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First Midwest Bancorp, Inc. Announces 2016 Third Quarter Results

ITASCA, Ill., Oct. 18, 2016 (GLOBE NEWSWIRE) -- First Midwest Bancorp, Inc. (the "Company" or "First Midwest") (NASDAQ:FMBI), the holding company of First Midwest Bank (the "Bank"), today reported results of operations and financial condition for the third quarter of 2016. Net income for the third quarter of 2016 was $28.4 million, or $0.35 per share. This compares to $25.3 million, or $0.31 per share, for the second quarter of 2016, and $23.3 million, or $0.30 per share, for the third quarter of 2015. Performance for the third and second quarters of 2016 was impacted by acquisition and integration related pre-tax expenses of $1.2 million and $618,000, respectively. In addition, a pre-tax gain of $5.5 million was recorded in the third quarter of 2016 as a result of the completion of the Company's sale-leaseback transaction announced during the quarter. Excluding these transactions, earnings per share was $0.32 for the third quarter of 2016, consistent with the second quarter of 2016.

SELECT THIRD QUARTER HIGHLIGHTS

  • Increased earnings per share to $0.35, up 13% from the second quarter of 2016 and 17% from third quarter of 2015.
  • Grew fee-based revenues to $38 million, an increase of 7% from the second quarter of 2016 and 16% from the third quarter of 2015.
  • Improved efficiency ratio (1) to 61%, consistent with the second quarter of 2016 and down from 63% for the third quarter of 2015.
  • Expanded total loans to $8 billion, up 10% annualized from June 30, 2016 and 18% from September 30, 2015.
  • Grew average core deposits to $8 billion, up 2% from the second quarter of 2016 and 12% from the third quarter of 2015.
  • Completed the Company's previously announced sale-leaseback transaction, which resulted in proceeds of $150 million and a pre-tax gain of $5.5 million in the third quarter of 2016.
  • Enhanced total capital to risk-weighted assets to 12.3%, which benefited from the issuance of $150 million of 5.875% subordinated notes.

"Performance for the quarter was once again strong," said Michael L. Scudder, President and Chief Executive Officer of First Midwest Bancorp, Inc. "Operating performance for the quarter reflected robust production across our sales platforms and continued focus on improving our efficiency. Measured expansion of our lending capabilities continues to provide diversified portfolio growth. Additionally, we moved to strengthen our capital foundation, enhancing our future capacity for growth."

Mr. Scudder continued, "As we look to close the year, our underlying business momentum is building and aided by the strength of our balance sheet. Our pending acquisition of Standard Bank and Trust Company remains on track and will further position us as the premier market leader in metro Chicago. As always, we remain centered on those actions which help our clients to achieve financial success, enhance the value of our franchise, and inure to the long-term benefit of our shareholders."

(1) The efficiency ratio is a Non-GAAP financial measure. For details on the calculation, see the sections titled "Non-GAAP Financial Information" and "Non-GAAP Reconciliations" presented later in this release.

SIGNIFICANT THIRD QUARTER EVENTS

Sale-Leaseback Transaction

On September 27, 2016, the Bank completed a sale-leaseback transaction, whereby the Bank sold to Oak Street Real Estate Capital, LLC ("Oak Street"), for an aggregate cash purchase price of $150.3 million, 55 properties owned and operated by the Bank as branches. Upon the sale of the branches to Oak Street, the Bank concurrently entered into triple net lease agreements with certain affiliates of Oak Street for each of the branches sold. Subject to the right of the Bank to terminate certain of the lease agreements at the end of the eleventh year, the lease agreements have initial terms of 14 years. Each lease agreement provides the Bank with five consecutive renewal options of five years each. The sale-leaseback transaction resulted in a pre-tax gain of $88.0 million, net of transaction related expenses, of which $5.5 million was immediately recognized in earnings with the remaining $82.5 million to be accreted into income on a straight-line basis over the initial terms of the leases. The Company expects the investment of proceeds and the gain from the sale of the branches, net of occupancy expenses associated with the branches, will be modestly accretive to the Company's earnings over the initial term of the lease agreements.

Issuance of Subordinated Notes

On September 29, 2016, the Company completed the issuance and sale of $150.0 million aggregate principal amount of its 5.875% subordinated notes due 2026. Interest on the notes is payable semiannually beginning on March 29, 2017. The Company received proceeds of $146.5 million, net of underwriting discounts and commissions and issuance costs. The Company expects to use the net proceeds to repay at maturity the entire $115.0 million aggregate principal amount outstanding of its 5.875% senior notes due November 22, 2016, plus accrued interest, and for other general corporate purposes.

ACQUISITION

Standard Bancshares, Inc.

On June 28, 2016, the Company entered into a definitive agreement to acquire Standard Bancshares, Inc. ("Standard"), the holding company for Standard Bank and Trust Company. With the acquisition, the Company would acquire 35 banking offices primarily in the southwest Chicago suburbs and adjacent markets in northwest Indiana. As of June 30, 2016, Standard had total assets of approximately $2.5 billion with $2.2 billion in deposits, of which over 90% were core deposits, and $1.8 billion in loans, of which 80% were commercial-related. If the merger is completed, the merger consideration to Standard shareholders will be Company common stock, with an overall transaction value of approximately $365 million as of the date of announcement. The acquisition is expected to close in late 2016 or early 2017, subject to customary regulatory approvals and closing conditions, as well as Company and Standard shareholder approval.

OPERATING PERFORMANCE

   
Net Interest Income and Margin Analysis
(Dollar amounts in thousands)
   
  Quarters Ended
  September 30, 2016     June 30, 2016     September 30, 2015
  Average
Balance
  Interest
Earned/
Paid
  Yield/
Rate
(%)
    Average
Balance
  Interest
Earned/
Paid
  Yield/
Rate
(%)
    Average
Balance
  Interest
Earned/
Paid
  Yield/
Rate
(%)
Assets:                                      
Other interest-earning assets $ 282,101     $ 472     0.67       $ 300,945     $ 426     0.57       $ 820,318     $ 645     0.31  
Securities (1) 1,896,195     10,752     2.27       1,721,781     10,636     2.47       1,194,711     9,559     3.20  
Federal Home Loan Bank ("FHLB") and
  Federal Reserve Bank ("FRB") stock
51,451     261     2.03       42,561     200     1.88       38,748     369     3.81  
Loans (1)(2) 8,067,900     88,500     4.36       7,883,806     87,481     4.46       6,887,611     76,328     4.40  
Total interest-earning assets (1) 10,297,647     99,985     3.87       9,949,093     98,743     3.99       8,941,388     86,901     3.86  
Cash and due from banks 150,467               154,693               132,504          
Allowance for loan losses (84,088 )             (80,561 )             (73,928 )        
Other assets 958,299               945,291               875,668          
Total assets $ 11,322,325               $ 10,968,516               $ 9,875,632          
Liabilities and Stockholders' Equity:                                      
Interest-bearing core deposits (3) $ 5,090,820     1,086     0.08       $ 4,941,779     991     0.08       $ 4,465,956     931     0.08  
Time deposits 1,248,425     1,434     0.46       1,277,694     1,491     0.47       1,173,127     1,398     0.47  
Borrowed funds 605,177     1,782     1.17       461,363     1,499     1.31       168,807     928     2.18  
Senior and subordinated debt 166,101     2,632     6.30       162,836     2,588     6.39       201,083     3,133     6.18  
Total interest-bearing liabilities 7,110,523     6,934     0.39       6,843,672     6,569     0.39       6,008,973     6,390     0.42  
Demand deposits (3) 2,806,851               2,771,813               2,601,442          
Total funding sources 9,917,374               9,615,485               8,610,415          
Other liabilities 143,249               117,534               130,250          
Stockholders' equity - common 1,261,702               1,235,497               1,134,967          
Total liabilities and
  stockholders' equity
$ 11,322,325               $ 10,968,516               $ 9,875,632          
Tax-equivalent net interest
  income/margin (1)
    93,051     3.60           92,174     3.72           80,511     3.58  
Tax-equivalent adjustment     (2,079 )             (2,193 )             (2,609 )    
Net interest income (GAAP)     $ 90,972               $ 89,981               $ 77,902      
                                                   

(1) Interest income and yields on tax-exempt securities and loans are presented on a tax-equivalent basis, assuming a federal income tax rate of 35%. The corresponding income tax impact related to tax-exempt items is recorded in income tax expense. These adjustments have no impact on net income. For details on the calculation of tax-equivalent net interest income, see the sections titled "Non-GAAP Financial Information" and "Non-GAAP Reconciliations" presented later in this release.

(2) Includes loans acquired through Federal Deposit Insurance Corporation ("FDIC")-assisted transactions subject to loss sharing agreements ("covered loans"), which totaled $24.3 million, $27.2 million, and $51.2 million at September 30, 2016, June 30, 2016, and September 30, 2015, respectively.

(3) See the Deposit Composition table presented later in this release for average balance detail by category.

For the third quarter of 2016, total average interest-earning assets rose $348.6 million from the second quarter of 2016 and $1.4 billion from the third quarter of 2015. The increase from both prior periods presented resulted from organic loan growth and security purchases. In addition, the rise in average interest-earning assets compared to the third quarter of 2015 was impacted by interest-earning assets acquired in the NI Bancshares Corporation ("NI Bancshares") transaction late in the first quarter of 2016 and the Peoples Bancorp, Inc. ("Peoples") transaction late in the fourth quarter of 2015.

Average funding sources increased by $301.9 million from the second quarter of 2016 and $1.3 billion from the third quarter of 2015. Compared to the second quarter of 2016, the rise resulted primarily from the addition of $200.0 million of FHLB advances and seasonally higher levels of interest-bearing core deposits and demand deposits. Deposits acquired in the NI Bancshares and Peoples transactions and the addition of $462.5 million of FHLB advances contributed to the increase in average funding sources compared to the third quarter of 2015.

Tax-equivalent net interest margin for the current quarter was 3.60%, decreasing 12 basis points from the second quarter of 2016 and increasing 2 basis points from the third quarter of 2015. The decline in tax-equivalent net interest margin from the second quarter of 2016 was due primarily to the redeployment of the typical third quarter seasonal increase of municipal tax deposits into investments, the continued shift in the loan mix to floating rate loans, and a modest decline in acquired loan accretion. Compared to the third quarter of 2015, the increase in tax-equivalent net interest margin was driven by higher accretion on acquired loans and the maturity of $38.5 million of subordinated notes early in the second quarter of 2016, which were partially offset by the continued shift in the loan mix to floating rate loans.

Net interest income increased by 4.4% on an annualized basis from the second quarter of 2016 and 16.8% compared to the third quarter of 2015. The rise in net interest income from the second quarter of 2016 resulted primarily from growth in interest-earning assets, which more than offset the decline in margin. Compared to the third quarter of 2015, the increase in net interest income was driven primarily by organic loan growth and the acquisition of interest-earning assets from the NI Bancshares and Peoples transactions.

Acquired loan accretion contributed $3.8 million, $3.9 million, and $1.8 million to net interest income for the third quarter of 2016, the second quarter of 2016, and the third quarter of 2015, respectively.

         
Fee-based Revenues and Total Noninterest Income Analysis
(Dollar amounts in thousands)
         
    Quarters Ended   September 30, 2016
Percent Change From
    September 30,
 2016
  June 30,
 2016
  September 30,
 2015
  June 30,
 2016
  September 30,
 2015
Service charges on deposit accounts   $ 10,708     $ 10,169     $ 10,519     5.3     1.8  
Wealth management fees   8,495     8,642     7,222     (1.7 )   17.6  
Card-based fees   7,332     7,592     6,868     (3.4 )   6.8  
Merchant servicing fees   3,319     3,170     3,207     4.7     3.5  
Mortgage banking income   3,394     1,863     1,402     82.2     142.1  
Other service charges, commissions, and fees   5,218     4,498     3,900     16.0     33.8  
Total fee-based revenues   38,466     35,934     33,118     7.0     16.1  
Net gain on sale-leaseback transaction   5,509                 100.0  
Net securities gains   187     23     524     713.0     (64.3 )
Other income   1,691     1,865     1,372     (9.3 )   23.3  
Total noninterest income   $ 45,853     $ 37,822     $ 35,014     21.2     31.0  
                                     

Total fee-based revenues of $38.5 million grew by $2.5 million, or 7.0%, compared to the second quarter of 2016, and $5.3 million, or 16.1%, compared to the third quarter of 2015. Higher mortgage banking income and sales of capital market products to commercial clients within other service charges, commissions, and fees drove the majority of the increase compared to both prior periods presented. Mortgage banking income rose as a result of $107.3 million in sales of 1-4 family mortgage loans in the secondary market during the third quarter of 2016, compared to $52.1 million in the second quarter of 2016 and $42.2 million in the third quarter of 2015. The rise in service charges on deposit accounts compared to the second quarter of 2016 reflects seasonally higher activity. Card-based fees declined modestly from the second quarter of 2016 due to normal seasonality. Compared to the third quarter of 2015, services provided to customers acquired in the NI Bancshares and Peoples transactions contributed to the increase.

During the third quarter of 2016, the Company completed a sale-leaseback transaction of 55 branches that resulted in a pre-tax gain of $88.0 million, net of transaction related expenses, of which $5.5 million was immediately recognized and the remaining $82.5 million was deferred and will be accreted against lease expense over the initial terms of the leases.

Total noninterest income of $45.9 million grew 21.2% and 31.0% from the second quarter of 2016 and the third quarter of 2015, respectively.

         
Noninterest Expense Analysis
(Dollar amounts in thousands)
         
    Quarters Ended   September 30, 2016
Percent Change From
    September 30,
 2016
  June 30,
 2016
  September 30,
 2015
  June 30,
 2016
  September 30,
 2015
Salaries and employee benefits:                    
Salaries and wages   $ 37,872     $ 37,916     $ 33,554     (0.1 )   12.9  
Retirement and other employee benefits   8,500     8,351     7,807     1.8     8.9  
Total salaries and employee benefits   46,372     46,267     41,361     0.2     12.1  
Net occupancy and equipment expense   10,755     9,928     9,406     8.3     14.3  
Professional services   6,772     5,292     6,172     28.0     9.7  
Technology and related costs   3,881     3,669     3,673     5.8     5.7  
Merchant card expense   2,857     2,724     2,722     4.9     5.0  
Advertising and promotions   1,941     1,927     1,828     0.7     6.2  
Cardholder expenses   1,515     1,512     1,354     0.2     11.9  
Net other real estate owned ("OREO") expense   313     1,122     1,290     (72.1 )   (75.7 )
Other expenses   7,310     8,295     6,559     (11.9 )   11.4  
Total noninterest expense excluding
  acquisition and integration related
  expenses (1)
  81,716     80,736     74,365     1.2     9.9  
Acquisition and integration related expenses   1,172     618         89.6     100.0  
Total noninterest expense   $ 82,888     $ 81,354     $ 74,365     1.9     11.5  
Efficiency ratio (2)   61 %   61 %   63 %        
                           

(1) See the Non-GAAP Financial Information discussion for detail.

(2) The efficiency ratio expresses noninterest expense, excluding OREO expense, as a percentage of tax-equivalent net interest income plus total fee-based revenues, other income, and tax-equivalent adjusted bank-owned life insurance ("BOLI") income. In addition, acquisition and integration related pre-tax expenses of $1.2 million and $618,000 are excluded from the efficiency ratio for the third and second quarters of 2016, respectively.  For details on the calculation of the efficiency ratio, see the sections titled "Non-GAAP Financial Information" and "Non-GAAP Reconciliations" presented later in this release.

The efficiency ratio was consistent at 61% compared to the second quarter of 2016 and improved from 63% for the third quarter of 2015. Excluding acquisition and integration related expenses, total noninterest expense increased by 1.2% from the second quarter of 2016 and 9.9% compared to the third quarter of 2015.

Compared to the second quarter of 2016, the rise in net occupancy and equipment expense was driven primarily by seasonally higher utilities, as well as increases in computer processing and software maintenance contracts. The increase in professional services from the second quarter of 2016 was impacted by lower than normal loan remediation expenses in the second quarter of 2016 and also reflects the variability in the timing of these expenditures. Net OREO expense decreased from the second quarter of 2016 due to reduced valuation adjustments and lower operating expenses. Other expenses were lower in the third quarter of 2016 due primarily to the change in the reserve for unfunded commitments compared to the third quarter of 2016.

The operations associated with the NI Bancshares and Peoples transactions contributed to approximately half of the increase from third quarter of 2015. These costs primarily occurred within salaries and employee benefits expense, net occupancy and equipment expense, professional services, and other expense. In addition, compensation costs associated with merit increases and investments in additional talent and systems to support organizational growth contributed to the rise compared to the third quarter of 2015.

LOAN PORTFOLIO AND ASSET QUALITY

         
Loan Portfolio Composition
(Dollar amounts in thousands)
         
    As of   September 30, 2016
Percent Change From
    September 30,
2016
  June 30,
2016
  September 30,
2015
  June 30,
2016
  September 30,
2015
Commercial and industrial   $ 2,849,399     $ 2,699,742     $ 2,392,860     5.5     19.1  
Agricultural   409,571     401,858     393,732     1.9     4.0  
Commercial real estate:                    
Office, retail, and industrial   1,537,038     1,529,675     1,414,077     0.5     8.7  
Multi-family   625,305     587,104     539,308     6.5     15.9  
Construction   401,857     371,016     192,086     8.3     109.2  
Other commercial real estate   970,855     1,000,655     869,748     (3.0 )   11.6  
Total commercial real estate   3,535,055     3,488,450     3,015,219     1.3     17.2  
Total corporate loans   6,794,025     6,590,050     5,801,811     3.1     17.1  
Home equity   733,260     722,881     647,223     1.4     13.3  
1-4 family mortgages   388,145     415,581     294,261     (6.6 )   31.9  
Installment   232,030     223,845     131,185     3.7     76.9  
Total consumer loans   1,353,435     1,362,307     1,072,669     (0.7 )   26.2  
Covered loans   24,322     27,180     51,219     (10.5 )   (52.5 )
Total loans   $ 8,171,782     $ 7,979,537     $ 6,925,699     2.4     18.0  
                                     

Total loans grew by 9.6% on an annualized basis from June 30, 2016 and 13.7% from September 30, 2015, excluding loans acquired in the NI Bancshares transaction of $299.7 million. Compared to both prior periods presented, growth in commercial and industrial loans reflects broad-based increases within our middle market and sector-based lending business units. Multi-family loans increased compared to both prior periods due to organic growth. The rise in construction loans compared to both prior periods was driven mainly by select commercial projects for which permanent financing is expected upon their completion.

Growth in consumer loans compared to September 30, 2015 was due to the continued expansion of mortgage and installment loans, as well as the addition of shorter-duration, floating rate home equity loans. Compared to June 30, 2016, sales of 1-4 family mortgages on the secondary market more than offset organic growth in consumer loans.

         
Asset Quality
(Dollar amounts in thousands)
         
    As of   September 30, 2016
Percent Change From
    September 30,
 2016
  June 30,
 2016
  September 30,
 2015
  June 30,
 2016
  September 30,
 2015
Asset quality, excluding covered
  loans and covered OREO
                   
Non-accrual loans   $ 43,797     $ 36,859     $ 32,308     18.8     35.6  
90 days or more past due loans, still accruing
  interest
  4,318     5,406     4,559     (20.1 )   (5.3 )
Total non-performing loans   48,115     42,265     36,867     13.8     30.5  
Accruing troubled debt restructurings
  ("TDRs")
  2,368     2,491     2,771     (4.9 )   (14.5 )
OREO   27,986     29,452     31,129     (5.0 )   (10.1 )
Total non-performing assets   $ 78,469     $ 74,208     $ 70,767     5.7     10.9  
30-89 days past due loans   $ 25,849     $ 22,770     $ 28,629          
Non-accrual loans to total loans   0.54 %   0.46 %   0.47 %        
Non-performing loans to total loans   0.59 %   0.53 %   0.54 %        
Non-performing assets to total loans plus
  OREO
  0.96 %   0.93 %   1.02 %        
Allowance for Credit Losses                    
Allowance for loan losses   $ 85,308     $ 80,105     $ 72,500          
Reserve for unfunded commitments   1,000     1,400     1,225          
Total allowance for credit losses   $ 86,308     $ 81,505     $ 73,725          
Allowance for credit losses to total loans (1)   1.06 %   1.02 %   1.06 %        
Allowance for credit losses to loans, excluding
  acquired loans
  1.13 %   1.11 %   1.14 %        
Allowance for credit losses to non-accrual
  loans, excluding covered loans
  194.11 %   217.34 %   215.45 %        
                           

(1) 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.

Non-accrual loans increased by $6.9 million from June 30, 2016, due primarily to the transfer of a corporate loan relationship to non-accrual status during the third quarter of 2016, for which the Bank believes it is adequately collateralized.

Total non-performing assets represented 0.96% of total loans and OREO at September 30, 2016, compared to 0.93% at June 30, 2016 and down from 1.02% at September 30, 2015.

     
Charge-Off Data
(Dollar amounts in thousands)
     
    Quarters Ended
    September 30,
 2016
  % of
Total
  June 30,
 2016
  % of
Total
  September 30,
 2015
  % of
Total
Net loan charge-offs (1):                        
Commercial and industrial   $ 1,145     23.9     $ 1,450     28.3     $ 1,601     52.3  
Agricultural                        
Office, retail, and industrial   2,151     44.9     1,633     31.8     457     14.9  
Multi-family   (69 )   (1.4 )   83     1.6     67     2.2  
Construction   (9 )   (0.2 )   (12 )   (0.2 )   (114 )   (3.7 )
Other commercial real estate   415     8.7     810     15.8     92     3.0  
Consumer   1,162     24.2     1,164     22.7     959     31.3  
Covered           2         1      
Total net loan charge-offs   $ 4,795     100.0     $ 5,130     100.0     $ 3,063     100.0  
                         
Net loan charge-offs to average
  loans, annualized:
                       
Quarter-to-date   0.24 %       0.26 %       0.18 %    
Year-to-date   0.24 %       0.24 %       0.33 %    

(1) Amounts represent charge-offs, net of recoveries.

DEPOSIT PORTFOLIO

         
Deposit Composition
(Dollar amounts in thousands)
         
    Average for Quarters Ended   September 30, 2016
Percent Change From
    September 30,
 2016
  June 30,
 2016
  September 30,
 2015
  June 30,
 2016
  September 30,
 2015
Demand deposits   $ 2,806,851     $ 2,771,813     $ 2,601,442     1.3     7.9  
Savings deposits   1,655,604     1,655,566     1,471,003         12.5  
NOW accounts   1,754,330     1,615,677     1,405,371     8.6     24.8  
Money market accounts   1,680,886     1,670,536     1,589,582     0.6     5.7  
Core deposits   7,897,671     7,713,592     7,067,398     2.4     11.7  
Time deposits and other   1,248,425     1,277,694     1,173,127     (2.3 )   6.4  
Total deposits   $ 9,146,096     $ 8,991,286     $ 8,240,525     1.7     11.0  
                                     

Average core deposits of $7.9 billion for the third quarter of 2016 increased by 2.4% and 11.7% compared to the second quarter of 2016 and the third quarter of 2015, respectively. The rise in average core deposits compared to the second quarter of 2016 resulted primarily from a seasonal increase in average municipal deposits. Compared to the third quarter of 2015, the rise reflects the impact of the core deposits assumed in the NI Bancshares and Peoples transactions, and organic growth.

CAPITAL MANAGEMENT

     
Capital Ratios
     
    As of
    September 30,
 2016
  June 30,
 2016
  December 31,
 2015
  September 30,
 2015
Company regulatory capital ratios:
Total capital to risk-weighted assets   12.25 %   10.68 %   11.15 %   11.43 %
Tier 1 capital to risk-weighted assets   9.89 %   9.83 %   10.28 %   10.55 %
Common equity Tier 1 ("CET1") to risk-weighted assets   9.38 %   9.32 %   9.73 %   10.00 %
Tier 1 capital to average assets   8.90 %   8.94 %   9.40 %   9.29 %
Company tangible common equity ratios (1)(2):            
Tangible common equity to tangible assets   8.04 %   8.29 %   8.59 %   8.50 %
Tangible common equity, excluding other comprehensive loss, to
  tangible assets
  8.16 %   8.37 %   8.89 %   8.67 %
Tangible common equity to risk-weighted assets   9.13 %   9.14 %   9.29 %   9.70 %

(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. See the accompanying Non-GAAP Reconciliations for details of the calculation of these ratios.

The Company's total capital to risk-weighted assets was 12.25% as of September 30, 2016, increasing compared to the prior periods presented due primarily to the issuance of $150.0 million of subordinated notes during the third quarter of 2016.

The Board of Directors approved a quarterly cash dividend of $0.09 per common share during the third quarter of 2016, which is consistent with the quarterly dividend paid to shareholders in the second quarter of 2016 and follows a dividend increase from $0.08 to $0.09 per common share during the first quarter of 2015.

Conference Call

A conference call to discuss the Company's results, outlook, and related matters will be held on Wednesday, October 19, 2016 at 11:00 A.M. (ET). Members of the public who would like to listen to the conference call should dial (877) 507-0639 (U.S. domestic) or (412) 317-6003 (International) and ask for the First Midwest Bancorp, Inc. Earnings Conference Call. The number should be dialed 10 to 15 minutes prior to the start of the conference call. There is no charge to access the call. The conference call will also be accessible as an audio webcast through the Investor Relations section of the Company's website, www.firstmidwest.com/investorrelations. For those unable to listen to the live broadcast, a replay will be available on the Company's website or by dialing (877) 344-7529 (U.S. domestic) or (412) 317-0088 (International) conference ID 10094285 beginning one hour after completion of the live call until 9:00 A.M. (ET) on October 27, 2016. Please direct any questions regarding obtaining access to the conference call to First Midwest Bancorp, Inc. Investor Relations, via e-mail, at investor.relations@firstmidwest.com.

Press Release and Additional Information Available on Website

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

Forward-Looking Statements

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

Forward-looking statements may be deemed to include, among other things, statements relating to our future financial performance, the performance of our loan or securities portfolio, the expected amount of future credit reserves or charge-offs, corporate strategies or objectives, including those relating to our strategic objectives regarding the sale-leaseback transaction, anticipated trends in our business, regulatory developments, acquisition transactions, including estimated synergies, cost savings and financial benefits of pending or consummated transactions, including First Midwest's proposed acquisition of Standard, and growth strategies, including possible future acquisitions. These statements are subject to certain risks, uncertainties and assumptions. For a discussion of these risks, uncertainties and assumptions, you should refer to the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2015, as well as our subsequent filings made with the Securities and Exchange Commission. However, these risks and uncertainties are not exhaustive. Other sections of such reports describe additional factors that could adversely impact our business and financial performance.

Non-GAAP Financial Information

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

The Company presents earnings per share, excluding certain significant transactions, and the efficiency ratio, both of which exclude acquisition and integration related expenses, the net gain on the sale-leaseback transaction, and property valuation adjustments. In addition, the Company presents noninterest expense, excluding acquisition and integration related expenses. Management believes excluding these transactions from earnings per share, the efficiency ratio, and noninterest expense are useful in assessing the Company's underlying operational performance since these transactions do not pertain to its core business operations and their exclusion facilitates better comparability between periods.

The tax-equivalent adjustment to net interest income and net interest margin recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a 35% tax rate. Management believes that it is standard practice in the banking industry to present net interest income and net interest margin on a fully tax-equivalent basis and that it enhances comparability for peer comparison purposes.

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

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

Additional Information for Stockholders

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 Standard, First Midwest has filed a registration statement on Form S-4 (file no. 333-213532) with the SEC. The registration statement includes a joint proxy statement of First Midwest and Standard, which also constitutes a prospectus of First Midwest, that First Midwest and Standard will send to their respective shareholders once finalized. Investors and shareholders are advised to read the joint proxy statement/prospectus because it contains important information about First Midwest, Standard and the proposed transaction. This document and other documents relating to the merger 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, One Pierce Place, Suite 1500, Itasca, Illinois 60143 or by calling (630) 875-7463, or from Standard upon written request to Standard Bancshares, Inc., Attn: Lawrence P. Kelley, President and Chief Executive Officer, 7800 West 95th Street, Hickory Hills, Illinois 60457 or by calling (708) 499-2000.

Participants in the Proposed Standard Transaction

First Midwest, Standard 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 the respective shareholders of First Midwest and Standard in connection with the proposed Standard 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 joint proxy statement/prospectus regarding the proposed Standard transaction. Additional information about First Midwest and its directors and officers may be found in the definitive proxy statement of First Midwest relating to its 2016 Annual Meeting of Stockholders filed with the SEC on April 14, 2016 and First Midwest's annual report on Form 10-K for the year ended December 31, 2015 filed with the SEC on February 23, 2016. 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 is a relationship-based financial institution and one of the largest independent publicly-traded bank holding companies based on assets headquartered in the Midwest. First Midwest's principal subsidiary, First Midwest Bank, and other affiliates provide a full range of commercial, equipment financing, retail, wealth management, trust and private banking products and services through over 110 locations in metropolitan Chicago, northwest Indiana, central and western Illinois, and eastern Iowa. First Midwest's website is www.firstmidwest.com.

Accompanying Unaudited Selected Financial Information

First Midwest Bancorp, Inc.
Consolidated Statements of Financial Condition (Unaudited)
(Dollar amounts in thousands)
   
  As of
  September 30,   June 30,   March 31,   December 31,   September 30,
  2016   2016   2016   2015   2015
Period-End Balance Sheet                  
Assets                  
Cash and due from banks $ 139,538     $ 149,957     $ 135,049     $ 114,587     $ 125,279  
Interest-bearing deposits in other banks 362,153     105,432     171,312     266,615     822,264  
Trading securities, at fair value 18,351     17,693     17,408     16,894     17,038  
Securities available-for-sale, at fair value 1,964,030     1,773,759     1,625,579     1,306,636     1,151,418  
Securities held-to-maturity, at amortized cost 20,337     20,672     21,051     23,152     23,723  
FHLB and FRB stock 53,506     44,506     40,916     39,306     38,748  
Loans:                  
Commercial and industrial 2,849,399     2,699,742     2,634,391     2,524,726     2,392,860  
Agricultural 409,571     401,858     422,231     387,440     393,732  
Commercial real estate:                  
Office, retail, and industrial 1,537,038     1,529,675     1,566,395     1,395,454     1,414,077  
Multi-family 625,305     587,104     562,065     528,324     539,308  
Construction 401,857     371,016     260,743     216,882     192,086  
Other commercial real estate 970,855     1,000,655     1,060,302     931,190     869,748  
Home equity 733,260     722,881     683,171     653,468     647,223  
1-4 family mortgages 388,145     415,581     390,887     355,854     294,261  
Installment 232,030     223,845     213,979     137,602     131,185  
Covered loans 24,322     27,180     28,391     30,775     51,219  
Total loans 8,171,782     7,979,537     7,822,555     7,161,715     6,925,699  
Allowance for loan losses (85,308 )   (80,105 )   (77,150 )   (73,630 )   (72,500 )
Net loans 8,086,474     7,899,432     7,745,405     7,088,085     6,853,199  
OREO 28,049     29,990     29,649     27,782     32,035  
Premises, furniture, and equipment, net 82,443     140,554     141,323     122,278     127,443  
Investment in BOLI 219,064     218,133     218,873     209,601     208,666  
Goodwill and other intangible assets 367,961     369,962     369,979     339,277     331,250  
Accrued interest receivable and other assets 236,291     225,720     212,378     178,463     203,983  
Total assets $ 11,578,197     $ 10,995,810     $ 10,728,922     $ 9,732,676     $ 9,935,046  
Liabilities and Stockholders' Equity                  
Noninterest-bearing deposits $ 2,766,265     $ 2,683,495     $ 2,627,530     $ 2,414,454     $ 2,671,793  
Interest-bearing deposits 6,339,839     6,287,821     6,153,288     5,683,284     5,624,657  
Total deposits 9,106,104     8,971,316     8,780,818     8,097,738     8,296,450  
Borrowed funds 639,539     449,744     387,411     165,096     169,943  
Senior and subordinated debt 309,444     162,876     201,293     201,208     201,123  
Accrued interest payable and other liabilities 253,846     160,985     134,835     122,366     119,861  
Stockholders' equity 1,269,264     1,250,889     1,224,565     1,146,268     1,147,669  
Total liabilities and stockholders' equity $ 11,578,197     $ 10,995,810     $ 10,728,922     $ 9,732,676     $ 9,935,046  
Stockholders' equity, excluding accumulated other
  comprehensive income ("AOCI")
$ 1,282,666     $ 1,259,692     $ 1,239,606     $ 1,174,657     $ 1,163,487  
Stockholders' equity, common 1,269,264     1,250,889     1,224,565     1,146,268     1,147,669  
                             


 
First Midwest Bancorp, Inc.
Condensed Consolidated Statements of Income (Unaudited)
(Dollar amounts in thousands)
                             
  Quarters Ended     Nine Months Ended
  September 30,   June 30,   March 31,   December 31,   September 30,     September 30,   September 30,
  2016   2016   2016   2015   2015     2016   2015
Income Statement                            
Interest income $ 97,906     $ 96,550     $ 87,548     $ 84,667     $ 84,292       $ 282,004     $ 251,317  
Interest expense 6,934     6,569     6,834     6,655     6,390       20,337     17,731  
Net interest income 90,972     89,981     80,714     78,012     77,902       261,667     233,586  
Provision for loan losses 9,998     8,085     7,593     4,500     4,100       25,676     16,652  
Net interest income after
  provision for loan losses
80,974     81,896     73,121     73,512     73,802       235,991     216,934  
Noninterest Income                            
Service charges on deposit
  accounts
10,708     10,169     9,473     10,303     10,519       30,350     29,676  
Wealth management fees 8,495     8,642     7,559     7,493     7,222       24,696     21,669  
Card-based fees 7,332     7,592     6,718     6,761     6,868       21,642     20,223  
Merchant servicing fees 3,319     3,170     3,028     2,929     3,207       9,517     8,810  
Mortgage banking income 3,394     1,863     1,368     1,777     1,402       6,625     3,964  
Other service charges,
  commissions, and fees
5,218     4,498     5,448     4,664     3,900       15,164     8,990  
Total fee-based revenues 38,466     35,934     33,594     33,927     33,118       107,994     93,332  
Net gain on sale-leaseback
  transaction
5,509                       5,509      
Net securities gains 187     23     887     822     524       1,097     1,551  
Other income 1,691     1,865     1,445     1,729     1,372       5,001     5,220  
Total noninterest income 45,853     37,822     35,926     36,478     35,014       119,601     100,103  
Noninterest Expense                            
Salaries and employee
  benefits:
                           
Salaries and wages 37,872     37,916     36,296     34,295     33,554       112,084     99,444  
Retirement and other
  employee benefits
8,500     8,351     8,298     8,925     7,807       25,149     22,927  
Total salaries and
  employee benefits
46,372     46,267     44,594     43,220     41,361       137,233     122,371  
Net occupancy and
  equipment expense
10,755     9,928     9,697     9,256     9,406       30,380     29,464  
Professional services 6,772     5,292     5,920     6,117     6,172       17,984     16,603  
Technology and related costs 3,881     3,669     3,701     3,694     3,673       11,251     10,887  
Merchant card expense 2,857     2,724     2,598     2,495     2,722       8,179     7,391  
Advertising and promotions 1,941     1,927     1,589     2,211     1,828       5,457     5,395  
Cardholder expenses 1,515     1,512     1,359     1,329     1,354       4,386     3,914  
Net OREO expense 313     1,122     664     926     1,290       2,099     4,355  
Other expenses 7,310     8,295     7,447     7,525     6,559       23,052     20,093  
Acquisition and integration
  related expenses
1,172     618     5,020     1,389           6,810      
Property valuation
  adjustments
            8,581                
Total noninterest expense 82,888     81,354     82,589     86,743     74,365       246,831     220,473  
Income before income tax
  expense
43,939     38,364     26,458     23,247     34,451       108,761     96,564  
Income tax expense 15,537     13,097     8,496     6,923     11,167       37,130     30,824  
Net income $ 28,402     $ 25,267     $ 17,962     $ 16,324     $ 23,284       $ 71,631     $ 65,740  
Net income applicable to
  common shares
$ 28,078     $ 24,977     $ 17,750     $ 16,145     $ 23,058       $ 70,805     $ 65,037  
Net income applicable to
  common shares, excluding
  certain significant 
  transactions (1)
$ 25,476     $ 25,348     $ 20,762     $ 22,127     $ 23,058       $ 71,586     $ 65,037  

Footnotes to Condensed Consolidated Statements of Income
(1) Certain significant transactions include the net gain on sale-leaseback transaction, acquisition and integration related expenses associated with completed and pending acquisitions, and property valuation adjustments related to strategic branch initiatives.

 
First Midwest Bancorp, Inc.
Selected Financial Information (Unaudited)
(Amounts in thousands, except per share data)
                             
  As of or for the
  Quarters Ended     Nine Months Ended
  September 30,   June 30,   March 31,   December 31,   September 30,     September 30,   September 30,
  2016   2016   2016   2015   2015     2016   2015
Earnings Per Share                            
Basic earnings per common
  share ("EPS") (1)
$ 0.35     $ 0.31     $ 0.23     $ 0.21     $ 0.30       $ 0.89     $ 0.84  
Diluted EPS (1) $ 0.35     $ 0.31     $ 0.23     $ 0.21     $ 0.30       $ 0.89     $ 0.84  
Diluted EPS, excluding certain
  significant transactions (1) (6)
$ 0.32     $ 0.32     $ 0.27     $ 0.29     $ 0.30       $ 0.90     $ 0.84  
Common Stock and Related Per Common Share Data          
Book value $ 15.61     $ 15.38     $ 15.06     $ 14.70     $ 14.72       $ 15.61     $ 14.72  
Tangible book value $ 11.08     $ 10.83     $ 10.51     $ 10.35     $ 10.47       $ 11.08     $ 10.47  
Dividends declared per share $ 0.09     $ 0.09     $ 0.09     $ 0.09     $ 0.09       $ 0.27     $ 0.27  
Closing price at period end $ 19.36     $ 17.56     $ 18.02     $ 18.43     $ 17.54       $ 19.36     $ 17.54  
Closing price to book value 1.2     1.1     1.2     1.3     1.2       1.2     1.2  
Period end shares outstanding 81,324     81,312     81,298     77,952     77,942       81,324     77,942  
Period end treasury shares 9,957     9,965     9,976     10,276     10,286       9,957     10,286  
Common dividends $ 7,408     $ 7,240     $ 7,228     $ 7,017     $ 7,014       $ 21,876     $ 21,047  
Key Ratios/Data                            
Return on average common
  equity (1) (2)
8.85 %   8.13 %   6.06 %   5.55 %   8.06 %     7.72 %   7.73 %
Return on average tangible
  common equity (1) (2)
12.85 %   11.94 %   8.87 %   8.06 %   11.68 %     11.27 %   11.28 %
Return on average tangible
  common equity, excluding
  certain significant
  transactions (1) (2) (6)
11.69 %   12.11 %   10.32 %   10.94 %   11.68 %     11.39 %   11.28 %
Return on average assets (2) 1.00 %   0.93 %   0.72 %   0.66 %   0.94 %     0.89 %   0.91 %
Return on average assets,
  excluding certain significant
  transactions (1) (2) (6)
0.91 %   0.94 %   0.84 %   0.90 %   0.94 %     0.90 %   0.91 %
Loans to deposits 89.74 %   88.94 %   89.09 %   88.44 %   83.48 %     89.74 %   83.48 %
Efficiency ratio (1) 60.83 %   60.98 %   64.82 %   64.95 %   63.20 %     62.12 %   63.10 %
Net interest margin (3) 3.60 %   3.72 %   3.66 %   3.59 %   3.58 %     3.66 %   3.70 %
Yield on average interest-earning
  assets (3)
3.87 %   3.99 %   3.96 %   3.89 %   3.86 %     3.94 %   3.98 %
Cost of funds 0.39 %   0.39 %   0.44 %   0.44 %   0.42 %     0.40 %   0.40 %
Net noninterest expense to
  average assets
1.50 %   1.61 %   1.90 %   2.08 %   1.60 %     1.66 %   1.69 %
Effective income tax rate 35.36 %   34.14 %   32.11 %   29.78 %   32.41 %     34.14 %   31.92 %
Capital Ratios                            
Total capital to risk-weighted
  assets (1)
12.25 %   10.68 %   10.64 %   11.15 %   11.43 %     12.25 %   11.43 %
Tier 1 capital to risk-weighted
  assets (1)
9.89 %   9.83 %   9.81 %   10.28 %   10.55 %     9.89 %   10.55 %
CET1 to risk-weighted assets (1) 9.38 %   9.32 %   9.30 %   9.73 %   10.00 %     9.38 %   10.00 %
Tier 1 capital to average assets (1) 8.90 %   8.94 %   9.56 %   9.40 %   9.29 %     8.90 %   9.29 %
Tangible common equity to
  tangible assets (1)
8.04 %   8.29 %   8.25 %   8.59 %   8.50 %     8.04 %   8.50 %
Tangible common equity,
  excluding AOCI, to tangible
  assets (1)
8.16 %   8.37 %   8.39 %   8.89 %   8.67 %     8.16 %   8.67 %
Tangible common equity to
  risk-weighted assets (1)
9.13 %   9.14 %   9.04 %   9.29 %   9.70 %     9.13 %   9.70 %
Note: Selected Financial Information footnotes are located at the end of this section.          


 
First Midwest Bancorp, Inc.
Selected Financial Information (Unaudited)
(Amounts in thousands, except per share data)
                             
  As of or for the
  Quarters Ended     Nine Months Ended
  September 30,   June 30,   March 31,   December 31,   September 30,     September 30,   September 30,
  2016   2016   2016   2015   2015     2016   2015
Asset Quality Performance Data                          
Non-performing assets (4)                            
Commercial and industrial $ 13,823     $ 6,303     $ 5,364     $ 5,587     $ 6,438       $ 13,823     $ 6,438  
Agricultural 184     475     295     355     112       184     112  
Commercial real estate:                            
Office, retail, and industrial 17,670     16,815     10,910     6,875     6,961       17,670     6,961  
Multi-family 316     321     410     796     1,046       316     1,046  
Construction 287     360     778     905     3,332       287     3,332  
Other commercial real estate 3,361     4,797     5,555     5,611     5,898       3,361     5,898  
Consumer 8,156     7,788     8,071     8,746     8,521       8,156     8,521  
Total non-accrual loans 43,797     36,859     31,383     28,875     32,308       43,797     32,308  
90 days or more past due loans,
  still accruing interest
4,318     5,406     5,483     2,883     4,559       4,318     4,559  
Total non-performing loans 48,115     42,265     36,866     31,758     36,867       48,115     36,867  
Accruing TDRs 2,368     2,491     2,702     2,743     2,771       2,368     2,771  
OREO 27,986     29,452     29,238     27,349     31,129       27,986     31,129  
Total non-performing assets $ 78,469     $ 74,208     $ 68,806     $ 61,850     $ 70,767       $ 78,469     $ 70,767  
30-89 days past due loans (4) $ 25,849     $ 22,770     $ 29,826     $ 16,329     $ 28,629       $ 25,849     $ 28,629  
Allowance for credit losses                            
Allowance for loan losses $ 84,016     $ 78,711     $ 75,582     $ 71,992     $ 68,384       $ 84,016     $ 68,384  
Allowance for covered loan
  losses
1,292     1,394     1,568     1,638     4,116       1,292     4,116  
Reserve for unfunded
  commitments
1,000     1,400     1,225     1,225     1,225       1,000     1,225  
Total allowance for credit
  losses
$ 86,308     $ 81,505     $ 78,375     $ 74,855     $ 73,725       $ 86,308     $ 73,725  
Provision for loan losses $ 9,998     $ 8,085     $ 7,593     $ 4,500     $ 4,100       $ 25,676     $ 16,652  
Net charge-offs by category                            
Commercial and industrial $ 1,145     $ 1,450     $ 1,396     $ 1,781     $ 1,601       $ 3,991     $ 11,531  
Agricultural                            
Commercial real estate:                            
Office, retail, and industrial 2,151     1,633     421     267     457       4,205     2,153  
Multi-family (69 )   83     179     (27 )   67       193     557  
Construction (9 )   (12 )   111     105     (114 )     90     (319 )
Other commercial real estate 415     810     1,294     110     92       2,519     540  
Consumer 1,162     1,164     672     1,134     959       2,998     1,870  
Covered loans     2             1       2     514  
Total net charge-offs $ 4,795     $ 5,130     $ 4,073     $ 3,370     $ 3,063       $ 13,998     $ 16,846  
Total recoveries included above $ 1,155     $ 1,003     $ 1,116     $ 1,031     $ 1,294       $ 3,274     $ 5,670  
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
    September 30,   June 30,   March 31,   December 31,   September 30,
    2016   2016   2016   2015   2015
Asset Quality ratios (4)                    
Non-accrual loans to total loans   0.54 %   0.46 %   0.40 %   0.40 %   0.47 %
Non-performing loans to total loans   0.59 %   0.53 %   0.47 %   0.45 %   0.54 %
Non-performing assets to total loans plus OREO   0.96 %   0.93 %   0.88 %   0.86 %   1.02 %
Non-performing assets to tangible common equity plus allowance
  for credit losses
  7.96 %   7.72 %   7.39 %   7.03 %   7.99 %
Non-accrual loans to total assets   0.38 %   0.34 %   0.29 %   0.30 %   0.33 %
Allowance for credit losses and net charge-off ratios
Allowance for credit losses to total loans (5)   1.06 %   1.02 %   1.00 %   1.05 %   1.06 %
Allowance for credit losses to loans, excluding acquired loans   1.13 %   1.11 %   1.11 %   1.11 %   1.14 %
Allowance for credit losses to non-accrual loans (4)   194.11 %   217.34 %   244.74 %   253.57 %   215.45 %
Allowance for credit losses to non-performing loans (4)   176.69 %   189.54 %   208.34 %   230.55 %   188.81 %
Net charge-offs to average loans (2)   0.24 %   0.26 %   0.22 %   0.19 %   0.18 %

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, which reflects federal and state tax benefits.
(4) Excludes covered loans and covered OREO.
(5) This ratio includes acquired loans that are recorded at fair value through an acquisition adjustment, which incorporates credit risk, as of the acquisition date with no allowance for credit losses being established at that time. As the acquisition adjustment is accreted into income over future periods, an allowance for credit losses is established on acquired loans as necessary to reflect credit deterioration.
(6) Certain significant transactions include the net gain on sale-leaseback transaction, acquisition and integration related expenses associated with completed and pending acquisitions, and property valuation adjustments related to strategic branch initiatives.

           
First Midwest Bancorp, Inc.          
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
         
                             
  Quarters Ended     Nine Months Ended
  September 30,   June 30,   March 31,   December 31,   September 30,     September 30,   September 30,
  2016   2016   2016   2015   2015     2016   2015
Earnings Per Share                            
Net income $ 28,402     $ 25,267     $ 17,962     $ 16,324     $ 23,284       $ 71,631     $ 65,740  
Net income applicable to
  non-vested restricted shares
(324 )   (290 )   (212 )   (179 )   (226 )     (826 )   (703 )
Net income applicable to
  common shares
28,078     24,977     17,750     16,145     23,058       70,805     65,037  
Net gain on sale-leaseback
  transaction
(5,509 )                     (5,509 )    
Tax effect of net gain on sale-
  leaseback transaction
2,204                       2,204      
Acquisition and integration
  related expenses
1,172     618     5,020     1,389           6,810      
Tax effect of acquisition and
  integration related expenses
(469 )   (247 )   (2,008 )   (556 )         (2,724 )    
Property valuation adjustments             8,581                
Tax effect of property valuation
  adjustments
            (3,432 )              
Net income applicable to
  common shares, excluding
  certain significant
  transactions (1)
$ 25,476     $ 25,348     $ 20,762     $ 22,127     $ 23,058       $ 71,586     $ 65,037  
Weighted-average common shares outstanding:                          
Weighted-average common
  shares outstanding (basic)
80,396     80,383     77,980     77,121     77,106       79,589     77,038  
Dilutive effect of common
  stock equivalents
13     13     12     13     13       13     13  
Weighted-average diluted
  common shares
  outstanding
80,409     80,396     77,992     77,134     77,119       79,602     77,051  
Basic EPS $ 0.35     $ 0.31     $ 0.23     $ 0.21     $ 0.30       $ 0.89     $ 0.84  
Diluted EPS $ 0.35     $ 0.31     $ 0.23     $ 0.21     $ 0.30       $ 0.89     $ 0.84  
Diluted EPS, excluding certain
  significant transactions (1)
$ 0.32     $ 0.32     $ 0.27     $ 0.29     $ 0.30       $ 0.90     $ 0.84  
Anti-dilutive shares not included
  in the computation of diluted
  EPS
454     469     608     735     751       510     822  
Efficiency Ratio Calculation                            
Noninterest expense $ 82,888     $ 81,354     $ 82,589     $ 86,743     $ 74,365       $ 246,831     $ 220,473  
Less:                            
Net OREO expense (313 )   (1,122 )   (664 )   (926 )   (1,290 )     (2,099 )   (4,355 )
Acquisition and integration
  related expenses
(1,172 )   (618 )   (5,020 )   (1,389 )         (6,810 )    
Property valuation
  adjustments
            (8,581 )              
Total $ 81,403     $ 79,614     $ 76,905     $ 75,847     $ 73,075       $ 237,922     $ 216,118  
Tax-equivalent net interest
  income (2)
$ 93,051     $ 92,174     $ 83,021     $ 80,506     $ 80,511       $ 268,246     $ 241,771  
Fee-based revenues 38,466     35,934     33,594     33,927     33,118       107,994     93,332  
Add:                            
Other income, excluding
  BOLI income
762     984     579     807     446       2,325     1,957  
BOLI 929     881     866     922     926       2,676     3,263  
Tax-equivalent adjustment of
  BOLI
619     587     577     615     617       1,784     2,175  
Total $ 133,827     $ 130,560     $ 118,637     $ 116,777     $ 115,618       $ 383,025     $ 342,498  
Efficiency ratio 60.83 %   60.98 %   64.82 %   64.95 %   63.20 %     62.12 %   63.10 %
                             
Note: Non-GAAP Reconciliations footnotes are located at the end of this section.          


 
First Midwest Bancorp, Inc.
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
                             
  As of or for the
  Quarters Ended     Nine Months Ended
  September 30,   June 30,   March 31,   December 31,   September 30,     September 30,   September 30,
  2016   2016   2016   2015   2015     2016   2015
Tax-Equivalent Net Interest Income                          
Net interest income $ 90,972     $ 89,981     $ 80,714     $ 78,012     $ 77,902       $ 261,667     $ 233,586  
Tax-equivalent adjustment 2,079     2,193     2,307     2,494     2,609       6,579     8,185  
Tax-equivalent net interest
  income (2)
$ 93,051     $ 92,174     $ 83,021     $ 80,506     $ 80,511       $ 268,246     $ 241,771  
Risk-Based Capital Data                            
Common stock $ 913     $ 913     $ 913     $ 882     $ 882       $ 913     $ 882  
Additional paid-in capital 496,918     495,159     493,153     446,672     445,037       496,918     445,037  
Retained earnings 1,003,271     982,277     964,250     953,516     944,209       1,003,271     944,209  
Treasury stock, at cost (218,436 )   (218,657 )   (218,710 )   (226,413 )   (226,641 )     (218,436 )   (226,641 )
Goodwill and other intangible
  assets, net of deferred tax
  liabilities
(357,079 )   (358,582 )   (357,895 )   (327,115 )   (318,854 )     (357,079 )   (318,854 )
Disallowed deferred tax assets (383 )   (2,263 )   (2,956 )   (1,902 )   (2,889 )     (383 )   (2,889 )
CET1 capital 925,204     898,847     878,755     845,640     841,744       925,204     841,744  
Trust-preferred securities 50,690     50,690     50,690     50,690     50,690       50,690     50,690  
Other disallowed deferred tax
  assets
(255 )   (1,508 )   (1,970 )   (2,868 )   (4,334 )     (255 )   (4,334 )
Tier 1 capital 975,639     948,029     927,475     893,462     888,100       975,639     888,100  
Tier 2 capital 232,792     81,505     78,375     74,855     73,725       232,792     73,725  
Total capital $ 1,208,431     $ 1,029,534     $ 1,005,850     $ 968,317     $ 961,825       $ 1,208,431     $ 961,825  
Risk-weighted assets $ 9,867,406     $ 9,641,953     $ 9,452,551     $ 8,687,864     $ 8,414,729       $ 9,867,406     $ 8,414,729  
Adjusted average assets $ 10,959,119     $ 10,608,085     $ 9,700,671     $ 9,501,087     $ 9,559,796       $ 10,959,119     $ 9,559,796  
Total capital to risk-weighted
  assets
12.25 %   10.68 %   10.64 %   11.15 %   11.43 %     12.25 %   11.43 %
Tier 1 capital to risk-weighted
  assets
9.89 %   9.83 %   9.81 %   10.28 %   10.55 %     9.89 %   10.55 %
CET1 to risk-weighted assets 9.38 %   9.32 %   9.30 %   9.73 %   10.00 %     9.38 %   10.00 %
Tier 1 capital to average assets 8.90 %   8.94 %   9.56 %   9.40 %   9.29 %     8.90 %   9.29 %
Tangible Common Equity                            
Stockholders' equity $ 1,269,264     $ 1,250,889     $ 1,224,565     $ 1,146,268     $ 1,147,669       $ 1,269,264     $ 1,147,669  
Less: goodwill and other
  intangible assets
(367,961 )   (369,962 )   (369,979 )   (339,277 )   (331,250 )     (367,961 )   (331,250 )
Tangible common equity 901,303     880,927     854,586     806,991     816,419       901,303     816,419  
Less: AOCI 13,402     8,803     15,041     28,389     15,818       13,402     15,818  
Tangible common equity,
  excluding AOCI
$ 914,705     $ 889,730     $ 869,627     $ 835,380     $ 832,237       $ 914,705     $ 832,237  
Total assets $ 11,578,197     $ 10,995,810     $ 10,728,922     $ 9,732,676     $ 9,935,046       $ 11,578,197     $ 9,935,046  
Less: goodwill and other
  intangible assets
(367,961 )   (369,962 )   (369,979 )   (339,277 )   (331,250 )     (367,961 )   (331,250 )
Tangible assets $ 11,210,236     $ 10,625,848     $ 10,358,943     $ 9,393,399     $ 9,603,796       $ 11,210,236     $ 9,603,796  
Tangible common equity to
  tangible assets
8.04 %   8.29 %   8.25 %   8.59 %   8.50 %     8.04 %   8.50 %
Tangible common equity,
  excluding AOCI, to tangible
  assets
8.16 %   8.37 %   8.39 %   8.89 %   8.67 %     8.16 %   8.67 %
Tangible common equity to
  risk-weighted assets
9.13 %   9.14 %   9.04 %   9.29 %   9.70 %     9.13 %   9.70 %
                             
Note: Non-GAAP Reconciliations footnotes are located at the end of this section.          


 
First Midwest Bancorp, Inc.
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
                             
  As of or for the
  Quarters Ended     Nine Months Ended
  September 30,   June 30,   March 31,   December 31,   September 30,     September 30,   September 30,
  2016   2016   2016   2015   2015     2016   2015
Return on Average Common and Tangible Common Equity                      
Net income applicable to
  common shares
$ 28,078     $ 24,977     $ 17,750     $ 16,145     $ 23,058       $ 70,805     $ 65,037  
Intangibles amortization 1,245     1,245     985     971     973       3,475     2,949  
Tax effect of intangibles
  amortization
(498 )   (498 )   (394 )   (388 )   (389 )     (1,390 )   (1,180 )
Net income applicable to
  common shares, excluding
  intangibles amortization
28,825     25,724     18,341     16,728     23,642       72,890     66,806  
Net gain on sale-leaseback
  transaction
(5,509 )                     (5,509 )    
Tax effect of net gain on sale-
  leaseback transaction
2,204                       2,204      
Acquisition and integration
  related expenses
1,172     618     5,020     1,389           6,810      
Tax effect of acquisition and
  integration related expenses
(469 )   (247 )   (2,008 )   (556 )         (2,724 )    
Property valuation adjustments             8,581                
Tax effect of property valuation
  adjustments
            (3,432 )              
Net income applicable to
  common shares, excluding
  intangibles amortization
  and certain significant
  transactions (1)
$ 26,223     $ 26,095     $ 21,353     $ 22,710     $ 23,642       $ 73,671     $ 66,806  
Average stockholders' equity $ 1,261,702     $ 1,235,497     $ 1,178,588     $ 1,154,506     $ 1,134,967       1,225,396     $ 1,124,493  
Less: average intangible assets (369,281 )   (369,177 )   (346,549 )   (331,013 )   (331,720 )     (361,697 )   (332,692 )
Average tangible common
  equity
$ 892,421     $ 866,320     $ 832,039     $ 823,493     $ 803,247       $ 863,699     $ 791,801  
Return on average common
  equity (3)
8.85 %   8.13 %   6.06 %   5.55 %   8.06 %     7.72 %   7.73 %
Return on average tangible
  common equity (3)
12.85 %   11.94 %   8.87 %   8.06 %   11.68 %     11.27 %   11.28 %
Return on average tangible
  common equity, excluding
  certain significant
  transactions (1) (3)
11.69 %   12.11 %   10.32 %   10.94 %   11.68 %     11.39 %   11.28 %
Return on Average Assets                      
Net income $ 28,402     $ 25,267     $ 17,962     $ 16,324     $ 23,284       $ 71,631     $ 65,740  
Net gain on sale-leaseback
  transaction
(5,509 )                     (5,509 )    
Tax effect of net gain on sale-
  leaseback transaction
2,204                       2,204      
Acquisition and integration
  related expenses
1,172     618     5,020     1,389           6,810      
Tax effect of acquisition and
  integration related expenses
(469 )   (247 )   (2,008 )   (556 )         (2,724 )    
Property valuation adjustments             8,581                
Tax effect of property valuation
  adjustments
            (3,432 )              
Net income, excluding certain
  significant transactions (1)
$ 25,800     $ 25,638     $ 20,974     $ 22,306     $ 23,284       $ 72,412     $ 65,740  
Average assets $ 11,322,325     $ 10,968,516     $ 10,056,845     $ 9,822,430     $ 9,875,632       $ 10,784,532     $ 9,661,483  
Return on average assets (3) 1.00 %   0.93 %   0.72 %   0.66 %   0.94 %     0.89 %   0.91 %
Return on average assets,
  excluding certain significant
  transactions (1) (3)
0.91 %   0.94 %   0.84 %   0.90 %   0.94 %     0.90 %   0.91 %

Footnotes to Non-GAAP Reconciliations
(1) Certain significant transactions include the net gain on sale-leaseback transaction, acquisition and integration related expenses associated with completed and pending acquisitions, and property valuation adjustments related to strategic branch initiatives.
(2) Presented on a tax-equivalent basis, which reflects federal and state tax benefits.
(3) Annualized based on the actual number of days for each period presented.

Contact Information

Investors:
Paul F. Clemens
EVP and Chief Financial Officer 
(630) 875-7347 
paul.clemens@firstmidwest.com

Media:
James M. Roolf
SVP and Corporate Relations Officer 
(630) 875-7533 
jim.roolf@firstmidwest.com

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