Document
Filed by First Midwest Bancorp, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: First Midwest Bancorp, Inc.
(Registration Statement No. 333-229674)

Set forth below is a copy of First Midwest Bancorp, Inc.’s first quarter 2019 earnings release.

a3282014fmbilogoa32.jpg
 
 
 
 
 
FOR IMMEDIATE RELEASE
 
 
 
 
 
 
 

FIRST MIDWEST BANCORP, INC. ANNOUNCES
2019 FIRST QUARTER RESULTS
CHICAGO, IL, April 23, 2019 – First Midwest Bancorp, Inc. (the "Company" or "First Midwest"), the holding company of First Midwest Bank (the "Bank"), today reported results of operations and financial condition for the first quarter of 2019. Net income for the first quarter of 2019 was $46.1 million, or $0.43 per share, compared to $41.4 million, or $0.39 per share, for the fourth quarter of 2018, and $33.5 million, or $0.33 per share, for the first quarter of 2018.
Reported results for the first quarter of 2019 and fourth quarter of 2018 were impacted by acquisition and integration related expenses and implementation costs related to the Company's Delivering Excellence initiative ("Delivering Excellence"). For additional detail on these adjustments, see the "Non-GAAP Financial Information" section presented later in this release.
Earnings per share ("EPS"), adjusted(1) was $0.46 for the first quarter of 2019, compared to $0.48 for the fourth quarter of 2018 and $0.33 for the first quarter of 2018.
SELECT FIRST QUARTER HIGHLIGHTS
Increased EPS to $0.43 compared to $0.39 and $0.33 for the fourth and first quarters of 2018, respectively.
Generated EPS, adjusted(1) of $0.46, seasonally down 4% from the fourth quarter of 2018 and up 39% from the first quarter of 2018.
Produced returns on average tangible common equity, adjusted(1) of 15.3% for the first quarter of 2019, down 111 basis points and up 281 basis points from the fourth and first quarters of 2018, respectively.
Expanded net interest income and margin to $139 million and 4.04%, up 8 basis points from the fourth quarter of 2018 and 24 basis points from the first quarter of 2018.
Controlled noninterest expense, reported an efficiency ratio(1) of 56%, consistent with the fourth quarter of 2018 and down from 61% in the first quarter of 2018.
Grew loans to $12 billion, up 4%, annualized from December 31, 2018 and 8% from March 31, 2018.
Increased total average deposits to $12 billion, up 10% from the first quarter of 2018.
Increased common equity Tier 1 capital to 10.52%, up 32 basis points from the fourth quarter of 2018 and 87 basis points from the first quarter of 2018.
Completed the acquisition of Northern Oak Wealth Management, Inc, on January 16, 2019, adding approximately $800 million of assets under management.
Announced a share repurchase program authorizing the Company to repurchase up to $180 million of its common stock.
"We had a solid start to the year, reflecting significant growth in earnings from a year ago," said Michael L. Scudder, Chairman of the Board and Chief Executive Officer of the Company. "Operating performance benefitted from strong earning asset growth, higher interest rates, and stable core funding and, in turn, improved interest margins and our already solid operating efficiency. Sales activity remained active, with quarterly comparisons largely reflective of both normal seasonality and the impact of market volatility on certain fee-based businesses."
Mr. Scudder continued, "We remain well-positioned for continued growth and expansion. Our acquisition of Bridgeview Bank will close in May, adding $1.3 billion of assets and a strong team of colleagues to our presence in metro Chicago. At the same time, Northern Oak Wealth Management, which we acquired in January, will further augment our commercial and private banking expansion into the Milwaukee marketplace. The strength of our earnings and balance sheet continue to provide flexibility as we manage our capital and consider opportunities for further business expansion."

First Midwest Bancorp, Inc. | 8750 West Bryn Mawr Avenue | Suite 1300 | Chicago | Illinois | 60631



ACQUISITIONS
Completed
Northern Oak Wealth Management, Inc.
On January 16, 2019, the Company completed its acquisition of Northern Oak Wealth Management, Inc. ("Northern Oak"), a registered investment adviser based in Milwaukee, Wisconsin with approximately $800 million of assets under management at closing.
Pending
Bridgeview Bancorp, Inc.
On December 6, 2018, the Company entered into a merger agreement to acquire Bridgeview Bancorp, Inc. ("Bridgeview"), the holding company for Bridgeview Bank Group. With the acquisition, the Company would acquire 13 banking offices located across greater Chicagoland. As of December 31, 2018, Bridgeview had approximately $1.3 billion of assets, $1.0 billion of deposits, and $800 million of loans, excluding Bridgeview's mortgage division, which the Company is not acquiring. The merger agreement provides for a fixed exchange ratio of 0.2767 shares of Company common stock, plus $1.79 in cash, for each share of Bridgeview common stock, subject to certain adjustments. We anticipate issuing approximately 4.7 million shares at closing. As of the date of announcement, the overall transaction was valued at approximately $145 million. The acquisition is subject to the approval of Bridgeview’s stockholders and the completion of various closing conditions, and is anticipated to close on May 9, 2019.

 



















(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



OPERATING PERFORMANCE
Net Interest Income and Margin Analysis
(Dollar amounts in thousands)
 
Quarters Ended
 
March 31, 2019
 
 
December 31, 2018
 
 
March 31, 2018
 
Average Balance
 
Interest
 
Yield/
Rate
(%)
 
 
Average
Balance
 
Interest
 
Yield/
Rate
(%)
 
 
Average
Balance
 
Interest
 
Yield/
Rate
(%)
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other interest-earning assets
$
125,615

 
$
728

 
2.35
 
 
$
145,436

 
$
476

 
1.30
 
 
$
112,137

 
$
423

 
1.53
Securities(1)
2,371,692

 
16,387

 
2.76
 
 
2,359,083

 
15,907

 
2.70
 
 
2,063,223

 
12,141

 
2.35
Federal Home Loan Bank ("FHLB") and
  Federal Reserve Bank ("FRB") stock
79,821

 
952

 
4.77
 
 
85,427

 
709

 
3.32
 
 
76,883

 
438

 
2.28
Loans(1)
11,458,233

 
145,531

 
5.15
 
 
11,408,062

 
143,561

 
4.99
 
 
10,499,283

 
119,318

 
4.61
Total interest-earning assets(1)
14,035,361

 
163,598

 
4.72
 
 
13,998,008

 
160,653

 
4.56
 
 
12,751,526

 
132,320

 
4.20
Cash and due from banks
202,101

 
 
 
 
 
 
211,312

 
 
 
 
 
 
181,797

 
 
 
 
Allowance for loan losses
(107,520
)
 
 
 
 
 
 
(104,681
)
 


 
 
 
 
(99,234
)
 


 
 
Other assets
1,537,897

 
 
 
 
 
 
1,398,760

 


 
 
 
 
1,352,964

 


 
 
Total assets
$
15,667,839

 
 
 
 
 
 
$
15,503,399

 
 
 
 
 
 
$
14,187,053

 
 
 
 
Liabilities and Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Savings deposits
$
2,037,831

 
346

 
0.07
 
 
$
2,044,312

 
358

 
0.07
 
 
$
2,015,679

 
368

 
0.07
NOW accounts
2,083,366

 
2,162

 
0.42
 
 
2,128,722

 
1,895

 
0.35
 
 
1,992,672

 
1,048

 
0.21
Money market deposits
1,809,234

 
2,349

 
0.53
 
 
1,831,311

 
1,990

 
0.43
 
 
1,814,057

 
824

 
0.18
Time deposits
2,647,316

 
11,745

 
1.80
 
 
2,311,453

 
8,894

 
1.53
 
 
1,735,155

 
3,939

 
0.92
Borrowed funds
877,995

 
3,551

 
1.64
 
 
1,031,249

 
4,469

 
1.72
 
 
858,297

 
3,479

 
1.64
Senior and subordinated debt
203,899

 
3,313

 
6.59
 
 
204,030

 
3,292

 
6.40
 
 
195,243

 
3,124

 
6.49
Total interest-bearing liabilities
9,659,641

 
23,466

 
0.99
 
 
9,551,077

 
20,898

 
0.87
 
 
8,611,103

 
12,782

 
0.60
Demand deposits
3,587,480

 
 
 
 
 
 
3,685,806

 
 
 
 
 
 
3,466,832

 
 
 
 
Total funding sources
13,247,121

 
 
 
0.72
 
 
13,236,883

 


 
0.63
 
 
12,077,935

 


 
0.43
Other liabilities
282,437

 
 
 
 
 
 
251,299

 
 
 
 
 
 
235,699

 
 
 
 
Stockholders' equity - common
2,138,281

 
 
 
 
 
 
2,015,217

 
 
 
 
 
 
1,873,419

 
 
 

Total liabilities and
  stockholders' equity
$
15,667,839

 
 
 
 
 
 
$
15,503,399

 
 
 
 
 
 
$
14,187,053

 
 
 
 
Tax-equivalent net interest
  income/margin(1)
 
 
140,132

 
4.04
 
 
 
 
139,755

 
3.96
 
 
 
 
119,538

 
3.80
Tax-equivalent adjustment
 
 
(1,108
)
 

 
 
 
 
(1,126
)
 

 
 
 
 
(975
)
 

Net interest income (GAAP)(1)
 
 
$
139,024

 

 
 
 
 
$
138,629

 

 
 
 
 
$
118,563

 

Impact of acquired loan accretion(1)
 
 
$
6,369

 
0.18
 
 
 
 
$
5,426

 
0.15
 
 
 
 
$
5,112

 
0.16
Tax-equivalent net interest income/
  margin, adjusted(1)
 
 
$
133,763

 
3.86
 
 
 
 
$
134,329

 
3.81
 
 
 
 
$
114,426

 
3.64
(1) Interest income and yields on tax-exempt securities and loans are presented on a tax-equivalent basis, assuming a federal income tax rate of 21%. The corresponding income tax impact related to tax-exempt items is recorded in income tax expense. These adjustments have no impact on net income. See the "Non-GAAP Financial Information" section presented later in this release for a discussion of this non-GAAP financial measure.
Net interest income for the first quarter of 2019 was consistent with the fourth quarter of 2018 and up 17.3% compared to the first quarter of 2018. Compared to the fourth quarter of 2018, the impact of higher rates and acquired loan accretion was offset by higher funding costs and fewer days in the quarter. The rise in net interest income compared to the first quarter of 2018 resulted primarily from the acquisition of interest-earning assets from the Northern States Financial Corporation ("Northern States") transaction in the fourth quarter of 2018, higher interest rates, growth in loans and securities, and higher acquired loan accretion, partially offset by higher cost of funds.
Acquired loan accretion contributed $6.4 million, $5.4 million, and $5.1 million to net interest income for the first quarter of 2019, the fourth quarter of 2018, and the first quarter of 2018, respectively.
Tax-equivalent net interest margin for the current quarter was 4.04%, increasing by 8 basis points from the fourth quarter of 2018 and 24 basis points from the first quarter of 2018. Compared to both prior periods, the benefit of higher interest rates more than

3



offset the rise in funding costs. In addition, tax-equivalent net interest margin was impacted by a 3 basis point and 2 basis point increase in acquired loan accretion compared to the fourth and first quarters of 2018, respectively.
For the first quarter of 2019, total average interest-earning assets were consistent with the fourth quarter of 2018 and rose by $1.3 billion from the first quarter of 2018. The increase compared to the first quarter of 2018 resulted primarily from the Northern States transaction, organic loan growth, and security purchases.
Total average funding sources for the first quarter of 2019 were consistent with the fourth quarter of 2018 and increased by $1.2 billion from the first quarter of 2018. The increase compared to the first quarter of 2018 resulted primarily from the Northern States transaction and time deposits.
Noninterest Income Analysis
(Dollar amounts in thousands)
 
 
Quarters Ended
 
March 31, 2019 Percent Change From
 
 
March 31,
2019
 
December 31,
2018
 
March 31,
2018
 
December 31,
2018
 
March 31,
2018
Service charges on deposit accounts
 
$
11,540

 
$
12,627

 
$
11,652

 
(8.6
)
 
(1.0
)
Wealth management fees
 
11,600

 
10,951

 
10,958

 
5.9

 
5.9

Card-based fees, net
 
4,378

 
4,574

 
3,933

 
(4.3
)
 
11.3

Capital market products income
 
1,279

 
1,408

 
1,558

 
(9.2
)
 
(17.9
)
Mortgage banking income
 
1,004

 
1,304

 
2,397

 
(23.0
)
 
(58.1
)
Merchant servicing fees, net
 
337

 
365

 
330

 
(7.7
)
 
2.1

Other service charges, commissions, and fees
 
2,274

 
2,353

 
2,218

 
(3.4
)
 
2.5

Total fee-based revenues
 
32,412

 
33,582

 
33,046

 
(3.5
)
 
(1.9
)
Other income
 
2,494

 
2,880

 
2,471

 
(13.4
)
 
0.9

Total noninterest income
 
$
34,906

 
$
36,462

 
$
35,517

 
(4.3
)
 
(1.7
)
Total noninterest income of $34.9 million was down 4.3% and 1.7% from the fourth and first quarters of 2018, respectively. Overall, noninterest income for the first quarter of 2019 was impacted by seasonality and market volatility, which were partially offset by services provided to customers acquired in the Northern Oak transaction. The decrease in service charges on deposit accounts and net card-based fees compared to the fourth quarter of 2018 was due primarily to seasonality. The rise in net card-based fees compared to the first quarter of 2018 resulted from higher transaction volumes and services provided to customers acquired in the Northern States transaction. Compared to both prior periods, the increase in wealth management fees was driven primarily by customers acquired in the Northern Oak transaction.
Capital market products income decreased compared to both prior periods, and fluctuates from quarter to quarter based on the size and frequency of sales to corporate clients.
The decrease in mortgage banking income compared to both prior periods resulted primarily from a reduction in the fair value of mortgage servicing rights during the first quarter of 2019. The change in the fair value of mortgage servicing rights fluctuates from quarter to quarter, and resulted in a decrease to mortgage banking income of $400,000 compared to the fourth quarter of 2018 and $1.1 million compared to the first quarter of 2018.
Other income was elevated in the fourth quarter of 2018 due primarily to higher fair value adjustments on equity securities and other miscellaneous items.

4



Noninterest Expense Analysis
(Dollar amounts in thousands)
 
 
Quarters Ended
 
March 31, 2019 Percent Change From
 
 
March 31,
2019
 
December 31,
2018
 
March 31,
2018
 
December 31,
2018
 
March 31,
2018
Salaries and employee benefits:
 
 
 
 
 
 
 
 
 
 
Salaries and wages
 
$
46,135

 
$
45,011

 
$
45,830

 
2.5

 
0.7

Retirement and other employee benefits
 
11,238

 
10,378

 
10,957

 
8.3

 
2.6

Total salaries and employee benefits
 
57,373

 
55,389

 
56,787

 
3.6

 
1.0

Net occupancy and equipment expense
 
14,770

 
12,827

 
13,773

 
15.1

 
7.2

Professional services
 
7,788

 
8,859

 
7,580

 
(12.1
)
 
2.7

Technology and related costs
 
4,596

 
4,849

 
4,771

 
(5.2
)
 
(3.7
)
Advertising and promotions
 
2,372

 
2,011

 
1,650

 
18.0

 
43.8

Net other real estate owned ("OREO") expense
 
681

 
763

 
1,068

 
(10.7
)
 
(36.2
)
Other expenses
 
10,581

 
13,418

 
9,953

 
(21.1
)
 
6.3

Acquisition and integration related expenses
 
3,691

 
9,553

 

 
(61.4
)
 
100.0

Delivering Excellence implementation costs
 
258

 
3,159

 

 
(91.8
)
 
100.0

Total noninterest expense
 
$
102,110

 
$
110,828

 
$
95,582

 
(7.9
)
 
6.8

Acquisition and integration related expenses
 
(3,691
)
 
(9,553
)
 

 
(61.4
)
 
(100.0
)
Delivering Excellence implementation costs
 
(258
)
 
(3,159
)
 

 
(91.8
)
 
(100.0
)
Total noninterest expense, adjusted(1)
 
$
98,161

 
$
98,116

 
$
95,582

 

 
2.7

(1) See the "Non-GAAP Financial Information" section presented later in this release for a discussion of this non-GAAP financial measure.
Total noninterest expense decreased by 7.9% from the fourth quarter of 2018 and increased by 6.8% from the first quarter of 2018. During the first quarter of 2019 and fourth quarter of 2018, noninterest expense was impacted by acquisition and integration related expenses and costs related to the implementation of the Delivering Excellence initiative. Excluding these items, noninterest expense for the first quarter of 2019 was $98.2 million, consistent with the fourth quarter of 2018 and up 2.7% from first quarter of 2018.
Compared to the fourth quarter of 2018, the increase in salaries and employee benefits was driven primarily by merit increases, payroll tax timing, and lower levels of deferred loan salaries, partially offset by ongoing benefits of the Delivering Excellence initiative. The decrease in professional services from the fourth quarter of 2018 was driven by lower loan remediation and legal fees.
Net occupancy and equipment expense increased compared to both prior periods due to the adoption of lease accounting guidance at the beginning of the first quarter of 2019. Upon adoption of this guidance, a deferred gain that resulted from a prior sale-leaseback transaction is no longer included as a reduction in net occupancy and equipment expense in the amount of approximately $1.5 million on a quarterly basis. In addition, higher costs related to winter weather conditions contributed to the rise in net occupancy and equipment expense from the fourth quarter of 2018. Advertising and promotions expense increased from both prior periods due to higher costs related to marketing campaigns.
The decrease in net OREO expense compared to the first quarter of 2018 was due mainly to higher levels of gains on sales of properties and a reduction in operating expenses.
Other expenses were elevated in the fourth quarter of 2018 due primarily to property valuation adjustments, the reserve for unfunded commitments, and other miscellaneous expenses.
Acquisition and integration related expenses for the first quarter of 2019 resulted from the acquisition of Northern States and Northern Oak and the pending acquisition of Bridgeview. For the fourth quarter of 2018, acquisition and integration related expenses resulted from the acquisition of Northern States.
Delivering Excellence implementation costs for the first quarter of 2019 and the fourth quarter of 2018 resulted from certain actions initiated by the Company in connection with its Delivering Excellence initiative and include property valuation adjustments on locations identified for closure, employee severance, and general restructuring and advisory services.

5




LOAN PORTFOLIO AND ASSET QUALITY
Loan Portfolio Composition
(Dollar amounts in thousands)
 
 
As of
 
March 31, 2019 Percent Change From
 
 
March 31, 
 2019
 
December 31, 
 2018
 
March 31, 
 2018
 
December 31, 
 2018
 
March 31, 
 2018
Commercial and industrial
 
$
4,183,262

 
$
4,120,293

 
$
3,659,066

 
1.5

 
14.3

Agricultural
 
438,461

 
430,928

 
435,734

 
1.7

 
0.6

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
Office, retail, and industrial
 
1,806,892

 
1,820,917

 
1,931,202

 
(0.8
)
 
(6.4
)
Multi-family
 
752,943

 
764,185

 
695,830

 
(1.5
)
 
8.2

Construction
 
683,475

 
649,337

 
585,766

 
5.3

 
16.7

Other commercial real estate
 
1,309,878

 
1,361,810

 
1,363,238

 
(3.8
)
 
(3.9
)
Total commercial real estate
 
4,553,188

 
4,596,249

 
4,576,036

 
(0.9
)
 
(0.5
)
Total corporate loans
 
9,174,911

 
9,147,470

 
8,670,836

 
0.3

 
5.8

Home equity
 
862,068

 
851,607

 
881,534

 
1.2

 
(2.2
)
1-4 family mortgages
 
1,086,264

 
1,017,181

 
798,902

 
6.8

 
36.0

Installment
 
445,760

 
430,525

 
325,502

 
3.5

 
36.9

Total consumer loans
 
2,394,092

 
2,299,313

 
2,005,938

 
4.1

 
19.4

Total loans
 
$
11,569,003

 
$
11,446,783

 
$
10,676,774

 
1.1

 
8.4

Total loans of $11.6 billion increased by 4.3%, annualized from December 31, 2018 and by 8.4% from March 31, 2018. The increase in loans compared to March 31, 2018 benefitted from the Northern States transaction. Compared to both prior periods, growth in commercial and industrial loans, primarily within our sector-based lending, drove the rise in total corporate loans. The rise in construction loans compared to both prior periods was due to new loan originations and line draws on existing credits. The overall decline in office, retail, and industrial and other commercial real estate loans compared to both prior periods resulted primarily from the decision of certain customers to opportunistically sell their commercial business or investment real estate properties, as well as refinancing with non-bank lenders and real estate investors.
Growth in consumer loans compared to both prior periods resulted from purchases of shorter-duration home equity loans and 1-4 family mortgages and organic growth. Compared to March 31, 2018, growth in consumer loans also benefited from the purchase of installment loans.

6




Asset Quality
(Dollar amounts in thousands)
 
 
As of
 
March 31, 2019 Percent Change From
 
 
March 31,
2019
 
December 31,
2018
 
March 31,
2018
 
December 31,
2018
 
March 31,
2018
Asset quality
 
 
 
 
 
 
 
 
 
 
Non-accrual loans
 
$
70,205

 
$
56,935

 
$
75,015

 
23.3

 
(6.4
)
90 days or more past due loans, still accruing
  interest(1)
 
8,446

 
8,282

 
4,633

 
2.0

 
82.3

Total non-performing loans
 
78,651

 
65,217

 
79,648

 
20.6

 
(1.3
)
Accruing troubled debt restructurings
  ("TDRs")
 
1,844

 
1,866

 
1,778

 
(1.2
)
 
3.7

OREO
 
10,818

 
12,821

 
17,472

 
(15.6
)
 
(38.1
)
Total non-performing assets
 
$
91,313

 
$
79,904

 
$
98,898

 
14.3

 
(7.7
)
30-89 days past due loans(1)
 
$
45,764

 
$
37,524

 
$
42,573

 


 


Non-accrual loans to total loans
 
0.61
%
 
0.50
%
 
0.70
%
 
 
 
 
Non-performing loans to total loans
 
0.68
%
 
0.57
%
 
0.75
%
 
 
 
 
Non-performing assets to total loans plus
  OREO
 
0.79
%
 
0.70
%
 
0.92
%
 
 
 
 
Allowance for credit losses
 
 
 
 
 
 
 
 
 
 
Allowance for credit losses
 
$
104,779

 
$
103,419

 
$
95,854

 


 


Allowance for credit losses to total loans(2)
 
0.91
%
 
0.90
%
 
0.90
%
 
 
 
 
Allowance for credit losses to loans, excluding
  acquired loans
 
1.00
%
 
1.01
%
 
1.01
%
 
 
 
 
Allowance for credit losses to non-accrual
  loans
 
149.25
%
 
181.64
%
 
127.78
%
 
 
 
 

(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 0.79% of total loans and OREO at March 31, 2019 compared to 0.70% and 0.92% at December 31, 2018 and March 31, 2018, respectively, reflective of normal fluctuations that can occur on a quarterly basis. The decline in OREO compared to March 31, 2018 resulted from sales of OREO properties.
The allowance for credit losses to total loans was 0.91% at March 31, 2019, consistent with December 31, 2018 and March 31, 2018.

7



Charge-Off Data
(Dollar amounts in thousands)
 
 
Quarters Ended
 
 
March 31,
2019
 
% of
Total
 
December 31,
2018
 
% of
Total
 
March 31,
2018
 
% of
Total
Net loan charge-offs(1)
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
5,061

 
55.7
 
$
5,558

 
73.9

 
$
13,149

 
81.9

Agricultural
 
89

 
1.0
 
71

 
0.9

 
983

 
6.1

Office, retail, and industrial
 
618

 
6.8
 
713

 
9.5

 
364

 
2.3

Multi-family
 
339

 
3.7
 
(3
)
 

 

 

Construction
 

 
 
(99
)
 
(1.3
)
 
(13
)
 
(0.1
)
Other commercial real estate
 
189

 
2.1
 
(817
)
 
(10.9
)
 
30

 
0.2

Consumer
 
2,788

 
30.7
 
2,094

 
27.9

 
1,543

 
9.6

Total net loan charge-offs
 
$
9,084

 
100.0
 
$
7,517

 
100.0

 
$
16,056

 
100.0

Total recoveries included above
 
$
1,693

 
 
 
$
2,810

 
 
 
$
1,029

 
 
Net loan charge-offs to average loans(1)(2):
 
 
 
 
 
 
 
 
 
 
 
 
Quarter-to-date(1)
 
0.32
%
 
 
 
0.26
%
 
 
 
0.62
%
 
 
(1) Amounts represent charge-offs, net of recoveries.
(2) Annualized based on the actual number of days for each period presented.
Net loan charge-offs to average loans, annualized were 0.32%, compared to 0.26% for the fourth quarter of 2018 and 0.62% for the first quarter of 2018. Net loan charge-offs were elevated in the first quarter of 2018 due to losses on two corporate loan relationships based upon circumstances unique to these borrowers.

DEPOSIT PORTFOLIO
Deposit Composition
(Dollar amounts in thousands)
 
 
Average for the Quarters Ended
 
March 31, 2019 Percent Change From
 
 
March 31,
2019
 
December 31,
2018
 
March 31,
2018
 
December 31,
2018
 
March 31,
2018
Demand deposits
 
$
3,587,480

 
$
3,685,806

 
$
3,466,832

 
(2.7
)
 
3.5

Savings deposits
 
2,037,831

 
2,044,312

 
2,015,679

 
(0.3
)
 
1.1

NOW accounts
 
2,083,366

 
2,128,722

 
1,992,672

 
(2.1
)
 
4.6

Money market accounts
 
1,809,234

 
1,831,311

 
1,814,057

 
(1.2
)
 
(0.3
)
Core deposits
 
9,517,911

 
9,690,151

 
9,289,240

 
(1.8
)
 
2.5

Time deposits
 
2,647,316

 
2,311,453

 
1,735,155

 
14.5

 
52.6

Total deposits
 
$
12,165,227

 
$
12,001,604

 
$
11,024,395

 
1.4

 
10.3


Total average deposits were $12.2 billion for the first quarter of 2019, up 1.4% and 10.3% from the fourth and first quarters of 2018, respectively. The decrease in average core deposits compared to the fourth quarter of 2018 resulted primarily from the normal seasonal decline in commercial and municipal deposits. Compared to the first quarter of 2018, the rise in total average core deposits was driven by deposits acquired in the Northern States transaction. The increase in average time deposits compared to both prior periods resulted from the continued success of time deposit marketing initiatives.

8





CAPITAL MANAGEMENT
Capital Ratios
 
 
As of
 
 
March 31,
2019
 
December 31,
2018
 
March 31,
2018
Company regulatory capital ratios:
 
 
 
 
 
 
Total capital to risk-weighted assets
 
12.91
%
 
12.62
%
 
12.07
%
Tier 1 capital to risk-weighted assets
 
10.52
%
 
10.20
%
 
10.07
%
Common equity Tier 1 ("CET1") to risk-weighted assets
 
10.52
%
 
10.20
%
 
9.65
%
Tier 1 capital to average assets
 
9.28
%
 
8.90
%
 
9.07
%
Company tangible common equity ratios(1)(2):
 
 
 
 
Tangible common equity to tangible assets
 
9.00
%
 
8.59
%
 
8.18
%
Tangible common equity, excluding accumulated other comprehensive
  income ("AOCI"), to tangible assets
 
9.21
%
 
8.95
%
 
8.60
%
Tangible common equity to risk-weighted assets
 
10.29
%
 
9.81
%
 
9.18
%
(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.
Compared to both prior periods, the increase in capital ratios resulted primarily from strong earnings and the approximately 25 basis point impact, or $47.3 million, of deferred gains, net of tax, which resulted from the adoption of lease accounting guidance at the beginning of the first quarter of 2019. These increases were partially offset by the Northern Oak acquisition and the impact of loan growth and securities purchases on risk-weighted assets. Compared to March 31, 2018, capital ratio increases were also partially offset by the Northern States acquisition. In addition, Tier 1 capital ratios compared to March 31, 2018 were impacted by the phase-out of Tier 1 treatment of the Company's trust-preferred securities in the fourth quarter of 2018.
The Board of Directors approved a quarterly cash dividend of $0.12 per common share during the first quarter of 2019, which follows a dividend increase from $0.11 to $0.12 per common share during the fourth quarter of 2018. This dividend represents the 145th 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 24, 2019 at 11 A.M. (ET). Members of the public who would like to listen to the conference call should dial (877) 507-6039 (U.S. domestic) or (412) 317-6003 (International) and ask for the First Midwest Bancorp, Inc. Earnings Conference Call. The number should be dialed 10 to 15 minutes prior to the start of the conference call. There is no charge to access the call. The conference call will also be accessible as an audio webcast through the Investor Relations section of the Company's website, www.firstmidwest.com/investorrelations. For those unable to listen to the live broadcast, a replay will be available on the Company's website or by dialing (877) 344-7529 (U.S. domestic) or (412) 317-0088 (International) conference I.D. 10130490 beginning one hour after completion of the live call until 9:00 A.M. (ET) on May 8, 2019. Please direct any questions regarding obtaining access to the conference call to First Midwest Bancorp, Inc. Investor Relations, via e-mail, at investor.relations@firstmidwest.com.
Press Release, Presentation Materials, and Additional Information Available on Website
This press release, the presentation materials to be discussed during the conference call, and the accompanying unaudited Selected Financial Information are available through the "Investor Relations" section of First Midwest's website at www.firstmidwest.com/investorrelations.
Forward-Looking Statements
This press release, as well as any oral statements made by or on behalf of First Midwest, may contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by the use of words such as "may," "might," "will," "would," "should," "could," "expect," "plan," "intend," "anticipate," "believe," "estimate," "outlook," "predict," "project," "probable," "potential," "possible," "target," "continue," "look forward," or "assume" and words of similar import. Forward-looking statements are not historical facts or guarantees of future performance but instead express only management's beliefs regarding future results or events, many of which, by their nature, are inherently uncertain and outside of management's control. It is possible that actual results and events may differ, possibly materially, from the anticipated results or events indicated in these forward-looking statements. First Midwest cautions you not to place undue

9



reliance on these statements. Forward-looking statements speak only as of the date made, and First Midwest undertakes no obligation to update any forward-looking statements.
Forward-looking statements may be deemed to include, among other things, statements relating to First Midwest's future financial performance, including the related outlook for 2019, the performance of First Midwest's loan or securities portfolio, the expected amount of future credit reserves or charge-offs, corporate strategies or objectives, including the impact of certain actions and initiatives, First Midwest's Delivering Excellence initiative, including costs and benefits associated therewith and the timing thereof, anticipated trends in our business, regulatory developments, the impact of federal income tax reform legislation, acquisition transactions, including First Midwest's proposed acquisition of Bridgeview, estimated synergies, cost savings and financial benefits of completed transactions, and growth strategies, including possible future acquisitions. These statements are subject to certain risks, uncertainties and assumptions, including those discussed under the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in First Midwest's Annual Report on Form 10-K for the year ended December 31, 2018, and in First Midwest's subsequent filings made with the Securities and Exchange Commission ("SEC"). These risks and uncertainties are not exhaustive, and other sections of these reports describe additional factors that could adversely impact First Midwest's business and financial performance.
Non-GAAP Financial Information
The Company's accounting and reporting policies conform to U.S. generally accepted accounting principles ("GAAP") and general practices within the banking industry. As a supplement to GAAP, the Company provides non-GAAP performance results, which the Company believes are useful because they assist investors in assessing the Company's operating performance. These non-GAAP financial measures include EPS, adjusted, the efficiency ratio, return on average assets, adjusted, tax-equivalent net interest income (including its individual components), tax-equivalent net interest margin, tax-equivalent net interest margin, adjusted, noninterest expense, adjusted, effective income tax rate, adjusted, tangible common equity to tangible assets, tangible common equity, excluding AOCI, to tangible assets, tangible common equity to risk-weighted assets, return on average common equity, adjusted, return on average tangible common equity, and return on average tangible common equity, adjusted.
The Company presents EPS, the efficiency ratio, return on average assets, return on average common equity, and return on average tangible common equity, all adjusted for certain significant transactions. These transactions include acquisition and integration related expenses associated with completed and pending acquisitions (third and fourth quarters of 2018 and first quarter of 2019), Delivering Excellence implementation costs (second, third and fourth quarters of 2018 and first quarter of 2019), and certain income tax benefits resulting from tax reform (third quarter of 2018). Management believes excluding these transactions from EPS, the efficiency ratio, return on average assets, return on average common equity, and return on average tangible common equity may be useful in assessing the Company's underlying operational performance since these transactions do not pertain to its core business operations and their exclusion may facilitate better comparability between periods. Management believes that excluding acquisition and integration related expenses from these metrics may be useful to the Company, as well as analysts and investors, since these expenses can vary significantly based on the size, type, and structure of each acquisition. Additionally, management believes excluding these transactions from these metrics may enhance comparability for peer comparison purposes.
The Company presents noninterest expense, adjusted, which excludes acquisition and integration related expenses and Delivering Excellence implementation costs. In addition, the Company presents the effective income tax rate, adjusted, which excludes certain income tax benefits aligned with tax reform. Management believes that excluding these items from noninterest expense and the effective income tax rate may be useful in assessing the Company’s underlying operational performance as these items either do not pertain to its core business operations or their exclusion may facilitate better comparability between periods and for peer comparison purposes.
The tax-equivalent adjustment to net interest income and net interest margin recognizes the income tax savings when comparing taxable and tax-exempt assets. Interest income and yields on tax-exempt securities and loans are presented using the current federal income tax rate of 21%. Management believes that it is standard practice in the banking industry to present net interest income and net interest margin on a fully tax-equivalent basis and that it may enhance comparability for peer comparison purposes. In addition, management believes that presenting tax-equivalent net interest margin, adjusted, may enhance comparability for peer comparison purposes and is useful to the Company, as well as analysts and investors, since acquired loan accretion income may fluctuate based on the size of each acquisition, as well as from period to period.
In management's view, tangible common equity measures are capital adequacy metrics that may be meaningful to the Company, as well as analysts and investors, in assessing the Company's use of equity and in facilitating comparisons with peers. These non-GAAP measures are valuable indicators of a financial institution's capital strength since they eliminate intangible assets from stockholders' equity and retain the effect of accumulated other comprehensive loss in stockholders' equity.

10



Although intended to enhance investors' understanding of the Company's business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. In addition, these non-GAAP financial measures may differ from those used by other financial institutions to assess their business and performance. See the previously provided tables and the following reconciliations in the "Non-GAAP Reconciliations" section for details on the calculation of these measures to the extent presented herein.
Additional Information
The information contained herein does not constitute an offer to sell or a solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed merger of First Midwest and Bridgeview, First Midwest has filed a registration statement on Form S-4 (333-229674) with the SEC. The registration statement includes a proxy statement of Bridgeview, which also constitutes a prospectus of First Midwest, that has been sent to Bridgeview stockholders. Investors and stockholders are advised to read the registration statement and proxy statement/prospectus because it contains important information about First Midwest, Bridgeview and the proposed transaction. This document and other documents relating to the transaction filed by First Midwest can be obtained free of charge from the SEC’s website at www.sec.gov. These documents also can be obtained free of charge by accessing First Midwest’s website at www.firstmidwest.com under the tab “Investor Relations” and then under “SEC Filings.” Alternatively, these documents can be obtained free of charge from First Midwest upon written request to First Midwest Bancorp, Inc., Attn: Corporate Secretary, 8750 West Bryn Mawr Avenue, Suite 1300, Chicago, Illinois 60631 or by calling (708) 831-7483, or from Bridgeview upon written request to Bridgeview Bancorp, Inc., Attn: Chief Financial Officer, 4753 North Broadway, Chicago, Illinois 60640 or by calling (708) 594-7400.
Participants in this Transaction
First Midwest, Bridgeview and certain of their respective directors and executive officers may be deemed under the rules of the SEC to be participants in the solicitation of proxies from Bridgeview stockholders in connection with the proposed transaction. Certain information regarding the interests of these participants and a description of their direct and indirect interests, by security holdings or otherwise, is included in the proxy statement/prospectus regarding the proposed Bridgeview transaction. Additional information about First Midwest and its directors and certain of its officers may be found in First Midwest’s definitive proxy statement relating to its 2019 Annual Meeting of Stockholders filed with the SEC on April 4, 2019 and First Midwest’s annual report on Form 10-K for the year ended December 31, 2018 filed with the SEC on March 1, 2019. The definitive proxy statement and annual report can be obtained free of charge from the SEC’s website at www.sec.gov.
About the Company
First Midwest (NASDAQ: FMBI) is a relationship-focused financial institution and one of the largest independent publicly-traded bank holding companies based on assets headquartered in Chicago and the Midwest, with approximately $16 billion in assets and $12 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 locations in metropolitan Chicago, northwest Indiana, central and western Illinois, and eastern Iowa. Visit First Midwest at www.firstmidwest.com.
Contacts
Investors:
Patrick S. Barrett
EVP and Chief Financial Officer
(708) 831-7231
pat.barrett@firstmidwest.com
Media:
Maurissa Kanter
SVP, Director of Corporate Communications
(708) 831-7345
maurissa.kanter@firstmidwest.com

11



Accompanying Unaudited Selected Financial Information
a3282014fmbilogoa32.jpg
Consolidated Statements of Financial Condition (Unaudited)
(Dollar amounts in thousands)
 
 
 
As of
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
2019
 
2018
 
2018
 
2018
 
2018
Period-End Balance Sheet
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
186,230

 
$
211,189

 
$
185,239

 
$
181,482

 
$
150,138

Interest-bearing deposits in other banks
76,529

 
78,069

 
111,360

 
192,785

 
84,898

Equity securities, at fair value
33,304

 
30,806

 
29,046

 
28,441

 
28,513

Securities available-for-sale, at fair value
2,350,195

 
2,272,009

 
2,179,410

 
2,142,865

 
2,040,950

Securities held-to-maturity, at amortized cost
12,842

 
10,176

 
12,673

 
13,042

 
13,400

FHLB and FRB stock
85,790

 
80,302

 
87,728

 
82,778

 
80,508

Loans:
 
 
 
 
 
 
 
 
 
Commercial and industrial
4,183,262

 
4,120,293

 
3,994,142

 
3,844,067

 
3,659,066

Agricultural
438,461

 
430,928

 
432,220

 
433,175

 
435,734

Commercial real estate:
 
 
 
 
 
 
 
 
 
Office, retail, and industrial
1,806,892

 
1,820,917

 
1,782,757

 
1,834,918

 
1,931,202

Multi-family
752,943

 
764,185

 
698,611

 
703,091

 
695,830

Construction
683,475

 
649,337

 
632,779

 
633,601

 
585,766

Other commercial real estate
1,309,878

 
1,361,810

 
1,348,831

 
1,337,396

 
1,363,238

Home equity
862,068

 
851,607

 
853,887

 
847,903

 
881,534

1-4 family mortgages
1,086,264

 
1,017,181

 
888,797

 
880,181

 
798,902

Installment
445,760

 
430,525

 
418,524

 
377,233

 
325,502

Total loans
11,569,003

 
11,446,783

 
11,050,548

 
10,891,565

 
10,676,774

Allowance for loan losses
(103,579
)
 
(102,219
)
 
(99,925
)
 
(96,691
)
 
(94,854
)
Net loans
11,465,424

 
11,344,564

 
10,950,623

 
10,794,874

 
10,581,920

OREO
10,818

 
12,821

 
12,244

 
12,892

 
17,472

Premises, furniture, and equipment, net
131,014

 
132,502

 
126,389

 
127,024

 
126,348

Investment in bank-owned life insurance ("BOLI")
295,899

 
296,733

 
284,074

 
282,664

 
281,285

Goodwill and other intangible assets
808,852

 
790,744

 
751,248

 
753,020

 
754,814

Accrued interest receivable and other assets
360,872

 
245,734

 
231,465

 
206,209

 
219,725

Total assets
$
15,817,769

 
$
15,505,649

 
$
14,961,499

 
$
14,818,076

 
$
14,379,971

Liabilities and Stockholders' Equity
 

 
 
 
 
 
 
 
Noninterest-bearing deposits
$
3,588,943


$
3,642,989

 
$
3,618,384

 
$
3,667,847

 
$
3,527,081

Interest-bearing deposits
8,572,039

 
8,441,123

 
7,908,730

 
7,824,416

 
7,618,941

Total deposits
12,160,982

 
12,084,112

 
11,527,114

 
11,492,263

 
11,146,022

Borrowed funds
973,852

 
906,079

 
1,073,546

 
981,044

 
950,688

Senior and subordinated debt
203,984

 
203,808

 
195,595

 
195,453

 
195,312

Accrued interest payable and other liabilities
319,480

 
256,652

 
247,569

 
265,753

 
218,662

Stockholders' equity
2,159,471

 
2,054,998

 
1,917,675

 
1,883,563

 
1,869,287

Total liabilities and stockholders' equity
$
15,817,769

 
$
15,505,649

 
$
14,961,499

 
$
14,818,076

 
$
14,379,971

Stockholders' equity, excluding AOCI
$
2,191,630

 
$
2,107,510

 
$
1,992,808

 
$
1,947,963

 
$
1,926,818

Stockholders' equity, common
2,159,471

 
2,054,998

 
1,917,675

 
1,883,563

 
1,869,287


12



a3282014fmbilogoa32.jpg
Condensed Consolidated Statements of Income (Unaudited)
(Dollar amounts in thousands)
 
 
 
 
 
 
 
 
 
 
 
Quarters Ended
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
2019
 
2018
 
2018
 
2018
 
2018
Income Statement
 
 
 

 
 
 
 
 
Interest income
$
162,490

 
$
159,527

 
$
149,532

 
$
142,088

 
$
131,345

Interest expense
23,466

 
20,898

 
17,505

 
14,685

 
12,782

Net interest income
139,024

 
138,629

 
132,027

 
127,403

 
118,563

Provision for loan losses
10,444

 
9,811

 
11,248

 
11,614

 
15,181

Net interest income after provision for loan losses
128,580

 
128,818

 
120,779

 
115,789

 
103,382

Noninterest Income
 
 
 
 
 
 
 
 
 
Service charges on deposit accounts
11,540

 
12,627

 
12,378

 
12,058

 
11,652

Wealth management fees
11,600

 
10,951

 
10,622

 
10,981

 
10,958

Card-based fees, net
4,378

 
4,574

 
4,123

 
4,394

 
3,933

Capital market products income
1,279

 
1,408

 
1,936

 
2,819

 
1,558

Mortgage banking income
1,004

 
1,304

 
1,657

 
1,736

 
2,397

Merchant servicing fees, net
337

 
365

 
387

 
383

 
330

Other service charges, commissions, and fees
2,274

 
2,353

 
2,399

 
2,455

 
2,218

Total fee-based revenues
32,412

 
33,582

 
33,502

 
34,826

 
33,046

Other income
2,494

 
2,880

 
2,164

 
2,121

 
2,471

Net securities gains (losses)

 

 

 

 

Total noninterest income
34,906

 
36,462

 
35,666

 
36,947

 
35,517

Noninterest Expense
 
 
 
 
 
 
 
 
 
Salaries and employee benefits:
 
 
 
 
 
 
 
 
Salaries and wages
46,135

 
45,011

 
44,067

 
46,256

 
45,830

Retirement and other employee benefits
11,238

 
10,378

 
10,093

 
11,676

 
10,957

Total salaries and employee benefits
57,373

 
55,389

 
54,160

 
57,932

 
56,787

Net occupancy and equipment expense
14,770

 
12,827

 
13,183

 
13,651

 
13,773

Professional services
7,788

 
8,859

 
7,944

 
8,298

 
7,580

Technology and related costs
4,596

 
4,849

 
4,763

 
4,837

 
4,771

Advertising and promotions
2,372

 
2,011

 
3,526

 
2,061

 
1,650

Net OREO expense
681

 
763

 
(413
)
 
(256
)
 
1,068

Other expenses
10,581

 
13,418

 
11,015

 
11,878

 
9,953

Acquisition and integration related expenses
3,691

 
9,553

 
60

 

 

Delivering Excellence implementation costs
258

 
3,159

 
2,239

 
15,015

 

Total noninterest expense
102,110

 
110,828

 
96,477

 
113,416

 
95,582

Income before income tax expense
61,376

 
54,452

 
59,968

 
39,320

 
43,317

Income tax expense
15,318


13,044


6,616


9,720


9,807

Net income
$
46,058

 
$
41,408

 
$
53,352

 
$
29,600

 
$
33,510

Net income applicable to common shares
$
45,655

 
$
41,088

 
$
52,911

 
$
29,360

 
$
33,199

Net income applicable to common shares, adjusted(1)
48,616

 
50,622

 
46,837

 
40,621

 
33,199

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

13



a3282014fmbilogoa32.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,
 
2019
 
2018
 
2018
 
2018
 
2018
EPS
 
 
 
 
 
 
 
 
 
Basic EPS
$
0.43

 
$
0.39

 
$
0.52

 
$
0.29

 
$
0.33

Diluted EPS
$
0.43

 
$
0.39

 
$
0.52

 
$
0.29

 
$
0.33

Diluted EPS, adjusted(1)
$
0.46

 
$
0.48

 
$
0.46

 
$
0.40

 
$
0.33

Common Stock and Related Per Common Share Data
Book value
$
20.20

 
$
19.32

 
$
18.61

 
$
18.28

 
$
18.13

Tangible book value
$
12.63

 
$
11.88

 
$
11.32

 
$
10.97

 
$
10.81

Dividends declared per share
$
0.12

 
$
0.12

 
$
0.11

 
$
0.11

 
$
0.11

Closing price at period end
$
20.46

 
$
19.81

 
$
26.59

 
$
25.47

 
$
24.59

Closing price to book value
1.0

 
1.0

 
1.4

 
1.4

 
1.4

Period end shares outstanding
106,900

 
106,375

 
103,058

 
103,059

 
103,092

Period end treasury shares
8,775

 
9,297

 
9,301

 
9,297

 
9,261

Common dividends
$
12,837

 
$
12,774

 
$
11,326

 
$
11,333

 
$
11,349

Key Ratios/Data
 
 
 
 
 
 
 
 
 
Return on average common equity(2)
8.66
%
 
8.09
%
 
10.99
%
 
6.23
%
 
7.19
%
Return on average common equity, adjusted(1)(2)
9.22
%
 
9.97
%
 
9.73
%
 
8.62
%
 
7.19
%
Return on average tangible common equity(2)
14.41
%
 
13.42
%
 
18.60
%
 
10.83
%
 
12.50
%
Return on average tangible common equity, adjusted(1)(2)
15.31
%
 
16.42
%
 
16.51
%
 
14.81
%
 
12.50
%
Return on average assets(2)
1.19
%
 
1.06
%
 
1.42
%
 
0.81
%
 
0.96
%
Return on average assets, adjusted(1)(2)
1.27
%
 
1.30
%
 
1.26
%
 
1.12
%
 
0.96
%
Loans to deposits
95.13
%
 
94.73
%
 
95.87
%
 
94.77
%
 
95.79
%
Efficiency ratio(1)
55.69
%
 
55.25
%
 
56.03
%
 
59.65
%
 
60.96
%
Net interest margin(2)(3)
4.04
%
 
3.96
%
 
3.92
%
 
3.91
%
 
3.80
%
Yield on average interest-earning assets(2)(3)
4.72
%
 
4.56
%
 
4.44
%
 
4.35
%
 
4.20
%
Cost of funds(2)(4)
0.72
%
 
0.63
%
 
0.55
%
 
0.47
%
 
0.43
%
Net noninterest expense to average assets(2)
1.74
%
 
1.90
%
 
1.62
%
 
2.10
%
 
1.72
%
Effective income tax rate
24.96
%
 
23.96
%
 
11.03
%
 
24.72
%
 
22.64
%
Effective income tax rate, adjusted(1)
24.96
%
 
23.96
%
 
24.04
%
 
24.72
%
 
22.64
%
Capital Ratios
 
 
 
 
 
 
 
 
 
Total capital to risk-weighted assets(1)
12.91
%
 
12.62
%
 
12.32
%
 
12.07
%
 
12.07
%
Tier 1 capital to risk-weighted assets(1)
10.52
%
 
10.20
%
 
10.34
%
 
10.09
%
 
10.07
%
CET1 to risk-weighted assets(1)
10.52
%
 
10.20
%
 
9.93
%
 
9.68
%
 
9.65
%
Tier 1 capital to average assets(1)
9.28
%
 
8.90
%
 
9.10
%
 
8.95
%
 
9.07
%
Tangible common equity to tangible assets(1)
9.00
%
 
8.59
%
 
8.21
%
 
8.04
%
 
8.18
%
Tangible common equity, excluding AOCI, to tangible
assets
(1)
9.21
%
 
8.95
%
 
8.74
%
 
8.50
%
 
8.60
%
Tangible common equity to risk -weighted assets(1)
10.29
%
 
9.81
%
 
9.33
%
 
9.16
%
 
9.18
%
Note: Selected Financial Information footnotes are located at the end of this section.

14



a3282014fmbilogoa32.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,
 
2019
 
2018
 
2018
 
2018
 
2018
Asset Quality Performance Data
 
 
 
 
 
 
 
 
Non-performing assets
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
34,694

 
$
33,507

 
$
37,981

 
$
22,672

 
$
43,974

Agricultural
2,359

 
1,564

 
2,104

 
2,992

 
4,086

Commercial real estate:
 
 
 
 
 
 
 
 
 
Office, retail, and industrial
17,484

 
6,510

 
6,685

 
9,007

 
12,342

Multi-family
2,959

 
3,107

 
3,184

 
3,551

 
144

Construction

 
144

 
208

 
208

 
208

Other commercial real estate
2,971

 
2,854

 
4,578

 
5,288

 
4,088

Consumer
9,738

 
9,249

 
10,026

 
9,757

 
10,173

Total non-accrual loans
70,205

 
56,935

 
64,766

 
53,475

 
75,015

90 days or more past due loans, still accruing interest
8,446

 
8,282

 
2,949

 
7,954

 
4,633

Total non-performing loans
78,651

 
65,217

 
67,715

 
61,429

 
79,648

Accruing TDRs
1,844

 
1,866

 
1,741

 
1,760

 
1,778

OREO
10,818

 
12,821

 
12,244

 
12,892

 
17,472

Total non-performing assets
$
91,313

 
$
79,904

 
$
81,700

 
$
76,081

 
$
98,898

30-89 days past due loans
$
45,764

 
$
37,524

 
$
46,257

 
$
39,171

 
$
42,573

Allowance for credit losses
 
 
 
 
 
 
 
 
 
Allowance for loan losses
$
103,579

 
$
102,219

 
$
99,925

 
$
96,691

 
$
94,854

Reserve for unfunded commitments
1,200

 
1,200

 
1,000

 
1,000

 
1,000

Total allowance for credit losses
$
104,779

 
$
103,419

 
$
100,925

 
$
97,691

 
$
95,854

Provision for loan losses
$
10,444

 
$
9,811

 
$
11,248

 
$
11,614

 
$
15,181

Net charge-offs by category
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
5,061

 
$
5,558

 
$
5,230

 
$
7,081

 
$
13,149

Agricultural
89

 
71

 
631

 
828

 
983

Commercial real estate:
 
 
 
 
 
 
 
 
 
Office, retail, and industrial
618

 
713

 
596

 
279

 
364

Multi-family
339

 
(3
)
 
1

 
4

 

Construction

 
(99
)
 
(4
)
 
(8
)
 
(13
)
Other commercial real estate
189

 
(817
)
 
23

 
(358
)
 
30

Consumer
2,788

 
2,094

 
1,537

 
1,951

 
1,543

Total net charge-offs
$
9,084

 
$
7,517

 
$
8,014

 
$
9,777

 
$
16,056

Total recoveries included above
$
1,693

 
$
2,810

 
$
1,250

 
$
1,532

 
$
1,029

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


15



a3282014fmbilogoa32.jpg
Selected Financial Information (Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
As of or for the
 
 
Quarters Ended
 
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
 
2019
 
2018
 
2018
 
2018
 
2018
Asset quality ratios
 
 
 
 
 
 
 
 
 
 
Non-accrual loans to total loans
 
0.61
%
 
0.50
%
 
0.59
%
 
0.49
%
 
0.70
%
Non-performing loans to total loans
 
0.68
%
 
0.57
%
 
0.61
%
 
0.56
%
 
0.75
%
Non-performing assets to total loans plus OREO
 
0.79
%
 
0.70
%
 
0.74
%
 
0.70
%
 
0.92
%
Non-performing assets to tangible common equity plus allowance
for credit losses
 
6.27
%
 
5.84
%
 
6.45
%
 
6.19
%
 
8.17
%
Non-accrual loans to total assets
 
0.44
%
 
0.37
%
 
0.43
%
 
0.36
%
 
0.52
%
Allowance for credit losses and net charge-off ratios
Allowance for credit losses to total loans(5)
 
0.91
%
 
0.90
%
 
0.91
%
 
0.90
%
 
0.90
%
Allowance for credit losses to loans, excluding acquired loans
 
1.00
%
 
1.01
%
 
1.01
%
 
1.00
%
 
1.01
%
Allowance for credit losses to non-accrual loans
 
149.25
%
 
181.64
%
 
155.83
%
 
182.69
%
 
127.78
%
Allowance for credit losses to non-performing loans
 
133.22
%
 
158.58
%
 
149.04
%
 
159.03
%
 
120.35
%
Net charge-offs to average loans(2)
 
0.32
%
 
0.26
%
 
0.29
%
 
0.36
%
 
0.62
%
Footnotes to Selected Financial Information
(1) 
See the "Non-GAAP Reconciliations" section for the detailed calculation.
(2) 
Annualized based on the actual number of days for each period presented.
(3) 
Presented on a tax-equivalent basis, assuming the applicable federal income tax rate of 21%.
(4) 
Cost of funds expresses total interest expense as a percentage of total average funding sources.
(5) 
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.




16



a3282014fmbilogoa32.jpg
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
Quarters Ended
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
2019
 
2018
 
2018
 
2018
 
2018
EPS
 
 


 
 
 
 
 


Net income
$
46,058

 
$
41,408

 
$
53,352

 
$
29,600

 
$
33,510

Net income applicable to non-vested restricted shares
(403
)
 
(320
)
 
(441
)
 
(240
)
 
(311
)
Net income applicable to common shares
45,655

 
41,088

 
52,911

 
29,360

 
33,199

Adjustments to net income:
 
 
 
 
 
 
 
 
 
Acquisition and integration related expenses
3,691

 
9,553

 
60

 

 

Tax effect of acquisition and integration related expenses
(923
)
 
(2,388
)
 
(15
)
 

 

Delivering Excellence implementation costs
258

 
3,159

 
2,239

 
15,015

 

Tax effect of Delivering Excellence implementation costs
(65
)
 
(790
)
 
(560
)
 
(3,754
)
 

Income tax benefits(1)

 

 
(7,798
)
 

 

Total adjustments to net income, net of tax
2,961

 
9,534

 
(6,074
)
 
11,261

 

Net income applicable to common shares, adjusted(1)
$
48,616

 
$
50,622

 
$
46,837

 
$
40,621

 
$
33,199

Weighted-average common shares outstanding:
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding (basic)
105,770

 
105,116

 
102,178

 
102,159

 
101,922

Dilutive effect of common stock equivalents

 

 

 

 
16

Weighted-average diluted common shares outstanding
105,770

 
105,116

 
102,178

 
102,159

 
101,938

Basic EPS
$
0.43

 
$
0.39

 
$
0.52

 
$
0.29

 
$
0.33

Diluted EPS
$
0.43

 
$
0.39

 
$
0.52

 
$
0.29

 
$
0.33

Diluted EPS, adjusted(1)
$
0.46

 
$
0.48

 
$
0.46

 
$
0.40

 
$
0.33

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

 

 

 

 
110

Effective Tax Rate
 
 
 
 
 
 
 
 
 
Income before income tax expense
$
61,376

 
$
54,452

 
$
59,968

 
$
39,320

 
$
43,317

Income tax expense
$
15,318

 
$
13,044

 
$
6,616

 
$
9,720

 
$
9,807

Income tax benefits
$

 
$

 
$
7,798

 
$

 
$

Income tax expense, adjusted
$
15,318


$
13,044


$
14,414


$
9,720


$
9,807

Effective income tax rate
24.96
%
 
23.96
%
 
11.03
%
 
24.72
%
 
22.64
%
Effective income tax rate, adjusted
24.96
%
 
23.96
%
 
24.04
%
 
24.72
%
 
22.64
%
 
 
 
 
 
 
 
 
 
 
Note: Non-GAAP Reconciliations footnotes are located at the end of this section.

17



a3282014fmbilogoa32.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,
 
2019
 
2018
 
2018
 
2018
 
2018
Return on Average Common and Tangible Common Equity
 
 
 
 
 
 
Net income applicable to common shares
$
45,655

 
$
41,088

 
$
52,911

 
$
29,360

 
$
33,199

Intangibles amortization
2,363

 
2,077

 
1,772

 
1,794

 
1,802

Tax effect of intangibles amortization
(591
)
 
(519
)
 
(443
)
 
(449
)
 
(508
)
Net income applicable to common shares, excluding
intangibles amortization
47,427

 
42,646

 
54,240

 
30,705

 
34,493

Total adjustments to net income, net of tax(1)
2,961

 
9,534

 
(6,074
)
 
11,261

 

Net income applicable to common shares, adjusted(1)
$
50,388

 
$
52,180

 
$
48,166

 
$
41,966

 
$
34,493

Average stockholders' equity
$
2,138,281

 
$
2,015,217

 
$
1,909,330

 
$
1,890,727

 
$
1,873,419

Less: average intangible assets
(803,408
)
 
(754,495
)
 
(752,109
)
 
(753,887
)
 
(753,870
)
Average tangible common equity
$
1,334,873

 
$
1,260,722

 
$
1,157,221

 
$
1,136,840

 
$
1,119,549

Return on average common equity(2)
8.66
%
 
8.09
%
 
10.99
%
 
6.23
%
 
7.19
%
Return on average common equity, adjusted(1)(2)
9.22
%
 
9.97
%
 
9.73
%
 
8.62
%
 
7.19
%
Return on average tangible common equity(2)
14.41
%
 
13.42
%
 
18.60
%
 
10.83
%
 
12.50
%
Return on average tangible common equity, adjusted(1)(2)
15.31
%
 
16.42
%
 
16.51
%
 
14.81
%
 
12.50
%
Return on Average Assets
 
 
 
 
 
 
Net income
$
46,058

 
$
41,408

 
$
53,352

 
$
29,600

 
$
33,510

Total adjustments to net income, net of tax(1)
2,961

 
9,534

 
(6,074
)
 
11,261

 

Net income, adjusted(1)
$
49,019

 
$
50,942

 
$
47,278

 
$
40,861

 
$
33,510

Average assets
$
15,667,839

 
$
15,503,399

 
$
14,894,670

 
$
14,605,715

 
$
14,187,053

Return on average assets(2)
1.19
%
 
1.06
%
 
1.42
%
 
0.81
%
 
0.96
%
Return on average assets, adjusted(1)(2)
1.27
%
 
1.30
%
 
1.26
%
 
1.12
%
 
0.96
%
Efficiency Ratio Calculation
 
 
 
 
 
 
 
 
Noninterest expense
$
102,110

 
$
110,828

 
$
96,477

 
$
113,416

 
$
95,582

Less:
 
 
 
 
 
 
 
 
 
Net OREO expense
(681
)
 
(763
)
 
413

 
256

 
(1,068
)
Acquisition and integration related expenses
(3,691
)
 
(9,553
)
 
(60
)
 

 

Delivering Excellence implementation costs
(258
)
 
(3,159
)
 
(2,239
)
 
(15,015
)
 

Total
$
97,480

 
$
97,353

 
$
94,591

 
$
98,657

 
$
94,514

Tax-equivalent net interest income(3)
$
140,132

 
$
139,755

 
$
133,161

 
$
128,442

 
$
119,538

Noninterest income
34,906

 
36,462

 
35,666

 
36,947

 
35,517

Total
$
175,038

 
$
176,217

 
$
168,827

 
$
165,389

 
$
155,055

Efficiency ratio
55.69
%
 
55.25
%
 
56.03
%
 
59.65
%
 
60.96
%
 
 
 
 
 
 
 
 
 
 
Note: Non-GAAP Reconciliations footnotes are located at the end of this section.

18



a3282014fmbilogoa32.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,
 
2019
 
2018
 
2018
 
2018
 
2018
Risk-Based Capital Data
 
 
 
 
 
 
 
 
 
Common stock
$
1,157

 
$
1,157

 
$
1,124

 
$
1,124

 
$
1,123

Additional paid-in capital
1,103,991

 
1,114,580

 
1,028,635

 
1,025,703

 
1,021,923

Retained earnings
1,273,245

 
1,192,767

 
1,164,133

 
1,122,107

 
1,103,840

Treasury stock, at cost
(186,763
)
 
(200,994
)
 
(201,084
)
 
(200,971
)
 
(200,068
)
Goodwill and other intangible assets, net of deferred tax liabilities
(808,852
)
 
(790,744
)
 
(751,248
)
 
(753,020
)
 
(754,814
)
Disallowed DTAs
(809
)
 
(1,334
)
 

 
(389
)
 
(522
)
CET1 capital
1,381,969

 
1,315,432

 
1,241,560

 
1,194,554

 
1,171,482

Trust-preferred securities

 

 
50,690

 
50,690

 
50,690

Other disallowed DTAs

 
(334
)
 

 
(97
)
 
(131
)
Tier 1 capital
1,381,969

 
1,315,098

 
1,292,250

 
1,245,147

 
1,222,041

Tier 2 capital
312,840

 
311,391

 
248,118

 
244,795

 
242,870

Total capital
$
1,694,809

 
$
1,626,489

 
$
1,540,368

 
$
1,489,942

 
$
1,464,911

Risk-weighted assets
$
13,131,237

 
$
12,892,180

 
$
12,500,342

 
$
12,345,200

 
$
12,135,662

Adjusted average assets
$
14,891,534

 
$
14,782,327

 
$
14,202,776

 
$
13,907,100

 
$
13,472,294

Total capital to risk-weighted assets
12.91
%
 
12.62
%
 
12.32
%
 
12.07
%
 
12.07
%
Tier 1 capital to risk-weighted assets
10.52
%
 
10.20
%
 
10.34
%
 
10.09
%
 
10.07
%
CET1 to risk-weighted assets
10.52
%
 
10.20
%
 
9.93
%
 
9.68
%
 
9.65
%
Tier 1 capital to average assets
9.28
%
 
8.90
%
 
9.10
%
 
8.95
%
 
9.07
%
Tangible Common Equity
 
 
 
 
 
 
 
 
 
Stockholders' equity
$
2,159,471

 
$
2,054,998

 
$
1,917,675

 
$
1,883,563

 
$
1,869,287

Less: goodwill and other intangible assets
(808,852
)
 
(790,744
)
 
(751,248
)
 
(753,020
)
 
(754,814
)
Tangible common equity
1,350,619

 
1,264,254

 
1,166,427

 
1,130,543

 
1,114,473

Less: AOCI
32,159

 
52,512

 
75,133

 
64,400

 
57,531

Tangible common equity, excluding AOCI
$
1,382,778

 
$
1,316,766

 
$
1,241,560

 
$
1,194,943

 
$
1,172,004

Total assets
$
15,817,769

 
$
15,505,649

 
$
14,961,499

 
$
14,818,076

 
$
14,379,971

Less: goodwill and other intangible assets
(808,852
)
 
(790,744
)
 
(751,248
)
 
(753,020
)
 
(754,814
)
Tangible assets
$
15,008,917

 
$
14,714,905

 
$
14,210,251

 
$
14,065,056

 
$
13,625,157

Tangible common equity to tangible assets
9.00
%
 
8.59
%
 
8.21
%
 
8.04
%
 
8.18
%
Tangible common equity, excluding AOCI, to tangible assets
9.21
%
 
8.95
%
 
8.74
%
 
8.50
%
 
8.60
%
Tangible common equity to risk-weighted assets
10.29
%
 
9.81
%
 
9.33
%
 
9.16
%
 
9.18
%
 
 
 
 
 
 
 
 
 
 
Footnotes to Non-GAAP Reconciliations
(1) 
Adjustments to net income for each period presented are detailed in the EPS non-GAAP reconciliation above. For additional discussion of adjustments, see the "Non-GAAP Financial Information" section.
(2) 
Annualized based on the actual number of days for each period presented.
(3) 
Presented on a tax-equivalent basis, assuming the applicable federal income tax rate of 21%.

19