CHICAGO, Jan. 21, 2020 (GLOBE NEWSWIRE) -- First Midwest Bancorp, Inc. (the "Company" or "First Midwest"), the holding company of First Midwest Bank (the "Bank"), today reported results of operations and financial condition for the fourth quarter and full year of 2019. Net income for the fourth quarter of 2019 was $52.1 million, or $0.47 per share, compared to $54.5 million, or $0.49 per share, for the third quarter of 2019, and $41.4 million, or $0.39 per share, for the fourth quarter of 2018. For the full year of 2019, the Company reported net income of $199.7 million, or $1.82 per share, compared to $157.9 million, or $1.52 per share, for the year ended December 31, 2018.

Reported results for all periods were impacted by acquisition and integration related expenses and implementation costs related to the Company's Delivering Excellence initiative ("Delivering Excellence"). In addition, results for full year 2018 were impacted by certain income tax benefits resulting from federal income tax reform legislation ("Tax Reform"). 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 $0.51 for the fourth quarter of 2019, compared to $0.52 for the third quarter of 2019 and $0.48 for the fourth quarter of 2018. EPS, adjusted(1) was $1.98 and $1.67 for the full years ended December 31, 2019 and 2018, respectively.

FOURTH QUARTER AND FULL YEAR HIGHLIGHTS

  • Generated EPS of $0.47 for the fourth quarter of 2019 and $1.82 for the full year of 2019, up from $0.39 and $1.52 from the same periods in 2018, respectively.
    • Increased EPS, adjusted(1) by 6% and 19% from the fourth quarter and full year of 2018, respectively.
  • Produced returns on average tangible common equity, adjusted(1) of 15.7% for the full year of 2019, up 58 basis points versus a year ago.
  • Expanded net interest income to $148 million and $588 million for the fourth quarter and full year of 2019, up 7% and 14% from the same periods in 2018.
    • Reported net interest margin of 3.72% for the fourth quarter of 2019, down 24 basis points from the same period in 2018, reflective of lower rates, and 3.90% for the full year of 2019, consistent with 2018.
  • Increased noninterest income to $46 million and $163 million for the fourth quarter and full year of 2019, up 28% and 13% from the same periods in 2018.
  • Maintained net loan charge-offs to average loans of 0.33% and 0.31% for the fourth quarter and full year of 2019, reflective of the benign credit environment.
  • Improved operating efficiency, lowering the efficiency ratio(1) to 55% for the full year of 2019 from 58% for 2018; realized an efficiency ratio(1) of 56% for the fourth quarter of 2019 compared to 55% for the same period in 2018.
  • Grew loans to nearly $13 billion, up 2%, annualized, from September 30, 2019 and 12% from December 31, 2018.
  • Increased total average deposits to $13 billion, consistent with the third quarter of 2019 and up 12% from the fourth quarter of 2018.
  • Generated 34 basis points of common equity Tier 1 capital from September 30, 2019 and 32 basis points from December 31, 2018, ending the year at 10.52%; replenished to levels last achieved prior to 2019 acquisitions.

"2019 was another strong year for First Midwest," said Michael L. Scudder, Chairman of the Board and Chief Executive Officer of the Company. "Against a difficult rate backdrop, we continued to expand our balance sheet, adding clients across our businesses while building operational efficiency. The success of these efforts helped to offset the revenue pressure resulting from lower interest rates. As a result, operating performance as reflected in adjusted EPS for the quarter and full year improved by a robust 6% and 19%, respectively, as compared to 2018."

Mr. Scudder concluded, "While our momentum in early 2020 will continue to be impacted by the transition to lower rates, we believe the economy remains solid. The strength of our funding and capital foundation provides the flexibility for continued investment in our businesses, communities, and colleagues as we navigate the year. We expect the environment will provide both the opportunity and incentive to invest in and leverage our infrastructure, processes, and capabilities to better serve our clients and manage risk. As always, we will remain focused on those actions that help our clients achieve financial success and inure to the long-term benefit of our shareholders."

PENDING ACQUISITION

Park Bank

On August 27, 2019, the Company entered into a merger agreement to acquire Bankmanagers Corp. ("Bankmanagers"), the holding company for Park Bank, based in Milwaukee, Wisconsin. As of September 30, 2019, Bankmanagers had approximately $1.0 billion of assets, $875 million of deposits, and $700 million of loans. The merger agreement provides for a fixed exchange ratio of 29.9675 shares of Company common stock, plus $623.02 in cash, for each share of Bankmanagers common stock, subject to certain adjustments. As of the date of announcement, the overall transaction was valued at approximately $195 million. The transaction is subject to customary regulatory approvals and the completion of various closing conditions.

(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
 December 31, 2019  September 30, 2019  December 31, 2018
 Average
Balance
 Interest
Earned/
Paid
 Yield/
Rate
(%)
  Average
Balance
 Interest
Earned/
Paid
 Yield/
Rate
(%)
  Average
Balance
 Interest
Earned/
Paid
 Yield/
Rate
(%)
Assets                   
Other interest-earning assets$204,001   $1,223   2.38   $283,178   $1,702   2.38   $145,436   $476   1.30 
Securities(1)2,893,856   19,989   2.76   2,869,461   19,906   2.77   2,359,083   15,907   2.70 
Federal Home Loan Bank ("FHLB") and
  Federal Reserve Bank ("FRB") stock
117,994   881   2.99   108,735   831   3.06   85,427   709   3.32 
Loans(1)12,753,436   155,863   4.85   12,539,541   160,756   5.09   11,408,062   143,561   4.99 
Total interest-earning assets(1)15,969,287   177,956   4.43   15,800,915   183,195   4.60   13,998,008   160,653   4.56 
Cash and due from banks241,616        224,127        211,312      
Allowance for loan losses (112,623)       (110,616)       (104,681)     
Other assets1,790,878        1,784,754        1,398,760      
Total assets $17,889,158        $17,699,180        $15,503,399      
Liabilities and Stockholders' Equity                   
Savings deposits $2,044,386   220   0.04   $2,056,128   308   0.06   $2,044,312   358   0.07 
NOW accounts 2,291,667   2,172   0.38   2,483,176   3,462   0.55   2,128,722   1,895   0.35 
Money market deposits 2,178,518   3,980   0.72   2,080,274   4,111   0.78   1,831,311   1,990   0.43 
Time deposits 3,033,903   13,554   1.77   3,026,423   13,873   1.82   2,311,453   8,894   1.53 
Borrowed funds1,559,326   4,579   1.17   1,369,079   5,639   1.63   1,031,249   4,469   1.72 
Senior and subordinated debt 233,848   3,740   6.35   233,642   3,783   6.42   204,030   3,292   6.40 
Total interest-bearing liabilities11,341,648   28,245   0.99   11,248,722   31,176   1.10   9,551,077   20,898   0.87 
Demand deposits 3,862,157        3,800,569        3,685,806      
Total funding sources15,203,805     0.74   15,049,291     0.82   13,236,883     0.63 
Other liabilities 326,156        322,610        251,299      
Stockholders' equity - common 2,359,197        2,327,279        2,015,217      
Total liabilities and
  stockholders' equity
$17,889,158        $17,699,180        $15,503,399      
Tax-equivalent net interest
  income/margin(1)
  149,711   3.72     152,019   3.82     139,755   3.96 
Tax-equivalent adjustment  (1,352)       (1,232)       (1,126)   
Net interest income (GAAP)(1)  $148,359        $150,787        $138,629    
Impact of acquired loan accretion(1)  $9,657   0.24     $9,244   0.23     $5,426   0.15 
Tax-equivalent net interest income/
  margin, adjusted(1)
  $140,054   3.48     $142,775   3.59     $134,329   3.81 

(1) Interest income and yields on tax-exempt securities and loans are presented on a tax-equivalent basis, assuming a federal income tax of 21%. The corresponding income tax impact related to tax-exempt items is recorded in income tax expense. These adjustments have no impact on net income. See the "Non-GAAP Financial Information" section presented later in this release for a discussion of this non-GAAP financial measure.

Net interest income for the fourth quarter of 2019 decreased by 1.6% from the third quarter of 2019 and increased by 7.0% from the fourth quarter of 2018. The decrease in net interest income compared to the third quarter of 2019 resulted primarily from lower interest rates, partially offset by lower cost of funds and higher acquired loan accretion. Compared to the fourth quarter of 2018, the increase in net interest income was driven primarily by the acquisition of interest-earning assets from the Bridgeview Bancorp, Inc. ("Bridgeview") transaction that closed in May 2019, growth in loans and securities, and higher acquired loan accretion, partially offset by higher cost of funds.

Acquired loan accretion contributed $9.7 million, $9.2 million, and $5.4 million to net interest income for the fourth quarter of 2019, the third quarter of 2019, and the fourth quarter of 2018, respectively.

Tax-equivalent net interest margin for the current quarter was 3.72%, decreasing by 10 basis points from the third quarter of 2019 and 24 basis points from the fourth quarter of 2018. Excluding the impact of acquired loan accretion, tax-equivalent net interest margin was 3.48%, down 11 basis points from the third quarter of 2019 and 33 basis points from the fourth quarter of 2018. Compared to the third quarter of 2019, tax-equivalent net interest margin decreased as a result of lower interest rates, partially offset by lower cost of funds. The decline in tax-equivalent net interest margin compared to the fourth quarter of 2018 was due primarily to lower interest rates, actions taken to reduce rate sensitivity, and higher cost of funds.

For the fourth quarter of 2019, total average interest-earning assets rose by $168.4 million from the third quarter of 2019 and $2.0 billion from the fourth quarter of 2018. The increase compared to the third quarter of 2019 resulted primarily from loan growth, while the increase compared to the fourth quarter of 2018 was driven primarily by interest-earning assets acquired in the Bridgeview transaction, loan growth, and securities purchases.

Total average funding sources for the fourth quarter of 2019 increased by $154.5 million from the third quarter of 2019 and $2.0 billion from the fourth quarter of 2018. The increase compared to the third quarter of 2019 resulted primarily from higher levels of borrowed funds. Compared to the fourth quarter of 2018, the increase was driven mainly by funding sources acquired in the Bridgeview transaction, higher levels of borrowed funds, and organic deposit growth.

Noninterest Income Analysis
(Dollar amounts in thousands)

  Quarters Ended December 31, 2019
Percent Change From
  December 31,
2019
 September 30,
2019
 December 31,
2018
 September 30,
2019
 December 31,
2018
Service charges on deposit accounts $12,664   $13,024  $12,627  (2.8) 0.3 
Wealth management fees 12,484   12,063  10,951  3.5  14.0 
Capital market products income 6,337   4,161  1,408  52.3  350.1 
Card-based fees, net 4,512   4,694  4,574  (3.9) (1.4)
Mortgage banking income 4,134   3,066  1,304  34.8  217.0 
Merchant servicing fees, net 330   385  365  (14.3) (9.6)
Other service charges, commissions, and fees 2,616   2,638  2,353  (0.8) 11.2 
Total fee-based revenues 43,077   40,031  33,582  7.6  28.3 
Other income 3,461   2,920  2,880  18.5  20.2 
Net securities losses (42)      N/M  N/M 
Total noninterest income  $46,496    $42,951   $36,462   8.3   27.5  

N/M – Not meaningful.

Total noninterest income of $46.5 million was up by 8.3% and 27.5% from the third quarter of 2019 and the fourth quarter of 2018, respectively. The increase in wealth management fees compared to the third quarter of 2019 resulted from continued sales of fiduciary and investment advisory services to new and existing customers and a strong market environment. Compared to the fourth quarter of 2018, growth in wealth management fees was driven primarily by customers acquired in the Northern Oak Wealth Management, Inc. ("Northern Oak") transaction completed in January 2019.

Capital market products income increased in the fourth quarter of 2019 as a result of higher sales to corporate clients reflecting the lower long-term rate environment. Mortgage banking income for the fourth quarter of 2019 resulted from sales of $173.0 million of 1-4 family mortgage loans in the secondary market, compared to $141.0 million in the third quarter of 2019 and $51.4 million in the fourth quarter of 2018. In addition, mortgage banking income for the fourth quarter of 2019 increased compared to both prior periods due to positive changes in the fair value of mortgage servicing rights, which fluctuate from quarter to quarter. Other income was higher compared to both prior periods due primarily to benefit settlements on bank-owned life insurance.

Noninterest Expense Analysis
(Dollar amounts in thousands)

  Quarters Ended December 31, 2019
Percent Change From
  December 31,
2019
 September 30,
2019
 December 31,
2018
 September 30,
2019
 December 31,
2018
Salaries and employee benefits:          
Salaries and wages  $53,043   $50,686   $45,011   4.7   17.8  
Retirement and other employee benefits 9,930   10,795   10,378   (8.0)  (4.3) 
Total salaries and employee benefits  62,973   61,481   55,389   2.4   13.7  
Net occupancy and equipment expense  13,990   13,903   12,827   0.6   9.1  
Professional services 12,136   9,550   8,859   27.1   37.0  
Technology and related costs  5,192   5,062   4,849   2.6   7.1  
Advertising and promotions 2,896   2,955   2,011   (2.0)  44.0  
Net other real estate owned ("OREO") expense  1,080   381   763   183.5   41.5  
Other expenses 13,000   11,432   13,418   13.7   (3.1) 
Acquisition and integration related expenses  5,258   3,397   9,553   54.8   (45.0) 
Delivering Excellence implementation costs  223   234   3,159   (4.7)  (92.9) 
Total noninterest expense  $116,748    $108,395    $110,828    7.7    5.3   
Acquisition and integration related expenses  (5,258)  (3,397)  (9,553)  54.8   (45.0) 
Delivering Excellence implementation costs  (223)  (234)  (3,159)  (4.7)  (92.9) 
Total noninterest expense, adjusted(1) $111,267   $104,764   $98,116   6.2   13.4  

(1) See the "Non-GAAP Financial Information" section presented later in this release for a discussion of this non-GAAP financial measure.

Total noninterest expense for the fourth quarter of 2019 increased by 7.7% and 5.3% compared to the third quarter of 2019 and the fourth quarter of 2018, respectively. Noninterest expense for all periods presented was impacted by acquisition and integration related expenses and costs related to the implementation of the Delivering Excellence initiative. Excluding these items, noninterest expense for the fourth quarter of 2019 was up by 6.2% and 13.4% from the third quarter of 2019 and fourth quarter of 2018, respectively, which resulted in an efficiency ratio of 56% for the fourth quarter of 2019, up from 54% and 55% compared to the same prior periods.

Operating costs associated with the Bridgeview and Northern Oak transactions completed during the first half of 2019 contributed to the increase in noninterest expense compared to the fourth quarter of 2018. These costs primarily occurred within salaries and employee benefits, net occupancy and equipment expense, professional services, advertising and promotions, and other expenses.

The increase in salaries and employee benefits compared to both prior periods was due to higher commissions resulting from sales of 1-4 family mortgage loans in the secondary market and the timing of certain compensation accruals. In addition, compared to the fourth quarter of 2018, salaries and employee benefits were impacted by merit increases. Professional services increased compared to both prior periods as a result of technology and process enhancements due to organizational growth. The increase in net OREO expenses compared to both prior periods was due mainly to sales of properties at a loss, partially offset by positive valuation adjustments.

Compared to the fourth quarter of 2018, net occupancy and equipment expense increased due to a deferred gain no longer being included as a quarterly reduction to expense upon adoption of lease accounting guidance at the beginning of 2019.

Other expenses for the third quarter of 2019 were impacted by a reduction in Federal Deposit Insurance Corporation premiums due to small bank assessments credits received.

Acquisition and integration related expenses for the fourth and third quarters of 2019 resulted from the acquisition of Bridgeview and the pending acquisition of Park Bank. Acquisition and integration related expenses for the fourth quarter of 2018 resulted from the acquisition of Northern States Financial Corporation.

Delivering Excellence implementation costs for all periods presented resulted from certain actions initiated by the Company in connection with its Delivering Excellence initiative and include property valuation adjustments on locations identified for closure, employee severance, and general restructuring and advisory services.

LOAN PORTFOLIO AND ASSET QUALITY

Loan Portfolio Composition
(Dollar amounts in thousands)

  As of December 31, 2019
Percent Change From
  December 31,
2019
 September 30,
2019
 December 31,
2018
 September 30,
2019
 December 31,
2018
Commercial and industrial $4,481,525  $4,570,361  $4,120,293  (1.9)  8.8  
Agricultural 405,616  417,740  430,928  (2.9)  (5.9) 
Commercial real estate:          
Office, retail, and industrial 1,848,718  1,892,877  1,820,917  (2.3)  1.5  
Multi-family 856,553  817,444  764,185  4.8   12.1  
Construction 593,093  637,256  649,337  (6.9)  (8.7) 
Other commercial real estate 1,383,708  1,425,292  1,361,810  (2.9)  1.6  
Total commercial real estate 4,682,072  4,772,869  4,596,249  (1.9)  1.9  
Total corporate loans 9,569,213  9,760,970  9,147,470  (2.0)  4.6  
Home equity 851,454  833,955  851,607  2.1     
1-4 family mortgages 1,927,078  1,686,967  1,017,181  14.2   89.5  
Installment 492,585  491,427  430,525  0.2   14.4  
Total consumer loans 3,271,117  3,012,349  2,299,313  8.6   42.3  
   Total loans $12,840,330  $12,773,319  $11,446,783  0.5   12.2  

Total loans of $12.8 billion grew by 2.1%, annualized, from September 30, 2019 and 12.2% from December 31, 2018. Excluding loans acquired in the Bridgeview transaction as of December 31, 2019, total loans grew by 7.1% from December 31, 2018. Commercial and industrial loans decreased compared to September 30, 2019 as a result of higher than expected paydowns due to favorable customer business conditions, partially offset by growth in certain sector-based lending businesses. Compared to both prior periods, total corporate loans benefited from growth in multi-family loans. Strong production within commercial real estate loans was offset by the impact of certain customers selling their commercial business or investment real estate properties, as well as refinancing with institutions offering loan terms outside of our credit parameters compared to both prior periods. In addition, compared to December 31, 2018 total corporate loans benefited from growth in commercial and industrial loans, primarily within our sector-based lending and middle market business units.

Growth in consumer loans compared to both prior periods resulted primarily from purchases of 1-4 family mortgages and home equity loans, as well as organic growth.

Asset Quality
(Dollar amounts in thousands)

  As of December 31, 2019
Percent Change From
  December 31,
2019
 September 30,
2019
 December 31,
2018
 September 30,
2019
 December 31,
2018
Asset quality          
Non-accrual loans $82,269  $77,692  $56,935  5.9   44.5  
90 days or more past due loans, still accruing
  interest(1)
 5,001  4,657  8,282  7.4   (39.6) 
Total non-performing loans 87,270  82,349  65,217  6.0   33.8  
Accruing troubled debt restructurings
  ("TDRs")
 1,233  1,422  1,866  (13.3)  (33.9) 
Foreclosed assets(2) 20,458  25,266  12,821  (19.0)  59.6  
Total non-performing assets $108,961  $109,037  $79,904  (0.1)  36.4  
30-89 days past due loans(1) $31,958  $46,171  $37,524     
Non-accrual loans to total loans 0.64% 0.61% 0.50%    
Non-performing loans to total loans 0.68% 0.64% 0.57%    
Non-performing assets to total loans plus
  foreclosed assets
 0.85% 0.85% 0.70%    
Allowance for credit losses  $109,222  $110,228  $103,419     
Allowance for credit losses to total loans(3) 0.85% 0.86% 0.90%    
Allowance for credit losses to loans, excluding
  acquired loans
 0.95% 0.98% 1.01%    
Allowance for credit losses to non-accrual
  loans
 132.76% 141.88% 181.64%    

(1) Purchased credit impaired loans with an accretable yield are considered current and are not included in past due loan totals.
(2) Foreclosed assets consist of OREO and other foreclosed assets acquired in partial or total satisfaction of default loans. Other foreclosed assets are included in other assets in the Consolidated Statement of Financial Condition.
(3) This ratio includes acquired loans that are recorded at fair value through an acquisition adjustment, which incorporates credit risk as of the acquisition date with no allowance for credit losses being established at that time. As the acquisition adjustment is accreted into income over future periods, an allowance for credit losses on acquired loans is established as necessary to reflect credit deterioration.

Total non-performing assets represented 0.85% of total loans and foreclosed assets at December 31, 2019 compared to 0.85% and 0.70% at September 30, 2019 and December 31, 2018, respectively, reflective of normal fluctuations. These fluctuations occurred within non-accrual loans and foreclosed assets, and are isolated to certain credits for which the Company has remediation plans in place.

The allowance for credit losses to total loans was 0.85% at December 31, 2019, consistent with September 30, 2019 and down from 0.90% at December 31, 2018. The decrease compared to December 31, 2018 was driven primarily by loans acquired in the Bridgeview transaction, for which no allowance for credit losses was established at the time of acquisition in accordance with accounting guidance applicable to business combinations.

Charge-Off Data
(Dollar amounts in thousands)

  Quarters Ended
  December 31,
2019
 % of
Total
 September 30,
2019
 % of
Total
 December 31,
2018
 % of
Total
Net loan charge-offs(1)            
Commercial and industrial  $6,799   64.2   $5,532   60.1   $5,558   73.9  
Agricultural  15   0.1   439   4.8   71   0.9  
Commercial real estate:             
Office, retail, and industrial 256   2.4   219   2.4   713   9.5  
Multi-family (439)  (4.1)  (38)  (0.4)  (3)    
Construction  3      (2)     (99)  (1.3) 
Other commercial real estate 13   0.1   (43)  (0.5)  (817)  (10.9) 
Consumer  3,953   37.3   3,092   33.6   2,094   27.9  
Total net loan charge-offs  $10,600   100.0   $9,199   100.0   $7,517   100.0  
Total recoveries included above  $2,135     $2,073     $2,810    
Net loan charge-offs to average loans(1)(2)            
Quarter-to-date 0.33 %   0.29 %   0.26 %  
Year-to-date 0.31 %   0.31 %   0.38 %  

(1) Amounts represent charge-offs, net of recoveries.
(2) Annualized based on the actual number of days for each period presented.

Net loan charge-offs to average loans, annualized, were 0.33% for the fourth quarter of 2019, compared to 0.29% for the third quarter of 2019 and 0.26% for the fourth quarter of 2018. For the year ended December 31, 2019, net loan charge-offs to average loans was 0.31%, down from 0.38% for the same period in 2018.

DEPOSIT PORTFOLIO

Deposit Composition
(Dollar amounts in thousands)

  Average for Quarters Ended December 31, 2019
Percent Change From
  December 31,
2019
 September 30,
2019
 December 31,
2018
 September 30,
2019
 December 31,
2018
Demand deposits  $3,862,157  $3,800,569  $3,685,806  1.6   4.8 
Savings deposits  2,044,386  2,056,128  2,044,312  (0.6)   
NOW accounts  2,291,667  2,483,176  2,128,722  (7.7)  7.7 
Money market accounts  2,178,518  2,080,274  1,831,311  4.7   19.0 
Core deposits 10,376,728  10,420,147  9,690,151  (0.4)  7.1 
Time deposits  3,033,903  3,026,423  2,311,453  0.2   31.3 
Total deposits  $13,410,631  $13,446,570  $12,001,604  (0.3)  11.7 

Total average deposits were $13.4 billion for the fourth quarter of 2019, consistent with the third quarter of 2019 and up 11.7% from the fourth quarter of 2018. The increase in total average deposits compared to the fourth quarter of 2018 was driven primarily by deposits assumed in the Bridgeview transaction during the second quarter of 2019, various time deposit marketing initiatives, and organic growth.

CAPITAL MANAGEMENT

Capital Ratios

  As of
  December 31,
2019
 September 30,
2019
 December 31,
2018
Company regulatory capital ratios:
Total capital to risk-weighted assets  12.96% 12.62% 12.62%
Tier 1 capital to risk-weighted assets  10.52% 10.18% 10.20%
Common equity Tier 1 ("CET1") to risk-weighted assets  10.52% 10.18% 10.20%
Tier 1 capital to average assets  8.81% 8.67% 8.90%
Company tangible common equity ratios(1)(2):    
Tangible common equity to tangible assets  8.81% 8.54% 8.59%
Tangible common equity, excluding accumulated other comprehensive
  income ("AOCI"), to tangible assets
 8.82% 8.50% 8.95%
Tangible common equity to risk-weighted assets  10.51% 10.24% 9.81%

(1)  These ratios are not subject to formal Federal Reserve regulatory guidance.
(2)  Tangible common equity represents common stockholders' equity less goodwill and identifiable intangible assets. For details of the calculation of these ratios, see the sections titled, "Non-GAAP Financial Information" and "Non-GAAP Reconciliations" presented later in this release.

Capital ratios generally increased compared to December 31, 2018, as strong earnings and deferred gains recognized due to the adoption of lease accounting guidance at the beginning of 2019 more than offset capital deployed for the Bridgeview and Northern Oak acquisitions, the impact of loan growth and securities purchases on risk-weighted assets, and stock repurchases.

During the first quarter of 2019, the Company announced a new stock repurchase program that authorizes the Company to repurchase up to $180 million of its common stock. Stock repurchases under this program may be made from time to time on the open market or in privately negotiated transactions, at the discretion of the Company. The Company did not repurchase any shares of its common stock during the fourth quarter of 2019 and repurchased 1.7 million shares of its common stock at a total cost of $33.9 million for the full year of 2019. As of December 31, 2019, the Company had remaining authorization to purchase $146.1 million of its common stock.

The Board of Directors approved a quarterly cash dividend of $0.14 per common share during the fourth quarter of 2019, which is a 17% increase from the fourth quarter of 2018. This dividend represents the 148th 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, January 22, 2020 at 11:00 A.M. (ET). Members of the public who would like to listen to the conference call should dial (877) 507-0639 (U.S. domestic) or (412) 317-6003 (International) and ask for the First Midwest Bancorp, Inc. Earnings Conference Call. The number should be dialed 10 to 15 minutes prior to the start of the conference call. There is no charge to access the call. The conference call will also be accessible as an audio webcast through the Investor Relations section of the Company's website, www.firstmidwest.com/investorrelations. For those unable to listen to the live broadcast, a replay will be available on the Company's website or by dialing (877) 344-7529 (U.S. domestic) or (412) 317-0088 (International) conference I.D. 10138434 beginning one hour after completion of the live call until 8:00 A.M. (ET) on February 5, 2020. Please direct any questions regarding obtaining access to the conference call to First Midwest Bancorp, Inc. Investor Relations, via e-mail, at investor.relations@firstmidwest.com.

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

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

Forward-Looking Statements

This press release, as well as any oral statements made by or on behalf of First Midwest, may contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by the use of words such as "may," "might," "will," "would," "should," "could," "expect," "plan," "intend," "anticipate," "believe," "estimate," "outlook," "predict," "project," "probable," "potential," "possible," "target," "continue," "look forward," or "assume" and words of similar import. Forward-looking statements are not historical facts or guarantees of future performance but instead express only management's beliefs regarding future results or events, many of which, by their nature, are inherently uncertain and outside of management's control. It is possible that actual results and events may differ, possibly materially, from the anticipated results or events indicated in these forward-looking statements. First Midwest cautions you not to place undue reliance on these statements. Forward-looking statements speak only as of the date made, and First Midwest undertakes no obligation to update any forward-looking statements.

Forward-looking statements may be deemed to include, among other things, statements relating to First Midwest's future financial performance, including the related outlook for 2020, the performance of First Midwest's loan or securities portfolio, the expected amount of future credit reserves or charge-offs, corporate strategies or objectives, including the impact of certain actions and initiatives, First Midwest's Delivering Excellence initiative, including costs and benefits associated therewith and the timing thereof, anticipated trends in First Midwest's business, regulatory developments, the impact of federal income tax reform legislation, acquisition transactions, including First Midwest's proposed acquisition of Bankmanagers, estimated synergies, cost savings and financial benefits of announced and completed transactions, and growth strategies, including possible future acquisitions. These statements are subject to certain risks, uncertainties and assumptions, including those discussed under the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in First Midwest's Annual Report on Form 10-K for the year ended December 31, 2018, and in First Midwest's subsequent filings made with the Securities and Exchange Commission ("SEC"). These risks and uncertainties are not exhaustive, and other sections of these reports describe additional factors that could adversely impact First Midwest's business and financial performance.

Non-GAAP Financial Information

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

The Company presents EPS, the efficiency ratio, return on average assets, return on average common equity, and return on average tangible common equity, all adjusted for certain significant transactions. These transactions include acquisition and integration related expenses associated with completed and pending acquisitions (all periods), Delivering Excellence implementation costs (all periods), and certain income tax benefits aligned with Tax Reform (full year 2018). In addition, the calculation of the efficiency ratio is adjusted for net OREO expense. Management believes excluding these transactions from EPS, the efficiency ratio, return on average assets, return on average common equity, and return on average tangible common equity may be useful in assessing the Company's underlying operational performance since these transactions do not pertain to its core business operations and their exclusion may facilitate better comparability between periods. Management believes that excluding acquisition and integration related expenses from these metrics may be useful to the Company, as well as analysts and investors, since these expenses can vary significantly based on the size, type, and structure of each acquisition. Additionally, management believes excluding these transactions from these metrics may enhance comparability for peer comparison purposes.

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

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

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

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

About the Company

First Midwest (NASDAQ: FMBI) is a relationship-focused financial institution and one of the largest independent publicly traded bank holding companies based on assets headquartered in Chicago and the Midwest, with approximately $18 billion of assets and $12 billion of assets under management. First Midwest's principal subsidiary, First Midwest Bank, and other affiliates provide a full range of commercial, treasury management, equipment leasing, consumer, wealth management, trust and private banking products and services through locations in metropolitan Chicago, southeast Wisconsin, northwest Indiana, central and western Illinois, and eastern Iowa. Visit First Midwest at www.firstmidwest.com.

CONTACTS:

Investors
Patrick S. Barrett
EVP, Chief Financial Officer
(708) 831-7231
pat.barrett@firstmidwest.com
Media
Maurissa Kanter
SVP, Director of Corporate Communications
(708) 831-7345
maurissa.kanter@firstmidwest.com


Accompanying Unaudited Selected Financial Information

First Midwest Bancorp, Inc.
Consolidated Statements of Financial Condition (Unaudited)
(Dollar amounts in thousands)
  
 As of
 December 31, September 30, June 30, March 31, December 31,
 2019 2019 2019 2019 2018
Period-End Balance Sheet         
Assets         
Cash and due from banks $214,894   $273,613   $199,684   $186,230   $211,189  
Interest-bearing deposits in other banks 84,327   202,054   126,966   76,529   78,069  
Equity securities, at fair value 42,136   40,723   40,690   33,304   30,806  
Securities available-for-sale, at fair value 2,873,386   2,905,738   2,793,316   2,350,195   2,272,009  
Securities held-to-maturity, at amortized cost21,997   22,566   23,277   12,842   10,176  
FHLB and FRB stock115,409   112,845   109,466   85,790   80,302  
Loans:         
Commercial and industrial 4,481,525   4,570,361   4,524,401   4,183,262   4,120,293  
Agricultural 405,616   417,740   430,589   438,461   430,928  
Commercial real estate:         
Office, retail, and industrial 1,848,718   1,892,877   1,936,577   1,806,892   1,820,917  
Multi-family 856,553   817,444   787,155   752,943   764,185  
Construction 593,093   637,256   654,607   683,475   649,337  
Other commercial real estate 1,383,708   1,425,292   1,447,673   1,309,878   1,361,810  
Home equity851,454   833,955   874,686   862,068   851,607  
1-4 family mortgages 1,927,078   1,686,967   1,391,814   1,086,264   1,017,181  
Installment492,585   491,427   472,102   445,760   430,525  
Total loans 12,840,330   12,773,319   12,519,604   11,569,003   11,446,783  
Allowance for loan losses (108,022)  (109,028)  (105,729)  (103,579)  (102,219) 
Net loans 12,732,308   12,664,291   12,413,875   11,465,424   11,344,564  
OREO 8,750   12,428   15,313   10,818   12,821  
Premises, furniture, and equipment, net147,996   147,064   148,347   131,014   132,502  
Investment in bank-owned life insurance ("BOLI")296,351   297,610   297,118   295,899   296,733  
Goodwill and other intangible assets 875,262   876,219   878,802   808,852   790,744  
Accrued interest receivable and other assets 437,581   458,303   415,379   360,872   245,734  
Total assets$17,850,397   $18,013,454   $17,462,233   $15,817,769   $15,505,649  
Liabilities and Stockholders' Equity         
Noninterest-bearing deposits $3,802,422   $3,832,744   $3,748,316   $3,588,943   $3,642,989  
Interest-bearing deposits 9,448,856   9,608,183   9,440,272   8,572,039   8,441,123  
Total deposits 13,251,278   13,440,927   13,188,588   12,160,982   12,084,112  
Borrowed funds 1,658,758   1,653,490   1,407,378   973,852   906,079  
Senior and subordinated debt233,948   233,743   233,538   203,984   203,808  
Accrued interest payable and other liabilities 335,620   345,695   332,156   319,480   256,652  
Stockholders' equity 2,370,793   2,339,599   2,300,573   2,159,471   2,054,998  
Total liabilities and stockholders' equity$17,850,397   $18,013,454   $17,462,233   $15,817,769   $15,505,649  
Stockholders' equity, excluding AOCI $2,372,747   $2,332,861   $2,303,383   $2,191,630   $2,107,510  
Stockholders' equity, common 2,370,793   2,339,599   2,300,573   2,159,471   2,054,998  


 
First Midwest Bancorp, Inc.
Condensed Consolidated Statements of Income (Unaudited)
(Dollar amounts in thousands)
               
 Quarters Ended  Years Ended
 December 31, September 30, June 30, March 31, December 31,  December 31, December 31,
 2019 2019 2019 2019 2018  2019 2018
Income Statement              
Interest income $176,604   $181,963  $177,682  $162,490  $159,527   $698,739   $582,492 
Interest expense 28,245   31,176  27,370  23,466  20,898   110,257   65,870 
Net interest income 148,359   150,787  150,312  139,024  138,629   588,482   516,622 
Provision for loan losses9,594   12,498  11,491  10,444  9,811   44,027   47,854 
Net interest income after
  provision for loan losses 
138,765   138,289  138,821  128,580  128,818   544,455   468,768 
Noninterest Income              
Service charges on deposit 
  accounts 
12,664   13,024  12,196  11,540  12,627   49,424   48,715 
Wealth management fees 12,484   12,063  12,190  11,600  10,951   48,337   43,512 
Card-based fees, net 4,512   4,694  4,549  4,378  4,574   18,133   17,024 
Capital market products 
  income 
6,337   4,161  2,154  1,279  1,408   13,931   7,721 
Mortgage banking income 4,134   3,066  1,901  1,004  1,304   10,105   7,094 
Merchant servicing fees, net 330   385  371  337  365   1,423   1,465 
Other service charges,
  commissions, and fees 
2,616   2,638  2,412  2,274  2,353   9,940   9,425 
Total fee-based revenues 43,077   40,031  35,773  32,412  33,582   151,293   134,956 
Other income3,461   2,920  2,753  2,494  2,880   11,628   9,636 
Net securities losses (42)           (42)   
Total noninterest
  income
46,496   42,951  38,526  34,906  36,462   162,879   144,592 
Noninterest Expense              
Salaries and employee benefits:             
Salaries and wages 53,043   50,686  47,776  46,135  45,011   197,640   181,164 
Retirement and other
  employee benefits
9,930   10,795  10,916  11,238  10,378   42,879   43,104 
Total salaries and
  employee benefits
62,973   61,481  58,692  57,373  55,389   240,519   224,268 
Net occupancy and
  equipment expense
13,990   13,903  13,671  14,770  12,827   56,334   53,434 
Professional services 12,136   9,550  10,467  7,788  8,859   39,941   32,681 
Technology and related costs 5,192   5,062  4,908  4,596  4,849   19,758   19,220 
Advertising and promotions 2,896   2,955  3,167  2,372  2,011   11,561   9,248 
Net OREO expense 1,080   381  294  681  763   2,436   1,162 
Other expenses 13,000   11,432  12,987  10,581  13,418   47,829   46,264 
Delivering Excellence 
  implementation costs 
223   234  442  258  3,159   1,157   20,413 
Acquisition and integration related expenses 5,258   3,397  9,514  3,691  9,553   21,860   9,613 
Total noninterest expense116,748   108,395  114,142  102,110  110,828   441,395   416,303 
Income before income
  tax expense
68,513   72,845  63,205  61,376  54,452   265,939   197,057 
Income tax expense 16,392   18,300  16,191  15,318  13,044   66,201   39,187 
Net income $52,121   $54,545  $47,014  $46,058  $41,408   $199,738   $157,870 
Net income applicable to
  common shares
$51,697   $54,080  $46,625  $45,655  $41,088   $198,057   $156,558 
Net income applicable to
  common shares, adjusted(1)
$55,807   $56,803  $54,091  $48,616  $50,622   $215,317   $171,279 

Footnotes to Condensed Consolidated Statements of Income
(1) See the "Non-GAAP Reconciliations" section for the detailed calculation.


 
First Midwest Bancorp, Inc.
Selected Financial Information (Unaudited)
(Amounts in thousands, except per share data)
               
 As of or for the
 Quarters Ended  Years Ended
 December 31, September 30, June 30, March 31, December 31,  December 31, December 31,
 2019 2019 2019 2019 2018  2019 2018
EPS              
Basic EPS $0.47  $0.49  $0.43  $0.43  $0.39   $1.83  $1.52 
Diluted EPS $0.47  $0.49  $0.43  $0.43  $0.39   $1.82  $1.52 
Diluted EPS, adjusted(1)$0.51  $0.52  $0.50  $0.46  $0.48   $1.98  $1.67 
Common Stock and Related Per Common Share Data     
Book value $21.56  $21.27  $20.80  $20.20  $19.32   $21.56  $19.32 
Tangible book value $13.60  $13.31  $12.86  $12.63  $11.88   $13.60  $11.88 
Dividends declared per share $0.14  $0.14  $0.14  $0.12  $0.12   $0.54  $0.45 
Closing price at period end $23.06  $19.48  $20.47  $20.46  $19.81   $23.06  $19.81 
Closing price to book value 1.1  0.9  1.0  1.0  1.0   1.1  1.0 
Period end shares outstanding 109,972  109,970  110,589  106,900  106,375   109,972  106,375 
Period end treasury shares 10,443  10,441  9,818  8,775  9,297   10,443  9,297 
Common dividends $15,404  $15,406  $15,503  $12,837  $12,774   $59,150  $46,782 
Dividend payout ratio29.79% 28.57% 32.56% 27.91% 30.77%  29.51% 29.61%
Dividend payout ratio, adjusted27.45% 26.92% 28.00% 26.09% 25.00%  27.27% 26.95%
Key Ratios/Data              
Return on average common
  equity(2)
8.69% 9.22% 8.34% 8.66% 8.09%  8.74% 8.14%
Return on average common
  equity, adjusted(1)(2)
9.38% 9.68% 9.68% 9.22% 9.97%  9.50% 8.91%
Return on average tangible
  common equity(1)(2)
14.37% 15.36% 13.83% 14.41% 13.42%  14.50% 13.87%
Return on average tangible
  common equity, adjusted(1)(2)
15.47% 16.10% 15.95% 15.31% 16.42%  15.71% 15.13%
Return on average assets(2)1.16% 1.22% 1.13% 1.19% 1.06%  1.17% 1.07%
Return on average assets,
  adjusted(1)(2)
1.25% 1.28% 1.31% 1.27% 1.30%  1.28% 1.17%
Loans to deposits96.90% 95.03% 94.93% 95.13% 94.73%  96.90% 94.73%
Efficiency ratio(1)56.15% 53.54% 54.67% 55.69% 55.25%  55.00% 57.87%
Net interest margin(2)(3)3.72% 3.82% 4.06% 4.04% 3.96%  3.90% 3.90%
Net interest margin,
  adjusted(1)(2)(3)
3.48% 3.59% 3.78% 3.86% 3.81%  3.67% 3.75%
Yield on average interest-earning
  assets(2)(3)
4.43% 4.60% 4.80% 4.72% 4.56%  4.63% 4.39%
Cost of funds(2)(4)0.74% 0.82% 0.77% 0.72% 0.63%  0.76% 0.52%
Net noninterest expense to
  average assets(2)
1.56% 1.47% 1.81% 1.74% 1.90%  1.64% 1.84%
Effective income tax rate 23.93% 25.12% 25.62% 24.96% 23.96%  24.89% 19.89%
Effective income tax rate,
  adjusted(1)
23.93% 25.12% 25.62% 24.96% 23.96%  24.89% 23.84%
Capital Ratios              
Total capital to risk-weighted
  assets(1)
12.96% 12.62% 12.57% 12.91% 12.62%  12.96% 12.62%
Tier 1 capital to risk-weighted
  assets(1)
10.52% 10.18% 10.11% 10.52% 10.20%  10.52% 10.20%
CET1 to risk-weighted assets(1)10.52% 10.18% 10.11% 10.52% 10.20%  10.52% 10.20%
Tier 1 capital to average assets(1)8.81% 8.67% 8.96% 9.28% 8.90%  8.81% 8.90%
Tangible common equity to
  tangible assets(1)
8.81% 8.54% 8.57% 9.00% 8.59%  8.81% 8.59%
Tangible common equity,
  excluding AOCI, to tangible
  assets(1)
8.82% 8.50% 8.59% 9.21% 8.95%  8.82% 8.95%
Tangible common equity to risk-
  weighted assets(1)
10.51% 10.24% 10.11% 10.29% 9.81%  10.51% 9.81%
Note: Selected Financial Information footnotes are located at the end of this section.


 
First Midwest Bancorp, Inc.
Selected Financial Information (Unaudited)
(Amounts in thousands, except per share data)
               
 As of or for the
 Quarters Ended  Years Ended
 December 31, September 30, June 30, March 31, December 31,  December 31, December 31,
 2019 2019 2019 2019 2018  2019 2018
Asset quality Performance Data             
Non-performing assets               
Commercial and industrial $29,995   $26,739   $19,809   $34,694  $33,507    $29,995   $33,507  
Agricultural 5,954   6,242   6,712   2,359  1,564    5,954   1,564  
Commercial real estate:              
Office, retail, and industrial25,857   26,812   17,875   17,484  6,510    25,857   6,510  
Multi-family 2,697   2,152   5,322   2,959  3,107    2,697   3,107  
Construction 152   152   152     144    152   144  
Other commercial real estate 4,729   4,680   3,982   2,971  2,854    4,729   2,854  
Consumer12,885   10,915   9,625   9,738  9,249    12,885   9,249  
Total non-accrual loans 82,269   77,692   63,477   70,205  56,935    82,269   56,935  
90 days or more past due loans, 
  still accruing interest 
5,001   4,657   2,615   8,446  8,282    5,001   8,282  
Total non-performing loans 87,270   82,349   66,092   78,651  65,217    87,270   65,217  
Accruing TDRs 1,233   1,422   1,441   1,844  1,866    1,233   1,866  
Foreclosed assets(5)20,458   25,266   28,488   10,818  12,821    20,458   12,821  
Total non-performing assets $108,961   $109,037   $96,021   $91,313  $79,904    $108,961   $79,904  
30-89 days past due loans$31,958   $46,171   $34,460   $45,764  $37,524    $31,958   $37,524  
Allowance for credit losses              
Allowance for loan losses$108,022   $109,028   $105,729   $103,579  $102,219    $108,022   $102,219  
Reserve for unfunded
  commitments
1,200   1,200   1,200   1,200  1,200    1,200   1,200  
Total allowance for credit 
  losses 
$109,222   $110,228   $106,929   $104,779  $103,419    $109,222   $103,419  
Provision for loan losses$9,594   $12,498   $11,491   $10,444  $9,811    $44,027   $47,854  
Net charge-offs by category              
Commercial and industrial $6,799   $5,532   $4,600   $5,061  $5,558    $21,992   $31,018  
Agricultural 15   439   658   89  71    1,201   2,513  
Commercial real estate:              
Office, retail, and industrial256   219   1,454   618  713    2,547   1,952  
Multi-family (439)  (38)     339  (3)   (138)  2  
Construction 3   (2)  (10)    (99)   (9)  (124) 
Other commercial real estate 13   (43)  284   189  (817)   443   (1,122) 
Consumer3,953   3,092   2,355   2,788  2,094    12,188   7,125  
Total net charge-offs 10,600   9,199   9,341   9,084  7,517    38,224   41,364  
Total recoveries included above $2,135   $2,073   $2,083   $1,693  $2,810    $7,984   $6,621  
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  Years Ended
 December 31, September 30, June 30, March 31, December 31,  December 31, December 31,
 2019 2019 2019 2019 2018  2019 2018
Asset quality ratios               
Non-accrual loans to total loans 0.64% 0.61% 0.51% 0.61% 0.50%  0.64% 0.50%
Non-performing loans to total 
  loans 
0.68% 0.64% 0.53% 0.68% 0.57%  0.68% 0.57%
Non-performing assets to total 
  loans plus foreclosed assets
0.85% 0.85% 0.77% 0.79% 0.70%  0.85% 0.70%
Non-performing assets to
  tangible common equity plus 
  allowance for credit losses 
6.79% 6.93% 6.28% 6.27% 5.84%  6.79% 5.84%
Non-accrual loans to total assets0.46% 0.43% 0.36% 0.44% 0.37%  0.46% 0.37%
Allowance for credit losses and net charge-off ratios     
Allowance for credit losses to
  total loans(6)
0.85% 0.86% 0.85% 0.91% 0.90%  0.85% 0.90%
Allowance for credit losses to
  loans, excluding acquired loans 
0.95% 0.98% 0.98% 1.00% 1.01%  0.95% 1.01%
Allowance for credit losses to
  non-accrual loans 
132.76% 141.88% 168.45% 149.25% 181.64%  132.76% 181.64%
Allowance for credit losses to
  non-performing loans 
125.15% 133.85% 161.79% 133.22% 158.58%  125.15% 158.58%
Net charge-offs to average
  loans(2)
0.33% 0.29% 0.31% 0.32% 0.26%  0.31% 0.38%

Footnotes to Selected Financial Information
(1) See the "Non-GAAP Reconciliations" section for the detailed calculation.
(2) Annualized based on the actual number of days for each period presented.
(3) Presented on a tax-equivalent basis, assuming the applicable federal income tax rate of 21%.
(4) Cost of funds expresses total interest expense as a percentage of total average funding sources.
(5) Foreclosed assets consist of OREO and other foreclosed assets acquired in partial or total satisfaction of defaulted loans. Other foreclosed assets are included in other assets in the Consolidated Statement of Financial Condition.
(6) This ratio includes acquired loans that are recorded at fair value through an acquisition adjustment, which incorporates credit risk, as of the acquisition date with no allowance for credit losses being established at that time. As the acquisition adjustment is accreted into income over future periods, an allowance for credit losses is established on acquired loans as necessary to reflect credit deterioration.


 
First Midwest Bancorp, Inc.
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
               
 Quarters Ended  Years Ended
 December 31, September 30, June 30, March 31, December 31,  December 31, December 31,
 2019 2019 2019 2019 2018  2019 2018
EPS              
Net income $52,121   $54,545   $47,014   $46,058   $41,408    $199,738   $157,870  
Net income applicable to non-
  vested restricted shares
(424)  (465)  (389)  (403)  (320)   (1,681)  (1,312) 
Net income applicable to
  common shares
51,697   54,080   46,625   45,655   41,088    198,057   156,558  
Adjustments to net income:              
Acquisition and integration related expenses 5,258   3,397   9,514   3,691   9,553    21,860   9,613  
Tax effect of acquisition and
  integration related expenses 
(1,315)  (849)  (2,379)  (923)  (2,388)   (5,466)  (2,403) 
Delivering Excellence 
  implementation costs
223   234   442   258   3,159    1,157   20,413  
Tax effect of Delivering
  Excellence implementation
  costs
(56)  (59)  (111)  (65)  (790)   (291)  (5,104) 
Income tax benefits(1)                   (7,798) 
Total adjustments to net 
  income, net of tax 
4,110   2,723   7,466   2,961   9,534    17,260   14,721  
Net income applicable to
  common shares,
  adjusted(1)
$55,807   $56,803   $54,091   $48,616   $50,622    $215,317   $171,279  
Weighted-average common shares outstanding:             
Weighted-average common 
  shares outstanding (basic)
109,059   109,281   108,467   105,770   105,116    108,156   102,850  
Dilutive effect of common 
  stock equivalents 
519   381             428   4  
Weighted-average diluted
  common shares 
  outstanding 
109,578   109,662   108,467   105,770   105,116    108,584   102,854  
Basic EPS $0.47   $0.49   $0.43   $0.43   $0.39    $1.83   $1.52  
Diluted EPS $0.47   $0.49   $0.43   $0.43   $0.39    $1.82   $1.52  
Diluted EPS, adjusted(1)$0.51   $0.52   $0.50   $0.46   $0.48    $1.98   $1.67  
Anti-dilutive shares not included 
  in the computation of diluted
  EPS 
                   27  
Dividend Payout Ratio              
Dividends declared per share$0.14   $0.14   $0.14   $0.12   $0.12    $0.54   $0.45  
Dividend payout ratio29.79 % 28.57 % 32.56 % 27.91 % 30.77 %  29.51 % 29.61 %
Dividend payout ratio, adjusted(1)27.45 % 26.92 % 28.00 % 26.09 % 25.00 %  27.27 % 26.95 %
Effective Tax Rate              
Income before income tax
  expense 
$68,513   $72,845   $63,205   $61,376   $54,452    $265,939   $197,057  
Income tax expense $16,392   $18,300   $16,191   $15,318   $13,044    $66,201   $39,187  
Income tax benefits                    7,798  
Income tax expense, adjusted $16,392   $18,300   $16,191   $15,318   $13,044    $66,201   $46,985  
Effective income tax rate 23.93 % 25.12 % 25.62 % 24.96 % 23.96 %  24.89 % 19.89 %
Effective income tax rate, 
  adjusted 
23.93 % 25.12 % 25.62 % 24.96 % 23.96 %  24.89 % 23.84 %
               
Note: Non-GAAP Reconciliations footnotes are located at the end of this section.


 
First Midwest Bancorp, Inc.
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
               
 As of or for the
 Quarters Ended  Years Ended
 December 31, September 30, June 30, March 31, December 31,  December 31, December 31,
 2019 2019 2019 2019 2018  2019 2018
Return on Average Common and Tangible Common Equity           
Net income applicable to 
  common shares
$51,697   $54,080   $46,625   $45,655   $41,088    $198,057   $156,558  
Intangibles amortization2,744   2,750   2,624   2,363   2,077    10,481   7,444  
Tax effect of intangibles 
  amortization
(686)  (688)  (656)  (591)  (519)   (2,621)  (1,919) 
Net income applicable to 
  common shares, excluding 
  intangibles amortization
53,755   56,142   48,593   47,427   42,646    205,917   162,083  
Total adjustments to net
  income, net of tax(1)
4,110   2,723   7,466   2,961   9,534    17,260   14,721  
Net income applicable to
  common shares, adjusted(1)
$57,865   $58,865   $56,059   $50,388   $52,180    $223,177   $176,804  
Average stockholders' equity$2,359,197   $2,327,279   $2,241,569   $2,138,281   $2,015,217    $2,267,353   $1,922,527  
Less: average intangible assets(874,829)  (877,069)  (832,263)  (803,408)  (754,495)   (847,171)  (753,588) 
Average tangible common 
  equity
$1,484,368   $1,450,210   $1,409,306   $1,334,873   $1,260,722    $1,420,182   $1,168,939  
Return on average common
  equity(2)
8.69 % 9.22 % 8.34 % 8.66 % 8.09 %  8.74 % 8.14 %
Return on average common
  equity, adjusted(1)(2)
9.38 % 9.68 % 9.68 % 9.22 % 9.97 %  9.50 % 8.91 %
Return on average tangible
  common equity(2)
14.37 % 15.36 % 13.83 % 14.41 % 13.42 %  14.50 % 13.87 %
Return on average tangible
  common equity, adjusted(1)(2)
15.47 % 16.10 % 15.95 % 15.31 % 16.42 %  15.71 % 15.13 %
Return on Average Assets           
Net income$52,121   $54,545   $47,014   $46,058   $41,408    $199,738   $157,870  
Total adjustments to net
  income, net of tax(1)
4,110   2,723   7,466   2,961   9,534    17,260   14,721  
Net income, adjusted(1)$56,231   $57,268   $54,480   $49,019   $50,942    $216,998   $172,591  
Average assets$17,889,158   $17,699,180   $16,740,050   $15,667,839   $15,503,399    $17,007,061   $14,801,581  
Return on average assets(2)1.16 % 1.22 % 1.13 % 1.19 % 1.06 %  1.17 % 1.07 %
Return on average assets,
  adjusted(1)(2)
1.25 % 1.28 % 1.31 % 1.27 % 1.30 %  1.28 % 1.17 %
Efficiency Ratio Calculation              
Noninterest expense$116,748   $108,395   $114,142   $102,110   $110,828    $441,395   $416,303  
Less:              
Net OREO expense(1,080)  (381)  (294)  (681)  (763)   (2,436)  (1,162) 
Acquisition and integration 
  related expenses
(5,258)  (3,397)  (9,514)  (3,691)  (9,553)   (21,860)  (9,613) 
Delivering Excellence 
  implementation costs
(223)  (234)  (442)  (258)  (3,159)   (1,157)  (20,413) 
Total$110,187   $104,383   $103,892   $97,480   $97,353    $415,942   $385,115  
Tax-equivalent net interest  income(3)$149,711   $152,019   $151,492   $140,132   $139,755    $593,354   $520,896  
Noninterest income46,496   42,951   38,526   34,906   36,462    162,879   144,592  
Add: net securities losses42                42     
Total$196,249   $194,970   $190,018   $175,038   $176,217    $756,275   $665,488  
Efficiency ratio56.15 % 53.54 % 54.67 % 55.69 % 55.25 %  55.00 % 57.87 %
               
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
  December 31, September 30, June 30, March 31, December 31,
  2019 2019 2019 2019 2018
Risk-Based Capital Data          
Common stock $1,204   $1,204   $1,204   $1,157   $1,157  
Additional paid-in capital 1,211,274   1,208,030   1,205,396   1,103,991   1,114,580  
Retained earnings  1,380,612   1,343,895   1,304,756   1,273,245   1,192,767  
Treasury stock, at cost  (220,343)  (220,268)  (207,973)  (186,763)  (200,994) 
Goodwill and other intangible assets, net of deferred tax liabilities (875,262)  (876,219)  (878,802)  (808,852)  (790,744) 
Disallowed DTAs  (1,437)  (1,688)  (2,804)  (809)  (1,334) 
CET1 capital  1,496,048   1,454,954   1,421,777   1,381,969   1,315,432  
Other disallowed DTAs              (334) 
Tier 1 capital  1,496,048   1,454,954   1,421,777   1,381,969   1,315,098  
Tier 2 capital 347,549   348,466   345,078   312,840   311,391  
Total capital  $1,843,597   $1,803,420   $1,766,855   $1,694,809   $1,626,489  
Risk-weighted assets  $14,225,444   $14,294,011   $14,056,482   $13,131,237   $12,892,180  
Adjusted average assets  $16,984,129   $16,787,720   $15,863,145   $14,891,534   $14,782,327  
Total capital to risk-weighted assets  12.96 % 12.62 % 12.57 % 12.91 % 12.62 %
Tier 1 capital to risk-weighted assets  10.52 % 10.18 % 10.11 % 10.52 % 10.20 %
CET1 to risk-weighted assets  10.52 % 10.18 % 10.11 % 10.52 % 10.20 %
Tier 1 capital to average assets  8.81 % 8.67 % 8.96 % 9.28 % 8.90 %
Tangible Common Equity          
Stockholders' equity  $2,370,793   $2,339,599   $2,300,573   $2,159,471   $2,054,998  
Less: goodwill and other intangible assets  (875,262)  (876,219)  (878,802)  (808,852)  (790,744) 
Tangible common equity 1,495,531   1,463,380   1,421,771   1,350,619   1,264,254  
Less: AOCI  1,954   (6,738)  2,810   32,159   52,512  
Tangible common equity, excluding AOCI $1,497,485   $1,456,642   $1,424,581   $1,382,778   $1,316,766  
Total assets  $17,850,397   $18,013,454   $17,462,233   $15,817,769   $15,505,649  
Less: goodwill and other intangible assets  (875,262)  (876,219)  (878,802)  (808,852)  (790,744) 
Tangible assets $16,975,135   $17,137,235   $16,583,431   $15,008,917   $14,714,905  
Tangible common equity to tangible assets  8.81 % 8.54 % 8.57 % 9.00 % 8.59 %
Tangible common equity, excluding AOCI, to tangible 
  assets 
 8.82 % 8.50 % 8.59 % 9.21 % 8.95 %
Tangible common equity to risk-weighted assets  10.51 % 10.24 % 10.11 % 10.29 % 9.81 %
           

Footnotes to Non-GAAP Reconciliations

(1) Adjustments to net income for each period presented are detailed in the EPS non-GAAP reconciliation above. For additional discussion of adjustments, see the "Non-GAAP Financial Information" section.
(2) Annualized based on the actual number of days for each period presented.
(3) Presented on a tax-equivalent basis, assuming the applicable federal income tax rate of 21%.