First Midwest Bancorp, Inc. Announces 2021 First Quarter Results – EPS Up 100% From a Year Ago

Chicago, Illinois, UNITED STATES


CHICAGO, April 20, 2021 (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 first quarter of 2021. Net income applicable to common shares for the first quarter of 2021 was $41 million, or $0.36 per diluted common share, compared to $37 million, or $0.33 per diluted common share, for the fourth quarter of 2020, and $19 million, or $0.18 per diluted common share, for the first quarter of 2020.

Comparative results for the first quarter of 2021 and the fourth and first quarters of 2020 were, in certain cases, impacted by the timing of costs related to bank acquisition and branch consolidation, as well as the recognition of certain income tax benefits. Such results were also impacted by the Company’s response to the COVID-19 pandemic (the "pandemic"), as well as governments' responses to the pandemic. The Company's responses included repositioning its balance sheet which impacted its performance. To facilitate comparison between periods, adjustments to reported results have been made to reflect these impacts. For additional detail on these adjustments, see the "Non-GAAP Financial Information" section presented later in this release.

SELECT FIRST QUARTER HIGHLIGHTS

  • Improved diluted EPS to $0.36, up 9% and 100% from the fourth and first quarters of 2020, respectively.
    • Diluted EPS, adjusted(1) of $0.37, declined 14% from the fourth quarter of 2020, impacted by lower income from the Paycheck Protection Program ("PPP"), partly offset by lower provisioning for loan losses. The increase from a year ago largely reflects the initial increase in provision for loan losses responsive to the pandemic.
  • Increased fee-based revenues to $44 million, up 5% and 17% from the fourth and first quarters of 2020, respectively, reflective of record wealth management fees and mortgage banking income.
  • Produced net interest income of $141 million at a net margin of 3.03%, down 11 basis points ("bps") linked quarter due to lower PPP loan income and down 51 bps from a year ago, reflective of lower interest rates.
  • Increased total loans to $14 billion, up 3% annualized from December 31, 2020, excluding PPP.
  • Maintained robust credit and capital reserves as economic recovery continues:
    • Held the allowance for credit losses ("ACL") at 1.73% of total loans, excluding PPP loans, in-line with 1.77% linked quarter and up from 1.62% a year ago.
      • Incurred net loan charge-offs ("NCOs") of $8 million, compared to $4 million and $10 million in the fourth and first quarters of 2020, excluding purchased credit deteriorated ("PCD") loans.
      • Decreased performing loans classified as substandard and special mention by 9% linked quarter while loans past due 30-89 days declined by 24%.
    • Increased Tier 1 capital to 11.7% of risk-weighted assets, up 12 bps linked quarter and 203 bps from a year ago.
      • Repurchased 715,000 shares of our common stock at a cost of $15 million.

"We had a solid start to the year as our overall performance improved as the economic recovery gains traction," said Michael L. Scudder, Chairman of the Board and Chief Executive Officer of the Company. "Operating performance for the quarter once again benefited from strong production from our fee-based businesses and continued focus on managing our costs. As expected, quarterly comparisons were affected by both normal seasonality and the impact of federal stimulus programs on both client liquidity and transactional volumes. Importantly, our underlying business momentum is strengthening as both production volumes and sales pipelines normalize and improve."

Mr. Scudder concluded, "As the economic recovery builds momentum, we are well positioned for continued growth and expansion. Our balance sheet is strong, preparing us to benefit from an improving credit outlook and growing business demand, as well as from anticipated higher interest rates. As always, our response and collective focus remain on helping our clients achieve financial success, delivering on our strategic priorities and creating long term value for our shareholders."

(1) This metric is a non-GAAP financial measure. For details on the calculation of this metric, 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
 March 31, 2021  December 31, 2020  March 31, 2020
 Average
Balance
 Interest Yield/
Rate
(%)
  Average
Balance
 Interest Yield/
Rate
(%)
  Average
Balance
 Interest Yield/
Rate
(%)
Assets                   
Other interest-earning assets$760,302  $680  0.36   $1,244,999  $930  0.30   $164,351  $816  2.00 
Securities(1)3,131,096  16,264  2.08   3,164,310  17,051  2.16   3,066,574  20,757  2.71 
Federal Home Loan Bank ("FHLB") and Federal Reserve Bank ("FRB") stock107,595  989  3.68   123,287  1,342  4.35   126,643  1,387  4.38 
Loans, excluding PPP loans(1)13,993,303  125,308  3.63   13,335,154  126,474  3.77   13,073,752  148,420  4.57 
PPP loans(1)1,014,798  8,892  3.55   1,013,511  15,195  5.96        
Total loans(1)15,008,101  134,200  3.63   14,348,665  141,669  3.93   13,073,752  148,420  4.57 
Total interest-earning assets(1)19,007,094  152,133  3.24   18,881,261  160,992  3.39   16,431,320  171,380  4.19 
Cash and due from banks236,944       252,268       261,336     
Allowance for loan losses(239,802)      (246,278)      (179,392)    
Other assets1,914,804       1,995,074       1,891,557     
Total assets$20,919,040       $20,882,325       $18,404,821     
Liabilities and Stockholders' Equity                   
Savings deposits$2,573,495  113  0.02   $2,436,930  109  0.02   $2,069,163  164  0.03 
NOW accounts2,802,568  251  0.04   2,774,989  277  0.04   2,273,156  1,630  0.29 
Money market deposits3,008,597  634  0.09   2,923,881  694  0.09   2,227,707  3,099  0.56 
Time deposits1,978,986  2,459  0.50   2,047,260  3,131  0.61   2,932,466  12,224  1.68 
Borrowed funds1,329,394  3,107  0.95   1,661,731  4,158  1.00   2,007,700  5,841  1.17 
Senior and subordinated debt234,873  3,471  5.99   234,669  3,482  5.90   234,053  3,694  6.35 
Total interest-bearing liabilities11,927,913  10,035  0.34   12,079,460  11,851  0.39   11,744,245  26,652  0.91 
Demand deposits5,917,978       5,753,600       3,884,015     
Total funding sources17,845,891    0.23   17,833,060    0.26   15,628,260    0.69 
Other liabilities389,396       373,854       361,404     
Stockholders' equity2,683,753       2,675,411       2,415,157     
Total liabilities and stockholders' equity$20,919,040       $20,882,325       $18,404,821     
Tax-equivalent net interest income/margin(1)  142,098  3.03     149,141  3.14     144,728  3.54 
Tax-equivalent adjustment  (983)      (1,030)      (1,153)  
Net interest income (GAAP)(1)  $141,115       $148,111       $143,575   
Impact of acquired loan accretion(1)  $7,165  0.15     $7,603  0.16     $6,946  0.17 
Tax-equivalent net interest income/margin, adjusted(1)  $134,933  2.88     $141,538  2.98     $137,782  3.37 

(1) Interest income and yields on tax-exempt securities and loans are presented on a tax-equivalent basis, assuming a federal income tax rate of 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 first quarter of 2021 was down 4.7% from the fourth quarter of 2020 and 1.7% from the first quarter of 2020. The decrease in net interest income compared to the fourth quarter of 2020 resulted primarily from lower fees on PPP loans and fewer days in the quarter, partially offset by growth in loans and lower costs of funds. Compared to the first quarter of 2020, net interest income was impacted by lower interest rates, partially offset by growth in loans and an increase in interest income and fees on PPP loans, as well as the acquisition of interest-earning assets from the Park Bank transaction that closed in the first quarter of 2020.

Acquired loan accretion contributed $7.2 million, $7.6 million, and $6.9 million to net interest income for the first quarter of 2021, fourth quarter of 2020, and first quarter of 2020, respectively.

Tax-equivalent net interest margin for the current quarter was 3.03%, decreasing 11 and 51 basis points from the fourth and first quarters of 2020, respectively. Excluding the impact of acquired loan accretion, tax-equivalent net interest margin was 2.88%, down 10 and 49 basis points from the fourth and first quarters of 2020, respectively. Compared to the fourth quarter of 2020, tax-equivalent net interest margin decreased due primarily to lower accelerated income on the forgiveness of PPP loans. Tax-equivalent net interest margin decreased compared to the first quarter of 2020 as a result of lower interest rates on loans and securities, as well as a higher balance of other interest-earning assets due to higher demand deposits as a result of PPP loan funds and other government stimuli, partially offset by lower cost of funds, loan growth, and higher yields on PPP loans.

For the first quarter of 2021, total average interest-earning assets rose by $125.8 million and $2.6 billion from the fourth and first quarters of 2020, respectively. The increase compared to the fourth quarter of 2020 resulted primarily from loan growth, partially offset by a lower balance of other interest-earning assets. Compared to the first quarter of 2020, the increase in average interest-earning assets was due primarily to assets acquired in the Park Bank transaction, loan growth, and a higher balance of other interest-earning assets due to higher demand deposits as a result of PPP loan funds and other government stimuli.

Total average funding sources for the first quarter of 2021 were consistent with the fourth quarter of 2020 and increased by $2.2 billion from first quarter of 2020. The increase compared to the first quarter of 2020 was driven primarily by deposit growth due to higher customer balances resulting from PPP funds and other government stimuli, as well as deposits assumed in the Park Bank transaction, partially offset by a decrease in FHLB advances.

 
Noninterest Income Analysis
(Dollar amounts in thousands)
     
  Quarters Ended March 31, 2021
Percent Change From
  March 31,
2021
 December 31, 
 2020
 March 31,
2020
 December 31, 
 2020
 March 31,
2020
Wealth management fees $14,149  $13,548  $12,361  4.4  14.5 
Mortgage banking income 10,187  9,191  1,788  10.8  469.7 
Service charges on deposit accounts 9,980  10,811  11,781  (7.7) (15.3)
Card-based fees, net 4,556  4,530  3,968  0.6  14.8 
Capital market products income 2,089  659  4,722  217.0  (55.8)
Other service charges, commissions, and fees 2,761  2,993  2,682  (7.8) 2.9 
Total fee-based revenues 43,722  41,732  37,302  4.8  17.2 
Other income 2,081  3,550  3,065  (41.4) (32.1)
Swap termination costs   (17,567)   N/M  N/M 
Net securities losses     (1,005) N/M  N/M 
Total noninterest income $45,803  $27,715  $39,362  65.3  16.4 

N/M – Not meaningful.

Total noninterest income of $45.8 million was up 65.3% from the fourth quarter of 2020 and 16.4% from the first quarter of 2020. Excluding the impact of swap termination costs in the fourth quarter of 2020, total noninterest income increased 1.2%. Record wealth management fees resulted from a higher market environment and continued sales of fiduciary and investment advisory services to new and existing customers compared to both prior periods. The decrease in service charges on deposit accounts compared to the fourth quarter of 2020 was due primarily to seasonality, whereas the decrease from the first quarter of 2020 resulted from the impact of lower transaction volumes due to the pandemic. Capital market products income resulted from levels of sales to corporate clients in light of market conditions that were higher than the fourth quarter of 2020 and lower than the first quarter of 2020.

Record mortgage banking income for the first quarter of 2021 resulted from sales of $283.9 million of 1-4 family mortgage loans in the secondary market compared to $275.6 million and $116.6 million in the fourth and first quarters of 2020, respectively. In addition, mortgage banking income for the first quarter of 2021 increased compared to both prior periods due to increases in the fair value of mortgage servicing rights.

Other income decreased compared to both prior periods as a result of fair value adjustments on equity securities.

During the fourth quarter of 2020, the Company terminated longer term interest rate swaps with a notional amount of $510 million as a result of excess liquidity and in response to market conditions. As a result, $17.6 of pre-tax losses on swap terminations were recorded.

Net securities losses of $1.0 million were recognized during the first quarter of 2020 as a result of repositioning of the Company's securities portfolio due to market conditions.

 
Noninterest Expense Analysis
(Dollar amounts in thousands)
     
  Quarters Ended March 31, 2021
Percent Change From
  March 31,
2021
 December 31, 
 2020
 March 31,
2020
 December 31, 
 2020
 March 31,
2020
Salaries and employee benefits:          
Salaries and wages $53,693  $55,950  $49,990  (4.0) 7.4 
Retirement and other employee benefits 12,708  10,430  12,869  21.8  (1.3)
Total salaries and employee benefits 66,401  66,380  62,859    5.6 
Net occupancy and equipment expense 14,752  14,002  14,227  5.4  3.7 
Technology and related costs 10,284  11,005  8,548  (6.6) 20.3 
Professional services 8,059  8,424  10,390  (4.3) (22.4)
Advertising and promotions 1,835  1,850  2,761  (0.8) (33.5)
Net other real estate owned ("OREO") expense 589  106  420  455.7  40.2 
Other expenses 14,735  12,851  12,654  14.7  16.4 
Optimization costs 1,525  1,493    2.1  100.0 
Acquisition and integration related expenses 245  1,860  5,472  (86.8) (95.5)
Total noninterest expense $118,425  $117,971  $117,331  0.4  0.9 
Optimization costs (1,525) (1,493)   2.1  (100.0)
Acquisition and integration related expenses (245) (1,860) (5,472) (86.8) (95.5)
Total noninterest expense, adjusted(1) $116,655  $114,618  $111,859  1.8  4.3 

(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 was stable compared to both prior periods. Noninterest expense for all periods presented was impacted by acquisition and integration related expenses. In addition, the first quarter of 2021 and fourth quarter of 2020 were impacted by optimization costs. Excluding these items, noninterest expense for the first quarter of 2021 was $116.7 million, up 1.8% from the fourth quarter of 2020 reflective of seasonality, and up 4.3% from the first quarter of 2020. Overall, noninterest expense, adjusted, to average assets, excluding PPP loans, was 2.38% for the first quarter of 2021, up 9 basis points and down 6 basis points from the fourth and first quarters of 2020, respectively.

Operating costs associated with the Park Bank transaction contributed to the increase in noninterest expense compared to the first quarter of 2020. These costs primarily occurred in salaries and employee benefits, net occupancy and equipment expense, technology and related costs, and other expenses.

Salaries and employee benefits compared to the fourth quarter of 2020 were impacted by merit increases, payroll tax timing, and higher equity compensation valuations, offset by ongoing benefits of optimization strategies and lower compensation accruals. Compared to the first quarter of 2020, salaries and employee benefits increased primarily due to higher equity compensation valuations, compensation accruals, commissions, and merit increases, partially offset by ongoing benefits of optimization strategies. Higher costs related to winter weather conditions contributed to the increase in net occupancy and equipment costs compared to the fourth quarter of 2020. Compared to the first quarter of 2020, technology and related costs was impacted by investments in technology, including the origination of PPP loans. Professional services expenses were elevated for the first quarter of 2020 due to process enhancements and expenses associated with higher capital market products income. Advertising and promotions expense decreased compared to the first quarter of 2020 due to the timing of certain costs related to marketing campaigns. Other expenses for the first quarter of 2021 was impacted by a valuation adjustment on a foreclosed asset.

Optimization costs of $1.5 million for the first quarter of 2021 primarily include advisory fees, employee severance, and other expenses associated with locations identified for closure.

Acquisition and integration related expenses for all periods presented resulted primarily from the acquisition of Park Bank.

INCOME TAXES

The Company's effective tax rate for the first quarter of 2021 was 27.8% up from 12.1% and 24.8% for the fourth and first quarters of 2020, respectively. The increase compared to both prior periods was driven primarily by a $1.1 million increase in income tax expense related to share-based payments and a decrease in federal and state tax exempt income. In addition, the effective tax rate for the fourth quarter of 2020 was impacted by $3.6 million of income tax benefits resulting from deferred tax asset adjustments, as well as the finalization of the prior year returns and the expiration of the statute of limitations on uncertain tax positions.

LOAN PORTFOLIO AND ASSET QUALITY

Loan Portfolio Composition
(Dollar amounts in thousands)
     
  As of March 31, 2021
Percent Change From
  March 31, 
 2021
 December 31, 
 2020
 March 31, 
 2020
 December 31, 
 2020
 March 31, 
 2020
Commercial and industrial $4,546,317  $4,578,254  $5,064,295  (0.7) (10.2)
Agricultural 355,883  364,038  393,063  (2.2) (9.5)
Commercial real estate:          
Office, retail, and industrial 1,827,116  1,861,768  2,092,097  (1.9) (12.7)
Multi-family 906,124  872,813  918,944  3.8  (1.4)
Construction 614,021  612,611  661,363  0.2  (7.2)
Other commercial real estate 1,463,582  1,481,976  1,415,892  (1.2) 3.4 
Total commercial real estate 4,810,843  4,829,168  5,088,296  (0.4) (5.5)
Total corporate loans, excluding PPP loans 9,713,043  9,771,460  10,545,654  (0.6) (7.9)
PPP loans 1,109,442  785,563    41.2  N/M 
Total corporate loans 10,822,485  10,557,023  10,545,654  2.5  2.6 
Home equity 690,030  761,725  973,658  (9.4) (29.1)
1-4 family mortgages 3,187,066  3,022,413  1,957,037  5.4  62.9 
Installment 483,945  410,071  488,668  18.0  (1.0)
Total consumer loans 4,361,041  4,194,209  3,419,363  4.0  27.5 
Total loans $15,183,526  $14,751,232  $13,965,017  2.9  8.7 
           

N/M – Not meaningful.

Total loans includes loans originated under the PPP loan programs beginning in the second quarter of 2020, which totaled $1.1 billion and $785.6 million as of March 31, 2021 and December 31, 2020, respectively. Excluding these loans, total loans were up 3% annualized from December 31, 2020 and 1% from March 31, 2020. Compared to both prior periods, corporate loans, excluding PPP loans, were impacted by lower line usage and higher paydowns due to current economic conditions as a result of the ongoing pandemic. Production increased in the first quarter of 2021 compared to the fourth quarter of 2020; however, this continued to be more than offset by excess borrower liquidity and paydowns as a result of the pandemic and below pre-pandemic production levels.

Growth in consumer loans compared to both prior periods resulted primarily from purchases of 1-4 family mortgages and installment loans, as well as strong production in the 1-4 family mortgages portfolio, which more than offset higher prepayments.

 
Allowance for Credit Losses
(Dollar amounts in thousands)
     
  As of or for the Quarters Ended March 31, 2021
Percent Change From
  March 31,
2021
 December 31, 
 2020
 March 31,
2020
 December 31, 
 2020
 March 31,
2020
ACL, excluding PCD loans $215,305  $215,915  $176,478  (0.3) 22.0 
PCD loan ACL 28,079  31,127  50,223  (9.8) (44.1)
Total ACL $243,384  $247,042  $226,701  (1.5) 7.4 
Provision for credit losses $6,098  $10,507  $39,532  (42.0) (84.6)
ACL to total loans 1.60% 1.67% 1.62%    
ACL to total loans, excluding PPP loans(1) 1.73% 1.77% 1.62%    
ACL to non-accrual loans 153.67% 173.33% 154.64%    

(1) This ratio excludes PPP loans that are fully guaranteed by the Small Business Administration ("SBA"). As a result, no allowance for credit losses is associated with these loans. See the "Non-GAAP Financial Information" section presented later in this release for a discussion of this non-GAAP financial measure.

The ACL was $243.4 million or 1.60% of total loans as of March 31, 2021, decreasing $3.7 million from December 31, 2020 and increasing $16.7 million compared to March 31, 2020. Excluding the impact of PPP loans, ACL to total loans was 1.73% as of March 31, 2021, compared to 1.77% and 1.62% as of December 31, 2020 and March 31, 2020, respectively. The decrease from December 31, 2020 reflects net charge-offs on PCD loans that previously had an ACL established upon acquisition and the increase compared to March 31, 2020 is due to additional ACL established as a result of the pandemic during 2020.

 
Asset Quality
(Dollar amounts in thousands)
     
  As of March 31, 2021
Percent Change From
  March 31,
2021
 December 31, 
 2020
 March 31,
2020
 December 31, 
 2020
 March 31,
2020
Non-accrual loans, excluding PCD loans(1) $128,650  $109,957  $97,649  17.0  31.7 
Non-accrual PCD loans 29,734  32,568  48,950  (8.7) (39.3)
Total non-accrual loans 158,384  142,525  146,599  11.1  8.0 
90 days or more past due loans, still accruing interest(1) 5,354  4,395  5,052  21.8  6.0 
Total non-performing loans, ("NPLs") 163,738  146,920  151,651  11.4  8.0 
Accruing troubled debt restructurings ("TDRs") 798  813  1,216  (1.8) (34.4)
Foreclosed assets(2) 13,228  16,671  21,027  (20.7) (37.1)
Total non-performing assets ("NPAs") $177,764  $164,404  $173,894  8.1  2.2 
30-89 days past due loans $30,973  $40,656  $81,127  (23.8) (61.8)
Special mention loans(3) $355,563  $409,083  $240,826  (13.1) 47.6 
Substandard loans(3) 342,600  357,219  196,923  (4.1) 74.0 
Total performing loans classified as substandard and special mention(3) $698,163  $766,302  $437,749  (8.9) 59.5 
Non-accrual loans to total loans:          
Non-accrual loans to total loans 1.04% 0.97% 1.05%    
Non-accrual loans to total loans, excluding PPP loans(1)(4) 1.13% 1.02% 1.05%    
Non-accrual loans to total loans, excluding PCD and PPP loans(1)(4) 0.93% 0.80% 0.71%    
Non-performing loans to total loans:          
NPLs to total loans 1.08% 1.00% 1.09%    
NPLs to total loans, excluding PPP loans(1)(4) 1.16% 1.05% 1.09%    
NPLs to total loans, excluding PCD and PPP loans(1)(4) 0.97% 0.83% 0.75%    
Non-performing assets to total loans plus foreclosed assets:        
NPAs to total loans plus foreclosed assets 1.17% 1.11% 1.24%    
NPAs to total loans plus foreclosed assets, excluding PPP loans(1)(4) 1.26% 1.18% 1.24%    
NPAs to total loans plus foreclosed assets, excluding PCD and PPP loans(1)(4) 1.07% 0.96% 0.91%    
Performing loans classified as substandard and special mention to corporate loans:   
Performing loans classified as substandard and special mention to corporate loans(3) 6.45% 7.26% 4.15%    
Performing loans classified as substandard and special mention to corporate loans, excluding PPP loans(3) 7.19% 7.84% 4.15%    

N/M – Not meaningful.
(1) See the "Non-GAAP Financial Information" section presented later in this release for a discussion of this non-GAAP financial measure.
(2) Foreclosed assets consists 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 Statements of Financial Condition.
(3) Performing loans classified as substandard and special mention excludes accruing TDRs.
(4) This ratio excludes PPP loans that are fully guaranteed by the SBA. As a result, no allowance for credit losses is associated with these loans.

NPAs represented 1.17% of total loans and foreclosed assets at March 31, 2021 compared to 1.11% and 1.24% at December 31, 2020 and March 31, 2020, respectively. Excluding the impact of PCD and PPP loans, NPAs to total loans plus foreclosed assets was 1.07% at March 31, 2021, compared to 0.96% at December 31, 2020 and 0.91% at March 31, 2020, reflective of normal fluctuations that occur on a quarterly basis.

Performing loans classified as substandard and special mention were $698 million for the first quarter of 2021 compared to $766 million and $438 million at December 31, 2020 and March 31, 2020, respectively. The decrease from the fourth quarter of 2020 was due primarily to the payoff of certain corporate credits in addition to upgrade and downgrade activity. The increase from the first quarter of 2020, is a result of the pandemic's impact on certain borrowers primarily focused in elevated risk sectors that the Company has determined require additional monitoring. These loans exhibit potential or well-defined weaknesses but continue to accrue interest because they are well secured, and collection of principal and interest is expected.

 
Charge-Off Data
(Dollar amounts in thousands)
   
  Quarters Ended
  March 31,
2021
 % of
Total
 December 31, 
 2020
 % of
Total
 March 31,
2020
 % of
Total
Net loan charge-offs(1)             
Commercial and industrial $1,740  17.8  $3,536  33.6  $4,680  38.7 
Agricultural 363  3.7  1,779  16.9  1,227  10.1 
Commercial real estate:             
Office, retail, and industrial 4,377  44.9  1,701  16.1  329  2.7 
Multi-family (5) (0.1) 19  0.2  5   
Construction     140  1.3  1,808  14.9 
Other commercial real estate 371  3.9  916  8.7  164  1.4 
Consumer 2,910  29.8  2,448  23.2  3,901  32.2 
Total NCOs $9,756  100.0  $10,539  100.0  $12,114  100.0 
Less: NCOs on PCD loans(2) (2,107) 21.6  (6,488) 61.6  (1,720) 14.2 
Total NCOs, excluding PCD loans(2) $7,649    $4,051    $10,394    
Recoveries included above $1,561    $2,588    $1,816    
Net loan charge-offs to average loans(1)(3)             
Quarter to date 0.26%   0.29%   0.37%   
Quarter to date, excluding PPP loans(2)(4) 0.28%   0.31%   0.37%   
Quarter to date, excluding PCD and PPP loans(2)(4) 0.22%   0.12%   0.32%   

N/A – Not applicable.
(1) Amounts represent charge-offs, net of recoveries.
(2) See the "Non-GAAP Financial Information" section presented later in this release for a discussion of this non-GAAP financial measure.
(3) Annualized based on the actual number of days for each period presented.
(4) This ratio excludes PPP loans that are fully guaranteed by the SBA. As a result, no allowance for credit losses is associated with these loans.

NCOs to average loans, annualized was 0.26%, down from 0.29% and 0.37% for the fourth and first quarters of 2020, respectively. Excluding charge-offs on PCD loans and the impact of PPP loans, NCOs to average loans was 0.22% for the first quarter of 2021, compared to 0.12% and 0.32% for the fourth and first quarters of 2020, respectively.

DEPOSIT PORTFOLIO

Deposit Composition
(Dollar amounts in thousands)
     
  Average for the Quarters Ended March 31, 2021
Percent Change From
  March 31,
2021
 December 31, 
 2020
 March 31,
2020
 December 31, 
 2020
 March 31,
2020
Demand deposits $5,917,978  $5,753,600  $3,884,015  2.9  52.4 
Savings deposits 2,573,495  2,436,930  2,069,163  5.6  24.4 
NOW accounts 2,802,568  2,774,989  2,273,156  1.0  23.3 
Money market accounts 3,008,597  2,923,881  2,227,707  2.9  35.1 
Core deposits 14,302,638  13,889,400  10,454,041  3.0  36.8 
Time deposits 1,978,986  2,047,260  2,932,466  (3.3) (32.5)
Total deposits $16,281,624  $15,936,660  $13,386,507  2.2  21.6 

Total average deposits were $16.3 billion for the first quarter of 2021, up 2.2% from the fourth quarter of 2020 and 21.6% from the first quarter of 2020. The increase in total average deposits compared to both prior periods was impacted by higher customer balances resulting from PPP funds and other government stimuli. Compared to the fourth quarter of 2020, the increase in total average deposits was partially offset by the normal seasonal decline in commercial and municipal deposits. In addition, the increase in total average deposits compared to the first quarter of 2020 was also driven by deposits assumed in the Park Bank transaction in March 2020.

CAPITAL MANAGEMENT

 
Capital Ratios
  As of
  March 31,
2021
 December 31, 
 2020
 March 31,
2020
Company regulatory capital ratios:      
Total capital to risk-weighted assets 14.26% 14.14% 12.00%
Tier 1 capital to risk-weighted assets 11.67% 11.55% 9.64%
Common equity Tier 1 ("CET1") to risk-weighted assets 10.17% 10.06% 9.64%
Tier 1 capital to average assets 8.96% 8.91% 8.60%
Company tangible common equity ratios(1)(2):    
Tangible common equity to tangible assets 7.37% 7.67% 7.97%
Tangible common equity to tangible assets, excluding PPP loans 7.79% 7.98% 7.97%
Tangible common equity, excluding accumulated other comprehensive income ("AOCI"), to tangible assets 7.48% 7.54% 7.79%
Tangible common equity, excluding AOCI, to tangible assets, excluding PPP loans 7.91% 7.85% 7.79%
Tangible common equity to risk-weighted assets 9.73% 9.93% 9.63%

(1) These ratios are not subject to formal Federal Reserve regulatory guidance.
(2) Tangible common equity ("TCE") is a non-GAAP measure that 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.

Regulatory capital ratios increased compared to all prior periods as a result of retained earnings and the mix of risk-weighted assets, partially offset by the approximately 10 basis point impact of stock repurchases. Compared to March 31, 2020 total and Tier 1 capital ratios also benefited from the issuance of preferred stock. The Company elected the five-year current expected credit losses ("CECL") transition relief for regulatory capital, which retained approximately 30 basis points of CET1 and Tier 1 capital at March 31, 2021.

During the first quarter of 2021, the Company announced that it would restart repurchases of its outstanding shares of common stock under its stock repurchase program after suspending repurchases in March 2020 as it shifted its capital deployment strategy in response to the COVID-19 pandemic. The Company repurchased approximately 715,000 shares of its common stock at a total cost of $14.9 million during the first quarter of 2021.

The Board of Directors approved a quarterly cash dividend of $0.14 per common share during the first quarter of 2021, which is consistent with the fourth and first quarters of 2020. This dividend represents the 153rd 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, April 21, 2021 at 11 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, investor.firstmidwest.com. 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. 10154308 beginning one hour after completion of the live call until 8:00 A.M. (ET) on July 20, 2021. 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 investor.firstmidwest.com.

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 2021, the performance of First Midwest's loan or securities portfolio, the expected amount of future credit allowances or charge-offs, corporate strategies or objectives, including the impact of certain actions and initiatives, anticipated trends in First Midwest's business, regulatory developments, acquisition transactions, estimated synergies, cost savings and financial benefits of completed transactions, growth strategies, including possible future acquisitions, and the continued or potential effects of the pandemic on our business, financial condition, liquidity, loans, asset quality and results of operations. These statements are subject to certain risks, uncertainties and assumptions, including the duration, extent and severity of the pandemic, including the continued effects on our business, operations and employees, as well as on our customers and service providers, and on economies and markets more generally and other risks, uncertainties and assumptions that are 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, 2020, 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, 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, return on average tangible common equity, adjusted, non-accrual loans, excluding PCD loans, non-accrual loans to total loans, excluding PPP loans, non-accrual loans to total loans, excluding PCD and PPP loans, NPLs to total loans, excluding PPP loans, NPLs to total loans, excluding PCD and PPP loans, NPAs to total loans plus foreclosed assets, excluding PPP loans, NPAs to total loans plus foreclosed assets, excluding PCD and PPP loans, performing loans classified as substandard and special mention to corporate loans, excluding PPP loans, NCOs, excluding PCD loans, NCOs to average loans, excluding PPP loans, NCOs to average loans, excluding PCD and PPP loans, and pre-tax, pre-provision earnings, 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 optimization costs (first quarter 2021 and fourth and third quarter of 2020), acquisition and integration related expenses associated with completed and pending acquisitions (all periods), swap termination costs (fourth and third quarters of 2020), income tax benefits (fourth quarter of 2020), and net securities gains (losses) (third and first quarters of 2020). In addition, net OREO expense is excluded from the calculation of the efficiency ratio. 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.

Income tax expense, provision for loan losses, and the certain significant transactions listed above are excluded from the calculation of pre-tax, pre-provision earnings, adjusted due to the fluctuation in income before income tax and the level of provision for loan losses required based on the estimated impact of the pandemic on the ACL. Management believes pre-tax, pre-provision earnings, adjusted may be useful in assessing the Company's underlying operational performance and their exclusion may facilitate better comparability between periods and for peer comparison purposes.

The Company presents noninterest expense, adjusted, which excludes optimization costs and acquisition and integration related expenses. Management believes that excluding these items from noninterest expense 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.

The Company presents non-accrual loans, non-accrual loans to total loans, NPLs to total loans, NPAs to total loans plus foreclosed assets, performing loans classified as substandard and special mention to corporate loans, excluding PPP loans, NCOs, and NCOs to average loans, all excluding PCD and/or PPP loans. Management believes excluding PCD and PPP loans is useful as it facilitates better comparability between periods. Prior to the adoption of CECL on January 1, 2020, PCI loans with an accretable yield were considered current and were not included in past due and non-accrual loan totals and the portion of PCI loans deemed to be uncollectible was recorded as a reduction of the credit-related acquisition adjustment, which was netted within loans. Subsequent to adoption, PCD loans, including those previously classified as PCI, are included in past due and non-accrual loan totals and an ACL on PCD loans is established as of the acquisition date and the PCD loans are no longer recorded net of a credit-related acquisition adjustment. PCD loans deemed to be uncollectible are recorded as a charge-off through the ACL. The Company began originating PPP loans during the second quarter of 2020 and the loans are fully guaranteed by the SBA and are expected to be forgiven if the applicable criteria are met. Additionally, management believes excluding PCD and PPP loans from these metrics may enhance comparability for peer comparison purposes.

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 First Midwest

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 $21 billion of assets and an additional $14 billion of assets under management. First Midwest Bank and First Midwest's other affiliates provide a full range of commercial, treasury management, equipment leasing, consumer, wealth management, trust and private banking products and services. The primary footprint of First Midwest's branch network and other locations is 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
 March 31, December 31, September 30, June 30, March 31,
 2021 2020 2020 2020 2020
Period-End Balance Sheet         
Assets         
Cash and due from banks$223,713  $196,364  $254,212  $304,445  $252,138 
Interest-bearing deposits in other banks786,814  920,880  936,528  637,856  229,474 
Equity securities, at fair value96,983  76,404  55,021  43,954  40,098 
Securities available-for-sale, at fair value3,195,405  3,096,408  3,279,884  3,435,862  3,382,865 
Securities held-to-maturity, at amortized cost11,711  12,071  22,193  19,628  19,825 
FHLB and FRB stock106,170  117,420  138,120  148,512  154,357 
Loans:         
Commercial and industrial4,546,317  4,578,254  4,635,571  4,789,556  5,064,295 
Agricultural355,883  364,038  377,466  381,124  393,063 
Commercial real estate:         
Office, retail, and industrial1,827,116  1,861,768  1,950,406  2,020,318  2,092,097 
Multi-family906,124  872,813  868,293  874,861  918,944 
Construction614,021  612,611  631,607  687,063  661,363 
Other commercial real estate1,463,582  1,481,976  1,452,994  1,475,937  1,415,892 
PPP loans1,109,442  785,563  1,196,538  1,179,403   
Home equity690,030  761,725  827,746  892,867  973,658 
1-4 family mortgages3,187,066  3,022,413  2,287,555  2,175,322  1,957,037 
Installment483,945  410,071  425,012  457,207  488,668 
Total loans15,183,526  14,751,232  14,653,188  14,933,658  13,965,017 
Allowance for loan losses(235,359) (239,017) (239,048) (240,052) (219,948)
Net loans14,948,167  14,512,215  14,414,140  14,693,606  13,745,069 
OREO6,273  8,253  6,552  9,947  9,814 
Premises, furniture, and equipment, net129,514  132,045  132,267  143,001  145,844 
Investment in bank-owned life insurance ("BOLI")301,365  301,101  300,429  299,649  298,827 
Goodwill and other intangible assets928,974  932,764  935,801  940,182  935,241 
Accrued interest receivable and other assets473,502  532,753  612,996  568,239  539,748 
Total assets$21,208,591  $20,838,678  $21,088,143  $21,244,881  $19,753,300 
Liabilities and Stockholders' Equity         
Noninterest-bearing deposits$6,156,145  $5,797,899  $5,555,735  $5,602,016  $4,222,523 
Interest-bearing deposits10,455,309  10,214,565  10,215,838  10,055,640  9,876,427 
Total deposits16,611,454  16,012,464  15,771,573  15,657,656  14,098,950 
Borrowed funds1,295,737  1,546,414  1,957,180  2,305,195  2,648,210 
Senior and subordinated debt234,973  234,768  234,563  234,358  234,153 
Accrued interest payable and other liabilities413,112  355,026  460,656  391,461  336,280 
Stockholders' equity2,653,315  2,690,006  2,664,171  2,656,211  2,435,707 
Total liabilities and stockholders' equity$21,208,591  $20,838,678  $21,088,143  $21,244,881  $19,753,300 
Stockholders' equity, excluding AOCI$2,675,411  $2,663,627  $2,638,422  $2,627,484  $2,400,384 
Stockholders' equity, common2,422,815  2,459,506  2,433,671  2,425,711  2,435,707 
               


 
First Midwest Bancorp, Inc.
Condensed Consolidated Statements of Income (Unaudited)
(Dollar amounts in thousands)
          
 Quarters Ended
 March 31, December 31, September 30, June 30, March 31,
 2021 2020 2020 2020 2020
Income Statement         
Interest income$151,150  $159,962  $159,085  $162,044  $170,227 
Interest expense10,035  11,851  16,356  16,810  26,652 
Net interest income141,115  148,111  142,729  145,234  143,575 
Provision for loan losses6,098  10,507  15,927  32,649  39,532 
Net interest income after provision for loan losses135,017  137,604  126,802  112,585  104,043 
Noninterest Income         
Wealth management fees14,149  13,548  12,837  11,942  12,361 
Mortgage banking income10,187  9,191  6,659  3,477  1,788 
Service charges on deposit accounts9,980  10,811  10,342  9,125  11,781 
Card-based fees, net4,556  4,530  4,472  3,180  3,968 
Capital market products income2,089  659  886  694  4,722 
Other service charges, commissions, and fees2,761  2,993  2,823  2,078  2,682 
Total fee-based revenues43,722  41,732  38,019  30,496  37,302 
Other income2,081  3,550  2,523  2,495  3,065 
Swap termination costs  (17,567) (14,285)    
Net securities gains (losses)    14,328    (1,005)
Total noninterest income45,803  27,715  40,585  32,991  39,362 
Noninterest Expense         
Salaries and employee benefits:        
Salaries and wages53,693  55,950  53,385  52,592  49,990 
Retirement and other employee benefits12,708  10,430  11,349  11,080  12,869 
Total salaries and employee benefits66,401  66,380  64,734  63,672  62,859 
Net occupancy and equipment expense14,752  14,002  13,736  15,116  14,227 
Technology and related costs10,284  11,005  10,416  9,853  8,548 
Professional services8,059  8,424  7,325  8,880  10,390 
Advertising and promotions1,835  1,850  2,688  2,810  2,761 
Net OREO expense589  106  544  126  420 
Other expenses14,735  12,851  12,374  14,624  12,654 
Optimization costs1,525  1,493  18,376     
Acquisition and integration related expenses245  1,860  881  5,249  5,472 
Total noninterest expense118,425  117,971  131,074  120,330  117,331 
Income before income tax expense62,395  47,348  36,313  25,246  26,074 
Income tax expense17,372  5,743  8,690  6,182  6,468 
Net income$45,023  $41,605  $27,623  $19,064  $19,606 
Preferred dividends(4,034) (4,049) (4,033) (1,037)  
Net income applicable to non-vested restricted shares(486) (369) (236) (187) (192)
Net income applicable to common shares$40,503  $37,187  $23,354  $17,840  $19,414 
Net income applicable to common shares, adjusted(1)41,831  49,238  37,765  21,777  24,272 

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
 March 31, December 31, September 30, June 30, March 31,
 2021 2020 2020 2020 2020
EPS         
Basic EPS$0.36  $0.33  $0.21  $0.16  $0.18 
Diluted EPS$0.36  $0.33  $0.21  $0.16  $0.18 
Diluted EPS, adjusted(1)$0.37  $0.43  $0.33  $0.19  $0.22 
Common Stock and Related Per Common Share Data
Book value$21.22  $21.52  $21.29  $21.23  $21.33 
Tangible book value$13.08  $13.36  $13.11  $13.00  $13.14 
Dividends declared per share$0.14  $0.14  $0.14  $0.14  $0.14 
Closing price at period end$21.91  $15.92  $10.78  $13.35  $13.24 
Closing price to book value1.0  0.7  0.5  0.6  0.6 
Period end shares outstanding114,196  114,296  114,293  114,276  114,213 
Period end treasury shares11,176  11,071  11,067  11,079  11,136 
Common dividends$15,997  $16,017  $16,011  $16,015  $16,002 
Dividend payout ratio38.89% 42.42% 66.67% 87.50% 77.78%
Dividend payout ratio, adjusted(1)37.84% 32.56% 42.42% 73.68% 63.64%
Key Ratios/Data         
Return on average common equity(2)6.70% 6.05% 3.80% 2.94% 3.23%
Return on average common equity, adjusted(1)(2)6.92% 8.01% 6.15% 3.58% 4.04%
Return on average tangible common equity(2)11.35% 10.35% 6.73% 5.32% 5.66%
Return on average tangible common equity, adjusted(1)(2)11.71% 13.53% 10.53% 6.37% 6.94%
Return on average assets(2)0.87% 0.79% 0.51% 0.37% 0.43%
Return on average assets, adjusted(1)(2)0.90% 1.02% 0.78% 0.44% 0.53%
Loans to deposits91.40% 92.12% 92.91% 95.38% 99.05%
Efficiency ratio(1)61.77% 58.90% 60.36% 64.08% 60.21%
Net interest margin(2)(3)3.03% 3.14% 2.95% 3.13% 3.54%
Yield on average interest-earning assets(2)(3)3.24% 3.39% 3.28% 3.49% 4.19%
Cost of funds(2)(4)0.23% 0.26% 0.35% 0.38% 0.69%
Noninterest expense to average assets(2)2.30% 2.25% 2.42% 2.32% 2.56%
Noninterest expense, adjusted to average assets, excluding PPP loans(1)(2)2.38% 2.29% 2.19% 2.32% 2.44%
Effective income tax rate27.84% 12.13% 23.93% 24.49% 24.81%
Capital Ratios         
Total capital to risk-weighted assets(1)14.26% 14.14% 14.06% 13.70% 12.00%
Tier 1 capital to risk-weighted assets(1)11.67% 11.55% 11.48% 11.19% 9.64%
CET1 to risk-weighted assets(1)10.17% 10.06% 9.97% 9.70% 9.64%
Tier 1 capital to average assets(1)8.96% 8.91% 8.50% 8.70% 8.60%
Tangible common equity to tangible assets(1)7.37% 7.67% 7.43% 7.32% 7.97%
Tangible common equity, excluding AOCI, to tangible assets(1)7.48% 7.54% 7.30% 7.17% 7.79%
Tangible common equity to risk-weighted assets(1)9.73% 9.93% 9.84% 9.61% 9.63%
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
 March 31, December 31, September 30, June 30, March 31,
 2021 2020 2020 2020 2020
Asset Quality Performance Data        
Non-performing assets          
Commercial and industrial$59,723  $38,314  $40,781  $19,475  $24,944 
Agricultural8,684  10,719  13,293  8,494  5,823 
Commercial real estate:         
Office, retail, and industrial23,339  27,382  26,406  26,342  26,107 
Multi-family3,701  1,670  1,547  2,132  2,688 
Construction1,154  1,155  2,977  18,640  18,764 
Other commercial real estate15,406  15,219  4,690  5,304  4,562 
Consumer16,643  15,498  13,888  13,657  14,761 
Non-accrual, excluding PCD loans128,650  109,957  103,582  94,044  97,649 
Non-accrual PCD loans29,734  32,568  39,990  45,116  48,950 
Total non-accrual loans158,384  142,525  143,572  139,160  146,599 
90 days or more past due loans, still accruing interest5,354  4,395  3,781  3,241  5,052 
Total NPLs163,738  146,920  147,353  142,401  151,651 
Accruing TDRs798  813  841  1,201  1,216 
Foreclosed assets(5)13,228  16,671  15,299  19,024  21,027 
Total NPAs$177,764  $164,404  $163,493  $162,626  $173,894 
30-89 days past due loans$30,973  $40,656  $21,551  $36,342  $81,127 
Allowance for credit losses         
Allowance for loan losses$235,359  $239,017  $239,048  $240,052  $219,948 
Allowance for unfunded commitments8,025  8,025  7,825  7,625  6,753 
Total ACL$243,384  $247,042  $246,873  $247,677  $226,701 
Provision for loan losses$6,098  $10,507  $15,927  $32,649  $39,532 
Net charge-offs by category         
Commercial and industrial$1,740  $3,536  $5,470  $4,735  $4,680 
Agricultural363  1,779  265  118  1,227 
Commercial real estate:         
Office, retail, and industrial4,377  1,701  1,339  3,086  329 
Multi-family(5) 19    9  5 
Construction  140  4,889  798  1,808 
Other commercial real estate371  916  1,753  19  164 
Consumer2,910  2,448  2,027  4,158  3,901 
Total NCOs$9,756  $10,539  $15,743  $12,923  $12,114 
Less: NCOs on PCD loans(2,107) (6,488) (6,923) (3,833) (1,720)
Total NCOs, excluding PCD loans$7,649  $4,051  $8,820  $9,090  $10,394 
Total recoveries included above$1,561  $2,588  $1,795  $1,311  $1,816 
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
 March 31, December 31, September 30, June 30, March 31,
 2021 2020 2020 2020 2020
Performing loans classified as substandard and special mention        
Special mention loans(7)$355,563  $409,083  $395,295  $256,373  $240,826 
Substandard loans(7)342,600  357,219  311,430  193,337  196,923 
Total performing loans classified as substandard and special mention(7)$698,163  $766,302  $706,725  $449,710  $437,749 
Asset quality ratios          
Non-accrual loans to total loans1.04% 0.97% 0.98% 0.93% 1.05%
Non-accrual loans to total loans, excluding PPP loans(6)1.13% 1.02% 1.07% 1.01% 1.05%
Non-accrual loans to total loans, excluding PCD and PPP loans(6)0.93% 0.80% 0.78% 0.70% 0.71%
NPLs to total loans1.08% 1.00% 1.01% 0.95% 1.09%
NPLs to total loans, excluding PPP loans(6)1.16% 1.05% 1.10% 1.04% 1.09%
NPLs to total loans, excluding PCD and PPP loans(6)0.97% 0.83% 0.81% 0.72% 0.75%
NPAs to total loans plus foreclosed assets1.17% 1.11% 1.11% 1.09% 1.24%
NPAs to total loans plus foreclosed assets, excluding PPP loans(6)1.26% 1.18% 1.21% 1.18% 1.24%
NPAs to total loans plus foreclosed assets, excluding PCD and PPP loans(6)1.07% 0.96% 0.93% 0.87% 0.91%
NPAs to tangible common equity plus ACL10.23% 9.27% 9.37% 9.38% 10.07%
Non-accrual loans to total assets0.75% 0.68% 0.68% 0.66% 0.74%
Performing loans classified as substandard and special mention to corporate loans(6)(7)6.45% 7.26% 6.36% 3.94% 4.15%
Performing loans classified as substandard and special mention to corporate loans, excluding PPP loans(6)(7)7.19% 7.84% 7.13% 4.40% 4.15%
Allowance for credit losses and net charge-off ratios
ACL to total loans1.60% 1.67% 1.68% 1.66% 1.62%
ACL to non-accrual loans153.67% 173.33% 171.95% 177.98% 154.64%
ACL to NPLs148.64% 168.15% 167.54% 173.93% 149.49%
NCOs to average loans(2)0.26% 0.29% 0.42% 0.36% 0.37%
NCOs to average loans, excluding PPP loans(2)0.28% 0.31% 0.46% 0.38% 0.37%
NCOs to average loans, excluding PCD and PPP loans(2)0.22% 0.12% 0.26% 0.27% 0.32%

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 consists 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 Statements of Financial Condition.
(6)   This ratio excludes PPP loans that are fully guaranteed by the SBA. As a result, no allowance for credit losses is associated with these loans.
(7)   Performing loans classified as substandard and special mention excludes accruing TDRs.

 
First Midwest Bancorp, Inc.
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
          
 Quarters Ended
 March 31, December 31, September 30, June 30, March 31,
 2021 2020 2020 2020 2020
EPS         
Net income$45,023  $41,605  $27,623  $19,064  $19,606 
Dividends and accretion on preferred stock(4,034) (4,049) (4,033) (1,037)  
Net income applicable to non-vested restricted shares(486) (369) (236) (187) (192)
Net income applicable to common shares40,503  37,187  23,354  17,840  19,414 
Adjustments to net income:         
Optimization costs1,525  1,493  18,376     
Tax effect of optimization costs(381) (373) (4,594)    
Acquisition and integration related expenses245  1,860  881  5,249  5,472 
Tax effect of acquisition and integration related expenses(61) (465) (220) (1,312) (1,368)
Swap termination costs  17,567  14,285     
Tax effect of swap termination costs  (4,392) (3,571)    
Income tax benefits  (3,639)      
Net securities (gains) losses    (14,328)   1,005 
Tax effect of net securities (gains) losses    3,582    (251)
Total adjustments to net income, net of tax1,328  12,051  14,411  3,937  4,858 
Net income applicable to common shares, adjusted(1)$41,831  $49,238  $37,765  $21,777  $24,272 
Weighted-average common shares outstanding:        
Weighted-average common shares outstanding (basic)113,098  113,174  113,160  113,145  109,922 
Dilutive effect of common stock equivalents773  430  276  191  443 
Weighted-average diluted common shares outstanding113,871  113,604  113,436  113,336  110,365 
Basic EPS$0.36  $0.33  $0.21  $0.16  $0.18 
Diluted EPS$0.36  $0.33  $0.21  $0.16  $0.18 
Diluted EPS, adjusted(1)$0.37  $0.43  $0.33  $0.19  $0.22 
Anti-dilutive shares not included in the computation of diluted EPS         
Dividend Payout Ratio         
Dividends declared per share$0.14  $0.14  $0.14  $0.14  $0.14 
Dividend payout ratio38.89% 42.42% 66.67% 87.50% 77.78%
Dividend payout ratio, adjusted(1)37.84% 32.56% 42.42% 73.68% 63.64%
          
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
 March 31, December 31, September 30, June 30, March 31,
 2021 2020 2020 2020 2020
Return on Average Common and Tangible Common Equity      
Net income applicable to common shares$40,503  $37,187  $23,354  $17,840  $19,414 
Intangibles amortization2,807  2,807  2,810  2,820  2,770 
Tax effect of intangibles amortization(702) (702) (703) (705) (693)
Net income applicable to common shares, excluding intangibles amortization42,608  39,292  25,461  19,955  21,491 
Total adjustments to net income, net of tax(1)1,328  12,051  14,411  3,937  4,858 
Net income applicable to common shares, adjusted(1)$43,936  $51,343  $39,872  $23,892  $26,349 
Average stockholders' common equity$2,453,253  $2,444,911  $2,444,594  $2,443,212  $2,415,157 
Less: average intangible assets(931,322) (934,347) (938,712) (934,022) (887,600)
Average tangible common equity$1,521,931  $1,510,564  $1,505,882  $1,509,190  $1,527,557 
Return on average common equity(2)6.70% 6.05% 3.80% 2.94% 3.23%
Return on average common equity, adjusted(1)(2)6.92% 8.01% 6.15% 3.58% 4.04%
Return on average tangible common equity(2)11.35% 10.35% 6.73% 5.32% 5.66%
Return on average tangible common equity, adjusted(1)(2)11.71% 13.53% 10.53% 6.37% 6.94%
Return on Average Assets      
Net income$45,023  $41,605  $27,623  $19,064  $19,606 
Total adjustments to net income, net of tax(1)1,328  12,051  14,411  3,937  4,858 
Net income, adjusted(1)$46,351  $53,656  $42,034  $23,001  $24,464 
Average assets$20,919,040  $20,882,325  $21,526,695  $20,868,106  $18,404,821 
Return on average assets(2)0.87% 0.79% 0.51% 0.37% 0.43%
Return on average assets, adjusted(1)(2)0.90% 1.02% 0.78% 0.44% 0.53%
Noninterest Expense to Average Assets      
Noninterest expense$118,425  $117,971  $131,074  $120,330  $117,331 
Less:         
Optimization costs(1,525) (1,493) (18,376)    
Acquisition and integration related expenses(245) (1,860) (881) (5,249) (5,472)
Total$116,655  $114,618  $111,817  $115,081  $111,859 
Average assets$20,919,040  $20,882,325  $21,526,695  $20,868,106  $18,404,821 
Less: average PPP loans(1,014,798) (1,013,511) (1,194,808) (887,977)  
Average assets, excluding PPP loans$19,904,242  $19,868,814  $20,331,887  $19,980,129  $18,404,821 
Noninterest expense to average assets(2)2.30% 2.25% 2.42% 2.32% 2.56%
Noninterest expense, adjusted to average assets, excluding PPP loans(2)2.38% 2.29% 2.19% 2.32% 2.44%
          
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
 March 31, December 31, September 30, June 30, March 31,
 2021 2020 2020 2020 2020
          
Efficiency Ratio Calculation        
Noninterest expense$118,425  $117,971  $131,074  $120,330  $117,331 
Less:         
Optimization costs(1,525) (1,493) (18,376)    
Acquisition and integration related expenses(245) (1,860) (881) (5,249) (5,472)
Net OREO expense(589) (106) (544) (126) (420)
Total$116,066  $114,512  $111,273  $114,955  $111,439 
Tax-equivalent net interest income(3)$142,098  $149,141  $143,821  $146,389  $144,728 
Noninterest income45,803  27,715  40,585  32,991  39,362 
Less:         
Swap termination costs  17,567  14,285     
Net securities (gains) losses    (14,328)   1,005 
Total$187,901  $194,423  $184,363  $179,380  $185,095 
Efficiency ratio61.77% 58.90% 60.36% 64.08% 60.21%
Pre-Tax, Pre-Provision Earnings        
Net Income$45,023  $41,605  $27,623  $19,064  $19,606 
Income tax expense17,372  5,743  8,690  6,182  6,468 
Provision for credit losses6,098  10,507  15,927  32,649  39,532 
Pre-Tax, Pre-Provision Earnings$68,493  $57,855  $52,240  $57,895  $65,606 
Adjustments to pre-tax, pre-provision earnings:         
Optimization costs$1,525  $1,493  $18,376  $  $ 
Acquisition and integration related expenses245  1,860  881  5,249  5,472 
Swap termination costs  17,567  14,285     
Net securities (gains) losses    (14,328)   1,005 
Total adjustments1,770  20,920  19,214  5,249  6,477 
Pre-Tax, Pre-Provision Earnings, adjusted$70,263  $78,775  $71,454  $63,144  $72,083 
          
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
 March 31, December 31, September 30, June 30, March 31,
 2021 2020 2020 2020 2020
Tangible Common Equity         
Stockholders' equity, common$2,422,815  $2,459,506  $2,433,671  $2,425,711  $2,435,707 
Less: goodwill and other intangible assets(928,974) (932,764) (935,801) (940,182) (935,241)
Tangible common equity1,493,841  1,526,742  1,497,870  1,485,529  1,500,466 
Less: AOCI22,096  (26,379) (25,749) (28,727) (35,323)
Tangible common equity, excluding AOCI$1,515,937  $1,500,363  $1,472,121  $1,456,802  $1,465,143 
Total assets$21,208,591  $20,838,678  $21,088,143  $21,244,881  $19,753,300 
Less: goodwill and other intangible assets(928,974) (932,764) (935,801) (940,182) (935,241)
Tangible assets20,279,617  19,905,914  20,152,342  20,304,699  18,818,059 
Less: PPP loans(1,109,442) (785,563) (1,196,538) (1,179,403)  
Tangible assets, excluding PPP loans$19,170,175  $19,120,351  $18,955,804  $19,125,296  $18,818,059 
Tangible common equity to tangible assets7.37% 7.67% 7.43% 7.32% 7.97%
Tangible common equity to tangible assets, excluding PPP loans7.79% 7.98% 7.90% 7.77% 7.97%
Tangible common equity, excluding AOCI, to tangible assets7.48% 7.54% 7.30% 7.17% 7.79%
Tangible common equity, excluding AOCI, to tangible assets, excluding PPP loans7.91% 7.85% 7.77% 7.62% 7.79%
Tangible common equity to risk-weighted assets9.73% 9.93% 9.84% 9.61% 9.63%
          

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%.