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First Midwest Bancorp, Inc. Announces 2019 Second Quarter Results
Globe Newswire 23-Jul-2019 5:35 PM
CHICAGO, July 23, 2019 (GLOBE NEWSWIRE) -- First Midwest Bancorp, Inc. (the "Company" or "First Midwest"), the holding company of First Midwest Bank (the "Bank"), today reported results of operations and financial condition for the second quarter of 2019. Net income for the second quarter of 2019 was $47.0 million, or $0.43 per share, compared to $46.1 million, or $0.43 per share, for the first quarter of 2019, and $29.6 million, or $0.29 per share, for the second quarter of 2018.
Reported results for all periods were impacted by implementation costs related to the Company's Delivering Excellence initiative(1) ("Delivering Excellence"). In addition, the second and first quarters of 2019 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 ("EPS"), adjusted(2) was $0.50 for the second quarter of 2019, compared to $0.46 for the first quarter of 2019 and $0.40 for the second quarter of 2018.
SELECT SECOND QUARTER HIGHLIGHTS
Generated EPS of $0.43, consistent with the first quarter of 2019 and up from $0.29 for the second quarter of 2018. -- Increased EPS, adjusted(2) to $0.50, up 9% and 25% from the first quarter of 2019 and second quarter of 2018, respectively. -- Produced returns on average tangible common equity, adjusted(2) of 16.0% for the second quarter of 2019, up 64 basis points and 114 basis points from the first quarter of 2019 and second quarter of 2018, respectively.
Grew loans to $13 billion, up 8% from March 31, 2019 and 15% from June 30, 2018.
Increased total average deposits to $13 billion, up 6% and 14% from the first quarter of 2019 and second quarter of 2018, respectively.
Expanded net interest income to $150 million, up 8% from the first quarter of 2019 and 18% from the second quarter of 2018.
Increased noninterest income to $39 million, up 10% from the first quarter of 2019 and 4% from the second quarter of 2018.
Controlled noninterest expense; reported an efficiency ratio(2) of 55%, down from 56% and 60% in the first quarter of 2019 and second quarter of 2018, respectively.
Completed the acquisition of Bridgeview Bancorp, Inc. on May 9, 2019, adding approximately $1.2 billion of assets, $700 million of loans, and $1.0 billion of deposits, net of fair value adjustments.
Repurchased approximately 1 million shares of our common stock at a cost of $21 million.
"It was a strong quarter, reflecting successful execution on a number of business fronts," said Michael L. Scudder, Chairman of the Board and Chief Executive Officer of the Company. "We closed the quarter with $17.5 billion of total assets, up 10% and 18% from the last quarter and a year ago and aided by our mid-May acquisition of Bridgeview Bank. Operating performance was again solid, benefiting from asset growth, improved fee income and continued operating efficiency."
Mr. Scudder concluded, "First Midwest remains well-positioned as we navigate an evolving landscape. Recent acquisitions have greatly expanded our distribution and top 10 market share in metro Chicago. Combined with an engaged team, ongoing investment in our business and our strong capital foundation, we continue to pursue opportunities for growth, revenue diversification and market expansion. As always, we do so with an unwavering commitment to the financial success of our clients and drive to provide our shareholders with superior, long-term returns."
ACQUISITION
Bridgeview Bancorp, Inc.
On May 9, 2019, the Company completed its acquisition of Bridgeview Bancorp, Inc. ("Bridgeview"), the holding company for Bridgeview Bank Group. At closing, the Company acquired 13 banking offices located across greater Chicagoland, and added approximately $1.2 billion of assets, $1.0 billion of deposits, and $700 million of loans, net of fair value adjustments. The merger consideration totaled $135.4 million and consisted of 4.7 million shares of Company stock and $37.1 million of cash. All Bridgeview operating systems were converted to our operating platform during the second quarter of 2019.
STOCK REPURCHASES
During the first quarter of 2019, the Company announced a new stock repurchase program that authorizes the Company to repurchase up to $180 million of its common stock. Stock repurchases under this program may be made from time to time on the open market or in privately negotiated transactions, at the discretion of the Company. The Company repurchased approximately 1.0 million shares of its common stock at a total cost of $21.2 million during the second quarter of 2019.
(1) The Company initiated certain actions in connection with its Delivering Excellence initiative in the second quarter of 2018, demonstrating the Company's ongoing commitment to provide service excellence to its clients and maximizing both the efficiency and scalability of its operating platform. (2) These metrics are non-GAAP financial measures. For details on the calculation of these metrics, see the sections titled "Non-GAAP Financial Information" and "Non-GAAP Reconciliations" presented later in this release.
OPERATING PERFORMANCE
Net Interest Income and Margin Analysis (Dollar amounts in thousands)
Quarters Ended
June 30, 2019
March 31, 2019
June 30, 2018
Average Balance
Interest
Yield/ Rate (%)
Average Balance
Interest
Yield/ Rate (%)
Average Balance
Interest
Yield/ Rate (%)
Assets
Other interest-earning assets
$
210,322
$
1,240
2.36
$
125,615
$
728
2.35
$
147,996
$
519
1.41
Securities(1)
2,631,437
18,423
2.80
2,371,692
16,387
2.76
2,165,091
13,322
2.46
Federal Home Loan Bank ("FHLB") and Federal Reserve Bank ("FRB") stock
87,815
757
3.45
79,821
952
4.77
80,038
864
4.32
Loans(1)
12,022,470
158,442
5.29
11,458,233
145,531
5.15
10,788,285
128,422
4.77
Total interest-earning assets(1)
14,952,044
178,862
4.80
14,035,361
163,598
4.72
13,181,410
143,127
4.35
Cash and due from banks
215,464
202,101
197,025
Allowance for loan losses
(108,698
)
(107,520
)
(99,469
)
Other assets
1,681,240
1,537,897
1,326,749
Total assets
$
16,740,050
$
15,667,839
$
14,605,715
Liabilities and Stockholders' Equity
Savings deposits
$
2,079,852
346
0.07
$
2,037,831
346
0.07
$
2,060,066
373
0.07
NOW accounts
2,261,103
2,776
0.49
2,083,366
2,162
0.42
2,065,530
1,472
0.29
Money market deposits
1,907,766
3,041
0.64
1,809,234
2,349
0.53
1,759,313
1,073
0.24
Time deposits
2,849,930
13,153
1.85
2,647,316
11,745
1.80
1,871,666
5,114
1.10
Borrowed funds
1,025,351
4,459
1.74
877,995
3,551
1.64
913,902
3,513
1.54
Senior and subordinated debt
220,756
3,595
6.53
203,899
3,313
6.59
195,385
3,140
6.45
Total interest-bearing liabilities
10,344,758
27,370
1.06
9,659,641
23,466
0.99
8,865,862
14,685
0.66
Demand deposits
3,835,567
3,587,480
3,621,645
Total funding sources
14,180,325
0.77
13,247,121
0.72
12,487,507
0.47
Other liabilities
318,156
282,437
227,481
Stockholders' equity - common
2,241,569
2,138,281
1,890,727
Total liabilities and stockholders' equity
$
16,740,050
$
15,667,839
$
14,605,715
Tax-equivalent net interest income/margin(1)
151,492
4.06
140,132
4.04
128,442
3.91
Tax-equivalent adjustment
(1,180
)
(1,108
)
(1,039
)
Net interest income (GAAP)(1)
$
150,312
$
139,024
$
127,403
Impact of acquired loan accretion(1)
$
10,308
0.28
$
6,369
0.18
$
4,445
0.14
Tax-equivalent net interest income/ margin, adjusted(1)
$
141,184
3.78
$
133,763
3.86
$
123,997
3.77
(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 second quarter of 2019 was up 8.1% and 18.0% compared to the first quarter of 2019 and second quarter of 2018, respectively. The rise in net interest income from both prior periods resulted primarily from the acquisition of interest-earning assets from the Bridgeview transaction in the second quarter of 2019, higher acquired loan accretion, security purchases, and loan growth, partially offset by higher cost of funds. In addition, net interest income for the second quarter of 2019 benefited from an increase in the number of days in the quarter compared to the first quarter of 2019. Compared to the second quarter of 2018, the rise in net interest income was also impacted by the acquisition of interest-earning assets from the Northern States Financial Corporation ("Northern States") transaction in the fourth quarter of 2018 and higher interest rates.
Acquired loan accretion contributed $10.3 million, $6.4 million, and $4.4 million to net interest income for the second quarter of 2019, the first quarter of 2019, and the second quarter of 2018, respectively.
Tax-equivalent net interest margin for the current quarter was 4.06%, increasing 2 basis points from the first quarter of 2019 and 15 basis points from the second quarter of 2018. Excluding the impact of acquired loan accretion, tax-equivalent net interest margin was 3.78%, down 8 basis points from the first quarter of 2019 and up one basis point from the second quarter of 2018. The decrease in tax-equivalent net interest margin, adjusted compared to the first quarter of 2019 was impacted by compression related to the mix of interest-earning assets acquired in the Bridgeview transaction, actions taken to reduce rate sensitivity, and higher cost of funds. These items were more than offset by higher interest rates compared to the second quarter of 2018.
For the second quarter of 2019, total average interest-earning assets rose by $916.7 million and $1.8 billion from the first quarter of 2019 and second quarter of 2018, respectively. The increase compared to both prior periods resulted primarily from the Bridgeview transaction in the second quarter of 2019, security purchases, and loan growth. In addition, the rise in average interest-earning assets compared to the second quarter of 2018 was impacted by the Northern States transaction.
Total average funding sources for the second quarter of 2019 increased by $933.2 million and $1.7 billion from the first quarter of 2019 and second quarter of 2018, respectively. The increase compared to both prior periods resulted primarily from the Bridgeview transaction in the second quarter of 2019 and organic growth. In addition, the rise in average funding sources compared to the second quarter of 2018 was impacted by the Northern States transaction.
Noninterest Income Analysis (Dollar amounts in thousands)
Quarters Ended
June 30, 2019 Percent Change From
June 30, 2019
March 31, 2019
June 30, 2018
March 31, 2019
June 30, 2018
Service charges on deposit accounts
$
12,196
$
11,540
$
12,058
5.7
1.1
Wealth management fees
12,190
11,600
10,981
5.1
11.0
Card-based fees, net
4,549
4,378
4,394
3.9
3.5
Capital market products income
2,154
1,279
2,819
68.4
(23.6
)
Mortgage banking income
1,901
1,004
1,736
89.3
9.5
Merchant servicing fees, net
371
337
383
10.1
(3.1
)
Other service charges, commissions, and fees
2,412
2,274
2,455
6.1
(1.8
)
Total fee-based revenues
35,773
32,412
34,826
10.4
2.7
Other income
2,753
2,494
2,121
10.4
29.8
Total noninterest income
$
38,526
$
34,906
$
36,947
10.4
4.3
Total noninterest income of $38.5 million was up 10.4% and 4.3% from the first quarter of 2019 and second quarter of 2018, respectively. The increase in service charges on deposit accounts and net card-based fees compared to the first quarter of 2019 was due to seasonally higher volumes and services provided to customers acquired in the Bridgeview transaction. The increase in wealth management fees from the first quarter of 2019 resulted primarily from the positive impact of market rates. Compared to the second quarter of 2018, the increase in wealth management fees was driven primarily by customers acquired in the Northern Oak Wealth Management, Inc. ("Northern Oak") transaction completed during the first quarter of 2019.
Capital market products income fluctuates from quarter to quarter based on the size and frequency of sales to corporate clients.
Mortgage banking income for the second quarter of 2019 resulted from sales of $93.5 million of 1-4 family mortgage loans in the secondary market, compared to $57.5 million in the first quarter of 2019 and $64.3 million in the second quarter of 2018. Mortgage banking income is also impacted by fluctuations in the fair value of mortgage servicing rights, which resulted in a decrease to mortgage banking income of $600,000 compared to the second quarter of 2018.
Other income was elevated compared to the second quarter of 2018 due primarily to higher fair value adjustments on equity securities and benefit settlements on bank-owned life insurance.
Noninterest Expense Analysis (Dollar amounts in thousands)
Quarters Ended
June 30, 2019 Percent Change From
June 30, 2019
March 31, 2019
June 30, 2018
March 31, 2019
June 30, 2018
Salaries and employee benefits:
Salaries and wages
$
47,776
$
46,135
$
46,256
3.6
3.3
Retirement and other employee benefits
10,916
11,238
11,676
(2.9
)
(6.5
)
Total salaries and employee benefits
58,692
57,373
57,932
2.3
1.3
Net occupancy and equipment expense
13,671
14,770
13,651
(7.4
)
0.1
Professional services
10,467
7,788
8,298
34.4
26.1
Technology and related costs
4,908
4,596
4,837
6.8
1.5
Advertising and promotions
3,167
2,372
2,061
33.5
53.7
Net other real estate owned ("OREO") expense
294
681
(256
)
(56.8
)
(214.8
)
Other expenses
12,987
10,581
11,878
22.7
9.3
Acquisition and integration related expenses
9,514
3,691
—
157.8
100.0
Delivering Excellence implementation costs
442
258
15,015
71.3
(97.1
)
Total noninterest expense
$
114,142
$
102,110
$
113,416
11.8
0.6
Acquisition and integration related expenses
(9,514
)
(3,691
)
—
157.8
(100.0
)
Delivering Excellence implementation costs
(442
)
(258
)
(15,015
)
71.3
(97.1
)
Total noninterest expense, adjusted(1)
$
104,186
$
98,161
$
98,401
6.1
5.9
(1) See the "Non-GAAP Financial Information" section presented later in this release for a discussion of this non-GAAP financial measure.
Total noninterest expense increased 11.8% from the first quarter of 2019 and was consistent with the second quarter of 2018. Noninterest expense for all periods presented was impacted by costs related to implementation of the Delivering Excellence initiative. In addition, the second and first quarters of 2019 were impacted by acquisition and integration related expenses. Excluding these items, noninterest expense for the second quarter of 2019 was $104.2 million, up 6.1% and 5.9% from the first quarter of 2019 and second quarter of 2018, respectively.
Operating costs associated with the Bridgeview transaction contributed to noninterest expense for the second quarter of 2019. In addition, operating costs associated with the Northern Oak and Northern States transactions contributed to the increase in noninterest expense compared to the second quarter of 2018. These costs primarily occurred in salaries and employee benefits, net occupancy and equipment expense, professional services, and other expenses.
Compared to the second quarter of 2018, the increase in salaries and employee benefits was also impacted by merit increases, which was more than offset by the ongoing benefits of the Delivering Excellence initiative and lower pension expense. Net occupancy and equipment expense was elevated in the first quarter of 2019 due to higher costs related to winter weather conditions. The increase in professional services from both prior periods was driven mainly by the timing of certain other professional fees associated with organizational growth and higher loan remediation costs and legal fees. Compared to both prior periods, the rise in advertising and promotions expense resulted from higher costs related to marketing campaigns. Net OREO expense for the second quarter of 2018 was impacted by higher levels of operating income. The rise in other expenses compared to the first quarter of 2019 was due to property valuation adjustments and other miscellaneous expenses.
Acquisition and integration related expenses for the second quarter of 2019 resulted primarily from the acquisition of Bridgeview. For the first quarter of 2019, acquisition and integration related expenses resulted from the acquisition of Northern States, Northern Oak, and Bridgeview.
Delivering Excellence implementation costs for all periods presented 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.
LOAN PORTFOLIO AND ASSET QUALITY
Loan Portfolio Composition (Dollar amounts in thousands)
As of
June 30, 2019 Percent Change From
June 30, 2019
March 31, 2019
June 30, 2018
March 31, 2019
June 30, 2018
Commercial and industrial
$
4,524,401
$
4,183,262
$
3,844,067
8.2
17.7
Agricultural
430,589
438,461
433,175
(1.8
)
(0.6
)
Commercial real estate:
Office, retail, and industrial
1,936,577
1,806,892
1,834,918
7.2
5.5
Multi-family
787,155
752,943
703,091
4.5
12.0
Construction
654,607
683,475
633,601
(4.2
)
3.3
Other commercial real estate
1,447,673
1,309,878
1,337,396
10.5
8.2
Total commercial real estate
4,826,012
4,553,188
4,509,006
6.0
7.0
Total corporate loans
9,781,002
9,174,911
8,786,248
6.6
11.3
Home equity
874,686
862,068
847,903
1.5
3.2
1-4 family mortgages
1,391,814
1,086,264
880,181
28.1
58.1
Installment
472,102
445,760
377,233
5.9
25.1
Total consumer loans
2,738,602
2,394,092
2,105,317
14.4
30.1
Total loans
$
12,519,604
$
11,569,003
$
10,891,565
8.2
14.9
Loan growth in all categories was positively impacted by the Bridgeview acquisition in the second quarter of 2019, which totaled $692.6 million as of June 30, 2019. Excluding these loans, total loans grew 8.9% annualized from March 31, 2019 and 8.6% from June 30, 2018. In addition, compared to both prior periods, growth in commercial and industrial loans, primarily within our sector-based lending and middle market business units, contributed to the rise in total corporate loans. Commercial real estate loans compared to both prior periods were also impacted by 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, which more than offset originations. The increase in loans compared to June 30, 2018 also benefitted from the Northern States transaction during the fourth quarter of 2018.
Growth in consumer loans compared to both prior periods resulted primarily from purchases of 1-4 family mortgages and organic growth. Compared to June 30, 2018, growth in consumer loans also benefited from the purchase of installment loans.
Asset Quality (Dollar amounts in thousands)
As of
June 30, 2019 Percent Change From
June 30, 2019
March 31, 2019
June 30, 2018
March 31, 2019
June 30, 2018
Asset quality
Non-accrual loans
$
63,477
$
70,205
$
53,475
(9.6
)
18.7
90 days or more past due loans, still accruing interest(1)
2,615
8,446
7,954
(69.0
)
(67.1
)
Total non-performing loans
66,092
78,651
61,429
(16.0
)
7.6
Accruing troubled debt restructurings ("TDRs")
1,441
1,844
1,760
(21.9
)
(18.1
)
Foreclosed assets(2)
28,488
10,818
12,892
163.3
121.0
Total non-performing assets
$
96,021
$
91,313
$
76,081
5.2
26.2
30-89 days past due loans(1)
$
34,460
$
45,764
$
39,171
Non-accrual loans to total loans
0.51
%
0.61
%
0.49
%
Non-performing loans to total loans
0.53
%
0.68
%
0.56
%
Non-performing assets to total loans plus foreclosed assets
0.77
%
0.79
%
0.70
%
Allowance for credit losses
Allowance for credit losses
$
106,929
$
104,779
$
97,691
Allowance for credit losses to total loans(3)
0.85
%
0.91
%
0.90
%
Allowance for credit losses to loans, excluding acquired loans
0.98
%
1.00
%
1.00
%
Allowance for credit losses to non-accrual loans
168.45
%
149.25
%
182.69
%
(1) Purchased credit impaired loans with an accretable yield are considered current and are not included in past due loan totals. (2) Foreclosed assets consists of OREO and other foreclosed assets acquired in partial or total satisfaction of defaulted loans. Other foreclosed assets are included in other assets in the Consolidated Statements of Financial Condition. (3) 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 0.77% of total loans and foreclosed assets at June 30, 2019 compared to 0.79% and 0.70% at March 31, 2019 and June 30, 2018, respectively, reflective of normal fluctuations that can occur on a quarterly basis. The decrease in non-accrual loans from March 31, 2019 was driven primarily by the transfer of one corporate loan relationship to foreclosed assets during the second quarter of 2019, for which the Company has remediation plans in place. In addition, included in foreclosed assets as of June 30, 2019 was $6.2 million of OREO acquired in the Bridgeview transaction.
The allowance for credit losses to total loans was 0.85% at June 30, 2019, down from 0.91% at March 31, 2019 and 0.90% at June 30, 2018 driven primarily by loans acquired in the Bridgeview transaction, for which no allowance for credit losses was established at the time of acquisition.
Charge-Off Data (Dollar amounts in thousands)
Quarters Ended
June 30, 2019
% of Total
March 31, 2019
% of Total
June 30, 2018
% of Total
Net loan charge-offs(1)
Commercial and industrial
$
4,600
49.3
$
5,061
55.7
$
7,081
72.4
Agricultural
658
7.0
89
1.0
828
8.5
Office, retail, and industrial
1,454
15.6
618
6.8
279
2.9
Multi-family
—
—
339
3.7
4
—
Construction
(10
)
(0.1
)
—
—
(8
)
(0.1
)
Other commercial real estate
284
3.0
189
2.1
(358
)
(3.7
)
Consumer
2,355
25.2
2,788
30.7
1,951
20.0
Total net loan charge-offs
$
9,341
100.0
$
9,084
100.0
$
9,777
100.0
Total recoveries included above
$
2,083
$
1,693
$
1,532
Net loan charge-offs to average loans(1)(2)
Quarter-to-date
0.31
%
0.32
%
0.36
%
Year-to-date
0.32
%
0.32
%
0.49
%
(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 0.31%, compared to 0.32% for the first quarter of 2019 and 0.36% for the second quarter of 2018.
DEPOSIT PORTFOLIO
Deposit Composition (Dollar amounts in thousands)
Average for the Quarters Ended
June 30, 2019 Percent Change From
June 30, 2019
March 31, 2019
June 30, 2018
March 31, 2019
June 30, 2018
Demand deposits
$
3,835,567
$
3,587,480
$
3,621,645
6.9
5.9
Savings deposits
2,079,852
2,037,831
2,060,066
2.1
1.0
NOW accounts
2,261,103
2,083,366
2,065,530
8.5
9.5
Money market accounts
1,907,766
1,809,234
1,759,313
5.4
8.4
Core deposits
10,084,288
9,517,911
9,506,554
6.0
6.1
Time deposits
2,849,930
2,647,316
1,871,666
7.7
52.3
Total deposits
$
12,934,218
$
12,165,227
$
11,378,220
6.3
13.7
Total average deposits were $12.9 billion for the second quarter of 2019, up 6.3% and 13.7% from the first quarter of 2019 and second quarter of 2018, respectively. The increase in total average deposits compared to both prior periods was driven by $566.6 million of total average deposits assumed in the Bridgeview transaction and organic growth. Compared to the first quarter of 2019, the rise in total average deposits was also impacted by the normal seasonal increase in municipal deposits. In addition, growth in total average deposits compared to the second quarter of 2018 was impacted by deposits assumed in the Northern States transaction and various time deposit marketing initiatives.
CAPITAL MANAGEMENT
Capital Ratios
As of
June 30, 2019
March 31, 2019
December 31, 2018
June 30, 2018
Company regulatory capital ratios:
Total capital to risk-weighted assets
12.57
%
12.91
%
12.62
%
12.07
%
Tier 1 capital to risk-weighted assets
10.11
%
10.52
%
10.20
%
10.09
%
Common equity Tier 1 ("CET1") to risk-weighted assets
10.11
%
10.52
%
10.20
%
9.68
%
Tier 1 capital to average assets
8.96
%
9.28
%
8.90
%
8.95
%
Company tangible common equity ratios(1)(2):
Tangible common equity to tangible assets
8.57
%
9.00
%
8.59
%
8.04
%
Tangible common equity, excluding accumulated other comprehensive income ("AOCI"), to tangible assets
8.59
%
9.21
%
8.95
%
8.50
%
Tangible common equity to risk-weighted assets
10.11
%
10.29
%
9.81
%
9.16
%
(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.
Capital ratios were consistent compared to December 31, 2018 as strong earnings and deferred gains recognized due to the adoption of lease accounting guidance at the beginning of 2019 were offset by the Bridgeview and Northern Oak acquisitions, the impact of loan growth and securities purchases on risk-weighted assets, and stock repurchases. In addition, capital ratios compared to June 30, 2018 were impacted by the phase-out of Tier 1 treatment of the Company's trust-preferred securities and the Northern States transaction in the fourth quarter of 2018.
The Board of Directors approved a quarterly cash dividend of $0.14 per common share during the second quarter of 2019, which is an increase of 17% from the first quarter of 2019 and 27% from the second quarter of 2018. This dividend represents the 146th 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, July 24, 2019 at 11 A.M. (ET). Members of the public who would like to listen to the conference call should dial (877) 507-0639 (U.S. domestic) or (412) 317-6003 (International) and ask for the First Midwest Bancorp, Inc. Earnings Conference Call. The number should be dialed 10 to 15 minutes prior to the start of the conference call. There is no charge to access the call. The conference call will also be accessible as an audio webcast through the Investor Relations section of the Company's website, 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. 10133117 beginning one hour after completion of the live call until 9:00 A.M. (ET) on August 7, 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 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 First Midwest's business, regulatory developments, the impact of federal income tax reform legislation, acquisition transactions, including 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 and second quarters of 2019), Delivering Excellence implementation costs (all periods), 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.
Although intended to enhance investors' understanding of the Company's business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. In addition, these non-GAAP financial measures may differ from those used by other financial institutions to assess their business and performance. See the previously provided tables and the following reconciliations in the "Non-GAAP Reconciliations" section for details on the calculation of these measures to the extent presented herein.
About First Midwest
First Midwest (NASDAQ:FMBI) is a relationship-focused financial institution and one of the largest independent publicly traded bank holding companies based on assets headquartered in Chicago and the Midwest, with approximately $17.5 billion of 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, consumer, wealth management, trust and private banking products and services through locations in metropolitan Chicago, northwest Indiana, southeast Wisconsin, central and western Illinois, and eastern Iowa. Visit First Midwest at www.firstmidwest.com.
CONTACTS
Investors Patrick S. Barrett EVP, Chief Financial Officer (708) 831-7231 pat.barrett@firstmidwest.com
Media Maurissa Kanter SVP, Director of Corporate Communications (708) 831-7345 maurissa.kanter@firstmidwest.com
Accompanying Unaudited Selected Financial Information
First Midwest Bancorp, Inc.
Consolidated Statements of Financial Condition (Unaudited) (Dollar amounts in thousands)
As of
June 30,
March 31,
December 31,
September 30,
June 30,
2019
2019
2018
2018
2018
Period-End Balance Sheet
Assets
Cash and due from banks
$
199,684
$
186,230
$
211,189
$
185,239
$
181,482
Interest-bearing deposits in other banks
126,966
76,529
78,069
111,360
192,785
Equity securities, at fair value
40,690
33,304
30,806
29,046
28,441
Securities available-for-sale, at fair value
2,793,316
2,350,195
2,272,009
2,179,410
2,142,865
Securities held-to-maturity, at amortized cost
23,277
12,842
10,176
12,673
13,042
FHLB and FRB stock
109,466
85,790
80,302
87,728
82,778
Loans:
Commercial and industrial
4,524,401
4,183,262
4,120,293
3,994,142
3,844,067
Agricultural
430,589
438,461
430,928
432,220
433,175
Commercial real estate:
Office, retail, and industrial
1,936,577
1,806,892
1,820,917
1,782,757
1,834,918
Multi-family
787,155
752,943
764,185
698,611
703,091
Construction
654,607
683,475
649,337
632,779
633,601
Other commercial real estate
1,447,673
1,309,878
1,361,810
1,348,831
1,337,396
Home equity
874,686
862,068
851,607
853,887
847,903
1-4 family mortgages
1,391,814
1,086,264
1,017,181
888,797
880,181
Installment
472,102
445,760
430,525
418,524
377,233
Total loans
12,519,604
11,569,003
11,446,783
11,050,548
10,891,565
Allowance for loan losses
(105,729
)
(103,579
)
(102,219
)
(99,925
)
(96,691
)
Net loans
12,413,875
11,465,424
11,344,564
10,950,623
10,794,874
OREO
15,313
10,818
12,821
12,244
12,892
Premises, furniture, and equipment, net
148,347
131,014
132,502
126,389
127,024
Investment in bank-owned life insurance ("BOLI")
297,118
295,899
296,733
284,074
282,664
Goodwill and other intangible assets
878,802
808,852
790,744
751,248
753,020
Accrued interest receivable and other assets
415,379
360,872
245,734
231,465
206,209
Total assets
$
17,462,233
$
15,817,769
$
15,505,649
$
14,961,499
$
14,818,076
Liabilities and Stockholders' Equity
Noninterest-bearing deposits
$
3,748,316
$
3,588,943
$
3,642,989
$
3,618,384
$
3,667,847
Interest-bearing deposits
9,440,272
8,572,039
8,441,123
7,908,730
7,824,416
Total deposits
13,188,588
12,160,982
12,084,112
11,527,114
11,492,263
Borrowed funds
1,407,378
973,852
906,079
1,073,546
981,044
Senior and subordinated debt
233,538
203,984
203,808
195,595
195,453
Accrued interest payable and other liabilities
332,156
319,480
256,652
247,569
265,753
Stockholders' equity
2,300,573
2,159,471
2,054,998
1,917,675
1,883,563
Total liabilities and stockholders' equity
$
17,462,233
$
15,817,769
$
15,505,649
$
14,961,499
$
14,818,076
Stockholders' equity, excluding AOCI
$
2,303,383
$
2,191,630
$
2,107,510
$
1,992,808
$
1,947,963
Stockholders' equity, common
2,300,573
2,159,471
2,054,998
1,917,675
1,883,563
First Midwest Bancorp, Inc.
Condensed Consolidated Statements of Income (Unaudited) (Dollar amounts in thousands)
Quarters Ended
Six Months Ended
June 30,
March 31,
December 31,
September 30,
June 30,
June 30,
June 30,
2019
2019
2018
2018
2018
2019
2018
Income Statement
Interest income
$
177,682
$
162,490
$
159,527
$
149,532
$
142,088
$
340,172
$
273,433
Interest expense
27,370
23,466
20,898
17,505
14,685
50,836
27,467
Net interest income
150,312
139,024
138,629
132,027
127,403
289,336
245,966
Provision for loan losses
11,491
10,444
9,811
11,248
11,614
21,935
26,795
Net interest income after provision for loan losses
138,821
128,580
128,818
120,779
115,789
267,401
219,171
Noninterest Income
Service charges on deposit accounts
12,196
11,540
12,627
12,378
12,058
23,736
23,710
Wealth management fees
12,190
11,600
10,951
10,622
10,981
23,790
21,939
Card-based fees, net
4,549
4,378
4,574
4,123
4,394
8,927
8,327
Capital market products income
2,154
1,279
1,408
1,936
2,819
3,433
4,377
Mortgage banking income
1,901
1,004
1,304
1,657
1,736
2,905
4,133
Merchant servicing fees, net
371
337
365
387
383
708
713
Other service charges, commissions, and fees
2,412
2,274
2,353
2,399
2,455
4,686
4,673
Total fee-based revenues
35,773
32,412
33,582
33,502
34,826
68,185
67,872
Other income
2,753
2,494
2,880
2,164
2,121
5,247
4,592
Total noninterest income
38,526
34,906
36,462
35,666
36,947
73,432
72,464
Noninterest Expense
Salaries and employee benefits:
Salaries and wages
47,776
46,135
45,011
44,067
46,256
93,911
92,086
Retirement and other employee benefits
10,916
11,238
10,378
10,093
11,676
22,154
22,633
Total salaries and employee benefits
58,692
57,373
55,389
54,160
57,932
116,065
114,719
Net occupancy and equipment expense
13,671
14,770
12,827
13,183
13,651
28,441
27,424
Professional services
10,467
7,788
8,859
7,944
8,298
18,255
15,878
Technology and related costs
4,908
4,596
4,849
4,763
4,837
9,504
9,608
Advertising and promotions
3,167
2,372
2,011
3,526
2,061
5,539
3,711
Net OREO expense
294
681
763
(413
)
(256
)
975
812
Other expenses
12,987
10,581
13,418
11,015
11,878
23,568
21,831
Acquisition and integration related expenses
9,514
3,691
9,553
60
—
13,205
—
Delivering Excellence implementation costs
442
258
3,159
2,239
15,015
700
15,015
Total noninterest expense
114,142
102,110
110,828
96,477
113,416
216,252
208,998
Income before income tax expense
63,205
61,376
54,452
59,968
39,320
124,581
82,637
Income tax expense
16,191
15,318
13,044
6,616
9,720
31,509
19,527
Net income
$
47,014
$
46,058
$
41,408
$
53,352
$
29,600
$
93,072
$
63,110
Net income applicable to common shares
$
46,625
$
45,655
$
41,088
$
52,911
$
29,360
$
92,280
$
62,559
Net income applicable to common shares, adjusted(1)
54,091
48,616
50,622
46,837
40,621
102,709
73,820
Footnotes to Condensed Consolidated Statements of Income (1) See the "Non-GAAP Reconciliations" section for the detailed calculation.
First Midwest Bancorp, Inc.
Selected Financial Information (Unaudited) (Amounts in thousands, except per share data)
As of or for the
Quarters Ended
Six Months Ended
June 30,
March 31,
December 31,
September 30,
June 30,
June 30,
June 30,
2019
2019
2018
2018
2018
2019
2018
EPS
Basic EPS
$
0.43
$
0.43
$
0.39
$
0.52
$
0.29
$
0.86
$
0.61
Diluted EPS
$
0.43
$
0.43
$
0.39
$
0.52
$
0.29
$
0.86
$
0.61
Diluted EPS, adjusted(1)
$
0.50
$
0.46
$
0.48
$
0.46
$
0.40
$
0.96
$
0.72
Common Stock and Related Per Common Share Data
Book value
$
20.80
$
20.20
$
19.32
$
18.61
$
18.28
$
20.80
$
18.28
Tangible book value
$
12.86
$
12.63
$
11.88
$
11.32
$
10.97
$
12.86
$
10.97
Dividends declared per share
$
0.14
$
0.12
$
0.12
$
0.11
$
0.11
$
0.26
$
0.22
Closing price at period end
$
20.47
$
20.46
$
19.81
$
26.59
$
25.47
$
20.47
$
25.47
Closing price to book value
1.0
1.0
1.0
1.4
1.4
1.0
1.4
Period end shares outstanding
110,589
106,900
106,375
103,058
103,059
110,589
103,059
Period end treasury shares
9,818
8,775
9,297
9,301
9,297
9,818
9,297
Common dividends
$
15,503
$
12,837
$
12,774
$
11,326
$
11,333
$
28,340
$
22,682
Dividend payout ratio
32.56
%
27.91
%
30.77
%
21.15
%
37.93
%
30.23
%
36.07
%
Dividend payout ratio, adjusted(1)
28.00
%
26.09
%
25.00
%
23.91
%
27.50
%
27.08
%
30.56
%
Key Ratios/Data
Return on average common equity(2)
8.34
%
8.66
%
8.09
%
10.99
%
6.23
%
8.50
%
6.70
%
Return on average common equity, adjusted(1)(2)
9.68
%
9.22
%
9.97
%
9.73
%
8.62
%
9.46
%
7.91
%
Return on average tangible common equity(2)
13.83
%
14.41
%
13.42
%
18.60
%
10.83
%
14.11
%
11.65
%
Return on average tangible common equity, adjusted(1)(2)
15.95
%
15.31
%
16.42
%
16.51
%
14.81
%
15.64
%
13.67
%
Return on average assets(2)
1.13
%
1.19
%
1.06
%
1.42
%
0.81
%
1.16
%
0.88
%
Return on average assets, adjusted(1)(2)
1.31
%
1.27
%
1.30
%
1.26
%
1.12
%
1.29
%
1.04
%
Loans to deposits
94.93
%
95.13
%
94.73
%
95.87
%
94.77
%
94.93
%
94.77
%
Efficiency ratio(1)
54.67
%
55.69
%
55.25
%
56.03
%
59.65
%
55.16
%
60.28
%
Net interest margin(2)(3)
4.06
%
4.04
%
3.96
%
3.92
%
3.91
%
4.05
%
3.85
%
Yield on average interest-earning assets(2)(3)
4.80
%
4.72
%
4.56
%
4.44
%
4.35
%
4.76
%
4.28
%
Cost of funds(2)(4)
0.77
%
0.72
%
0.63
%
0.55
%
0.47
%
0.75
%
0.45
%
Net noninterest expense to average assets(2)
1.81
%
1.74
%
1.90
%
1.62
%
2.10
%
1.78
%
1.91
%
Effective income tax rate
25.62
%
24.96
%
23.96
%
11.03
%
24.72
%
25.29
%
23.63
%
Effective income tax rate, adjusted(1)
25.62
%
24.96
%
23.96
%
24.04
%
24.72
%
25.29
%
23.63
%
Capital Ratios
Total capital to risk-weighted assets(1)
12.57
%
12.91
%
12.62
%
12.32
%
12.07
%
12.57
%
12.07
%
Tier 1 capital to risk-weighted assets(1)
10.11
%
10.52
%
10.20
%
10.34
%
10.09
%
10.11
%
10.09
%
CET1 to risk-weighted assets(1)
10.11
%
10.52
%
10.20
%
9.93
%
9.68
%
10.11
%
9.68
%
Tier 1 capital to average assets(1)
8.96
%
9.28
%
8.90
%
9.10
%
8.95
%
8.96
%
8.95
%
Tangible common equity to tangible assets(1)
8.57
%
9.00
%
8.59
%
8.21
%
8.04
%
8.57
%
8.04
%
Tangible common equity, excluding AOCI, to tangible assets(1)
8.59
%
9.21
%
8.95
%
8.74
%
8.50
%
8.59
%
8.50
%
Tangible common equity to risk -weighted assets(1)
10.11
%
10.29
%
9.81
%
9.33
%
9.16
%
10.11
%
9.16
%
Note: Selected Financial Information footnotes are located at the end of this section.
First Midwest Bancorp, Inc.
Selected Financial Information (Unaudited) (Amounts in thousands, except per share data)
As of or for the
Quarters Ended
Six Months Ended
June 30,
March 31,
December 31,
September 30,
June 30,
June 30,
June 30,
2019
2019
2018
2018
2018
2019
2018
Asset Quality Performance Data
Non-performing assets
Commercial and industrial
$
19,809
$
34,694
$
33,507
$
37,981
$
22,672
$
19,809
$
22,672
Agricultural
6,712
2,359
1,564
2,104
2,992
6,712
2,992
Commercial real estate:
Office, retail, and industrial
17,875
17,484
6,510
6,685
9,007
17,875
9,007
Multi-family
5,322
2,959
3,107
3,184
3,551
5,322
3,551
Construction
152
—
144
208
208
152
208
Other commercial real estate
3,982
2,971
2,854
4,578
5,288
3,982
5,288
Consumer
9,625
9,738
9,249
10,026
9,757
9,625
9,757
Total non-accrual loans
63,477
70,205
56,935
64,766
53,475
63,477
53,475
90 days or more past due loans, still accruing interest
2,615
8,446
8,282
2,949
7,954
2,615
7,954
Total non-performing loans
66,092
78,651
65,217
67,715
61,429
66,092
61,429
Accruing TDRs
1,441
1,844
1,866
1,741
1,760
1,441
1,760
Foreclosed assets(5)
28,488
10,818
12,821
12,244
12,892
28,488
12,892
Total non-performing assets
$
96,021
$
91,313
$
79,904
$
81,700
$
76,081
$
96,021
$
76,081
30-89 days past due loans
$
34,460
$
45,764
$
37,524
$
46,257
$
39,171
$
34,460
$
39,171
Allowance for credit losses
Allowance for loan losses
$
105,729
$
103,579
$
102,219
$
99,925
$
96,691
$
105,729
$
96,691
Reserve for unfunded commitments
1,200
1,200
1,200
1,000
1,000
1,200
1,000
Total allowance for credit losses
$
106,929
$
104,779
$
103,419
$
100,925
$
97,691
$
106,929
$
97,691
Provision for loan losses
$
11,491
$
10,444
$
9,811
$
11,248
$
11,614
$
21,935
$
26,795
Net charge-offs by category
Commercial and industrial
$
4,600
$
5,061
$
5,558
$
5,230
$
7,081
$
9,661
$
20,230
Agricultural
658
89
71
631
828
747
1,811
Commercial real estate:
Office, retail, and industrial
1,454
618
713
596
279
2,072
643
Multi-family
—
339
(3
)
1
4
339
4
Construction
(10
)
—
(99
)
(4
)
(8
)
(10
)
(21
)
Other commercial real estate
284
189
(817
)
23
(358
)
473
(328
)
Consumer
2,355
2,788
2,094
1,537
1,951
5,143
3,494
Total net charge-offs
$
9,341
$
9,084
$
7,517
$
8,014
$
9,777
$
18,425
$
25,833
Total recoveries included above
$
2,083
$
1,693
$
2,810
$
1,250
$
1,532
$
3,776
$
2,561
Note: Selected Financial Information footnotes are located at the end of this section.
First Midwest Bancorp, Inc.
Selected Financial Information (Unaudited)
As of or for the
Quarters Ended
June 30,
March 31,
December 31,
September 30,
June 30,
2019
2019
2018
2018
2018
Asset quality ratios
Non-accrual loans to total loans
0.51
%
0.61
%
0.50
%
0.59
%
0.49
%
Non-performing loans to total loans
0.53
%
0.68
%
0.57
%
0.61
%
0.56
%
Non-performing assets to total loans plus foreclosed assets
0.77
%
0.79
%
0.70
%
0.74
%
0.70
%
Non-performing assets to tangible common equity plus allowance for credit losses
6.28
%
6.27
%
5.84
%
6.45
%
6.19
%
Non-accrual loans to total assets
0.36
%
0.44
%
0.37
%
0.43
%
0.36
%
Allowance for credit losses and net charge-off ratios
Allowance for credit losses to total loans(6)
0.85
%
0.91
%
0.90
%
0.91
%
0.90
%
Allowance for credit losses to loans, excluding acquired loans
0.98
%
1.00
%
1.01
%
1.01
%
1.00
%
Allowance for credit losses to non-accrual loans
168.45
%
149.25
%
181.64
%
155.83
%
182.69
%
Allowance for credit losses to non-performing loans
161.79
%
133.22
%
158.58
%
149.04
%
159.03
%
Net charge-offs to average loans(2)
0.31
%
0.32
%
0.26
%
0.29
%
0.36
%
Footnotes to Selected Financial Information (1) See the "Non-GAAP Reconciliations" section for the detailed calculation. (2) Annualized based on the actual number of days for each period presented. (3) Presented on a tax-equivalent basis, assuming the applicable federal income tax rate of 21%. (4) Cost of funds expresses total interest expense as a percentage of total average funding sources. (5) Foreclosed assets consists of OREO and other foreclosed assets acquired in partial or total satisfaction of defaulted loans. Other foreclosed assets are included in other assets in the Consolidated Statements of Financial Condition. (6) This ratio 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.
First Midwest Bancorp, Inc.
Non-GAAP Reconciliations (Unaudited) (Amounts in thousands, except per share data)
Quarters Ended
Six Months Ended
June 30,
March 31,
December 31,
September 30,
June 30,
June 30,
June 30,
2019
2019
2018
2018
2018
2019
2018
EPS
Net income
$
47,014
$
46,058
$
41,408
$
53,352
$
29,600
$
93,072
$
63,110
Net income applicable to non -vested restricted shares
(389
)
(403
)
(320
)
(441
)
(240
)
(792
)
(551
)
Net income applicable to common shares
46,625
45,655
41,088
52,911
29,360
92,280
62,559
Adjustments to net income:
Acquisition and integration related expenses
9,514
3,691
9,553
60
—
13,205
—
Tax effect of acquisition and integration related expenses
(2,379
)
(923
)
(2,388
)
(15
)
—
(3,301
)
—
Delivering Excellence implementation costs
442
258
3,159
2,239
15,015
700
15,015
Tax effect of Delivering Excellence implementation costs
(111
)
(65
)
(790
)
(560
)
(3,754
)
(175
)
(3,754
)
Income tax benefits
—
—
—
(7,798
)
—
—
—
Total adjustments to net income, net of tax
7,466
2,961
9,534
(6,074
)
11,261
10,429
11,261
Net income applicable to common shares, adjusted(1)
$
54,091
$
48,616
$
50,622
$
46,837
$
40,621
$
102,709
$
73,820
Weighted-average common shares outstanding:
Weighted-average common shares outstanding (basic)
108,467
105,770
105,116
102,178
102,159
107,126
102,041
Dilutive effect of common stock equivalents
—
—
—
—
—
—
8
Weighted-average diluted common shares outstanding
108,467
105,770
105,116
102,178
102,159
107,126
102,049
Basic EPS
$
0.43
$
0.43
$
0.39
$
0.52
$
0.29
$
0.86
$
0.61
Diluted EPS
$
0.43
$
0.43
$
0.39
$
0.52
$
0.29
$
0.86
$
0.61
Diluted EPS, adjusted(1)
$
0.50
$
0.46
$
0.48
$
0.46
$
0.40
$
0.96
$
0.72
Anti-dilutive shares not included in the computation of diluted EPS
—
—
—
—
—
—
54
Dividend Payout Ratio
Dividends declared per share
$
0.14
$
0.12
$
0.12
$
0.11
$
0.11
$
0.26
$
0.22
Dividend payout ratio
32.56
%
27.91
%
30.77
%
21.15
%
37.93
%
30.23
%
36.07
%
Dividend payout ratio, adjusted(1)
28.00
%
26.09
%
25.00
%
23.91
%
27.50
%
27.08
%
30.56
%
Effective Tax Rate
Income before income tax expense
$
63,205
$
61,376
$
54,452
$
59,968
$
39,320
$
124,581
$
82,637
Income tax expense
$
16,191
$
15,318
$
13,044
$
6,616
$
9,720
$
31,509
$
19,527
Income tax benefits
—
—
—
7,798
—
—
—
Income tax expense, adjusted
$
16,191
$
15,318
$
13,044
$
14,414
$
9,720
$
31,509
$
19,527
Effective income tax rate
25.62
%
24.96
%
23.96
%
11.03
%
24.72
%
25.29
%
23.63
%
Effective income tax rate, adjusted
25.62
%
24.96
%
23.96
%
24.04
%
24.72
%
25.29
%
23.63
%
Note: Non-GAAP Reconciliations footnotes are located at the end of this section.
First Midwest Bancorp, Inc.
Non-GAAP Reconciliations (Unaudited) (Amounts in thousands, except per share data)
As of or for the
Quarters Ended
Six Months Ended
June 30,
March 31,
December 31,
September 30,
June 30,
June 30,
June 30,
2019
2019
2018
2018
2018
2019
2018
Return on Average Common and Tangible Common Equity
Net income applicable to common shares
$
46,625
$
45,655
$
41,088
$
52,911
$
29,360
$
92,280
$
62,559
Intangibles amortization
2,624
2,363
2,077
1,772
1,794
4,987
3,596
Tax effect of intangibles amortization
(656
)
(591
)
(519
)
(443
)
(449
)
(1,247
)
(957
)
Net income applicable to common shares, excluding intangibles amortization
48,593
47,427
42,646
54,240
30,705
96,020
65,198
Total adjustments to net income, net of tax(1)
7,466
2,961
9,534
(6,074
)
11,261
10,429
11,261
Net income applicable to common shares, adjusted(1)
$
56,059
$
50,388
$
52,180
$
48,166
$
41,966
$
106,449
$
76,459
Average stockholders' equity
$
2,241,569
$
2,138,281
$
2,015,217
$
1,909,330
$
1,890,727
$
2,190,210
$
1,882,121
Less: average intangible assets
(832,263
)
(803,408
)
(754,495
)
(752,109
)
(753,887
)
(817,915
)
(753,879
)
Average tangible common equity
$
1,409,306
$
1,334,873
$
1,260,722
$
1,157,221
$
1,136,840
$
1,372,295
$
1,128,242
Return on average common equity(2)
8.34
%
8.66
%
8.09
%
10.99
%
6.23
%
8.50
%
6.70
%
Return on average common equity, adjusted(1)(2)
9.68
%
9.22
%
9.97
%
9.73
%
8.62
%
9.46
%
7.91
%
Return on average tangible common equity(2)
13.83
%
14.41
%
13.42
%
18.60
%
10.83
%
14.11
%
11.65
%
Return on average tangible common equity, adjusted(1)(2)
15.95
%
15.31
%
16.42
%
16.51
%
14.81
%
15.64
%
13.67
%
Return on Average Assets
Net income
$
47,014
$
46,058
$
41,408
$
53,352
$
29,600
$
93,072
$
63,110
Total adjustments to net income, net of tax(1)
7,466
2,961
9,534
(6,074
)
11,261
10,429
11,261
Net income, adjusted(1)
$
54,480
$
49,019
$
50,942
$
47,278
$
40,861
$
103,501
$
74,371
Average assets
$
16,740,050
$
15,667,839
$
15,503,399
$
14,894,670
$
14,605,715
$
16,206,906
$
14,397,540
Return on average assets(2)
1.13
%
1.19
%
1.06
%
1.42
%
0.81
%
1.16
%
0.88
%
Return on average assets, adjusted(1)(2)
1.31
%
1.27
%
1.30
%
1.26
%
1.12
%
1.29
%
1.04
%
Efficiency Ratio Calculation
Noninterest expense
$
114,142
$
102,110
$
110,828
$
96,477
$
113,416
$
216,252
$
208,998
Less:
Net OREO expense
(294
)
(681
)
(763
)
413
256
(975
)
(812
)
Acquisition and integration related expenses
(9,514
)
(3,691
)
(9,553
)
(60
)
—
(13,205
)
—
Delivering Excellence implementation costs
(442
)
(258
)
(3,159
)
(2,239
)
(15,015
)
(700
)
(15,015
)
Total
$
103,892
$
97,480
$
97,353
$
94,591
$
98,657
$
201,372
$
193,171
Tax-equivalent net interest income(3)
$
151,492
$
140,132
$
139,755
$
133,161
$
128,442
$
291,624
$
247,980
Noninterest income
38,526
34,906
36,462
35,666
36,947
73,432
72,464
Total
$
190,018
$
175,038
$
176,217
$
168,827
$
165,389
$
365,056
$
320,444
Efficiency ratio
54.67
%
55.69
%
55.25
%
56.03
%
59.65
%
55.16
%
60.28
%
Note: Non-GAAP Reconciliations footnotes are located at the end of this section.
First Midwest Bancorp, Inc.
Non-GAAP Reconciliations (Unaudited) (Amounts in thousands, except per share data)
As of or for the
Quarters Ended
June 30,
March 31,
December 31,
September 30,
June 30,
2019
2019
2018
2018
2018
Risk-Based Capital Data
Common stock
$
1,204
$
1,157
$
1,157
$
1,124
$
1,124
Additional paid-in capital
1,205,396
1,103,991
1,114,580
1,028,635
1,025,703
Retained earnings
1,304,756
1,273,245
1,192,767
1,164,133
1,122,107
Treasury stock, at cost
(207,973
)
(186,763
)
(200,994
)
(201,084
)
(200,971
)
Goodwill and other intangible assets, net of deferred tax liabilities
(878,802
)
(808,852
)
(790,744
)
(751,248
)
(753,020
)
Disallowed DTAs
(2,804
)
(809
)
(1,334
)
—
(389
)
CET1 capital
1,421,777
1,381,969
1,315,432
1,241,560
1,194,554
Trust-preferred securities
—
—
—
50,690
50,690
Other disallowed DTAs
—
—
(334
)
—
(97
)
Tier 1 capital
1,421,777
1,381,969
1,315,098
1,292,250
1,245,147
Tier 2 capital
345,078
312,840
311,391
248,118
244,795
Total capital
$
1,766,855
$
1,694,809
$
1,626,489
$
1,540,368
$
1,489,942
Risk-weighted assets
$
14,056,482
$
13,131,237
$
12,892,180
$
12,500,342
$
12,345,200
Adjusted average assets
$
15,863,145
$
14,891,534
$
14,782,327
$
14,202,776
$
13,907,100
Total capital to risk-weighted assets
12.57
%
12.91
%
12.62
%
12.32
%
12.07
%
Tier 1 capital to risk-weighted assets
10.11
%
10.52
%
10.20
%
10.34
%
10.09
%
CET1 to risk-weighted assets
10.11
%
10.52
%
10.20
%
9.93
%
9.68
%
Tier 1 capital to average assets
8.96
%
9.28
%
8.90
%
9.10
%
8.95
%
Tangible Common Equity
Stockholders' equity
$
2,300,573
$
2,159,471
$
2,054,998
$
1,917,675
$
1,883,563
Less: goodwill and other intangible assets
(878,802
)
(808,852
)
(790,744
)
(751,248
)
(753,020
)
Tangible common equity
1,421,771
1,350,619
1,264,254
1,166,427
1,130,543
Less: AOCI
2,810
32,159
52,512
75,133
64,400
Tangible common equity, excluding AOCI
$
1,424,581
$
1,382,778
$
1,316,766
$
1,241,560
$
1,194,943
Total assets
$
17,462,233
$
15,817,769
$
15,505,649
$
14,961,499
$
14,818,076
Less: goodwill and other intangible assets
(878,802
)
(808,852
)
(790,744
)
(751,248
)
(753,020
)
Tangible assets
$
16,583,431
$
15,008,917
$
14,714,905
$
14,210,251
$
14,065,056
Tangible common equity to tangible assets
8.57
%
9.00
%
8.59
%
8.21
%
8.04
%
Tangible common equity, excluding AOCI, to tangible assets
8.59
%
9.21
%
8.95
%
8.74
%
8.50
%
Tangible common equity to risk-weighted assets
10.11
%
10.29
%
9.81
%
9.33
%
9.16
%
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%
