continued, "As we look ahead, our focus remains centered on helping our clients achieve financial success, meeting those needs with the superior service which they have come to expect and which sets us apart. Continued execution on our Delivering Excellence initiative, the strength of our core deposit foundation and business momentum leave us well positioned to benefit from a growing economy and evolving rate environment."

DELIVERING EXCELLENCE INITIATIVE

During the second and third quarters of 2018, the Company initiated certain actions in connection with its previously announced Delivering Excellence initiative. This initiative further demonstrates the Company's ongoing commitment to providing service excellence to its clients, as well as maximizing both the efficiency and scalability of its operating platform. Components of Delivering Excellence include improved delivery of services to clients through streamlined processes, the consolidation or closing of 19 locations, organizational realignments, and several revenue growth opportunities.

The Company expects to incur total pre-tax implementation costs associated with Delivering Excellence of $25 million, the majority of which will be recognized in 2018. The implementation of this initiative in the second and third quarters of 2018 resulted in pre-tax implementation costs of $15 million and $2 million, respectively, associated with property valuation adjustments on locations identified for closure, employee severance, and general restructuring and advisory services.

ACQUISITION

Northern States Financial Corporation

On October 12, 2018, the Company completed its acquisition of Northern States Financial Corporation ("Northern States"), the holding company for NorStates Bank, based in Waukegan, Illinois. At closing, the Company acquired approximately $550 million in total assets, $465 million in deposits, and $305 million in loans. The merger consideration totaled approximately $83 million and consisted of 3.3 million shares of Company stock. The Company expects that NorStates Bank will be merged with and into First Midwest Bank, with associated systems conversions completed, in early December 2018.

(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, 2018  June 30, 2018  September 30, 2017
 Average
Balance
 Interest Yield/
Rate
(%)
  Average
Balance
 Interest Yield/
Rate
(%)
  Average
Balance
 Interest Yield/
Rate
(%)
Assets                   
Other interest-earning assets $162,646  $631  1.54   $147,996  $519  1.41   $237,727  $793  1.32 
Securities(1) 2,245,784  14,533  2.59   2,165,091  13,322  2.46   1,961,382  11,586  2.36 
Federal Home Loan Bank ("FHLB") and
  Federal Reserve Bank ("FRB") stock 
83,273  734  3.53   80,038  864  4.32   67,605  312  1.85 
Loans(1) 10,980,916  134,768  4.87   10,788,285  128,422  4.77   10,277,420  119,267  4.60 
Total interest-earning assets(1) 13,472,619  150,666  4.44   13,181,410  143,127  4.35   12,544,134  131,958  4.18 
Cash and due from banks 196,382       197,025       194,149     
Allowance for loan losses (100,717)      (99,469)      (99,249)    
Other assets 1,326,386       1,326,749       1,516,732     
Total assets $14,894,670       $14,605,715       $14,155,766     
Liabilities and Stockholders' Equity                   
Savings deposits $2,003,928  364  0.07   $2,060,066  373  0.07   $2,040,609  391  0.08 
NOW accounts 2,164,018  2,151  0.39   2,065,530  1,472  0.29   2,039,593  809  0.16 
Money market deposits 1,772,821  1,522  0.34   1,759,313  1,073  0.24   1,928,962  700  0.14 
Time deposits 1,993,361  6,389  1.27   1,871,666  5,114  1.10   1,559,966  2,469  0.63 
Borrowed funds 980,421  3,927  1.59   913,902  3,513  1.54   648,275  2,544  1.56 
Senior and subordinated debt 195,526  3,152  6.40   195,385  3,140  6.45   194,961  3,110  6.33 
Total interest-bearing liabilities9,110,075  17,505  0.76   8,865,862  14,685  0.66   8,412,366  10,023  0.47 
Demand deposits 3,624,520       3,621,645       3,574,012     
Total funding sources 12,734,595    0.55   12,487,507    0.47   11,986,378    0.33 
Other liabilities 250,745       227,481       313,741     
Stockholders' equity - common 1,909,330       1,890,727       1,855,647     
Total liabilities and
  stockholders' equity 
$14,894,670       $14,605,715       $14,155,766     
Tax-equivalent net interest
  income/margin(1) 
  133,161  3.92     128,442  3.91     121,935  3.86 
Tax-equivalent adjustment   (1,134)      (1,039)      (2,042)  
Net interest income (GAAP)(1)   $132,027       $127,403       $119,893   
Impact of acquired loan accretion(1)   $4,565  0.13     $4,445  0.14     $7,581  0.24 
Tax-equivalent net interest income/
  margin, adjusted(1) 
  $128,596  3.79     $123,997  3.77     $114,354  3.62 

(1)  Interest income and yields on tax-exempt securities and loans are presented on a tax-equivalent basis, assuming the applicable federal income tax rate for each period presented. As a result, interest income and yields on tax-exempt securities and loans subsequent to December 31, 2017 are presented using the current federal income tax rate of 21% and prior periods are presented using the federal income tax rate applicable at that time 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 for the third quarter of 2018 increased by 3.6% from the second quarter of 2018 and 10.1% compared to the third quarter of 2017. The rise in net interest income compared to both prior periods resulted primarily from the impact of higher interest rates and growth in loans and securities, partially offset by higher cost of funds. In addition, net interest income for the third quarter of 2018 benefited from an increase in the number of days compared to the second quarter of 2018. Compared to the third quarter of 2017, net interest income was impacted by lower acquired loan accretion.

Acquired loan accretion contributed $4.6 million, $4.4 million, and $7.6 million to net interest income for the third quarter of 2018, the second quarter of 2018, and the third quarter of 2017, respectively.

Tax-equivalent net interest margin for the current quarter was 3.92%, increasing 1 basis point from the second quarter of 2018 and 6 basis points from the third quarter of 2017. Compared to both prior periods, the benefit of higher interest rates and growth in interest-earning assets more than offset the rise in funding costs. In addition, compared to the third quarter of 2017, tax-equivalent net interest margin was negatively impacted by an 11 basis point decrease in acquired loan accretion and a 3 basis point reduction in the tax-equivalent adjustment as a result of lower federal income tax rates.

For the third quarter of 2018, total average interest-earning assets rose by $291.2 million from the second quarter of 2018 and $928.5 million from the third quarter of 2017. The increase compared to both prior periods resulted primarily from loan growth and security purchases.

Total average funding sources for the third quarter of 2018 increased by $247.1 million from the second quarter of 2018 and $748.2 million from the third quarter of 2017. The increase compared to both prior periods resulted primarily from time deposits and FHLB advances.

 

Noninterest Income Analysis
(Dollar amounts in thousands)

  Quarters Ended September 30, 2018
Percent Change From
  September 30,
 2018
 June 30,
 2018
 September 30,
 2017
 June 30,
 2018
 September 30,
 2017
Service charges on deposit accounts  $12,378  $12,058  $12,561  2.7  (1.5)
Wealth management fees  10,622  10,981  10,169  (3.3) 4.5 
Card-based fees, net(1):          
Card-based fees  5,975  6,270  5,992  (4.7) (0.3)
Cardholder expenses  (1,852) (1,876)   (1.3) N/M
Card-based fees, net  4,123  4,394  5,992  (6.2) (31.2)
Capital market products income  1,936  2,819  2,592  (31.3) (25.3)
Mortgage banking income  1,657  1,736  2,246  (4.6) (26.2)
Merchant servicing fees, net(1):          
Merchant servicing fees  2,702  2,553  2,237  5.8  20.8 
Merchant card expenses  (2,315) (2,170)   6.7  N/M
Merchant servicing fees, net  387  383  2,237  1.0  (82.7)
Other service charges, commissions, and fees  2,399  2,455  2,508  (2.3) (4.3)
Total fee-based revenues  33,502  34,826  38,305  (3.8) (12.5)
Other income  2,164  2,121  1,846  2.0  17.2 
Net securities gains      3,197    (100.0)
Total noninterest income(1)  $35,666  $36,947  $43,348  (3.5) (17.7)
Accounting reclassification(1)      (3,699)   (100.0)
Net securities gains      (3,197)   (100.0)
Total noninterest income, adjusted(2)  $35,666  $36,947  $36,452  (3.5) (2.2)

N/M – Not meaningful.

(1) As a result of accounting guidance adopted in the first quarter of 2018 (the "accounting reclassification"), certain noninterest income line items and the related noninterest expense line items that are presented on a gross basis for the prior year period are presented on a net basis in noninterest income for the current year periods. For further discussion of this guidance, see Note 2 of "Notes to the Consolidated Financial Statements" in Item 8 in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.
(2) See the "Non-GAAP Financial Information" section presented later in this release for a discussion of this non-GAAP financial measure.

Total noninterest income of $35.7 million was down by 3.5% and 17.7% from the second quarter of 2018 and the third quarter of 2017, respectively. In the first quarter of 2018, the Company adopted accounting guidance which impacted how cardholder and merchant card expenses are presented within noninterest income on a prospective basis. As a result, these expenses are presented on a net basis against the related noninterest income for the second and third quarters of 2018 versus a gross basis within noninterest expense for the third quarter of 2017. Excluding the accounting reclassification and net securities gains, noninterest income was down by 2.2% compared to third quarter of 2017.

The decrease in noninterest income compared to both prior periods was due primarily to lower capital market products income, which fluctuates from quarter to quarter based on the size and frequency of sales to corporate clients. Compared to the second quarter of 2018, higher transaction volumes in service charges on deposit accounts were offset by lower wealth management fees, both due to seasonality. The increase in wealth management fees compared to the third quarter of 2017 was driven primarily by continued sales of fiduciary and investment advisory services.

Mortgage banking income for the third quarter of 2018 resulted from sales of $61.3 million of 1-4 family mortgage loans in the secondary market, compared to $64.3 million in the second quarter of 2018 and $72.1 million in the third quarter of 2017.

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.

Noninterest Expense Analysis
(Dollar amounts in thousands)

  Quarters Ended September 30, 2018
Percent Change From
  September 30,
 2018
 June 30,
 2018
 September 30,
 2017
 June 30,
 2018
 September 30,
 2017
Salaries and employee benefits:          
Salaries and wages  $44,067  $46,256  $45,219  (4.7) (2.5)
Retirement and other employee benefits  10,093  11,676  10,419  (13.6) (3.1)
Total salaries and employee benefits  54,160  57,932  55,638  (6.5) (2.7)
Net occupancy and equipment expense  13,183  13,651  12,115  (3.4) 8.8 
Professional services  7,944  8,298  8,498  (4.3) (6.5)
Technology and related costs  4,763  4,837  4,505  (1.5) 5.7 
Advertising and promotions  3,526  2,061  1,852  71.1  90.4 
Net other real estate owned ("OREO") expense (413) (256) 657  61.3  (162.9)
Other expenses  11,015  11,878  9,842  (7.3) 11.9 
Delivering Excellence implementation costs  2,239  15,015    (85.1) 100.0 
Acquisition and integration related expenses  60    384  100.0  (84.4)
Cardholder expenses(1)      1,962    (100.0)
Merchant card expenses(1)     1,737    (100.0)
Total noninterest expense(1)  $96,477  $113,416  $97,190  (14.9) (0.7)
Delivering Excellence implementation costs  (2,239) (15,015)   (85.1) (100.0)
Acquisition and integration related expenses (60)   (384) (100.0) (84.4)
Accounting reclassification(1)      (3,699)   (100.0)
Total noninterest expense, adjusted(2)  $94,178  $98,401  $93,107  (4.3) 1.2 

(1) As a result of accounting guidance adopted in the first quarter of 2018, certain noninterest income line items and the related noninterest expense line items that are presented on a gross basis for the prior year period are presented on a net basis in noninterest income for the current year periods. For further discussion of this guidance, see Note 2 of "Notes to the Consolidated Financial Statements" in Item 8 in our Annual Report on Form 10-K for the year ended December 31, 2017.
(2) See the "Non-GAAP Financial Information" section presented later in this release for a discussion of this non-GAAP financial measure.

Total noninterest expense decreased by 14.9% compared to the second quarter of 2018 and was consistent with the third quarter of 2017. During the third and second quarters of 2018, noninterest expense was impacted by costs related to the implementation of the Delivering Excellence initiative, which include property valuation adjustments on locations identified for closure, employee severance, and general restructuring and advisory services. In the first quarter of 2018, the Company adopted accounting guidance which impacted how cardholder and merchant card expenses are presented within noninterest income on a prospective basis. As a result, these expenses are presented on a net basis against the related noninterest income for the second and third quarters of 2018 versus a gross basis within noninterest expense for the prior period. The third quarters of 2018 and 2017 were also impacted by acquisition and integration related expenses. Excluding these items, noninterest expense for the third quarter of 2018 was $94.2 million, down 4.3% from the second quarter of 2018 and up 1.2% from third quarter of 2017.

Compared to both prior periods, the decrease in salaries and employee benefits was driven primarily by the ongoing benefits of the Delivering Excellence initiative. In addition, salaries and employee benefits expense was elevated in the second quarter of 2018 due to the distribution of higher pension plan lump-sum payments to retired employees. Advertising and promotions expense increased compared to both prior periods as a result of the launch of a new marketing campaign and a contribution to the First Midwest Charitable Foundation.

Net occupancy and equipment expense increased compared to the third quarter of 2017 as a result of the Company's corporate headquarters relocation during the second quarter of 2018. The decrease in net OREO expense compared to the third quarter of 2017 was due mainly to higher levels of gains on sales of properties and a reduction in operating expenses.

For the second quarter of 2018, other expenses were elevated due to property valuation adjustments related to the Company's corporate headquarters relocation and other miscellaneous expenses. The increase in other expenses compared to the third quarter of 2017 resulted from higher other miscellaneous expenses associated with organizational growth.

INCOME TAXES

The Company's effective tax rate for the third quarter of 2018 was 11.0% compared to 24.7% for the second quarter of 2018 and 31.7% for the third quarter of 2017. The third quarter of 2018 was impacted by $7.8 million of certain income tax benefits aligned with tax reform. The Company's effective tax rate for the same period in 2017 was impacted by a $2.8 million income tax benefit due to changes in Illinois income tax rates. Excluding these items, the Company's effective tax rate for the third quarter of 2018 was 24.0%, compared to 24.7% for the second quarter of 2018 and 36.7% for the third quarter of 2017. The decrease in the effective tax rate from the third quarter of 2017 was driven by the reduction in the federal income tax rate from 35% to 21%, which became effective in the first quarter of 2018 as a result of tax reform.

 

LOAN PORTFOLIO AND ASSET QUALITY

Loan Portfolio Composition
(Dollar amounts in thousands)

  As of September 30, 2018
Percent Change From
  September 30,
 2018
 June 30, 2018 September 30,
2017
 June 30, 2018 September 30,
2017
Commercial and industrial  $3,994,142  $3,844,067  $3,462,612  3.9  15.4 
Agricultural  432,220  433,175  437,721  (0.2) (1.3)
Commercial real estate:          
Office, retail, and industrial  1,782,757  1,834,918  1,960,367  (2.8) (9.1)
Multi-family  698,611  703,091  711,101  (0.6) (1.8)
Construction  632,779  633,601  545,666  (0.1) 16.0 
Other commercial real estate  1,348,831  1,337,396  1,391,241  0.9  (3.0)
Total commercial real estate  4,462,978  4,509,006  4,608,375  (1.0) (3.2)
Total corporate loans  8,889,340  8,786,248  8,508,708  1.2  4.5 
Home equity  853,887  847,903  847,209  0.7  0.8 
1-4 family mortgages  888,797  880,181  711,607  1.0  24.9 
Installment  418,524  377,233  322,768  10.9  29.7 
Total consumer loans  2,161,208  2,105,317  1,881,584  2.7  14.9 
Total loans  $11,050,548  $10,891,565  $10,390,292  1.5  6.4 
                   

Total loans of $11.1 billion increased by 5.8%, annualized from June 30, 2018 and by 6.4% from September 30, 2017. Compared to both prior periods, growth in commercial and industrial loans, primarily within our sector-based lending and middle market business units, drove the rise in total corporate loans. The rise in construction loans compared to September 30, 2017 was due largely to line draws on existing credits. The overall decline in office, retail, and industrial loans compared to both prior periods and other commercial real estate loans compared to September 30, 2017 resulted primarily from the decision of certain customers to opportunistically sell their commercial business and investment real estate properties, as well as expected payoffs.

Growth in consumer loans compared to both prior periods benefited from organic production, as well as the impact of purchases of shorter-duration home equity and installment loans. Compared to September 30, 2017, growth in consumer loans also benefited from the purchase of 1-4 family mortgages.

 

Asset Quality
(Dollar amounts in thousands)

  As of September 30, 2018
Percent Change From
  September 30,
 2018
 June 30,
 2018
 September 30,
 2017
 June 30,
 2018
 September 30,
 2017
Asset quality          
Non-accrual loans  $64,766  $53,475  $65,176  21.1  (0.6)
90 days or more past due loans, still accruing
  interest(1) 
 2,949  7,954  2,839  (62.9) 3.9 
Total non-performing loans  67,715  61,429  68,015  10.2  (0.4)
Accruing troubled debt restructurings
  ("TDRs") 
 1,741  1,760  1,813  (1.1) (4.0)
OREO  12,244  12,892  19,873  (5.0) (38.4)
Total non-performing assets  $81,700  $76,081  $89,701  7.4  (8.9)
30-89 days past due loans(1)  $46,257  $39,171  $28,868     
Non-accrual loans to total loans  0.59% 0.49% 0.63%    
Non-performing loans to total loans  0.61% 0.56% 0.65%    
Non-performing assets to total loans plus
  OREO 
 0.74% 0.70% 0.86%    
Allowance for credit losses  $100,925  $97,691  $95,814     
Allowance for credit losses to total loans(2)  0.91% 0.90% 0.92%    
Allowance for credit losses to loans, excluding
  acquired loans 
 1.01% 1.00% 1.09%    
Allowance for credit losses to non-accrual
  loans 
 155.83% 182.69% 147.01%    

(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 0.74% of total loans and OREO at September 30, 2018 compared to 0.70% and 0.86% at June 30, 2018 and September 30, 2017, respectively. Non-accrual loans increased by $11.3 million from the second quarter of 2018, due primarily to the transfer of one corporate performing potential problem loan to non-accrual status during the third quarter of 2018. The Company has established a specific reserve and implemented a remediation plan associated with this borrower. The decline in OREO compared to September 30, 2017 resulted from sales of OREO properties.

The allowance for credit losses to total loans was 0.91% at September 30, 2018, consistent with June 30, 2018 and September 30, 2017.

Charge-Off Data
 (Dollar amounts in thousands)

  Quarters Ended
  September 30,
 2018
 % of
Total
 June 30,
 2018
 % of
Total
 September 30,
 2017
 % of
Total
Net loan charge-offs(1)            
Commercial and industrial  $5,230  65.2  $7,081  72.4  $8,237  107.4 
Agricultural  631  7.9  828  8.5     
Office, retail, and industrial  596  7.4  279  2.9  (1,811) (23.6)
Multi-family  1    4    (2)  
Construction  (4)   (8) (0.1) (25) (0.3)
Other commercial real estate  23  0.3  (358) (3.7) (19) (0.2)
Consumer  1,537  19.2  1,951  20.0  1,286  16.7 
Total net loan charge-offs  $8,014  100.0  $9,777  100.0  $7,666  100.0 
Total recoveries included above  $1,250    $1,532    $2,900   
Net loan charge-offs to average loans:            
Quarter-to-date(1) 0.29%   0.36%   0.30%  
Year-to-date(1)  0.42%   0.49%   0.19%  

(1) Amounts represent charge-offs, net of recoveries.

Net loan charge-offs to average loans, annualized were 0.29%, down from 0.36% for the second quarter of 2018 and 0.30% for the third quarter of 2017.

 

DEPOSIT PORTFOLIO

Deposit Composition
(Dollar amounts in thousands)

  Average for the Quarters Ended September 30, 2018
Percent Change From
  September 30,
 2018
 June 30,
 2018
 September 30,
 2017
 June 30,
 2018
 September 30,
 2017
Demand deposits $3,624,520  $3,621,645  $3,574,012  0.1  1.4 
Savings deposits  2,003,928  2,060,066  2,040,609  (2.7) (1.8)
NOW accounts  2,164,018  2,065,530  2,039,593  4.8  6.1 
Money market accounts  1,772,821  1,759,313  1,928,962  0.8  (8.1)
Core deposits  9,565,287  9,506,554  9,583,176  0.6  (0.2)
Time deposits  1,993,361  1,871,666  1,559,966  6.5  27.8 
Total deposits  $11,558,648  $11,378,220  $11,143,142  1.6  3.7 

Average core deposits of $9.6 billion for the third quarter of 2018 were consistent with both prior periods presented. The increase in average time deposits compared to both prior periods was primarily driven by the continued success of promotions which started in 2017.

 

CAPITAL MANAGEMENT

Capital Ratios

  As of
  September 30,
 2018
 June 30,
 2018
 December 31,
 2017
 September 30,
 2017
Company regulatory capital ratios:
Total capital to risk-weighted assets  12.32% 12.07% 12.15% 11.79%
Tier 1 capital to risk-weighted assets  10.34% 10.09% 10.10% 9.83%
Common equity Tier 1 ("CET1") to risk-weighted assets  9.93% 9.68% 9.68% 9.42%
Tier 1 capital to average assets 9.10% 8.95% 8.99% 9.04%
Company tangible common equity ratios(1)(2):      
Tangible common equity to tangible assets  8.21% 8.04% 8.33% 8.25%
Tangible common equity, excluding accumulated other comprehensive
  income ("AOCI"), to tangible assets 
 8.74% 8.50% 8.58% 8.53%
Tangible common equity to risk-weighted assets  9.33% 9.16% 9.31% 9.02%

(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 increased compared to all prior periods as a result of strong earnings, partially offset by the impact of loan growth on risk-weighted assets. In addition, compared to September 30, 2017, the Company's regulatory capital ratios benefited from the sale of its trust-preferred collateralized debt obligations portfolio during the fourth quarter of 2017, partly offset by the phase-in of certain regulatory capital calculation provisions.

The Board of Directors approved a quarterly cash dividend of $0.11 per common share during the third quarter of 2018, which is consistent with the second quarter of 2018 and follows a dividend increase from $0.10 to $0.11 per common share during the first quarter of 2018. This dividend represents the 143rd consecutive cash dividend paid by the Company since its inception in 1983.

Conference Call

A conference call to discuss the Company's results, outlook, and related matters will be held on Wednesday, October 24, 2018 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 10124799 beginning one hour after completion of the live call until 9:00 A.M. (ET) on November 7, 2018. Please direct any questions regarding obtaining access to the conference call to First Midwest Bancorp, Inc. Investor Relations, via e-mail, at investor.relations@firstmidwest.com.

Press Release, Presentation Materials, and Additional Information Available on Website

This press release, the presentation materials to be discussed during the conference call, and the accompanying unaudited Selected Financial Information are available through the "Investor Relations" section of First Midwest's website at www.firstmidwest.com/investorrelations.

Forward-Looking Statements

This press release, as well as any oral statements made by or on behalf of First Midwest, may contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by the use of words such as "may," "might," "will," "would," "should," "could," "expect," "plan," "intend," "anticipate," "believe," "estimate," "outlook," "predict," "project," "probable," "potential," "possible," "target," "continue," "look forward," or "assume" and words of similar import. Forward-looking statements are not historical facts or guarantees of future performance but instead express only management's beliefs regarding future results or events, many of which, by their nature, are inherently uncertain and outside of management's control. It is possible that actual results and events may differ, possibly materially, from the anticipated results or events indicated in these forward-looking statements. First Midwest cautions you not to place undue reliance on these statements. Forward-looking statements 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, including the related outlook for 2018, the performance of our loan or securities portfolio, the expected amount of future credit reserves or charge-offs, corporate strategies or objectives, including the impact of certain actions and initiatives, First Midwest's "Delivering Excellence" initiative, including actions, goals, and expectations, as well as costs and benefits therewith and the timing thereof, anticipated trends in our business, regulatory developments, the impact of federal income tax reform legislation, 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 entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the year ended December 31, 2017, as well as our subsequent filings made with the Securities and Exchange Commission ("SEC"). 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 EPS, adjusted, the efficiency ratio, return on average assets, adjusted, tax-equivalent net interest income (including its individual components), tax-equivalent net interest margin, tax-equivalent net interest margin, adjusted, noninterest income, adjusted, noninterest expense, adjusted, effective income tax rate, adjusted, tangible common equity to tangible assets, tangible common equity, excluding AOCI, to tangible assets, tangible common equity to risk-weighted assets, return on average common equity, adjusted, return on average tangible common equity, and return on average tangible common equity, adjusted.

The Company presents EPS, the efficiency ratio, return on average assets, return on average common equity, and return on average tangible common equity, all adjusted for certain significant transactions. These transactions include certain income tax benefits aligned with tax reform (third quarter of 2018), Delivering Excellence implementation costs (third and second quarters of 2018), acquisition and integration related expenses associated with completed and pending acquisitions (third quarters of 2018 and 2017), the revaluations of DTAs (third and fourth quarters of 2017), certain actions resulting in securities losses and gains (third and fourth quarters of 2017), and a special bonus to colleagues and charitable contributions to the First Midwest Charitable Foundation (fourth quarter of 2017). Management believes excluding these transactions from EPS, the efficiency ratio, return on average assets, return on average common equity, and return on average tangible common equity may be useful in assessing the Company's underlying operational performance since these transactions do not pertain to its core business operations and their exclusion may facilitate better comparability between periods. Management believes that excluding acquisition and integration related expenses from these metrics may be useful to the Company, as well as analysts and investors, since these expenses can vary significantly based on the size, type, and structure of each acquisition. Additionally, management believes excluding these transactions from these metrics may enhance comparability for peer comparison purposes.

The Company presents noninterest income, adjusted, which excludes the accounting reclassification and net securities gains, and noninterest expense, adjusted, which excludes the accounting reclassification, Delivering Excellence implementation costs, and acquisition and integration related expenses. In addition, the Company presents the effective income tax rate, adjusted, which excludes certain income tax benefits aligned with tax reform and the revaluations of DTAs. Management believes that excluding these items from noninterest income, noninterest expense, and the effective income tax rate may be useful in assessing the Company’s underlying operational performance as these items either do not pertain to its core business operations or their exclusion may facilitate better comparability between periods and for peer comparison purposes.

The tax-equivalent adjustment to net interest income and net interest margin recognizes the income tax savings when comparing taxable and tax-exempt assets. Interest income and yields on tax-exempt securities and loans subsequent to December 31, 2017 are presented using the current federal income tax rate of 21% and prior periods are computed using the federal income tax rate applicable at that time of 35%. Management believes that it is standard practice in the banking industry to present net interest income and net interest margin on a fully tax-equivalent basis and that it may enhance comparability for peer comparison purposes. In addition, management believes that presenting tax-equivalent net interest margin, adjusted, may enhance comparability for peer comparison purposes and is useful to the Company, as well as analysts and investors, since acquired loan accretion income may fluctuate based on the size of each acquisition, as well as from period to period.

In management's view, tangible common equity measures are capital adequacy metrics that may be meaningful to the Company, as well as analysts and investors, in assessing the Company's use of equity and in facilitating comparisons with peers. These non-GAAP measures are valuable indicators of a financial institution's capital strength since they eliminate intangible assets from stockholders' equity and retain the effect of accumulated other comprehensive loss in stockholders' equity.

Although intended to enhance investors' understanding of the Company's business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. In addition, these non-GAAP financial measures may differ from those used by other financial institutions to assess their business and performance. See the previously provided tables and the following reconciliations in the "Non-GAAP Reconciliations" section for details on the calculation of these measures to the extent presented herein.

About 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 Chicago and the Midwest, with approximately $15 billion in assets and $11 billion in trust assets under management. First Midwest's principal subsidiary, First Midwest Bank, and other affiliates provide a full range of commercial, treasury management, equipment leasing, retail, wealth management, trust and private banking products and services through 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 and Chief Financial Officer
(708) 831-7231
pat.barrett@firstmidwest.com
  
    


Accompanying Unaudited Selected Financial Information

 
First Midwest Bancorp, Inc.
Consolidated Statements of Financial Condition (Unaudited)
(Dollar amounts in thousands)
  
 As of
 September 30, June 30, March 31, December 31, September 30,
 2018 2018 2018 2017 2017
Period-End Balance Sheet         
Assets         
Cash and due from banks $185,239  $181,482  $150,138  $192,800  $174,147 
Interest-bearing deposits in other banks 111,360  192,785  84,898  153,770  252,753 
Trading securities, at fair value(1)       20,447  20,425 
Equity securities, at fair value(1) 29,046  28,441  28,513     
Securities available-for-sale, at fair value(1) 2,179,410  2,142,865  2,040,950  1,884,209  1,732,984 
Securities held-to-maturity, at amortized cost 12,673  13,042  13,400  13,760  14,638 
FHLB and FRB stock 87,728  82,778  80,508  69,708  69,708 
Loans:         
Commercial and industrial 3,994,142  3,844,067  3,659,066  3,529,914  3,462,612 
Agricultural 432,220  433,175  435,734  430,886  437,721 
Commercial real estate:         
Office, retail, and industrial 1,782,757  1,834,918  1,931,202  1,979,820  1,960,367 
Multi-family 698,611  703,091  695,830  675,463  711,101 
Construction 632,779  633,601  585,766  539,820  545,666 
Other commercial real estate 1,348,831  1,337,396  1,363,238  1,358,515  1,391,241 
Home equity 853,887  847,903  881,534  827,055  847,209 
1-4 family mortgages 888,797  880,181  798,902  774,357  711,607 
Installment 418,524  377,233  325,502  321,982  322,768 
Total loans 11,050,548  10,891,565  10,676,774  10,437,812  10,390,292 
Allowance for loan losses (99,925) (96,691) (94,854) (95,729) (94,814)
Net loans 10,950,623  10,794,874  10,581,920  10,342,083  10,295,478 
OREO 12,244  12,892  17,472  20,851  19,873 
Premises, furniture, and equipment, net 126,389  127,024  126,348  123,316  131,295 
Investment in bank-owned life insurance ("BOLI") 284,074  282,664  281,285  279,900  279,639 
Goodwill and other intangible assets 751,248  753,020  754,814  754,757  750,436 
Accrued interest receivable and other assets 231,465  206,209  219,725  221,451  525,766 
Total assets $14,961,499  $14,818,076  $14,379,971  $14,077,052  $14,267,142 
Liabilities and Stockholders' Equity         
Noninterest-bearing deposits $3,618,384  $3,667,847  $3,527,081  $3,576,190  $3,580,922 
Interest-bearing deposits 7,908,730  7,824,416  7,618,941  7,477,135  7,627,575 
Total deposits 11,527,114  11,492,263  11,146,022  11,053,325  11,208,497 
Borrowed funds 1,073,546  981,044  950,688  714,884  700,536 
Senior and subordinated debt 195,595  195,453  195,312  195,170  195,028 
Accrued interest payable and other liabilities 247,569  265,753  218,662  248,799  297,951 
Stockholders' equity1,917,675  1,883,563  1,869,287  1,864,874  1,865,130 
Total liabilities and stockholders' equity $14,961,499  $14,818,076  $14,379,971  $14,077,052  $14,267,142 
Stockholders' equity, excluding accumulated other
  comprehensive income ("AOCI") 
$1,992,808  $1,947,963  $1,926,818  $1,897,910  $1,903,166 
Stockholders' equity, common1,917,675  1,883,563  1,869,287  1,864,874  1,865,130 

Footnote to Consolidated Statements of Financial Condition
(1) As a result of accounting guidance adopted in the first quarter of 2018, equity securities are no longer presented within trading securities or securities available-for-sale and are now presented as equity securities in the Consolidated Statements of Financial Condition for periods subsequent to December 31, 2017.

      
First Midwest Bancorp, Inc.     
Condensed Consolidated Statements of Income (Unaudited)     
(Dollar amounts in thousands)     
               
 Quarters Ended  Nine Months Ended
 September 30, June 30, March 31, December 31, September 30,  September 30, September 30,
 2018 2018 2018 2017 2017  2018 2017
Income Statement              
Interest income $149,532  $142,088  $131,345  $129,585  $129,916   $422,965  $380,131 
Interest expense 17,505  14,685  12,782  10,254  10,023   44,972  27,458 
Net interest income 132,027  127,403  118,563  119,331  119,893   377,993  352,673 
Provision for loan losses 11,248  11,614  15,181  8,024  10,109   38,043  23,266 
Net interest income after
  provision for loan losses 
120,779  115,789  103,382  111,307  109,784   339,950  329,407 
Noninterest Income              
Service charges on deposit
  accounts
12,378  12,058  11,652  12,289  12,561   36,088  36,079 
Wealth management fees 10,622  10,981  10,958  10,967  10,169   32,561  30,354 
Card-based fees, net(1):              
Card-based fees 5,975  6,270  5,692  6,052  5,992   17,937  22,940 
Cardholder expenses (1,852) (1,876) (1,759)      (5,487)  
Card-based fees, net4,123  4,394  3,933  6,052  5,992   12,450  22,940 
Capital market products
  income 
1,936  2,819  1,558  1,986  2,592   6,313  6,185 
Mortgage banking income 1,657  1,736  2,397  2,352  2,246   5,790  5,779 
Merchant servicing fees, net(1):              
Merchant servicing fees 2,702  2,553  2,237  1,771  2,237   7,492  8,569 
Merchant card expenses (2,315) (2,170) (1,907)      (6,392)  
Merchant servicing fees,
  net 
387  383  330  1,771  2,237   1,100  8,569 
Other service charges,
  commissions, and fees 
2,399  2,455  2,218  2,369  2,508   7,072  7,474 
Total fee-based revenues 33,502  34,826  33,046  37,786  38,305   101,374  117,380 
Other income 2,164  2,121  2,471  2,476  1,846   6,756  7,383 
Net securities (losses) gains       (5,357) 3,197     3,481 
Total noninterest
  income 
35,666  36,947  35,517  34,905  43,348   108,130  128,244 
Noninterest Expense              
Salaries and employee benefits:             
Salaries and wages 44,067  46,256  45,830  48,204  45,219   136,153  134,303 
Retirement and other
  employee benefits 
10,093  11,676  10,957  10,204  10,419   32,726  31,682 
Total salaries and
  employee benefits 
54,160  57,932  56,787  58,408  55,638   168,879  165,985 
Net occupancy and
  equipment expense
13,183  13,651  13,773  12,826  12,115   40,607  36,925 
Professional services7,944  8,298  7,580  7,616  8,498   23,822  26,073 
Technology and related costs 4,763  4,837  4,771  4,645  4,505   14,371  13,423 
Advertising and promotions 3,526  2,061  1,650  4,083  1,852   7,237  4,611 
Net OREO expense (413) (256) 1,068  695  657   399  3,988 
Merchant card expenses(1)       1,423  1,737     6,954 
Cardholder expenses(1)       1,915  1,962     5,408 
Other expenses 11,015  11,878  9,953  10,715  9,842   32,846  30,093 
Delivering Excellence 
  implementation costs 
2,239  15,015         17,254   
Acquisition and integration
  related expenses 
60        384   60  20,123 
Total noninterest expense 96,477  113,416  95,582  102,326  97,190   305,475  313,583 
Income before income tax
  expense 
59,968  39,320  43,317  43,886  55,942   142,605  144,068 
Income tax expense6,616  9,720  9,807  41,539  17,707   26,143  48,028 
Net income $53,352  $29,600  $33,510  $2,347  $38,235   $116,462  $96,040 
Net income applicable to
  common shares 
$52,911  $29,360  $33,199  $2,341  $37,895   $115,470  $95,130 
Net income applicable to
  common shares, adjusted(2) 
46,837  40,621  33,199  34,131  33,390   120,657  102,468 

Footnotes to Condensed Consolidated Statements of Income
(1) As a result of accounting guidance adopted in the first quarter of 2018, certain noninterest income line items and related noninterest expense line items that are presented on a gross basis for periods prior to December 31, 2017 are now presented on a net basis in noninterest income for periods subsequent to December 31, 2017.
(2) See the "Non-GAAP Reconciliations" section for the detailed calculation.

      
First Midwest Bancorp, Inc.     
Selected Financial Information (Unaudited)
(Amounts in thousands, except per share data)
               
 As of or for the
 Quarters Ended  Nine Months Ended
 September 30, June 30, March 31, December 31, September 30,  September 30, September 30,
 2018 2018 2018 2017 2017  2018 2017
EPS              
Basic EPS$0.52  $0.29  $0.33  $0.02  $0.37   $1.13  $0.94 
Diluted EPS $0.52  $0.29  $0.33  $0.02  $0.37   $1.13  $0.94 
Diluted EPS, adjusted(1) $0.46  $0.40  $0.33  $0.34  $0.33   $1.18  $1.01 
Common Stock and Related Per Common Share Data     
Book value $18.61  $18.28  $18.13  $18.16  $18.16   $18.61  $18.16 
Tangible book value$11.32  $10.97  $10.81  $10.81  $10.85   $11.32  $10.85 
Dividends declared per share $0.11  $0.11  $0.11  $0.10  $0.10   $0.33  $0.29 
Closing price at period end $26.59  $25.47  $24.59  $24.01  $23.42   $26.59  $23.42 
Closing price to book value 1.4  1.4  1.4  1.3  1.3   1.4  1.3 
Period end shares outstanding 103,058  103,059  103,092  102,717  102,722   103,058  102,722 
Period end treasury shares 9,301  9,297  9,261  9,634  9,626   9,301  9,626 
Common dividends $11,326  $11,333  $11,349  $10,278  $10,411   $34,008  $29,793 
Key Ratios/Data              
Return on average common
  equity(2) 
10.99% 6.23% 7.19% 0.49% 8.10%  8.16% 7.00%
Return on average common
  equity, adjusted(1)(2)
9.73% 8.62% 7.19% 7.20% 7.14%  8.53% 7.54%
Return on average tangible
  common equity(2) 
18.60% 10.83% 12.50% 1.20% 14.02%  14.03% 12.40%
Return on average tangible
  common equity, adjusted(1)(2) 
16.51% 14.81% 12.50% 12.35% 12.41%  14.64% 13.32%
Return on average assets(2) 1.42% 0.81% 0.96% 0.07% 1.07%  1.07% 0.92%
Return on average assets,
  adjusted(1)(2) 
1.26% 1.12% 0.96% 0.96% 0.95%  1.12% 0.99%
Loans to deposits 95.87% 94.77% 95.79% 94.43% 92.70%  95.87% 92.70%
Efficiency ratio(1) 56.03% 59.65% 60.96% 60.78% 59.32%  58.81% 59.86%
Efficiency ratio (prior
  presentation)(1)(3) 
N/A N/A N/A 60.32% 58.97%  N/A 59.52%
Net interest margin(2)(4) 3.92% 3.91% 3.80% 3.84% 3.86%  3.88% 3.88%
Yield on average interest-earning
  assets(2)(4)
4.44% 4.35% 4.20% 4.16% 4.18%  4.34% 4.17%
Cost of funds(2)(5) 0.55% 0.47% 0.43% 0.34% 0.33%  0.48% 0.31%
Net noninterest expense to
  average assets(2) 
1.62% 2.10% 1.72% 1.74% 1.60%  1.81% 1.81%
Effective income tax rate 11.03% 24.72% 22.64% 94.65% 31.65%  18.33% 33.34%
Effective income tax rate,
  adjusted(1) 
24.04% 24.72% 22.64% 34.14% 36.74%  23.80% 35.31%
Capital Ratios              
Total capital to risk-weighted
  assets(1) 
12.32% 12.07% 12.07% 12.15% 11.79%  12.32% 11.79%
Tier 1 capital to risk-weighted
  assets(1) 
10.34% 10.09% 10.07% 10.10% 9.83%  10.34% 9.83%
CET1 to risk-weighted assets(1)9.93% 9.68% 9.65% 9.68% 9.42%  9.93% 9.42%
Tier 1 capital to average assets(1) 9.10% 8.95% 9.07% 8.99% 9.04%  9.10% 9.04%
Tangible common equity to
  tangible assets(1) 
8.21% 8.04% 8.18% 8.33% 8.25%  8.21% 8.25%
Tangible common equity,
  excluding AOCI, to tangible
  assets(1) 
8.74% 8.50% 8.60% 8.58% 8.53%  8.74% 8.53%
Tangible common equity to risk
  -weighted assets(1) 
9.33% 9.16% 9.18% 9.31% 9.02%  9.33% 9.02%
Note: Selected Financial Information footnotes are located at the end of this section.     


      
First Midwest Bancorp, Inc.     
Selected Financial Information (Unaudited)
(Amounts in thousands, except per share data)
               
 As of or for the
 Quarters Ended  Nine Months Ended
 September 30, June 30, March 31, December 31, September 30,  September 30, September 30,
 2018 2018 2018 2017 2017  2018 2017
Asset Quality Performance Data             
Non-performing assets              
Commercial and industrial $37,981  $22,672  $43,974  $40,580  $41,504   $37,981  $41,504 
Agricultural 2,104  2,992  4,086  219  380   2,104  380 
Commercial real estate:              
Office, retail, and industrial 6,685  9,007  12,342  11,560  12,221   6,685  12,221 
Multi-family 3,184  3,551  144  377  153   3,184  153 
Construction 208  208  208  209  146   208  146 
Other commercial real estate 4,578  5,288  4,088  3,621  2,239   4,578  2,239 
Consumer10,026  9,757  10,173  10,358  8,533   10,026  8,533 
Total non-accrual loans 64,766  53,475  75,015  66,924  65,176   64,766  65,176 
90 days or more past due loans,
  still accruing interest 
2,949  7,954  4,633  3,555  2,839   2,949  2,839 
Total non-performing loans 67,715  61,429  79,648  70,479  68,015   67,715  68,015 
Accruing TDRs 1,741  1,760  1,778  1,796  1,813   1,741  1,813 
OREO 12,244  12,892  17,472  20,851  19,873   12,244  19,873 
Total non-performing assets $81,700  $76,081  $98,898  $93,126  $89,701   $81,700  $89,701 
30-89 days past due loans $46,257  $39,171  $42,573  $39,725  $28,868   $46,257  $28,868 
Allowance for credit losses              
Allowance for loan losses $99,925  $96,691  $94,854  $95,729  $94,814   $99,925  $94,814 
Reserve for unfunded
  commitments 
1,000  1,000  1,000  1,000  1,000   1,000  1,000 
Total allowance for credit
  losses 
$100,925  $97,691  $95,854  $96,729  $95,814   $100,925  $95,814 
Provision for loan losses $11,248  $11,614  $15,181  $8,024  $10,109   $38,043  $23,266 
Net charge-offs by category              
Commercial and industrial $5,230  $7,081  $13,149  $5,635  $8,237   $25,460  $11,852 
Agricultural 631  828  983  (102)    2,442  1,350 
Commercial real estate:              
Office, retail, and industrial 596  279  364  (78) (1,811)  1,239  (2,667)
Multi-family 1  4    (3) (2)  5  (36)
Construction (4) (8) (13) (12) (25)  (25) (220)
Other commercial real estate 23  (358) 30  (5) (19)  (305) 516 
Consumer1,537  1,951  1,543  1,674  1,286   5,031  3,740 
Total net charge-offs$8,014  $9,777  $16,056  $7,109  $7,666   $33,847  $14,535 
Total recoveries included above $1,250  $1,532  $1,029  $2,011  $2,900   $3,811  $7,168 
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,
  2018 2018 2018 2017 2017
Asset quality ratios          
Non-accrual loans to total loans  0.59% 0.49% 0.70% 0.64% 0.63%
Non-performing loans to total loans  0.61% 0.56% 0.75% 0.68% 0.65%
Non-performing assets to total loans plus OREO  0.74% 0.70% 0.92% 0.89% 0.86%
Non-performing assets to tangible common equity plus allowance
  for credit losses 
 6.45% 6.19% 8.17% 7.72% 7.41%
Non-accrual loans to total assets  0.43% 0.36% 0.52% 0.48% 0.46%
Allowance for credit losses and net charge-off ratios
Allowance for credit losses to total loans(6)  0.91% 0.90% 0.90% 0.93% 0.92%
Allowance for credit losses to loans, excluding acquired loans 1.01% 1.00% 1.01% 1.07% 1.09%
Allowance for credit losses to non-accrual loans  155.83% 182.69% 127.78% 144.54% 147.01%
Allowance for credit losses to non-performing loans  149.04% 159.03% 120.35% 137.25% 140.87%
Net charge-offs to average loans(2)  0.29% 0.36% 0.62% 0.27% 0.30%

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 as calculated prior to March 31, 2018, which included a tax-equivalent adjustment for BOLI. Management believes that removing this adjustment from the current calculation of this metric enhances comparability for peer comparison purposes.
(4) Presented on a tax-equivalent basis, assuming the applicable federal income tax rate for each period presented. As a result, interest income and yields on tax-exempt securities and loans subsequent to December 31, 2017 are presented using the current federal income tax rate of 21% and prior periods are computed using the federal income tax rate applicable at that time of 35%.
(5) Cost of funds expresses total interest expense as a percentage of total average funding sources.
(6) This ratio includes acquired loans that are recorded at fair value through an acquisition adjustment, which incorporates credit risk, as of the acquisition date with no allowance for credit losses being established at that time. As the acquisition adjustment is accreted into income over future periods, an allowance for credit losses is established on acquired loans as necessary to reflect credit deterioration.

 

      
First Midwest Bancorp, Inc.     
Non-GAAP Reconciliations (Unaudited)     
(Amounts in thousands, except per share data)     
               
 Quarters Ended  Nine Months Ended
 September 30, June 30, March 31, December 31, September 30,  September 30, September 30,
 2018 2018 2018 2017 2017  2018 2017
EPS              
Net income $53,352  $29,600  $33,510  $2,347  $38,235   $116,462  $96,040 
Net income applicable to non-
  vested restricted shares 
(441) (240) (311) (6) (340)  (992) (910)
Net income applicable to
  common shares 
52,911  29,360  33,199  2,341  37,895   115,470  95,130 
Adjustments to net income:              
Income tax benefits(1) (7,798)          (7,798)  
Delivering Excellence
  implementation costs 
2,239  15,015         17,254   
Tax effect of Delivering
  Excellence implementation
  costs 
(560) (3,754)        (4,314)  
Acquisition and integration
  related expenses 
60        384   60  20,123 
Tax effect of acquisition and
  integration related expenses 
(15)       (157)  (15) (8,053)
DTA revaluation       26,555  (2,846)    (2,846)
Losses (gains) from securities
  portfolio repositioning 
      5,357  (3,197)    (3,197)
Tax effect of losses (gains)
  from securities portfolio
  repositioning 
      (2,196) 1,311     1,311 
Special bonus       1,915        
Tax effect of special bonus       (785)       
Charitable contribution       1,600        
Tax effect of charitable
  contribution 
      (656)       
Total adjustments to net
  income, net of tax 
(6,074) 11,261    31,790  (4,505)  5,187  7,338 
Net income applicable to
  common shares,
  adjusted(2) 
$46,837  $40,621  $33,199  $34,131  $33,390   $120,657  $102,468 
Weighted-average common shares outstanding:             
Weighted-average common
  shares outstanding (basic) 
102,178  102,159  101,922  101,766  101,752   102,087  101,307 
Dilutive effect of common
  stock equivalents 
    16  21  20   5  20 
Weighted-average diluted
  common shares
  outstanding 
102,178  102,159  101,938  101,787  101,772   102,092  101,327 
Basic EPS$0.52  $0.29  $0.33  $0.02  $0.37   $1.13  $0.94 
Diluted EPS $0.52  $0.29  $0.33  $0.02  $0.37   $1.13  $0.94 
Diluted EPS, adjusted(2) $0.46  $0.40  $0.33  $0.34  $0.33   $1.18  $1.01 
Anti-dilutive shares not included
  in the computation of diluted
  EPS 
    110  190  190   36  242 
Effective Tax Rate              
Income before income tax
  expense 
$59,968  $39,320  $43,317  $43,886  $55,942   $142,605  $144,068 
Income tax expense$6,616  $9,720  $9,807  $41,539  $17,707   $26,143  $48,028 
Income tax benefits(1) 7,798           7,798   
DTA revaluation       (26,555) 2,846     2,846 
Income tax expense, adjusted $14,414  $9,720  $9,807  $14,984  $20,553   $33,941  $50,874 
Effective income tax rate 11.03% 24.72% 22.64% 94.65% 31.65%  18.33% 33.34%
Effective income tax rate,
  adjusted
24.04% 24.72% 22.64% 34.14% 36.74%  23.80% 35.31%
               
Note: Non-GAAP Reconciliations footnotes are located at the end of this section.     


 
First Midwest Bancorp, Inc.
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
               
 As of or for the
 Quarters Ended  Nine Months Ended
 September 30, June 30, March 31, December 31, September 30,  September 30, September 30,
 2018 2018 2018 2017 2017  2018 2017
Return on Average Common and Tangible Common Equity           
Net income applicable to
  common shares 
$52,911  $29,360  $33,199  $2,341  $37,895   $115,470  $95,130 
Intangibles amortization 1,772  1,794  1,802  1,806  1,931   5,368  6,059 
Tax effect of intangibles
  amortization 
(443) (449) (508) (740) (792)  (1,400) (2,424)
Net income applicable to
  common shares, excluding
  intangibles amortization 
54,240  30,705  34,493  3,407  39,034   119,438  98,765 
Total adjustments to net income,
  net of tax(2) 
(6,074) 11,261    31,790  (4,505)  5,187  7,338 
Net income applicable to
  common shares, adjusted(2)
$48,166  $41,966  $34,493  $35,197  $34,529   $124,625  $106,103 
Average stockholders' equity $1,909,330  $1,890,727  $1,873,419  $1,880,265  $1,855,647   $1,891,290  $1,816,911 
Less: average intangible assets (752,109) (753,887) (753,870) (749,700) (751,366)  (753,282) (751,828)
Average tangible common
  equity 
$1,157,221  $1,136,840  $1,119,549  $1,130,565  $1,104,281   $1,138,008  $1,065,083 
Return on average common
  equity(3) 
10.99% 6.23% 7.19% 0.49% 8.10%  8.16% 7.00%
Return on average common
  equity, adjusted(2)(3)
9.73% 8.62% 7.19% 7.20% 7.14%  8.53% 7.54%
Return on average tangible
  common equity(3) 
18.60% 10.83% 12.50% 1.20% 14.02%  14.03% 12.40%
Return on average tangible
  common equity, adjusted(2)(3) 
16.51% 14.81% 12.50% 12.35% 12.41%  14.64% 13.32%
Return on Average Assets           
Net income $53,352  $29,600  $33,510  $2,347  $38,235   $116,462  $96,040 
Total adjustments to net income,
  net of tax(2) 
(6,074) 11,261    31,790  (4,505)  5,187  7,338 
Net income, adjusted(2) $47,278  $40,861  $33,510  $34,137  $33,730   $121,649  $103,378 
Average assets $14,894,670  $14,605,715  $14,187,053  $14,118,625  $14,155,766   $14,565,071  $13,931,679 
Return on average assets(3) 1.42% 0.81% 0.96% 0.07% 1.07%  1.07% 0.92%
Return on average assets,
  adjusted(2)(3) 
1.26% 1.12% 0.96% 0.96% 0.95%  1.12% 0.99%
Efficiency Ratio Calculation             
Noninterest expense$96,477  $113,416  $95,582  $102,326  $97,190   $305,475  $313,583 
Less:              
Net OREO expense 413  256  (1,068) (695) (657)  (399) (3,988)
Delivering Excellence
  implementation costs 
(2,239) (15,015)        (17,254)  
Acquisition and integration
  related expenses 
(60)       (384)  (60) (20,123)
Special bonus       (1,915)       
Charitable contribution       (1,600)       
Total $94,591  $98,657  $94,514  $98,116  $96,149   $287,762  $289,472 
Tax-equivalent net interest
  income(4) 
$133,161  $128,442  $119,538  $121,154  $121,935   $381,141  $358,811 
Noninterest income 35,666  36,947  35,517  34,905  43,348   108,130  128,244 
Less: net securities losses (gains)       5,357  (3,197)    (3,481)
Total $168,827  $165,389  $155,055  $161,416  $162,086   $489,271  $483,574 
Efficiency ratio 56.03% 59.65% 60.96% 60.78% 59.32%  58.81% 59.86%
               
Note: Non-GAAP Reconciliations footnotes are located at the end of this section.     


 
First Midwest Bancorp, Inc.
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
          
 As of or for the
 Quarters Ended
 September 30, June 30, March 31, December 31, September 30,
 2018 2018 2018 2017 2017
Risk-Based Capital Data         
Common stock $1,124  $1,124  $1,123  $1,123  $1,123 
Additional paid-in capital 1,028,635  1,025,703  1,021,923  1,031,870  1,029,002 
Retained earnings 1,164,133  1,122,107  1,103,840  1,074,990  1,082,921 
Treasury stock, at cost (201,084) (200,971) (200,068) (210,073) (209,880)
Goodwill and other intangible assets, net of deferred tax liabilities (751,248) (753,020) (754,814) (743,327) (738,645)
Disallowed DTAs   (389) (522) (644) (275)
CET1 capital 1,241,560  1,194,554  1,171,482  1,153,939  1,164,246 
Trust-preferred securities 50,690  50,690  50,690  50,690  50,690 
Other disallowed DTAs   (97) (131) (161) (69)
Tier 1 capital 1,292,250  1,245,147  1,222,041  1,204,468  1,214,867 
Tier 2 capital 248,118  244,795  242,870  243,656  242,652 
Total capital $1,540,368  $1,489,942  $1,464,911  $1,448,124  $1,457,519 
Risk-weighted assets$12,500,342  $12,345,200  $12,135,662  $11,920,372  $12,362,833 
Adjusted average assets $14,202,776  $13,907,100  $13,472,294  $13,404,998  $13,439,744 
Total capital to risk-weighted assets 12.32% 12.07% 12.07% 12.15% 11.79%
Tier 1 capital to risk-weighted assets 10.34% 10.09% 10.07% 10.10% 9.83%
CET1 to risk-weighted assets 9.93% 9.68% 9.65% 9.68% 9.42%
Tier 1 capital to average assets 9.10% 8.95% 9.07% 8.99% 9.04%
Tangible Common Equity         
Stockholders' equity$1,917,675  $1,883,563  $1,869,287  $1,864,874  $1,865,130 
Less: goodwill and other intangible assets(751,248) (753,020) (754,814) (754,757) (750,436)
Tangible common equity 1,166,427  1,130,543  1,114,473  1,110,117  1,114,694 
Less: AOCI 75,133  64,400  57,531  33,036  38,036 
Tangible common equity, excluding AOCI $1,241,560  $1,194,943  $1,172,004  $1,143,153  $1,152,730 
Total assets $14,961,499  $14,818,076  $14,379,971  $14,077,052  $14,267,142 
Less: goodwill and other intangible assets(751,248) (753,020) (754,814) (754,757) (750,436)
Tangible assets $14,210,251  $14,065,056  $13,625,157  $13,322,295  $13,516,706 
Tangible common equity to tangible assets 8.21% 8.04% 8.18% 8.33% 8.25%
Tangible common equity, excluding AOCI, to tangible assets 8.74% 8.50% 8.60% 8.58% 8.53%
Tangible common equity to risk-weighted assets 9.33% 9.16% 9.18% 9.31% 9.02%
          

Footnotes to Non-GAAP Reconciliations
(1) Includes certain income tax benefits aligned with tax reform.
(2) Adjustments to net income for each period presented are detailed in the EPS non-GAAP reconciliation above. For additional discussion of adjustments, see the "Non-GAAP Financial Information" section.
(3) Annualized based on the actual number of days for each period presented.
(4) Presented on a tax-equivalent basis, assuming the applicable federal income tax rate for each period presented. As a result, interest income and yields on tax-exempt securities and loans subsequent to December 31, 2017 are presented using the current federal income tax rate of 21% and prior periods are computed using the federal income tax rate applicable at that time of 35%.

image001 (4).jpg

© 2024 Canjex Publishing Ltd. All rights reserved.