First Midwest Bancorp in Itasca, Ill., has positioned itself to surpass $10 billion in assets at some point early next year.

The $9.9 billion-asset company didn't follow in the footsteps of other banks by relying on a big, transformative deal to catapult over a threshold that brings with it added regulation. Rather, First Midwest chose to add a pair of banks that should collectively bring in $800 million in assets.

First Midwest's latest acquisition – NI Bancshares in Sycamore, Ill. – will add $680 million in assets and meaningful market share in DeKalb County. First Midwest disclosed in a slide presentation that it will become DeKalb's second-biggest bank with seven branches and nearly 22% of the market's deposits. (First National Bank of Omaha will remain the county's biggest institution, with about 35% deposit market share.)

NI Bancshares is the latest in a series of smaller deals for First Midwest. Late last year, the company bought the $570 million-asset Great Lakes Financial. It also has a pending deal for the $108 million-asset People's Bank of Arlington Heights.

First Midwest's latest deal "is just another step forward," John Rodis, an analyst at FIG Partners, said. "They'll probably have to take a few more steps."

While $10 billion in assets is the threshold for added compliance, Rodis and other industry observers believe banks need to surpass that mark by at least $2 billion to find enough revenue and efficiencies to offset increased regulatory burden.

First Midwest, for instance, said it expects NI Bancshares and People's to boost annual earnings by 5 cents a share in 2017. But a cap on interchange fees that is expected to take hold in mid-2017 could cost the company 5-7 cents a share in annual revenue.

"It is almost a wash, which leads me to believe that they'll certainly look to do more deals," Rodis said, noting that Chicago is a fragmented market where it is difficult to find a large acquisition target. "To a degree, you have to take what you can get."

First Midwest, meanwhile, isn't planning on shedding assets in order to wait for a large deal to materialize.

"I'm not very good at running backwards," Michael Scudder, the company's chief executive, told American Banker last week. "We are going to continue to drive forward."

First Midwest, meanwhile, will pay $70 million, or $65.86 a share, in cash and stock for NI Bancshares, which is the parent of National Bank & Trust Co. of Sycamore. The bank has 10 branches, $534 million in core deposits, $415 million in loans and more than $700 million in trust assets under administration.

The deal values NI Bancshares at 127% of its tangible book value. First Midwest expects to incur about $9 million in pretax merger-related expenses.

NI Bancshares provides several opportunities for First Midwest to boost its bottom line. The seller has a 69% loan-to-deposit ratio, providing low-cost funding, and an 84% efficiency ratio, suggesting that there is plenty of room for cutting costs.

Alan Kline contributed to this report.

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