FIRST MIDWEST BANCORP INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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EX-99.2 - EXHIBIT 99.2 - FIRST MIDWEST BANCORP INC	fmbi09302018presentationma.htm
8-K - 8-K - FIRST MIDWEST BANCORP INC	fmbi09302018er8-k.htm

Exhibit 99.1





	FOR IMMEDIATE RELEASE

FIRST MIDWEST BANCORP, INC. ANNOUNCES

2018 THIRD QUARTER RESULTS

CHICAGO, IL, October 23, 2018 - First Midwest Bancorp, Inc. (the "Company" or "First Midwest") (NASDAQ NGS: FMBI), the holding company of First Midwest Bank (the "Bank"), today reported results of operations and financial condition for the third quarter of 2018. Net income for the third quarter of 2018 was $53.4 million, or $0.52 per share, compared to $29.6 million, or $0.29 per share, for the second quarter of 2018, and $38.2 million, or $0.37 per share, for the third quarter of 2017.

Reported results for the third quarter of 2018 were impacted by certain income tax benefits aligned with federal income tax reform legislation ("tax reform"). In addition, both the third and second quarters of 2018 were impacted by implementation costs related to the Company's Delivering Excellence initiative ("Delivering Excellence") and reported results for the third quarter of 2017 were impacted by the revaluation of deferred tax assets ("DTAs"), certain actions related to the securities portfolio, and acquisition and integration related expenses. For additional detail on these adjustments, see the "Non-GAAP Financial Information" section presented later in this release.

Earnings per share ("EPS"), adjusted⁽¹⁾ was $0.46 for the third quarter of 2018, compared to $0.40 for the second quarter of 2018 and $0.33 for the third quarter of 2017.

SELECT THIRD QUARTER HIGHLIGHTS


•	Generated EPS of $0.52 compared to $0.29 and $0.37 for the second quarter of 2018 and third quarter of 2017, respectively, includes $0.08 due to certain income tax benefits and $0.02 due to Delivering Excellence implementation costs.


◦	Increased EPS, adjusted⁽¹⁾ to $0.46, up 15% from the second quarter of 2018 and 39% from the third quarter of 2017.


◦	Produced returns on average tangible common equity,adjusted⁽¹⁾ of 16.5% for the third quarter of 2018, up 170 basis points and 410 basis points from the second quarter of 2018 and third quarter of 2017, respectively.


•	Grew loans to $11 billion, up 6%, annualized, from June 30, 2018 and 6% from September 30, 2017.


•	Increased total average deposits to $11.6 billion, up 2% from the second quarter of 2018 and 4% from the third quarter of 2017.


•	Expanded net interest income and margin to $132 million and 3.92%, respectively, up 4% and 1 basis point from the second quarter of 2018 and 10% and 6 basis points from the third quarter of 2017.


•	Improved efficiency ratio⁽¹⁾ to 56%, down from 60% in the second quarter of 2018 and 59% in the third quarter of 2017.


•	Reduced net charge-offs to average loans, annualized, to 29 basis points, down from 36 basis points for the second quarter of 2018 and 30 basis points for the third quarter of 2017.


•	Increased common equity Tier 1 capital to 9.93%, up 25 basis points from the second quarter of 2018 and 51 basis points from the third quarter of 2017.


•	Completed the acquisition of Northern States Financial Corporation on October 12, 2018, subsequent to the third quarter of 2018, adding approximately $550 million in total assets and $465 million of deposits, of which 75% were core deposits.

"Operating performance for the quarter was strong, reflecting successful execution on multiple business fronts," said Michael L. Scudder, Chairman of the Board, President, and Chief Executive Officer of the Company. "Our solid commercial loan production, the benefits of earning asset growth and higher interest rates on margins, controlled spending and tax reform resulted in comparative improvement in our underlying operating performance of 15% and 39% compared to the prior quarter and a year ago, respectively. Additionally, performance for the quarter was aided by a net $0.06 per share, largely due to the recognition of certain income tax benefits modestly offset by costs attendant to our Delivering Excellence initiative."

Mr. Scudder continued, "As we look ahead, our focus remains centered on helping our clients achieve financial success, meeting those needs with the superior service which they have come to expect and which sets us apart. Continued execution on our Delivering Excellence initiative, the strength of our core deposit foundation and business momentum leave us well positioned to benefit from a growing economy and evolving rate environment."

DELIVERING EXCELLENCE INITIATIVE

During the second and third quarters of 2018, the Company initiated certain actions in connection with its previously announced Delivering Excellence initiative. This initiative further demonstrates the Company's ongoing commitment to providing service excellence to its clients, as well as maximizing both the efficiency and scalability of its operating platform. Components of Delivering Excellence include improved delivery of services to clients through streamlined processes, the consolidation or closing of 19 locations, organizational realignments, and several revenue growth opportunities.

The Company expects to incur total pre-tax implementation costs associated with Delivering Excellence of $25 million, the majority of which will be recognized in 2018. The implementation of this initiative in the second and third quarters of 2018 resulted in pre-tax implementation costs of $15 million and $2 million, respectively, associated with property valuation adjustments on locations identified for closure, employee severance, and general restructuring and advisory services.

ACQUISITION

Northern States Financial Corporation

On October 12, 2018, the Company completed its acquisition of Northern States Financial Corporation ("Northern States"), the holding company for NorStates Bank, based in Waukegan, Illinois. At closing, the Company acquired approximately $550 million in total assets, $465 million in deposits, and $305 million in loans. The merger consideration totaled approximately $83 million and consisted of 3.3 million shares of Company stock. The Company expects that NorStates Bank will be merged with and into First Midwest Bank, with associated systems conversions completed, in early December 2018.

⁽¹⁾ These metrics are non-GAAP financial measures. For details on the calculation of these metrics, see the sections titled "Non-GAAP Financial Information" and "Non-GAAP Reconciliations" presented later in this release.

OPERATING PERFORMANCE

Net Interest Income and Margin Analysis

(Dollar amounts in thousands)



	Quarters Ended
	September 30, 2018							June 30, 2018							September 30, 2017
	Average Balance			Interest			Yield/ Rate (%)	Average Balance			Interest			Yield/ Rate (%)	Average Balance			Interest			Yield/ Rate (%)
Assets
Other interest-earning assets	$	162,646		$	631		1.54	$	147,996		$	519		1.41	$	237,727		$	793		1.32
Securities⁽¹⁾	2,245,784			14,533			2.59	2,165,091			13,322			2.46	1,961,382			11,586			2.36
Federal Home Loan Bank ("FHLB") and Federal Reserve Bank ("FRB") stock	83,273			734			3.53	80,038			864			4.32	67,605			312			1.85
Loans⁽¹⁾	10,980,916			134,768			4.87	10,788,285			128,422			4.77	10,277,420			119,267			4.60
Total interest-earning assets⁽¹⁾	13,472,619			150,666			4.44	13,181,410			143,127			4.35	12,544,134			131,958			4.18
Cash and due from banks	196,382							197,025							194,149
Allowance for loan losses	(100,717		)					(99,469		)					(99,249		)
Other assets	1,326,386							1,326,749							1,516,732
Total assets	$	14,894,670						$	14,605,715						$	14,155,766
Liabilities and Stockholders' Equity
Savings deposits	$	2,003,928		364			0.07	$	2,060,066		373			0.07	$	2,040,609		391			0.08
NOW accounts	2,164,018			2,151			0.39	2,065,530			1,472			0.29	2,039,593			809			0.16
Money market deposits	1,772,821			1,522			0.34	1,759,313			1,073			0.24	1,928,962			700			0.14
Time deposits	1,993,361			6,389			1.27	1,871,666			5,114			1.10	1,559,966			2,469			0.63
Borrowed funds	980,421			3,927			1.59	913,902			3,513			1.54	648,275			2,544			1.56
Senior and subordinated debt	195,526			3,152			6.40	195,385			3,140			6.45	194,961			3,110			6.33
Total interest-bearing liabilities	9,110,075			17,505			0.76	8,865,862			14,685			0.66	8,412,366			10,023			0.47
Demand deposits	3,624,520							3,621,645							3,574,012
Total funding sources	12,734,595						0.55	12,487,507						0.47	11,986,378						0.33
Other liabilities	250,745							227,481							313,741
Stockholders' equity - common	1,909,330							1,890,727							1,855,647
Total liabilities and stockholders' equity	$	14,894,670						$	14,605,715						$	14,155,766
Tax-equivalent net interest income/margin⁽¹⁾				133,161			3.92				128,442			3.91				121,935			3.86
Tax-equivalent adjustment				(1,134		)					(1,039		)					(2,042		)
Net interest income (GAAP)⁽¹⁾				$	132,027						$	127,403						$	119,893
Impact of acquired loan accretion⁽¹⁾				$	4,565		0.13				$	4,445		0.14				$	7,581		0.24
Tax-equivalent net interest income/ margin, adjusted⁽¹⁾				$	128,596		3.79				$	123,997		3.77				$	114,354		3.62

⁽¹⁾Interest income and yields on tax-exempt securities and loans are presented on a tax-equivalent basis, assuming the applicable federal income tax rate for each period presented. As a result, interest income and yields on tax-exempt securities and loans subsequent to December 31, 2017 are presented using the current federal income tax rate of 21% and prior periods are presented using the federal income tax rate applicable at that time 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. 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 third quarter of 2018 increased by 3.6% from the second quarter of 2018 and 10.1% compared to the third quarter of 2017. The rise in net interest income compared to both prior periods resulted primarily from the impact of higher interest rates and growth in loans and securities, partially offset by higher cost of funds. In addition, net interest income for the third quarter of 2018 benefited from an increase in the number of days compared to the second quarter of 2018. Compared to the third quarter of 2017, net interest income was impacted by lower acquired loan accretion.

Acquired loan accretion contributed $4.6 million, $4.4 million, and $7.6 million to net interest income for the third quarter of 2018, the second quarter of 2018, and the third quarter of 2017, respectively.

Tax-equivalent net interest margin for the current quarter was 3.92%, increasing 1 basis point from the second quarter of 2018 and 6 basis points from the third quarter of 2017. Compared to both prior periods, the benefit of higher interest rates and growth

in interest-earning assets more than offset the rise in funding costs. In addition, compared to the third quarter of 2017, tax-equivalent net interest margin was negatively impacted by an 11 basis point decrease in acquired loan accretion and a 3 basis point reduction in the tax-equivalent adjustment as a result of lower federal income tax rates.

For the third quarter of 2018, total average interest-earning assets rose by $291.2 million from the second quarter of 2018 and $928.5 million from the third quarter of 2017. The increase compared to both prior periods resulted primarily from loan growth and security purchases.

Total average funding sources for the third quarter of 2018 increased by $247.1 million from the second quarter of 2018 and $748.2 million from the third quarter of 2017. The increase compared to both prior periods resulted primarily from time deposits and FHLB advances.

Noninterest Income Analysis

(Dollar amounts in thousands)



	Quarters Ended									September 30, 2018 Percent Change From
	September 30, 2018			June 30, 2018			September 30, 2017			June 30, 2018		September 30, 2017
Service charges on deposit accounts	$	12,378		$	12,058		$	12,561		2.7		(1.5	)
Wealth management fees	10,622			10,981			10,169			(3.3	)	4.5
Card-based fees, net⁽¹⁾:
Card-based fees	5,975			6,270			5,992			(4.7	)	(0.3	)
Cardholder expenses	(1,852		)	(1,876		)	—			(1.3	)	N/M
Card-based fees, net	4,123			4,394			5,992			(6.2	)	(31.2	)
Capital market products income	1,936			2,819			2,592			(31.3	)	(25.3	)
Mortgage banking income	1,657			1,736			2,246			(4.6	)	(26.2	)
Merchant servicing fees, net⁽¹⁾:
Merchant servicing fees	2,702			2,553			2,237			5.8		20.8
Merchant card expenses	(2,315		)	(2,170		)	—			6.7		N/M
Merchant servicing fees, net	387			383			2,237			1.0		(82.7	)
Other service charges, commissions, and fees	2,399			2,455			2,508			(2.3	)	(4.3	)
Total fee-based revenues	33,502			34,826			38,305			(3.8	)	(12.5	)
Other income	2,164			2,121			1,846			2.0		17.2
Net securities gains	—			—			3,197			—		(100.0	)
Total noninterest income⁽¹⁾	$	35,666		$	36,947		$	43,348		(3.5	)	(17.7	)
Accounting reclassification⁽¹⁾	—			—			(3,699		)	—		(100.0	)
Net securities gains	—			—			(3,197		)	—		(100.0	)
Total noninterest income, adjusted⁽²⁾	$	35,666		$	36,947		$	36,452		(3.5	)	(2.2	)

N/M – Not meaningful.

⁽¹⁾ As a result of accounting guidance adopted in the first quarter of 2018 (the "accounting reclassification"), certain noninterest income line items and the related noninterest expense line items that are presented on a gross basis for the prior year period are presented on a net basis in noninterest income for the current year periods. For further discussion of this guidance, see Note 2 of "Notes to the Consolidated Financial Statements" in Item 8 in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.

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

Total noninterest income of $35.7 million was down by 3.5% and 17.7% from the second quarter of 2018 and the third quarter of 2017, respectively. In the first quarter of 2018, the Company adopted accounting guidance which impacted how cardholder and merchant card expenses are presented within noninterest income on a prospective basis. As a result, these expenses are presented on a net basis against the related noninterest income for the second and third quarters of 2018 versus a gross basis within noninterest expense for the third quarter of 2017. Excluding the accounting reclassification and net securities gains, noninterest income was down by 2.2% compared to third quarter of 2017.

The decrease in noninterest income compared to both prior periods was due primarily to lower capital market products income, which fluctuates from quarter to quarter based on the size and frequency of sales to corporate clients. Compared to the second quarter of 2018, higher transaction volumes in service charges on deposit accounts were offset by lower wealth management fees,

both due to seasonality. The increase in wealth management fees compared to the third quarter of 2017 was driven primarily by continued sales of fiduciary and investment advisory services.

Mortgage banking income for the third quarter of 2018 resulted from sales of $61.3 million of 1-4 family mortgage loans in the secondary market, compared to $64.3 million in the second quarter of 2018 and $72.1 million in the third quarter of 2017.

Net securities gains of $3.2 million were recognized during the third quarter of 2017 as a result of the opportunistic repositioning of the securities portfolio.

Noninterest Expense Analysis

(Dollar amounts in thousands)



	Quarters Ended									September 30, 2018 Percent Change From
	September 30, 2018			June 30, 2018			September 30, 2017			June 30, 2018		September 30, 2017
Salaries and employee benefits:
Salaries and wages	$	44,067		$	46,256		$	45,219		(4.7	)	(2.5	)
Retirement and other employee benefits	10,093			11,676			10,419			(13.6	)	(3.1	)
Total salaries and employee benefits	54,160			57,932			55,638			(6.5	)	(2.7	)
Net occupancy and equipment expense	13,183			13,651			12,115			(3.4	)	8.8
Professional services	7,944			8,298			8,498			(4.3	)	(6.5	)
Technology and related costs	4,763			4,837			4,505			(1.5	)	5.7
Advertising and promotions	3,526			2,061			1,852			71.1		90.4
Net other real estate owned ("OREO") expense	(413		)	(256		)	657			61.3		(162.9	)
Other expenses	11,015			11,878			9,842			(7.3	)	11.9
Delivering Excellence implementation costs	2,239			15,015			—			(85.1	)	100.0
Acquisition and integration related expenses	60			—			384			100.0		(84.4	)
Cardholder expenses⁽¹⁾	—			—			1,962			—		(100.0	)
Merchant card expenses⁽¹⁾	—			—			1,737			—		(100.0	)
Total noninterest expense⁽¹⁾	$	96,477		$	113,416		$	97,190		(14.9	)	(0.7	)
Delivering Excellence implementation costs	(2,239		)	(15,015		)	—			(85.1	)	(100.0	)
Acquisition and integration related expenses	(60		)	—			(384		)	(100.0	)	(84.4	)
Accounting reclassification⁽¹⁾	—			—			(3,699		)	—		(100.0	)
Total noninterest expense, adjusted⁽²⁾	$	94,178		$	98,401		$	93,107		(4.3	)	1.2

⁽¹⁾ As a result of accounting guidance adopted in the first quarter of 2018, certain noninterest income line items and the related noninterest expense line items that are presented on a gross basis for the prior year period are presented on a net basis in noninterest income for the current year periods. For further discussion of this guidance, see Note 2 of "Notes to the Consolidated Financial Statements" in Item 8 in our Annual Report on Form 10-K for the year ended December 31, 2017.

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

Total noninterest expense decreased by 14.9% compared to the second quarter of 2018 and was consistent with the third quarter of 2017. During the third and second quarters of 2018, noninterest expense was impacted by costs related to the implementation of the Delivering Excellence initiative, which include property valuation adjustments on locations identified for closure, employee severance, and general restructuring and advisory services. In the first quarter of 2018, the Company adopted accounting guidance which impacted how cardholder and merchant card expenses are presented within noninterest income on a prospective basis. As a result, these expenses are presented on a net basis against the related noninterest income for the second and third quarters of 2018 versus a gross basis within noninterest expense for the prior period. The third quarters of 2018 and 2017 were also impacted by acquisition and integration related expenses. Excluding these items, noninterest expense for the third quarter of 2018 was $94.2 million, down 4.3% from the second quarter of 2018 and up 1.2% from third quarter of 2017.

Compared to both prior periods, the decrease in salaries and employee benefits was driven primarily by the ongoing benefits of the Delivering Excellence initiative. In addition, salaries and employee benefits expense was elevated in the second quarter of 2018 due to the distribution of higher pension plan lump-sum payments to retired employees. Advertising and promotions expense increased compared to both prior periods as a result of the launch of a new marketing campaign and a contribution to the First Midwest Charitable Foundation.

Net occupancy and equipment expense increased compared to the third quarter of 2017 as a result of the Company's corporate headquarters relocation during the second quarter of 2018. The decrease in net OREO expense compared to the third quarter of 2017 was due mainly to higher levels of gains on sales of properties and a reduction in operating expenses.

For the second quarter of 2018, other expenses were elevated due to property valuation adjustments related to the Company's corporate headquarters relocation and other miscellaneous expenses. The increase in other expenses compared to the third quarter of 2017 resulted from higher other miscellaneous expenses associated with organizational growth.

INCOME TAXES

The Company's effective tax rate for the third quarter of 2018 was 11.0% compared to 24.7% for the second quarter of 2018 and 31.7% for the third quarter of 2017. The third quarter of 2018 was impacted by $7.8 million of certain income tax benefits aligned with tax reform. The Company's effective tax rate for the same period in 2017 was impacted by a $2.8 million income tax benefit due to changes in Illinois income tax rates. Excluding these items, the Company's effective tax rate for the third quarter of 2018 was 24.0%, compared to 24.7% for the second quarter of 2018 and 36.7% for the third quarter of 2017. The decrease in the effective tax rate from the third quarter of 2017 was driven by the reduction in the federal income tax rate from 35% to 21%, which became effective in the first quarter of 2018 as a result of tax reform.

LOAN PORTFOLIO AND ASSET QUALITY

Loan Portfolio Composition

(Dollar amounts in thousands)



	As of						September 30, 2018 Percent Change From
	September 30, 2018		June 30, 2018		September 30, 2017		June 30, 2018		September 30, 2017
Commercial and industrial	$	3,994,142	$	3,844,067	$	3,462,612	3.9		15.4
Agricultural	432,220		433,175		437,721		(0.2	)	(1.3	)
Commercial real estate:
Office, retail, and industrial	1,782,757		1,834,918		1,960,367		(2.8	)	(9.1	)
Multi-family	698,611		703,091		711,101		(0.6	)	(1.8	)
Construction	632,779		633,601		545,666		(0.1	)	16.0
Other commercial real estate	1,348,831		1,337,396		1,391,241		0.9		(3.0	)
Total commercial real estate	4,462,978		4,509,006		4,608,375		(1.0	)	(3.2	)
Total corporate loans	8,889,340		8,786,248		8,508,708		1.2		4.5
Home equity	853,887		847,903		847,209		0.7		0.8
1-4 family mortgages	888,797		880,181		711,607		1.0		24.9
Installment	418,524		377,233		322,768		10.9		29.7
Total consumer loans	2,161,208		2,105,317		1,881,584		2.7		14.9
Total loans	$	11,050,548	$	10,891,565	$	10,390,292	1.5		6.4

Total loans of $11.1 billion increased by 5.8%, annualized from June 30, 2018 and by 6.4% from September 30, 2017. Compared to both prior periods, growth in commercial and industrial loans, primarily within our sector-based lending and middle market business units, drove the rise in total corporate loans. The rise in construction loans compared to September 30, 2017 was due largely to line draws on existing credits. The overall decline in office, retail, and industrial loans compared to both prior periods and other commercial real estate loans compared to September 30, 2017 resulted primarily from the decision of certain customers to opportunistically sell their commercial business and investment real estate properties, as well as expected payoffs.

Growth in consumer loans compared to both prior periods benefited from organic production, as well as the impact of purchases of shorter-duration home equity and installment loans. Compared to September 30, 2017, growth in consumer loans also benefited from the purchase of 1-4 family mortgages.

Asset Quality

(Dollar amounts in thousands)



	As of									September 30, 2018 Percent Change From
	September 30, 2018			June 30, 2018			September 30, 2017			June 30, 2018		September 30, 2017
Asset quality
Non-accrual loans	$	64,766		$	53,475		$	65,176		21.1		(0.6	)
90 days or more past due loans, still accruing interest⁽¹⁾	2,949			7,954			2,839			(62.9	)	3.9
Total non-performing loans	67,715			61,429			68,015			10.2		(0.4	)
Accruing troubled debt restructurings ("TDRs")	1,741			1,760			1,813			(1.1	)	(4.0	)
OREO	12,244			12,892			19,873			(5.0	)	(38.4	)
Total non-performing assets	$	81,700		$	76,081		$	89,701		7.4		(8.9	)
30-89 days past due loans⁽¹⁾	$	46,257		$	39,171		$	28,868
Non-accrual loans to total loans	0.59		%	0.49		%	0.63		%
Non-performing loans to total loans	0.61		%	0.56		%	0.65		%
Non-performing assets to total loans plus OREO	0.74		%	0.70		%	0.86		%
Allowance for credit losses	$	100,925		$	97,691		$	95,814
Allowance for credit losses to total loans⁽²⁾	0.91		%	0.90		%	0.92		%
Allowance for credit losses to loans, excluding acquired loans	1.01		%	1.00		%	1.09		%
Allowance for credit losses to non-accrual loans	155.83		%	182.69		%	147.01		%

⁽¹⁾ Purchased credit impaired loans with an accretable yield are considered current and are not included in past due loan totals.

⁽²⁾ This ratio includes acquired loans that are recorded at fair value through an acquisition adjustment, which incorporates credit risk as of the acquisition date with no allowance for credit losses being established at that time. As the acquisition adjustment is accreted into income over future periods, an allowance for credit losses on acquired loans is established as necessary to reflect credit deterioration.

Total non-performing assets represented 0.74% of total loans and OREO at September 30, 2018 compared to 0.70% and 0.86% at June 30, 2018 and September 30, 2017, respectively. Non-accrual loans increased by $11.3 million from the second quarter of 2018, due primarily to the transfer of one corporate performing potential problem loan to non-accrual status during the third quarter of 2018. The Company has established a specific reserve and implemented a remediation plan associated with this borrower. The decline in OREO compared to September 30, 2017 resulted from sales of OREO properties.

The allowance for credit losses to total loans was 0.91% at September 30, 2018, consistent with June 30, 2018 and September 30, 2017.

Charge-Off Data

(Dollar amounts in thousands)



	Quarters Ended
	September 30, 2018			% of Total	June 30, 2018			% of Total		September 30, 2017			% of Total
Net loan charge-offs⁽¹⁾
Commercial and industrial	$	5,230		65.2	$	7,081		72.4		$	8,237		107.4
Agricultural	631			7.9	828			8.5		—			—
Office, retail, and industrial	596			7.4	279			2.9		(1,811		)	(23.6	)
Multi-family	1			—	4			—		(2		)	—
Construction	(4		)	—	(8		)	(0.1	)	(25		)	(0.3	)
Other commercial real estate	23			0.3	(358		)	(3.7	)	(19		)	(0.2	)
Consumer	1,537			19.2	1,951			20.0		1,286			16.7
Total net loan charge-offs	$	8,014		100.0	$	9,777		100.0		$	7,666		100.0
Total recoveries included above	$	1,250			$	1,532				$	2,900
Net loan charge-offs to average loans:
Quarter-to-date⁽¹⁾	0.29		%		0.36		%			0.30		%
Year-to-date⁽¹⁾	0.42		%		0.49		%			0.19		%

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

Net loan charge-offs to average loans, annualized were 0.29%, down from 0.36% for the second quarter of 2018 and 0.30% for the third quarter of 2017.

DEPOSIT PORTFOLIO

Deposit Composition

(Dollar amounts in thousands)



	Average for the Quarters Ended						September 30, 2018 Percent Change From
	September 30, 2018		June 30, 2018		September 30, 2017		June 30, 2018		September 30, 2017
Demand deposits	$	3,624,520	$	3,621,645	$	3,574,012	0.1		1.4
Savings deposits	2,003,928		2,060,066		2,040,609		(2.7	)	(1.8	)
NOW accounts	2,164,018		2,065,530		2,039,593		4.8		6.1
Money market accounts	1,772,821		1,759,313		1,928,962		0.8		(8.1	)
Core deposits	9,565,287		9,506,554		9,583,176		0.6		(0.2	)
Time deposits	1,993,361		1,871,666		1,559,966		6.5		27.8
Total deposits	$	11,558,648	$	11,378,220	$	11,143,142	1.6		3.7

Average core deposits of $9.6 billion for the third quarter of 2018 were consistent with both prior periods presented. The increase in average time deposits compared to both prior periods was primarily driven by the continued success of promotions which started in 2017.

CAPITAL MANAGEMENT

Capital Ratios



	As of
	September 30, 2018		June 30, 2018		December 31, 2017		September 30, 2017
Company regulatory capital ratios:
Total capital to risk-weighted assets	12.32	%	12.07	%	12.15	%	11.79	%
Tier 1 capital to risk-weighted assets	10.34	%	10.09	%	10.10	%	9.83	%
Common equity Tier 1 ("CET1") to risk-weighted assets	9.93	%	9.68	%	9.68	%	9.42	%
Tier 1 capital to average assets	9.10	%	8.95	%	8.99	%	9.04	%
Company tangible common equity ratios^(1)(2):
Tangible common equity to tangible assets	8.21	%	8.04	%	8.33	%	8.25	%
Tangible common equity, excluding accumulated other comprehensive income ("AOCI"), to tangible assets	8.74	%	8.50	%	8.58	%	8.53	%
Tangible common equity to risk-weighted assets	9.33	%	9.16	%	9.31	%	9.02	%

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

⁽²⁾ Tangible common equity ("TCE") represents common stockholders' equity less goodwill and identifiable intangible assets. For details of the calculation of these ratios, see the sections titled, "Non-GAAP Financial Information" and "Non-GAAP Reconciliations" presented later in this release.

The Company's regulatory capital ratios increased compared to all prior periods as a result of strong earnings, partially offset by the impact of loan growth on risk-weighted assets. In addition, compared to September 30, 2017, the Company's regulatory capital ratios benefited from the sale of its trust-preferred collateralized debt obligations portfolio during the fourth quarter of 2017, partly offset by the phase-in of certain regulatory capital calculation provisions.

The Board of Directors approved a quarterly cash dividend of $0.11 per common share during the third quarter of 2018, which is consistent with the second quarter of 2018 and follows a dividend increase from $0.10 to $0.11 per common share during the first quarter of 2018. This dividend represents the 143^rd consecutive cash dividend paid by the Company since its inception in 1983.

Conference Call

A conference call to discuss the Company's results, outlook, and related matters will be held on Wednesday, October 24, 2018 at 11:00 A.M. (ET). Members of the public who would like to listen to the conference call should dial (877) 507-0639 (U.S. domestic) or (412) 317-6003 (International) and ask for the First Midwest Bancorp, Inc. Earnings Conference Call. The number should be dialed 10 to 15 minutes prior to the start of the conference call. There is no charge to access the call. The conference call will also be accessible as an audio webcast through the Investor Relations section of the Company's website, www.firstmidwest.com/investorrelations. For those unable to listen to the live broadcast, a replay will be available on the Company's website or by dialing (877) 344-7529 (U.S. domestic) or (412) 317-0088 (International) conference ID 10124799 beginning one hour after completion of the live call until 9:00 A.M. (ET) on November 7, 2018. Please direct any questions regarding obtaining access to the conference call to First Midwest Bancorp, Inc. Investor Relations, via e-mail, at investor.relations@firstmidwest.com.

Press Release, Presentation Materials, and Additional Information Available on Website

This press release, the presentation materials to be discussed during the conference call, and the accompanying unaudited Selected Financial Information are available through the "Investor Relations" section of First Midwest's website at www.firstmidwest.com/investorrelations.

Forward-Looking Statements

This press release, as well as any oral statements made by or on behalf of First Midwest, may contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by the use of words such as "may," "might," "will," "would," "should," "could," "expect," "plan," "intend," "anticipate," "believe," "estimate," "outlook," "predict," "project," "probable," "potential," "possible," "target," "continue," "look forward," or "assume" and words of similar import. Forward-looking statements are not historical facts or guarantees of future performance but instead express only management's beliefs regarding future results or events, many of which, by their nature, are inherently uncertain and outside of management's control. It is possible that actual results and events may differ, possibly materially, from the anticipated results or events indicated in these forward-looking statements. First Midwest cautions you not to place undue reliance on these statements. Forward-looking statements are made only as of the date of this press release, and First Midwest

undertakes no obligation to update any forward-looking statements contained in this press release to reflect new information or events or conditions after the date hereof.

Forward-looking statements may be deemed to include, among other things, statements relating to our future financial performance, including the related outlook for 2018, the performance of our loan or securities portfolio, the expected amount of future credit reserves or charge-offs, corporate strategies or objectives, including the impact of certain actions and initiatives, First Midwest's "Delivering Excellence" initiative, including actions, goals, and expectations, as well as costs and benefits therewith and the timing thereof, anticipated trends in our business, regulatory developments, the impact of federal income tax reform legislation, acquisition transactions, including estimated synergies, cost savings and financial benefits of consummated transactions, and growth strategies, including possible future acquisitions. These statements are subject to certain risks, uncertainties and assumptions. For a discussion of these risks, uncertainties and assumptions, you should refer to the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the year ended December 31, 2017, as well as our subsequent filings made with the Securities and Exchange Commission ("SEC"). 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 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 income, adjusted, noninterest expense, adjusted, effective income tax rate, adjusted, tangible common equity to tangible assets, tangible common equity, excluding AOCI, to tangible assets, tangible common equity to risk-weighted assets, return on average common equity, adjusted, return on average tangible common equity, and return on average tangible common equity, adjusted.

The Company presents EPS, the efficiency ratio, return on average assets, return on average common equity, and return on average tangible common equity, all adjusted for certain significant transactions. These transactions include certain income tax benefits aligned with tax reform (third quarter of 2018), Delivering Excellence implementation costs (third and second quarters of 2018), acquisition and integration related expenses associated with completed and pending acquisitions (third quarters of 2018 and 2017), the revaluations of DTAs (third and fourth quarters of 2017), certain actions resulting in securities losses and gains (third and fourth quarters of 2017), and a special bonus to colleagues and charitable contributions to the First Midwest Charitable Foundation (fourth quarter of 2017). Management believes excluding these transactions from EPS, the efficiency ratio, return on average assets, return on average common equity, and return on average tangible common equity may be useful in assessing the Company's underlying operational performance since these transactions do not pertain to its core business operations and their exclusion may facilitate better comparability between periods. Management believes that excluding acquisition and integration related expenses from these metrics may be useful to the Company, as well as analysts and investors, since these expenses can vary significantly based on the size, type, and structure of each acquisition. Additionally, management believes excluding these transactions from these metrics may enhance comparability for peer comparison purposes.

The Company presents noninterest income, adjusted, which excludes the accounting reclassification and net securities gains, and noninterest expense, adjusted, which excludes the accounting reclassification, Delivering Excellence implementation costs, and acquisition and integration related expenses. In addition, the Company presents the effective income tax rate, adjusted, which excludes certain income tax benefits aligned with tax reform and the revaluations of DTAs. Management believes that excluding these items from noninterest income, noninterest expense, and the effective income tax rate may be useful in assessing the Company’s underlying operational performance as these items either do not pertain to its core business operations or their exclusion may facilitate better comparability between periods and for peer comparison purposes.

The tax-equivalent adjustment to net interest income and net interest margin recognizes the income tax savings when comparing taxable and tax-exempt assets. Interest income and yields on tax-exempt securities and loans subsequent to December 31, 2017 are presented using the current federal income tax rate of 21% and prior periods are computed using the federal income tax rate applicable at that time of 35%. Management believes that it is standard practice in the banking industry to present net interest income and net interest margin on a fully tax-equivalent basis and that it may enhance comparability for peer comparison purposes. In addition, management believes that presenting tax-equivalent net interest margin, adjusted, may enhance comparability for peer comparison purposes and is useful to the Company, as well as analysts and investors, since acquired loan accretion income may fluctuate based on the size of each acquisition, as well as from period to period.

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

Although intended to enhance investors' understanding of the Company's business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP. In addition, these non-GAAP financial measures may differ from those used by other financial institutions to assess their business and performance. See the previously provided tables and the following reconciliations in the "Non-GAAP Reconciliations" section for details on the calculation of these measures to the extent presented herein.

About the Company

First Midwest is a relationship-focused financial institution and one of the largest independent publicly-traded bank holding companies based on assets headquartered in Chicago and the Midwest, with approximately $15 billion in assets and $11 billion in trust assets under management. First Midwest's principal subsidiary, First Midwest Bank, and other affiliates provide a full range of commercial, treasury management, equipment leasing, retail, wealth management, trust and private banking products and services through locations in metropolitan Chicago, northwest Indiana, central and western Illinois, and eastern Iowa. First Midwest's common stock is traded on the NASDAQ Stock Market under the symbol FMBI. First Midwest's website is www.firstmidwest.com.

Contact Information



Investors:	Patrick S. Barrett EVP and Chief Financial Officer (708) 831-7231 pat.barrett@firstmidwest.com

Accompanying Unaudited Selected Financial Information




Consolidated Statements of Financial Condition (Unaudited) (Dollar amounts in thousands)

	As of
	September 30,			June 30,			March 31,			December 31,			September 30,
	2018			2018			2018			2017			2017
Period-End Balance Sheet
Assets
Cash and due from banks	$	185,239		$	181,482		$	150,138		$	192,800		$	174,147
Interest-bearing deposits in other banks	111,360			192,785			84,898			153,770			252,753
Trading securities, at fair value⁽¹⁾	—			—			—			20,447			20,425
Equity securities, at fair value⁽¹⁾	29,046			28,441			28,513			—			—
Securities available-for-sale, at fair value⁽¹⁾	2,179,410			2,142,865			2,040,950			1,884,209			1,732,984
Securities held-to-maturity, at amortized cost	12,673			13,042			13,400			13,760			14,638
FHLB and FRB stock	87,728			82,778			80,508			69,708			69,708
Loans:
Commercial and industrial	3,994,142			3,844,067			3,659,066			3,529,914			3,462,612
Agricultural	432,220			433,175			435,734			430,886			437,721
Commercial real estate:
Office, retail, and industrial	1,782,757			1,834,918			1,931,202			1,979,820			1,960,367
Multi-family	698,611			703,091			695,830			675,463			711,101
Construction	632,779			633,601			585,766			539,820			545,666
Other commercial real estate	1,348,831			1,337,396			1,363,238			1,358,515			1,391,241
Home equity	853,887			847,903			881,534			827,055			847,209
1-4 family mortgages	888,797			880,181			798,902			774,357			711,607
Installment	418,524			377,233			325,502			321,982			322,768
Total loans	11,050,548			10,891,565			10,676,774			10,437,812			10,390,292
Allowance for loan losses	(99,925		)	(96,691		)	(94,854		)	(95,729		)	(94,814		)
Net loans	10,950,623			10,794,874			10,581,920			10,342,083			10,295,478
OREO	12,244			12,892			17,472			20,851			19,873
Premises, furniture, and equipment, net	126,389			127,024			126,348			123,316			131,295
Investment in bank-owned life insurance ("BOLI")	284,074			282,664			281,285			279,900			279,639
Goodwill and other intangible assets	751,248			753,020			754,814			754,757			750,436
Accrued interest receivable and other assets	231,465			206,209			219,725			221,451			525,766
Total assets	$	14,961,499		$	14,818,076		$	14,379,971		$	14,077,052		$	14,267,142
Liabilities and Stockholders' Equity
Noninterest-bearing deposits	$	3,618,384		$	3,667,847		$	3,527,081		$	3,576,190		$	3,580,922
Interest-bearing deposits	7,908,730			7,824,416			7,618,941			7,477,135			7,627,575
Total deposits	11,527,114			11,492,263			11,146,022			11,053,325			11,208,497
Borrowed funds	1,073,546			981,044			950,688			714,884			700,536
Senior and subordinated debt	195,595			195,453			195,312			195,170			195,028
Accrued interest payable and other liabilities	247,569			265,753			218,662			248,799			297,951
Stockholders' equity	1,917,675			1,883,563			1,869,287			1,864,874			1,865,130
Total liabilities and stockholders' equity	$	14,961,499		$	14,818,076		$	14,379,971		$	14,077,052		$	14,267,142
Stockholders' equity, excluding accumulated other comprehensive income ("AOCI")	$	1,992,808		$	1,947,963		$	1,926,818		$	1,897,910		$	1,903,166
Stockholders' equity, common	1,917,675			1,883,563			1,869,287			1,864,874			1,865,130

Footnote to Consolidated Statements of Financial Condition


⁽¹⁾	As a result of accounting guidance adopted in the first quarter of 2018, equity securities are no longer presented within trading securities or securities available-for-sale and are now presented as equity securities in the Consolidated Statements of Financial Condition for periods subsequent to December 31, 2017.




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,
	2018			2018			2018			2017			2017		2018			2017
Income Statement
Interest income	$	149,532		$	142,088		$	131,345		$	129,585		$	129,916	$	422,965		$	380,131
Interest expense	17,505			14,685			12,782			10,254			10,023		44,972			27,458
Net interest income	132,027			127,403			118,563			119,331			119,893		377,993			352,673
Provision for loan losses	11,248			11,614			15,181			8,024			10,109		38,043			23,266
Net interest income after provision for loan losses	120,779			115,789			103,382			111,307			109,784		339,950			329,407
Noninterest Income
Service charges on deposit accounts	12,378			12,058			11,652			12,289			12,561		36,088			36,079
Wealth management fees	10,622			10,981			10,958			10,967			10,169		32,561			30,354
Card-based fees, net⁽¹⁾:
Card-based fees	5,975			6,270			5,692			6,052			5,992		17,937			22,940
Cardholder expenses	(1,852		)	(1,876		)	(1,759		)	—			—		(5,487		)	—
Card-based fees, net	4,123			4,394			3,933			6,052			5,992		12,450			22,940
Capital market products income	1,936			2,819			1,558			1,986			2,592		6,313			6,185
Mortgage banking income	1,657			1,736			2,397			2,352			2,246		5,790			5,779
Merchant servicing fees, net⁽¹⁾:
Merchant servicing fees	2,702			2,553			2,237			1,771			2,237		7,492			8,569
Merchant card expenses	(2,315		)	(2,170		)	(1,907		)	—			—		(6,392		)	—
Merchant servicing fees, net	387			383			330			1,771			2,237		1,100			8,569
Other service charges, commissions, and fees	2,399			2,455			2,218			2,369			2,508		7,072			7,474
Total fee-based revenues	33,502			34,826			33,046			37,786			38,305		101,374			117,380
Other income	2,164			2,121			2,471			2,476			1,846		6,756			7,383
Net securities (losses) gains	—			—			—			(5,357		)	3,197		—			3,481
Total noninterest income	35,666			36,947			35,517			34,905			43,348		108,130			128,244
Noninterest Expense
Salaries and employee benefits:
Salaries and wages	44,067			46,256			45,830			48,204			45,219		136,153			134,303
Retirement and other employee benefits	10,093			11,676			10,957			10,204			10,419		32,726			31,682
Total salaries and employee benefits	54,160			57,932			56,787			58,408			55,638		168,879			165,985
Net occupancy and equipment expense	13,183			13,651			13,773			12,826			12,115		40,607			36,925
Professional services	7,944			8,298			7,580			7,616			8,498		23,822			26,073
Technology and related costs	4,763			4,837			4,771			4,645			4,505		14,371			13,423
Advertising and promotions	3,526			2,061			1,650			4,083			1,852		7,237			4,611
Net OREO expense	(413		)	(256		)	1,068			695			657		399			3,988
Merchant card expenses⁽¹⁾	—			—			—			1,423			1,737		—			6,954
Cardholder expenses⁽¹⁾	—			—			—			1,915			1,962		—			5,408
Other expenses	11,015			11,878			9,953			10,715			9,842		32,846			30,093
Delivering Excellence implementation costs	2,239			15,015			—			—			—		17,254			—
Acquisition and integration related expenses	60			—			—			—			384		60			20,123
Total noninterest expense	96,477			113,416			95,582			102,326			97,190		305,475			313,583
Income before income tax expense	59,968			39,320			43,317			43,886			55,942		142,605			144,068
Income tax expense	6,616			9,720			9,807			41,539			17,707		26,143			48,028
Net income	$	53,352		$	29,600		$	33,510		$	2,347		$	38,235	$	116,462		$	96,040
Net income applicable to common shares	$	52,911		$	29,360		$	33,199		$	2,341		$	37,895	$	115,470		$	95,130
Net income applicable to common shares, adjusted⁽²⁾	46,837			40,621			33,199			34,131			33,390		120,657			102,468

Footnotes to Condensed Consolidated Statements of Income


⁽¹⁾	As a result of accounting guidance adopted in the first quarter of 2018, certain noninterest income line items and related noninterest expense line items that are presented on a gross basis for periods prior to December 31, 2017 are now presented on a net basis in noninterest income for periods subsequent to December 31, 2017.


⁽²⁾	See the "Non-GAAP Reconciliations" section for the detailed calculation.




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,
	2018			2018			2018			2017			2017			2018			2017
EPS
Basic EPS	$	0.52		$	0.29		$	0.33		$	0.02		$	0.37		$	1.13		$	0.94
Diluted EPS	$	0.52		$	0.29		$	0.33		$	0.02		$	0.37		$	1.13		$	0.94
Diluted EPS, adjusted⁽¹⁾	$	0.46		$	0.40		$	0.33		$	0.34		$	0.33		$	1.18		$	1.01
Common Stock and Related Per Common Share Data
Book value	$	18.61		$	18.28		$	18.13		$	18.16		$	18.16		$	18.61		$	18.16
Tangible book value	$	11.32		$	10.97		$	10.81		$	10.81		$	10.85		$	11.32		$	10.85
Dividends declared per share	$	0.11		$	0.11		$	0.11		$	0.10		$	0.10		$	0.33		$	0.29
Closing price at period end	$	26.59		$	25.47		$	24.59		$	24.01		$	23.42		$	26.59		$	23.42
Closing price to book value	1.4			1.4			1.4			1.3			1.3			1.4			1.3
Period end shares outstanding	103,058			103,059			103,092			102,717			102,722			103,058			102,722
Period end treasury shares	9,301			9,297			9,261			9,634			9,626			9,301			9,626
Common dividends	$	11,326		$	11,333		$	11,349		$	10,278		$	10,411		$	34,008		$	29,793
Key Ratios/Data
Return on average common equity⁽²⁾	10.99		%	6.23		%	7.19		%	0.49		%	8.10		%	8.16		%	7.00		%
Return on average common equity, adjusted⁽¹⁾⁽²⁾	9.73		%	8.62		%	7.19		%	7.20		%	7.14		%	8.53		%	7.54		%
Return on average tangible common equity⁽²⁾	18.60		%	10.83		%	12.50		%	1.20		%	14.02		%	14.03		%	12.40		%
Return on average tangible common equity, adjusted⁽¹⁾⁽²⁾	16.51		%	14.81		%	12.50		%	12.35		%	12.41		%	14.64		%	13.32		%
Return on average assets⁽²⁾	1.42		%	0.81		%	0.96		%	0.07		%	1.07		%	1.07		%	0.92		%
Return on average assets, adjusted⁽¹⁾⁽²⁾	1.26		%	1.12		%	0.96		%	0.96		%	0.95		%	1.12		%	0.99		%
Loans to deposits	95.87		%	94.77		%	95.79		%	94.43		%	92.70		%	95.87		%	92.70		%
Efficiency ratio⁽¹⁾	56.03		%	59.65		%	60.96		%	60.78		%	59.32		%	58.81		%	59.86		%
Efficiency ratio (prior presentation)⁽¹⁾⁽³⁾	N/A			N/A			N/A			60.32		%	58.97		%	N/A			59.52		%
Net interest margin⁽²⁾⁽⁴⁾	3.92		%	3.91		%	3.80		%	3.84		%	3.86		%	3.88		%	3.88		%
Yield on average interest-earning assets⁽²⁾⁽⁴⁾	4.44		%	4.35		%	4.20		%	4.16		%	4.18		%	4.34		%	4.17		%
Cost of funds⁽²⁾⁽⁵⁾	0.55		%	0.47		%	0.43		%	0.34		%	0.33		%	0.48		%	0.31		%
Net noninterest expense to average assets⁽²⁾	1.62		%	2.10		%	1.72		%	1.74		%	1.60		%	1.81		%	1.81		%
Effective income tax rate	11.03		%	24.72		%	22.64		%	94.65		%	31.65		%	18.33		%	33.34		%
Effective income tax rate, adjusted⁽¹⁾	24.04		%	24.72		%	22.64		%	34.14		%	36.74		%	23.80		%	35.31		%
Capital Ratios
Total capital to risk-weighted assets⁽¹⁾	12.32		%	12.07		%	12.07		%	12.15		%	11.79		%	12.32		%	11.79		%
Tier 1 capital to risk-weighted assets⁽¹⁾	10.34		%	10.09		%	10.07		%	10.10		%	9.83		%	10.34		%	9.83		%
CET1 to risk-weighted assets⁽¹⁾	9.93		%	9.68		%	9.65		%	9.68		%	9.42		%	9.93		%	9.42		%
Tier 1 capital to average assets⁽¹⁾	9.10		%	8.95		%	9.07		%	8.99		%	9.04		%	9.10		%	9.04		%
Tangible common equity to tangible assets⁽¹⁾	8.21		%	8.04		%	8.18		%	8.33		%	8.25		%	8.21		%	8.25		%
Tangible common equity, excluding AOCI, to tangible assets⁽¹⁾	8.74		%	8.50		%	8.60		%	8.58		%	8.53		%	8.74		%	8.53		%
Tangible common equity to risk -weighted assets⁽¹⁾	9.33		%	9.16		%	9.18		%	9.31		%	9.02		%	9.33		%	9.02		%
Note: Selected Financial Information footnotes are located at the end of this section.




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,
	2018			2018			2018			2017			2017			2018			2017
Asset Quality Performance Data
Non-performing assets
Commercial and industrial	$	37,981		$	22,672		$	43,974		$	40,580		$	41,504		$	37,981		$	41,504
Agricultural	2,104			2,992			4,086			219			380			2,104			380
Commercial real estate:
Office, retail, and industrial	6,685			9,007			12,342			11,560			12,221			6,685			12,221
Multi-family	3,184			3,551			144			377			153			3,184			153
Construction	208			208			208			209			146			208			146
Other commercial real estate	4,578			5,288			4,088			3,621			2,239			4,578			2,239
Consumer	10,026			9,757			10,173			10,358			8,533			10,026			8,533
Total non-accrual loans	64,766			53,475			75,015			66,924			65,176			64,766			65,176
90 days or more past due loans, still accruing interest	2,949			7,954			4,633			3,555			2,839			2,949			2,839
Total non-performing loans	67,715			61,429			79,648			70,479			68,015			67,715			68,015
Accruing TDRs	1,741			1,760			1,778			1,796			1,813			1,741			1,813
OREO	12,244			12,892			17,472			20,851			19,873			12,244			19,873
Total non-performing assets	$	81,700		$	76,081		$	98,898		$	93,126		$	89,701		$	81,700		$	89,701
30-89 days past due loans	$	46,257		$	39,171		$	42,573		$	39,725		$	28,868		$	46,257		$	28,868
Allowance for credit losses
Allowance for loan losses	$	99,925		$	96,691		$	94,854		$	95,729		$	94,814		$	99,925		$	94,814
Reserve for unfunded commitments	1,000			1,000			1,000			1,000			1,000			1,000			1,000
Total allowance for credit losses	$	100,925		$	97,691		$	95,854		$	96,729		$	95,814		$	100,925		$	95,814
Provision for loan losses	$	11,248		$	11,614		$	15,181		$	8,024		$	10,109		$	38,043		$	23,266
Net charge-offs by category
Commercial and industrial	$	5,230		$	7,081		$	13,149		$	5,635		$	8,237		$	25,460		$	11,852
Agricultural	631			828			983			(102		)	—			2,442			1,350
Commercial real estate:
Office, retail, and industrial	596			279			364			(78		)	(1,811		)	1,239			(2,667		)
Multi-family	1			4			—			(3		)	(2		)	5			(36		)
Construction	(4		)	(8		)	(13		)	(12		)	(25		)	(25		)	(220		)
Other commercial real estate	23			(358		)	30			(5		)	(19		)	(305		)	516
Consumer	1,537			1,951			1,543			1,674			1,286			5,031			3,740
Total net charge-offs	$	8,014		$	9,777		$	16,056		$	7,109		$	7,666		$	33,847		$	14,535
Total recoveries included above	$	1,250		$	1,532		$	1,029		$	2,011		$	2,900		$	3,811		$	7,168
Note: Selected Financial Information footnotes are located at the end of this section.




Selected Financial Information (Unaudited)

	As of or for the
	Quarters Ended
	September 30,		June 30,		March 31,		December 31,		September 30,
	2018		2018		2018		2017		2017
Asset quality ratios
Non-accrual loans to total loans	0.59	%	0.49	%	0.70	%	0.64	%	0.63	%
Non-performing loans to total loans	0.61	%	0.56	%	0.75	%	0.68	%	0.65	%
Non-performing assets to total loans plus OREO	0.74	%	0.70	%	0.92	%	0.89	%	0.86	%
Non-performing assets to tangible common equity plus allowance for credit losses	6.45	%	6.19	%	8.17	%	7.72	%	7.41	%
Non-accrual loans to total assets	0.43	%	0.36	%	0.52	%	0.48	%	0.46	%
Allowance for credit losses and net charge-off ratios
Allowance for credit losses to total loans⁽⁶⁾	0.91	%	0.90	%	0.90	%	0.93	%	0.92	%
Allowance for credit losses to loans, excluding acquired loans	1.01	%	1.00	%	1.01	%	1.07	%	1.09	%
Allowance for credit losses to non-accrual loans	155.83	%	182.69	%	127.78	%	144.54	%	147.01	%
Allowance for credit losses to non-performing loans	149.04	%	159.03	%	120.35	%	137.25	%	140.87	%
Net charge-offs to average loans⁽²⁾	0.29	%	0.36	%	0.62	%	0.27	%	0.30	%

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 as calculated prior to March 31, 2018, which included a tax-equivalent adjustment for BOLI. Management believes that removing this adjustment from the current calculation of this metric enhances comparability for peer comparison purposes.


⁽⁴⁾	Presented on a tax-equivalent basis, assuming the applicable federal income tax rate for each period presented. As a result, interest income and yields on tax-exempt securities and loans subsequent to December 31, 2017 are presented using the current federal income tax rate of 21% and prior periods are computed using the federal income tax rate applicable at that time of 35%.


⁽⁵⁾	Cost of funds expresses total interest expense as a percentage of total average funding sources.

⁽⁶⁾

This ratio includes acquired loans that are recorded at fair value through an acquisition adjustment, which incorporates credit risk, as of the acquisition date with no allowance for credit losses being established at that time. As the acquisition adjustment is accreted into income over future periods, an allowance for credit losses is established on acquired loans as necessary to reflect credit deterioration.




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,
	2018			2018			2018			2017			2017			2018			2017
EPS
Net income	$	53,352		$	29,600		$	33,510		$	2,347		$	38,235		$	116,462		$	96,040
Net income applicable to non- vested restricted shares	(441		)	(240		)	(311		)	(6		)	(340		)	(992		)	(910		)
Net income applicable to common shares	52,911			29,360			33,199			2,341			37,895			115,470			95,130
Adjustments to net income:
Income tax benefits⁽¹⁾	(7,798		)	—			—			—			—			(7,798		)	—
Delivering Excellence implementation costs	2,239			15,015			—			—			—			17,254			—
Tax effect of Delivering Excellence implementation costs	(560		)	(3,754		)	—			—			—			(4,314		)	—
Acquisition and integration related expenses	60			—			—			—			384			60			20,123
Tax effect of acquisition and integration related expenses	(15		)	—			—			—			(157		)	(15		)	(8,053		)
DTA revaluation	—			—			—			26,555			(2,846		)	—			(2,846		)
Losses (gains) from securities portfolio repositioning	—			—			—			5,357			(3,197		)	—			(3,197		)
Tax effect of losses (gains) from securities portfolio repositioning	—			—			—			(2,196		)	1,311			—			1,311
Special bonus	—			—			—			1,915			—			—			—
Tax effect of special bonus	—			—			—			(785		)	—			—			—
Charitable contribution	—			—			—			1,600			—			—			—
Tax effect of charitable contribution	—			—			—			(656		)	—			—			—
Total adjustments to net income, net of tax	(6,074		)	11,261			—			31,790			(4,505		)	5,187			7,338
Net income applicable to common shares, adjusted⁽²⁾	$	46,837		$	40,621		$	33,199		$	34,131		$	33,390		$	120,657		$	102,468
Weighted-average common shares outstanding:
Weighted-average common shares outstanding (basic)	102,178			102,159			101,922			101,766			101,752			102,087			101,307
Dilutive effect of common stock equivalents	—			—			16			21			20			5			20
Weighted-average diluted common shares outstanding	102,178			102,159			101,938			101,787			101,772			102,092			101,327
Basic EPS	$	0.52		$	0.29		$	0.33		$	0.02		$	0.37		$	1.13		$	0.94
Diluted EPS	$	0.52		$	0.29		$	0.33		$	0.02		$	0.37		$	1.13		$	0.94
Diluted EPS, adjusted⁽²⁾	$	0.46		$	0.40		$	0.33		$	0.34		$	0.33		$	1.18		$	1.01
Anti-dilutive shares not included in the computation of diluted EPS	—			—			110			190			190			36			242
Effective Tax Rate
Income before income tax expense	$	59,968		$	39,320		$	43,317		$	43,886		$	55,942		$	142,605		$	144,068
Income tax expense	$	6,616		$	9,720		$	9,807		$	41,539		$	17,707		$	26,143		$	48,028
Income tax benefits⁽¹⁾	7,798			—			—			—			—			7,798			—
DTA revaluation	—			—			—			(26,555		)	2,846			—			2,846
Income tax expense, adjusted	$	14,414		$	9,720		$	9,807		$	14,984		$	20,553		$	33,941		$	50,874
Effective income tax rate	11.03		%	24.72		%	22.64		%	94.65		%	31.65		%	18.33		%	33.34		%
Effective income tax rate, adjusted	24.04		%	24.72		%	22.64		%	34.14		%	36.74		%	23.80		%	35.31		%

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




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,
	2018			2018			2018			2017			2017			2018			2017
Return on Average Common and Tangible Common Equity
Net income applicable to common shares	$	52,911		$	29,360		$	33,199		$	2,341		$	37,895		$	115,470		$	95,130
Intangibles amortization	1,772			1,794			1,802			1,806			1,931			5,368			6,059
Tax effect of intangibles amortization	(443		)	(449		)	(508		)	(740		)	(792		)	(1,400		)	(2,424		)
Net income applicable to common shares, excluding intangibles amortization	54,240			30,705			34,493			3,407			39,034			119,438			98,765
Total adjustments to net income, net of tax⁽²⁾	(6,074		)	11,261			—			31,790			(4,505		)	5,187			7,338
Net income applicable to common shares, adjusted⁽²⁾	$	48,166		$	41,966		$	34,493		$	35,197		$	34,529		$	124,625		$	106,103
Average stockholders' equity	$	1,909,330		$	1,890,727		$	1,873,419		$	1,880,265		$	1,855,647		$	1,891,290		$	1,816,911
Less: average intangible assets	(752,109		)	(753,887		)	(753,870		)	(749,700		)	(751,366		)	(753,282		)	(751,828		)
Average tangible common equity	$	1,157,221		$	1,136,840		$	1,119,549		$	1,130,565		$	1,104,281		$	1,138,008		$	1,065,083
Return on average common equity⁽³⁾	10.99		%	6.23		%	7.19		%	0.49		%	8.10		%	8.16		%	7.00		%
Return on average common equity, adjusted⁽²⁾⁽³⁾	9.73		%	8.62		%	7.19		%	7.20		%	7.14		%	8.53		%	7.54		%
Return on average tangible common equity⁽³⁾	18.60		%	10.83		%	12.50		%	1.20		%	14.02		%	14.03		%	12.40		%
Return on average tangible common equity, adjusted⁽²⁾⁽³⁾	16.51		%	14.81		%	12.50		%	12.35		%	12.41		%	14.64		%	13.32		%
Return on Average Assets
Net income	$	53,352		$	29,600		$	33,510		$	2,347		$	38,235		$	116,462		$	96,040
Total adjustments to net income, net of tax⁽²⁾	(6,074		)	11,261			—			31,790			(4,505		)	5,187			7,338
Net income, adjusted⁽²⁾	$	47,278		$	40,861		$	33,510		$	34,137		$	33,730		$	121,649		$	103,378
Average assets	$	14,894,670		$	14,605,715		$	14,187,053		$	14,118,625		$	14,155,766		$	14,565,071		$	13,931,679
Return on average assets⁽³⁾	1.42		%	0.81		%	0.96		%	0.07		%	1.07		%	1.07		%	0.92		%
Return on average assets, adjusted⁽²⁾⁽³⁾	1.26		%	1.12		%	0.96		%	0.96		%	0.95		%	1.12		%	0.99		%
Efficiency Ratio Calculation
Noninterest expense	$	96,477		$	113,416		$	95,582		$	102,326		$	97,190		$	305,475		$	313,583
Less:
Net OREO expense	413			256			(1,068		)	(695		)	(657		)	(399		)	(3,988		)
Delivering Excellence implementation costs	(2,239		)	(15,015		)	—			—			—			(17,254		)	—
Acquisition and integration related expenses	(60		)	—			—			—			(384		)	(60		)	(20,123		)
Special bonus	—			—			—			(1,915		)	—			—			—
Charitable contribution	—			—			—			(1,600		)	—			—			—
Total	$	94,591		$	98,657		$	94,514		$	98,116		$	96,149		$	287,762		$	289,472
Tax-equivalent net interest income⁽⁴⁾	$	133,161		$	128,442		$	119,538		$	121,154		$	121,935		$	381,141		$	358,811
Noninterest income	35,666			36,947			35,517			34,905			43,348			108,130			128,244
Less: net securities losses (gains)	—			—			—			5,357			(3,197		)	—			(3,481		)
Total	$	168,827		$	165,389		$	155,055		$	161,416		$	162,086		$	489,271		$	483,574
Efficiency ratio	56.03		%	59.65		%	60.96		%	60.78		%	59.32		%	58.81		%	59.86		%

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




Non-GAAP Reconciliations (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,
	2018			2018			2018			2017			2017
Risk-Based Capital Data
Common stock	$	1,124		$	1,124		$	1,123		$	1,123		$	1,123
Additional paid-in capital	1,028,635			1,025,703			1,021,923			1,031,870			1,029,002
Retained earnings	1,164,133			1,122,107			1,103,840			1,074,990			1,082,921
Treasury stock, at cost	(201,084		)	(200,971		)	(200,068		)	(210,073		)	(209,880		)
Goodwill and other intangible assets, net of deferred tax liabilities	(751,248		)	(753,020		)	(754,814		)	(743,327		)	(738,645		)
Disallowed DTAs	—			(389		)	(522		)	(644		)	(275		)
CET1 capital	1,241,560			1,194,554			1,171,482			1,153,939			1,164,246
Trust-preferred securities	50,690			50,690			50,690			50,690			50,690
Other disallowed DTAs	—			(97		)	(131		)	(161		)	(69		)
Tier 1 capital	1,292,250			1,245,147			1,222,041			1,204,468			1,214,867
Tier 2 capital	248,118			244,795			242,870			243,656			242,652
Total capital	$	1,540,368		$	1,489,942		$	1,464,911		$	1,448,124		$	1,457,519
Risk-weighted assets	$	12,500,342		$	12,345,200		$	12,135,662		$	11,920,372		$	12,362,833
Adjusted average assets	$	14,202,776		$	13,907,100		$	13,472,294		$	13,404,998		$	13,439,744
Total capital to risk-weighted assets	12.32		%	12.07		%	12.07		%	12.15		%	11.79		%
Tier 1 capital to risk-weighted assets	10.34		%	10.09		%	10.07		%	10.10		%	9.83		%
CET1 to risk-weighted assets	9.93		%	9.68		%	9.65		%	9.68		%	9.42		%
Tier 1 capital to average assets	9.10		%	8.95		%	9.07		%	8.99		%	9.04		%
Tangible Common Equity
Stockholders' equity	$	1,917,675		$	1,883,563		$	1,869,287		$	1,864,874		$	1,865,130
Less: goodwill and other intangible assets	(751,248		)	(753,020		)	(754,814		)	(754,757		)	(750,436		)
Tangible common equity	1,166,427			1,130,543			1,114,473			1,110,117			1,114,694
Less: AOCI	75,133			64,400			57,531			33,036			38,036
Tangible common equity, excluding AOCI	$	1,241,560		$	1,194,943		$	1,172,004		$	1,143,153		$	1,152,730
Total assets	$	14,961,499		$	14,818,076		$	14,379,971		$	14,077,052		$	14,267,142
Less: goodwill and other intangible assets	(751,248		)	(753,020		)	(754,814		)	(754,757		)	(750,436		)
Tangible assets	$	14,210,251		$	14,065,056		$	13,625,157		$	13,322,295		$	13,516,706
Tangible common equity to tangible assets	8.21		%	8.04		%	8.18		%	8.33		%	8.25		%
Tangible common equity, excluding AOCI, to tangible assets	8.74		%	8.50		%	8.60		%	8.58		%	8.53		%
Tangible common equity to risk-weighted assets	9.33		%	9.16		%	9.18		%	9.31		%	9.02		%

Footnotes to Non-GAAP Reconciliations


⁽¹⁾	Includes certain income tax benefits aligned with tax reform.


⁽²⁾	Adjustments to net income for each period presented are detailed in the EPS non-GAAP reconciliation above. For additional discussion of adjustments, see the "Non-GAAP Financial Information" section.


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


⁽⁴⁾	Presented on a tax-equivalent basis, assuming the applicable federal income tax rate for each period presented. As a result, interest income and yields on tax-exempt securities and loans subsequent to December 31, 2017 are presented using the current federal income tax rate of 21% and prior periods are computed using the federal income tax rate applicable at that time of 35%.

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