Midland States Bancorp, Inc. Announces 2016 Third Quarter Results

Third Quarter 2016 Summary

Net income of $8.1 million, or $0.51 diluted earnings per share
Total loans increased $152 million to $2.31 billion at September 30, 2016
Average loans increased $96 million, or 17.7% annualized
Non-interest income of $14.9 million, or 35.4% of total revenue
Return on average assets of 1.03%; Return on average equity of 10.04%

EFFINGHAM, Ill., Oct. 27, 2016 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (NASDAQ:MSBI) (the “Company”) today reported net income of $8.1 million, or $0.51 diluted earnings per share, for the third quarter of 2016, compared with net income of $6.8 million, or $0.50 diluted earnings per share, for the second quarter of 2016, and net income of $3.4 million, or $0.28 diluted earnings per share, for the third quarter of 2015.

“We delivered a solid quarter driven by well-diversified loan production and improved efficiencies,” said Leon J. Holschbach, President and Chief Executive Officer of the Company. “As a result of this performance, we were able to generate a higher level of earnings and an improvement in our return on average assets.

“We had excellent growth across the loan portfolio with double-digit annualized increases in the commercial real estate, residential real estate, consumer and equipment leasing portfolios. We also continued to generate a high level of non-interest income with solid contributions from our residential mortgage banking and wealth management businesses. This offset a light quarter in the commercial FHA business as we had relatively few loans in the latter stages of the pipeline during the third quarter.

“We continue to see strong loan demand throughout our markets. As we continue to generate quality balance sheet growth and maintain disciplined expense control, we expect to see a continuation of the positive trends in the business going forward,” said Mr. Holschbach.

Net Interest Income

Net interest income for the third quarter of 2016 was $27.3 million, a decrease of 2.6% from $28.0 million for the second quarter of 2016. The Company’s net interest income benefits from accretion income associated with purchased loan portfolios. Accretion income totaled $2.6 million for the third quarter of 2016, compared with $4.9 million for the second quarter of 2016. The reduction in accretion income offset the impact of higher average loan balances in the third quarter of 2016.

Relative to the third quarter of 2015, net interest income increased $1.8 million due to an increase in average loan balances.

Net Interest Margin

Net interest margin for the third quarter of 2016 was 4.00%, compared to 4.20% for the second quarter of 2016. The Company’s net interest margin benefits from accretion income on purchased loan portfolios. Excluding accretion income, net interest margin was 3.66% for the third quarter of 2016, compared with 3.52% for the second quarter of 2016. The increase in net interest margin excluding accretion income was primarily attributable to a favorable shift in the mix of both earning assets and funding liabilities within the balance sheet. Average cash balances decreased by $77.6 million and was redeployed into higher yielding loans and investments in the third quarter compared to the second quarter, while at the same time interest bearing liabilities decreased and funding shifted to increased levels of both noninterest bearing deposits and equity.

Relative to the third quarter of 2015, the net interest margin declined from 4.17%, primarily due to lower average yields on loans and investment securities. Excluding accretion income, net interest margin declined from 3.83%, which was primarily attributable to lower average yields on loans and investment securities and an increase in cost of funds.

Noninterest Income

Noninterest income for the third quarter of 2016 was $14.9 million, an increase of 6.6% from $14.0 million for the second quarter of 2016. The increase was primarily attributable to higher residential mortgage banking revenue and the absence of FDIC loss-sharing expense. This was partially offset by lower commercial FHA revenue.

Commercial FHA revenue for the third quarter of 2016 was $3.3 million, a decrease of 61.8% from $8.5 million in the second quarter of 2016. The Company originated $73.4 million in rate lock commitments during the third quarter of 2016, compared to $281.2 million in the prior quarter. The Company also recorded mortgage servicing rights impairment of $1.1 million in the third quarter of 2016.

Residential mortgage banking revenue for the third quarter of 2016 was $5.0 million, an increase from $1.0 million in the second quarter of 2016. During the second quarter of 2016, the Company recorded mortgage servicing rights impairment of $3.0 million, which substantially reduced the residential mortgage banking revenue recognized in that quarter.

Relative to the third quarter of 2015, noninterest income increased 3.3% from $14.5 million. The increase was primarily due to higher residential mortgage banking and wealth management revenue, which was partially offset by lower commercial FHA revenue.

Noninterest Expense

Noninterest expense for the third quarter of 2016 was $28.7 million, a decrease of 7.2% from $30.9 million for the second quarter of 2016. The decrease was primarily driven by lower salaries and benefits expense. Non-interest expense in the second quarter of 2016 also included a $511,000 write-off of accounting discount related to the early payoff of subordinated debt, while no similar write-off occurred in the third quarter of 2016.

Relative to the third quarter of 2015, noninterest expense increased 3.0% from $27.8 million. The increase was primarily due to higher salaries and benefits expense resulting from an increase in FTEs over the past 12 months.

Loan Portfolio

Total loans outstanding were $2.31 billion at September 30, 2016, compared with $2.16 billion at June 30, 2016, and $1.97 billion at September 30, 2015. The $151.7 million increase in the loan portfolio from June 30, 2016 was driven primarily by a $55.8 million increase in commercial loans, a $26.9 million increase in commercial real estate loans, a $37.8 million increase in residential real estate loans, a $43.1 million increase in consumer loans, and a $5.9 million increase in equipment lease financing loans. These increases were partially offset by a $17.8 million decrease in construction and land development loans, most of which migrated to permanent financing in the commercial real estate portfolio.

Approximately $73 million of the increase in total loans outstanding at September 30, 2016 compared to June 30, 2016 was related to advances on a warehouse line of credit to a customer that originates government-guaranteed commercial FHA loans. The advances on this warehouse line of credit are short-term in nature.

Deposits

Total deposits were $2.42 billion at September 30, 2016, compared with $2.35 billion at June 30, 2016, and $2.30 billion at September 30, 2015. The increase in total deposits from June 30, 2016 was primarily due to an increase in demand deposits, partially offset by a decrease in time and brokered deposits. Approximately $101.4 million of the increase in demand deposits during the third quarter of 2016 was attributable to commercial and residential mortgage servicing accounts. Of this increase, approximately $82.3 million represents new loan origination and modification payments received in the commercial FHA banking business that were remitted to GNMA in October 2016.

Asset Quality

Non-performing loans totaled $29.9 million, or 1.29% of total loans, at September 30, 2016, compared with $18.4 million, or 0.85% of total loans, at June 30, 2016. The increase in non-performing loans is primarily due to one commercial real estate loan that was classified as a troubled debt restructuring (“TDR”) during the quarter.

Net charge-offs for the third quarter of 2016 were $585,000, or 0.11% of average loans on an annualized basis.

The Company recorded a provision for loan losses of $1.4 million for the third quarter of 2016, primarily to reflect the growth in the loan portfolio.

The Company’s allowance for loan losses was 0.67% of total loans and 52.0% of non-performing loans at September 30, 2016, compared with 0.68% and 80.0%, respectively, at June 30, 2016. Including the fair market value discounts recorded in connection with acquired loan portfolios, the allowance for loan losses to total loans ratio was 1.06% at September 30, 2016, compared with 1.13% at June 30, 2016.

Capital

At September 30, 2016, 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:

	September 30, 2016			Well Capitalized Regulatory Requirements
Total capital to risk-weighted assets		13.53	%		10.00	%
Tier 1 capital to risk-weighted assets		10.94	%		8.00	%
Tier 1 leverage ratio		9.82	%		5.00	%
Tier 1 common capital to risk-weighted assets		9.03	%		6.50	%
Tangible common equity to tangible assets		8.44	%		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, October 28, 2016. During the call, management will review the third quarter results and operational highlights. The call can be accessed via telephone at (877) 516-3531 (passcode: 85446301). A recorded replay can be accessed through November 3, 2016 by dialing (855) 859-2056; passcode: 85446301.

A slide presentation relating to the third quarter 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. Midland had assets of approximately $3.2 billion, and its Midland Wealth Management Group had assets under administration of approximately $1.2 billion as of September 30, 2016. 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 leasing services are provided through Heartland Business Credit, and multi-family and healthcare facility FHA financing is provided through Love Funding, Midland's non-bank subsidiaries. Midland has more than 80 locations across the United States. 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,” “Yield on Loans Excluding Accretion Income, ” “Net Interest Margin Excluding Accretion Income,” “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.

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 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.

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited)

	For the Quarter Ended
	September 30,				June 30,			March 31,				December 31,			September 30,
(in thousands, except per share data)	2016				2016			2016				2015			2015
Earnings Summary
Net interest income	$	27,265			$	27,989		$	24,041			$	26,452		$	25,437
Provision for loan losses		1,392				629			1,125				1,052			6,699
Noninterest income		14,937				14,016			12,618				12,799			14,464
Noninterest expense		28,663				30,903			27,639				27,692			27,823
Income before income taxes		12,147				10,473			7,895				10,507			5,379
Income taxes		4,102				3,683			2,777				2,811			1,928
Net income		8,045				6,790			5,118				7,696			3,451
Net income (loss) attributable to noncontrolling interest in subsidiaries		(6	)			1			(1	)			1			6
Net income attributable to Midland States Bancorp, Inc.	$	8,051			$	6,789		$	5,119			$	7,695		$	3,445

Diluted earnings per common share	$	0.51			$	0.50		$	0.42			$	0.63		$	0.28
Weighted average shares outstanding - diluted		15,858,273				13,635,074			12,229,293				12,181,664			12,130,529
Return on average assets		1.03		%		0.89	%		0.70		%		1.06	%		0.49	%
Return on average shareholders' equity		10.04		%		10.18	%		8.69		%		13.19	%		5.88	%
Return on average tangible common shareholders' equity		12.01		%		12.67	%		11.22		%		17.26	%		7.72	%
Net interest margin		4.00		%		4.20	%		3.80		%		4.19	%		4.17	%
Efficiency ratio		64.56		%		67.09	%		67.73		%		68.83	%		64.32	%

Adjusted Earnings Performance Summary
Adjusted earnings	$	8,269			$	7,107		$	5,767			$	7,525		$	4,638
Adjusted diluted earnings per common share	$	0.52			$	0.52		$	0.47			$	0.61		$	0.38
Adjusted return on average assets		1.06		%		0.93	%		0.79		%		1.04	%		0.66	%
Adjusted return on average shareholders' equity		10.32		%		10.66	%		9.79		%		12.90	%		7.92	%
Adjusted return on average tangible common shareholders' equity		12.34		%		13.27	%		12.64		%		16.77	%		10.39	%
Net interest margin excluding accretion income		3.66		%		3.52	%		3.55		%		3.56	%		3.83	%

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)

	For the Quarter Ended
	September 30,			June 30,			March 31,			December 31,			September 30,
(in thousands, except per share data)	2016			2016			2016			2015			2015
Net interest income:
Total interest income	$	31,186		$	32,115		$	27,967		$	30,300		$	28,949
Total interest expense		3,921			4,126			3,926			3,848			3,512
Net interest income		27,265			27,989			24,041			26,452			25,437
Provision for loan losses		1,392			629			1,125			1,052			6,699
Net interest income after provision for loan losses		25,873			27,360			22,916			25,400			18,738
Noninterest income:
Commercial FHA revenue		3,260			8,538			6,562			3,045			5,914
Residential mortgage banking revenue		4,990			1,037			1,121			3,328			3,490
Wealth management revenue		1,941			1,870			1,785			1,831			1,808
Service charges on deposit accounts		1,044			965			907			979			1,022
Interchange revenue		920			945			964			858			895
FDIC loss sharing expense		-			(1,608	)		(53	)		(212	)		(57	)
Gain on sales of investment securities, net		39			72			204			33			1
Other-than-temporary impairment on investment securities		-			-			(824	)		-			(299	)
Other income		2,743			2,197			1,952			2,937			1,690
Total noninterest income		14,937			14,016			12,618			12,799			14,464
Noninterest expense:
Salaries and employee benefits		16,568			17,012			15,387			13,725			14,932
Occupancy and equipment		3,271			3,233			3,310			3,424			3,114
Data processing		2,586			2,624			2,620			2,546			2,541
Professional		1,877			1,573			1,701			2,079			2,075
Amortization of intangible assets		514			519			580			598			597
Other		3,847			5,942			4,041			5,320			4,564
Total noninterest expense		28,663			30,903			27,639			27,692			27,823
Income before income taxes		12,147			10,473			7,895			10,507			5,379
Income taxes		4,102			3,683			2,777			2,811			1,928
Net income		8,045			6,790			5,118			7,696			3,451
Net (loss) income attributable to noncontrolling interest in subsidiaries		(6	)		1			(1	)		1			6
Net income attributable to Midland States Bancorp, Inc.	$	8,051		$	6,789		$	5,119		$	7,695		$	3,445

Basic earnings per common share	$	0.51		$	0.51		$	0.43		$	0.64		$	0.29
Diluted earnings per common share	$	0.51		$	0.50		$	0.42		$	0.63		$	0.28

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)

	As of
	September 30,			June 30,			March 31,			December 31,			September 30,
(in thousands)	2016			2016			2016			2015			2015
Assets
Cash and cash equivalents	$	228,030		$	123,366		$	162,416		$	212,475		$	206,664
Investment securities available-for-sale at fair value		252,212			238,781			232,074			236,627			211,359
Investment securities held to maturity at amortized cost		82,941			84,756			88,085			87,521			92,011
Loans		2,312,778			2,161,041			2,016,034			1,995,589			1,972,844
Allowance for loan losses		(15,559	)		(14,752	)		(14,571	)		(15,988	)		(15,157	)
Total loans, net		2,297,219			2,146,289			2,001,463			1,979,601			1,957,687
Loans held for sale at fair value		61,363			101,782			103,365			54,413			53,032
Premises and equipment, net		70,727			72,147			72,421			73,133			73,362
Other real estate owned		4,828			3,540			4,740			5,472			6,471
Mortgage servicing rights at lower of cost or market		64,689			62,808			65,486			66,651			65,417
Intangible assets		5,391			5,905			6,424			7,004			7,601
Goodwill		46,519			46,519			46,519			46,519			47,102
Cash surrender value of life insurance policies		74,276			73,665			53,173			52,729			52,271
Other assets		59,532			62,226			61,914			62,679			59,331
Total assets	$	3,247,727		$	3,021,784		$	2,898,080		$	2,884,824		$	2,832,308

Liabilities and Shareholders' Equity
Noninterest bearing deposits	$	629,113		$	528,966		$	546,664		$	543,401		$	512,632
Interest bearing deposits		1,790,919			1,825,586			1,843,046			1,824,247			1,791,846
Total deposits		2,420,032			2,354,552			2,389,710			2,367,648			2,304,478
Short-term borrowings		138,289			125,014			101,649			107,538			108,823
FHLB advances and other borrowings		237,543			97,588			40,133			40,178			50,225
Subordinated debt		54,484			54,459			61,903			61,859			61,814
Trust preferred debentures		37,316			37,229			37,142			37,057			36,973
Other liabilities		38,273			36,627			28,982			37,488			38,370
Total liabilities		2,925,937			2,705,469			2,659,519			2,651,768			2,600,683
Midland States Bancorp, Inc. shareholders’ equity		321,749			316,268			238,386			232,880			231,415
Noncontrolling interest in subsidiaries		41			47			175			176			210
Total shareholders’ equity		321,790			316,315			238,561			233,056			231,625
Total liabilities and shareholders’ equity	$	3,247,727		$	3,021,784		$	2,898,080		$	2,884,824		$	2,832,308

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)

	As of
	September 30,		June 30,		March 31,		December 31,		September 30,
(in thousands)	2016		2016		2016		2015		2015
Loan Portfolio
Commercial loans	$	545,069	$	489,228	$	484,618	$	499,573	$	521,983
Commercial real estate loans		956,298		929,399		897,099		876,784		866,027
Construction and land development loans		163,900		181,667		159,507		150,266		131,083
Residential real estate loans		216,935		179,184		158,221		163,224		168,129
Consumer loans		248,131		205,060		158,938		161,512		157,521
Lease financing loans		182,445		176,503		157,651		144,230		128,101
Total loans	$	2,312,778	$	2,161,041	$	2,016,034	$	1,995,589	$	1,972,844


Deposit Portfolio
Noninterest-bearing demand deposits	$	629,113	$	528,966	$	546,664	$	543,401	$	512,632
NOW accounts		658,021		627,003		612,475		621,925		623,494
Money market accounts		366,193		374,537		415,130		377,654		350,398
Savings accounts		162,742		164,792		163,163		155,778		154,632
Time deposits		420,779		431,173		433,386		446,621		426,762
Brokered deposits		183,184		228,081		218,892		222,269		236,560
Total deposits	$	2,420,032	$	2,354,552	$	2,389,710	$	2,367,648	$	2,304,478

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)

	For the Quarter Ended
	September 30,			June 30,			March 31,			December 31,			September 30,
(in thousands)	2016			2016			2016			2015			2015
Average Balance Sheets
Cash and cash equivalents	$	154,764		$	232,362		$	223,951		$	184,072		$	131,272
Investment securities		348,265			338,224			327,267			345,114			317,886
Loans		2,268,178			2,171,814			2,063,568			2,039,046			2,032,122
Total interest-earning assets		2,771,207			2,742,400			2,614,786			2,568,232			2,481,280
Non-earning assets		329,504			324,880			317,648			312,154			314,959
Total assets	$	3,100,711		$	3,067,280		$	2,932,434		$	2,880,386		$	2,796,239
Interest-bearing deposits	$	1,803,189		$	1,844,493		$	1,832,599		$	1,813,974		$	1,733,899
Short-term borrowings		134,052			114,651			120,753			118,118			121,453
FHLB advances and other borrowings		165,774			185,195			99,499			48,583			54,056
Subordinated debt		54,470			61,677			61,878			61,835			62,830
Trust preferred debentures		37,266			37,182			37,094			37,013			37,083
Total interest-bearing liabilities		2,194,751			2,243,198			2,151,823			2,079,523			2,009,321
Noninterest-bearing deposits		550,816			522,632			511,019			529,196			509,259
Other noninterest-bearing liabilities		36,235			33,188			32,671			40,247			45,379
Shareholders' equity		318,909			268,262			236,921			231,420			232,280
Total liabilities and shareholders' equity	$	3,100,711		$	3,067,280		$	2,932,434		$	2,880,386		$	2,796,239

Yields
Cash and cash equivalents		0.50	%		0.50	%		0.50	%		0.27	%		0.24	%
Investment securities		4.93	%		5.12	%		5.31	%		5.02	%		5.33	%
Loans		4.79	%		5.22	%		4.68	%		5.15	%		4.94	%
Total interest-earning assets		4.57	%		4.81	%		4.40	%		4.79	%		4.73	%
Interest-bearing deposits		0.48	%		0.50	%		0.49	%		0.48	%		0.44	%
Short-term borrowings		0.24	%		0.24	%		0.23	%		0.20	%		0.18	%
FHLB advances and other borrowings		0.73	%		0.56	%		0.55	%		0.87	%		0.81	%
Subordinated debt		6.38	%		6.87	%		6.87	%		6.79	%		6.76	%
Trust preferred debentures		5.03	%		4.95	%		4.80	%		4.60	%		3.97	%
Total interest-bearing liabilities		0.71	%		0.74	%		0.73	%		0.73	%		0.69	%
Net interest margin		4.00	%		4.20	%		3.80	%		4.19	%		4.17	%

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)

	As of and for the Quarter Ended
	September 30,			June 30,			March 31,			December 31,			September 30,
(in thousands, except per share data)	2016			2016			2016			2015			2015
Asset Quality
Loans 30-89 days past due	$	10,318		$	10,453		$	6,616		$	10,120		$	11,079
Nonperforming loans		29,926			18,430			18,787			24,891			24,223
Nonperforming assets		34,304			21,469			22,312			29,206			30,118
Net charge-offs		585			448			2,542			220			7,748
Loans 30-89 days past due to total loans		0.45	%		0.48	%		0.33	%		0.51	%		0.56	%
Nonperforming loans to total loans		1.29	%		0.85	%		0.93	%		1.25	%		1.23	%
Nonperforming assets to total assets		1.06	%		0.71	%		0.77	%		1.01	%		1.06	%
Allowance for loan losses to total loans		0.67	%		0.68	%		0.72	%		0.80	%		0.77	%
Allowance for loan losses to nonperforming loans		51.99	%		80.04	%		77.56	%		64.23	%		62.57	%
Net charge-offs to average loans		0.11	%		0.09	%		0.51	%		0.04	%		1.57	%

Wealth Management
Trust assets under administration	$	1,235,132		$	1,198,044		$	1,189,693		$	1,181,128		$	1,145,056

Market Data
Book value per share at period end	$	20.89		$	20.53		$	20.19		$	19.74		$	19.68
Tangible book value per share at period end	$	17.52		$	17.13		$	15.71		$	15.20		$	15.03
Market price at period end	$	25.34		$	21.69		$	N/A		$	N/A		$	N/A
Shares outstanding at period end		15,404,423			15,402,946			11,804,779			11,797,404			11,760,589
Weighted average shares outstanding:
Basic		15,578,703			13,358,289			11,957,381			11,924,072			11,911,414
Diluted		15,858,273			13,635,074			12,229,293			12,181,664			12,130,529

Capital
Total capital to risk-weighted assets		13.53	%		13.91	%		11.67	%		11.82	%		11.43	%
Tier 1 capital to risk-weighted assets		10.94	%		11.23	%		8.48	%		8.62	%		8.19	%
Tier 1 leverage ratio		9.82	%		9.77	%		7.25	%		7.49	%		7.41	%
Tier 1 common capital to risk-weighted assets		9.03	%		9.24	%		6.40	%		6.50	%		6.16	%
Tangible common equity to tangible assets		8.44	%		8.89	%		6.52	%		6.33	%		6.36	%

MIDLAND STATES BANCORP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

	For the Quarter Ended
	September 30,				June 30,				March 31,				December 31,				September 30,
(in thousands, except per share data)	2016				2016				2016				2015				2015
Adjusted Earnings Reconciliation
Income before income taxes - GAAP	$	12,147			$	10,473			$	7,895			$	10,507			$	5,379
Adjustments to other income:
Gain on sales of investment securities, net		39				72				204				33				1
Other than-temporary-impairment on investment securities		-				-				(824	)			-				(299	)
FDIC loss-sharing expense		-				-				-				(212	)			(57	)
Amortization of FDIC indemnification asset, net		-				-				-				(39	)			(121	)
Reversal of contingent consideration accrual		-				350				-				-				-
Other income		-				-				-				-				12
Total adjusted other income		39				422				(620	)			(218	)			(464	)
Adjustments to other expense:
Expenses associated with payoff of subordinated debt		-				511				-				-				-
Integration and acquisition expenses		352				406				385				214				898
Total adjusted other expense		352				917				385				214				898
Adjusted earnings pre tax		12,460				10,968				8,900				10,939				6,741
Adjusted earnings tax		4,191				3,861				3,133				3,414				2,103
Adjusted earnings - non-GAAP	$	8,269			$	7,107			$	5,767			$	7,525			$	4,638
Adjusted diluted EPS	$	0.52			$	0.52			$	0.47			$	0.61			$	0.38
Adjusted return on average assets		1.06		%		0.93		%		0.79		%		1.04		%		0.66		%
Adjusted return on average shareholders' equity		10.32		%		10.66		%		9.79		%		12.90		%		7.92		%
Adjusted return on average tangible common equity		12.34		%		13.27		%		12.64		%		16.77		%		10.39		%


Yield on Loans
Reported yield on loans		4.79		%		5.22		%		4.68		%		5.15		%		4.94		%
Effect of accretion income on acquired loans		(0.41	)	%		(0.85	)	%		(0.30	)	%		(0.78	)	%		(0.41	)	%
Yield on loans excluding accretion income		4.38		%		4.37		%		4.38		%		4.37		%		4.53		%

Net Interest Margin
Reported net interest margin		4.00		%		4.20		%		3.80		%		4.19		%		4.17		%
Effect of accretion income on acquired loans		(0.34	)	%		(0.68	)	%		(0.25	)	%		(0.63	)	%		(0.34	)	%
Net interest margin excluding accretion income		3.66		%		3.52		%		3.55		%		3.56		%		3.83		%

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
	September 30,				June 30,				March 31,				December 31,				September 30,
(in thousands, except per share data)	2016				2016				2016				2015				2015

*Shareholders' Equity to Tangible Common Equity*
Total shareholders' equity—GAAP	$	321,790			$	316,315			$	238,561			$	233,056			$	231,625
Adjustments:
Noncontrolling interest in subsidiaries		(41	)			(47	)			(175	)			(176	)			(210	)
Goodwill		(46,519	)			(46,519	)			(46,519	)			(46,519	)			(47,102	)
Other intangibles		(5,391	)			(5,905	)			(6,424	)			(7,004	)			(7,601	)
Tangible common equity	$	269,839			$	263,844			$	185,443			$	179,357			$	176,712

*Total Assets to Tangible Assets:*
Total assets—GAAP		3,247,727				3,021,784				2,898,080				2,884,824				2,832,308
Adjustments:
Goodwill		(46,519	)			(46,519	)			(46,519	)			(46,519	)			(47,102	)
Other intangibles		(5,391	)			(5,905	)			(6,424	)			(7,004	)			(7,601	)
Tangible assets	$	3,195,817			$	2,969,360			$	2,845,137			$	2,831,301			$	2,777,605

Common Shares Outstanding		15,404,423				15,402,946				11,804,779				11,797,404				11,760,589

*Tangible Common Equity to Tangible Assets*		8.44		%		8.89		%		6.52		%		6.33		%		6.36		%
*Tangible Book Value Per Share*	$	17.52			$	17.13			$	15.71			$	15.20			$	15.03


Return on Average Tangible Common Equity (ROATCE)

	As of
	September 30,				June 30,				March 31,				December 31,				September 30,
(in thousands)	2016				2016				2016				2015				2015

Net Income	$	8,051			$	6,789			$	5,119			$	7,695			$	3,445

Average total shareholders' equity—GAAP	$	318,909			$	268,262			$	236,921			$	231,420			$	232,287
Adjustments:
Noncontrolling interest in subsidiaries		(49	)			(121	)			(184	)			(204	)			(207	)
Goodwill		(46,519	)			(46,519	)			(46,519	)			(46,997	)			(47,102	)
Other intangibles		(5,656	)			(6,184	)			(6,740	)			(7,324	)			(7,917	)
Average tangible common equity	$	266,685			$	215,438			$	183,478			$	176,895			$	177,061
ROATCE		12.01		%		12.67		%		11.22		%		17.26		%		7.72		%

CONTACTS:

Jeffrey G. Ludwig, Exec. V.P., 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.

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Press Release

Midland States Bancorp, Inc. Announces 2016 Third Quarter Results