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First Midwest Bancorp, Inc. Announces 2017 Third Quarter Results

ITASCA, Ill., Oct. 24, 2017 (GLOBE NEWSWIRE) -- First Midwest Bancorp, Inc. (the "Company" or "First Midwest") (NASDAQ:FMBI), the holding company of First Midwest Bank (the "Bank"), today reported results of operations and financial condition for the third quarter of 2017. Net income for the third quarter of 2017 was $38.2 million, or $0.37 per share, compared to $35.0 million, or $0.34 per share, for the second quarter of 2017, and $28.4 million, or $0.35 per share, for the third quarter of 2016.

Reported results for all periods presented were impacted by certain significant transactions, which include acquisition and integration related expenses associated with completed and pending acquisitions (all periods presented) and the net gain on the sale-leaseback transaction (third quarter of 2016). Excluding these certain significant transactions, earnings per share (1) was $0.37 for the third quarter of 2017, compared to $0.35 for the second quarter of 2017 and $0.32 for the third quarter of 2016.

SELECT THIRD QUARTER HIGHLIGHTS

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

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

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

(1) These metrics are non-GAAP financial measures. For details on the calculation of these metrics, see the sections titled "Non-GAAP Financial Information" and "Non-GAAP Reconciliations" presented later in this release.

OPERATING PERFORMANCE

Net Interest Income and Margin Analysis
(Dollar amounts in thousands)
Quarters Ended
September 30, 2017 June 30, 2017 September 30, 2016
Average Balance Interest Yield/
Rate
(%)
Average
Balance
Interest Yield/
Rate
(%)
Average
Balance
Interest Yield/
Rate
(%)
Assets:
Other interest-earning assets$237,727 $793 1.32 $262,206 $686 1.05 $282,101 $472 0.67
Securities (1)1,961,382 11,586 2.36 1,983,341 11,482 2.32 1,896,195 10,752 2.27
Federal Home Loan Bank ("FHLB") and
Federal Reserve Bank ("FRB") stock
67,605 312 1.85 57,073 441 3.09 51,451 261 2.03
Loans (1)10,277,420 119,267 4.60 10,064,119 115,949 4.62 8,067,900 88,500 4.36
Total interest-earning assets (1)12,544,134 131,958 4.18 12,366,739 128,558 4.17 10,297,647 99,985 3.87
Cash and due from banks194,149 188,886 150,467
Allowance for loan losses(99,249) (92,152) (84,088)
Other assets1,516,732 1,497,370 958,299
Total assets$14,155,766 $13,960,843 $11,322,325
Liabilities and Stockholders' Equity:
Savings deposits$2,040,609 391 0.08 $2,072,343 394 0.08 $1,655,604 298 0.07
NOW accounts2,039,593 809 0.16 2,010,152 663 0.13 1,754,330 338 0.08
Money market deposits1,928,962 700 0.14 1,942,672 648 0.13 1,680,886 450 0.11
Time deposits1,559,966 2,469 0.63 1,538,845 2,024 0.53 1,248,425 1,434 0.46
Borrowed funds648,275 2,544 1.56 553,046 2,099 1.52 605,177 1,782 1.17
Senior and subordinated debt194,961 3,110 6.33 194,819 3,105 6.39 166,101 2,632 6.30
Total interest-bearing liabilities8,412,366 10,023 0.47 8,311,877 8,933 0.43 7,110,523 6,934 0.39
Demand deposits3,574,012 3,538,049 2,806,851
Total funding sources11,986,378 11,849,926 9,917,374
Other liabilities313,741 280,381 143,249
Stockholders' equity - common1,855,647 1,830,536 1,261,702
Total liabilities and
stockholders' equity
$14,155,766 $13,960,843 $11,322,325
Tax-equivalent net interest
income/margin (1)
121,935 3.86 119,625 3.88 93,051 3.60
Tax-equivalent adjustment (2,042) (2,042) (2,079)
Net interest income (GAAP) (1) $119,893 $117,583 $90,972
Impact of acquired loan accretion (1) $7,581 0.24 $8,757 0.28 $4,555 0.18
Tax-equivalent net interest income/
margin, excluding the impact of
acquired loan accretion (1)
$114,354 3.62 $110,868 3.60 $88,496 3.42
(1) Interest income and yields on tax-exempt securities and loans are presented on a tax-equivalent basis, assuming a federal income tax rate of 35%. The corresponding income tax impact related to tax-exempt items is recorded in income tax expense. These adjustments have no impact on net income. See the "Non-GAAP Financial Information" section presented later in this release for a discussion of this non-GAAP financial measure.

Net interest income increased by 2.0% from the second quarter of 2017 and 31.8% compared to the third quarter of 2016. The rise in net interest income compared to the second quarter of 2017 resulted primarily from higher interest rates and loan growth, partially offset by a decrease in acquired loan accretion. Compared to the third quarter of 2016, higher interest rates, combined with loan growth and the acquisition of interest-earning assets and acquired loan accretion from the Standard Bancshares, Inc. ("Standard") transaction early in the first quarter of 2017, contributed to the increase in net interest income.

Acquired loan accretion contributed $7.6 million, $8.8 million, and $4.6 million to net interest income for the third quarter of 2017, the second quarter of 2017, and the third quarter of 2016, respectively.

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

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

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

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

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

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

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

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

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

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

Noninterest Expense Analysis
(Dollar amounts in thousands)
Quarters Ended September 30, 2017
Percent Change From
September 30,
2017
June 30,
2017
September 30,
2016
June 30,
2017
September 30,
2016
Salaries and employee benefits:
Salaries and wages $45,219 $44,194 $37,872 2.3 19.4
Retirement and other employee benefits 10,419 10,381 8,500 0.4 22.6
Total salaries and employee benefits 55,638 54,575 46,372 1.9 20.0
Net occupancy and equipment expense 12,115 12,485 10,755 (3.0) 12.6
Professional services 8,498 9,112 6,772 (6.7) 25.5
Technology and related costs 4,505 4,485 3,881 0.4 16.1
Merchant card expense 1,737 2,632 2,857 (34.0) (39.2)
Advertising and promotions 1,852 1,693 1,941 9.4 (4.6)
Cardholder expenses 1,962 1,682 1,515 16.6 29.5
Net other real estate owned ("OREO") expense 657 1,631 313 (59.7) 109.9
Other expenses 9,842 10,282 7,310 (4.3) 34.6
Total noninterest expense excluding
certain significant transactions (1)
96,806 98,577 81,716 (1.8) 18.5
Acquisition and integration related expenses 384 1,174 1,172 (67.3) (67.2)
Total noninterest expense $97,190 $99,751 $82,888 (2.6) 17.3
(1) Total noninterest expense, excluding certain significant transactions, is a non-GAAP financial measure. See the Non-GAAP Financial Information discussion for detail.

Total noninterest expense decreased by 2.6% compared to the second quarter of 2017 and increased by 17.3% compared to the third quarter of 2016. Compared to the second quarter of 2017, the increase in salaries and employee benefits was driven primarily by higher staffing levels. Professional services decreased compared to the second quarter of 2017 as a result of lower loan remediation costs. The decline in merchant card expense is in-line with the decrease in merchant servicing fees included in noninterest income for each period presented. Net OREO expense decreased from the second quarter of 2017 due primarily to lower valuation adjustments.

Compared to the third quarter of 2016, the increase in total noninterest expense largely resulted from operating costs associated with the Standard and Premier transactions, which impacted most expense categories. In addition, compensation costs associated with merit increases and investments in additional talent to support growth contributed to the rise in salaries and employee benefits. Professional services were impacted by certain costs associated with organizational growth. In addition, other expenses increased compared to the third quarter of 2016 due to a reduction in the reserve for unfunded commitments during the third quarter of 2016.

Acquisition and integration related expenses for the second and third quarters of 2017 resulted from the acquisitions of Standard and Premier completed during the first quarter of 2017. For the third quarter of 2016, acquisition and integration related expenses resulted from the acquisition of NI Bancshares Corporation completed during the first quarter of 2016. These expenses fluctuate based on the size and timing of each transaction.

INCOME TAXES

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

LOAN PORTFOLIO AND ASSET QUALITY

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

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

Asset Quality
(Dollar amounts in thousands)
As of September 30, 2017
Percent Change From
September 30,
2017
June 30,
2017
September 30,
2016
June 30,
2017
September 30,
2016
Asset quality
Non-accrual loans $65,176 $79,196 $44,289 (17.7) 47.2
90 days or more past due loans, still accruing
interest (1)
2,839 2,059 4,318 37.9 (34.3)
Total non-performing loans 68,015 81,255 48,607 (16.3) 39.9
Accruing troubled debt restructurings
("TDRs")
1,813 2,029 2,368 (10.6) (23.4)
OREO 19,873 26,493 28,049 (25.0) (29.1)
Total non-performing assets $89,701 $109,777 $79,024 (18.3) 13.5
30-89 days past due loans (1) $28,868 $19,081 $26,140
Non-accrual loans to total loans 0.63% 0.77% 0.54%
Non-performing loans to total loans 0.65% 0.79% 0.59%
Non-performing assets to total loans plus
OREO
0.86% 1.07% 0.96%
Allowance for credit losses
Allowance for loan losses $94,814 $92,371 $85,308
Reserve for unfunded commitments 1,000 1,000 1,000
Total allowance for credit losses $95,814 $93,371 $86,308
Allowance for credit losses to total loans (2) 0.92% 0.91% 1.06%
Allowance for credit losses to loans, excluding
acquired loans
1.09% 1.10% 1.13%
Allowance for credit losses to non-accrual
loans
147.01% 117.90% 194.87%
(1) Purchased credit impaired loans with an accretable yield are considered current and are not included in past due loan totals.

(2) This ratio includes acquired loans that are recorded at fair value through an acquisition adjustment, which incorporates credit risk as of the acquisition date with no allowance for credit losses being established at that time. As the acquisition adjustment is accreted into income over future periods, an allowance for credit losses on acquired loans is established as necessary to reflect credit deterioration.

Total non-performing assets represented 0.86% of total loans and OREO at September 30, 2017, down from 1.07% at June 30, 2017 and 0.96% at September 30, 2016. Total OREO includes $5.9 million and $6.9 million as of September 30, 2017 and June 30, 2017, respectively, that was acquired in the Standard transaction during the first quarter of 2017.

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


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


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

DEPOSIT PORTFOLIO

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

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

CAPITAL MANAGEMENT

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

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

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

Conference Call

A conference call to discuss the Company's results, outlook, and related matters will be held on Wednesday, October 25, 2017 at 11:00 A.M. (ET). Members of the public who would like to listen to the conference call should dial (877) 507-0639 (U.S. domestic) or (412) 317-6003 (International) and ask for the First Midwest Bancorp, Inc. Earnings Conference Call. The number should be dialed 10 to 15 minutes prior to the start of the conference call. There is no charge to access the call. The conference call will also be accessible as an audio webcast through the Investor Relations section of the Company's website, www.firstmidwest.com/investorrelations. For those unable to listen to the live broadcast, a replay will be available on the Company's website or by dialing (877) 344-7529 (U.S. domestic) or (412) 317-0088 (International) conference ID 10112793 beginning one hour after completion of the live call until 9:00 A.M. (ET) on November 8, 2017. Please direct any questions regarding obtaining access to the conference call to First Midwest Bancorp, Inc. Investor Relations, via e-mail, at investor.relations@firstmidwest.com.

Press Release and Additional Information Available on Website

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

Forward-Looking Statements

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

Forward-looking statements may be deemed to include, among other things, statements relating to our future financial performance, the performance of our loan or securities portfolio, the expected amount of future credit reserves or charge-offs, corporate strategies or objectives, anticipated trends in our business, regulatory developments, acquisition transactions, including estimated synergies, cost savings and financial benefits of consummated transactions, and growth strategies, including possible future acquisitions. These statements are subject to certain risks, uncertainties and assumptions. For a discussion of these risks, uncertainties and assumptions, you should refer to the sections titled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2016, as well as our subsequent filings made with the Securities and Exchange Commission. However, these risks and uncertainties are not exhaustive. Other sections of such reports describe additional factors that could adversely impact our business and financial performance.

Non-GAAP Financial Information

The Company's accounting and reporting policies conform to U.S. generally accepted accounting principles ("GAAP") and general practices within the banking industry. As a supplement to GAAP, the Company provides non-GAAP performance results, which the Company believes are useful because they assist investors in assessing the Company's operating performance. These non-GAAP financial measures include earnings per share ("EPS"), excluding certain significant transactions, the efficiency ratio, total noninterest expense, excluding certain significant transactions, return on average assets, excluding certain significant transactions, tax-equivalent net interest income (including its individual components), tax-equivalent net interest margin, tax-equivalent net interest margin, excluding the impact of acquired loan accretion, tangible common equity to tangible assets, tangible common equity, excluding accumulated other comprehensive loss, to tangible assets, tangible common equity to risk-weighted assets, return on average tangible common equity, and return on average tangible common equity, excluding certain significant transactions.

The Company presents EPS, the efficiency ratio, total noninterest expense, return on average assets, and return on average tangible common equity, all excluding certain significant transactions. Certain significant transactions include acquisition and integration related expenses (all periods presented), a net gain related to a sale-leaseback transaction (third quarter of 2016), and a lease cancellation fee (fourth quarter of 2016). Management believes excluding these transactions from EPS, the efficiency ratio, total noninterest expense, return on average assets, and return on average tangible common equity is useful in assessing the Company's underlying operational performance since these transactions do not pertain to its core business operations and their exclusion facilitates better comparability between periods. Management believes that excluding acquisition and integration related expenses from these metrics is useful to the Company, as well as analysts and investors, since these expenses can vary significantly based on the size, type, and structure of each acquisition. Additionally, management believes excluding these transactions from these metrics enhances comparability for peer comparison purposes.

The tax-equivalent adjustment to net interest income and net interest margin recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a 35% tax rate. Management believes that it is standard practice in the banking industry to present net interest income and net interest margin on a fully tax-equivalent basis and that it enhances comparability for peer comparison purposes. In addition, management believes that the tax-equivalent net interest margin, excluding the impact of acquired loan accretion, enhances comparability for peer comparison purposes and is useful to the Company, as well as analysts and investors, since acquired loan accretion income may fluctuate based on the size of each acquisition, as well as from period to period.

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

Although intended to enhance investors' understanding of the Company's business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. See the previously provided tables and the following reconciliations in the "Non-GAAP Reconciliations" section for details on the calculation of these measures to the extent presented herein.

About the Company

First Midwest is a relationship-focused financial institution and one of the largest independent publicly-traded bank holding companies based on assets headquartered in the Midwest, with over $14 billion in assets and $10 billion in trust assets under management. First Midwest's principal subsidiary, First Midwest Bank, and other affiliates provide a full range of commercial, equipment leasing, treasury management, retail, wealth management, trust and private banking products and services through over 130 locations in metropolitan Chicago, northwest Indiana, central and western Illinois, and eastern Iowa. First Midwest's common stock is traded on the NASDAQ Stock Market under the symbol FMBI. First Midwest's website is www.firstmidwest.com.

Contact Information

Investors:Patrick S. Barrett
EVP, Chief Financial Officer
(630) 875-7273
pat.barrett@firstmidwest.com
Media:James M. Roolf
SVP, Corporate Relations Officer
(630) 875-7533
jim.roolf@firstmidwest.com


Accompanying Unaudited Selected Financial Information

First Midwest Bancorp, Inc.
Consolidated Statements of Financial Condition (Unaudited)
(Dollar amounts in thousands)
As of
September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
September 30,
2016
Period-End Balance Sheet
Assets
Cash and due from banks$174,147 $181,171 $174,268 $155,055 $139,538
Interest-bearing deposits in other banks252,753 103,181 74,892 107,093 362,153
Trading securities, at fair value20,425 19,545 19,130 17,920 18,351
Securities available-for-sale, at fair value1,732,984 1,908,248 1,937,124 1,919,450 1,964,030
Securities held-to-maturity, at amortized cost14,638 17,353 17,742 22,291 20,337
FHLB and FRB stock69,708 66,333 46,306 59,131 53,506
Loans:
Commercial and industrial3,462,612 3,410,748 3,370,780 2,827,658 2,849,399
Agricultural437,721 433,424 422,784 389,496 409,571
Commercial real estate:
Office, retail, and industrial1,960,367 1,983,802 1,988,979 1,581,967 1,537,181
Multi-family711,101 681,032 671,710 614,052 625,324
Construction545,666 543,892 568,460 451,540 401,857
Other commercial real estate1,391,241 1,383,937 1,357,781 979,528 971,030
Home equity847,209 865,656 880,667 747,983 748,571
1-4 family mortgages711,607 614,818 540,148 423,922 396,819
Installment322,768 314,850 253,061 237,999 232,030
Total loans10,390,292 10,232,159 10,054,370 8,254,145 8,171,782
Allowance for loan losses(94,814) (92,371) (88,163) (86,083) (85,308)
Net loans10,295,478 10,139,788 9,966,207 8,168,062 8,086,474
OREO19,873 26,493 29,140 26,083 28,049
Premises, furniture, and equipment, net131,295 135,745 140,653 82,577 82,443
Investment in bank-owned life insurance ("BOLI")279,639 278,353 276,960 219,746 219,064
Goodwill and other intangible assets750,436 752,413 754,621 366,876 367,961
Accrued interest receivable and other assets525,766 340,517 336,428 278,271 236,291
Total assets$14,267,142 $13,969,140 $13,773,471 $11,422,555 $11,578,197
Liabilities and Stockholders' Equity
Noninterest-bearing deposits$3,580,922 $3,525,905 $3,492,987 $2,766,748 $2,766,265
Interest-bearing deposits7,627,575 7,473,815 7,463,554 6,061,855 6,339,839
Total deposits11,208,497 10,999,720 10,956,541 8,828,603 9,106,104
Borrowed funds700,536 639,333 547,923 879,008 639,539
Senior and subordinated debt195,028 194,886 194,745 194,603 309,444
Accrued interest payable and other liabilities297,951 298,358 269,529 263,261 253,846
Stockholders' equity1,865,130 1,836,843 1,804,733 1,257,080 1,269,264
Total liabilities and stockholders' equity$14,267,142 $13,969,140 $13,773,471 $11,422,555 $11,578,197
Stockholders' equity, excluding accumulated other
comprehensive income ("AOCI")
$1,903,166 $1,873,410 $1,844,997 $1,297,990 $1,282,666
Stockholders' equity, common1,865,130 1,836,843 1,804,733 1,257,080 1,269,264


First Midwest Bancorp, Inc.
Condensed Consolidated Statements of Income (Unaudited)
(Dollar amounts in thousands)
Quarters Ended Nine Months Ended
September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
September 30,
2016
September 30,
2017
September 30,
2016
Income Statement
Interest income$129,916 $126,516 $123,699 $96,328 $97,906 $380,131 $282,004
Interest expense10,023 8,933 8,502 8,304 6,934 27,458 20,337
Net interest income119,893 117,583 115,197 88,024 90,972 352,673 261,667
Provision for loan losses10,109 8,239 4,918 5,307 9,998 23,266 25,676
Net interest income after
provision for loan losses
109,784 109,344 110,279 82,717 80,974 329,407 235,991
Noninterest Income
Service charges on deposit
accounts
12,561 12,153 11,365 10,315 10,708 36,079 30,350
Wealth management fees10,169 10,525 9,660 8,375 8,495 30,354 24,696
Card-based fees5,992 8,832 8,116 7,462 7,332 22,940 21,642
Merchant servicing fees2,237 3,197 3,135 3,016 3,319 8,569 9,517
Mortgage banking income2,246 1,645 1,888 3,537 3,394 5,779 6,625
Capital market products
income
2,592 2,217 1,376 1,827 2,916 6,185 8,197
Other service charges,
commissions, and fees
2,508 2,659 2,307 2,575 2,302 7,474 6,967
Total fee-based revenues38,305 41,228 37,847 37,107 38,466 117,380 107,994
Net securities gains3,197 284 323 187 3,481 1,097
Net gain on sale-leaseback
transaction
5,509 5,509
Other income1,846 3,433 2,104 2,281 1,691 7,383 5,001
Total noninterest income43,348 44,945 39,951 39,711 45,853 128,244 119,601
Noninterest Expense
Salaries and employee
benefits:
Salaries and wages45,219 44,194 44,890 39,257 37,872 134,303 112,084
Retirement and other
employee benefits
10,419 10,381 10,882 8,160 8,500 31,682 25,149
Total salaries and
employee benefits
55,638 54,575 55,772 47,417 46,372 165,985 137,233
Net occupancy and
equipment expense
12,115 12,485 12,325 10,774 10,755 36,925 30,380
Professional services8,498 9,112 8,463 7,138 6,772 26,073 17,984
Technology and related costs4,505 4,485 4,433 3,514 3,881 13,423 11,251
Merchant card expense1,737 2,632 2,585 2,603 2,857 6,954 8,179
Advertising and promotions1,852 1,693 1,066 2,330 1,941 4,611 5,457
Cardholder expenses1,962 1,682 1,764 1,426 1,515 5,408 4,386
Net OREO expense657 1,631 1,700 925 313 3,988 2,099
Other expenses9,842 10,282 9,969 8,050 7,310 30,093 23,052
Acquisition and integration
related expenses
384 1,174 18,565 7,542 1,172 20,123 6,810
Lease cancellation fee 950
Total noninterest expense97,190 99,751 116,642 92,669 82,888 313,583 246,831
Income before income tax
expense
55,942 54,538 33,588 29,759 43,939 144,068 108,761
Income tax expense17,707 19,588 10,733 9,041 15,537 48,028 37,130
Net income$38,235 $34,950 $22,855 $20,718 $28,402 $96,040 $71,631
Net income applicable to
common shares
$37,895 $34,614 $22,621 $20,501 $28,078 $95,130 $70,805
Net income applicable to
common shares, excluding
certain significant
transactions (1)
$38,125 $35,318 $33,760 $25,596 $25,476 $107,204 $71,586
Footnotes to Condensed Consolidated Statements of Income
(1) Certain significant transactions that are recorded in various periods presented include acquisition and integration related expenses associated with completed and pending acquisitions, the lease cancellation fee recognized as a result of the Company's planned 2018 corporate headquarters relocation, and a net gain on a sale-leaseback transaction.


First Midwest Bancorp, Inc.
Selected Financial Information (Unaudited)
(Amounts in thousands, except per share data)
As of or for the
Quarters Ended Nine Months Ended
September 30, 2017 June 30, 2017 March 31, 2017 December 31, 2016 September 30, 2016 September 30, 2017 September 30, 2016
Earnings Per Share
Basic earnings per common
share ("EPS")
$0.37 $0.34 $0.23 $0.25 $0.35 $0.94 $0.89
Diluted EPS$0.37 $0.34 $0.23 $0.25 $0.35 $0.94 $0.89
Diluted EPS, excluding certain
significant transactions (1) (6)
$0.37 $0.35 $0.34 $0.32 $0.32 $1.06 $0.90
Common Stock and Related Per Common Share Data
Book value$18.16 $17.88 $17.56 $15.46 $15.61 $18.16 $15.61
Tangible book value$10.85 $10.55 $10.22 $10.95 $11.08 $10.85 $11.08
Dividends declared per share$0.10 $0.10 $0.09 $0.09 $0.09 $0.29 $0.27
Closing price at period end$23.42 $23.31 $23.68 $25.23 $19.36 $23.42 $19.36
Closing price to book value1.3 1.3 1.3 1.6 1.2 1.3 1.2
Period end shares outstanding102,722 102,741 102,757 81,325 81,324 102,722 81,324
Period end treasury shares9,626 9,604 9,586 9,959 9,957 9,626 9,957
Common dividends$10,411 $10,256 $9,126 $7,315 $7,408 $29,793 $21,876
Key Ratios/Data
Return on average common
equity (2)
8.10% 7.58% 5.20% 6.42% 8.85% 7.00% 7.72%
Return on average tangible
common equity (2)
14.03% 13.37% 9.53% 9.35% 12.85% 12.40% 11.27%
Return on average tangible
common equity, excluding
certain significant
transactions (1) (2) (6)
14.11% 13.64% 13.99% 11.60% 11.69% 13.91% 11.39%
Return on average assets (2)1.07% 1.00% 0.68% 0.72% 1.00% 0.92% 0.89%
Return on average assets,
excluding certain significant
transactions (1) (2) (6)
1.08% 1.02% 1.01% 0.90% 0.91% 1.04% 0.90%
Loans to deposits92.70% 93.02% 91.77% 93.49% 89.74% 92.70% 89.74%
Efficiency ratio (1)58.97% 58.67% 60.98% 63.98% 60.83% 59.52% 62.12%
Net interest margin (3)3.86% 3.88% 3.89% 3.44% 3.60% 3.88% 3.66%
Yield on average interest-earning
assets (3)
4.18% 4.17% 4.17% 3.76% 3.87% 4.17% 3.94%
Cost of funds (4)0.33% 0.30% 0.30% 0.33% 0.28% 0.31% 0.29%
Net noninterest expense to
average assets
1.60% 1.58% 2.27% 1.86% 1.50% 1.81% 1.66%
Effective income tax rate31.65% 35.92% 31.95% 30.38% 35.36% 33.34% 34.14%
Capital Ratios
Total capital to risk-weighted
assets (1)
11.79% 11.69% 11.48% 12.23% 12.25% 11.79% 12.25%
Tier 1 capital to risk-weighted
assets (1)
9.83% 9.71% 9.53% 9.90% 9.89% 9.83% 9.89%
CET1 to risk-weighted assets (1)9.42% 9.30% 9.11% 9.39% 9.38% 9.42% 9.38%
Tier 1 capital to average assets (1)9.04% 8.93% 8.89% 8.99% 8.90% 9.04% 8.90%
Tangible common equity to
tangible assets (1)
8.25% 8.20% 8.07% 8.05% 8.04% 8.25% 8.04%
Tangible common equity,
excluding AOCI, to tangible
assets (1)
8.53% 8.48% 8.38% 8.42% 8.16% 8.53% 8.16%
Tangible common equity to
risk-weighted assets (1)
9.02% 8.90% 8.68% 8.88% 9.13% 9.02% 9.13%
Note: Selected Financial Information footnotes are located at the end of this section.


First Midwest Bancorp, Inc.
Selected Financial Information (Unaudited)
(Amounts in thousands, except per share data)
As of or for the
Quarters Ended Nine Months Ended
September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
September 30,
2016
September 30,
2017
September 30,
2016
Asset Quality Performance Data
Non-performing assets
Commercial and industrial$41,504 $51,400 $21,514 $29,938 $13,823 $41,504 $13,823
Agricultural380 387 1,283 181 184 380 184
Commercial real estate:
Office, retail, and industrial12,221 15,031 19,505 17,277 17,670 12,221 17,670
Multi-family153 158 163 311 316 153 316
Construction146 197 198 286 287 146 287
Other commercial real estate2,239 3,736 3,858 2,892 3,361 2,239 3,361
Consumer8,533 8,287 7,773 8,404 8,648 8,533 8,648
Total non-accrual loans65,176 79,196 54,294 59,289 44,289 65,176 44,289
90 days or more past due loans,
still accruing interest
2,839 2,059 2,633 5,009 4,318 2,839 4,318
Total non-performing loans68,015 81,255 56,927 64,298 48,607 68,015 48,607
Accruing TDRs1,813 2,029 2,112 2,291 2,368 1,813 2,368
OREO19,873 26,493 29,140 26,083 28,049 19,873 28,049
Total non-performing assets$89,701 $109,777 $88,179 $92,672 $79,024 $89,701 $79,024
30-89 days past due loans$28,868 $19,081 $23,641 $21,043 $26,140 $28,868 $26,140
Allowance for credit losses
Allowance for loan losses$94,814 $92,371 $88,163 $86,083 $85,308 $94,814 $85,308
Reserve for unfunded
commitments
1,000 1,000 1,000 1,000 1,000 1,000 1,000
Total allowance for credit
losses
$95,814 $93,371 $89,163 $87,083 $86,308 $95,814 $86,308
Provision for loan losses$10,109 $8,239 $4,918 $5,307 $9,998 $23,266 $25,676
Net charge-offs by category
Commercial and industrial$8,237 $1,721 $1,894 $3,540 $1,145 $11,852 $3,991
Agricultural 836 514 1,350
Commercial real estate:
Office, retail, and industrial(1,811) (8) (848) 165 2,151 (2,667) 4,205
Multi-family(2) (6) (28) 17 (69) (36) 193
Construction(25) 27 (222) (12) (9) (220) 90
Other commercial real estate(19) 228 307 (111) 415 516 2,519
Consumer1,286 1,233 1,221 933 1,162 3,740 3,000
Total net charge-offs$7,666 $4,031 $2,838 $4,532 $4,795 $14,535 $13,998
Total recoveries included above$2,900 $828 $3,440 $1,489 $1,155 $7,168 $3,274
Note: Selected Financial Information footnotes are located at the end of this section.


First Midwest Bancorp, Inc.
Selected Financial Information (Unaudited)
As of or for the
Quarters Ended
September 30, June 30, March 31, December 31, September 30,
2017 2017 2017 2016 2016
Asset Quality ratios
Non-accrual loans to total loans 0.63% 0.77% 0.54% 0.72% 0.54%
Non-performing loans to total loans 0.65% 0.79% 0.57% 0.78% 0.59%
Non-performing assets to total loans plus OREO 0.86% 1.07% 0.87% 1.12% 0.96%
Non-performing assets to tangible common equity plus allowance
for credit losses
7.41% 9.32% 7.74% 9.48% 8.00%
Non-accrual loans to total assets 0.46% 0.57% 0.39% 0.52% 0.38%
Allowance for credit losses and net charge-off ratios
Allowance for credit losses to total loans (5) 0.92% 0.91% 0.89% 1.06% 1.06%
Allowance for credit losses to loans, excluding acquired loans 1.09% 1.10% 1.11% 1.11% 1.13%
Allowance for credit losses to non-accrual loans 147.01% 117.90% 164.22% 146.88% 194.87%
Allowance for credit losses to non-performing loans 140.87% 114.91% 156.63% 135.44% 177.56%
Net charge-offs to average loans (2) 0.30% 0.16% 0.12% 0.22% 0.24%
Footnotes to Selected Financial Information
(1) See the Non-GAAP Reconciliations section for the detailed calculation.
(2) Annualized based on the actual number of days for each period presented.
(3) Presented on a tax-equivalent basis, assuming a federal income tax rate of 35%.
(4) Cost of funds expresses total interest expense as a percentage of average total funding sources.
(5) This ratio includes acquired loans that are recorded at fair value through an acquisition adjustment, which incorporates credit risk, as of the acquisition date with no allowance for credit losses being established at that time. As the acquisition adjustment is accreted into income over future periods, an allowance for credit losses is established on acquired loans as necessary to reflect credit deterioration.
(6) Certain significant transactions that are recorded in various periods presented include acquisition and integration related expenses associated with completed and pending acquisitions, the lease cancellation fee recognized as a result of the Company's planned 2018 corporate headquarters relocation, and a net gain on a sale-leaseback transaction.


First Midwest Bancorp, Inc.
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
Quarters Ended Nine Months Ended
September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
September 30,
2016
September 30,
2017
September 30,
2016
Earnings Per Share
Net income$38,235 $34,950 $22,855 $20,718 $28,402 $96,040 $71,631
Net income applicable to non-
vested restricted shares
(340) (336) (234) (217) (324) (910) (826)
Net income applicable to
common shares
37,895 34,614 22,621 20,501 28,078 95,130 70,805
Acquisition and integration
related expenses
384 1,174 18,565 7,542 1,172 20,123 6,810
Tax effect of acquisition and
integration related expenses
(154) (470) (7,426) (3,017) (469) (8,049) (2,724)
Lease cancellation fee 950
Tax effect of lease cancellation
fee
(380)
Net gain on sale-leaseback
transaction
(5,509) (5,509)
Tax effect of net gain on sale-
leaseback transaction
2,204 2,204
Net income applicable to
common shares, excluding
certain significant
transactions (1)
$38,125 $35,318 $33,760 $25,596 $25,476 $107,204 $71,586


Weighted-average common shares outstanding:
Weighted-average common
shares outstanding (basic)
101,752 101,743 100,411 80,415 80,396 101,307 79,589
Dilutive effect of common
stock equivalents
20 20 21 15 13 20 13
Weighted-average diluted
common shares
outstanding
101,772 101,763 100,432 80,430 80,409 101,327 79,602
Basic EPS$0.37 $0.34 $0.23 $0.25 $0.35 $0.94 $0.89
Diluted EPS$0.37 $0.34 $0.23 $0.25 $0.35 $0.94 $0.89
Diluted EPS, excluding certain
significant transactions (1)
$0.37 $0.35 $0.34 $0.32 $0.32 $1.06 $0.90
Anti-dilutive shares not included
in the computation of diluted
EPS
190 195 343 445 454 242 510
Efficiency Ratio Calculation
Noninterest expense$97,190 $99,751 $116,642 $92,669 $82,888 $313,583 $246,831
Less:
Net OREO expense(657) (1,631) (1,700) (925) (313) (3,988) (2,099)
Acquisition and integration
related expenses
(384) (1,174) (18,565) (7,542) (1,172) (20,123) (6,810)
Lease cancellation fee (950)
Total$96,149 $96,946 $96,377 $83,252 $81,403 $289,472 $237,922
Tax-equivalent net interest
income (2)
$121,935 $119,625 $117,251 $90,088 $93,051 $358,811 $268,246
Fee-based revenues38,305 41,228 37,847 37,107 38,466 117,380 107,994
Add:
Other income, excluding
BOLI income
422 2,022 844 1,310 762 3,288 2,325
BOLI1,424 1,411 1,260 971 929 4,095 2,676
Tax-equivalent adjustment
of BOLI
949 941 840 647 619 2,730 1,784
Total$163,035 $165,227 $158,042 $130,123 $133,827 $486,304 $383,025
Efficiency ratio58.97% 58.67% 60.98% 63.98% 60.83% 59.52% 62.12%
Note: Non-GAAP Reconciliations footnotes are located at the end of this section.


First Midwest Bancorp, Inc.
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
As of or for the
Quarters Ended Nine Months Ended
September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
September 30,
2016
September 30,
2017
September 30,
2016
Risk-Based Capital Data
Common stock$1,123 $1,123 $1,123 $913 $913 $1,123 $913
Additional paid-in capital1,029,002 1,025,607 1,022,417 498,937 496,918 1,029,002 496,918
Retained earnings1,082,921 1,056,072 1,030,403 1,016,674 1,003,271 1,082,921 1,003,271
Treasury stock, at cost(209,880) (209,392) (208,946) (218,534) (218,436) (209,880) (218,436)
Goodwill and other intangible
assets, net of deferred tax
liabilities
(738,645) (740,236) (742,012) (356,477) (357,079) (738,645) (357,079)
Disallowed deferred tax assets(275) (472) (1,150) (198) (383) (275) (383)
CET1 capital1,164,246 1,132,702 1,101,835 941,315 925,204 1,164,246 925,204
Trust-preferred securities50,690 50,690 50,690 50,690 50,690 50,690 50,690
Other disallowed deferred tax
assets
(69) (118) (287) (132) (255) (69) (255)
Tier 1 capital1,214,867 1,183,274 1,152,238 991,873 975,639 1,214,867 975,639
Tier 2 capital242,652 240,121 235,825 233,656 232,792 242,652 232,792
Total capital$1,457,519 $1,423,395 $1,388,063 $1,225,529 $1,208,431 $1,457,519 $1,208,431
Risk-weighted assets$12,362,833 $12,180,416 $12,095,592 $10,019,434 $9,867,406 $12,362,833 $9,867,406
Adjusted average assets$13,439,744 $13,245,499 $12,965,450 $11,036,835 $10,959,119 $13,439,744 $10,959,119
Total capital to risk-weighted
assets
11.79% 11.69% 11.48% 12.23% 12.25% 11.79% 12.25%
Tier 1 capital to risk-weighted
assets
9.83% 9.71% 9.53% 9.90% 9.89% 9.83% 9.89%
CET1 to risk-weighted assets9.42% 9.30% 9.11% 9.39% 9.38% 9.42% 9.38%
Tier 1 capital to average assets9.04% 8.93% 8.89% 8.99% 8.90% 9.04% 8.90%
Tangible Common Equity
Stockholders' equity$1,865,130 $1,836,843 $1,804,733 $1,257,080 $1,269,264 $1,865,130 $1,269,264
Less: goodwill and other
intangible assets
(750,436) (752,413) (754,621) (366,876) (367,961) (750,436) (367,961)
Tangible common equity1,114,694 1,084,430 1,050,112 890,204 901,303 1,114,694 901,303
Less: AOCI38,036 36,567 40,264 40,910 13,402 38,036 13,402
Tangible common equity,
excluding AOCI
$1,152,730 $1,120,997 $1,090,376 $931,114 $914,705 $1,152,730 $914,705
Total assets$14,267,142 $13,969,140 $13,773,471 $11,422,555 $11,578,197 $14,267,142 $11,578,197
Less: goodwill and other
intangible assets
(750,436) (752,413) (754,621) (366,876) (367,961) (750,436) (367,961)
Tangible assets$13,516,706 $13,216,727 $13,018,850 $11,055,679 $11,210,236 $13,516,706 $11,210,236
Tangible common equity to
tangible assets
8.25% 8.20% 8.07% 8.05% 8.04% 8.25% 8.04%
Tangible common equity,
excluding AOCI, to tangible
assets
8.53% 8.48% 8.38% 8.42% 8.16% 8.53% 8.16%
Tangible common equity to risk-
weighted assets
9.02
% 8.90% 8.68% 8.88% 9.13% 9.02% 9.13%
Note: Non-GAAP Reconciliations footnotes are located at the end of this section.


First Midwest Bancorp, Inc.
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
As of or for the
Quarters Ended Nine Months Ended
September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
September 30,
2016
September 30,
2017
September 30,
2016
Return on Average Common and Tangible Common Equity
Net income applicable to
common shares
$37,895 $34,614 $22,621 $20,501 $28,078 $95,130 $70,805
Intangibles amortization1,931 2,163 1,965 1,207 1,245 6,059 3,475
Tax effect of intangibles
amortization
(772) (865) (786) (483) (498) (2,424) (1,390)
Net income applicable to
common shares, excluding
intangibles amortization
39,054 35,912 23,800 21,225 28,825 98,765 72,890
Acquisition and integration
related expenses
384 1,174 18,565 7,542 1,172 20,123 6,810
Tax effect of acquisition and
integration related expenses
(154) (470) (7,426) (3,017) (469) (8,049) (2,724)
Lease cancellation fee 950
Tax effect of lease cancellation
fee
(380)
Net gain on sale-leaseback
transaction
(5,509) (5,509)
Tax effect of net gain on sale-
leaseback transaction
2,204 2,204
Net income applicable to
common shares, excluding
intangibles amortization
and certain significant
transactions (1)
$39,284 $36,616 $34,939 $26,320 $26,223 $110,839 $73,671
Average stockholders' equity$1,855,647 $1,830,536 $1,763,538 $1,269,993 $1,261,702 1,816,911 $1,225,396
Less: average intangible assets(751,366) (753,521) (750,589) (367,328) (369,281) (751,828) (361,697)
Average tangible common
equity
$1,104,281 $1,077,015 $1,012,949 $902,665 $892,421 $1,065,083 $863,699
Return on average common
equity (3)
8.10% 7.58% 5.20% 6.42% 8.85% 7.00% 7.72%
Return on average tangible
common equity (3)
14.03% 13.37% 9.53% 9.35% 12.85% 12.40% 11.27%
Return on average tangible
common equity, excluding
certain significant
transactions (1) (3)
14.11% 13.64% 13.99% 11.60% 11.69% 13.91% 11.39%
Return on Average Assets
Net income$38,235 $34,950 $22,855 $20,718 $28,402 $96,040 $71,631
Acquisition and integration
related expenses
384 1,174 18,565 7,542 1,172 20,123 6,810
Tax effect of acquisition and
integration related expenses
(154) (470) (7,426) (3,017) (469) (8,049) (2,724)
Lease cancellation fee 950
Tax effect of lease cancellation
fee
(380)
Net gain on sale-leaseback
transaction
(5,509) (5,509)
Tax effect of net gain on sale-
leaseback transaction
2,204 2,204
Net income, excluding
certain significant
transactions (1)
$38,465 $35,654 $33,994 $25,813 $25,800 $108,114 $72,412
Average assets$14,155,766 $13,960,843 $13,673,125 $11,380,108 $11,322,325 $13,931,679 $10,784,532
Return on average assets (3)1.07% 1.00% 0.68% 0.72% 1.00% 0.92% 0.89%
Return on average assets,
excluding certain significant
transactions (1) (3)
1.08% 1.02% 1.01% 0.90% 0.91% 1.04% 0.90%
Footnotes to Non-GAAP Reconciliations
(1) Certain significant transactions that are recorded in various periods presented include acquisition and integration related expenses associated with completed and pending acquisitions, the lease cancellation fee recognized as a result of the Company's planned 2018 corporate headquarters relocation, and a net gain on a sale-leaseback transaction.
(2) Presented on a tax-equivalent basis, assuming a federal income tax rate of 35%.
(3) Annualized based on the actual number of days for each period presented.

Source:First Midwest Bancorp, Inc.