Exhibit 99.1

a3282014fmbilogoa27.jpg
 
 
 
 
 
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."

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



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.


2



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

3



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,

4



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.

5



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.

6




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.

7



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.

8





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 143rd 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

9



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.

10



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
 
 

11



Accompanying Unaudited Selected Financial Information
a3282014fmbilogoa27.jpg
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.

12



a3282014fmbilogoa27.jpg
 
 
 
 
 
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.

13



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