EX-99.1 2 fmbi03312018er.htm EXHIBIT 99.1 Exhibit

Exhibit 99.1

a3282014fmbilogoa17.jpg
 
 
 
 
 
FOR IMMEDIATE RELEASE
 
 
 
 
 
 
 

FIRST MIDWEST BANCORP, INC. ANNOUNCES
2018 FIRST QUARTER RESULTS
ITASCA, IL, April 24, 2018 - First Midwest Bancorp, Inc. (the "Company" or "First Midwest") (NASDAQ NGS: FMBI), the holding company of First Midwest Bank (the "Bank"), today reported results of operations and financial condition for the first quarter of 2018. Net income for the first quarter of 2018 was $33.5 million, or $0.33 per share, compared to $2.3 million, or $0.02 per share, for the fourth quarter of 2017, and $22.9 million, or $0.23 per share, for the first quarter of 2017.
Reported results for the fourth quarter of 2017 were impacted by the revaluation of the Company's deferred tax assets ("DTAs") and various actions taken by the Company in light of federal income tax reform legislation. For the first quarter of 2017, reported results were impacted by acquisition and integration related expenses. For additional detail on these adjustments, see the "Non-GAAP Financial Information" section presented later in this release.
Earnings per share, adjusted(1) was $0.33 for the first quarter of 2018, compared to $0.34 for both the fourth and the first quarters of 2017.
SELECT FIRST QUARTER HIGHLIGHTS
•
Increased earnings per share to $0.33, up from $0.02 and $0.23 for the fourth and first quarters of 2017, respectively.
◦
Generated earnings per share, adjusted(1) of $0.33, down 3% from the fourth and first quarters of 2017.
◦
Higher provision expense impacted earnings per share by $0.05 compared to the fourth quarter of 2017, reflective of loan growth and remediation costs specific to two isolated credits.
•
Grew loans to $11 billion, up 9% annualized from December 31, 2017 and 6% from March 31, 2017.
•
Maintained total average deposits at $11 billion, consistent with the fourth quarter of 2017 and up 3% from the first quarter of 2017; core deposit mix of 84%, consistent with both prior periods.
•
Generated tax-equivalent net interest margin(1) of 3.80%; reflects declining loan accretion and a 3 basis point reduction due to federal income tax reform; excluding these items, underlying margin expanded 3 basis points compared to the fourth quarter of 2017 and up 16 basis points from the first quarter of 2017.
•
Lower noninterest income by 11% compared to the first quarter of 2017; up 6% from the first quarter of 2017, excluding the $4 million reclassification impact of recently adopted accounting guidance(2), the impact of the Durbin Amendment effective in the third quarter of 2017, and net securities losses(1).
•
Controlled noninterest expenses, reporting an efficiency ratio(1) of 61%, consistent with the fourth and first quarters of 2017.
•
Increased dividends per share to $0.11, up 10% and 22% from the fourth and first quarters of 2017, respectively.
"We had a solid start to the year," said Michael L. Scudder, Chairman of the Board, President, and Chief Executive Officer of the Company. "Operating performance for the quarter benefitted from strong earning asset growth and stable core funding and margins, combined with lower corporate income taxes. At the same time, comparatively higher credit provisioning weighed on the quarter’s results, reflective of both the pace of loan growth and isolated credit remediation."
Mr. Scudder concluded, "As we look ahead, progress continues on our "Delivering Excellence" initiative, our Company-wide effort to better align customer needs, technology, and processes with client experiences. These same efforts will also enhance operational efficiency and further improve the scalability of our platform. Continued successful execution combined with the strength of our capital and core funding will leave us well-positioned for further business expansion and improved operating performance."

(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.
(2) As a result of accounting guidance adopted in the first quarter of 2018, certain noninterest income line items and the related noninterest expense line items that are presented on a gross basis in prior periods are presented on a net basis in noninterest income for the current period.

First Midwest Bancorp, Inc. | One Pierce Place | Suite 1500 | Itasca | Illinois | 60143


OPERATING PERFORMANCE
Net Interest Income and Margin Analysis
(Dollar amounts in thousands)
 
Quarters Ended
 
March 31, 2018
 
 
December 31, 2017
 
 
March 31, 2017
 
Average Balance
 
Interest
 
Yield/
Rate
(%)
 
 
Average
Balance
 
Interest
 
Yield/
Rate
(%)
 
 
Average
Balance
 
Interest
 
Yield/
Rate
(%)
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other interest-earning assets
$
112,137

 
$
423

 
1.53
 
 
$
203,459

 
$
721

 
1.41
 
 
$
215,915

 
$
441

 
0.83
Securities(1)
2,063,223

 
12,141

 
2.35
 
 
1,890,020

 
10,977

 
2.32
 
 
2,021,157

 
11,535

 
2.28
Federal Home Loan Bank ("FHLB") and
  Federal Reserve Bank ("FRB") stock
76,883

 
438

 
2.28
 
 
63,520

 
506

 
3.19
 
 
54,219

 
368

 
2.71
Loans(1)
10,499,283

 
119,318

 
4.61
 
 
10,384,074

 
119,204

 
4.55
 
 
9,920,513

 
113,409

 
4.64
Total interest-earning assets(1)
12,751,526

 
132,320

 
4.20
 
 
12,541,073

 
131,408

 
4.16
 
 
12,211,804

 
125,753

 
4.17
Cash and due from banks
181,797

 
 
 
 
 
 
188,683

 
 
 
 
 
 
176,953

 
 
 
 
Allowance for loan losses
(99,234
)
 
 
 
 
 
 
(99,590
)
 


 
 
 
 
(89,065
)
 


 
 
Other assets
1,352,964

 
 
 
 
 
 
1,488,459

 


 
 
 
 
1,373,433

 


 
 
Total assets
$
14,187,053

 
 
 
 
 
 
$
14,118,625

 
 
 
 
 
 
$
13,673,125

 
 
 
 
Liabilities and Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Savings deposits
$
2,015,679

 
368

 
0.07
 
 
$
2,017,489

 
382

 
0.08
 
 
$
2,029,631

 
400

 
0.08
NOW accounts
1,992,672

 
1,048

 
0.21
 
 
1,992,150

 
690

 
0.14
 
 
1,916,816

 
478

 
0.10
Money market deposits
1,814,057

 
824

 
0.18
 
 
1,938,195

 
772

 
0.16
 
 
1,890,703

 
619

 
0.13
Time deposits
1,735,155

 
3,939

 
0.92
 
 
1,619,758

 
3,033

 
0.74
 
 
1,515,597

 
1,712

 
0.46
Borrowed funds
858,297

 
3,479

 
1.64
 
 
554,634

 
2,263

 
1.62
 
 
734,091

 
2,194

 
1.21
Senior and subordinated debt
195,243

 
3,124

 
6.49
 
 
195,102

 
3,114

 
6.33
 
 
194,677

 
3,099

 
6.46
Total interest-bearing liabilities
8,611,103

 
12,782

 
0.60
 
 
8,317,328

 
10,254

 
0.49
 
 
8,281,515

 
8,502

 
0.42
Demand deposits
3,466,832

 
 
 
 
 
 
3,611,811

 
 
 
 
 
 
3,355,674

 
 
 
 
Total funding sources
12,077,935

 
 
 
0.43
 
 
11,929,139

 


 
0.34
 
 
11,637,189

 


 
0.30
Other liabilities
235,699

 
 
 
 
 
 
309,221

 
 
 
 
 
 
272,398

 
 
 
 
Stockholders' equity - common
1,873,419

 
 
 
 
 
 
1,880,265

 
 
 
 
 
 
1,763,538

 
 
 

Total liabilities and
  stockholders' equity
$
14,187,053

 
 
 
 
 
 
$
14,118,625

 
 
 
 
 
 
$
13,673,125

 
 
 
 
Tax-equivalent net interest
  income/margin(1)
 
 
119,538

 
3.80
 
 
 
 
121,154

 
3.84
 
 
 
 
117,251

 
3.89
Tax-equivalent adjustment
 
 
(975
)
 

 
 
 
 
(1,823
)
 

 
 
 
 
(2,054
)
 

Net interest income (GAAP)(1)
 
 
$
118,563

 

 
 
 
 
$
119,331

 

 
 
 
 
$
115,197

 

Impact of acquired loan accretion(1)
 
 
$
5,112

 
0.16
 
 
 
 
$
6,240

 
0.20
 
 
 
 
$
11,345

 
0.38
Tax-equivalent net interest income/
  margin, adjusted(1)
 
 
$
114,426

 
3.64
 
 
 
 
$
114,914

 
3.64
 
 
 
 
$
105,906

 
3.51
(1) Interest income and yields on tax-exempt securities and loans are presented on a tax-equivalent basis, assuming the applicable federal income tax rate for each period presented. As a result, interest income and yields on tax-exempt securities and loans subsequent to December 31, 2017 are presented using the current federal income tax rate of 21% and prior periods are presented using the federal income tax rate applicable at that time, or 35%. The corresponding income tax impact related to tax-exempt items is recorded in income tax expense. These adjustments have no impact on net income. See the "Non-GAAP Financial Information" section presented later in this release for a discussion of this non-GAAP financial measure.
Net interest income for the first quarter of 2018 was consistent with the fourth quarter of 2017 and increased 2.9% compared to the first quarter of 2017. Compared to the fourth quarter of 2017, net interest income benefited from the impact of higher interest rates and growth in loans and securities, offset by fewer days in the quarter, lower acquired loan accretion, and higher cost of funds. The rise in net interest income compared to the first quarter of 2017 was driven primarily by higher interest rates and loan growth, partially offset by lower acquired loan accretion and higher cost of funds.
Acquired loan accretion contributed $5.1 million, $6.2 million, and $11.3 million to net interest income for the first quarter of 2018, the fourth quarter of 2017, and the first quarter of 2017, respectively.
Tax-equivalent net interest margin for the current quarter was 3.80%, decreasing 4 basis points from the fourth quarter of 2017 and 9 basis points from the first quarter of 2017. Compared to both prior periods, tax-equivalent net interest margin was negatively

2


impacted by a 3 basis points reduction in the tax-equivalent adjustment as a result of lower federal income tax rates. In addition, compared to the fourth quarter of 2017, the decrease in tax-equivalent net interest margin was impacted by a 4 basis point reduction in acquired loan accretion and higher cost of funds, mostly offset by the benefit of higher interest rates. The decrease in tax-equivalent net interest margin compared to the first quarter of 2017 was due to a 22 basis point decrease in acquired loan accretion partially offset by the positive impact of higher interest rates.
For the first quarter of 2018, total average interest-earning assets rose by $210.5 million from the fourth quarter of 2017 and $539.7 million from the first quarter of 2017. The increase compared to both prior periods resulted primarily from loan growth, which was partially offset by a reduction in other interest-earning assets. In addition, security purchases during the first quarter of 2018 contributed to the growth in total average interest-earning assets compared to the fourth quarter of 2017.
Total average funding sources for the first quarter of 2018 increased by $148.8 million from the fourth quarter of 2017 and $440.7 million from the first quarter of 2017. The increase compared to both prior periods resulted from an increase in FHLB advances and time deposits.

3


Noninterest Income Analysis
(Dollar amounts in thousands)
 
 
Quarters Ended
 
March 31, 2018 Percent Change From
 
 
March 31,
2018
 
December 31,
2017
 
March 31,
2017
 
December 31,
2017
 
March 31,
2017
Service charges on deposit accounts
 
$
11,652

 
$
12,289

 
$
11,365

 
(5.2
)
 
2.5

Wealth management fees
 
10,958

 
10,967

 
9,660

 
(0.1
)
 
13.4

Card-based fees, net(1):
 
 
 
 
 
 
 
 
 
 
Card-based fees
 
5,692

 
6,052

 
8,116

 
(5.9
)
 
(29.9
)
Cardholder expenses
 
(1,759
)
 
—

 
—

 
N/M

 
N/M

Card-based fees, net
 
3,933

 
6,052

 
8,116

 
(35.0
)
 
(51.5
)
Mortgage banking income
 
2,397

 
2,352

 
1,888

 
1.9

 
27.0

Capital market products income
 
1,558

 
1,986

 
1,376

 
(21.6
)
 
13.2

Merchant servicing fees, net(1):
 
 
 
 
 
 
 
 
 
 
Merchant servicing fees
 
2,237

 
1,771

 
3,135

 
26.3

 
(28.6
)
Merchant card expenses
 
(1,907
)
 
—

 
—

 
N/M

 
N/M

Merchant servicing fees, net
 
330

 
1,771

 
3,135

 
(81.4
)
 
(89.5
)
Other service charges, commissions, and fees
 
2,218

 
2,369

 
2,307

 
(6.4
)
 
(3.9
)
Other income
 
2,471

 
2,476

 
2,104

 
(0.2
)
 
17.4

Net securities losses
 
—

 
(5,357
)
 
—

 
(100.0
)
 
—

Total noninterest income(1)
 
$
35,517

 
$
34,905

 
$
39,951

 
1.8

 
(11.1
)
Noninterest Income, Excluding Net Securities Losses,
the Accounting Reclassification, and Durbin(2) 
(Dollar amounts in thousands)
 
 
Quarters Ended
 
March 31, 2018 Percent Change From
 
 
March 31,
2018
 
December 31,
2017
 
March 31,
2017
 
December 31,
2017
 
March 31,
2017
Total noninterest income(1)
 
$
35,517

 
$
34,905

 
$
39,951

 
1.8

 
(11.1
)
Net securities losses
 
—

 
5,357

 
—

 
—

 
—

Reclassification impact of adopted accounting
  guidance(1)
 
3,666

 
—

 
—

 
N/M

 
N/M

Impact of the Durbin Amendment of the
  Dodd-Frank Act ("Durbin")
 
—

 
—

 
(2,900
)
 
—

 
(100.0
)
Total noninterest income, excluding net
  securities losses, reclassification,
  and Durbin(2)
 
$
39,183

 
$
40,262

 
$
37,051

 
(2.7
)
 
5.8

N/M – Not meaningful.
(1) As a result of accounting guidance adopted in the first quarter of 2018, certain noninterest income line items and the related noninterest expense line items that are presented on a gross basis for the prior periods are presented on a net basis in noninterest income for the current period. For further discussion of this guidance, see Note 2 of "Notes to the Consolidated Financial Statements" in Item 8 in our Annual Report on Form 10-K for the year ended December 31, 2017.
(2) See the "Non-GAAP Financial Information" section presented later in this release for a discussion of this non-GAAP financial measure.
Total noninterest income of $35.5 million was up 1.8% from the fourth quarter of 2017 and down 11.1% compared to the first quarter of 2017. In the first quarter of 2018, the Company adopted accounting guidance which impacted how cardholder and merchant card expenses are presented within noninterest income on a prospective basis. As a result, these expenses are presented on a net basis against the related noninterest income for the first quarter of 2018 versus a gross basis within noninterest expense for the prior periods. In addition, Durbin became effective for the Company in the third quarter of 2017. Excluding net securities losses, the accounting reclassification, and Durbin, noninterest income was $39.2 million, down 2.7% from the fourth quarter of 2017 and up 5.8% from the first quarter of 2017.

4


The decrease in noninterest income compared to the fourth quarter of 2017 was impacted by a normal seasonal decline in service charges on deposit accounts and card-based fees. Capital market products income decreased compared to the fourth quarter of 2017, which fluctuates from quarter to quarter based on the size and frequency of sales to commercial clients.
Net card-based fees were up 8.4% compared to the first quarter of 2017, excluding the accounting reclassification and Durbin, due to higher transaction volumes. Compared to the first quarter of 2017, the increase in wealth management fees was driven primarily by the full quarter impact of customers acquired in the Premier Asset Management LLC ("Premier") transaction and organic growth. The decline in merchant servicing fees from the first quarter of 2017 reflected lower customer volumes, substantially offset by the decline in merchant card expense.
Mortgage banking income for the first quarter of 2018 resulted from sales of $63.8 million of 1-4 family mortgage loans in the secondary market, compared to $66.5 million in the fourth quarter of 2017 and $54.6 million in the first quarter of 2017. In addition, mortgage banking income for the first quarter of 2018 was positively impacted by changes in the fair value of mortgage servicing rights, which fluctuate from quarter to quarter.
Net securities losses of $5.4 million were recognized during the fourth quarter of 2017 in connection with securities portfolio repositioning in light of federal income tax reform.

5


Noninterest Expense Analysis
(Dollar amounts in thousands)
 
 
Quarters Ended
 
March 31, 2018 Percent Change From
 
 
March 31,
2018
 
December 31,
2017
 
March 31,
2017
 
December 31,
2017
 
March 31,
2017
Salaries and employee benefits:
 
 
 
 
 
 
 
 
 
 
Salaries and wages
 
$
45,830

 
$
48,204

 
$
44,890

 
(4.9
)
 
2.1

Retirement and other employee benefits
 
10,957

 
10,204

 
10,882

 
7.4

 
0.7

Total salaries and employee benefits
 
56,787

 
58,408

 
55,772

 
(2.8
)
 
1.8

Net occupancy and equipment expense
 
13,773

 
12,826

 
12,325

 
7.4

 
11.7

Professional services
 
7,580

 
7,616

 
8,463

 
(0.5
)
 
(10.4
)
Technology and related costs
 
4,771

 
4,645

 
4,433

 
2.7

 
7.6

Advertising and promotions
 
1,650

 
4,083

 
1,066

 
(59.6
)
 
54.8

Net other real estate owned ("OREO") expense
 
1,068

 
695

 
1,700

 
53.7

 
(37.2
)
Cardholder expenses(1)
 
—

 
1,915

 
1,764

 
(100.0
)
 
(100.0
)
Merchant card expenses(1)
 
—

 
1,423

 
2,585

 
(100.0
)
 
(100.0
)
Other expenses
 
9,953

 
10,715

 
9,969

 
(7.1
)
 
(0.2
)
Acquisition and integration related expenses
 
—

 
—

 
18,565

 
—

 
(100.0
)
Total noninterest expense(1)
 
$
95,582

 
$
102,326

 
$
116,642

 
(6.6
)
 
(18.1
)
Noninterest Expense, Adjusted, Excluding the Accounting Reclassification(2) 
(Dollar amounts in thousands)
 
 
Quarters Ended
 
March 31, 2018 Percent Change From
 
 
March 31,
2018
 
December 31,
2017
 
March 31,
2017
 
December 31,
2017
 
March 31,
2017
Total noninterest expense(1)
 
$
95,582

 
$
102,326

 
$
116,642

 
(6.6
)
 
(18.1
)
Reclassification impact of adopted accounting
  guidance(1)
 
3,666

 
—

 
—

 
100.0

 
100.0

Special bonus, charitable contribution
 
—

 
(3,515
)
 
—

 
(100.0
)
 
—

Acquisition and integration related expenses
 
—

 
—

 
(18,565
)
 
—

 
(100.0
)
Total noninterest expense, adjusted,
  excluding the reclassification(2)
 
$
99,248

 
$
98,811

 
$
98,077

 
0.4

 
1.2

(1) As a result of accounting guidance adopted in the first quarter of 2018, certain noninterest income line items and the related noninterest expense line items that are presented on a gross basis for the prior periods are presented on a net basis in noninterest income for the current period. For further discussion of this guidance, see Note 2 of "Notes to the Consolidated Financial Statements" in Item 8 in our Annual Report on Form 10-K for the year ended December 31, 2017.
(2) See the "Non-GAAP Financial Information" section presented later in this release for a discussion of this non-GAAP financial measure.
Total noninterest expense decreased by 6.6% compared to the fourth quarter of 2017 and 18.1% compared to the first quarter of 2017. In the first quarter of 2018, the Company adopted accounting guidance which impacted how cardholder and merchant card expenses are presented within noninterest income on a prospective basis. As a result, these expenses are presented on a net basis against the related noninterest income for the first quarter of 2018 versus a gross basis within noninterest expense for the prior periods. In addition, the fourth quarter of 2017 was impacted by a special bonus and charitable contribution in connection with federal income tax reform and the first quarter of 2017 was impacted by acquisition and integration related expenses that resulted from the acquisition of Standard Bancshares, Inc. ("Standard"). Noninterest expense, adjusted, excluding the accounting reclassification, for the first quarter of 2018 was $99.2 million, consistent with the fourth and first quarters of 2017.
Compared to the fourth quarter of 2017, the decreases in salaries and wages and advertising and promotions expense were driven mainly by a special bonus and charitable contribution made during the fourth quarter of 2017. Net occupancy and equipment expense increased compared to the fourth quarter of 2017 primarily as a result of higher costs related to winter weather conditions. The increase in net OREO expense resulted from net losses on sales of OREO properties compared to net gains on sales in the fourth quarter of 2017, partially offset by a decrease in operating expenses.

6


The increase in salaries and wages compared to the first quarter of 2017 was driven primarily by merit increases and organizational growth. Compared to the first quarter of 2017, net occupancy and equipment expenses increased as a result of higher costs related to winter weather conditions and the timing of expenses related to the Company's planned corporate headquarters relocation. Professional services expense declined compared to the first quarter of 2017 due to lower loan remediation expenses. Compared to the first quarter of 2017, the rise in advertising and promotions expense resulted from the timing of certain advertising costs. Net OREO expense decreased compared to the first quarter of 2017 as a result of lower levels of operating expenses, losses on sales, and valuation adjustments.
INCOME TAXES
The Company's effective tax rate for the first quarter of 2018 was 22.6%, compared to 94.7% for the fourth quarter of 2017 and 32.0% for the first quarter of 2017. The decrease in the effective tax rate from both prior periods was driven primarily by the reduction in the federal income tax rate from 35% to 21% which became effective in the first quarter of 2018 as a result of federal income tax reform. In addition, the first quarter of 2018 was impacted by a $1.0 million income tax benefit related to employee share-based payments and the fourth quarter of 2017 was impacted by the downward revaluation of DTAs due to federal income tax reform.
LOAN PORTFOLIO AND ASSET QUALITY
Loan Portfolio Composition
(Dollar amounts in thousands)
 
 
As of
 
March 31, 2018 Percent Change From
 
 
March 31, 
 2018
 
December 31, 
 2017
 
March 31, 
 2017
 
December 31, 
 2017
 
March 31, 
 2017
Commercial and industrial
 
$
3,659,066

 
$
3,529,914

 
$
3,370,780

 
3.7

 
8.6

Agricultural
 
435,734

 
430,886

 
422,784

 
1.1

 
3.1

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
Office, retail, and industrial
 
1,931,202

 
1,979,820

 
1,988,979

 
(2.5
)
 
(2.9
)
Multi-family
 
695,830

 
675,463

 
671,710

 
3.0

 
3.6

Construction
 
585,766

 
539,820

 
568,460

 
8.5

 
3.0

Other commercial real estate
 
1,363,238

 
1,358,515

 
1,357,781

 
0.3

 
0.4

Total commercial real estate
 
4,576,036

 
4,553,618

 
4,586,930

 
0.5

 
(0.2
)
Total corporate loans
 
8,670,836

 
8,514,418

 
8,380,494

 
1.8

 
3.5

Home equity
 
881,534

 
827,055

 
880,667

 
6.6

 
0.1

1-4 family mortgages
 
798,902

 
774,357

 
540,148

 
3.2

 
47.9

Installment
 
325,502

 
321,982

 
253,061

 
1.1

 
28.6

Total consumer loans
 
2,005,938

 
1,923,394

 
1,673,876

 
4.3

 
19.8

Total loans
 
$
10,676,774

 
$
10,437,812

 
$
10,054,370

 
2.3

 
6.2

Total loans of $10.7 billion increased by 9.3%, annualized from December 31, 2017 and 6.2% from March 31, 2017. Compared to both prior periods, growth in commercial and industrial loans, primarily within our sector-based lending businesses, multi-family, and construction loans drove the rise in total corporate loans.
Growth in consumer loans compared to both prior periods benefited from the impact of purchases of shorter-duration home equity loans and organic production. Compared to March 31, 2017, growth in consumer loans also benefited from certain purchases of 1-4 family mortgages and installment loans.

7


Asset Quality
(Dollar amounts in thousands)
 
 
As of
 
March 31, 2018 Percent Change From
 
 
March 31,
2018
 
December 31,
2017
 
March 31,
2017
 
December 31,
2017
 
March 31,
2017
Asset quality
 
 
 
 
 
 
 
 
 
 
Non-accrual loans
 
$
75,015

 
$
66,924

 
$
54,294

 
12.1

 
38.2

90 days or more past due loans, still accruing
  interest(1)
 
4,633

 
3,555

 
2,633

 
30.3

 
76.0

Total non-performing loans
 
79,648

 
70,479

 
56,927

 
13.0

 
39.9

Accruing troubled debt restructurings
  ("TDRs")
 
1,778

 
1,796

 
2,112

 
(1.0
)
 
(15.8
)
OREO
 
17,472

 
20,851

 
29,140

 
(16.2
)
 
(40.0
)
Total non-performing assets
 
$
98,898

 
$
93,126

 
$
88,179

 
6.2

 
12.2

30-89 days past due loans(1)
 
$
42,573

 
$
39,725

 
$
23,641

 


 


Non-accrual loans to total loans
 
0.70
%
 
0.64
%
 
0.54
%
 
 
 
 
Non-performing loans to total loans
 
0.75
%
 
0.68
%
 
0.57
%
 
 
 
 
Non-performing assets to total loans plus
  OREO
 
0.92
%
 
0.89
%
 
0.87
%
 
 
 
 
Allowance for credit losses
 
 
 
 
 
 
 
 
 
 
Allowance for credit losses
 
$
95,854

 
$
96,729

 
$
89,163

 


 


Allowance for credit losses to total loans(2)
 
0.90
%
 
0.93
%
 
0.89
%
 
 
 
 
Allowance for credit losses to loans, excluding
  acquired loans
 
1.01
%
 
1.07
%
 
1.11
%
 
 
 
 
Allowance for credit losses to non-accrual
  loans
 
127.78
%
 
144.54
%
 
164.22
%
 
 
 
 

(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 0.92% of total loans and OREO at March 31, 2018, up from 0.89% and 0.87% at December 31, 2017 and March 31, 2017, respectively, reflective of normal fluctuations that can occur on a quarterly basis.
The allowance for credit losses to total loans was 0.90% at March 31, 2018, compared to 0.93% at December 31, 2017 and consistent with March 31, 2017.

8


Charge-Off Data
(Dollar amounts in thousands)
 
 
Quarters Ended
 
 
March 31,
2018
 
% of
Total
 
December 31,
2017
 
% of
Total
 
March 31,
2017
 
% of
Total
Net loan charge-offs(1)
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
13,149

 
81.9

 
$
5,635

 
79.3

 
$
1,894

 
66.8

Agricultural
 
983

 
6.1

 
(102
)
 
(1.4
)
 
514

 
18.1

Office, retail, and industrial
 
364

 
2.3

 
(78
)
 
(1.1
)
 
(848
)
 
(29.9
)
Multi-family
 
—

 
—

 
(3
)
 
—

 
(28
)
 
(1.0
)
Construction
 
(13
)
 
(0.1
)
 
(12
)
 
(0.2
)
 
(222
)
 
(7.8
)
Other commercial real estate
 
30

 
0.2

 
(5
)
 
(0.1
)
 
307

 
10.8

Consumer
 
1,543

 
9.6

 
1,674

 
23.5

 
1,221

 
43.0

Total net loan charge-offs
 
$
16,056

 
100.0

 
$
7,109

 
100.0

 
$
2,838

 
100.0

Total recoveries included above
 
$
1,029

 
 
 
$
2,011

 
 
 
$
3,440

 
 
Net loan charge-offs to average loans:
 
 
 
 
 
 
 
 
 
 
 
 
Quarter-to-date(1)
 
0.62
%
 
 
 
0.27
%
 
 
 
0.12
%
 
 
(1) Amounts represent charge-offs, net of recoveries.
Net loan charge-offs to average loans, annualized were 0.62%, up from 0.27% and 0.12% for the fourth and first quarters of 2017, respectively. The increase in net loan charge-offs compared to both prior periods resulted largely from expected losses on two corporate relationships based upon circumstances unique to these borrowers. Included within net charge-offs for the first quarter of 2017 were $3.4 million in recoveries which related to three corporate relationships that were charged-off in prior periods.

DEPOSIT PORTFOLIO
Deposit Composition
(Dollar amounts in thousands)
 
 
Average for the Quarters Ended
 
March 31, 2018 Percent Change From
 
 
March 31,
2018
 
December 31,
2017
 
March 31,
2017
 
December 31,
2017
 
March 31,
2017
Demand deposits
 
$
3,466,832

 
$
3,611,811

 
$
3,355,674

 
(4.0
)
 
3.3

Savings deposits
 
2,015,679

 
2,017,489

 
2,029,631

 
(0.1
)
 
(0.7
)
NOW accounts
 
1,992,672

 
1,992,150

 
1,916,816

 
—

 
4.0

Money market accounts
 
1,814,057

 
1,938,195

 
1,890,703

 
(6.4
)
 
(4.1
)
Core deposits
 
9,289,240

 
9,559,645

 
9,192,824

 
(2.8
)
 
1.0

Time deposits
 
1,735,155

 
1,619,758

 
1,515,597

 
7.1

 
14.5

Total deposits
 
$
11,024,395

 
$
11,179,403

 
$
10,708,421

 
(1.4
)
 
3.0


Average core deposits of $9.3 billion for the first quarter of 2018 decreased by 2.8% from the fourth quarter of 2017 and increased 1.0% compared to the first quarter of 2017. The decrease in average core deposits compared to the fourth quarter of 2017 resulted primarily from the normal seasonal decline in commercial and municipal deposits. Compared to the first quarter of 2017, the rise in average core deposits was driven by organic growth. The increase in average time deposits compared to both prior periods was primarily driven by the continued success of promotions started in 2017.

9


CAPITAL MANAGEMENT
Capital Ratios
 
 
As of
 
 
March 31,
2018
 
December 31,
2017
 
March 31,
2017
Company regulatory capital ratios:
Total capital to risk-weighted assets
 
12.07
%
 
12.15
%
 
11.48
%
Tier 1 capital to risk-weighted assets
 
10.07
%
 
10.10
%
 
9.53
%
Common equity Tier 1 ("CET1") to risk-weighted assets
 
9.65
%
 
9.68
%
 
9.11
%
Tier 1 capital to average assets
 
9.07
%
 
8.99
%
 
8.89
%
Company tangible common equity ratios(1)(2):
 
 
 
 
Tangible common equity to tangible assets
 
8.18
%
 
8.33
%
 
8.07
%
Tangible common equity, excluding accumulated other comprehensive
  income ("AOCI"), to tangible assets
 
8.60
%
 
8.58
%
 
8.38
%
Tangible common equity to risk-weighted assets
 
9.18
%
 
9.31
%
 
8.68
%
(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.
Overall, the Company's regulatory capital ratios decreased compared to December 31, 2017, due primarily to the impact of loan growth on risk-weighted assets and the nearly 10 basis point impact of the phase-in of certain provisions related to regulatory capital ratio calculations, substantially offset by an increase in retained earnings. Compared to March 31, 2017, the Company's regulatory capital ratios benefited from the full-year impact of retained earnings and certain actions taken by management in the fourth quarter of 2017 to sell all of its $46 million in trust-preferred collateralized debt obligations, partially offset by loan growth and the phase-in of certain provisions.
The Board of Directors approved a quarterly cash dividend of $0.11 per common share during the first quarter of 2018, which is a 10% increase from the fourth quarter of 2017 and will represent the 141st consecutive cash dividend paid by the Company since its inception in 1983.
Conference Call
A conference call to discuss the Company's results, outlook, and related matters will be held on Wednesday, April 25, 2018 at 11:00 A.M. (ET). Members of the public who would like to listen to the conference call should dial (877) 507-0639 (U.S. domestic) or (412) 317-6003 (International) and ask for the First Midwest Bancorp, Inc. Earnings Conference Call. The number should be dialed 10 to 15 minutes prior to the start of the conference call. There is no charge to access the call. The conference call will also be accessible as an audio webcast through the Investor Relations section of the Company's website, www.firstmidwest.com/investorrelations. For those unable to listen to the live broadcast, a replay will be available on the Company's website or by dialing (877) 344-7529 (U.S. domestic) or (412) 317-0088 (International) conference ID 10118829 beginning one hour after completion of the live call until 9:00 A.M. (ET) on May 9, 2018. Please direct any questions regarding obtaining access to the conference call to First Midwest Bancorp, Inc. Investor Relations, via e-mail, at investor.relations@firstmidwest.com.
Press Release, Presentation Materials, and Additional Information Available on Website
This press release, the presentation materials to be discussed during the conference call, and the accompanying unaudited Selected Financial Information are available through the "Investor Relations" section of First Midwest's website at www.firstmidwest.com/investorrelations.
Forward-Looking Statements
This press release may contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by the use of words such as "may," "might," "will," "would," "should," "could," "expect," "plan," "intend," "anticipate," "believe," "estimate," "outlook," "predict," "project," "probable," "potential," "possible," "target," "continue," "look forward," or "assume" and words of similar import. Forward-looking statements are not historical facts 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.

10


Forward-looking statements are made only as of the date of this press release, and First Midwest undertakes no obligation to update any forward-looking statements contained in this press release to reflect new information or events or conditions after the date hereof.
Forward-looking statements may be deemed to include, among other things, statements relating to our future financial performance, including the related outlook for 2018, the performance of our loan or securities portfolio, the expected amount of future credit reserves or charge-offs, corporate strategies or objectives, including the impact of certain actions and initiatives, anticipated trends in our business, regulatory developments, the impact of federal income tax reform legislation, acquisition transactions, including estimated synergies, cost savings and financial benefits of consummated transactions, and growth strategies, including possible future acquisitions. These statements are subject to certain risks, uncertainties and assumptions. For a discussion of these risks, uncertainties and assumptions, you should refer to the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2017, as well as our subsequent filings made with the Securities and Exchange Commission. 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"), adjusted, the efficiency ratio, total return on average assets, adjusted, tax-equivalent net interest income (including its individual components), tax-equivalent net interest margin, tax-equivalent net interest margin, adjusted, noninterest income, excluding net securities losses, the accounting reclassification, and Durbin, noninterest expense, adjusted, excluding the accounting reclassification, effective income tax rate, excluding revaluations of DTAs, tangible common equity to tangible assets, tangible common equity, excluding AOCI, to tangible assets, tangible common equity to risk-weighted assets, return on average tangible common equity, and return on average tangible common equity, adjusted.
The Company presents EPS, the efficiency ratio, return on average assets, and return on average tangible common equity, all adjusted for certain significant transactions. These transaction include the revaluation of DTAs (fourth and third quarters of 2017), certain actions resulting in securities losses and gains (fourth and third quarters of 2017), a special bonus to colleagues (fourth quarter of 2017), a charitable contribution to the First Midwest Charitable Foundation (fourth quarter of 2017), and acquisition and integration related expenses associated with completed and pending acquisitions (first, second, and third quarters of 2017). Management believes excluding these transactions from EPS, the efficiency ratio, 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 Company presents noninterest income, excluding net securities losses, the accounting reclassification, and Durbin and noninterest expense, adjusted, excluding the accounting reclassification. Management believes that excluding these items from noninterest income and noninterest expense is useful in assessing the Company’s underlying operational performance as these items either do not pertain to its core business operations or their exclusion facilitates better comparability between periods and for peer comparison purposes.
The tax-equivalent adjustment to net interest income and net interest margin recognizes the income tax savings when comparing taxable and tax-exempt assets. Interest income and yields on tax-exempt securities and loans subsequent to December 31, 2017 are presented using the current federal income tax rate of 21% and prior periods are computed using the federal income tax rate applicable at that time, or 35%. Management believes that it is standard practice in the banking industry to present net interest income and net interest margin on a fully tax-equivalent basis and that it enhances comparability for peer comparison purposes. In addition, management believes that presenting tax-equivalent net interest margin, adjusted, 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.

11


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 approximately $11 billion in trust assets under management. First Midwest's principal subsidiary, First Midwest Bank, and other affiliates provide a full range of commercial, treasury management, equipment leasing, retail, wealth management, trust and private banking products and services through 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 and Chief Financial Officer
(630) 875-7273
pat.barrett@firstmidwest.com
Media:
James M. Roolf
SVP and Corporate Relations Officer
(630) 875-7533
jim.roolf@firstmidwest.com


12


Accompanying Unaudited Selected Financial Information
a3282014fmbilogoa17.jpg
Consolidated Statements of Financial Condition (Unaudited)
(Dollar amounts in thousands)
 
 
 
As of
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
2018
 
2017
 
2017
 
2017
 
2017
Period-End Balance Sheet
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
150,138

 
$
192,800

 
$
174,147

 
$
181,171

 
$
174,268

Interest-bearing deposits in other banks
84,898

 
153,770

 
252,753

 
103,181

 
74,892

Trading securities, at fair value(1)
—

 
20,447

 
20,425

 
19,545

 
19,130

Equity securities, at fair value(1)
28,513

 
—

 
—

 
—

 
—

Securities available-for-sale, at fair value(1)
2,040,950

 
1,884,209

 
1,732,984

 
1,908,248

 
1,937,124

Securities held-to-maturity, at amortized cost
13,400

 
13,760

 
14,638

 
17,353

 
17,742

FHLB and FRB stock
80,508

 
69,708

 
69,708

 
66,333

 
46,306

Loans:
 
 
 
 
 
 
 
 
 
Commercial and industrial
3,659,066

 
3,529,914

 
3,462,612

 
3,410,748

 
3,370,780

Agricultural
435,734

 
430,886

 
437,721

 
433,424

 
422,784

Commercial real estate:
 
 
 
 
 
 
 
 
 
Office, retail, and industrial
1,931,202

 
1,979,820

 
1,960,367

 
1,983,802

 
1,988,979

Multi-family
695,830

 
675,463

 
711,101

 
681,032

 
671,710

Construction
585,766

 
539,820

 
545,666

 
543,892

 
568,460

Other commercial real estate
1,363,238

 
1,358,515

 
1,391,241

 
1,383,937

 
1,357,781

Home equity
881,534

 
827,055

 
847,209

 
865,656

 
880,667

1-4 family mortgages
798,902

 
774,357

 
711,607

 
614,818

 
540,148

Installment
325,502

 
321,982

 
322,768

 
314,850

 
253,061

Total loans
10,676,774

 
10,437,812

 
10,390,292

 
10,232,159

 
10,054,370

Allowance for loan losses
(94,854
)
 
(95,729
)
 
(94,814
)
 
(92,371
)
 
(88,163
)
Net loans
10,581,920

 
10,342,083

 
10,295,478

 
10,139,788

 
9,966,207

OREO
17,472

 
20,851

 
19,873

 
26,493

 
29,140

Premises, furniture, and equipment, net
126,348

 
123,316

 
131,295

 
135,745

 
140,653

Investment in bank-owned life insurance ("BOLI")
281,285

 
279,900

 
279,639

 
278,353

 
276,960

Goodwill and other intangible assets
754,814

 
754,757

 
750,436

 
752,413

 
754,621

Accrued interest receivable and other assets
219,725

 
221,451

 
525,766

 
340,517

 
336,428

Total assets
$
14,379,971

 
$
14,077,052

 
$
14,267,142

 
$
13,969,140

 
$
13,773,471

Liabilities and Stockholders' Equity
 

 
 
 
 
 
 
 
Noninterest-bearing deposits
$
3,527,081


$
3,576,190

 
$
3,580,922

 
$
3,525,905

 
$
3,492,987

Interest-bearing deposits
7,618,941

 
7,477,135

 
7,627,575

 
7,473,815

 
7,463,554

Total deposits
11,146,022

 
11,053,325

 
11,208,497

 
10,999,720

 
10,956,541

Borrowed funds
950,688

 
714,884

 
700,536

 
639,333

 
547,923

Senior and subordinated debt
195,312

 
195,170

 
195,028

 
194,886

 
194,745

Accrued interest payable and other liabilities
218,662

 
248,799

 
297,951

 
298,358

 
269,529

Stockholders' equity
1,869,287

 
1,864,874

 
1,865,130

 
1,836,843

 
1,804,733

Total liabilities and stockholders' equity
$
14,379,971

 
$
14,077,052

 
$
14,267,142

 
$
13,969,140

 
$
13,773,471

Stockholders' equity, excluding accumulated other
comprehensive income ("AOCI")
$
1,926,818

 
$
1,897,910

 
$
1,903,166

 
$
1,873,410

 
$
1,844,997

Stockholders' equity, common
1,869,287

 
1,864,874

 
1,865,130

 
1,836,843

 
1,804,733

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

13


a3282014fmbilogoa17.jpg
Condensed Consolidated Statements of Income (Unaudited)
(Dollar amounts in thousands)
 
 
 
 
 
 
 
 
 
 
 
Quarters Ended
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
2018
 
2017
 
2017
 
2017
 
2017
Income Statement
 
 
 

 
 
 
 
 
Interest income
$
131,345

 
$
129,585

 
$
129,916

 
$
126,516

 
$
123,699

Interest expense
12,782

 
10,254

 
10,023

 
8,933

 
8,502

Net interest income
118,563

 
119,331

 
119,893

 
117,583

 
115,197

Provision for loan losses
15,181

 
8,024

 
10,109

 
8,239

 
4,918

Net interest income after provision for loan losses
103,382

 
111,307

 
109,784

 
109,344

 
110,279

Noninterest Income
 
 
 
 
 
 
 
 
 
Service charges on deposit accounts
11,652

 
12,289

 
12,561

 
12,153

 
11,365

Wealth management fees
10,958

 
10,967

 
10,169

 
10,525

 
9,660

Card-based fees, net(1):
 
 
 
 
 
 
 
 
 
Card-based fees
5,692

 
6,052

 
5,992

 
8,832

 
8,116

Cardholder expenses
(1,759
)
 
—

 
—

 
—

 
—

Card-based fees, net
3,933

 
6,052

 
5,992

 
8,832

 
8,116

Mortgage banking income
2,397

 
2,352

 
2,246

 
1,645

 
1,888

Capital market products income
1,558

 
1,986

 
2,592

 
2,217

 
1,376

Merchant servicing fees, net(1):
 
 
 
 
 
 
 
 
 
Merchant servicing fees
2,237

 
1,771

 
2,237

 
3,197

 
3,135

Merchant card expenses
(1,907
)
 
—

 
—

 
—

 
—

Merchant servicing fees, net
330

 
1,771

 
2,237

 
3,197

 
3,135

Other service charges, commissions, and fees
2,218

 
2,369

 
2,508

 
2,659

 
2,307

Other income
2,471

 
2,476

 
1,846

 
3,433

 
2,104

Noninterest income, excluding net securities
  (losses) gains
35,517

 
40,262

 
40,151

 
44,661

 
39,951

Net securities (losses) gains
—

 
(5,357
)
 
3,197

 
284

 
—

Total noninterest income
35,517

 
34,905

 
43,348

 
44,945

 
39,951

Noninterest Expense
 
 
 
 
 
 
 
 
 
Salaries and employee benefits:
 
 
 
 
 
 
 
 
 
Salaries and wages
45,830

 
48,204

 
45,219

 
44,194

 
44,890

Retirement and other employee benefits
10,957

 
10,204

 
10,419

 
10,381

 
10,882

Total salaries and employee benefits
56,787

 
58,408

 
55,638

 
54,575

 
55,772

Net occupancy and equipment expense
13,773

 
12,826

 
12,115

 
12,485

 
12,325

Professional services
7,580

 
7,616

 
8,498

 
9,112

 
8,463

Technology and related costs
4,771

 
4,645

 
4,505

 
4,485

 
4,433

Advertising and promotions
1,650

 
4,083

 
1,852

 
1,693

 
1,066

Net OREO expense
1,068

 
695

 
657

 
1,631

 
1,700

Merchant card expenses(1)
—

 
1,423

 
1,737

 
2,632

 
2,585

Cardholder expenses(1)
—

 
1,915

 
1,962

 
1,682

 
1,764

Other expenses
9,953

 
10,715

 
9,842

 
10,282

 
9,969

Acquisition and integration related expenses
—

 
—

 
384

 
1,174

 
18,565

Total noninterest expense
95,582

 
102,326

 
97,190

 
99,751

 
116,642

Income before income tax expense
43,317

 
43,886

 
55,942

 
54,538

 
33,588

Income tax expense
9,807

 
41,539

 
17,707

 
19,588

 
10,733

Net income
$
33,510

 
$
2,347

 
$
38,235

 
$
34,950

 
$
22,855

Net income applicable to common shares
$
33,199

 
$
2,341

 
$
37,895

 
$
34,614

 
$
22,621

Net income applicable to common shares, adjusted(2)
$
33,199

 
$
34,131

 
$
33,390

 
$
35,318

 
$
33,760

Footnotes to Condensed Consolidated Statements of Income
(1) 
As a result of accounting guidance adopted in the first quarter of 2018, certain noninterest income line items and related noninterest expense line items that are presented on a gross basis for prior periods presented are now presented on a net basis in noninterest income for the current period.
(2) 
Adjustments to net income for the fourth and third quarters of 2017 include revaluation of DTAs related to federal income tax reform and changes in Illinois income tax rates, a special colleague bonus, a charitable contribution, and certain actions related to the securities portfolio. In addition, net income for certain periods was adjusted for acquisition and integration related expenses associated with completed and pending acquisitions. For additional discussion of adjustments, see the "Non-GAAP Financial Information" section.

14


a3282014fmbilogoa17.jpg
Selected Financial Information (Unaudited)
(Amounts in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
As of or for the
 
Quarters Ended
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
2018
 
2017
 
2017
 
2017
 
2017
Earnings Per Share
 
 
 
 
 
 
 
 
 
Basic EPS(1)
$
0.33

 
$
0.02

 
$
0.37

 
$
0.34

 
$
0.23

Diluted EPS(1)
$
0.33

 
$
0.02

 
$
0.37

 
$
0.34

 
$
0.23

Diluted EPS, adjusted(1)(7)
$
0.33

 
$
0.34

 
$
0.33

 
$
0.35

 
$
0.34

Common Stock and Related Per Common Share Data
Book value
$
18.13

 
$
18.16

 
$
18.16

 
$
17.88

 
$
17.56

Tangible book value
$
10.81

 
$
10.81

 
$
10.85

 
$
10.55

 
$
10.22

Dividends declared per share
$
0.11

 
$
0.10

 
$
0.10

 
$
0.10

 
$
0.09

Closing price at period end
$
24.59

 
$
24.01

 
$
23.42

 
$
23.31

 
$
23.68

Closing price to book value
1.4

 
1.3

 
1.3

 
1.3

 
1.3

Period end shares outstanding
103,092

 
102,717

 
102,722

 
102,741

 
102,757

Period end treasury shares
9,261

 
9,634

 
9,626

 
9,604

 
9,586

Common dividends
$
11,349

 
$
10,278

 
$
10,411

 
$
10,256

 
$
9,126

Key Ratios/Data
 
 
 
 
 
 
 
 
 
Return on average common equity(1)(2)
7.19
%
 
0.49
%
 
8.10
%
 
7.58
%
 
5.20
%
Return on average tangible common equity(1)(2)
12.50
%
 
1.20
%
 
14.02
%
 
13.37
%
 
9.53
%
Return on average tangible common equity, adjusted(1)(2)(7)
12.50
%
 
12.35
%
 
12.41
%
 
13.64
%
 
13.99
%
Return on average assets(2)
0.96
%
 
0.07
%
 
1.07
%
 
1.00
%
 
0.68
%
Return on average assets, adjusted(1)(2)(7)
0.96
%
 
0.96
%
 
0.95
%
 
1.02
%
 
1.01
%
Loans to deposits
95.79
%
 
94.43
%
 
92.70
%
 
93.02
%
 
91.77
%
Efficiency ratio(1)
60.96
%
 
60.78
%
 
59.32
%
 
59.01
%
 
61.31
%
Efficiency ratio (prior presentation)(1)(8)
N/A

 
60.32
%
 
58.97
%
 
58.67
%
 
60.98
%
Net interest margin(3)
3.80
%
 
3.84
%
 
3.86
%
 
3.88
%
 
3.89
%
Yield on average interest-earning assets(3)
4.20
%
 
4.16
%
 
4.18
%
 
4.17
%
 
4.17
%
Cost of funds(4)
0.43
%
 
0.34
%
 
0.33
%
 
0.30
%
 
0.30
%
Net noninterest expense to average assets
1.72
%
 
1.74
%
 
1.60
%
 
1.58
%
 
2.27
%
Effective income tax rate
22.64
%
 
94.65
%
 
31.65
%
 
35.92
%
 
31.95
%
Effective income tax rate, excluding the revaluations of DTAs(5)
22.64
%
 
34.14
%
 
36.74
%
 
35.92
%
 
31.95
%
Capital Ratios
 
 
 
 
 
 
 
 
 
Total capital to risk-weighted assets(1)
12.07
%
 
12.15
%
 
11.79
%
 
11.69
%
 
11.48
%
Tier 1 capital to risk-weighted assets(1)
10.07
%
 
10.10
%
 
9.83
%
 
9.71
%
 
9.53
%
CET1 to risk-weighted assets(1)
9.65
%
 
9.68
%
 
9.42
%
 
9.30
%
 
9.11
%
Tier 1 capital to average assets(1)
9.07
%
 
8.99
%
 
9.04
%
 
8.93
%
 
8.89
%
Tangible common equity to tangible assets(1)
8.18
%
 
8.33
%
 
8.25
%
 
8.20
%
 
8.07
%
Tangible common equity, excluding AOCI, to tangible assets(1)
8.60
%
 
8.58
%
 
8.53
%
 
8.48
%
 
8.38
%
Tangible common equity to risk-weighted assets(1)
9.18
%
 
9.31
%
 
9.02
%
 
8.90
%
 
8.68
%
Note: Selected Financial Information footnotes are located at the end of this section.

15


a3282014fmbilogoa17.jpg
Selected Financial Information (Unaudited)
(Amounts in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
As of or for the
 
Quarters Ended
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
2018
 
2017
 
2017
 
2017
 
2017
Asset Quality Performance Data
 
 
 
 
 
 
 
 
Non-performing assets
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
43,974

 
$
40,580

 
$
41,504

 
$
51,400

 
$
21,514

Agricultural
4,086

 
219

 
380

 
387

 
1,283

Commercial real estate:
 
 
 
 
 
 
 
 
 
Office, retail, and industrial
12,342

 
11,560

 
12,221

 
15,031

 
19,505

Multi-family
144

 
377

 
153

 
158

 
163

Construction
208

 
209

 
146

 
197

 
198

Other commercial real estate
4,088

 
3,621

 
2,239

 
3,736

 
3,858

Consumer
10,173

 
10,358

 
8,533

 
8,287

 
7,773

Total non-accrual loans
75,015

 
66,924

 
65,176

 
79,196

 
54,294

90 days or more past due loans, still accruing interest
4,633

 
3,555

 
2,839

 
2,059

 
2,633

Total non-performing loans
79,648

 
70,479

 
68,015

 
81,255

 
56,927

Accruing TDRs
1,778

 
1,796

 
1,813

 
2,029

 
2,112

OREO
17,472

 
20,851

 
19,873

 
26,493

 
29,140

Total non-performing assets
$
98,898

 
$
93,126

 
$
89,701

 
$
109,777

 
$
88,179

30-89 days past due loans
$
42,573

 
$
39,725

 
$
28,868

 
$
19,081

 
$
23,641

Allowance for credit losses
 
 
 
 
 
 
 
 
 
Allowance for loan losses
$
94,854

 
$
95,729

 
$
94,814

 
$
92,371

 
$
88,163

Reserve for unfunded commitments
1,000

 
1,000

 
1,000

 
1,000

 
1,000

Total allowance for credit losses
$
95,854

 
$
96,729

 
$
95,814

 
$
93,371

 
$
89,163

Provision for loan losses
$
15,181

 
$
8,024

 
$
10,109

 
$
8,239

 
$
4,918

Net charge-offs by category
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
13,149

 
$
5,635

 
$
8,237

 
$
1,721

 
$
1,894

Agricultural
983

 
(102
)
 
—

 
836

 
514

Commercial real estate:
 
 
 
 
 
 
 
 
 
Office, retail, and industrial
364

 
(78
)
 
(1,811
)
 
(8
)
 
(848
)
Multi-family
—

 
(3
)
 
(2
)
 
(6
)
 
(28
)
Construction
(13
)
 
(12
)
 
(25
)
 
27

 
(222
)
Other commercial real estate
30

 
(5
)
 
(19
)
 
228

 
307

Consumer
1,543

 
1,674

 
1,286

 
1,233

 
1,221

Total net charge-offs
$
16,056

 
$
7,109

 
$
7,666

 
$
4,031

 
$
2,838

Total recoveries included above
$
1,029

 
$
2,011

 
$
2,900

 
$
828

 
$
3,440

Note: Selected Financial Information footnotes are located at the end of this section.


16


a3282014fmbilogoa17.jpg
Selected Financial Information (Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
As of or for the
 
 
Quarters Ended
 
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
 
2018
 
2017
 
2017
 
2017
 
2017
Asset Quality ratios
 
 
 
 
 
 
 
 
 
 
Non-accrual loans to total loans
 
0.70
%
 
0.64
%
 
0.63
%
 
0.77
%
 
0.54
%
Non-performing loans to total loans
 
0.75
%
 
0.68
%
 
0.65
%
 
0.79
%
 
0.57
%
Non-performing assets to total loans plus OREO
 
0.92
%
 
0.89
%
 
0.86
%
 
1.07
%
 
0.87
%
Non-performing assets to tangible common equity plus allowance
for credit losses
 
8.17
%
 
7.72
%
 
7.41
%
 
9.32
%
 
7.74
%
Non-accrual loans to total assets
 
0.52
%
 
0.48
%
 
0.46
%
 
0.57
%
 
0.39
%
Allowance for credit losses and net charge-off ratios
Allowance for credit losses to total loans(5)
 
0.90
%
 
0.93
%
 
0.92
%
 
0.91
%
 
0.89
%
Allowance for credit losses to loans, excluding acquired loans
 
1.01
%
 
1.07
%
 
1.09
%
 
1.10
%
 
1.11
%
Allowance for credit losses to non-accrual loans
 
127.78
%
 
144.54
%
 
147.01
%
 
117.90
%
 
164.22
%
Allowance for credit losses to non-performing loans
 
120.35
%
 
137.25
%
 
140.87
%
 
114.91
%
 
156.63
%
Net charge-offs to average loans(2)
 
0.62
%
 
0.27
%
 
0.30
%
 
0.16
%
 
0.12
%
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 for each period presented. As a result, interest income and yields on tax-exempt securities and loans subsequent to December 31, 2017 are presented using the current federal income tax rate of 21% and prior periods are computed using the federal income tax rate applicable at that time, or 35%.
(4) 
Cost of funds expresses total interest expense as a percentage of average total funding sources.
(5) 
This measure excludes the impact of revaluation of DTAs related to federal tax reform and changes in Illinois income tax rates for the fourth and third quarter of 2017.
(6) 
This ratio includes acquired loans that are recorded at fair value through an acquisition adjustment, which incorporates credit risk, as of the acquisition date with no allowance for credit losses being established at that time. As the acquisition adjustment is accreted into income over future periods, an allowance for credit losses is established on acquired loans as necessary to reflect credit deterioration.
(7) 
Adjustments to net income for the fourth and third quarters of 2017 include revaluation of DTAs related to federal income tax reform and changes in Illinois income tax rates, a special colleague bonus, a charitable contribution, and certain actions related to the securities portfolio. In addition, net income for certain periods was adjusted for acquisition and integration related expenses associated with completed and pending acquisitions. For additional discussion of adjustments, see the "Non-GAAP Financial Information" section.
(8) 
Presented as calculated prior to March 31, 2018, which included a tax-equivalent adjustment for BOLI. Management believes that removing this adjustment from the current calculation of this metric enhances comparability for peer comparison purposes.


17


a3282014fmbilogoa17.jpg
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
Quarters Ended
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
2018
 
2017
 
2017
 
2017
 
2017
Earnings Per Share
 
 


 
 
 
 
 


Net income
$
33,510

 
$
2,347

 
$
38,235

 
$
34,950

 
$
22,855

Net income applicable to non-vested restricted shares
(311
)
 
(6
)
 
(340
)
 
(336
)
 
(234
)
Net income applicable to common shares
33,199

 
2,341

 
37,895

 
34,614

 
22,621

Adjustments to net income:
 
 
 
 
 
 
 
 
 
DTA revaluation
—

 
26,555

 
(2,846
)
 
—

 
—

Losses (gains) from securities portfolio repositioning
—

 
5,357

 
(3,197
)
 
—

 
—

Tax effect of losses (gains) from securities portfolio repositioning
—

 
(2,196
)
 
1,311

 
—

 
—

Special bonus
—

 
1,915

 
—

 
—

 
—

Tax effect of special bonus
—

 
(785
)
 
—

 
—

 
—

Charitable contribution
—

 
1,600

 
—

 
—

 
—

Tax effect of charitable contribution
—

 
(656
)
 
—

 
—

 
—

Acquisition and integration related expenses
—

 
—

 
384

 
1,174

 
18,565

Tax effect of acquisition and integration related expenses
—

 
—

 
(157
)
 
(470
)
 
(7,426
)
Total adjustments to net income, net of tax
—

 
31,790

 
(4,505
)
 
704

 
11,139

Net income applicable to common shares, adjusted(1)
$
33,199

 
$
34,131

 
$
33,390

 
$
35,318

 
$
33,760

Weighted-average common shares outstanding:
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding (basic)
101,922

 
101,766

 
101,752

 
101,743

 
100,411

Dilutive effect of common stock equivalents
16

 
21

 
20

 
20

 
21

Weighted-average diluted common shares outstanding
101,938

 
101,787

 
101,772

 
101,763

 
100,432

Basic EPS
$
0.33

 
$
0.02

 
$
0.37

 
$
0.34

 
$
0.23

Diluted EPS
$
0.33

 
$
0.02

 
$
0.37

 
$
0.34

 
$
0.23

Diluted EPS, adjusted(1)
$
0.33

 
$
0.34

 
$
0.33

 
$
0.35

 
$
0.34

Anti-dilutive shares not included in the computation of diluted EPS
110

 
190

 
190

 
195

 
343

 
 
 
 
 
 
 
 
 
 
Note: Non-GAAP Reconciliations footnotes are located at the end of this section.

18


a3282014fmbilogoa17.jpg
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
As of or for the
 
Quarters Ended
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
2018
 
2017
 
2017
 
2017
 
2017
Return on Average Common and Tangible Common Equity
 
 
 
 
 
 
Net income applicable to common shares
$
33,199

 
$
2,341

 
$
37,895

 
$
34,614

 
$
22,621

Intangibles amortization
1,802

 
1,806

 
1,931

 
2,163

 
1,965

Tax effect of intangibles amortization
(508
)
 
(740
)
 
(792
)
 
(865
)
 
(786
)
Net income applicable to common shares, excluding intangibles
amortization
34,493

 
3,407

 
39,034

 
35,912

 
23,800

Total adjustments to net income, net of tax
—

 
31,790

 
(4,505
)
 
704

 
11,139

Net income applicable to common shares, adjusted(1)
$
34,493

 
$
35,197

 
$
34,529

 
$
36,616

 
$
34,939

Average stockholders' equity
$
1,873,419

 
$
1,880,265

 
$
1,855,647

 
$
1,830,536

 
$
1,763,538

Less: average intangible assets
(753,870
)
 
(749,700
)
 
(751,366
)
 
(753,521
)
 
(750,589
)
Average tangible common equity
$
1,119,549

 
$
1,130,565

 
$
1,104,281

 
$
1,077,015

 
$
1,012,949

Return on average common equity(3)
7.19
%
 
0.49
%
 
8.10
%
 
7.58
%
 
5.20
%
Return on average tangible common equity(3)
12.50
%
 
1.20
%
 
14.02
%
 
13.37
%
 
9.53
%
Return on average tangible common equity, adjusted(1)(3)
12.50
%
 
12.35
%
 
12.41
%
 
13.64
%
 
13.99
%
Return on Average Assets
 
 
 
 
 
 
Net income
$
33,510

 
$
2,347

 
$
38,235

 
$
34,950

 
$
22,855

Total adjustments to net income, net of tax
—

 
31,790

 
(4,505
)
 
704

 
11,139

Net income, adjusted(1)
$
33,510

 
$
34,137

 
$
33,730

 
$
35,654

 
$
33,994

Average assets
$
14,187,053

 
$
14,118,625

 
$
14,155,766

 
$
13,960,843

 
$
13,673,125

Return on average assets(3)
0.96
%
 
0.07
%
 
1.07
%
 
1.00
%
 
0.68
%
Return on average assets, adjusted(1)(3)
0.96
%
 
0.96
%
 
0.95
%
 
1.02
%
 
1.01
%
Efficiency Ratio Calculation
 
 
 
 
 
 
 
 
Noninterest expense
$
95,582

 
$
102,326

 
$
97,190

 
$
99,751

 
$
116,642

Less:
 
 
 
 
 
 
 
 
 
Net OREO expense
(1,068
)
 
(695
)
 
(657
)
 
(1,631
)
 
(1,700
)
Special bonus
—

 
(1,915
)
 
—

 
—

 
—

Charitable contribution
—

 
(1,600
)
 
—

 
—

 
—

Acquisition and integration related expenses
—

 
—

 
(384
)
 
(1,174
)
 
(18,565
)
Total
$
94,514

 
$
98,116

 
$
96,149

 
$
96,946

 
$
96,377

Tax-equivalent net interest income(2)
$
119,538

 
$
121,154

 
$
121,935

 
$
119,625

 
$
117,251

Noninterest income
35,517

 
34,905

 
43,348

 
44,945

 
39,951

Less: net securities losses (gains)
—

 
5,357

 
(3,197
)
 
(284
)
 
—

Total
$
155,055

 
$
161,416

 
$
162,086

 
$
164,286

 
$
157,202

Efficiency ratio
60.96
%
 
60.78
%
 
59.32
%
 
59.01
%
 
61.31
%
 
 
 
 
 
 
 
 
 
 
Note: Non-GAAP Reconciliations footnotes are located at the end of this section.

19


a3282014fmbilogoa17.jpg
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
As of or for the
 
Quarters Ended
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
2018
 
2017
 
2017
 
2017
 
2017
Risk-Based Capital Data
 
 
 
 
 
 
 
 
 
Common stock
$
1,123

 
$
1,123

 
$
1,123

 
$
1,123

 
$
1,123

Additional paid-in capital
1,021,923

 
1,031,870

 
1,029,002

 
1,025,607

 
1,022,417

Retained earnings
1,103,840

 
1,074,990

 
1,082,921

 
1,056,072

 
1,030,403

Treasury stock, at cost
(200,068
)
 
(210,073
)
 
(209,880
)
 
(209,392
)
 
(208,946
)
Goodwill and other intangible assets, net of deferred tax liabilities
(754,814
)
 
(743,327
)
 
(738,645
)
 
(740,236
)
 
(742,012
)
Disallowed DTAs
(522
)
 
(644
)
 
(275
)
 
(472
)
 
(1,150
)
CET1 capital
1,171,482

 
1,153,939

 
1,164,246

 
1,132,702

 
1,101,835

Trust-preferred securities
50,690

 
50,690

 
50,690

 
50,690

 
50,690

Other disallowed DTAs
(131
)
 
(161
)
 
(69
)
 
(118
)
 
(287
)
Tier 1 capital
1,222,041

 
1,204,468

 
1,214,867

 
1,183,274

 
1,152,238

Tier 2 capital
242,870

 
243,656

 
242,652

 
240,121

 
235,825

Total capital
$
1,464,911

 
$
1,448,124

 
$
1,457,519

 
$
1,423,395

 
$
1,388,063

Risk-weighted assets
$
12,135,662

 
$
11,920,372

 
$
12,362,833

 
$
12,180,416

 
$
12,095,592

Adjusted average assets
$
13,472,294

 
$
13,404,998

 
$
13,439,744

 
$
13,245,499

 
$
12,965,450

Total capital to risk-weighted assets
12.07
%
 
12.15
%
 
11.79
%
 
11.69
%
 
11.48
%
Tier 1 capital to risk-weighted assets
10.07
%
 
10.10
%
 
9.83
%
 
9.71
%
 
9.53
%
CET1 to risk-weighted assets
9.65
%
 
9.68
%
 
9.42
%
 
9.30
%
 
9.11
%
Tier 1 capital to average assets
9.07
%
 
8.99
%
 
9.04
%
 
8.93
%
 
8.89
%
Tangible Common Equity
 
 
 
 
 
 
 
 
 
Stockholders' equity
$
1,869,287

 
$
1,864,874

 
$
1,865,130

 
$
1,836,843

 
$
1,804,733

Less: goodwill and other intangible assets
(754,814
)
 
(754,757
)
 
(750,436
)
 
(752,413
)
 
(754,621
)
Tangible common equity
1,114,473

 
1,110,117

 
1,114,694

 
1,084,430

 
1,050,112

Less: AOCI
57,531

 
33,036

 
38,036

 
36,567

 
40,264

Tangible common equity, excluding AOCI
$
1,172,004

 
$
1,143,153

 
$
1,152,730

 
$
1,120,997

 
$
1,090,376

Total assets
$
14,379,971

 
$
14,077,052

 
$
14,267,142

 
$
13,969,140

 
$
13,773,471

Less: goodwill and other intangible assets
(754,814
)
 
(754,757
)
 
(750,436
)
 
(752,413
)
 
(754,621
)
Tangible assets
$
13,625,157

 
$
13,322,295

 
$
13,516,706

 
$
13,216,727

 
$
13,018,850

Tangible common equity to tangible assets
8.18
%
 
8.33
%
 
8.25
%
 
8.20
%
 
8.07
%
Tangible common equity,excluding AOCI, to tangible assets
8.60
%
 
8.58
%
 
8.53
%
 
8.48
%
 
8.38
%
Tangible common equity to risk-weighted assets
9.18
%
 
9.31
%
 
9.02
%
 
8.90
%
 
8.68
%
 
 
 
 
 
 
 
 
 
 
Footnotes to Non-GAAP Reconciliations
(1) 
Adjustments to net income for the fourth and third quarters of 2017 include revaluation of DTAs related to federal income tax reform and changes in Illinois income tax rates, a special colleague bonus, a charitable contribution, and certain actions related to the securities portfolio. In addition, net income for certain periods was adjusted for acquisition and integration related expenses associated with completed and pending acquisitions. For additional discussion of adjustments, see the "Non-GAAP Financial Information" section.
(2) 
Presented on a tax-equivalent basis, assuming the applicable federal income tax rate for each period presented. As a result, interest income and yields on tax-exempt securities and loans subsequent to December 31, 2017 are presented using the current federal income tax rate of 21% and prior periods are computed using the federal income tax rate applicable at that time, or 35%.
(3) 
Annualized based on the actual number of days for each period presented.

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