UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
Form 8-K
_____________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event Reported): July 25, 2019
Midland States Bancorp, Inc.
(Exact Name of Registrant as Specified in Charter)
| Illinois | 001-35272 | 37-1233196 |
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) |
| 1201 Network Centre Drive, Effingham, Illinois 62401 |
| (Address of Principal Executive Offices) (Zip Code) |
(217) 342-7321
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
| Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | ||
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common stock, $0.01 par value | MSBI | Nasdaq Global Select Market |
Item 2.02. Results of Operations and Financial Condition.
On July 25, 2019, Midland States Bancorp, Inc. (the “Company”) issued a press release announcing its financial results for the second quarter of 2019. The press release is attached as Exhibit 99.1.
Item 7.01. Regulation FD Disclosure.
On July 25, 2019, the Company made available on its website a slide presentation regarding the Company's second quarter 2019 financial results, which will be used as part of a publicly accessible conference call on July 26, 2019. The slide presentation is attached as Exhibit 99.2 The information in this Form 8-K and the attached exhibits shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in any such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.Exhibit No. Description 99.1 Press Release of Midland States Bancorp, Inc., dated July 25, 2019 99.2 Slide Presentation of Midland States Bancorp, Inc. regarding second quarter 2019 financial results
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Midland States Bancorp, Inc. | ||
| Date: July 25, 2019 | By: | /s/ Douglas J. Tucker |
| Douglas J. Tucker | ||
| Senior Vice President and Corporate Counsel | ||
EXHIBIT 99.1
Midland States Bancorp, Inc. Announces 2019 Second Quarter Results
Highlights
- Net income of $16.4 million, or $0.67 diluted earnings per share
- Book value per share increased 2.2% to $26.66
- Tangible book value per share increased 3.8% to $18.36
- Acquisition of HomeStar Financial Group, Inc. completed on July 17, 2019
EFFINGHAM, Ill., July 25, 2019 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (Nasdaq: MSBI) (the “Company”) today reported net income of $16.4 million, or $0.67 diluted earnings per share, for the second quarter of 2019. This compares to net income of $14.0 million, or $0.57 diluted earnings per share, for the first quarter of 2019, and net income of $12.8 million, or $0.52 diluted earnings per share, for the second quarter of 2018, which included $2.0 million in integration and acquisition expenses.
Jeffrey G. Ludwig, President and Chief Executive Officer of the Company, said, “We continue to execute well on our strategic priorities and deliver solid financial results for our shareholders. We had another strong quarter of production in our equipment finance business, generated significant non-interest income from a diverse range of business lines, and continued to drive improved efficiencies throughout our organization. We were very pleased to complete our acquisition of HomeStar Financial Group, Inc. in just over three months after announcing the transaction. With its leading market position in Kankakee, Illinois, attractive deposit base, excess liquidity, and strong team of community bankers, we believe that HomeStar adds significant value to our franchise.”
Net Interest Income
Net interest income for the second quarter of 2019 was $46.1 million, an increase of 1.0% from $45.6 million for the first quarter of 2019. Excluding accretion income, net interest income decreased $0.4 million from the prior quarter. Accretion income associated with purchased loan portfolios totaled $3.4 million for the second quarter of 2019, compared with $2.5 million for the first quarter of 2019.
Relative to the second quarter of 2018, net interest income decreased $2.2 million, or 4.6%. Accretion income for the second quarter of 2018 was $5.5 million. Excluding the impact of accretion income, net interest income was relatively unchanged compared to the second quarter of 2018.
Net Interest Margin
Net interest margin for the second quarter of 2019 was 3.76%, compared to 3.73% for the first quarter of 2019. The Company’s net interest margin benefits from accretion income on purchased loan portfolios, which contributed 25 and 17 basis points to net interest margin in the second quarter of 2019 and first quarter of 2019, respectively. Excluding the impact of accretion income, net interest margin decreased five basis points from the first quarter of 2019, primarily due to the impact of higher average deposit costs.
Relative to the second quarter of 2018, net interest margin decreased from 3.91%. Accretion income on purchased loan portfolios contributed 40 basis points to net interest margin in the second quarter of 2018. Excluding the impact of accretion income, net interest margin was unchanged compared to the second quarter of 2018.
Noninterest Income
Noninterest income for the second quarter of 2019 was $19.6 million, an increase of 14.7% from $17.1 million for the first quarter of 2019. The increase was attributable to increases in most major noninterest income items.
Relative to the second quarter of 2018, noninterest income increased 23.6% from $15.8 million. The increase was primarily attributable to higher commercial FHA revenue, partially offset by a decline in residential mortgage banking revenue.
Wealth management revenue for the second quarter of 2019 was $5.5 million, an increase of 11.1% from $5.0 million in the first quarter of 2019, primarily due to an increase in trust fees. Compared to the second quarter of 2018, wealth management revenue increased 3.5%.
Commercial FHA revenue for the second quarter of 2019 was $4.9 million, compared to $3.3 million in the first quarter of 2019. Commercial FHA revenue in the second quarter of 2019 included a $0.6 million recapture of mortgage servicing rights impairment, lower loan costs and an increase in gain premiums. The Company originated $42.2 million in rate lock commitments during the second quarter of 2019, compared to $64.5 million in the prior quarter. Compared to the second quarter of 2018, commercial FHA revenue increased $4.6 million.
Noninterest Expense
Noninterest expense for the second quarter of 2019 was $40.2 million, which included $0.3 million in integration and acquisition expenses and a $0.5 million gain on mortgage servicing rights held for sale, compared with $41.1 million for the first quarter of 2019, which included $0.2 million in integration and acquisition expenses. The decrease was primarily attributable to lower salaries and employee benefits expense, partially offset by higher professional fees.
Relative to the second quarter of 2018, noninterest expense decreased 13.5% from $46.5 million, which included $2.0 million in integration and acquisition expenses and a $0.2 million loss on mortgage servicing rights held for sale. Excluding these items, noninterest expense decreased 8.6% from $44.2 million. The decrease was primarily due to lower salaries and employee benefits expense and certain non-recurring items that impacted expense levels in the second quarter of 2018.
Loan Portfolio
Total loans outstanding were $4.07 billion at June 30, 2019, compared with $4.09 billion at March 31, 2019 and $4.10 billion at June 30, 2018. The decrease in total loans from March 31, 2019 was primarily attributable to declines in the commercial real estate and residential real estate portfolios, which was partially offset by organic growth in commercial loans and leases and construction and land development loans. Equipment finance balances increased $74.0 million from March 31, 2019, which are booked within the commercial loans and leases portfolio, reflecting management’s efforts to grow the equipment finance business. The decrease in total loans from June 30, 2018 was primarily attributable to a decline in commercial real estate and residential real estate loans, partially offset by organic growth in commercial loans and leases and consumer loans.
Deposits
Total deposits were $4.01 billion at June 30, 2019, compared with $4.04 billion at March 31, 2019, and $4.16 billion at June 30, 2018. The decrease in total deposits from March 31, 2019 was primarily related to the intentional reduction of $111.7 million in brokered money market deposits and brokered time deposits.
Asset Quality
Nonperforming loans totaled $50.7 million, or 1.24% of total loans, at June 30, 2019, compared with $49.3 million, or 1.20% of total loans, at March 31, 2019, and $28.3 million, or 0.69% of total loans, at June 30, 2018.
Net charge-offs for the second quarter of 2019 were $1.2 million, or 0.12% of average loans on an annualized basis.
The Company recorded a provision for loan losses of $4.1 million for the second quarter of 2019, which included a specific reserve for one credit placed on non-accrual during the prior quarter. The Company’s allowance for loan losses was 0.64% of total loans and 51.2% of nonperforming loans at June 30, 2019, compared with 0.56% of total loans and 46.9% of nonperforming loans at March 31, 2019. Fair market value discounts recorded in connection with acquired loan portfolios represented 0.39% of total loans at June 30, 2019, compared with 0.47% of total loans at March 31, 2019.
Capital
At June 30, 2019, the Company exceeded all regulatory capital requirements under Basel III and was considered to be a ‘‘well-capitalized’’ financial institution, as summarized in the following table:
| June 30, 2019 | Well Capitalized Regulatory Requirements | |||
| Total capital to risk-weighted assets | 13.49% | 10.00% | ||
| Tier 1 capital to risk-weighted assets | 10.85% | 8.00% | ||
| Tier 1 leverage ratio | 9.27% | 5.00% | ||
| Common equity Tier 1 capital | 9.38% | 6.50% | ||
| Tangible common equity to tangible assets (1) | 8.20% | NA | ||
(1) A non-GAAP financial measure. Refer to page 14 for a reconciliation to the comparable GAAP financial measure.
Acquisition of HomeStar Financial Group, Inc.
On July 17, 2019, the Company completed its acquisition of HomeStar Financial Group, Inc. and its banking subsidiary, HomeStar Bank and Financial Services, which operates 5 locations in the Kankakee, Illinois area, and which the Company intends to merge into the Bank. The Company acquired HomeStar for consideration of approximately $1.0 million in cash and the issuance of 405,000 shares of the Company’s common stock. At closing, HomeStar had approximately $374.4 million in assets, $219.5 million in loans, and $321.8 million in deposits.
Conference Call, Webcast and Slide Presentation
The Company will host a conference call and webcast at 7:30 a.m. Central Time on Friday, July 26, 2019 to discuss its financial results. The call can be accessed via telephone at (877) 516-3531; conference ID: 8484268. A recorded replay can be accessed through August 2, 2019 by dialing (855) 859-2056; conference ID: 8484268.
A slide presentation relating to the second quarter 2019 results will be accessible prior to the scheduled conference call. The slide presentation and webcast of the conference call can be accessed on the Webcasts and Presentations page of the Company’s investor relations website.
About Midland States Bancorp, Inc.
Midland States Bancorp, Inc. is a community-based financial holding company headquartered in Effingham, Illinois, and is the sole shareholder of Midland States Bank. As of June 30, 2019, the Company had total assets of approximately $5.55 billion and its Wealth Management Group had assets under administration of approximately $3.13 billion. Midland provides a full range of commercial and consumer banking products and services, business equipment financing, merchant credit card services, trust and investment management, and insurance and financial planning services. In addition, multi-family and healthcare facility FHA financing is provided through Love Funding, Midland’s non-bank subsidiary. For additional information, visit https://www.midlandsb.com/ or follow Midland on LinkedIn at https://www.linkedin.com/company/midland-states-bank.
Non-GAAP Financial Measures
Some of the financial measures included in this press release are not measures of financial performance recognized in accordance with GAAP. These non-GAAP financial measures include “Adjusted Earnings,” “Adjusted Diluted Earnings Per Common Share,” “Adjusted Return on Average Assets,” “Adjusted Return on Average Shareholders’ Equity,” “Adjusted Return on Average Tangible Common Equity,” “Efficiency Ratio,” “Tangible Common Equity to Tangible Assets,” “Tangible Book Value Per Share” and “Return on Average Tangible Common Equity.” The Company believes these non-GAAP financial measures provide both management and investors a more complete understanding of the Company’s funding profile and profitability. These non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP financial measures. Not all companies use the same calculation of these measures; therefore, this presentation may not be comparable to other similarly titled measures as presented by other companies.
Forward-Looking Statements
Readers should note that in addition to the historical information contained herein, this press release includes "forward-looking statements" within the meanings of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including but not limited to statements about the Company’s plans, objectives, future performance, goals and future earnings levels. These statements are subject to many risks and uncertainties, including changes in interest rates and other general economic, business and political conditions, including changes in the financial markets; changes in business plans as circumstances warrant; risks relating to acquisitions; and other risks detailed from time to time in filings made by the Company with the Securities and Exchange Commission. Readers should note that the forward-looking statements included in this press release are not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "will," "propose," "may," "plan," "seek," "expect," "intend," "estimate," "anticipate," "believe" or "continue," or similar terminology. Any forward-looking statements presented herein are made only as of the date of this press release, and the Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.
CONTACTS:
Jeffrey G. Ludwig, President and CEO, at jludwig@midlandsb.com or (217) 342-7321
Stephen A. Erickson, Chief Financial Officer, at serickson@midlandsb.com or (217) 540-1712
Douglas J. Tucker, SVP and Corporate Counsel, at dtucker@midlandsb.com or (217) 342-7321
| MIDLAND STATES BANCORP, INC. | |||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) | |||||||||||||||||||
| For the Quarter Ended | |||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||
| (dollars in thousands, except per share data) | 2019 | 2019 | 2018 | 2018 | 2018 | ||||||||||||||
| Earnings Summary | |||||||||||||||||||
| Net interest income | $ | 46,077 | $ | 45,601 | $ | 48,535 | $ | 45,081 | $ | 48,286 | |||||||||
| Provision for loan losses | 4,076 | 3,243 | 3,467 | 2,103 | 1,854 | ||||||||||||||
| Noninterest income | 19,587 | 17,075 | 21,170 | 18,272 | 15,847 | ||||||||||||||
| Noninterest expense | 40,194 | 41,097 | 45,375 | 50,317 | 46,452 | ||||||||||||||
| Income before income taxes | 21,394 | 18,336 | 20,863 | 10,933 | 15,827 | ||||||||||||||
| Income taxes | 5,039 | 4,354 | 4,527 | 2,436 | 3,045 | ||||||||||||||
| Net income | 16,355 | 13,982 | 16,336 | 8,497 | 12,782 | ||||||||||||||
| Preferred stock dividends, net | 34 | 34 | 34 | 35 | 36 | ||||||||||||||
| Net income available to common shareholders | $ | 16,321 | $ | 13,948 | $ | 16,302 | $ | 8,462 | $ | 12,746 | |||||||||
| Diluted earnings per common share | $ | 0.67 | $ | 0.57 | $ | 0.67 | $ | 0.35 | $ | 0.52 | |||||||||
| Weighted average shares outstanding - diluted | 24,303,211 | 24,204,661 | 24,200,346 | 24,325,743 | 24,268,111 | ||||||||||||||
| Return on average assets | 1.17 | % | 1.01 | % | 1.14 | % | 0.59 | % | 0.91 | % | |||||||||
| Return on average shareholders' equity | 10.43 | % | 9.23 | % | 10.81 | % | 5.68 | % | 8.77 | % | |||||||||
| Return on average tangible common equity (1) | 15.34 | % | 13.79 | % | 16.40 | % | 8.69 | % | 13.48 | % | |||||||||
| Net interest margin | 3.76 | % | 3.73 | % | 3.85 | % | 3.59 | % | 3.91 | % | |||||||||
| Efficiency ratio (1) | 61.58 | % | 64.73 | % | 65.50 | % | 63.02 | % | 67.76 | % | |||||||||
| Adjusted Earnings Performance Summary | |||||||||||||||||||
| Adjusted earnings (1) | $ | 16,196 | $ | 14,098 | $ | 16,397 | $ | 15,632 | $ | 14,469 | |||||||||
| Adjusted diluted earnings per common share (1) | $ | 0.66 | $ | 0.58 | $ | 0.67 | $ | 0.64 | $ | 0.59 | |||||||||
| Adjusted return on average assets (1) | 1.16 | % | 1.02 | % | 1.14 | % | 1.09 | % | 1.03 | % | |||||||||
| Adjusted return on average shareholders' equity (1) | 10.33 | % | 9.31 | % | 10.85 | % | 10.45 | % | 9.93 | % | |||||||||
| Adjusted return on average tangible common equity (1) | 15.19 | % | 13.90 | % | 16.46 | % | 16.02 | % | 15.27 | % | |||||||||
| (1) Non-GAAP financial measures. Refer to pages 12 - 14 for a reconciliation to the comparable GAAP financial measures. | |||||||||||||||||||
| MIDLAND STATES BANCORP, INC. | |||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | |||||||||||||||||||
| For the Quarter Ended | |||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||
| (in thousands, except per share data) | 2019 | 2019 | 2018 | 2018 | 2018 | ||||||||||||||
| Net interest income: | |||||||||||||||||||
| Total interest income | $ | 60,636 | $ | 59,432 | $ | 61,592 | $ | 56,987 | $ | 58,283 | |||||||||
| Total interest expense | 14,559 | 13,831 | 13,057 | 11,906 | 9,997 | ||||||||||||||
| Net interest income | 46,077 | 45,601 | 48,535 | 45,081 | 48,286 | ||||||||||||||
| Provision for loan losses | 4,076 | 3,243 | 3,467 | 2,103 | 1,854 | ||||||||||||||
| Net interest income after provision for loan losses | 42,001 | 42,358 | 45,068 | 42,978 | 46,432 | ||||||||||||||
| Noninterest income: | |||||||||||||||||||
| Wealth management revenue | 5,504 | 4,953 | 5,651 | 5,467 | 5,316 | ||||||||||||||
| Commercial FHA revenue | 4,917 | 3,270 | 4,194 | 3,130 | 326 | ||||||||||||||
| Residential mortgage banking revenue | 611 | 834 | 1,041 | 1,154 | 2,116 | ||||||||||||||
| Service charges on deposit accounts | 2,639 | 2,520 | 2,976 | 2,804 | 2,693 | ||||||||||||||
| Interchange revenue | 3,010 | 2,680 | 2,941 | 2,759 | 2,929 | ||||||||||||||
| Gain (loss) on sales of investment securities, net | 14 | - | 469 | - | (70 | ) | |||||||||||||
| Other income | 2,892 | 2,818 | 3,898 | 2,958 | 2,537 | ||||||||||||||
| Total noninterest income | 19,587 | 17,075 | 21,170 | 18,272 | 15,847 | ||||||||||||||
| Noninterest expense: | |||||||||||||||||||
| Salaries and employee benefits | 21,134 | 22,039 | 23,020 | 22,528 | 23,467 | ||||||||||||||
| Occupancy and equipment | 4,500 | 4,832 | 4,914 | 5,040 | 4,708 | ||||||||||||||
| Data processing | 4,987 | 4,891 | 5,660 | 10,817 | 5,106 | ||||||||||||||
| Professional | 2,410 | 2,073 | 2,752 | 3,087 | 3,185 | ||||||||||||||
| Amortization of intangible assets | 1,673 | 1,810 | 1,852 | 1,853 | 1,576 | ||||||||||||||
| (Gain) loss on mortgage servicing rights held for sale | (515 | ) | - | - | 270 | 188 | |||||||||||||
| Other expense | 6,005 | 5,452 | 7,177 | 6,722 | 8,222 | ||||||||||||||
| Total noninterest expense | 40,194 | 41,097 | 45,375 | 50,317 | 46,452 | ||||||||||||||
| Income before income taxes | 21,394 | 18,336 | 20,863 | 10,933 | 15,827 | ||||||||||||||
| Income taxes | 5,039 | 4,354 | 4,527 | 2,436 | 3,045 | ||||||||||||||
| Net income | 16,355 | 13,982 | 16,336 | 8,497 | 12,782 | ||||||||||||||
| Preferred stock dividends, net | 34 | 34 | 34 | 35 | 36 | ||||||||||||||
| Net income available to common shareholders | $ | 16,321 | $ | 13,948 | $ | 16,302 | $ | 8,462 | $ | 12,746 | |||||||||
| Basic earnings per common share | $ | 0.67 | $ | 0.58 | $ | 0.68 | $ | 0.35 | $ | 0.53 | |||||||||
| Diluted earnings per common share | $ | 0.67 | $ | 0.57 | $ | 0.67 | $ | 0.35 | $ | 0.52 | |||||||||
| MIDLAND STATES BANCORP, INC. | |||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | |||||||||||||||||||
| As of | |||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||
| (in thousands) | 2019 | 2019 | 2018 | 2018 | 2018 | ||||||||||||||
| Assets | |||||||||||||||||||
| Cash and cash equivalents | $ | 245,415 | $ | 276,480 | $ | 213,700 | $ | 242,433 | $ | 276,331 | |||||||||
| Investment securities | 613,026 | 656,152 | 660,785 | 685,753 | 708,001 | ||||||||||||||
| Loans | 4,073,527 | 4,092,106 | 4,137,551 | 4,156,282 | 4,095,811 | ||||||||||||||
| Allowance for loan losses | (25,925 | ) | (23,091 | ) | (20,903 | ) | (19,631 | ) | (18,246 | ) | |||||||||
| Total loans, net | 4,047,602 | 4,069,015 | 4,116,648 | 4,136,651 | 4,077,565 | ||||||||||||||
| Loans held for sale, at fair value | 22,143 | 16,851 | 30,401 | 35,246 | 41,449 | ||||||||||||||
| Premises and equipment, net | 94,824 | 94,514 | 94,840 | 95,062 | 94,783 | ||||||||||||||
| Other real estate owned | 3,797 | 2,020 | 3,483 | 3,684 | 3,911 | ||||||||||||||
| Mortgage servicing rights, at lower of cost or fair value | 54,191 | 52,957 | 53,447 | 51,626 | 52,381 | ||||||||||||||
| Mortgage servicing rights held for sale | 159 | 257 | 3,545 | 4,419 | 4,806 | ||||||||||||||
| Intangible assets | 33,893 | 35,566 | 37,376 | 39,228 | 41,081 | ||||||||||||||
| Goodwill | 164,673 | 164,673 | 164,673 | 164,044 | 164,044 | ||||||||||||||
| Cash surrender value of life insurance policies | 140,593 | 139,686 | 138,783 | 138,600 | 137,681 | ||||||||||||||
| Other assets | 125,739 | 133,609 | 119,992 | 127,866 | 128,567 | ||||||||||||||
| Total assets | $ | 5,546,055 | $ | 5,641,780 | $ | 5,637,673 | $ | 5,724,612 | $ | 5,730,600 | |||||||||
| Liabilities and Shareholders' Equity | |||||||||||||||||||
| Noninterest-bearing deposits | $ | 902,286 | $ | 941,344 | $ | 972,164 | $ | 991,311 | $ | 1,001,802 | |||||||||
| Interest-bearing deposits | 3,108,921 | 3,094,944 | 3,102,006 | 3,151,895 | 3,158,055 | ||||||||||||||
| Total deposits | 4,011,207 | 4,036,288 | 4,074,170 | 4,143,206 | 4,159,857 | ||||||||||||||
| Short-term borrowings | 113,844 | 115,832 | 124,235 | 145,450 | 114,536 | ||||||||||||||
| FHLB advances and other borrowings | 582,387 | 669,009 | 640,631 | 652,253 | 678,873 | ||||||||||||||
| Subordinated debt | 94,215 | 94,174 | 94,134 | 94,093 | 94,053 | ||||||||||||||
| Trust preferred debentures | 48,041 | 47,918 | 47,794 | 47,676 | 47,559 | ||||||||||||||
| Other liabilities | 56,473 | 54,391 | 48,184 | 47,788 | 43,187 | ||||||||||||||
| Total liabilities | 4,906,167 | 5,017,612 | 5,029,148 | 5,130,466 | 5,138,065 | ||||||||||||||
| Total shareholders’ equity | 639,888 | 624,168 | 608,525 | 594,146 | 592,535 | ||||||||||||||
| Total liabilities and shareholders’ equity | $ | 5,546,055 | $ | 5,641,780 | $ | 5,637,673 | $ | 5,724,612 | $ | 5,730,600 | |||||||||
| MIDLAND STATES BANCORP, INC. | |||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | |||||||||||||||||||
| As of | |||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||
| (in thousands) | 2019 | 2019 | 2018 | 2018 | 2018 | ||||||||||||||
| Loan Portfolio | |||||||||||||||||||
| Commercial loans and leases | $ | 1,149,370 | $ | 1,122,621 | $ | 1,074,935 | $ | 1,034,546 | $ | 991,164 | |||||||||
| Commercial real estate loans | 1,524,369 | 1,560,427 | 1,639,155 | 1,711,926 | 1,711,296 | ||||||||||||||
| Construction and land development loans | 250,414 | 239,376 | 232,229 | 239,480 | 247,889 | ||||||||||||||
| Residential real estate loans | 552,406 | 569,051 | 578,048 | 586,134 | 601,808 | ||||||||||||||
| Consumer loans | 596,968 | 600,631 | 613,184 | 584,196 | 543,654 | ||||||||||||||
| Total loans | $ | 4,073,527 | $ | 4,092,106 | $ | 4,137,551 | $ | 4,156,282 | $ | 4,095,811 | |||||||||
| Deposit Portfolio | |||||||||||||||||||
| Noninterest-bearing demand deposits | $ | 902,286 | $ | 941,344 | $ | 972,164 | $ | 991,311 | $ | 1,001,802 | |||||||||
| Interest-bearing: | |||||||||||||||||||
| Checking accounts | 1,009,023 | 968,844 | 1,002,275 | 1,047,914 | 1,024,506 | ||||||||||||||
| Money market accounts | 732,573 | 802,036 | 862,171 | 836,151 | 843,984 | ||||||||||||||
| Savings accounts | 442,017 | 457,176 | 442,132 | 445,640 | 460,560 | ||||||||||||||
| Time deposits | 785,337 | 685,700 | 633,787 | 633,654 | 638,215 | ||||||||||||||
| Brokered time deposits | 139,971 | 181,188 | 161,641 | 188,536 | 190,790 | ||||||||||||||
| Total deposits | $ | 4,011,207 | $ | 4,036,288 | $ | 4,074,170 | $ | 4,143,206 | $ | 4,159,857 | |||||||||
| MIDLAND STATES BANCORP, INC. | |||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | |||||||||||||||||||
| For the Quarter Ended | |||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||
| (dollars in thousands) | 2019 | 2019 | 2018 | 2018 | 2018 | ||||||||||||||
| Average Balance Sheets | |||||||||||||||||||
| Cash and cash equivalents | $ | 162,110 | $ | 152,078 | $ | 155,280 | $ | 154,526 | $ | 227,499 | |||||||||
| Investment securities | 636,946 | 654,764 | 676,483 | 700,018 | 731,017 | ||||||||||||||
| Loans | 4,086,720 | 4,128,893 | 4,139,831 | 4,106,367 | 3,982,958 | ||||||||||||||
| Loans held for sale | 40,177 | 30,793 | 51,981 | 48,715 | 31,220 | ||||||||||||||
| Nonmarketable equity securities | 44,217 | 44,279 | 42,708 | 42,770 | 38,872 | ||||||||||||||
| Total interest-earning assets | 4,970,170 | 5,010,807 | 5,066,283 | 5,052,396 | 5,011,566 | ||||||||||||||
| Non-earning assets | 618,023 | 618,996 | 624,378 | 639,323 | 639,864 | ||||||||||||||
| Total assets | $ | 5,588,193 | $ | 5,629,803 | $ | 5,690,661 | $ | 5,691,719 | $ | 5,651,430 | |||||||||
| Interest-bearing deposits | $ | 3,107,660 | $ | 3,093,979 | $ | 3,123,134 | $ | 3,172,422 | $ | 3,158,816 | |||||||||
| Short-term borrowings | 120,859 | 135,337 | 143,869 | 139,215 | 120,794 | ||||||||||||||
| FHLB advances and other borrowings | 607,288 | 673,250 | 645,642 | 608,153 | 573,107 | ||||||||||||||
| Subordinated debt | 94,196 | 94,156 | 94,115 | 94,075 | 94,035 | ||||||||||||||
| Trust preferred debentures | 47,982 | 47,848 | 47,737 | 47,601 | 47,488 | ||||||||||||||
| Total interest-bearing liabilities | 3,977,985 | 4,044,570 | 4,054,497 | 4,061,466 | 3,994,240 | ||||||||||||||
| Noninterest-bearing deposits | 921,115 | 919,185 | 989,954 | 989,142 | 1,025,308 | ||||||||||||||
| Other noninterest-bearing liabilities | 60,363 | 51,838 | 46,487 | 47,654 | 47,229 | ||||||||||||||
| Shareholders' equity | 628,730 | 614,210 | 599,723 | 593,457 | 584,653 | ||||||||||||||
| Total liabilities and shareholders' equity | $ | 5,588,193 | $ | 5,629,803 | $ | 5,690,661 | $ | 5,691,719 | $ | 5,651,430 | |||||||||
| Yields | |||||||||||||||||||
| Cash and cash equivalents | 2.43 | % | 2.42 | % | 2.24 | % | 1.96 | % | 1.79 | % | |||||||||
| Investment securities | 3.11 | % | 3.07 | % | 3.04 | % | 3.01 | % | 2.91 | % | |||||||||
| Loans | 5.32 | % | 5.22 | % | 5.28 | % | 4.88 | % | 5.21 | % | |||||||||
| Loans held for sale | 4.50 | % | 3.94 | % | 3.92 | % | 4.17 | % | 3.79 | % | |||||||||
| Nonmarketable equity securities | 5.42 | % | 5.69 | % | 5.20 | % | 5.01 | % | 4.97 | % | |||||||||
| Total interest-earning assets | 4.94 | % | 4.85 | % | 4.87 | % | 4.52 | % | 4.71 | % | |||||||||
| Interest-bearing deposits | 1.09 | % | 0.97 | % | 0.86 | % | 0.77 | % | 0.64 | % | |||||||||
| Short-term borrowings | 0.70 | % | 0.71 | % | 0.67 | % | 0.61 | % | 0.38 | % | |||||||||
| FHLB advances and other borrowings | 2.34 | % | 2.32 | % | 2.26 | % | 2.09 | % | 1.81 | % | |||||||||
| Subordinated debt | 6.43 | % | 6.43 | % | 6.43 | % | 6.44 | % | 6.44 | % | |||||||||
| Trust preferred debentures | 7.17 | % | 7.38 | % | 6.93 | % | 6.81 | % | 6.59 | % | |||||||||
| Total interest-bearing liabilities | 1.47 | % | 1.39 | % | 1.28 | % | 1.16 | % | 1.00 | % | |||||||||
| Net interest margin | 3.76 | % | 3.73 | % | 3.85 | % | 3.59 | % | 3.91 | % | |||||||||
| MIDLAND STATES BANCORP, INC. | |||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | |||||||||||||||||||
| As of and for the Quarter Ended | |||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||
| (dollars in thousands, except per share data) | 2019 | 2019 | 2018 | 2018 | 2018 | ||||||||||||||
| Asset Quality | |||||||||||||||||||
| Loans 30-89 days past due | $ | 21,554 | $ | 23,999 | $ | 25,213 | $ | 22,678 | $ | 19,362 | |||||||||
| Nonperforming loans | 50,676 | 49,262 | 42,899 | 38,561 | 28,342 | ||||||||||||||
| Nonperforming assets | 54,473 | 51,282 | 45,899 | 41,638 | 31,542 | ||||||||||||||
| Net charge-offs | 1,242 | 1,055 | 2,195 | 718 | 1,312 | ||||||||||||||
| Loans 30-89 days past due to total loans | 0.53 | % | 0.59 | % | 0.61 | % | 0.55 | % | 0.47 | % | |||||||||
| Nonperforming loans to total loans | 1.24 | % | 1.20 | % | 1.04 | % | 0.93 | % | 0.69 | % | |||||||||
| Nonperforming assets to total assets | 0.98 | % | 0.91 | % | 0.81 | % | 0.73 | % | 0.55 | % | |||||||||
| Allowance for loan losses to total loans | 0.64 | % | 0.56 | % | 0.51 | % | 0.47 | % | 0.45 | % | |||||||||
| Allowance for loan losses to nonperforming loans | 51.16 | % | 46.87 | % | 48.73 | % | 50.91 | % | 64.38 | % | |||||||||
| Net charge-offs to average loans | 0.12 | % | 0.10 | % | 0.21 | % | 0.07 | % | 0.13 | % | |||||||||
| Wealth Management | |||||||||||||||||||
| Trust assets under administration | $ | 3,125,869 | $ | 3,097,091 | $ | 2,945,084 | $ | 3,218,013 | $ | 3,188,909 | |||||||||
| Market Data | |||||||||||||||||||
| Book value per share at period end | $ | 26.66 | $ | 26.08 | $ | 25.50 | $ | 24.96 | $ | 24.92 | |||||||||
| Tangible book value per share at period end (1) | $ | 18.36 | $ | 17.68 | $ | 17.00 | $ | 16.38 | $ | 16.25 | |||||||||
| Market price at period end | $ | 26.72 | $ | 24.06 | $ | 22.34 | $ | 32.10 | $ | 34.26 | |||||||||
| Shares outstanding at period end | 23,897,038 | 23,827,438 | 23,751,798 | 23,694,637 | 23,664,596 | ||||||||||||||
| Capital | |||||||||||||||||||
| Total capital to risk-weighted assets | 13.49 | % | 13.25 | % | 12.79 | % | 12.35 | % | 12.27 | % | |||||||||
| Tier 1 capital to risk-weighted assets | 10.85 | % | 10.65 | % | 10.25 | % | 9.85 | % | 9.78 | % | |||||||||
| Tier 1 leverage ratio | 9.27 | % | 8.92 | % | 8.53 | % | 8.24 | % | 8.16 | % | |||||||||
| Tier 1 common capital to risk-weighted assets | 9.38 | % | 9.16 | % | 8.76 | % | 8.37 | % | 8.28 | % | |||||||||
| Tangible common equity to tangible assets (1) | 8.20 | % | 7.74 | % | 7.43 | % | 7.03 | % | 6.96 | % | |||||||||
| (1) Non-GAAP financial measures. Refer to pages 12 - 14 for a reconciliation to the comparable GAAP financial measures. | |||||||||||||||||||
| MIDLAND STATES BANCORP, INC. | |||||||||||||||||||||||
| RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES | |||||||||||||||||||||||
| Adjusted Earnings Reconciliation | |||||||||||||||||||||||
| For the Quarter Ended | |||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||||||
| (dollars in thousands, except per share data) | 2019 | 2019 | 2018 | 2018 | 2018 | ||||||||||||||||||
| Income before income taxes - GAAP | $ | 21,394 | $ | 18,336 | $ | 20,863 | $ | 10,933 | $ | 15,827 | |||||||||||||
| Adjustments to noninterest income: | |||||||||||||||||||||||
| Gain (loss) on sales of investment securities, net | 14 | - | 469 | - | (70 | ) | |||||||||||||||||
| Other | (23 | ) | - | (1 | ) | (12 | ) | (48 | ) | ||||||||||||||
| Total adjustments to noninterest income | (9 | ) | - | 468 | (12 | ) | (118 | ) | |||||||||||||||
| Adjustments to noninterest expense: | |||||||||||||||||||||||
| (Gain) loss on mortgage servicing rights held for sale | (515 | ) | - | - | 270 | 188 | |||||||||||||||||
| Integration and acquisition expenses | 286 | 160 | 553 | 9,559 | 2,019 | ||||||||||||||||||
| Total adjustments to noninterest expense | (229 | ) | 160 | 553 | 9,829 | 2,207 | |||||||||||||||||
| Adjusted earnings pre tax | 21,174 | 18,496 | 20,948 | 20,774 | 18,152 | ||||||||||||||||||
| Adjusted earnings tax | 4,978 | 4,398 | 4,551 | 5,142 | 3,683 | ||||||||||||||||||
| Adjusted earnings - non-GAAP | 16,196 | 14,098 | 16,397 | 15,632 | 14,469 | ||||||||||||||||||
| Preferred stock dividends, net | 34 | 34 | 34 | 35 | 36 | ||||||||||||||||||
| Adjusted earnings available to common shareholders - non-GAAP | $ | 16,162 | $ | 14,064 | $ | 16,363 | $ | 15,597 | $ | 14,433 | |||||||||||||
| Adjusted diluted earnings per common share | $ | 0.66 | $ | 0.58 | $ | 0.67 | $ | 0.64 | $ | 0.59 | |||||||||||||
| Adjusted return on average assets | 1.16 | % | 1.02 | % | 1.14 | % | 1.09 | % | 1.03 | % | |||||||||||||
| Adjusted return on average shareholders' equity | 10.33 | % | 9.31 | % | 10.85 | % | 10.45 | % | 9.93 | % | |||||||||||||
| Adjusted return on average tangible common equity | 15.19 | % | 13.90 | % | 16.46 | % | 16.02 | % | 15.27 | % | |||||||||||||
| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||||||
| RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (continued) | ||||||||||||||||||||||||
| Efficiency Ratio Reconciliation | ||||||||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||||||
| (dollars in thousands) | 2019 | 2019 | 2018 | 2018 | 2018 | |||||||||||||||||||
| Noninterest expense - GAAP | $ | 40,194 | $ | 41,097 | $ | 45,375 | $ | 50,317 | $ | 46,452 | ||||||||||||||
| Gain (loss) on mortgage servicing rights held for sale | 515 | - | - | (270 | ) | (188 | ) | |||||||||||||||||
| Integration and acquisition expenses | (286 | ) | (160 | ) | (553 | ) | (9,559 | ) | (2,019 | ) | ||||||||||||||
| Adjusted noninterest expense | $ | 40,423 | $ | 40,937 | $ | 44,822 | $ | 40,488 | $ | 44,245 | ||||||||||||||
| Net interest income - GAAP | $ | 46,077 | $ | 45,601 | $ | 48,535 | $ | 45,081 | $ | 48,286 | ||||||||||||||
| Effect of tax-exempt income | 526 | 543 | 574 | 585 | 541 | |||||||||||||||||||
| Adjusted net interest income | 46,603 | 46,144 | 49,109 | 45,666 | 48,827 | |||||||||||||||||||
| Noninterest income - GAAP | $ | 19,587 | $ | 17,075 | $ | 21,170 | $ | 18,272 | $ | 15,847 | ||||||||||||||
| Mortgage servicing rights (recapture) impairment | (559 | ) | 25 | (1,380 | ) | 297 | 500 | |||||||||||||||||
| (Gain) loss on sales of investment securities, net | (14 | ) | - | (469 | ) | - | 70 | |||||||||||||||||
| Other | 23 | - | 1 | 12 | 48 | |||||||||||||||||||
| Adjusted noninterest income | 19,037 | 17,100 | 19,322 | 18,581 | 16,465 | |||||||||||||||||||
| Adjusted total revenue | $ | 65,640 | $ | 63,244 | $ | 68,431 | $ | 64,247 | $ | 65,292 | ||||||||||||||
| Efficiency ratio | 61.58 | % | 64.73 | % | 65.50 | % | 63.02 | % | 67.76 | % | ||||||||||||||
| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||||||
| RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (continued) | ||||||||||||||||||||||||
| Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share | ||||||||||||||||||||||||
| As of | ||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||||||
| (dollars in thousands, except per share data) | 2019 | 2019 | 2018 | 2018 | 2018 | |||||||||||||||||||
| Shareholders' Equity to Tangible Common Equity | ||||||||||||||||||||||||
| Total shareholders' equity—GAAP | $ | 639,888 | $ | 624,168 | $ | 608,525 | $ | 594,146 | $ | 592,535 | ||||||||||||||
| Adjustments: | ||||||||||||||||||||||||
| Preferred stock | (2,684 | ) | (2,733 | ) | (2,781 | ) | (2,829 | ) | (2,876 | ) | ||||||||||||||
| Goodwill | (164,673 | ) | (164,673 | ) | (164,673 | ) | (164,044 | ) | (164,044 | ) | ||||||||||||||
| Other intangibles | (33,893 | ) | (35,566 | ) | (37,376 | ) | (39,228 | ) | (41,081 | ) | ||||||||||||||
| Tangible common equity | $ | 438,638 | $ | 421,196 | $ | 403,695 | $ | 388,045 | $ | 384,534 | ||||||||||||||
| Total Assets to Tangible Assets: | ||||||||||||||||||||||||
| Total assets—GAAP | $ | 5,546,055 | $ | 5,641,780 | $ | 5,637,673 | $ | 5,724,612 | $ | 5,730,600 | ||||||||||||||
| Adjustments: | ||||||||||||||||||||||||
| Goodwill | (164,673 | ) | (164,673 | ) | (164,673 | ) | (164,044 | ) | (164,044 | ) | ||||||||||||||
| Other intangibles | (33,893 | ) | (35,566 | ) | (37,376 | ) | (39,228 | ) | (41,081 | ) | ||||||||||||||
| Tangible assets | $ | 5,347,489 | $ | 5,441,541 | $ | 5,435,624 | $ | 5,521,340 | $ | 5,525,475 | ||||||||||||||
| Common Shares Outstanding | 23,897,038 | 23,827,438 | 23,751,798 | 23,694,637 | 23,664,596 | |||||||||||||||||||
| Tangible Common Equity to Tangible Assets | 8.20 | % | 7.74 | % | 7.43 | % | 7.03 | % | 6.96 | % | ||||||||||||||
| Tangible Book Value Per Share | $ | 18.36 | $ | 17.68 | $ | 17.00 | $ | 16.38 | $ | 16.25 | ||||||||||||||
| Return on Average Tangible Common Equity (ROATCE) | ||||||||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||||||
| (dollars in thousands) | 2019 | 2019 | 2018 | 2018 | 2018 | |||||||||||||||||||
| Net income available to common shareholders | $ | 16,321 | $ | 13,948 | $ | 16,302 | $ | 8,462 | $ | 12,746 | ||||||||||||||
| Average total shareholders' equity—GAAP | $ | 628,730 | $ | 614,210 | $ | 599,723 | $ | 593,457 | $ | 584,653 | ||||||||||||||
| Adjustments: | ||||||||||||||||||||||||
| Preferred stock | (2,708 | ) | (2,759 | ) | (2,812 | ) | (2,859 | ) | (2,905 | ) | ||||||||||||||
| Goodwill | (164,673 | ) | (164,673 | ) | (164,051 | ) | (164,044 | ) | (158,461 | ) | ||||||||||||||
| Other intangibles | (34,689 | ) | (36,438 | ) | (38,394 | ) | (40,228 | ) | (44,098 | ) | ||||||||||||||
| Average tangible common equity | $ | 426,660 | $ | 410,340 | $ | 394,466 | $ | 386,326 | $ | 379,189 | ||||||||||||||
| ROATCE | 15.34 | % | 13.79 | % | 16.40 | % | 8.69 | % | 13.48 | % | ||||||||||||||
EXHIBIT 99.2
1 Midland States Bancorp, Inc. NASDAQ: MSBI Second Quarter 2019 Earnings Call
2 Forward - Looking Statements. This presentation may contain forward - looking statements within the meaning of the federal securities laws. Forward - looking statements express management’s current expectations, forecasts of future events or long - term goals, including with respect to pending acquisitions, and may be based upon beliefs, expectations and assumptions of Midland ’s management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “intend,” “esti mat e,” “may,” “will,” “would,” “could,” “should” or other similar expressions. All statements in this presentation speak only as of th e date they are made, and Midland undertakes no obligation to update any statement. A number of factors, many of which are beyond th e ability of Midland to control or predict, could cause actual results to differ materially from those in its forward - looking statements. These risks and uncertainties should be considered in evaluating forward - looking statements and undue reliance shou ld not be placed on such statements. Additional information concerning Midland and its respective businesses, including addition al factors that could materially affect Midland’s financial results, are included in Midland’s filings with the Securities and E xch ange Commission. Use of Non - GAAP Financial Measures. This presentation may contain certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States (“GAAP”). These non - GAAP financial measure s include “Adjusted Earnings,” “Adjusted Diluted Earnings Per Share,” “Adjusted Return on Average Assets,” “Adjusted Return on Average Shareholders’ Equity,” “Adjusted Return on Average Tangible Common Equity,” “Efficiency Ratio,” “Tangible Common Equ ity to Tangible Assets,” “Tangible Book Value Per Share” and “Return on Average Tangible Common Equity.” The Company believes tha t these non - GAAP financial measures provide both management and investors a more complete understanding of the Company’s funding profile and profitability. These non - GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP financial measures. Not all companies use the same calculation of these measures; therefore this presentation m ay not be comparable to other similarly titled measures as presented by other companies. Reconciliations of these non - GAAP measures are provided in the Appendix section of this presentation.
3 Overview of 2Q19 3 Solid Execution on Strategic Priorities 2Q19 Earnings HomeStar Acquisition • Continued strong production in equipment financing • Diverse business lines generating strong contributions of noninterest income • Efficiency ratio (1) improves to 61.6% from 64.7% in prior quarter • Closed on July 17, 2019 • Adds attractive low - cost deposit base with excess liquidity • Expected to be ~9% accretive to EPS in 2020 Strong Capital Generation • Book value per share increased 2.2% to $26.66 • Tangible book value per share (1) increased 3.8% to $18.36 • Continued increases in all capital ratios • Net income of $16.4 million • Diluted EPS of $0.67 Notes: (1) Represents a non - GAAP financial measure. See “Non - GAAP Reconciliation” in the appendix.
4 2Q 2019 1Q 2019 2Q 2018 Commercial loans and leases $ 1,149 $ 1,123 $ 991 Commercial real estate 1,524 1,560 1,711 Construction and land development 250 239 248 Residential real estate 552 569 602 Consumer 597 601 544 Total Loans $ 4,074 $ 4,092 $ 4,096 $4,096 $4,156 $4,138 $4,092 $4,074 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 Loan Portfolio Total Loans 4 • Total loans declined $18.6 million, or 0.5%, to $4.07 billion • Decline in commercial real estate and residential real estate partially offset by continued growth in commercial loans and leases • Equipment finance balances increased $74.0 million, or 17.1%, from March 31, 2019 Loan Portfolio Mix (in millions, as of quarter - end) (in millions, as of quarter - end)
5 2Q 2019 1Q 2019 2Q 2018 Noninterest - bearing demand $ 902 $ 941 $ 1,002 Interest - bearing: Checking 1,009 969 1,025 Money market 733 802 844 Savings 442 457 461 Time 785 686 638 Brokered time 140 181 191 Total Deposits $ 4,011 $ 4,036 $ 4,160 $4,160 $4,143 $4,074 $4,036 $4,011 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 Total Deposits Total Deposits 5 • Total deposits decreased $25.1 million, or 0.6%, to $4.01 billion • Decline in deposits primarily attributable to intentional reduction of brokered money market deposits of $70.5 million and brokered time deposits of $41.2 million • Core funding deposit campaigns replaced the majority of the decrease in brokered deposits Deposit Mix (in millions, as of quarter - end) (in millions, as of quarter - end)
6 $5.32 $5.47 $5.65 $4.95 $5.50 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 $3,189 $3,218 $2,945 $3,097 $3,126 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 • Total Wealth Management revenue increased 11.1% from the prior quarter • Increase attributable to an increase in trust fees • During 2Q19, assets under administration increased $28.8 million, primarily due to market performance Wealth Management Wealth Management Revenue 6 Assets Under Administration (in millions) (in millions )
7 $5.5 $1.7 $4.3 $2.5 $3.4 $46.1 $48.3 $45.1 $48.5 $45.6 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 NII Accretion Income 0.40% 0.10% 0.31% 0.17% 0.25% 3.76% 3.91% 3.59% 3.85% 3.73% 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 NIM Accretion Income • Net interest income and margin increased due to higher accretion income • Excluding the impact of accretion income, net interest margin decreased 5 bps, primarily due to higher average deposit costs • Average rate on new and renewed loans was 5.61% • Expected scheduled accretion income: $1.9 million in 3Q19; $9.5 million in FY 2019 (excluding impact of HomeStar acquisition) Net Interest Income/Margin Net Interest Margin 7 Net Interest Income (in millions) $5.
8 Noninterest Income 8 • Noninterest income increased 14.7% from prior quarter • Wealth management remains largest single contributor to noninterest income • Commercial FHA revenue positively impacted by $0.6 million recapture of MSR impairment, lower loan costs and an increase in gain premiums Noninterest Income (in millions) $15.8 $18.3 $21.2 $17.1 $19.6 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 All Other Community Banking Revenue Residential Mortgage Commercial FHA Wealth Management Notes: (1) Represents service charges, interchange revenue, net gain (loss) on sale of investment securities, and other income (1)
9 Noninterest Expense and Operating Efficiency 9 • Efficiency Ratio (1) was 61.6% in 2Q19 vs. 64.7% in 1Q19 • Adjustments to non - interest expense: • Excluding these adjustments, noninterest expense decreased 1.3% on a linked - quarter basis • Decrease in noninterest expense primarily attributable to lower salaries and benefits, partially offset by an increase in professional fees Noninterest Expense and Efficiency Ratio (1) (Noninterest expense in millions) $2.2 $9.8 $0.6 $0.2 $(0.2) 67.8% 63.0% 65.5% 64.7% 61.6% $46.5 $50.3 $45.5 $41.1 $40.2 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 Total Noninterest Expense Adjustments to Noninterest Expense Efficiency Ratio Notes: (1) Represents a non - GAAP financial measure. See “Non - GAAP Reconciliation” in the appendix. ($ in millions) 2Q19 1Q19 Integration and acquisition related expenses ($0.3) ($0.2) Gain on MSRs held for sale $0.5
10 Asset Quality NCO / Average Loans 10 • Net charge - offs for 2Q19 was 0.12% of average loans on an annualized basis • Provision for loan losses of $4.1 million in 2Q19 includes a specific reserve related to one credit placed on non - accrual during the prior quarter • ALLL/total loans of 0.64% and credit marks/total loans of 0.39% at June 30, 2019 Nonperforming Loans / Total Loans (Total Loans as of quarter - end) 0.69% 0.93% 1.04% 1.20% 1.24% 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019 0.13% 0.07% 0.21% 0.10% 0.12% 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019
11 Outlook • Continued execution on protecting margin and controlling expenses resulting in solid financial performance • Low - single - digit organic loan growth expected in 2019 • HomeStar acquisition provides additional liquidity that will enhance our funding profile and increase flexibility in loan production going forward • HomeStar acquisition to be ~9% accretive to EPS in 2020, which provides foundation for solid year of earnings growth 11
12 APPENDIX
13 13 Adjusted Earnings Reconciliation (dollars in thousands, except per share data) Income before income taxes - GAAP $ 21,394 $ 18,336 $ 20,863 $ 10,933 $ 15,827 Adjustments to noninterest income: Gain (loss) on sales of investment securities, net 14 - 469 - (70) Other (23) - (1) (12) (48) Total adjustments to noninterest income (9) - 468 (12) (118) Adjustments to noninterest expense: (Gain) loss on mortgage servicing rights held for sale (515) - - 270 188 Integration and acquisition expenses 286 160 553 9,559 2,019 Total adjustments to noninterest expense (229) 160 553 9,829 2,207 Adjusted earnings pre tax 21,174 18,496 20,948 20,774 18,152 Adjusted earnings tax 4,978 4,398 4,551 5,142 3,683 Adjusted earnings - non-GAAP 16,196 14,098 16,397 15,632 14,469 Preferred stock dividends, net 34 34 34 35 36 Adjusted earnings available to common shareholders - non-GAAP $ 16,162 $ 14,064 $ 16,363 $ 15,597 $ 14,433 Adjusted diluted earnings per common share $ 0.66 $ 0.58 $ 0.67 $ 0.64 $ 0.59 Adjusted return on average assets 1.16 % 1.02 % 1.14 % 1.09 % 1.03 % Adjusted return on average shareholders' equity 10.33 % 9.31 % 10.85 % 10.45 % 9.93 % Adjusted return on average tangible common equity 15.19 % 13.90 % 16.46 % 16.02 % 15.27 % MIDLAND STATES BANCORP, INC.RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES For the Quarter Ended 2019 2019 2018 2018 2018 June 30, March 31, December 31, September 30, June 30,
14 14 Efficiency Ratio Reconciliation (dollars in thousands) Noninterest expense - GAAP $ 40,194 $ 41,097 $ 45,375 $ 50,317 $ 46,452 Gain (loss) on mortgage servicing rights held for sale 515 - - (270) (188) Integration and acquisition expenses (286) (160) (553) (9,559) (2,019) Adjusted noninterest expense $ 40,423 $ 40,937 $ 44,822 $ 40,488 $ 44,245 Net interest income - GAAP $ 46,077 $ 45,601 $ 48,535 $ 45,081 $ 48,286 Effect of tax-exempt income 526 543 574 585 541 Adjusted net interest income 46,603 46,144 49,109 45,666 48,827 Noninterest income - GAAP $ 19,587 $ 17,075 $ 21,170 $ 18,272 $ 15,847 Mortgage servicing rights (recapture) impairment (559) 25 (1,380) 297 500 (Gain) loss on sales of investment securities, net (14) - (469) - 70 Other 23 - 1 12 48 Adjusted noninterest income 19,037 17,100 19,322 18,581 16,465 Adjusted total revenue $ 65,640 $ 63,244 $ 68,431 $ 64,247 $ 65,292 Efficiency ratio 61.58 % 64.73 % 65.50 % 63.02 % 67.76 % MIDLAND STATES BANCORP, INC.RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (continued) For the Quarter Ended 2019 2019 2018 2018 2018 June 30, March 31, December 31, September 30, June 30,
15 15 Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share (dollars in thousands, except per share data) Shareholders' Equity to Tangible Common Equity Total shareholders' equity—GAAP $ 639,888 $ 624,168 $ 608,525 $ 594,146 $ 592,535 Adjustments: Preferred stock (2,684) (2,733) (2,781) (2,829) (2,876) Goodwill (164,673) (164,673) (164,673) (164,044) (164,044) Other intangibles (33,893) (35,566) (37,376) (39,228) (41,081) Tangible common equity $ 438,638 $ 421,196 $ 403,695 $ 388,045 $ 384,534 Total Assets to Tangible Assets: Total assets—GAAP $ 5,546,055 $ 5,641,780 $ 5,637,673 $ 5,724,612 $ 5,730,600 Adjustments: Goodwill (164,673) (164,673) (164,673) (164,044) (164,044) Other intangibles (33,893) (35,566) (37,376) (39,228) (41,081) Tangible assets $ 5,347,489 $ 5,441,541 $ 5,435,624 $ 5,521,340 $ 5,525,475 Common Shares Outstanding 23,897,038 23,827,438 23,751,798 23,694,637 23,664,596 Tangible Common Equity to Tangible Assets 8.20 % 7.74 % 7.43 % 7.03 % 6.96 % Tangible Book Value Per Share $ 18.36 $ 17.68 $ 17.00 $ 16.38 $ 16.25 Return on Average Tangible Common Equity (ROATCE) (dollars in thousands) Net income available to common shareholders $ 16,321 $ 13,948 $ 16,302 $ 8,462 $ 12,746 Average total shareholders' equity—GAAP $ 628,730 $ 614,210 $ 599,723 $ 593,457 $ 584,653 Adjustments: Preferred stock (2,708) (2,759) (2,812) (2,859) (2,905) Goodwill (164,673) (164,673) (164,051) (164,044) (158,461) Other intangibles (34,689) (36,438) (38,394) (40,228) (44,098) Average tangible common equity $ 426,660 $ 410,340 $ 394,466 $ 386,326 $ 379,189 ROATCE 15.34 % 13.79 % 16.40 % 8.69 % 13.48 % MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (continued) As of June 30, March 31, December 31, September 30, June 30, 2019 2019 2018 2018 2018 For the Quarter Ended 2019 2019 2018 2018 2018 June 30, March 31, December 31, September 30, June 30,