First Midwest Bancorp, Inc. Announces 2021 Fourth Quarter and Full Year Results

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CHICAGO, Jan. 18, 2022 (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 fourth quarter and full year of 2021. Net income applicable to common shares for the fourth quarter of 2021 was $44 million, or $0.39 per diluted common share, compared to $50 million, or $0.44 per diluted common share, for the third quarter of 2021, and $37 million, or $0.33 per diluted common share, for the fourth quarter of 2020. For the full year of 2021, the Company reported net income applicable to common shares of $182 million, or $1.60 per diluted common share, compared to $98 million, or $0.87 per diluted common share, for the year ended December 31, 2020.

Comparative results for all periods were impacted by the timing of costs related to acquisitions. In addition, certain periods were impacted by retail and balance sheet optimization strategies, and securities gains, as well as the Company’s response to the COVID-19 pandemic (the “pandemic”) and federal, state and local responses to the pandemic. To facilitate comparisons between periods, adjustments to reported results have been made to reflect these impacts. For additional detail on these adjustments, see the “Non-GAAP Financial Information” section presented later in this release.

FOURTH QUARTER AND FULL YEAR HIGHLIGHTS

  • Improved diluted EPS to $0.39 for the fourth quarter of 2021 and $1.60 for the full year of 2021, up 18% and 84% from the same periods in 2020; down 5% and up 44% on an adjusted(1) basis, respectively.
    • Generated total revenue of $183 million for the fourth quarter of 2021 and $751 million for the full year of 2021, both up 4% from the same periods in 2020.
      • Net interest income and margin down 6% and 39 basis points (“bps”), respectively, from the fourth quarter of 2020 and down 2% and 27 bps from the full year of 2020, reflective of the lower interest rate environment and elevated liquidity.
      • Fee-based revenues up 1% and 15% from the fourth quarter of 2020 and full year of 2020, respectively.
    • Controlled noninterest expense to average assets of 2.18% for the fourth quarter of 2021 and 2.21% for the full year of 2021, down 7 bps and 17 bps from the same periods in 2020.
  • Grew total loans to $15 billion, up 3% from the prior year, excluding PPP loans.
  • Increased total average deposits to $17 billion for both the fourth quarter and full year of 2021, up 10% and 13% from the same periods in 2020.
  • Established the allowance for credit losses (“ACL”) at $210 million, or 1.45% of total loans, excluding PPP loans, compared to 1.77% at December 31, 2020, reflective of improving credit environment.
    • Lowered non-performing assets and performing loans classified as substandard and special mention 21% and 16%, respectively, compared to December 31, 2020.
    • Reduced net loan charge-offs (“NCOs”) to average loans to 0.05% for the fourth quarter of 2021 and 0.23% for the full year of 2021, compared to 0.12% and 0.24% for the same periods in 2020, excluding purchased credit deteriorated (“PCD”) and PPP loans.
  • Generated 67 bps of Tier 1 capital to risk-weighted assets during 2021, ending the year at 12.2%, largely reflective of higher retained earnings.

“The best of First Midwest was once again on display throughout 2021,” said Michael L. Scudder, Chairman of the Board and Chief Executive Officer of the Company. “The year’s financial results were strong, reflecting solid operating performance. I am extremely proud of our 2,000 colleagues who represent First Midwest each day. Amid the demands of an ongoing health crisis and challenging operating environment, they have remained agile and focused – all while working tirelessly to help support our clients, communities, and each other.”

Mr. Scudder continued, “We are very encouraged and excited about what lies ahead for our Company. Strong capital levels and a highly engaged team provide operating flexibility as we see economic recovery and growing opportunities for business expansion. As we look to our future, our ongoing integration planning efforts relative to our announced business combination with Old National Bank are on pace and in line with our expectations. This combination will see us grow to become one of the Midwest’s largest commercial banks and position us well for continued expansion, investment, and innovation in talent, capabilities, and services – all to the benefit of our clients, colleagues, communities and stockholders.”

PENDING MERGER

First Midwest and Old National Bancorp

On June 1, 2021, the Company and Old National Bancorp (“Old National”), the holding company for Old National Bank, jointly announced that they entered into a definitive merger agreement to combine in an all-stock merger of equals transaction to create a premier Midwestern bank with approximately $45 billion of combined assets. The merger agreement provides for a fixed exchange ratio whereby holders of First Midwest common stock will receive 1.1336 shares of Old National common stock for each share of First Midwest common stock they own. The merger agreement has been unanimously approved by the boards of directors of both companies, and has also been approved by approximately 99% of the votes cast at each company’s respective shareholder meeting.

As of the date of announcement, the overall transaction was valued at approximately $6.5 billion. On August 19, 2021, the Office of the Comptroller of the Currency approved the application for the merger of First Midwest Bank and Old National Bank. Completion of the merger remains subject to regulatory approval by the Board of Governors of the Federal Reserve System and certain other customary closing conditions set forth in the merger agreement.

(1) This metric is a non-GAAP financial measure. For details on the calculation of this metric, 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
  December 31, 2021     September 30, 2021     December 31, 2020
  Average Balance   Interest   Yield/
Rate
(%)
    Average
Balance
  Interest   Yield/
Rate
(%)
    Average
Balance
  Interest   Yield/
Rate
(%)
Assets                                      
Other interest-earning assets $ 2,122,042     $ 1,462     0.27     $ 1,672,005     $ 1,222     0.29     $ 1,244,999     $ 930     0.30
Securities(1)   3,308,840       18,711     2.26       3,265,812       16,189     1.98       3,164,310       17,051     2.16
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) stock   106,096       867     3.27       106,759       852     3.19       123,287       1,342     4.35
Loans, excluding PPP loans(1)   14,308,310       122,879     3.41       14,364,785       127,631     3.53       13,335,154       126,474     3.77
PPP loans(1)   317,553       5,119     6.40       549,380       9,772     7.06       1,013,511       15,195     5.96
Total loans(1)   14,625,863       127,998     3.47       14,914,165       137,403     3.66       14,348,665       141,669     3.93
Total interest-earning assets(1)   20,162,841       149,038     2.94       19,958,741       155,666     3.10       18,881,261       160,992     3.39
Cash and due from banks   286,846                 277,720                 252,268          
Allowance for loan losses   (208,048 )               (215,395 )               (246,278 )        
Other assets   1,805,033                 1,878,494                 1,995,074          
Total assets $ 22,046,672               $ 21,899,560               $ 20,882,325          
Liabilities and Stockholders’ Equity                                      
Savings deposits $ 2,825,792       125     0.02     $ 2,785,816       124     0.02     $ 2,436,930       109     0.02
NOW accounts   3,165,689       280     0.04       3,213,637       275     0.03       2,774,989       277     0.04
Money market deposits   3,316,492       510     0.06       3,211,355       549     0.07       2,923,881       694     0.09
Time deposits   1,736,197       1,702     0.39       1,800,493       1,915     0.42       2,047,260       3,131     0.61
Borrowed funds   1,288,778       3,143     0.97       1,281,968       3,146     0.97       1,661,731       4,158     1.00
Senior and subordinated debt   235,490       3,467     5.84       235,284       3,467     5.85       234,669       3,482     5.90
Total interest-bearing liabilities   12,568,438       9,227     0.29       12,528,553       9,476     0.30       12,079,460       11,851     0.39
Demand deposits   6,411,550                 6,272,903                 5,753,600          
Total funding sources   18,979,988         0.19       18,801,456         0.20       17,833,060         0.26
Other liabilities   336,533                 364,576                 373,854          
Stockholders’ equity   2,730,151                 2,733,528                 2,675,411          
Total liabilities and stockholders’ equity $ 22,046,672               $ 21,899,560               $ 20,882,325          
Tax-equivalent net interest income/margin(1)       139,811     2.75           146,190     2.91           149,141     3.14
Tax-equivalent adjustment       (1,035 )               (994 )               (1,030 )    
Net interest income (GAAP)(1)     $ 138,776               $ 145,196               $ 148,111      
Impact of acquired loan accretion(1)     $ 5,684     0.11         $ 6,231     0.12         $ 7,603     0.16
Tax-equivalent net interest income/margin, adjusted(1)     $ 134,127     2.64         $ 139,959     2.79         $ 141,538     2.98
                                                   

(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 fourth quarter of 2021 decreased by 4.4% from the third quarter of 2021 and was down 6.3% from the fourth quarter of 2020. Net interest income compared to both prior periods was impacted by a decrease in interest income and fees on PPP loans, as well as lower yields on loans and acquired loan accretion, partially offset by higher income on equity securities held in a grantor trust under our deferred compensation plan, which are substantially offset by the corresponding obligation to participants within total salaries and employee benefits. In addition, loan growth and lower cost of funds partially offset the decrease compared to the fourth quarter of 2020.

Acquired loan accretion contributed $5.7 million, $6.2 million, and $7.6 million to net interest income for the fourth quarter of 2021, the third quarter of 2021, and the fourth quarter of 2020, respectively.

Tax-equivalent net interest margin for the current quarter was 2.75%, decreasing by 16 basis points from the third quarter of 2021 and 39 basis points from the fourth quarter of 2020. Excluding the impact of acquired loan accretion, tax-equivalent net interest margin was 2.64%, down 15 basis points from the third quarter of 2021 and 34 basis points from the fourth quarter of 2020. Compared to both prior periods tax-equivalent net interest margin decreased due primarily to lower PPP loan income and yields on loans, excluding PPP loans, as well as a higher balance of other interest-earning assets from growth in commercial deposits compared to the third quarter of 2021 and PPP loan funds and other government stimuli compared to the fourth quarter of 2020. Higher income on equity securities held in a grantor trust under our deferred compensation plan and lower cost of funds partially offset the decrease compared to both prior periods.

For the fourth quarter of 2021, total average interest-earning assets increased by $204.1 million from the third quarter of 2021 and increased $1.3 billion from the fourth quarter of 2020. The increase compared to both prior periods resulted primarily from a higher balance of other interest-earning assets due to deposit growth, partially offset by lower PPP loan funds. In addition, compared to the fourth quarter of 2020, loan growth contributed to the increase in interest-earning assets.

Total average funding sources for the fourth quarter of 2021 increased by $178.5 million from the third quarter of 2021 and $1.1 billion from the fourth quarter of 2020. The increase compared to the third quarter of 2021 was impacted by growth in commercial deposits, partially offset by the seasonal outflows of municipal deposits. Compared to the fourth quarter of 2020, the increase was driven by higher customer balances resulting from PPP funds and other government stimuli, partially offset by a decrease in FHLB advances.

Noninterest Income Analysis
(Dollar amounts in thousands)

    Quarters Ended   December 31, 2021
Percent Change From
    December 31,
2021
  September 30,
2021
  December 31,
2020
  September 30,
2021
  December 31,
2020
Wealth management fees   $ 14,246   $ 14,820   $ 13,548     (3.9 )   5.2  
Service charges on deposit accounts     12,149     11,496     10,811     5.7     12.4  
Mortgage banking income     6,149     6,664     9,191     (7.7 )   (33.1 )
Card-based fees, net     4,451     4,992     4,530     (10.8 )   (1.7 )
Capital market products income     1,462     1,333     659     9.7     121.9  
Other service charges, commissions, and fees     3,775     2,832     2,993     33.3     26.1  
Total fee-based revenues     42,232     42,137     41,732     0.2     1.2  
Other income     2,247     3,043     3,550     (26.2 )   (36.7 )
Swap termination costs             (17,567 )   N/M     N/M  
Total noninterest income   $ 44,479   $ 45,180   $ 27,715     (1.6 )   60.5  
                                 

N/M – Not meaningful.

Total noninterest income of $44.5 million was down 1.6% and up 60.5% from the third quarter of 2021 and the fourth quarter of 2020, respectively. Excluding the impact of swap termination costs in the fourth quarter of 2020, total noninterest income decreased 1.8%. Wealth management fees decreased compared to a record third quarter of 2021 due to seasonality and increased compared to the fourth quarter of 2020 due to positive market performance and continued sales of fiduciary and investment advisory services to new and existing customers. The increase in service charges on deposit accounts compared to the third quarter of 2021 was due primarily to seasonality, whereas the increase from the fourth quarter of 2020 resulted from the impact of higher transaction volumes.

Mortgage banking income for the fourth quarter of 2021 resulted from sales of $179.1 million of 1-4 family mortgage loans in the secondary market compared to $199.9 million in the third quarter of 2021 and $275.6 million in the fourth quarter of 2020. In addition, mortgage banking income for the fourth quarter of 2021 was impacted by decreases in market pricing on sales of 1-4 family mortgage loans compared to the same period in 2020.

Capital market products income increased compared to both prior periods as a result higher levels of sales to corporate clients in light of market conditions. Other service charges, commissions, and fees for the fourth quarter of 2021 was elevated as a result of sales of loans at gains. Other income compared to both prior periods was impacted by lower fair value adjustments on equity securities as a result of the market environment, partially offset by benefit settlements on bank-owned life insurance. In addition, other income for the third quarter of 2021 was elevated as a result of net gains from the disposition of branch properties and other miscellaneous items.

During the fourth quarter of 2020, the Company terminated longer term interest rate swaps with notional amounts of $510 million due to excess liquidity and in response to market conditions. As a result of this transaction, $17.6 million of pre-tax losses on swap terminations were recorded in the same period.

Noninterest Expense Analysis
(Dollar amounts in thousands)

    Quarters Ended   December 31, 2021
Percent Change From
    December 31,
2021
  September 30,
2021
  December 31,
2020
  September 30,
2021
  December 31,
2020
Salaries and employee benefits:                    
Salaries and wages   $ 56,334     $ 51,503     $ 55,950     9.4     0.7  
Retirement and other employee benefits     11,112       10,924       10,430     1.7     6.5  
Total salaries and employee benefits     67,446       62,427       66,380     8.0     1.6  
Net occupancy and equipment expense     13,550       14,198       14,002     (4.6 )   (3.2 )
Technology and related costs     10,468       10,742       11,005     (2.6 )   (4.9 )
Professional services     7,620       6,991       8,424     9.0     (9.5 )
Advertising and promotions     2,853       3,168       1,850     (9.9 )   54.2  
Net other real estate owned (“OREO”) expense     442       (4 )     106     N/M     317.0  
Other expenses     14,565       15,616       12,851     (6.7 )   13.3  
Acquisition and integration related expenses     3,945       2,916       1,860     35.3     112.1  
Optimization costs                 1,493     N/M     N/M  
Total noninterest expense   $ 120,889     $ 116,054     $ 117,971     4.2     2.5  
Acquisition and integration related expenses     (3,945 )     (2,916 )     (1,860 )   35.3     112.1  
Optimization costs                 (1,493 )   N/M     N/M  
Total noninterest expense, adjusted(1)   $ 116,944     $ 113,138     $ 114,618     3.4     2.0  
                                     

N/M – Not meaningful.

(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 4.2% and 2.5% compared to the third quarter of 2021 and fourth quarter of 2020, respectively. Noninterest expense for all periods presented was impacted by acquisition and integration related expenses. In addition, the fourth quarter of 2020 was impacted by optimization costs. Excluding these items, noninterest expense for the fourth quarter of 2021 was $116.9 million, up 3.4% and 2.0% from the third quarter of 2021 and fourth quarter of 2020, respectively. Overall, noninterest expense, adjusted, to average assets, excluding PPP loans, was 2.14% for the fourth quarter of 2021, up 4 basis points from the third quarter of 2021 and down 15 basis points from the fourth quarter of 2020.

The increase in salaries and employee benefits compared to both prior periods was driven primarily by higher compensation accruals and deferred compensation plan obligations due to income on the respective equity securities held in a grantor trust. Compared to the fourth quarter of 2020, the increase in salaries and employee benefits was impacted by merit increases, partially offset by the ongoing benefits of optimization strategies. Net occupancy expense decreased compared to both prior periods as a result of lower maintenance costs. Professional services expense increased compared to the third quarter of 2021 due mainly to higher loan related fees associated with 1-4 family mortgage production. Compared to the fourth quarter of 2020, professional services expense decreased due primarily to lower loan remediation costs. Advertising and promotions expense increased compared to the fourth quarter of 2020 due to the timing of certain costs related to marketing campaigns. Other expenses decreased compared to the third quarter of 2021 as a result of lower other miscellaneous expenses. Compared to the fourth quarter of 2020, other expenses increased due primarily to higher servicing fees from purchases of consumer loans.

Optimization costs of $1.5 million for the fourth quarter of 2020, primarily include valuation adjustments related to locations identified for closure, modernization of our ATM network, advisory fees, employee severance, and other expenses associated with locations identified for closure.

Acquisition and integration related expenses for the fourth and third quarters of 2021 resulted from the pending merger with Old National. Acquisition and integration related expenses for the fourth quarter of 2020 resulted from the acquisition of Park Bank, which closed in the first quarter of 2020.

LOAN PORTFOLIO AND ASSET QUALITY

Loan Portfolio Composition
(Dollar amounts in thousands)

    As of   December 31, 2021
Percent Change From
    December 31,
2021
  September 30,
2021
  December 31,
2020
  September 30,
2021
  December 31,
2020
Commercial and industrial   $ 4,834,332   $ 4,705,458   $ 4,578,254   2.7     5.6  
Agricultural     327,873     349,159     364,038   (6.1 )   (9.9 )
Commercial real estate:                    
Office, retail, and industrial     1,746,944     1,765,592     1,861,768   (1.1 )   (6.2 )
Multi-family     1,120,748     1,082,941     872,813   3.5     28.4  
Construction     588,247     595,204     612,611   (1.2 )   (4.0 )
Other commercial real estate     1,275,906     1,408,955     1,481,976   (9.4 )   (13.9 )
Total commercial real estate     4,731,845     4,852,692     4,829,168   (2.5 )   (2.0 )
Total corporate loans, excluding PPP loans     9,894,050     9,907,309     9,771,460   (0.1 )   1.3  
PPP loans     230,687     384,100     785,563   (39.9 )   (70.6 )
Total corporate loans     10,124,737     10,291,409     10,557,023   (1.6 )   (4.1 )
Home equity     565,443     591,126     761,725   (4.3 )   (25.8 )
1-4 family mortgages     3,418,059     3,332,732     3,022,413   2.6     13.1  
Installment     557,252     573,465     410,071   (2.8 )   35.9  
Total consumer loans     4,540,754     4,497,323     4,194,209   1.0     8.3  
Total loans   $ 14,665,491   $ 14,788,732   $ 14,751,232   (0.8 )   (0.6 )
                               

Total loans includes loans originated under the PPP loan program, which totaled $230.7 million, $384.1 million, and $785.6 million as of December 31, 2021, September 30, 2021, and December 31, 2020, respectively. Excluding these loans, total loans were up 1% annualized from September 30, 2021 and 3% from December 31, 2020. Compared to both prior periods, strong production and line usage within our sector-based lending businesses drove the increase in corporate loan growth, excluding PPP loans. Middle market businesses also contributed to this growth compared to December 31, 2020. Production was partially offset by higher paydowns and prepayments due to excess borrower liquidity as a result of the pandemic and the impact of certain customers selling their commercial business or investment real estate properties, as well as refinancing with institutions offering loan terms outside of our credit parameters.

Consumer loans compared to both prior periods were impacted by purchases of 1-4 family mortgages, as well as strong production in the 1-4 family mortgages portfolio, which was partially offset by higher prepayments. In addition, consumer loans compared to December 31, 2020 were impacted by purchases of installment loans.

Allowance for Credit Losses
(Dollar amounts in thousands)

    As of or for the Quarters Ended   December 31, 2021
Percent Change From
    December 31,
2021
  September 30,
2021
  December 31,
2020
  September 30,
2021
  December 31,
2020
ACL, excluding PCD loans   $ 190,510     $ 195,903     $ 215,915     (2.8 )   (11.8 )
PCD loan ACL     19,352       18,963       31,127     2.1     (37.8 )
Total ACL   $ 209,862     $ 214,866     $ 247,042     (2.3 )   (15.1 )
Provision for credit losses   $ (2,924 )   $     $ 10,507     N/M     (127.8 )
ACL to total loans     1.43 %     1.45 %     1.67 %        
ACL to total loans, excluding PPP loans(1)     1.45 %     1.49 %     1.77 %        
ACL to non-accrual loans     205.79 %     243.94 %     173.33 %        
                                 

N/M – Not meaningful.

(1) This ratio excludes PPP loans that are fully guaranteed by the Small Business Administration (“SBA”). As a result, no allowance for credit losses is associated with these loans. See the “Non-GAAP Financial Information” section presented later in this release for a discussion of this non-GAAP financial measure.

The ACL was $209.9 million or 1.43% of total loans as of December 31, 2021, decreasing $5.0 million from September 30, 2021 and $37.2 million compared to December 31, 2020. Excluding the impact of PPP loans, ACL to total loans was 1.45% as of December 31, 2021, compared to 1.49% and 1.77% as of September 30, 2021 and December 31, 2020, respectively. The decrease from both prior periods reflects an improving credit environment as well as net charge-offs on PCD loans that previously had an ACL established upon acquisition.

Asset Quality
(Dollar amounts in thousands)

    As of   December 31, 2021
Percent Change From
    December 31,
2021
  September 30,
2021
  December 31,
2020
  September 30,
2021
  December 31,
2020
Non-accrual loans, excluding PCD loans(1)   $ 80,920     $ 64,166     $ 109,957     26.1     (26.4 )
Non-accrual PCD loans     21,059       23,917       32,568     (11.9 )   (35.3 )
Total non-accrual loans     101,979       88,083       142,525     15.8     (28.4 )
90 days or more past due loans, still accruing interest(1)     927       1,293       4,395     (28.3 )   (78.9 )
Total non-performing loans, (“NPLs”)     102,906       89,376       146,920     15.1     (30.0 )
Accruing troubled debt restructurings (“TDRs”)     534       539       813     (0.9 )   (34.3 )
Foreclosed assets(2)     25,837       26,375       16,671     (2.0 )   55.0  
Total non-performing assets (“NPAs”)   $ 129,277     $ 116,290     $ 164,404     11.2     (21.4 )
30-89 days past due loans   $ 34,430     $ 30,718     $ 40,656     12.1     (15.3 )
Special mention loans(3)   $ 314,772     $ 330,218     $ 409,083     (4.7 )   (23.1 )
Substandard loans(3)     325,520       351,192       357,219     (7.3 )   (8.9 )
Total performing loans classified as substandard and special mention(3)   $ 640,292     $ 681,410     $ 766,302     (6.0 )   (16.4 )
Non-accrual loans to total loans:                    
Non-accrual loans to total loans     0.70 %     0.60 %     0.97 %        
Non-accrual loans to total loans, excluding PPP loans(1)(4)     0.71 %     0.61 %     1.02 %        
Non-accrual loans to total loans, excluding PCD and PPP loans(1)(4)     0.57 %     0.45 %     0.80 %        
Non-performing loans to total loans:                    
NPLs to total loans     0.70 %     0.60 %     1.00 %        
NPLs to total loans, excluding PPP loans(1)(4)     0.71 %     0.62 %     1.05 %        
NPLs to total loans, excluding PCD and PPP loans(1)(4)     0.57 %     0.46 %     0.83 %        
Non-performing assets to total loans plus foreclosed assets:                
NPAs to total loans plus foreclosed assets     0.88 %     0.78 %     1.11 %        
NPAs to total loans plus foreclosed assets, excluding PPP loans(1)(4)     0.89 %     0.81 %     1.18 %        
NPAs to total loans plus foreclosed assets, excluding PCD and PPP loans(1)(4)     0.76 %     0.65 %     0.96 %        
Performing loans classified as substandard and special mention to corporate loans:
Performing loans classified as substandard and special mention to corporate loans(3)     6.32 %     6.62 %     7.26 %        
Performing loans classified as substandard and special mention to corporate loans, excluding PPP loans(3)     6.47 %     6.88 %     7.84 %        
                                 

(1) See the “Non-GAAP Financial Information” section presented later in this release for a discussion of this non-GAAP financial measure.

(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) Performing loans classified as substandard and special mention excludes accruing TDRs.

(4) This ratio excludes PPP loans that are fully guaranteed by the SBA. As a result, no allowance for credit losses is associated with these loans.

NPAs represented 0.88% of total loans and foreclosed assets at December 31, 2021 compared to 0.78% and 1.11% at September 30, 2021 and December 31, 2020, respectively. Excluding the impact of PCD and PPP loans, NPAs to total loans plus foreclosed assets was 0.76% at December 31, 2021, compared to 0.65% at September 30, 2021 and 0.96% at December 31, 2020. The increase compared to September 30, 2021 is reflective of normal fluctuations that occur on a quarterly basis. The decrease compared to December 31, 2020 is due primarily to an improving credit environment as well as one corporate loan relationship transferred from non-accrual loans to foreclosed assets during the first nine months of 2021.

Performing loans classified as substandard and special mention decreased to $640.3 million at December 31, 2021 from $681.4 million and $766.3 million at September 30, 2021 and December 31, 2020, respectively. The decrease from both prior periods was driven by an improving credit environment.

Charge-Off Data
(Dollar amounts in thousands)

    Quarters Ended
    December 31,
2021
  % of
Total
  September 30,
2021
  % of
Total
  December 31,
2020
  % of
Total
Net loan charge-offs(1)                        
Commercial and industrial   $ (39 )   (1.9 )   $ 5,002     59.8     $ 3,536     33.6
Agricultural     122     5.9       (37 )   (0.4 )     1,779     16.9
Commercial real estate:                        
Office, retail, and industrial     (7 )   (0.3 )     556     6.7       1,701     16.1
Multi-family     85     4.1       1           19     0.2
Construction     189     9.1       986     11.8       140     1.3
Other commercial real estate     261     12.5       829     9.9       916     8.7
Consumer     1,469     70.6       1,023     12.2       2,448     23.2
Total NCOs   $ 2,080     100.0     $ 8,360     100.0     $ 10,539     100.0
Less: NCOs on PCD loans(2)     (327 )   15.7       (1,757 )   21.0       (6,488 )   61.6
Total NCOs, excluding PCD loans(2)   $ 1,753         $ 6,603         $ 4,051      
Total recoveries included above   $ 2,254         $ 3,397         $ 2,588      
Quarter-to-Date(1)(3):                        
Net charge-offs to average loans     0.06 %         0.22 %         0.29 %    
Net charge-offs to average loans, excluding PPP loans(2)(4)     0.06 %         0.23 %         0.31 %    
Net charge-offs to average loans, excluding PCD and PPP loans(2)(4)     0.05 %         0.18 %         0.12 %    
Year-to-Date(1)(3):                        
Net charge-offs to average loans     0.27 %         0.35 %         0.36 %    
Net charge-offs to average loans, excluding PPP loans(2)(4)     0.29 %         0.37 %         0.38 %    
Net charge-offs to average loans, excluding PCD and PPP loans(2)(4)     0.23 %         0.29 %         0.24 %    
                                     

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

(2) See the “Non-GAAP Financial Information” section presented later in this release for a discussion of this non-GAAP financial measure.

(3) Annualized based on the actual number of days for each period presented.

(4) This ratio excludes PPP loans that are fully guaranteed by the SBA. As a result, no allowance for credit losses is associated with these loans.

Net loan charge-offs to average loans, annualized, were 0.06% for the fourth quarter of 2021, compared to 0.22% for the third quarter of 2021 and 0.29% for the fourth quarter of 2020. Excluding charge-offs on PCD and PPP loans on this metric, NCOs to average loans was 0.05% for the fourth quarter of 2021, down from 0.18% for the third quarter of 2021 and 0.12% for the fourth quarter of 2020. For the year ended December 31, 2021, net loan charge-offs to average loans was 0.27% compared to 0.36% for the same period in 2020. Excluding charge-offs on PCD and PPP loans, NCOs to average loans was 0.23% for 2021 and 0.24% for 2020.

DEPOSIT PORTFOLIO

Deposit Composition
(Dollar amounts in thousands)

    Average for the Quarters Ended   December 31, 2021
Percent Change From
    December 31,
2021
  September 30,
2021
  December 31,
2020
  September 30,
2021
  December 31,
2020
Demand deposits   $ 6,411,550   $ 6,272,903   $ 5,753,600   2.2     11.4  
Savings deposits     2,825,792     2,785,816     2,436,930   1.4     16.0  
NOW accounts     3,165,689     3,213,637     2,774,989   (1.5 )   14.1  
Money market accounts     3,316,492     3,211,355     2,923,881   3.3     13.4  
Core deposits     15,719,523     15,483,711     13,889,400   1.5     13.2  
Time deposits     1,736,197     1,800,493     2,047,260   (3.6 )   (15.2 )
Total deposits   $ 17,455,720   $ 17,284,204   $ 15,936,660   1.0     9.5  
                               

Total average deposits were $17.5 billion for the fourth quarter of 2021, up modestly from the third quarter of 2021 and up 9.5% from the fourth quarter of 2020. The increase in total average deposits compared to the third quarter of 2021 was impacted by growth in commercial deposits, partially offset by seasonal outflows of municipal deposits. Compared to the fourth quarter of 2020, the increase in total average deposits was due to higher customer balances resulting from PPP funds and other government stimulus measures.

CAPITAL MANAGEMENT

Capital Ratios

    As of
    December 31,
2021
  September 30,
2021
  December 31,
2020
Company regulatory capital ratios:
Total capital to risk-weighted assets   14.47 %   14.26 %   14.14 %
Tier 1 capital to risk-weighted assets   12.22 %   11.99 %   11.55 %
Common equity Tier 1 (“CET1”) to risk-weighted assets   10.74 %   10.51 %   10.06 %
Tier 1 capital to average assets   8.97 %   8.89 %   8.91 %
Company tangible common equity ratios(1)(2):        
Tangible common equity to tangible assets   7.63 %   7.53 %   7.67 %
Tangible common equity to tangible assets, excluding PPP loans   7.72 %   7.67 %   7.98 %
Tangible common equity, excluding accumulated other comprehensive income (“AOCI”), to tangible assets   7.81 %   7.65 %   7.54 %
Tangible common equity, excluding AOCI, to tangible assets, excluding PPP loans   7.90 %   7.79 %   7.85 %
Tangible common equity to risk-weighted assets   10.24 %   10.08 %   9.93 %
                   

(1) These ratios are not subject to formal Federal Reserve regulatory guidance.

(2) Tangible common equity (“TCE”) is a non-GAAP measure that 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.

Risk-weighted regulatory capital ratios compared to all prior periods were impacted by retained earnings and the mix of risk-weighted assets. Total capital to risk-weighted assets compared to December 31, 2020 was impacted by the beginning of the five-year phase-out of Tier 2 treatment of the Company’s subordinated debt. The Company elected the five-year current expected credit losses (“CECL”) transition relief for regulatory capital, which retained approximately 30 basis points of CET1 and Tier 1 capital at December 31, 2021.

The Board of Directors approved a quarterly cash dividend of $0.14 per common share during the fourth quarter of 2021, which is consistent with third quarter of 2021 and the fourth quarter of 2020. This dividend represents the 156th consecutive cash dividend paid by the Company since its inception in 1983.

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 investor.firstmidwest.com.

Forward-Looking Statements

This communication may contain certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding the financial condition, results of operations, business plans and future performance of First Midwest. 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,” “forecast,” “predict,” “project,” “probable,” “potential,” “possible,” “target,” “continue,” “look forward,” or “assume” and words of similar import. Because forward-looking statements relate to future results and occurrences, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. 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, the performance of First Midwest’s loan or securities portfolio, the expected amount of future credit allowances or charge-offs, the timing of the pending merger of First Midwest and Old National, the failure to obtain necessary regulatory approvals or to satisfy any of the other conditions to the merger on a timely basis or at all, the possibility that the anticipated benefits of the merger are not realized when expected or at all, corporate strategies or objectives, including the impact of certain actions and initiatives, anticipated trends in First Midwest’s business, regulatory developments, estimated synergies, cost savings and financial benefits of completed transactions, growth strategies, the inability to realize cost savings or improved revenues or to implement integration plans associated with the proposed merger with Old National and the continued or potential effects of the COVID-19 pandemic and related variants and mutations on First Midwest’s business, financial condition, liquidity, loans, asset quality and results of operations. These statements are subject to certain risks, uncertainties and assumptions, including the duration, extent and severity of the COVID-19 pandemic and related variants and mutations, including the continued effects on First Midwest’s business, operations and employees, as well as on First Midwest’s customers and service providers, and on economies and markets more generally and other risks, uncertainties and assumptions that are 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, 2020, 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, 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, return on average tangible common equity, adjusted, non-accrual loans, excluding PCD loans, non-accrual loans to total loans, excluding PPP loans, non-accrual loans to total loans, excluding PCD and PPP loans, NPLs to total loans, excluding PPP loans, NPLs to total loans, excluding PCD and PPP loans, NPAs to total loans plus foreclosed assets, excluding PPP loans, NPAs to total loans plus foreclosed assets, excluding PCD and PPP loans, performing loans classified as substandard and special mention to corporate loans, excluding PPP loans, NCOs, excluding PCD loans, NCOs to average loans, excluding PPP loans, NCOs to average loans, excluding PCD and PPP loans, and pre-tax, pre-provision earnings, 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 (all periods), optimization costs (second and first quarters of 2021 and fourth quarter of 2020), swap termination costs (fourth quarter of 2020), income tax benefits (fourth quarter of 2020), and net securities gains (full year 2020). In addition, net OREO expense is excluded from the calculation of the efficiency ratio. 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.

Income tax expense, provision for loan losses, and the certain significant transactions listed above are excluded from the calculation of pre-tax, pre-provision earnings, adjusted due to the fluctuation in income before income tax and the level of provision for loan losses required based on the estimated impact of the pandemic on the ACL. Management believes pre-tax, pre-provision earnings, adjusted may be useful in assessing the Company’s underlying operational performance and their exclusion may facilitate better comparability between periods and for peer comparison purposes.

The Company presents noninterest expense, adjusted, which excludes optimization costs, and acquisition and integration related expenses. Management believes that excluding these items from noninterest expense 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.

The Company presents non-accrual loans, non-accrual loans to total loans, NPLs to total loans, NPAs to total loans plus foreclosed assets, performing loans classified as substandard and special mention to corporate loans, excluding PPP loans, NCOs, and NCOs to average loans, all excluding PCD and/or PPP loans. Management believes excluding PCD and PPP loans is useful as it facilitates better comparability between periods. Prior to the adoption of CECL on January 1, 2020, PCI loans with an accretable yield were considered current and were not included in past due and non-accrual loan totals and the portion of PCI loans deemed to be uncollectible was recorded as a reduction of the credit-related acquisition adjustment, which was netted within loans. Subsequent to adoption, PCD loans, including those previously classified as PCI, are included in past due and non-accrual loan totals and an ACL on PCD loans is established as of the acquisition date and the PCD loans are no longer recorded net of a credit-related acquisition adjustment. PCD loans deemed to be uncollectible are recorded as a charge-off through the ACL. The Company began originating PPP loans during the second quarter of 2020 and the loans are fully guaranteed by the SBA and are expected to be forgiven if the applicable criteria are met. Additionally, management believes excluding PCD and PPP loans from these metrics may enhance comparability for peer comparison purposes.

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 $22 billion of assets and an additional $15 billion of wealth management assets. First Midwest Bank and its other affiliates provide a full range of commercial, treasury management, equipment leasing, consumer, mortgage, wealth management, trust and private banking products and services. The primary footprint of First Midwest’s branch network and other locations is in metropolitan Chicago, southeast Wisconsin, northwest Indiana, central and western Illinois, and eastern Iowa. Visit First Midwest at www.firstmidwest.com.

CONTACTS:

InvestorsPatrick S. BarrettEVP, Chief Financial Officer
(708) 831-7231
[email protected]
MediaMaurissa KanterSVP, Director of Corporate Communications
(708) 831-7345
[email protected]
   

Accompanying Unaudited Selected Financial Information

First Midwest Bancorp, Inc.
Consolidated Statements of Financial Condition (Unaudited)
(Dollar amounts in thousands)
   
  As of
  December 31,   September 30,   June 30,   March 31,   December 31,
    2021       2021       2021       2021       2020  
Period-End Balance Sheet                  
Assets                  
Cash and due from banks $ 220,207     $ 270,020     $ 232,989     $ 223,713     $ 196,364  
Interest-bearing deposits in other banks   1,898,865       1,654,917       1,312,412       786,814       920,880  
Equity securities, at fair value   118,857       114,848       112,977       96,983       76,404  
Securities available-for-sale, at fair value   3,147,220       3,212,908       3,156,194       3,195,405       3,096,408  
Securities held-to-maturity, at amortized cost   8,655       10,853       11,593       11,711       12,071  
FHLB and FRB stock   106,097       106,090       106,890       106,170       117,420  
Loans:                  
Commercial and industrial   4,834,332       4,705,458       4,608,148       4,546,317       4,578,254  
Agricultural   327,873       349,159       342,834       355,883       364,038  
Commercial real estate:                  
Office, retail, and industrial   1,746,944       1,765,592       1,807,428       1,827,116       1,861,768  
Multi-family   1,120,748       1,082,941       1,012,722       906,124       872,813  
Construction   588,247       595,204       577,338       614,021       612,611  
Other commercial real estate   1,275,906       1,408,955       1,461,370       1,463,582       1,481,976  
PPP loans   230,687       384,100       705,915       1,109,442       785,563  
Home equity   565,443       591,126       629,367       690,030       761,725  
1-4 family mortgages   3,418,059       3,332,732       3,287,773       3,187,066       3,022,413  
Installment   557,252       573,465       602,324       483,945       410,071  
Total loans   14,665,491       14,788,732       15,035,219       15,183,526       14,751,232  
Allowance for loan losses   (201,237 )     (206,241 )     (214,601 )     (235,359 )     (239,017 )
Net loans   14,464,254       14,582,491       14,820,618       14,948,167       14,512,215  
OREO   5,196       5,106       5,289       6,273       8,253  
Premises, furniture, and equipment, net   120,555       123,413       125,837       129,514       132,045  
Investment in bank-owned life insurance (“BOLI”)   300,730       300,387       300,537       301,365       301,101  
Goodwill and other intangible assets   920,599       923,383       926,176       928,974       932,764  
Accrued interest receivable and other assets   467,007       473,764       513,912       473,502       532,753  
Total assets $ 21,778,242     $ 21,778,180     $ 21,625,424     $ 21,208,591     $ 20,838,678  
Liabilities and Stockholders’ Equity                  
Noninterest-bearing deposits $ 6,191,885     $ 6,097,698     $ 6,187,478     $ 6,156,145     $ 5,797,899  
Interest-bearing deposits   10,999,044       11,100,704       10,845,405       10,455,309       10,214,565  
Total deposits   17,190,929       17,198,402       17,032,883       16,611,454       16,012,464  
Borrowed funds   1,291,816       1,274,572       1,299,424       1,295,737       1,546,414  
Senior and subordinated debt   235,588       235,383       235,178       234,973       234,768  
Accrued interest payable and other liabilities   317,181       346,600       353,791       413,112       355,026  
Stockholders’ equity   2,742,728       2,723,223       2,704,148       2,653,315       2,690,006  
Total liabilities and stockholders’ equity $ 21,778,242     $ 21,778,180     $ 21,625,424     $ 21,208,591     $ 20,838,678  
Stockholders’ equity, excluding AOCI $ 2,780,521     $ 2,748,604     $ 2,710,089     $ 2,675,411     $ 2,663,627  
Stockholders’ equity, common   2,512,228       2,492,723       2,473,648       2,422,815       2,459,506  
                                       
First Midwest Bancorp, Inc.
Condensed Consolidated Statements of Income (Unaudited)
(Dollar amounts in thousands)
                             
  Quarters Ended     Years Ended
  December 31,   September 30,   June 30,   March 31,   December 31,     December 31,   December 31,
    2021       2021       2021       2021       2020         2021       2020  
Income Statement                            
Interest income $ 148,003     $ 154,672     $ 154,000     $ 151,150     $ 159,962       $ 607,825     $ 651,318  
Interest expense   9,227       9,476       9,712       10,035       11,851         38,450       71,669  
Net interest income   138,776       145,196       144,288       141,115       148,111         569,375       579,649  
Provision for loan losses   (2,924 )                 6,098       10,507         3,174       98,615  
Net interest income after provision for loan losses   141,700       145,196       144,288       135,017       137,604         566,201       481,034  
Noninterest Income                            
Wealth management fees   14,246       14,820       14,555       14,149       13,548         57,770       50,688  
Service charges on deposit accounts   12,149       11,496       10,778       9,980       10,811         44,403       42,059  
Mortgage banking income   6,149       6,664       6,749       10,187       9,191         29,749       21,115  
Card-based fees, net   4,451       4,992       4,764       4,556       4,530         18,763       16,150  
Capital market products income   1,462       1,333       1,954       2,089       659         6,838       6,961  
Other service charges, commissions, and fees   3,775       2,832       2,823       2,761       2,993         12,191       10,576  
Total fee-based revenues   42,232       42,137       41,623       43,722       41,732         169,714       147,549  
Other income   2,247       3,043       4,647       2,081       3,550         12,018       11,633  
Swap termination costs                           (17,567 )             (31,852 )
Net securities gains                                         13,323  
Total noninterest income   44,479       45,180       46,270       45,803       27,715         181,732       140,653  
Noninterest Expense                            
Salaries and employee benefits:                          
Salaries and wages   56,334       51,503       51,887       53,693       55,950         213,417       211,917  
Retirement and other employee benefits   11,112       10,924       12,324       12,708       10,430         47,068       45,728  
Total salaries and employee benefits   67,446       62,427       64,211       66,401       66,380         260,485       257,645  
Net occupancy and equipment expense   13,550       14,198       13,654       14,752       14,002         56,154       57,081  
Technology and related costs   10,468       10,742       10,453       10,284       11,005         41,947       39,822  
Professional services   7,620       6,991       7,568       8,059       8,424         30,238       35,019  
Advertising and promotions   2,853       3,168       2,899       1,835       1,850         10,755       10,109  
Net OREO expense   442       (4 )     160       589       106         1,187       1,196  
Other expenses   14,565       15,616       14,670       14,735       12,851         59,586       52,503  
Acquisition and integration related expenses   3,945       2,916       7,773       245       1,860         14,879       13,462  
Optimization costs               31       1,525       1,493         1,556       19,869  
Total noninterest expense   120,889       116,054       121,419       118,425       117,971         476,787       486,706  
Income before income tax expense   65,290       74,322       69,139       62,395       47,348         271,146       134,981  
Income tax expense   16,737       19,459       18,018       17,372       5,743         71,586       27,083  
Net income $ 48,553     $ 54,863     $ 51,121     $ 45,023     $ 41,605       $ 199,560     $ 107,898  
Preferred dividends   (4,034 )     (4,033 )     (4,034 )     (4,034 )     (4,049 )       (16,135 )     (9,119 )
Net income applicable to non-vested restricted shares   (398 )     (517 )     (521 )     (486 )     (369 )       (1,922 )     (984 )
Net income applicable to common shares $ 44,121     $ 50,313     $ 46,566     $ 40,503     $ 37,187       $ 181,503     $ 97,795  
Net income applicable to common shares, adjusted(1)   47,080       52,500       52,419       41,831       49,238         193,830       133,052  

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     Years Ended
  December 31,   September 30,   June 30,   March 31,   December 31,     December 31,   December 31,
    2021       2021       2021       2021       2020         2021       2020  
EPS                            
Basic EPS $ 0.39     $ 0.45     $ 0.41     $ 0.36     $ 0.33       $ 1.61     $ 0.87  
Diluted EPS $ 0.39     $ 0.44     $ 0.41     $ 0.36     $ 0.33       $ 1.60     $ 0.87  
Diluted EPS, adjusted(1) $ 0.41     $ 0.46     $ 0.46     $ 0.37     $ 0.43       $ 1.70     $ 1.18  
Common Stock and Related Per Common Share Data          
Book value $ 22.01     $ 21.83     $ 21.67     $ 21.22     $ 21.52       $ 22.01     $ 21.52  
Tangible book value $ 13.95     $ 13.75     $ 13.55     $ 13.08     $ 13.36       $ 13.95     $ 13.36  
Dividends declared per share $ 0.14     $ 0.14     $ 0.14     $ 0.14     $ 0.14       $ 0.56     $ 0.56  
Closing price at period end $ 20.48     $ 19.01     $ 19.83     $ 21.91     $ 15.92       $ 20.48     $ 15.92  
Closing price to book value   0.9       0.9       0.9       1.0       0.7         0.9       0.7  
Period end shares outstanding   114,128       114,167       114,177       114,196       114,296         114,128       114,296  
Period end treasury shares   11,259       11,213       11,199       11,176       11,071         11,259       11,071  
Common dividends $ 15,792     $ 15,974     $ 15,979     $ 15,997     $ 16,017       $ 63,742     $ 64,045  
Dividend payout ratio   35.90 %     31.11 %     34.15 %     38.89 %     42.42 %       34.78 %     64.37 %
Dividend payout ratio, adjusted(1)   34.15 %     30.43 %     30.43 %     37.84 %     32.56 %       32.94 %     47.46 %
Key Ratios/Data                            
Return on average common equity(2)   7.00 %     7.97 %     7.60 %     6.70 %     6.05 %       7.32 %     4.01 %
Return on average common equity, adjusted(1)(2)   7.47 %     8.32 %     8.56 %     6.92 %     8.01 %       7.82 %     5.46 %
Return on average tangible common equity(1)(2)   11.62 %     13.17 %     12.77 %     11.35 %     10.35 %       12.24 %     7.02 %
Return on average tangible common equity, adjusted(1)(2)   12.36 %     13.72 %     14.31 %     11.71 %     13.53 %       13.03 %     9.36 %
Return on average assets(2)   0.87 %     0.99 %     0.95 %     0.87 %     0.79 %       0.92 %     0.53 %
Return on average assets, adjusted(1)(2)   0.93 %     1.03 %     1.06 %     0.90 %     1.02 %       0.98 %     0.70 %
Loans to deposits   85.31 %     85.99 %     88.27 %     91.40 %     92.12 %       85.31 %     92.12 %
Efficiency ratio(1)   63.22 %     59.12 %     59.24 %     61.77 %     58.90 %       60.81 %     60.84 %
Net interest margin(2)(3)   2.75 %     2.91 %     2.96 %     3.03 %     3.14 %       2.91 %     3.18 %
Yield on average interest-earning assets(2)(3)   2.94 %     3.10 %     3.16 %     3.24 %     3.39 %       3.11 %     3.57 %
Cost of funds(2)(4)   0.19 %     0.20 %     0.21 %     0.23 %     0.26 %       0.21 %     0.41 %
Noninterest expense to average assets(2)   2.18 %     2.10 %     2.26 %     2.30 %     2.25 %       2.21 %     2.38 %
Noninterest expense, adjusted to average assets, excluding PPP loans(1)(2)   2.14 %     2.10 %     2.22 %     2.38 %     2.29 %       2.21 %     2.31 %
Effective income tax rate   25.63 %     26.18 %     26.06 %     27.84 %     12.13 %       26.40 %     20.06 %
Effective income tax rate, adjusted(1)   25.63 %     26.18 %     26.06 %     27.84 %     19.81 %       26.40 %     22.76 %
Capital Ratios                            
Total capital to risk-weighted assets(1)   14.47 %     14.26 %     14.19 %     14.26 %     14.14 %       14.47 %     14.14 %
Tier 1 capital to risk-weighted assets(1)   12.22 %     11.99 %     11.71 %     11.67 %     11.55 %       12.22 %     11.55 %
CET1 to risk-weighted assets(1)   10.74 %     10.51 %     10.23 %     10.17 %     10.06 %       10.74 %     10.06 %
Tier 1 capital to average assets(1)   8.97 %     8.89 %     8.85 %     8.96 %     8.91 %       8.97 %     8.91 %
Tangible common equity to tangible assets(1)   7.63 %     7.53 %     7.48 %     7.37 %     7.67 %       7.63 %     7.67 %
Tangible common equity, excluding AOCI, to tangible assets(1)   7.81 %     7.65 %     7.50 %     7.48 %     7.54 %       7.81 %     7.54 %
Tangible common equity to risk-weighted assets(1)   10.24 %     10.08 %     9.92 %     9.73 %     9.93 %       10.24 %     9.93 %
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     Years Ended
  December 31,   September 30,   June 30,   March 31,   December 31,     December 31,   December 31,
    2021       2021       2021       2021       2020         2021       2020  
Asset quality Performance Data                          
Non-performing assets                            
Commercial and industrial $ 11,096     $ 9,952     $ 42,036     $ 59,723     $ 38,314       $ 11,096     $ 38,314  
Agricultural   6,410       6,682       7,135       8,684       10,719         6,410       10,719  
Commercial real estate:                            
Office, retail, and industrial   23,756       13,450       17,367       23,339       27,382         23,756       27,382  
Multi-family   12,751       2,672       2,622       3,701       1,670         12,751       1,670  
Construction   1,104       1,154       1,154       1,154       1,155         1,104       1,155  
Other commercial real estate   11,629       13,083       14,200       15,406       15,219         11,629       15,219  
Consumer   14,174       17,173       16,867       16,643       15,498         14,174       15,498  
Non-accrual, excluding PCD loans   80,920       64,166       101,381       128,650       109,957         80,920       109,957  
Non-accrual PCD loans   21,059       23,917       23,101       29,734       32,568         21,059       32,568  
Total non-accrual loans   101,979       88,083       124,482       158,384       142,525         101,979       142,525  
90 days or more past due loans, still accruing interest   927       1,293       878       5,354       4,395         927       4,395  
Total NPLs   102,906       89,376       125,360       163,738       146,920         102,906       146,920  
Accruing TDRs   534       539       782       798       813         534       813  
Foreclosed assets(5)   25,837       26,375       26,732       13,228       16,671         25,837       16,671  
Total NPAs $ 129,277     $ 116,290     $ 152,874     $ 177,764     $ 164,404       $ 129,277     $ 164,404  
30-89 days past due loans $ 34,430     $ 30,718     $ 21,051     $ 30,973     $ 40,656       $ 34,430     $ 40,656  
Allowance for credit losses                            
Allowance for loan losses $ 201,237     $ 206,241     $ 214,601     $ 235,359     $ 239,017       $ 201,237     $ 239,017  
Reserve for unfunded commitments   8,625       8,625       8,625       8,025       8,025         8,625       8,025  
Total ACL $ 209,862     $ 214,866     $ 223,226     $ 243,384     $ 247,042       $ 209,862     $ 247,042  
Provision for loan losses $ (2,924 )   $     $     $ 6,098     $ 10,507       $ 3,174     $ 98,615  
Net charge-offs by category                            
Commercial and industrial $ (39 )   $ 5,002     $ 14,733     $ 1,740     $ 3,536       $ 21,436     $ 18,421  
Agricultural   122       (37 )           363       1,779         448       3,389  
Commercial real estate:                            
Office, retail, and industrial   (7 )     556       3,878       4,377       1,701         8,804       6,455  
Multi-family   85       1       2       (5 )     19         83       33  
Construction   189       986       208             140         1,383       7,635  
Other commercial real estate   261       829       459       371       916         1,920       2,852  
Consumer   1,469       1,023       1,478       2,910       2,448         6,880       12,534  
Total NCOs $ 2,080     $ 8,360     $ 20,758     $ 9,756     $ 10,539       $ 40,954     $ 51,319  
Less: NCOs on PCD loans   (327 )     (1,757 )     (4,337 )     (2,107 )     (6,488 )       (8,528 )     (18,964 )
Total NCOs, excluding PCD loans $ 1,753     $ 6,603     $ 16,421     $ 7,649     $ 4,051       $ 32,426     $ 32,355  
Total recoveries included above $ 2,254     $ 3,397     $ 2,869     $ 1,561     $ 2,588       $ 10,081     $ 7,510  
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     Years Ended
  December 31,   September 30,   June 30,   March 31,   December 31,     December 31,   December 31,
    2021       2021       2021       2021       2020         2021       2020  
Performing loans classified as substandard and special mention          
Special mention loans(7) $ 314,772     $ 330,218     $ 343,547     $ 355,563     $ 409,083       $ 314,772     $ 409,083  
Substandard loans(7)   325,520       351,192       325,727       342,600       357,219         325,520       357,219  
Total performing loans classified as substandard and special mention(7) $ 640,292     $ 681,410     $ 669,274     $ 698,163     $ 766,302       $ 640,292     $ 766,302  
Asset quality ratios                            
Non-accrual loans to total loans   0.70 %     0.60 %     0.83 %     1.04 %     0.97 %       0.70 %     0.97 %
Non-accrual loans to total loans, excluding PPP loans(6)   0.71 %     0.61 %     0.87 %     1.13 %     1.02 %       0.71 %     1.02 %
Non-accrual loans to total loans, excluding PCD and PPP loans(6)   0.57 %     0.45 %     0.72 %     0.93 %     0.80 %       0.57 %     0.80 %
NPLs to total loans   0.70 %     0.60 %     0.83 %     1.08 %     1.00 %       0.70 %     1.00 %
NPLs to total loans, excluding PPP loans(6)   0.71 %     0.62 %     0.87 %     1.16 %     1.05 %       0.71 %     1.05 %
NPLs to total loans, excluding PCD and PPP loans(6)   0.57 %     0.46 %     0.72 %     0.97 %     0.83 %       0.57 %     0.83 %
NPAs to total loans plus foreclosed assets   0.88 %     0.78 %     1.01 %     1.17 %     1.11 %       0.88 %     1.11 %
NPAs to total loans plus foreclosed assets, excluding PPP loans(6)   0.89 %     0.81 %     1.06 %     1.26 %     1.18 %       0.89 %     1.18 %
NPAs to total loans plus foreclosed assets, excluding PCD and PPP loans(6)   0.76 %     0.65 %     0.92 %     1.07 %     0.96 %       0.76 %     0.96 %
NPAs to tangible common equity plus ACL   7.18 %     6.52 %     8.63 %     10.23 %     9.27 %       7.18 %     9.27 %
Non-accrual loans to total assets   0.47 %     0.40 %     0.58 %     0.75 %     0.68 %       0.47 %     0.68 %
Performing loans classified as substandard and special mention to corporate loans(7)   6.32 %     6.62 %     6.36 %     6.45 %     7.26 %       6.32 %     7.26 %
Performing loans classified as substandard and special mention to corporate loans, excluding PPP loans(6)(7)   6.47 %     6.88 %     6.82 %     7.19 %     7.84 %       6.47 %     7.84 %
Allowance for credit losses and net charge-off ratios          
ACL to total loans(7)   1.43 %     1.45 %     1.48 %     1.60 %     1.67 %       1.43 %     1.67 %
ACL to non-accrual loans   205.79 %     243.94 %     179.32 %     153.67 %     173.33 %       205.79 %     173.33 %
ACL to NPLs   203.94 %     240.41 %     178.07 %     148.64 %     168.15 %       203.94 %     168.15 %
NCOs to average loans(2)   0.06 %     0.22 %     0.55 %     0.26 %     0.29 %       0.27 %     0.36 %
NCOs to average loans, excluding PPP loans(2)(6)   0.06 %     0.23 %     0.59 %     0.28 %     0.31 %       0.29 %     0.38 %
NCOs to average loans, excluding PCD and PPP loans(2)(6)   0.05 %     0.18 %     0.47 %     0.22 %     0.12 %       0.23 %     0.24 %

Footnotes to Selected Financial Information
(1)   See the “Non-GAAP Reconciliations” section for the detailed calculation.
(2)   Annualized based on the actual number of days for each period presented.
(3)   Presented on a tax-equivalent basis, assuming 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 excludes PPP loans that are fully guaranteed by the SBA. As a result, no allowance for credit losses is associated with these loans.
(7)   Performing loans classified as substandard and special mention excludes accruing TDRs.

First Midwest Bancorp, Inc.
Non-GAAP Reconciliations (Unaudited)
(Amounts in thousands, except per share data)
                             
  Quarters Ended     Years Ended
  December 31,   September 30,   June 30,   March 31,   December 31,     December 31,   December 31,
    2021       2021       2021       2021       2020         2021       2020  
EPS                            
Net income $ 48,553     $ 54,863     $ 51,121     $ 45,023     $ 41,605       $ 199,560     $ 107,898  
Dividends and accretion on preferred stock   (4,034 )     (4,033 )     (4,034 )     (4,034 )     (4,049 )       (16,135 )     (9,119 )
Net income applicable to non-vested restricted shares   (398 )     (517 )     (521 )     (486 )     (369 )       (1,922 )     (984 )
Net income applicable to common shares   44,121       50,313       46,566       40,503       37,187         181,503       97,795  
Adjustments to net income:                            
Acquisition and integration related expenses   3,945       2,916       7,773       245       1,860         14,879       13,462  
Tax effect of acquisition and integration related expenses   (986 )     (729 )     (1,943 )     (61 )     (465 )       (3,719 )     (3,365 )
Optimization costs               31       1,525       1,493         1,556       19,869  
Tax effect of optimization costs               (8 )     (381 )     (373 )       (389 )     (4,967 )
Swap termination costs                           17,567               31,852  
Tax effect of swap termination costs                           (4,392 )             (7,963 )
Income tax benefits                           (3,639 )             (3,639 )
Net securities gains                                         (13,323 )
Tax effect of net securities gains                                         3,331  
Total adjustments to net income, net of tax   2,959       2,187       5,853       1,328       12,051         12,327       35,257  
Net income applicable to common shares, adjusted(1) $ 47,080     $ 52,500     $ 52,419     $ 41,831     $ 49,238       $ 193,830     $ 133,052  
Weighted-average common shares outstanding:                          
Weighted-average common shares outstanding (basic)   112,930       112,898       112,865       113,098       113,174         112,947       112,355  
Dilutive effect of common stock equivalents   995       878       775       773       430         834       347  
Weighted-average diluted common shares outstanding   113,925       113,776       113,640       113,871       113,604         113,781       112,702  
Basic EPS $ 0.39     $ 0.45     $ 0.41     $ 0.36     $ 0.33       $ 1.61     $ 0.87  
Diluted EPS $ 0.39     $ 0.44     $ 0.41     $ 0.36     $ 0.33       $ 1.60     $ 0.87  
Diluted EPS, adjusted(1) $ 0.41     $ 0.46     $ 0.46     $ 0.37     $ 0.43       $ 1.70     $ 1.18  
Anti-dilutive shares not included in the computation of diluted EPS                                          
Dividend Payout Ratio                            
Dividends declared per share $ 0.14     $ 0.14     $ 0.14     $ 0.14     $ 0.14       $ 0.56     $ 0.56  
Dividend payout ratio   35.90 %     31.11 %     34.15 %     38.89 %     42.42 %       34.78 %     64.37 %
Dividend payout ratio, adjusted(1)   34.15 %     30.43 %     30.43 %     37.84 %     32.56 %       32.94 %     47.46 %
                             
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     Years Ended
  December 31,   September 30,   June 30,   March 31,   December 31,     December 31,   December 31,
    2021       2021       2021       2021       2020         2021       2020  
Return on Average Common and Tangible Common Equity                      
Net income applicable to common shares $ 44,121     $ 50,313     $ 46,566     $ 40,503     $ 37,187       $ 181,503     $ 97,795  
Intangibles amortization   2,784       2,793       2,798       2,807       2,807         11,182       11,207  
Tax effect of intangibles amortization   (696 )     (698 )     (700 )     (702 )     (702 )       (2,796 )     (2,803 )
Net income applicable to common shares, excluding intangibles amortization   46,209       52,408       48,664       42,608       39,292         189,889       106,199  
Total adjustments to net income, net of tax(1)   2,959       2,187       5,853       1,328       12,051         12,327       35,257  
Net income applicable to common shares, adjusted(1) $ 49,168     $ 54,595     $ 54,517     $ 43,936     $ 51,343       $ 202,216     $ 141,456  
Average stockholders’ common equity $ 2,499,651     $ 2,503,028     $ 2,456,034     $ 2,453,253     $ 2,444,911       $ 2,478,187     $ 2,437,011  
Less: average intangible assets   (921,937 )     (924,743 )     (927,522 )     (931,322 )     (934,347 )       (926,351 )     (923,741 )
Average tangible common equity $ 1,577,714     $ 1,578,285     $ 1,528,512     $ 1,521,931     $ 1,510,564       $ 1,551,836     $ 1,513,270  
Return on average common equity(2)   7.00 %     7.97 %     7.60 %     6.70 %     6.05 %       7.32 %     4.01 %
Return on average common equity, adjusted(1)(2)   7.47 %     8.32 %     8.56 %     6.92 %     8.01 %    <