Press Release

Midland States Bancorp, Inc. Announces 2017 Fourth Quarter Results

Highlights

• Net income of $2.0 million, or $0.10 diluted earnings per share, included the following significant items

  • $0.23 per diluted share in tax expense due to the revaluation of deferred tax assets 
      
  • $0.08 per diluted share of integration and acquisition expenses

• Two charge-offs drive $4.6 million increase in provision for loan losses compared to prior quarter, impacting EPS by $0.14 per diluted share

• Total loans increase at 9% annualized rate

• Efficiency ratio improves to 64.6% from 69.0% in third quarter 2017

• Acquisition of Alpine Bancorporation expected to close by the end of February 2018

EFFINGHAM, Ill., Jan. 25, 2018 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (NASDAQ:MSBI) (the “Company”) today reported financial results for the fourth quarter of 2017, which included $2.7 million, or $0.08 per diluted share, in integration and acquisition expenses, and $4.5 million, or $0.23 per diluted share, in tax expense related to the revaluation of the Company’s net deferred tax assets as a result of the decrease in the federal corporate tax rate.  Inclusive of these expenses, Midland reported net income of $2.0 million, or $0.10 diluted earnings per share, for the fourth quarter of 2017.  This compares to net income of $2.0 million, or $0.10 diluted earnings per share, for the third quarter of 2017, and net income of $11.6 million, or $0.72 diluted earnings per share, for the fourth quarter of 2016. 

“While our fourth quarter results were negatively impacted by the revaluation of our deferred tax assets, our level of profitability will benefit from a lower effective tax rate going forward,” said Leon J. Holschbach, President and Chief Executive Officer of the Company.  “During the fourth quarter, we saw an improvement in balance sheet growth driven by strong loan production across our portfolio and solid inflows of core deposits.  We had 9% annualized loan growth in the quarter with strong increases coming in our commercial, construction and consumer loan portfolios.  As we continue to realize the synergies from the Centrue acquisition, we are also seeing an improvement in our efficiency ratio.   

“In 2018, we will be focused on integrating our acquisition of Alpine Bancorporation, capturing the synergies we project from this transaction, and expanding our core community banking and wealth management businesses.  With the higher earnings resulting from the lowering of our effective tax rate, we intend to strengthen our capital base following the Alpine acquisition, as well as continue to deliver strong dividend growth to our shareholders.  Over the past 15 years, we have increased our dividend at an annual rate of more than 10%.  With the greater earnings power we are projecting following the Alpine acquisition and the lower effective tax rate, we believe we will maintain our strong track record of returning capital to our shareholders.”

Adjusted Earnings

Financial results for the fourth quarter of 2017 included $4.5 million of additional tax expense related to the revaluation of the Company’s net deferred tax assets, $2.7 million in integration and acquisition-related expenses, and $0.4 million in loss on mortgage servicing rights (“MSRs”) held-for-sale.  Financial results for the third quarter of 2017 included $8.3 million in integration and acquisition-related expenses and $3.6 million in loss on MSRs held-for-sale.

Excluding these expenses, adjusted earnings were $8.4 million, or $0.42 diluted earnings per share, for the fourth quarter of 2017, compared with adjusted earnings of $9.2 million, or $0.46 diluted earnings per share, for the third quarter of 2017.  The decline in adjusted earnings per share is primarily attributable to an increase in the provision for loan losses.  Adjusted pre-tax pre-provision earnings were $16.9 million for the fourth quarter of 2017, compared with $15.6 million for the third quarter of 2017.  A reconciliation of adjusted earnings and adjusted pre-tax pre-provision earnings to net income according to generally accepted accounting principles (“GAAP”) is provided in the financial tables at the end of this press release.

Net Interest Income

Net interest income for the fourth quarter of 2017 was $36.0 million, a decrease of 2.0% from $36.8 million for the third quarter of 2017.  The decrease in net interest income was primarily attributable to a decline in net interest margin.

The Company’s net interest income benefits from accretion income associated with purchased loan portfolios.  Accretion income totaled $2.7 million for the fourth quarter of 2017, compared with $3.0 million for the third quarter of 2017. 

Relative to the fourth quarter of 2016, net interest income increased $10.1 million, or 38.8%.  Accretion income for the fourth quarter of 2016 was $2.2 million.  The increase in net interest income resulted from a $12.5 million increase in interest income on loans due primarily to growth in the average balance of loans.  This increase was offset in part by a $3.4 million increase in interest expense primarily due to interest-bearing deposits from Centrue combined with increased usage of FHLB advances and subordinated debt.

Net Interest Margin

Net interest margin for the fourth quarter of 2017 was 3.73%, compared to 3.78% for the third quarter of 2017.  The Company’s net interest margin benefits from accretion income on purchased loan portfolios, which contributed 26 and 27 basis points to net interest margin in the fourth and third quarters of 2017, respectively.  Excluding the impact of accretion income, the decrease in net interest margin was attributable to the addition of $40 million of subordinated debt issued in preparation for the acquisition of Alpine Bancorporation.

Relative to the fourth quarter of 2016, the net interest margin increased from 3.70%.  Accretion income on purchased loan portfolios contributed 28 basis points to net interest margin in the fourth quarter of 2016.  Excluding the impact of accretion income, the increase in net interest margin was primarily driven by higher average loans yields. 

Noninterest Income

Noninterest income for the fourth quarter of 2017 was $14.0 million, a decrease of 9.1% from $15.4 million for the third quarter of 2017.  This decrease was primarily attributable to lower commercial FHA and residential mortgage banking revenue.

Wealth management revenue for the fourth quarter of 2017 was $3.6 million, an increase of 3.2% from $3.5 million in the third quarter of 2017.  Compared to the fourth quarter of 2016, wealth management revenue increased 43.8%, which was attributable to 12% organic growth in assets under management and the acquisition of CedarPoint Investment Advisors in March 2017.

Commercial FHA revenue for the fourth quarter of 2017 was $3.1 million, a decrease of 17.2% from $3.8 million in the third quarter of 2017.  The Company originated $98.5 million in rate lock commitments during the fourth quarter of 2017, compared to $112.5 million in the prior quarter.  Compared to the fourth quarter of 2016, commercial FHA revenue decreased 15.6%.

Residential mortgage banking revenue for the fourth quarter of 2017 was $1.6 million, a decrease of 32.8% from $2.3 million in the third quarter of 2017.  Compared to the fourth quarter of 2016, residential mortgage banking revenue decreased 75.1%, primarily due to the recapture of previously recorded mortgage servicing rights impairment totaling $3.6 million during the fourth quarter of 2016.

Relative to the fourth quarter of 2016, noninterest income decreased 54.1% from $30.5 million.  During the fourth quarter of 2016, the Company recognized a gain of $14.4 million related to the sale of collateralized mortgage obligations (“CMOs”).

Noninterest Expense

Noninterest expense for the fourth quarter of 2017 was $36.2 million, compared with $48.4 million for the third quarter of 2017.  Noninterest expense for the fourth and third quarters of 2017 included $2.7 million and $8.3 million in integration and acquisition-related expenses, respectively, and $0.4 million and $3.6 million losses on MSRs held-for-sale, respectively.  Excluding these expenses, noninterest expense decreased $3.4 million, or 9.3%, from the prior quarter.  The decrease was attributable to a decline in salaries and employee benefits expense due to a 5.7% decrease in FTEs resulting from the continued integration of Centrue, as well as reduced variable compensation in the commercial FHA and residential mortgage businesses.

Relative to the fourth quarter of 2016, noninterest expense excluding integration and acquisition-related expenses, branch network optimization plan charges, loss share agreement termination expenses, and the loss on mortgage servicing rights held-for-sale increased 8.6% from $30.4 million.  The increase was primarily due to personnel and facilities added in the two acquisitions completed over the past year, partially offset by cost savings resulting from the Company’s Operational Excellence initiative. 

Income Tax Expense

Income tax expense was $5.8 million for the fourth quarter of 2017, compared to $0.3 million for the third quarter of 2017. 

On December 22, 2017, “H.R.1”, formerly known as the “Tax Cuts and Jobs Act”, was signed into law. Among other items, H.R.1 reduces the federal corporate tax rate to 21% effective January 1, 2018.  As a result, Midland concluded that the reduction in the federal corporate tax rate required the revaluation of the Company’s net deferred tax assets.  The Company’s net deferred tax assets represents net operating loss carryforwards that will be used to reduce corporate taxes expected to be paid in the future as well as differences between the carrying amounts and tax bases of assets and liabilities carried on the Company’s balance sheet.  The Company performed an analysis and determined that the value of the deferred tax assets had declined by $4.5 million.   To reflect the decline in the value of the deferred tax assets, the Company recorded additional tax expense of $4.5 million during the fourth quarter of 2017.

For 2018, the Company expects its effective tax rate to be approximately 23%.

Loan Portfolio

Total loans outstanding were $3.23 billion at December 31, 2017, compared with $3.16 billion at September 30, 2017 and $2.32 billion at December 31, 2016.  The increase in total loans from September 30, 2017 was primarily attributable to increases in the commercial, construction and consumer loan portfolios.  The increase in total loans from December 31, 2016, was due to 9.8% organic growth and the addition of $679.9 million of loans from Centrue. 

Deposits

Total deposits were $3.13 billion at December 31, 2017, compared with $3.11 billion at September 30, 2017, and $2.40 billion at December 31, 2016.  The increase in total deposits from September 30, 2017 was primarily attributable to growth throughout the commercial, retail and servicing portfolios, which was partially offset by the continued reduction of brokered deposits.

Asset Quality

Non-performing loans totaled $26.8 million, or 0.83% of total loans, at December 31, 2017, compared with $33.4 million, or 1.06% of total loans, at September 30, 2017, and $31.6 million, or 1.36% of total loans, at December 31, 2016.  The decrease in non-performing loans during the fourth quarter of 2017 was primarily driven by charge-offs.

Net charge-offs for the fourth quarter of 2017 were $6.5 million, or 0.81% of average loans on an annualized basis.  The net charge-offs were primarily related to two commercial real estate loans.

The Company recorded a provision for loan losses of $6.1 million for the fourth quarter of 2017, which was driven by the growth in total loans outstanding and the net charge-offs taken in the quarter.  The Company’s allowance for loan losses was 0.51% of total loans and 61.4% of non-performing loans at December 31, 2017, compared with 0.53% of total loans and 50.4% of non-performing loans at September 30, 2017.  Fair market value discounts recorded in connection with acquired loan portfolios represented 0.51% of total loans at December 31, 2017, compared with 0.45% at September 30, 2017.

Capital

At December 31, 2017, 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:

  December 31, 2017 Well Capitalized
Regulatory Requirements
 Total capital to risk-weighted assets 13.26% 10.00%
 Tier 1 capital to risk-weighted assets 10.19% 8.00%
 Tier 1 leverage ratio 8.63% 5.00%
 Common equity Tier 1 capital 8.45% 6.50%
 Tangible common equity to tangible assets 7.70% NA

Conference Call, Webcast and Slide Presentation

The Company will host a conference call and webcast at 7:30 a.m. Central Time on Friday, January 26, 2018 to discuss its financial results.  The call can be accessed via telephone at (877) 516-3531 (passcode: 5699319).  A recorded replay can be accessed through February 2, 2018 by dialing (855) 859-2056; passcode: 5699319.

A slide presentation relating to the fourth quarter 2017 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 December 31, 2017, the Company had total assets of $4.4 billion and its Wealth Management Group had assets under administration of approximately $2.1 billion.  Midland provides a full range of commercial and consumer banking products and services, merchant credit card services, trust and investment management, and insurance and financial planning services. In addition, commercial equipment financing is provided through Midland Equipment Finance, and multi-family and healthcare facility FHA financing is provided through Love Funding. For additional information, visit 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 accounting principles generally accepted in the United States (“GAAP”).   These non-GAAP financial measures 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,” “Adjusted Pre-Tax, Pre-Provision Earnings,” “Efficiency Ratio,” “Tangible Common Equity to Tangible Assets,” “Tangible Book Value Per Share” and “Return on Average Tangible Common Equity.” The Company believes that 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," including but not limited to statements about the Company’s expected loan production, operating expenses 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; 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 we do 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, Chief Financial Officer, at jludwig@midlandsb.com or (217) 342-7321
Douglas J. Tucker, Sr. V.P., Corporate Counsel, at dtucker@midlandsb.com or (217) 342-7321


MIDLAND STATES BANCORP, INC.  
CONSOLIDATED FINANCIAL SUMMARY (unaudited)  
                                         
    For the Quarter Ended  
    December 31,    September 30,    June 30,    March 31,    December 31, 
(dollars in thousands, except per share data)   2017   2017   2017   2017   2016
Earnings Summary                                        
Net interest income   $   36,036     $   36,765     $   29,400      $    27,461      $    25,959  
Provision for loan losses       6,076         1,489         458         1,533         2,445  
Noninterest income       13,998         15,403         13,619         16,342         30,486  
Noninterest expense       36,192         48,363         37,645         30,797         34,090  
Income before income taxes       7,766         2,316         4,916         11,473         19,910  
Income taxes       5,775         280         1,377         2,983         8,327  
Net income    $   1,991     $   2,036     $   3,539      $    8,490      $    11,583  
                                         
Diluted earnings per common share   $ 0.10     $ 0.10     $ 0.20     $ 0.52     $ 0.72  
Weighted average shares outstanding - diluted     19,741,833       19,704,217       17,320,089       16,351,637       16,032,016  
Return on average assets     0.18 %     0.18 %     0.39 %     1.05 %     1.44 %
Return on average shareholders' equity     1.74 %     1.78 %     3.93 %     10.58 %     14.05 %
Return on average tangible common shareholders' equity     2.33 %     2.39 %     4.91 %     12.78 %     16.84 %
Net interest margin     3.73 %     3.78 %     3.70 %     3.87 %     3.70 %
Efficiency ratio     64.64 %     69.00 %     66.54 %     66.34 %     76.64 %
                                         
Adjusted Earnings Performance Summary                                        
Adjusted earnings   $ 8,403     $ 9,173     $ 8,076     $ 9,243     $ 6,302  
Adjusted diluted earnings per common share   $ 0.42     $ 0.46     $ 0.46     $ 0.56     $ 0.39  
Adjusted return on average assets     0.76 %     0.82 %     0.89 %     1.14 %     0.78 %
Adjusted return on average shareholders' equity     7.34 %     8.03 %     8.97 %     11.52 %     7.64 %
Adjusted return on average tangible common shareholders' equity     9.83 %     10.77 %     11.21 %     13.91 %     9.16 %
                                         

 

                                         
MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
   
    For the Quarter Ended  
    December 31,    September 30,    June 30,    March 31,    December 31, 
(in thousands, except per share data)   2017   2017   2017   2017   2016
Net interest income:                                        
Total interest income   $ 43,500     $ 43,246     $ 34,528     $ 31,839     $ 29,981  
Total interest expense     7,464       6,481       5,128       4,378       4,022  
Net interest income     36,036       36,765       29,400       27,461       25,959  
Provision for loan losses     6,076       1,489       458       1,533       2,445  
Net interest income after provision for loan losses     29,960       35,276       28,942       25,928       23,514  
Noninterest income:                                        
Commercial FHA revenue     3,127       3,777       4,153       6,695       3,704  
Residential mortgage banking revenue     1,556       2,317       2,330       2,916       6,241  
Wealth management revenue     3,587       3,475       3,406       2,872       2,495  
Service charges on deposit accounts     1,828       2,133       1,122       892       988  
Interchange revenue     1,538       1,724       1,114       977       921  
Gain on sales of investment securities, net     2       98       55       67       14,387  
Other income     2,360       1,879       1,439       1,923       1,750  
Total noninterest income     13,998       15,403       13,619       16,342       30,486  
Noninterest expense:                                        
Salaries and employee benefits     17,344       22,411       21,842       17,115       17,326  
Occupancy and equipment     3,859       4,144       3,472       3,184       3,266  
Data processing     3,640       5,786       2,949       2,796       2,828  
Professional     3,611       4,151       3,142       2,992       2,898  
Amortization of intangible assets     1,035       1,187       579       525       534  
Loss on mortgage servicing rights held for sale     442       3,617       -       -       -  
Other     6,261       7,067       5,661       4,185       7,238  
Total noninterest expense     36,192       48,363       37,645       30,797       34,090  
Income before income taxes     7,766       2,316       4,916       11,473       19,910  
Income taxes     5,775       280       1,377       2,983       8,327  
Net income   $ 1,991     $ 2,036     $ 3,539     $ 8,490     $ 11,583  
                                         
Basic earnings per common share   $ 0.10     $ 0.10     $ 0.21     $ 0.54     $ 0.74  
Diluted earnings per common share   $ 0.10     $ 0.10     $ 0.20     $ 0.52     $ 0.72  
                                         

 

                                       
MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
                                       
    At Quarter Ended
    December 31,    September 30,    June 30,    March 31,    December 31, 
(in thousands)   2017   2017   2017   2017   2016
Assets                                      
Cash and cash equivalents   $ 215,202       $ 183,572       $ 334,356       $ 218,096       $ 190,716  
Investment securities available-for-sale at fair value     450,525         396,985         385,340         259,332         246,339  
Investment securities held to maturity at amortized cost       -          70,867         75,371         76,276         78,672  
Loans     3,226,678         3,157,972         3,184,063         2,454,950         2,319,976  
Allowance for loan losses     (16,431 )       (16,861 )       (15,424 )       (15,805 )       (14,862 )
Total loans, net     3,210,247         3,141,111         3,168,639         2,439,145         2,305,114  
Loans held for sale at fair value     50,089         35,874         41,689         39,900         70,565  
Premises and equipment, net     76,162         80,941         76,598         66,914         66,692  
Other real estate owned     5,708         6,379         7,036         3,680         3,560  
Mortgage servicing rights at lower of cost or market     56,352         56,299         70,277         68,557         68,008  
Mortgage servicing rights held for sale     10,176         10,618           -            -            -   
Intangible assets     16,932         17,966         18,459         8,633         7,187  
Goodwill     98,624         97,351         96,940         50,807         48,836  
Cash surrender value of life insurance policies     113,366         112,591         111,802         74,806         74,226  
Other assets     109,318         137,207         105,135         67,431         73,808  
Total assets   $ 4,412,701       $ 4,347,761       $ 4,491,642       $ 3,373,577       $ 3,233,723  
                                       
Liabilities and Shareholders' Equity                                      
Noninterest bearing deposits   $ 724,443       $ 674,118       $ 780,803       $ 528,021       $ 562,333  
Interest bearing deposits     2,406,646         2,440,349         2,552,228         1,999,455         1,842,033  
Total deposits     3,131,089         3,114,467         3,333,031         2,527,476         2,404,366  
Short-term borrowings     156,126         153,443         170,629         124,035         131,557  
FHLB advances and other borrowings     496,436         488,870         400,304         250,353         237,518  
Subordinated debt     93,972         54,581         54,556         54,532         54,508  
Trust preferred debentures     45,379         45,267         45,156         37,496         37,405  
Other liabilities     40,154         40,444         36,014         45,352         46,599  
Total liabilities     3,963,156         3,897,072         4,039,690         3,039,244         2,911,953  
Total shareholders’ equity     449,545         450,689         451,952         334,333         321,770  
Total liabilities and shareholders’ equity   $ 4,412,701       $ 4,347,761       $ 4,491,642       $ 3,373,577       $ 3,233,723  
                                       

 

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
                                         
    As of  
    December 31,    September 30,    June 30,    March 31,    December 31, 
(in thousands)   2017   2017   2017   2017   2016
Loan Portfolio                                        
Commercial loans   $ 555,930     $ 513,544     $ 571,111     $ 475,408     $ 457,827  
Commercial real estate loans     1,440,011       1,472,284       1,470,487       997,200       969,615  
Construction and land development loans     200,587       182,513       176,098       171,047       177,325  
Residential real estate loans     453,552       445,747       428,464       277,402       253,713  
Consumer loans     371,455       343,038       335,902       337,081       270,017  
Lease financing loans     205,143       200,846       202,001       196,812       191,479  
Total loans   $ 3,226,678     $ 3,157,972     $ 3,184,063     $ 2,454,950     $ 2,319,976  
                                         
                                         
Deposit Portfolio                                        
Noninterest-bearing demand deposits   $ 724,443     $ 674,118     $ 780,803     $ 528,021     $ 562,333  
Checking accounts     785,935       800,649       841,640       751,193       656,248  
Money market accounts     646,426       633,844       578,077       415,322       399,851  
Savings accounts     281,212       278,977       291,912       169,715       166,910  
Time deposits     502,810       493,777       525,647       394,508       400,304  
Brokered deposits     190,263       233,102       314,952       268,717       218,720  
Total deposits   $ 3,131,089     $ 3,114,467     $ 3,333,031     $ 2,527,476     $ 2,404,366  
                                         

 

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
                                         
    For the Quarter Ended  
    December 31,    September 30,    June 30,    March 31,    December 31, 
(in thousands)   2017   2017   2017   2017   2016
Average Balance Sheets                                        
Cash and cash equivalents   $ 173,540     $ 202,407     $ 192,483     $ 163,595     $ 140,439  
Investment securities     461,475       474,216       362,268       328,880       315,511  
Loans     3,198,036       3,173,027       2,620,875       2,361,380       2,299,115  
Loans held for sale     40,615       46,441       61,759       73,914       86,665  
Nonmarketable equity securities     33,703       31,224       22,246       20,047       18,927  
Total interest-earning assets     3,907,369       3,927,315       3,259,631       2,947,816       2,860,657  
Non-earning assets     497,502       498,364       372,525       336,761       337,566  
Total assets   $ 4,404,871     $ 4,425,679     $ 3,632,156     $ 3,284,577     $ 3,198,223  
Interest-bearing deposits   $ 2,433,461     $ 2,527,490     $ 2,116,564     $ 1,896,569     $ 1,838,760  
Short-term borrowings     181,480       182,015       146,144       143,583       151,191  
FHLB advances and other borrowings     472,709       434,860       290,401       248,045       183,614  
Subordinated debt     88,832       54,570       54,542       54,518       54,495  
Trust preferred debentures     45,312       45,201       39,179       37,443       37,357  
Total interest-bearing liabilities     3,221,794       3,244,136       2,646,830       2,380,158       2,265,417  
Noninterest-bearing deposits     684,907       688,986       579,977       525,868       562,958  
Other noninterest-bearing liabilities     44,202       39,240       44,014       53,109       41,962  
Shareholders' equity     453,968       453,317       361,335       325,442       327,886  
Total liabilities and shareholders' equity   $ 4,404,871     $ 4,425,679     $ 3,632,156     $ 3,284,577     $ 3,198,223  
                                         
Yields                                        
Cash and cash equivalents     1.28 %     1.19 %     1.02 %     0.77 %     0.53 %
Investment securities     3.01 %     2.86 %     3.33 %     3.21 %     3.10 %
Loans     4.88 %     4.90 %     4.71 %     4.91 %     4.65 %
Loans held for sale     3.62 %     3.74 %     4.67 %     4.22 %     4.22 %
Nonmarketable equity securities     4.78 %     4.20 %     4.31 %     4.41 %     3.85 %
Total interest-earning assets     4.48 %     4.44 %     4.33 %     4.47 %     4.26 %
Interest-bearing deposits     0.58 %     0.53 %     0.53 %     0.51 %     0.48 %
Short-term borrowings     0.26 %     0.22 %     0.23 %     0.23 %     0.22 %
FHLB advances and other borrowings     1.42 %     1.36 %     1.16 %     0.93 %     0.78 %
Subordinated debt     6.46 %     6.40 %     6.40 %     6.40 %     6.41 %
Trust preferred debentures     5.75 %     5.60 %     5.37 %     5.12 %     4.99 %
Total interest-bearing liabilities     0.92 %     0.79 %     0.78 %     0.75 %     0.71 %
Net interest margin     3.73 %     3.78 %     3.70 %     3.87 %     3.70 %
                                         

 

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
                                         
    As of and for the Quarter Ended  
    December 31,    September 30,    June 30,    March 31,    December 31, 
(dollars in thousands, except per share data)   2017   2017   2017   2017   2016
Asset Quality                                        
Loans 30-89 days past due   $ 15,405     $ 13,526     $ 13,566     $ 14,075     $ 10,767  
Nonperforming loans     26,760       33,431       27,615       28,933       31,603  
Nonperforming assets     30,894       38,109       33,150       31,684       34,550  
Net charge-offs      6,506       52       839       590       3,142  
Loans 30-89 days past due to total loans     0.48 %     0.43 %     0.43 %     0.57 %     0.46 %
Nonperforming loans to total loans     0.83 %     1.06 %     0.87 %     1.18 %     1.36 %
Nonperforming assets to total assets     0.70 %     0.88 %     0.74 %     0.94 %     1.07 %
Allowance for loan losses to total loans     0.51 %     0.53 %     0.48 %     0.64 %     0.64 %
Allowance for loan losses to nonperforming loans     61.40 %     50.43 %     55.81 %     54.62 %     47.03 %
Net charge-offs to average loans     0.81 %     0.01 %     0.13 %     0.10 %     0.54 %
                                         
Wealth Management                                        
Trust assets under administration   $ 2,051,249     $ 2,001,106     $ 1,929,513     $ 1,869,314     $ 1,658,235  
                                         
Market Data                                        
Book value per share at period end   $ 23.35     $ 23.45     $ 23.51     $ 21.19     $ 20.78  
Tangible book value per share at period end   $ 17.31     $ 17.41     $ 17.47     $ 17.42     $ 17.16  
Market price at period end   $ 32.48     $ 31.68     $ 33.52     $ 34.39     $ 36.18  
Shares outstanding at period end     19,122,049       19,093,153       19,087,409       15,780,651       15,483,499  
                                         
Capital                                        
Total capital to risk-weighted assets     13.26 %     12.21 %     11.98 %     13.48 %     13.85 %
Tier 1 capital to risk-weighted assets     10.19 %     10.20 %     10.05 %     10.97 %     11.27 %
Tier 1 leverage ratio     8.63 %     8.54 %     10.45 %     9.61 %     9.76 %
Common equity Tier 1 capital ratio     8.45 %     8.50 %     8.36 %     9.10 %     9.35 %
Tangible common equity to tangible assets     7.70 %     7.85 %     7.62 %     8.29 %     8.36 %
                                         


MIDLAND STATES BANCORP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
                                       
                                       
Adjusted Earnings Reconciliation                                      
                                       
  For the Quarter Ended  
  December 31,    September 30,    June 30,    March 31,    December 31, 
(in thousands, except per share data) 2017   2017   2017   2017    2016
Income before income taxes - GAAP $ 7,766       $ 2,316     $ 4,916       $ 11,473       $ 19,910  
Adjustments to noninterest income:                                            
Gain on sales of investment securities, net   2         98       55         67         14,387  
Gain (loss) on sale of other assets   37         45       (91 )       (58 )       -  
Total adjustments to noninterest income   39         143       (36 )       9         14,387  
Adjustments to noninterest expense:                                            
Net expense from loss share termination agreement   -         -       -         -         351  
Branch network optimization plan charges   371         336       1,236         9         2,099  
Loss on mortgage servicing rights held for sale   442         3,617       -         -         -  
Integration and acquisition expenses   2,315         7,967       6,214         1,242         1,200  
Total adjustments to noninterest expense   3,128         11,920       7,450         1,251         3,650  
Adjusted earnings pre tax   10,855         14,093       12,402         12,715         9,173  
Adjusted earnings tax (a)   6,992         4,920       4,326         3,472         2,871  
Revaluation of net deferred tax assets   (4,540 )       -       -         -         -  
Adjusted earnings - non-GAAP $ 8,403       $ 9,173     $ 8,076       $ 9,243       $ 6,302  
Adjusted diluted EPS $ 0.42       $ 0.46     $ 0.46       $ 0.56       $ 0.39  
Adjusted return on average assets   0.76   %     0.82 %     0.89   %     1.14   %     0.78 %
Adjusted return on average shareholders' equity   7.34   %     8.03 %     8.97   %     11.52   %     7.64 %
Adjusted return on average tangible common equity   9.83   %     10.77 %     11.21   %     13.91   %     9.16 %
                                       
                                       
(a) Tax rate applied to adjustments changed for prior 2017 quarters to statutory tax rate for fiscal 2017. 
                                       
                                       
Adjusted Pre-Tax, Pre-Provision Earnings Reconciliation                                      
                                       
  For the Quarter Ended  
  December 31,    September 30,    June 30,    March 31,    December 31, 
(in thousands) 2017   2017   2017   2017   2016
Adjusted earnings pre tax $ 10,855       $ 14,093     $ 12,402       $ 12,715       $ 9,173  
Provision for loan losses   6,076         1,489       458         1,533         2,445  
Adjusted pre-tax, pre-provision earnings - non-GAAP $ 16,931       $ 15,582     $ 12,860       $ 14,248       $ 11,618  
                                             


MIDLAND STATES BANCORP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
                                         
                                         
Efficiency Ratio Reconciliation                                        
    For the Quarter Ended  
    December 31,    September 30,    June 30,    March 31,    December 31, 
(in thousands)   2017   2017   2017   2017   2016
Noninterest expense - GAAP   $ 36,192       $ 48,364       $ 37,644       $ 30,798       $ 34,090    
Net expense from loss-share termination agreement     -         -         -         -         (351 )  
Branch network optimization plan charges     (371 )       (336 )       (1,236 )       (9 )       (2,099 )  
Loss on mortgage servicing rights held for sale     (442 )       (3,617 )       -         -         -    
Integration and acquisition expenses     (2,315 )       (7,967 )       (6,214 )       (1,242 )       (1,200 )  
Adjusted noninterest expense   $ 33,064       $ 36,444       $ 30,194       $ 29,547       $ 30,440    
                                         
Net interest income - GAAP   $ 36,036       $ 36,765       $ 29,400       $ 27,461       $ 25,959    
Effect of tax-exempt income   659         687         674         671         620    
Adjusted net interest income     36,695         37,452         30,074         28,132         26,579    
                                         
Noninterest income - GAAP   $ 13,998       $ 15,403       $ 13,619       $ 16,342       $ 30,485    
Mortgage servicing rights impairment (recovery)     494         104         1,650         76         (2,958 )  
Gain on sales of investment securities, net   (2 )       (98 )       (55 )       (67 )       (14,387 )  
Other income   (37 )       (45 )       91         58         -    
Adjusted noninterest income     14,453         15,364         15,305         16,409         13,140    
                                         
Adjusted total revenue   $ 51,148       $ 52,816       $ 45,379       $ 44,541       $ 39,719    
                                         
Efficiency ratio     64.64   %     69.00   %     66.54   %     66.34   %     76.64   %
                                         

 

MIDLAND STATES BANCORP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
                                         
                                         
Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share                          
                                         
    As of   
    December 31,    September 30,    June 30,    March 31,    December 31, 
(dollars in thousands, except per share data)   2017   2017   2017   2017   2016
                                         
Shareholders' Equity to Tangible Common Equity                                        
Total shareholders' equity—GAAP   $ 449,545       $ 450,689       $ 451,952       $ 334,333       $ 321,770    
Adjustments:                                        
Preferred stock     (2,970 )       (3,015 )       (3,134 )       -         -    
Goodwill     (98,624 )       (97,351 )       (96,940 )       (50,807 )       (48,836 )  
Other intangibles     (16,932 )       (17,966 )       (18,459 )       (8,633 )       (7,187 )  
Tangible common equity   $ 331,019       $ 332,357       $ 333,419       $ 274,893       $ 265,747    
                                         
Total Assets to Tangible Assets:                                        
Total assets—GAAP     4,412,701         4,347,761         4,491,642         3,373,577         3,233,723    
Adjustments:                                        
Goodwill     (98,624 )       (97,351 )       (96,940 )       (50,807 )       (48,836 )  
Other intangibles     (16,932 )       (17,966 )       (18,459 )       (8,633 )       (7,187 )  
Tangible assets   $ 4,297,145       $ 4,232,444       $ 4,376,243       $ 3,314,137       $ 3,177,700    
                                         
Common Shares Outstanding     19,122,049         19,093,153         19,087,409         15,780,651         15,483,499    
                                         
Tangible Common Equity to Tangible Assets     7.70   %     7.85   %     7.62   %     8.29   %     8.36   %
Tangible Book Value Per Share   $ 17.31       $ 17.41       $ 17.47       $ 17.42       $ 17.16    
                                         
                                         
Return on Average Tangible Common Equity (ROATCE)                                  
    As of   
    December 31,    September 30,    June 30,    March 31,    December 31, 
(in thousands)   2017   2017   2017   2017   2016
                                         
Net Income   $ 1,991       $ 2,036       $ 3,539       $ 8,490       $ 11,583    
                                         
Average total shareholders' equity—GAAP   $ 453,968       $ 453,317       $ 361,335       $ 325,442       $ 327,886    
Adjustments:                                        
Goodwill     (97,406 )       (97,129 )       (61,424 )       (48,836 )       (46,594 )  
Other intangibles     (17,495 )       (18,153 )       (10,812 )       (7,144 )       (7,718 )  
Average tangible common equity   $ 339,067       $ 338,035       $ 289,099       $ 269,462       $ 273,574    
ROATCE     2.33   %     2.39   %     4.91   %     12.78   %     16.84   %
                                         


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Midland States Bancorp, Inc.