First Midwest Bancorp, Inc. Announces 2021 Fourth Quarter and Full Year Results

Chicago, Illinois, UNITED STATES


CHICAGO, Jan. 18, 2022 (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 2021. Net income applicable to common shares for the fourth quarter of 2021 was $44 million, or $0.39 per diluted common share, compared to $50 million, or $0.44 per diluted common share, for the third quarter of 2021, and $37 million, or $0.33 per diluted common share, for the fourth quarter of 2020. For the full year of 2021, the Company reported net income applicable to common shares of $182 million, or $1.60 per diluted common share, compared to $98 million, or $0.87 per diluted common share, for the year ended December 31, 2020.

Comparative results for all periods were impacted by the timing of costs related to acquisitions. In addition, certain periods were impacted by retail and balance sheet optimization strategies, and securities gains, as well as the Company's response to the COVID-19 pandemic (the "pandemic") and federal, state and local responses to the pandemic. To facilitate comparisons 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.

FOURTH QUARTER AND FULL YEAR HIGHLIGHTS

  • Improved diluted EPS to $0.39 for the fourth quarter of 2021 and $1.60 for the full year of 2021, up 18% and 84% from the same periods in 2020; down 5% and up 44% on an adjusted(1) basis, respectively.
    • Generated total revenue of $183 million for the fourth quarter of 2021 and $751 million for the full year of 2021, both up 4% from the same periods in 2020.
      • Net interest income and margin down 6% and 39 basis points ("bps"), respectively, from the fourth quarter of 2020 and down 2% and 27 bps from the full year of 2020, reflective of the lower interest rate environment and elevated liquidity.
      • Fee-based revenues up 1% and 15% from the fourth quarter of 2020 and full year of 2020, respectively.
    • Controlled noninterest expense to average assets of 2.18% for the fourth quarter of 2021 and 2.21% for the full year of 2021, down 7 bps and 17 bps from the same periods in 2020.
  • Grew total loans to $15 billion, up 3% from the prior year, excluding PPP loans.
  • Increased total average deposits to $17 billion for both the fourth quarter and full year of 2021, up 10% and 13% from the same periods in 2020.
  • Established the allowance for credit losses ("ACL") at $210 million, or 1.45% of total loans, excluding PPP loans, compared to 1.77% at December 31, 2020, reflective of improving credit environment.
    • Lowered non-performing assets and performing loans classified as substandard and special mention 21% and 16%, respectively, compared to December 31, 2020.
    • Reduced net loan charge-offs ("NCOs") to average loans to 0.05% for the fourth quarter of 2021 and 0.23% for the full year of 2021, compared to 0.12% and 0.24% for the same periods in 2020, excluding purchased credit deteriorated ("PCD") and PPP loans.
  • Generated 67 bps of Tier 1 capital to risk-weighted assets during 2021, ending the year at 12.2%, largely reflective of higher retained earnings.

"The best of First Midwest was once again on display throughout 2021," said Michael L. Scudder, Chairman of the Board and Chief Executive Officer of the Company. "The year's financial results were strong, reflecting solid operating performance. I am extremely proud of our 2,000 colleagues who represent First Midwest each day. Amid the demands of an ongoing health crisis and challenging operating environment, they have remained agile and focused – all while working tirelessly to help support our clients, communities, and each other."

Mr. Scudder continued, "We are very encouraged and excited about what lies ahead for our Company. Strong capital levels and a highly engaged team provide operating flexibility as we see economic recovery and growing opportunities for business expansion. As we look to our future, our ongoing integration planning efforts relative to our announced business combination with Old National Bank are on pace and in line with our expectations. This combination will see us grow to become one of the Midwest’s largest commercial banks and position us well for continued expansion, investment, and innovation in talent, capabilities, and services – all to the benefit of our clients, colleagues, communities and stockholders."

PENDING MERGER

First Midwest and Old National Bancorp

On June 1, 2021, the Company and Old National Bancorp ("Old National"), the holding company for Old National Bank, jointly announced that they entered into a definitive merger agreement to combine in an all-stock merger of equals transaction to create a premier Midwestern bank with approximately $45 billion of combined assets. The merger agreement provides for a fixed exchange ratio whereby holders of First Midwest common stock will receive 1.1336 shares of Old National common stock for each share of First Midwest common stock they own. The merger agreement has been unanimously approved by the boards of directors of both companies, and has also been approved by approximately 99% of the votes cast at each company's respective shareholder meeting.

As of the date of announcement, the overall transaction was valued at approximately $6.5 billion. On August 19, 2021, the Office of the Comptroller of the Currency approved the application for the merger of First Midwest Bank and Old National Bank. Completion of the merger remains subject to regulatory approval by the Board of Governors of the Federal Reserve System and certain other customary closing conditions set forth in the merger agreement.

(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
 December 31, 2021  September 30, 2021  December 31, 2020
 Average Balance Interest Yield/
Rate
(%)
  Average
Balance
 Interest Yield/
Rate
(%)
  Average
Balance
 Interest Yield/
Rate
(%)
Assets                   
Other interest-earning assets$2,122,042  $1,462  0.27  $1,672,005  $1,222  0.29  $1,244,999  $930  0.30
Securities(1) 3,308,840   18,711  2.26   3,265,812   16,189  1.98   3,164,310   17,051  2.16
Federal Home Loan Bank ("FHLB") and Federal Reserve Bank ("FRB") stock 106,096   867  3.27   106,759   852  3.19   123,287   1,342  4.35
Loans, excluding PPP loans(1) 14,308,310   122,879  3.41   14,364,785   127,631  3.53   13,335,154   126,474  3.77
PPP loans(1) 317,553   5,119  6.40   549,380   9,772  7.06   1,013,511   15,195  5.96
Total loans(1) 14,625,863   127,998  3.47   14,914,165   137,403  3.66   14,348,665   141,669  3.93
Total interest-earning assets(1) 20,162,841   149,038  2.94   19,958,741   155,666  3.10   18,881,261   160,992  3.39
Cash and due from banks 286,846        277,720        252,268     
Allowance for loan losses (208,048)       (215,395)       (246,278)    
Other assets 1,805,033        1,878,494        1,995,074     
Total assets$22,046,672       $21,899,560       $20,882,325     
Liabilities and Stockholders' Equity                   
Savings deposits$2,825,792   125  0.02  $2,785,816   124  0.02  $2,436,930   109  0.02
NOW accounts 3,165,689   280  0.04   3,213,637   275  0.03   2,774,989   277  0.04
Money market deposits 3,316,492   510  0.06   3,211,355   549  0.07   2,923,881   694  0.09
Time deposits 1,736,197   1,702  0.39   1,800,493   1,915  0.42   2,047,260   3,131  0.61
Borrowed funds 1,288,778   3,143  0.97   1,281,968   3,146  0.97   1,661,731   4,158  1.00
Senior and subordinated debt 235,490   3,467  5.84   235,284   3,467  5.85   234,669   3,482  5.90
Total interest-bearing liabilities 12,568,438   9,227  0.29   12,528,553   9,476  0.30   12,079,460   11,851  0.39
Demand deposits 6,411,550        6,272,903        5,753,600     
Total funding sources 18,979,988    0.19   18,801,456    0.20   17,833,060    0.26
Other liabilities 336,533        364,576        373,854     
Stockholders' equity 2,730,151        2,733,528        2,675,411     
Total liabilities and stockholders' equity$22,046,672       $21,899,560       $20,882,325     
Tax-equivalent net interest income/margin(1)   139,811  2.75     146,190  2.91     149,141  3.14
Tax-equivalent adjustment   (1,035)       (994)       (1,030)  
Net interest income (GAAP)(1)  $138,776       $145,196       $148,111   
Impact of acquired loan accretion(1)  $5,684  0.11    $6,231  0.12    $7,603  0.16
Tax-equivalent net interest income/margin, adjusted(1)  $134,127  2.64    $139,959  2.79    $141,538  2.98
                          

(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 fourth quarter of 2021 decreased by 4.4% from the third quarter of 2021 and was down 6.3% from the fourth quarter of 2020. Net interest income compared to both prior periods was impacted by a decrease in interest income and fees on PPP loans, as well as lower yields on loans and acquired loan accretion, partially offset by higher income on equity securities held in a grantor trust under our deferred compensation plan, which are substantially offset by the corresponding obligation to participants within total salaries and employee benefits. In addition, loan growth and lower cost of funds partially offset the decrease compared to the fourth quarter of 2020.

Acquired loan accretion contributed $5.7 million, $6.2 million, and $7.6 million to net interest income for the fourth quarter of 2021, the third quarter of 2021, and the fourth quarter of 2020, respectively.

Tax-equivalent net interest margin for the current quarter was 2.75%, decreasing by 16 basis points from the third quarter of 2021 and 39 basis points from the fourth quarter of 2020. Excluding the impact of acquired loan accretion, tax-equivalent net interest margin was 2.64%, down 15 basis points from the third quarter of 2021 and 34 basis points from the fourth quarter of 2020. Compared to both prior periods tax-equivalent net interest margin decreased due primarily to lower PPP loan income and yields on loans, excluding PPP loans, as well as a higher balance of other interest-earning assets from growth in commercial deposits compared to the third quarter of 2021 and PPP loan funds and other government stimuli compared to the fourth quarter of 2020. Higher income on equity securities held in a grantor trust under our deferred compensation plan and lower cost of funds partially offset the decrease compared to both prior periods.

For the fourth quarter of 2021, total average interest-earning assets increased by $204.1 million from the third quarter of 2021 and increased $1.3 billion from the fourth quarter of 2020. The increase compared to both prior periods resulted primarily from a higher balance of other interest-earning assets due to deposit growth, partially offset by lower PPP loan funds. In addition, compared to the fourth quarter of 2020, loan growth contributed to the increase in interest-earning assets.

Total average funding sources for the fourth quarter of 2021 increased by $178.5 million from the third quarter of 2021 and $1.1 billion from the fourth quarter of 2020. The increase compared to the third quarter of 2021 was impacted by growth in commercial deposits, partially offset by the seasonal outflows of municipal deposits. Compared to the fourth quarter of 2020, the increase was driven by higher customer balances resulting from PPP funds and other government stimuli, partially offset by a decrease in FHLB advances.

Noninterest Income Analysis
(Dollar amounts in thousands)

  Quarters Ended December 31, 2021
Percent Change From
  December 31,
2021
 September 30,
2021
 December 31,
2020
 September 30,
2021
 December 31,
2020
Wealth management fees $14,246 $14,820 $13,548  (3.9) 5.2 
Service charges on deposit accounts  12,149  11,496  10,811  5.7  12.4 
Mortgage banking income  6,149  6,664  9,191  (7.7) (33.1)
Card-based fees, net  4,451  4,992  4,530  (10.8) (1.7)
Capital market products income  1,462  1,333  659  9.7  121.9 
Other service charges, commissions, and fees  3,775  2,832  2,993  33.3  26.1 
Total fee-based revenues  42,232  42,137  41,732  0.2  1.2 
Other income  2,247  3,043  3,550  (26.2) (36.7)
Swap termination costs      (17,567) N/M  N/M 
Total noninterest income $44,479 $45,180 $27,715  (1.6) 60.5 
                 

N/M – Not meaningful.

Total noninterest income of $44.5 million was down 1.6% and up 60.5% from the third quarter of 2021 and the fourth quarter of 2020, respectively. Excluding the impact of swap termination costs in the fourth quarter of 2020, total noninterest income decreased 1.8%. Wealth management fees decreased compared to a record third quarter of 2021 due to seasonality and increased compared to the fourth quarter of 2020 due to positive market performance and continued sales of fiduciary and investment advisory services to new and existing customers. The increase in service charges on deposit accounts compared to the third quarter of 2021 was due primarily to seasonality, whereas the increase from the fourth quarter of 2020 resulted from the impact of higher transaction volumes.

Mortgage banking income for the fourth quarter of 2021 resulted from sales of $179.1 million of 1-4 family mortgage loans in the secondary market compared to $199.9 million in the third quarter of 2021 and $275.6 million in the fourth quarter of 2020. In addition, mortgage banking income for the fourth quarter of 2021 was impacted by decreases in market pricing on sales of 1-4 family mortgage loans compared to the same period in 2020.

Capital market products income increased compared to both prior periods as a result higher levels of sales to corporate clients in light of market conditions. Other service charges, commissions, and fees for the fourth quarter of 2021 was elevated as a result of sales of loans at gains. Other income compared to both prior periods was impacted by lower fair value adjustments on equity securities as a result of the market environment, partially offset by benefit settlements on bank-owned life insurance. In addition, other income for the third quarter of 2021 was elevated as a result of net gains from the disposition of branch properties and other miscellaneous items.

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

Noninterest Expense Analysis
(Dollar amounts in thousands)

  Quarters Ended December 31, 2021
Percent Change From
  December 31,
2021
 September 30,
2021
 December 31,
2020
 September 30,
2021
 December 31,
2020
Salaries and employee benefits:          
Salaries and wages $56,334  $51,503  $55,950  9.4  0.7 
Retirement and other employee benefits  11,112   10,924   10,430  1.7  6.5 
Total salaries and employee benefits  67,446   62,427   66,380  8.0  1.6 
Net occupancy and equipment expense  13,550   14,198   14,002  (4.6) (3.2)
Technology and related costs  10,468   10,742   11,005  (2.6) (4.9)
Professional services  7,620   6,991   8,424  9.0  (9.5)
Advertising and promotions  2,853   3,168   1,850  (9.9) 54.2 
Net other real estate owned ("OREO") expense  442   (4)  106  N/M  317.0 
Other expenses  14,565   15,616   12,851  (6.7) 13.3 
Acquisition and integration related expenses  3,945   2,916   1,860  35.3  112.1 
Optimization costs        1,493  N/M  N/M 
Total noninterest expense $120,889  $116,054  $117,971  4.2  2.5 
Acquisition and integration related expenses  (3,945)  (2,916)  (1,860) 35.3  112.1 
Optimization costs        (1,493) N/M  N/M 
Total noninterest expense, adjusted(1) $116,944  $113,138  $114,618  3.4  2.0 
                   

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.

Total noninterest expense increased 4.2% and 2.5% compared to the third quarter of 2021 and fourth quarter of 2020, respectively. Noninterest expense for all periods presented was impacted by acquisition and integration related expenses. In addition, the fourth quarter of 2020 was impacted by optimization costs. Excluding these items, noninterest expense for the fourth quarter of 2021 was $116.9 million, up 3.4% and 2.0% from the third quarter of 2021 and fourth quarter of 2020, respectively. Overall, noninterest expense, adjusted, to average assets, excluding PPP loans, was 2.14% for the fourth quarter of 2021, up 4 basis points from the third quarter of 2021 and down 15 basis points from the fourth quarter of 2020.

The increase in salaries and employee benefits compared to both prior periods was driven primarily by higher compensation accruals and deferred compensation plan obligations due to income on the respective equity securities held in a grantor trust. Compared to the fourth quarter of 2020, the increase in salaries and employee benefits was impacted by merit increases, partially offset by the ongoing benefits of optimization strategies. Net occupancy expense decreased compared to both prior periods as a result of lower maintenance costs. Professional services expense increased compared to the third quarter of 2021 due mainly to higher loan related fees associated with 1-4 family mortgage production. Compared to the fourth quarter of 2020, professional services expense decreased due primarily to lower loan remediation costs. Advertising and promotions expense increased compared to the fourth quarter of 2020 due to the timing of certain costs related to marketing campaigns. Other expenses decreased compared to the third quarter of 2021 as a result of lower other miscellaneous expenses. Compared to the fourth quarter of 2020, other expenses increased due primarily to higher servicing fees from purchases of consumer loans.

Optimization costs of $1.5 million for the fourth quarter of 2020, primarily include valuation adjustments related to locations identified for closure, modernization of our ATM network, advisory fees, employee severance, and other expenses associated with locations identified for closure.

Acquisition and integration related expenses for the fourth and third quarters of 2021 resulted from the pending merger with Old National. Acquisition and integration related expenses for the fourth quarter of 2020 resulted from the acquisition of Park Bank, which closed in the first quarter of 2020.

LOAN PORTFOLIO AND ASSET QUALITY

Loan Portfolio Composition
(Dollar amounts in thousands)

  As of December 31, 2021
Percent Change From
  December 31,
2021
 September 30,
2021
 December 31,
2020
 September 30,
2021
 December 31,
2020
Commercial and industrial $4,834,332 $4,705,458 $4,578,254 2.7  5.6 
Agricultural  327,873  349,159  364,038 (6.1) (9.9)
Commercial real estate:          
Office, retail, and industrial  1,746,944  1,765,592  1,861,768 (1.1) (6.2)
Multi-family  1,120,748  1,082,941  872,813 3.5  28.4 
Construction  588,247  595,204  612,611 (1.2) (4.0)
Other commercial real estate  1,275,906  1,408,955  1,481,976 (9.4) (13.9)
Total commercial real estate  4,731,845  4,852,692  4,829,168 (2.5) (2.0)
Total corporate loans, excluding PPP loans  9,894,050  9,907,309  9,771,460 (0.1) 1.3 
PPP loans  230,687  384,100  785,563 (39.9) (70.6)
Total corporate loans  10,124,737  10,291,409  10,557,023 (1.6) (4.1)
Home equity  565,443  591,126  761,725 (4.3) (25.8)
1-4 family mortgages  3,418,059  3,332,732  3,022,413 2.6  13.1 
Installment  557,252  573,465  410,071 (2.8) 35.9 
Total consumer loans  4,540,754  4,497,323  4,194,209 1.0  8.3 
Total loans $14,665,491 $14,788,732 $14,751,232 (0.8) (0.6)
                

Total loans includes loans originated under the PPP loan program, which totaled $230.7 million, $384.1 million, and $785.6 million as of December 31, 2021, September 30, 2021, and December 31, 2020, respectively. Excluding these loans, total loans were up 1% annualized from September 30, 2021 and 3% from December 31, 2020. Compared to both prior periods, strong production and line usage within our sector-based lending businesses drove the increase in corporate loan growth, excluding PPP loans. Middle market businesses also contributed to this growth compared to December 31, 2020. Production was partially offset by higher paydowns and prepayments due to excess borrower liquidity as a result of the pandemic and 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.

Consumer loans compared to both prior periods were impacted by purchases of 1-4 family mortgages, as well as strong production in the 1-4 family mortgages portfolio, which was partially offset by higher prepayments. In addition, consumer loans compared to December 31, 2020 were impacted by purchases of installment loans.

Allowance for Credit Losses
(Dollar amounts in thousands)

  As of or for the Quarters Ended December 31, 2021
Percent Change From
  December 31,
2021
 September 30,
2021
 December 31,
2020
 September 30,
2021
 December 31,
2020
ACL, excluding PCD loans $190,510  $195,903  $215,915  (2.8) (11.8)
PCD loan ACL  19,352   18,963   31,127  2.1  (37.8)
Total ACL $209,862  $214,866  $247,042  (2.3) (15.1)
Provision for credit losses $(2,924) $  $10,507  N/M  (127.8)
ACL to total loans  1.43%  1.45%  1.67%    
ACL to total loans, excluding PPP loans(1)  1.45%  1.49%  1.77%    
ACL to non-accrual loans  205.79%  243.94%  173.33%    
                 

N/M – Not meaningful.

(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 $209.9 million or 1.43% of total loans as of December 31, 2021, decreasing $5.0 million from September 30, 2021 and $37.2 million compared to December 31, 2020. Excluding the impact of PPP loans, ACL to total loans was 1.45% as of December 31, 2021, compared to 1.49% and 1.77% as of September 30, 2021 and December 31, 2020, respectively. The decrease from both prior periods reflects an improving credit environment as well as net charge-offs on PCD loans that previously had an ACL established upon acquisition.

Asset Quality
(Dollar amounts in thousands)

  As of December 31, 2021
Percent Change From
  December 31,
2021
 September 30,
2021
 December 31,
2020
 September 30,
2021
 December 31,
2020
Non-accrual loans, excluding PCD loans(1) $80,920  $64,166  $109,957  26.1  (26.4)
Non-accrual PCD loans  21,059   23,917   32,568  (11.9) (35.3)
Total non-accrual loans  101,979   88,083   142,525  15.8  (28.4)
90 days or more past due loans, still accruing interest(1)  927   1,293   4,395  (28.3) (78.9)
Total non-performing loans, ("NPLs")  102,906   89,376   146,920  15.1  (30.0)
Accruing troubled debt restructurings ("TDRs")  534   539   813  (0.9) (34.3)
Foreclosed assets(2)  25,837   26,375   16,671  (2.0) 55.0 
Total non-performing assets ("NPAs") $129,277  $116,290  $164,404  11.2  (21.4)
30-89 days past due loans $34,430  $30,718  $40,656  12.1  (15.3)
Special mention loans(3) $314,772  $330,218  $409,083  (4.7) (23.1)
Substandard loans(3)  325,520   351,192   357,219  (7.3) (8.9)
Total performing loans classified as substandard and special mention(3) $640,292  $681,410  $766,302  (6.0) (16.4)
Non-accrual loans to total loans:          
Non-accrual loans to total loans  0.70%  0.60%  0.97%    
Non-accrual loans to total loans, excluding PPP loans(1)(4)  0.71%  0.61%  1.02%    
Non-accrual loans to total loans, excluding PCD and PPP loans(1)(4)  0.57%  0.45%  0.80%    
Non-performing loans to total loans:          
NPLs to total loans  0.70%  0.60%  1.00%    
NPLs to total loans, excluding PPP loans(1)(4)  0.71%  0.62%  1.05%    
NPLs to total loans, excluding PCD and PPP loans(1)(4)  0.57%  0.46%  0.83%    
Non-performing assets to total loans plus foreclosed assets:        
NPAs to total loans plus foreclosed assets  0.88%  0.78%  1.11%    
NPAs to total loans plus foreclosed assets, excluding PPP loans(1)(4)  0.89%  0.81%  1.18%    
NPAs to total loans plus foreclosed assets, excluding PCD and PPP loans(1)(4)  0.76%  0.65%  0.96%    
Performing loans classified as substandard and special mention to corporate loans:
Performing loans classified as substandard and special mention to corporate loans(3)  6.32%  6.62%  7.26%    
Performing loans classified as substandard and special mention to corporate loans, excluding PPP loans(3)  6.47%  6.88%  7.84%    
                 

(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 0.88% of total loans and foreclosed assets at December 31, 2021 compared to 0.78% and 1.11% at September 30, 2021 and December 31, 2020, respectively. Excluding the impact of PCD and PPP loans, NPAs to total loans plus foreclosed assets was 0.76% at December 31, 2021, compared to 0.65% at September 30, 2021 and 0.96% at December 31, 2020. The increase compared to September 30, 2021 is reflective of normal fluctuations that occur on a quarterly basis. The decrease compared to December 31, 2020 is due primarily to an improving credit environment as well as one corporate loan relationship transferred from non-accrual loans to foreclosed assets during the first nine months of 2021.

Performing loans classified as substandard and special mention decreased to $640.3 million at December 31, 2021 from $681.4 million and $766.3 million at September 30, 2021 and December 31, 2020, respectively. The decrease from both prior periods was driven by an improving credit environment.

Charge-Off Data
(Dollar amounts in thousands)

  Quarters Ended
  December 31,
2021
 % of
Total
 September 30,
2021
 % of
Total
 December 31,
2020
 % of
Total
Net loan charge-offs(1)            
Commercial and industrial $(39) (1.9) $5,002  59.8  $3,536  33.6
Agricultural  122  5.9   (37) (0.4)  1,779  16.9
Commercial real estate:            
Office, retail, and industrial  (7) (0.3)  556  6.7   1,701  16.1
Multi-family  85  4.1   1     19  0.2
Construction  189  9.1   986  11.8   140  1.3
Other commercial real estate  261  12.5   829  9.9   916  8.7
Consumer  1,469  70.6   1,023  12.2   2,448  23.2
Total NCOs $2,080  100.0  $8,360  100.0  $10,539  100.0
Less: NCOs on PCD loans(2)  (327) 15.7   (1,757) 21.0   (6,488) 61.6
Total NCOs, excluding PCD loans(2) $1,753    $6,603    $4,051   
Total recoveries included above $2,254    $3,397    $2,588   
Quarter-to-Date(1)(3):            
Net charge-offs to average loans  0.06%    0.22%    0.29%  
Net charge-offs to average loans, excluding PPP loans(2)(4)  0.06%    0.23%    0.31%  
Net charge-offs to average loans, excluding PCD and PPP loans(2)(4)  0.05%    0.18%    0.12%  
Year-to-Date(1)(3):            
Net charge-offs to average loans  0.27%    0.35%    0.36%  
Net charge-offs to average loans, excluding PPP loans(2)(4)  0.29%    0.37%    0.38%  
Net charge-offs to average loans, excluding PCD and PPP loans(2)(4)  0.23%    0.29%    0.24%  
                   

(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.

Net loan charge-offs to average loans, annualized, were 0.06% for the fourth quarter of 2021, compared to 0.22% for the third quarter of 2021 and 0.29% for the fourth quarter of 2020. Excluding charge-offs on PCD and PPP loans on this metric, NCOs to average loans was 0.05% for the fourth quarter of 2021, down from 0.18% for the third quarter of 2021 and 0.12% for the fourth quarter of 2020. For the year ended December 31, 2021, net loan charge-offs to average loans was 0.27% compared to 0.36% for the same period in 2020. Excluding charge-offs on PCD and PPP loans, NCOs to average loans was 0.23% for 2021 and 0.24% for 2020.

DEPOSIT PORTFOLIO

Deposit Composition
(Dollar amounts in thousands)

  Average for the Quarters Ended December 31, 2021
Percent Change From
  December 31,
2021
 September 30,
2021
 December 31,
2020
 September 30,
2021
 December 31,
2020
Demand deposits $6,411,550 $6,272,903 $5,753,600 2.2  11.4 
Savings deposits  2,825,792  2,785,816  2,436,930 1.4  16.0 
NOW accounts  3,165,689  3,213,637  2,774,989 (1.5) 14.1 
Money market accounts  3,316,492  3,211,355  2,923,881 3.3  13.4 
Core deposits  15,719,523  15,483,711  13,889,400 1.5  13.2 
Time deposits  1,736,197  1,800,493  2,047,260 (3.6) (15.2)
Total deposits $17,455,720 $17,284,204 $15,936,660 1.0  9.5 
                

Total average deposits were $17.5 billion for the fourth quarter of 2021, up modestly from the third quarter of 2021 and up 9.5% from the fourth quarter of 2020. The increase in total average deposits compared to the third quarter of 2021 was impacted by growth in commercial deposits, partially offset by seasonal outflows of municipal deposits. Compared to the fourth quarter of 2020, the increase in total average deposits was due to higher customer balances resulting from PPP funds and other government stimulus measures.

CAPITAL MANAGEMENT

Capital Ratios

  As of
  December 31,
2021
 September 30,
2021
 December 31,
2020
Company regulatory capital ratios:
Total capital to risk-weighted assets 14.47% 14.26% 14.14%
Tier 1 capital to risk-weighted assets 12.22% 11.99% 11.55%
Common equity Tier 1 ("CET1") to risk-weighted assets 10.74% 10.51% 10.06%
Tier 1 capital to average assets 8.97% 8.89% 8.91%
Company tangible common equity ratios(1)(2):    
Tangible common equity to tangible assets 7.63% 7.53% 7.67%
Tangible common equity to tangible assets, excluding PPP loans 7.72% 7.67% 7.98%
Tangible common equity, excluding accumulated other comprehensive income ("AOCI"), to tangible assets 7.81% 7.65% 7.54%
Tangible common equity, excluding AOCI, to tangible assets, excluding PPP loans 7.90% 7.79% 7.85%
Tangible common equity to risk-weighted assets 10.24% 10.08% 9.93%
          

(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.

Risk-weighted regulatory capital ratios compared to all prior periods were impacted by retained earnings and the mix of risk-weighted assets. Total capital to risk-weighted assets compared to December 31, 2020 was impacted by the beginning of the five-year phase-out of Tier 2 treatment of the Company's subordinated debt. 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 December 31, 2021.

The Board of Directors approved a quarterly cash dividend of $0.14 per common share during the fourth quarter of 2021, which is consistent with third quarter of 2021 and the fourth quarter of 2020. This dividend represents the 156th consecutive cash dividend paid by the Company since its inception in 1983.

Press Release and Additional Information Available on Website

This press release and the accompanying unaudited Selected Financial Information are available through the Investor Relations section of First Midwest's website at investor.firstmidwest.com.

Forward-Looking Statements

This communication may contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding the financial condition, results of operations, business plans and future performance of First Midwest. 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," "forecast," "predict," "project," "probable," "potential," "possible," "target," "continue," "look forward," or "assume" and words of similar import. Because forward-looking statements relate to future results and occurrences, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. 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, the performance of First Midwest's loan or securities portfolio, the expected amount of future credit allowances or charge-offs, the timing of the pending merger of First Midwest and Old National, the failure to obtain necessary regulatory approvals or to satisfy any of the other conditions to the merger on a timely basis or at all, the possibility that the anticipated benefits of the merger are not realized when expected or at all, corporate strategies or objectives, including the impact of certain actions and initiatives, anticipated trends in First Midwest's business, regulatory developments, estimated synergies, cost savings and financial benefits of completed transactions, growth strategies, the inability to realize cost savings or improved revenues or to implement integration plans associated with the proposed merger with Old National and the continued or potential effects of the COVID-19 pandemic and related variants and mutations on First Midwest's 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 COVID-19 pandemic and related variants and mutations, including the continued effects on First Midwest's business, operations and employees, as well as on First Midwest's 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 acquisition and integration related expenses associated with completed and pending acquisitions (all periods), optimization costs (second and first quarters of 2021 and fourth quarter of 2020), swap termination costs (fourth quarter of 2020), income tax benefits (fourth quarter of 2020), and net securities gains (full year 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 $22 billion of assets and an additional $15 billion of wealth management assets. First Midwest Bank and its other affiliates provide a full range of commercial, treasury management, equipment leasing, consumer, mortgage, 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
 December 31, September 30, June 30, March 31, December 31,
  2021   2021   2021   2021   2020 
Period-End Balance Sheet         
Assets         
Cash and due from banks$220,207  $270,020  $232,989  $223,713  $196,364 
Interest-bearing deposits in other banks 1,898,865   1,654,917   1,312,412   786,814   920,880 
Equity securities, at fair value 118,857   114,848   112,977   96,983   76,404 
Securities available-for-sale, at fair value 3,147,220   3,212,908   3,156,194   3,195,405   3,096,408 
Securities held-to-maturity, at amortized cost 8,655   10,853   11,593   11,711   12,071 
FHLB and FRB stock 106,097   106,090   106,890   106,170   117,420 
Loans:         
Commercial and industrial 4,834,332   4,705,458   4,608,148   4,546,317   4,578,254 
Agricultural 327,873   349,159   342,834   355,883   364,038 
Commercial real estate:         
Office, retail, and industrial 1,746,944   1,765,592   1,807,428   1,827,116   1,861,768 
Multi-family 1,120,748   1,082,941   1,012,722   906,124   872,813 
Construction 588,247   595,204   577,338   614,021   612,611 
Other commercial real estate 1,275,906   1,408,955   1,461,370   1,463,582   1,481,976 
PPP loans 230,687   384,100   705,915   1,109,442   785,563 
Home equity 565,443   591,126   629,367   690,030   761,725 
1-4 family mortgages 3,418,059   3,332,732   3,287,773   3,187,066   3,022,413 
Installment 557,252   573,465   602,324   483,945   410,071 
Total loans 14,665,491   14,788,732   15,035,219   15,183,526   14,751,232 
Allowance for loan losses (201,237)  (206,241)  (214,601)  (235,359)  (239,017)
Net loans 14,464,254   14,582,491   14,820,618   14,948,167   14,512,215 
OREO 5,196   5,106   5,289   6,273   8,253 
Premises, furniture, and equipment, net 120,555   123,413   125,837   129,514   132,045 
Investment in bank-owned life insurance ("BOLI") 300,730   300,387   300,537   301,365   301,101 
Goodwill and other intangible assets 920,599   923,383   926,176   928,974   932,764 
Accrued interest receivable and other assets 467,007   473,764   513,912   473,502   532,753 
Total assets$21,778,242  $21,778,180  $21,625,424  $21,208,591  $20,838,678 
Liabilities and Stockholders' Equity         
Noninterest-bearing deposits$6,191,885  $6,097,698  $6,187,478  $6,156,145  $5,797,899 
Interest-bearing deposits 10,999,044   11,100,704   10,845,405   10,455,309   10,214,565 
Total deposits 17,190,929   17,198,402   17,032,883   16,611,454   16,012,464 
Borrowed funds 1,291,816   1,274,572   1,299,424   1,295,737   1,546,414 
Senior and subordinated debt 235,588   235,383   235,178   234,973   234,768 
Accrued interest payable and other liabilities 317,181   346,600   353,791   413,112   355,026 
Stockholders' equity 2,742,728   2,723,223   2,704,148   2,653,315   2,690,006 
Total liabilities and stockholders' equity$21,778,242  $21,778,180  $21,625,424  $21,208,591  $20,838,678 
Stockholders' equity, excluding AOCI$2,780,521  $2,748,604  $2,710,089  $2,675,411  $2,663,627 
Stockholders' equity, common 2,512,228   2,492,723   2,473,648   2,422,815   2,459,506 
                    


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,
  2021   2021   2021   2021   2020    2021   2020 
Income Statement              
Interest income$148,003  $154,672  $154,000  $151,150  $159,962   $607,825  $651,318 
Interest expense 9,227   9,476   9,712   10,035   11,851    38,450   71,669 
Net interest income 138,776   145,196   144,288   141,115   148,111    569,375   579,649 
Provision for loan losses (2,924)        6,098   10,507    3,174   98,615 
Net interest income after provision for loan losses 141,700   145,196   144,288   135,017   137,604    566,201   481,034 
Noninterest Income              
Wealth management fees 14,246   14,820   14,555   14,149   13,548    57,770   50,688 
Service charges on deposit accounts 12,149   11,496   10,778   9,980   10,811    44,403   42,059 
Mortgage banking income 6,149   6,664   6,749   10,187   9,191    29,749   21,115 
Card-based fees, net 4,451   4,992   4,764   4,556   4,530    18,763   16,150 
Capital market products income 1,462   1,333   1,954   2,089   659    6,838   6,961 
Other service charges, commissions, and fees 3,775   2,832   2,823   2,761   2,993    12,191   10,576 
Total fee-based revenues 42,232   42,137   41,623   43,722   41,732    169,714   147,549 
Other income 2,247   3,043   4,647   2,081   3,550    12,018   11,633 
Swap termination costs             (17,567)      (31,852)
Net securities gains                    13,323 
Total noninterest income 44,479   45,180   46,270   45,803   27,715    181,732   140,653 
Noninterest Expense              
Salaries and employee benefits:             
Salaries and wages 56,334   51,503   51,887   53,693   55,950    213,417   211,917 
Retirement and other employee benefits 11,112   10,924   12,324   12,708   10,430    47,068   45,728 
Total salaries and employee benefits 67,446   62,427   64,211   66,401   66,380    260,485   257,645 
Net occupancy and equipment expense 13,550   14,198   13,654   14,752   14,002    56,154   57,081 
Technology and related costs 10,468   10,742   10,453   10,284   11,005    41,947   39,822 
Professional services 7,620   6,991   7,568   8,059   8,424    30,238   35,019 
Advertising and promotions 2,853   3,168   2,899   1,835   1,850    10,755   10,109 
Net OREO expense 442   (4)  160   589   106    1,187   1,196 
Other expenses 14,565   15,616   14,670   14,735   12,851    59,586   52,503 
Acquisition and integration related expenses 3,945   2,916   7,773   245   1,860    14,879   13,462 
Optimization costs       31   1,525   1,493    1,556   19,869 
Total noninterest expense 120,889   116,054   121,419   118,425   117,971    476,787   486,706 
Income before income tax expense 65,290   74,322   69,139   62,395   47,348    271,146   134,981 
Income tax expense 16,737   19,459   18,018   17,372   5,743    71,586   27,083 
Net income$48,553  $54,863  $51,121  $45,023  $41,605   $199,560  $107,898 
Preferred dividends (4,034)  (4,033)  (4,034)  (4,034)  (4,049)   (16,135)  (9,119)
Net income applicable to non-vested restricted shares (398)  (517)  (521)  (486)  (369)   (1,922)  (984)
Net income applicable to common shares$44,121  $50,313  $46,566  $40,503  $37,187   $181,503  $97,795 
Net income applicable to common shares, adjusted(1) 47,080   52,500   52,419   41,831   49,238    193,830   133,052 

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,
  2021   2021   2021   2021   2020    2021   2020 
EPS              
Basic EPS$0.39  $0.45  $0.41  $0.36  $0.33   $1.61  $0.87 
Diluted EPS$0.39  $0.44  $0.41  $0.36  $0.33   $1.60  $0.87 
Diluted EPS, adjusted(1)$0.41  $0.46  $0.46  $0.37  $0.43   $1.70  $1.18 
Common Stock and Related Per Common Share Data     
Book value$22.01  $21.83  $21.67  $21.22  $21.52   $22.01  $21.52 
Tangible book value$13.95  $13.75  $13.55  $13.08  $13.36   $13.95  $13.36 
Dividends declared per share$0.14  $0.14  $0.14  $0.14  $0.14   $0.56  $0.56 
Closing price at period end$20.48  $19.01  $19.83  $21.91  $15.92   $20.48  $15.92 
Closing price to book value 0.9   0.9   0.9   1.0   0.7    0.9   0.7 
Period end shares outstanding 114,128   114,167   114,177   114,196   114,296    114,128   114,296 
Period end treasury shares 11,259   11,213   11,199   11,176   11,071    11,259   11,071 
Common dividends$15,792  $15,974  $15,979  $15,997  $16,017   $63,742  $64,045 
Dividend payout ratio 35.90%  31.11%  34.15%  38.89%  42.42%   34.78%  64.37%
Dividend payout ratio, adjusted(1) 34.15%  30.43%  30.43%  37.84%  32.56%   32.94%  47.46%
Key Ratios/Data              
Return on average common equity(2) 7.00%  7.97%  7.60%  6.70%  6.05%   7.32%  4.01%
Return on average common equity, adjusted(1)(2) 7.47%  8.32%  8.56%  6.92%  8.01%   7.82%  5.46%
Return on average tangible common equity(1)(2) 11.62%  13.17%  12.77%  11.35%  10.35%   12.24%  7.02%
Return on average tangible common equity, adjusted(1)(2) 12.36%  13.72%  14.31%  11.71%  13.53%   13.03%  9.36%
Return on average assets(2) 0.87%  0.99%  0.95%  0.87%  0.79%   0.92%  0.53%
Return on average assets, adjusted(1)(2) 0.93%  1.03%  1.06%  0.90%  1.02%   0.98%  0.70%
Loans to deposits 85.31%  85.99%  88.27%  91.40%  92.12%   85.31%  92.12%
Efficiency ratio(1) 63.22%  59.12%  59.24%  61.77%  58.90%   60.81%  60.84%
Net interest margin(2)(3) 2.75%  2.91%  2.96%  3.03%  3.14%   2.91%  3.18%
Yield on average interest-earning assets(2)(3) 2.94%  3.10%  3.16%  3.24%  3.39%   3.11%  3.57%
Cost of funds(2)(4) 0.19%  0.20%  0.21%  0.23%  0.26%   0.21%  0.41%
Noninterest expense to average assets(2) 2.18%  2.10%  2.26%  2.30%  2.25%   2.21%  2.38%
Noninterest expense, adjusted to average assets, excluding PPP loans(1)(2) 2.14%  2.10%  2.22%  2.38%  2.29%   2.21%  2.31%
Effective income tax rate 25.63%  26.18%  26.06%  27.84%  12.13%   26.40%  20.06%
Effective income tax rate, adjusted(1) 25.63%  26.18%  26.06%  27.84%  19.81%   26.40%  22.76%
Capital Ratios              
Total capital to risk-weighted assets(1) 14.47%  14.26%  14.19%  14.26%  14.14%   14.47%  14.14%
Tier 1 capital to risk-weighted assets(1) 12.22%  11.99%  11.71%  11.67%  11.55%   12.22%  11.55%
CET1 to risk-weighted assets(1) 10.74%  10.51%  10.23%  10.17%  10.06%   10.74%  10.06%
Tier 1 capital to average assets(1) 8.97%  8.89%  8.85%  8.96%  8.91%   8.97%  8.91%
Tangible common equity to tangible assets(1) 7.63%  7.53%  7.48%  7.37%  7.67%   7.63%  7.67%
Tangible common equity, excluding AOCI, to tangible assets(1) 7.81%  7.65%  7.50%  7.48%  7.54%   7.81%  7.54%
Tangible common equity to risk-weighted assets(1) 10.24%  10.08%  9.92%  9.73%  9.93%   10.24%  9.93%
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,
  2021   2021   2021   2021   2020    2021   2020 
Asset quality Performance Data             
Non-performing assets               
Commercial and industrial$11,096  $9,952  $42,036  $59,723  $38,314   $11,096  $38,314 
Agricultural 6,410   6,682   7,135   8,684   10,719    6,410   10,719 
Commercial real estate:              
Office, retail, and industrial 23,756   13,450   17,367   23,339   27,382    23,756   27,382 
Multi-family 12,751   2,672   2,622   3,701   1,670    12,751   1,670 
Construction 1,104   1,154   1,154   1,154   1,155    1,104   1,155 
Other commercial real estate 11,629   13,083   14,200   15,406   15,219    11,629   15,219 
Consumer 14,174   17,173   16,867   16,643   15,498    14,174   15,498 
Non-accrual, excluding PCD loans 80,920   64,166   101,381   128,650   109,957    80,920   109,957 
Non-accrual PCD loans 21,059   23,917   23,101   29,734   32,568    21,059   32,568 
Total non-accrual loans 101,979   88,083   124,482   158,384   142,525    101,979   142,525 
90 days or more past due loans, still accruing interest 927   1,293   878   5,354   4,395    927   4,395 
Total NPLs 102,906   89,376   125,360   163,738   146,920    102,906   146,920 
Accruing TDRs 534   539   782   798   813    534   813 
Foreclosed assets(5) 25,837   26,375   26,732   13,228   16,671    25,837   16,671 
Total NPAs$129,277  $116,290  $152,874  $177,764  $164,404   $129,277  $164,404 
30-89 days past due loans$34,430  $30,718  $21,051  $30,973  $40,656   $34,430  $40,656 
Allowance for credit losses              
Allowance for loan losses$201,237  $206,241  $214,601  $235,359  $239,017   $201,237  $239,017 
Reserve for unfunded commitments 8,625   8,625   8,625   8,025   8,025    8,625   8,025 
Total ACL$209,862  $214,866  $223,226  $243,384  $247,042   $209,862  $247,042 
Provision for loan losses$(2,924) $  $  $6,098  $10,507   $3,174  $98,615 
Net charge-offs by category              
Commercial and industrial$(39) $5,002  $14,733  $1,740  $3,536   $21,436  $18,421 
Agricultural 122   (37)     363   1,779    448   3,389 
Commercial real estate:              
Office, retail, and industrial (7)  556   3,878   4,377   1,701    8,804   6,455 
Multi-family 85   1   2   (5)  19    83   33 
Construction 189   986   208      140    1,383   7,635 
Other commercial real estate 261   829   459   371   916    1,920   2,852 
Consumer 1,469   1,023   1,478   2,910   2,448    6,880   12,534 
Total NCOs$2,080  $8,360  $20,758  $9,756  $10,539   $40,954  $51,319 
Less: NCOs on PCD loans (327)  (1,757)  (4,337)  (2,107)  (6,488)   (8,528)  (18,964)
Total NCOs, excluding PCD loans$1,753  $6,603  $16,421  $7,649  $4,051   $32,426  $32,355 
Total recoveries included above$2,254  $3,397  $2,869  $1,561  $2,588   $10,081  $7,510 
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,
  2021   2021   2021   2021   2020    2021   2020 
Performing loans classified as substandard and special mention     
Special mention loans(7)$314,772  $330,218  $343,547  $355,563  $409,083   $314,772  $409,083 
Substandard loans(7) 325,520   351,192   325,727   342,600   357,219    325,520   357,219 
Total performing loans classified as substandard and special mention(7)$640,292  $681,410  $669,274  $698,163  $766,302   $640,292  $766,302 
Asset quality ratios               
Non-accrual loans to total loans 0.70%  0.60%  0.83%  1.04%  0.97%   0.70%  0.97%
Non-accrual loans to total loans, excluding PPP loans(6) 0.71%  0.61%  0.87%  1.13%  1.02%   0.71%  1.02%
Non-accrual loans to total loans, excluding PCD and PPP loans(6) 0.57%  0.45%  0.72%  0.93%  0.80%   0.57%  0.80%
NPLs to total loans 0.70%  0.60%  0.83%  1.08%  1.00%   0.70%  1.00%
NPLs to total loans, excluding PPP loans(6) 0.71%  0.62%  0.87%  1.16%  1.05%   0.71%  1.05%
NPLs to total loans, excluding PCD and PPP loans(6) 0.57%  0.46%  0.72%  0.97%  0.83%   0.57%  0.83%
NPAs to total loans plus foreclosed assets 0.88%  0.78%  1.01%  1.17%  1.11%   0.88%  1.11%
NPAs to total loans plus foreclosed assets, excluding PPP loans(6) 0.89%  0.81%  1.06%  1.26%  1.18%   0.89%  1.18%
NPAs to total loans plus foreclosed assets, excluding PCD and PPP loans(6) 0.76%  0.65%  0.92%  1.07%  0.96%   0.76%  0.96%
NPAs to tangible common equity plus ACL 7.18%  6.52%  8.63%  10.23%  9.27%   7.18%  9.27%
Non-accrual loans to total assets 0.47%  0.40%  0.58%  0.75%  0.68%   0.47%  0.68%
Performing loans classified as substandard and special mention to corporate loans(7) 6.32%  6.62%  6.36%  6.45%  7.26%   6.32%  7.26%
Performing loans classified as substandard and special mention to corporate loans, excluding PPP loans(6)(7) 6.47%  6.88%  6.82%  7.19%  7.84%   6.47%  7.84%
Allowance for credit losses and net charge-off ratios     
ACL to total loans(7) 1.43%  1.45%  1.48%  1.60%  1.67%   1.43%  1.67%
ACL to non-accrual loans 205.79%  243.94%  179.32%  153.67%  173.33%   205.79%  173.33%
ACL to NPLs 203.94%  240.41%  178.07%  148.64%  168.15%   203.94%  168.15%
NCOs to average loans(2) 0.06%  0.22%  0.55%  0.26%  0.29%   0.27%  0.36%
NCOs to average loans, excluding PPP loans(2)(6) 0.06%  0.23%  0.59%  0.28%  0.31%   0.29%  0.38%
NCOs to average loans, excluding PCD and PPP loans(2)(6) 0.05%  0.18%  0.47%  0.22%  0.12%   0.23%  0.24%

Footnotes to Selected Financial Information
(1)   See the "Non-GAAP Reconciliations" section for the detailed calculation.
(2)   Annualized based on the actual number of days for each period presented.
(3)   Presented on a tax-equivalent basis, assuming 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  Years Ended
 December 31, September 30, June 30, March 31, December 31,  December 31, December 31,
  2021   2021   2021   2021   2020    2021   2020 
EPS              
Net income$48,553  $54,863  $51,121  $45,023  $41,605   $199,560  $107,898 
Dividends and accretion on preferred stock (4,034)  (4,033)  (4,034)  (4,034)  (4,049)   (16,135)  (9,119)
Net income applicable to non-vested restricted shares (398)  (517)  (521)  (486)  (369)   (1,922)  (984)
Net income applicable to common shares 44,121   50,313   46,566   40,503   37,187    181,503   97,795 
Adjustments to net income:              
Acquisition and integration related expenses 3,945   2,916   7,773   245   1,860    14,879   13,462 
Tax effect of acquisition and integration related expenses (986)  (729)  (1,943)  (61)  (465)   (3,719)  (3,365)
Optimization costs       31   1,525   1,493    1,556   19,869 
Tax effect of optimization costs       (8)  (381)  (373)   (389)  (4,967)
Swap termination costs             17,567       31,852 
Tax effect of swap termination costs             (4,392)      (7,963)
Income tax benefits             (3,639)      (3,639)
Net securities gains                    (13,323)
Tax effect of net securities gains                    3,331 
Total adjustments to net income, net of tax 2,959   2,187   5,853   1,328   12,051    12,327   35,257 
Net income applicable to common shares, adjusted(1)$47,080  $52,500  $52,419  $41,831  $49,238   $193,830  $133,052 
Weighted-average common shares outstanding:             
Weighted-average common shares outstanding (basic) 112,930   112,898   112,865   113,098   113,174    112,947   112,355 
Dilutive effect of common stock equivalents 995   878   775   773   430    834   347 
Weighted-average diluted common shares outstanding 113,925   113,776   113,640   113,871   113,604    113,781   112,702 
Basic EPS$0.39  $0.45  $0.41  $0.36  $0.33   $1.61  $0.87 
Diluted EPS$0.39  $0.44  $0.41  $0.36  $0.33   $1.60  $0.87 
Diluted EPS, adjusted(1)$0.41  $0.46  $0.46  $0.37  $0.43   $1.70  $1.18 
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   $0.56  $0.56 
Dividend payout ratio 35.90%  31.11%  34.15%  38.89%  42.42%   34.78%  64.37%
Dividend payout ratio, adjusted(1) 34.15%  30.43%  30.43%  37.84%  32.56%   32.94%  47.46%
               
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,
  2021   2021   2021   2021   2020    2021   2020 
Return on Average Common and Tangible Common Equity           
Net income applicable to common shares$44,121  $50,313  $46,566  $40,503  $37,187   $181,503  $97,795 
Intangibles amortization 2,784   2,793   2,798   2,807   2,807    11,182   11,207 
Tax effect of intangibles amortization (696)  (698)  (700)  (702)  (702)   (2,796)  (2,803)
Net income applicable to common shares, excluding intangibles amortization 46,209   52,408   48,664   42,608   39,292    189,889   106,199 
Total adjustments to net income, net of tax(1) 2,959   2,187   5,853   1,328   12,051    12,327   35,257 
Net income applicable to common shares, adjusted(1)$49,168  $54,595  $54,517  $43,936  $51,343   $202,216  $141,456 
Average stockholders' common equity$2,499,651  $2,503,028  $2,456,034  $2,453,253  $2,444,911   $2,478,187  $2,437,011 
Less: average intangible assets (921,937)  (924,743)  (927,522)  (931,322)  (934,347)   (926,351)  (923,741)
Average tangible common equity$1,577,714  $1,578,285  $1,528,512  $1,521,931  $1,510,564   $1,551,836  $1,513,270 
Return on average common equity(2) 7.00%  7.97%  7.60%  6.70%  6.05%   7.32%  4.01%
Return on average common equity, adjusted(1)(2) 7.47%  8.32%  8.56%  6.92%  8.01%   7.82%  5.46%
Return on average tangible common equity(2) 11.62%  13.17%  12.77%  11.35%  10.35%   12.24%  7.02%
Return on average tangible common equity, adjusted(1)(2) 12.36%  13.72%  14.31%  11.71%  13.53%   13.03%  9.36%
Return on Average Assets           
Net income$48,553  $54,863  $51,121  $45,023  $41,605   $199,560  $107,898 
Total adjustments to net income, net of tax(1) 2,959   2,187   5,853   1,328   12,051    12,327   35,257 
Net income, adjusted(1)$51,512  $57,050  $56,974  $46,351  $53,656   $211,887  $143,155 
Average assets$22,046,672  $21,899,560  $21,533,209  $20,919,040  $20,882,325   $21,603,531  $20,424,771 
Return on average assets(2) 0.87%  0.99%  0.95%  0.87%  0.79%   0.92%  0.53%
Return on average assets, adjusted(1)(2) 0.93%  1.03%  1.06%  0.90%  1.02%   0.98%  0.70%
Noninterest Expense to Average Assets           
Noninterest expense$120,889  $116,054  $121,419  $118,425  $117,971   $476,787  $486,706 
Less:              
Acquisition and integration related expenses (3,945)  (2,916)  (7,773)  (245)  (1,860)   (14,879)  (13,462)
Optimization costs       (31)  (1,525)  (1,493)   (1,556)  (19,869)
Total$116,944  $113,138  $113,615  $116,655  $114,618   $460,352  $453,375 
Average assets$22,046,672  $21,899,560  $21,533,209  $20,919,040  $20,882,325   $21,603,531  $20,424,771 
Less: average PPP loans (317,553)  (549,380)  (1,035,386)  (1,014,798)  (1,013,511)   (726,876)  (775,883)
Average assets, excluding PPP loans$21,729,119  $21,350,180  $20,497,823  $19,904,242  $19,868,814   $20,876,655  $19,648,888 
Noninterest expense to average assets(2) 2.18%  2.10%  2.26%  2.30%  2.25%   2.21%  2.38%
Noninterest expense, adjusted to average assets, excluding PPP loans(2) 2.14%  2.10%  2.22%  2.38%  2.29%   2.21%  2.31%
               
Note: Non-GAAP Reconciliations footnotes are located at the end of this section.
 


First Midwest Bancorp, Inc.
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
               
 As of or for the
 Quarters Ended  Years Ended
 December 31, September 30, June 30, March 31, December 31,  December 31, December 31,
  2021   2021   2021   2021   2020    2021   2020 
Efficiency Ratio Calculation              
Noninterest expense$120,889  $116,054  $121,419  $118,425  $117,971   $476,787  $486,706 
Less:              
Acquisition and integration related expenses (3,945)  (2,916)  (7,773)  (245)  (1,860)   (14,879)  (13,462)
Net OREO expense (442)  4   (160)  (589)  (106)   (1,187)  (1,196)
Optimization costs       (31)  (1,525)  (1,493)   (1,556)  (19,869)
Total$116,502  $113,142  $113,455  $116,066  $114,512   $459,165  $452,179 
Tax-equivalent net interest income(3)$139,811  $146,190  $145,241  $142,098  $149,141   $573,340  $584,079 
Noninterest income 44,479   45,180   46,270   45,803   27,715    181,732   140,653 
Less:              
Swap termination costs             17,567       31,852 
Net securities gains                    (13,323)
Total$184,290  $191,370  $191,511  $187,901  $194,423   $755,072  $743,261 
Efficiency ratio 63.22%  59.12%  59.24%  61.77%  58.90%   60.81%  60.84%
Pre-Tax, Pre-Provision Earnings             
Net Income$48,553  $54,863  $51,121  $45,023  $41,605   $199,560  $107,898 
Income tax expense 16,737   19,459   18,018   17,372   5,743    71,586   27,083 
Provision for credit losses (2,924)        6,098   10,507    3,174   98,615 
Pre-Tax, Pre-Provision Earnings$62,366  $74,322  $69,139  $68,493  $57,855   $274,320  $233,596 
Adjustments to pre-tax, pre-provision earnings:              
Acquisition and integration related expenses$3,945  $2,916  $7,773  $245  $1,860   $14,879  $13,462 
Optimization costs       31   1,525   1,493    1,556   19,869 
Swap termination costs             17,567       31,852 
Net securities gains                    (13,323)
Total adjustments 3,945   2,916   7,804   1,770   20,920    16,435   51,860 
Pre-Tax, Pre-Provision Earnings, adjusted$66,311  $77,238  $76,943  $70,263  $78,775   $290,755  $285,456 
               
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,
   2021   2021   2021   2021   2020 
Tangible Common Equity          
Stockholders' equity, common $2,512,228  $2,492,723  $2,473,648  $2,422,815  $2,459,506 
Less: goodwill and other intangible assets  (920,599)  (923,383)  (926,176)  (928,974)  (932,764)
Tangible common equity  1,591,629   1,569,340   1,547,472   1,493,841   1,526,742 
Less: AOCI  37,793   25,381   5,941   22,096   (26,379)
Tangible common equity, excluding AOCI $1,629,422  $1,594,721  $1,553,413  $1,515,937  $1,500,363 
Total assets $21,778,242  $21,778,180