Midland States Bancorp, Inc. Announces 2017 First Quarter Results

Highlights

Net income of $8.5 million for first quarter of 2017
Earnings per share of $0.52, an increase of 24% over prior year period
Total loans increased $135 million, or 23.3% annualized
Return on average assets of 1.05%; Return on average tangible equity of 12.78%
Acquisition of CedarPoint Investment Advisors added $180 million in assets under administration

EFFINGHAM, Ill., April 27, 2017 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (NASDAQ:MSBI) (the “Company”) today reported net income of $8.5 million, or $0.52 diluted earnings per share, for the first quarter of 2017, compared with net income of $11.6 million, or $0.72 diluted earnings per share, for the fourth quarter of 2016, and net income of $5.1 million, or $0.42 diluted earnings per share, for the first quarter of 2016. Financial results for the fourth quarter of 2016 included a $14.3 million gain on sale of a portfolio of private label collateralized mortgage obligations (“CMOs”), $2.1 million in charges related to the Company’s branch network optimization actions, and $1.6 million in other integration and acquisition-related expenses.

“We had strong performances across all of our major business lines in the first quarter, resulting in 24% earnings per share growth over the prior year,” said Leon J. Holschbach, President and Chief Executive Officer of the Company. “We are seeing positive trends in all of our key metrics including well diversified loan growth, an expanding net interest margin, higher non-interest income and strong credit quality. We are also executing well on our Operational Excellence initiative, which is delivering the cost savings and efficiency improvements that we are targeting. Collectively, these positive trends helped us to more than offset the loss of the interest income previously generated from the portfolio of private label CMOs that we sold during the fourth quarter of 2016.

“We are seeing good opportunities to continue driving organic growth going forward. Combined with the strategic and financial benefits projected for our pending acquisition of Centrue Financial Corporation, we believe that Midland is well positioned to continue increasing our level of profitability and enhancing the value of our franchise,” said Mr. Holschbach.

Net Interest Income

Net interest income for the first quarter of 2017 was $27.5 million, an increase of 5.8% from $26.0 million for the fourth quarter of 2016. The increase in net interest income was primarily attributable to higher interest income on loans due to a 2.1% increase in the average balance of loans and an increase 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 first quarter of 2017, compared with $2.2 million for the fourth quarter of 2016.

Relative to the first quarter of 2016, net interest income increased 14.2%. Excluding the impact of a $0.8 million increase in accretion income, net interest income increased $2.6 million. This increase resulted from a $4.5 million increase in interest income on loans (excluding the effect of accretion income) due to growth in the average balance of loans, partially offset by a $1.5 million decline in interest income on investment securities due to the sale of the portfolio of CMOs.

Net Interest Margin

Net interest margin for the first quarter of 2017 was 3.87%, compared to 3.70% for the fourth quarter of 2016. The Company’s net interest margin benefits from accretion income on purchased loan portfolios. Excluding accretion income, net interest margin was 3.52% for the first quarter of 2017, compared with 3.42% for the fourth quarter of 2016. The increase in net interest margin excluding accretion income was primarily attributable to an increase in average loan yields.

Relative to the first quarter of 2016, the net interest margin increased from 3.80%, primarily due to an increase in accretion income. Excluding accretion income, the net interest margin declined slightly from 3.55%, which was primarily attributable to lower average yields on investment securities following the sale of the portfolio of CMOs.

Noninterest Income

Noninterest income for the first quarter of 2017 was $16.3 million, a decrease of 46.4% from $30.5 million for the fourth quarter of 2016. Excluding the $14.3 million gain on sale of the CMOs recognized in the fourth quarter of 2016, non-interest income was essentially unchanged from the prior quarter.

Commercial FHA revenue for the first quarter of 2017 was $6.7 million, an increase of 80.8% from $3.7 million in the fourth quarter of 2016. The Company originated $216.9 million in rate lock commitments during the first quarter of 2017, compared to $159.0 million in the prior quarter. Compared to the first quarter of 2016, commercial FHA revenue increased 2.0%.

Residential mortgage banking revenue for the first quarter of 2017 was $2.9 million, a decrease of 53.3% from $6.2 million in the fourth quarter of 2016. The decrease was attributable to the recapture of previously recorded mortgage servicing rights (“MSR”) impairment totaling $3.6 million that positively impacted residential mortgage banking revenue in the fourth quarter of 2016. Compared to the first quarter of 2016, residential mortgage banking revenue increased 160.1%, primarily due to MSR impairment charges recorded in the prior year period.

Wealth management revenue for the first quarter of 2017 was $2.9 million, an increase of 15.1% from $2.5 million in the fourth quarter of 2016. The increase was attributable to the full quarter impact of the increase in assets under administration resulting from the acquisition of Sterling Trust in November 2016. Compared to the first quarter of 2016, wealth management revenue increased 60.9%, which was attributable to 9% organic growth in assets under management and the acquisition of Sterling Trust.

Relative to the first quarter of 2016, noninterest income increased 29.4% from $12.6 million. The increase was primarily due to higher residential mortgage banking and wealth management revenue, while commercial FHA revenue was consistent with the prior year period.

Noninterest Expense

Noninterest expense for the first quarter of 2017 was $30.8 million, compared with $34.1 million for the fourth quarter of 2016. Noninterest expense for the first quarter of 2017 included $1.3 million of integration and acquisition-related expenses, while noninterest expense for the fourth quarter of 2016 included $2.1 million in charges related to the Company’s branch network optimization actions and $1.6 million in other integration and acquisition-related expenses. Excluding these expenses, noninterest expense decreased $0.9 million or 3.0% from the prior quarter. The decrease was attributable to minor declines across most of the Company’s major expense line items.

Relative to the first quarter of 2016, noninterest expense excluding integration and acquisition-related expenses increased 8.1% from $27.3 million. The increase was primarily due to higher salaries and benefits expense, as well as higher professional fees.

Income Tax Expense

Income tax expense was $3.0 million for the first quarter of 2017, compared to $8.3 million for the fourth quarter of 2016. The effective tax rate for the first quarter of 2017 was 26.0%, compared to 41.8% in the prior quarter. The 26.0% effective tax rate used for the first quarter of 2017 reflects the recognition of tax benefits related to the exercise of employee stock options and the recent establishment of a captive insurance subsidiary.

Loan Portfolio

Total loans outstanding were $2.45 billion at March 31, 2017, compared with $2.32 billion at December 31, 2016, representing an annualized increase of 23.3%. Over the prior 12 month period, total loans increased 21.8% from $2.02 billion at March 31, 2016. The $135.0 million increase in the loan portfolio from December 31, 2016 was primarily driven by a $67.1 million increase in consumer loans, a $27.6 million increase in commercial real estate loans, a $23.7 million increase in residential real estate loans, and a $17.6 million increase in commercial loans.

Deposits

Total deposits were $2.53 billion at March 31, 2017, compared with $2.40 billion at December 31, 2016, and $2.39 billion at March 31, 2016. The increase was primarily driven by growth in checking accounts, money market accounts and brokered deposits.

Asset Quality

Non-performing loans totaled $28.9 million, or 1.18% of total loans, at March 31, 2017, compared with $31.6 million, or 1.36% of total loans, at December 31, 2016, and $18.8 million, or 0.93% of total loans, at March 31, 2016.

Net charge-offs for the first quarter of 2017 were $0.6 million, or 0.10% of average loans on an annualized basis.

The Company recorded a provision for loan losses of $1.5 million for the first quarter of 2017, primarily reflecting the growth in the loan portfolio.

The Company’s allowance for loan losses was 0.64% of total loans and 54.6% of non-performing loans at March 31, 2017, compared with 0.64% and 47.0%, respectively, at December 31, 2016. Including the fair market value discounts recorded in connection with acquired loan portfolios, the allowance for loan losses to total loans ratio was 0.92% at March 31, 2017, compared with 1.02% at December 31, 2016.

Capital

At March 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:

	March 31, 2017		Well Capitalized Regulatory Requirements
Total capital to risk-weighted assets	13.48	%	10.00	%
Tier 1 capital to risk-weighted assets	10.97	%	8.00	%
Tier 1 leverage ratio	9.61	%	5.00	%
Common equity Tier 1 capital	9.10	%	6.50	%
Tangible common equity to tangible assets	8.29	%	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, April 28, 2017 to discuss its financial results. The call can be accessed via telephone at (877) 516-3531 (passcode: 3106625). A recorded replay can be accessed through May 5, 2017 by dialing (855) 859-2056; passcode: 3106625.

A slide presentation relating to the first 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. Midland had assets of approximately $3.4 billion, and its Midland Wealth Management Group had assets under administration of approximately $1.9 billion as of March 31, 2017. 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 70 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, operating expenses and future earnings levels including with respect to the planned acquisition of Centrue Financial Corporation. 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
	March 31,			December 31,			September 30,			June 30,			March 31,
(dollars in thousands, except per share data)	2017			2016			2016			2016			2016
Earnings Summary
Net interest income	$	27,461		$	25,959		$	27,265		$	27,989		$	24,041
Provision for loan losses		1,533			2,445			1,392			629			1,125
Noninterest income		16,330			30,486			14,937			14,016			12,618
Noninterest expense		30,785			34,090			28,657			30,904			27,638
Income before income taxes		11,473			19,910			12,153			10,472			7,896
Income taxes		2,983			8,327			4,102			3,683			2,777
Net income	$	8,490		$	11,583		$	8,051		$	6,789		$	5,119

Diluted earnings per common share	$	0.52		$	0.72		$	0.51		$	0.50		$	0.42
Weighted average shares outstanding - diluted		16,351,637			16,032,016			15,858,273			13,635,074			12,229,293
Return on average assets		1.05	%		1.44	%		1.03	%		0.89	%		0.70	%
Return on average shareholders' equity		10.58	%		14.05	%		10.04	%		10.18	%		8.70	%
Return on average tangible common shareholders' equity		12.78	%		16.84	%		12.01	%		12.67	%		11.22	%
Net interest margin		3.87	%		3.70	%		4.00	%		4.20	%		3.80	%
Efficiency ratio		66.26	%		76.64	%		64.56	%		66.46	%		67.72	%

Adjusted Earnings Performance Summary
Adjusted earnings	$	9,436		$	6,302		$	8,277		$	7,106		$	5,768
Adjusted diluted earnings per common share	$	0.57		$	0.39		$	0.52		$	0.52		$	0.47
Adjusted return on average assets		1.17	%		0.78	%		1.06	%		0.93	%		0.79	%
Adjusted return on average shareholders' equity		11.76	%		7.64	%		10.33	%		10.66	%		9.80	%
Adjusted return on average tangible common shareholders' equity		14.20	%		9.16	%		12.35	%		13.27	%		12.64	%
Net interest margin excluding accretion income		3.52	%		3.42	%		3.66	%		3.52	%		3.55	%


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

	For the Quarter Ended
	March 31,		December 31,		September 30,		June 30,			March 31,
(in thousands, except per share data)	2017		2016		2016		2016			2016
Net interest income:
Total interest income	$	31,839	$	29,981	$	31,186	$	32,115		$	27,967
Total interest expense		4,378		4,022		3,921		4,126			3,926
Net interest income		27,461		25,959		27,265		27,989			24,041
Provision for loan losses		1,533		2,445		1,392		629			1,125
Net interest income after provision for loan losses		25,928		23,514		25,873		27,360			22,916
Noninterest income:
Commercial FHA revenue		6,695		3,704		3,260		8,538			6,562
Residential mortgage banking revenue		2,916		6,241		4,990		1,037			1,121
Wealth management revenue		2,872		2,495		1,941		1,870			1,785
Service charges on deposit accounts		892		988		1,044		965			907
Interchange revenue		977		921		920		945			964
FDIC loss sharing expense		-		-		-		(1,608	)		(53	)
Gain on sales of investment securities, net		67		14,387		39		72			204
Other-than-temporary impairment on investment securities		-		-		-		-			(824	)
Other income		1,911		1,750		2,743		2,197			1,952
Total noninterest income		16,330		30,486		14,937		14,016			12,618
Noninterest expense:
Salaries and employee benefits		17,115		17,326		16,568		17,012			15,387
Occupancy and equipment		3,184		3,266		3,271		3,233			3,310
Data processing		2,796		2,828		2,586		2,624			2,620
Professional		2,992		2,898		1,877		1,573			1,701
Amortization of intangible assets		525		534		514		519			580
Other		4,173		7,238		3,841		5,943			4,040
Total noninterest expense		30,785		34,090		28,657		30,904			27,638
Income before income taxes		11,473		19,910		12,153		10,472			7,896
Income taxes		2,983		8,327		4,102		3,683			2,777
Net income	$	8,490	$	11,583	$	8,051	$	6,789		$	5,119

Basic earnings per common share	$	0.54	$	0.74	$	0.51	$	0.51		$	0.43
Diluted earnings per common share	$	0.52	$	0.72	$	0.51	$	0.50		$	0.42


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

	At Quarter Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
(in thousands)	2017			2016			2016			2016			2016
Assets
Cash and cash equivalents	$	218,096		$	190,716		$	228,030		$	123,366		$	162,416
Investment securities available-for-sale at fair value		259,332			246,339			252,212			238,781			232,074
Investment securities held to maturity at amortized cost		76,276			78,672			82,941			84,756			88,085
Loans		2,454,950			2,319,976			2,312,778			2,161,041			2,016,034
Allowance for loan losses		(15,805	)		(14,862	)		(15,559	)		(14,752	)		(14,571	)
Total loans, net		2,439,145			2,305,114			2,297,219			2,146,289			2,001,463
Loans held for sale at fair value		39,900			70,565			61,363			101,782			103,365
Premises and equipment, net		66,914			66,692			70,727			72,147			72,421
Other real estate owned		3,680			3,560			4,828			3,540			4,740
Mortgage servicing rights at lower of cost or market		68,557			68,008			64,689			62,808			65,486
Intangible assets		8,633			7,187			5,391			5,905			6,424
Goodwill		50,807			48,836			46,519			46,519			46,519
Cash surrender value of life insurance policies		74,806			74,226			74,276			73,665			53,173
Other assets		67,431			73,808			59,532			62,226			61,914
Total assets	$	3,373,577		$	3,233,723		$	3,247,727		$	3,021,784		$	2,898,080

Liabilities and Shareholders' Equity
Noninterest bearing deposits	$	528,021		$	562,333		$	629,113		$	528,966		$	546,664
Interest bearing deposits		1,999,455			1,842,033			1,790,919			1,825,586			1,843,046
Total deposits		2,527,476			2,404,366			2,420,032			2,354,552			2,389,710
Short-term borrowings		124,035			131,557			138,289			125,014			101,649
FHLB advances and other borrowings		250,353			237,518			237,543			97,588			40,133
Subordinated debt		54,532			54,508			54,484			54,459			61,903
Trust preferred debentures		37,496			37,405			37,316			37,229			37,142
Other liabilities		45,352			46,599			38,314			36,674			29,157
Total liabilities		3,039,244			2,911,953			2,925,978			2,705,516			2,659,694
Total shareholders’ equity		334,333			321,770			321,749			316,268			238,386
Total liabilities and shareholders’ equity	$	3,373,577		$	3,233,723		$	3,247,727		$	3,021,784		$	2,898,080


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

	As of
	March 31,		December 31,		September 30,		June 30,		March 31,
(in thousands)	2017		2016		2016		2016		2016
Loan Portfolio
Commercial loans	$	475,408	$	457,827	$	545,069	$	489,228	$	484,618
Commercial real estate loans		997,200		969,615		956,298		929,399		897,099
Construction and land development loans		171,047		177,325		163,900		181,667		159,507
Residential real estate loans		277,402		253,713		216,935		179,184		158,221
Consumer loans		337,081		270,017		248,131		205,060		158,938
Lease financing loans		196,812		191,479		182,445		176,503		157,651
Total loans	$	2,454,950	$	2,319,976	$	2,312,778	$	2,161,041	$	2,016,034


Deposit Portfolio
Noninterest-bearing demand deposits	$	528,021	$	562,333	$	629,113	$	528,966	$	546,664
Checking accounts		751,193		656,248		658,021		627,003		612,475
Money market accounts		415,322		399,851		366,193		374,537		415,130
Savings accounts		169,715		166,910		162,742		164,792		163,163
Time deposits		394,508		400,304		420,779		431,173		433,386
Brokered deposits		268,717		218,720		183,184		228,081		218,892
Total deposits	$	2,527,476	$	2,404,366	$	2,420,032	$	2,354,552	$	2,389,710


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

	For the Quarter Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
(in thousands)	2017			2016			2016			2016			2016
Average Balance Sheets
Cash and cash equivalents	$	163,595		$	140,439		$	154,764		$	232,362		$	223,951
Investment securities		328,880			315,511			329,900			321,424			311,806
Loans		2,361,380			2,299,115			2,177,517			2,092,248			2,004,191
Loans held for sale		73,914			86,665			90,661			79,566			59,377
Nonmarketable equity securities		20,047			18,927			18,365			16,800			15,461
Total interest-earning assets		2,947,816			2,860,657			2,771,207			2,742,400			2,614,786
Non-earning assets		336,761			337,566			329,504			324,880			317,728
Total assets	$	3,284,577		$	3,198,223		$	3,100,711		$	3,067,280		$	2,932,514
Interest-bearing deposits	$	1,896,569		$	1,838,760		$	1,803,189		$	1,844,493		$	1,832,599
Short-term borrowings		143,583			151,191			134,052			114,651			120,753
FHLB advances and other borrowings		248,045			183,614			165,774			185,195			99,499
Subordinated debt		54,518			54,495			54,470			61,677			61,878
Trust preferred debentures		37,443			37,357			37,266			37,182			37,094
Total interest-bearing liabilities		2,380,158			2,265,417			2,194,751			2,243,198			2,151,823
Noninterest-bearing deposits		525,868			562,958			550,816			522,632			511,019
Other noninterest-bearing liabilities		53,109			41,962			36,284			33,309			32,935
Shareholders' equity		325,442			327,886			318,860			268,141			236,737
Total liabilities and shareholders' equity	$	3,284,577		$	3,198,223		$	3,100,711		$	3,067,280		$	2,932,514

Yields
Cash and cash equivalents		0.77	%		0.53	%		0.50	%		0.50	%		0.50	%
Investment securities		3.21	%		3.10	%		5.02	%		5.15	%		5.34	%
Loans		4.91	%		4.65	%		4.83	%		5.24	%		4.70	%
Loans held for sale		4.22	%		4.22	%		3.77	%		4.65	%		4.22	%
Nonmarketable equity securities		4.41	%		3.85	%		3.77	%		4.16	%		4.06	%
Total interest-earning assets		4.47	%		4.26	%		4.57	%		4.81	%		4.40	%
Interest-bearing deposits		0.51	%		0.48	%		0.48	%		0.50	%		0.49	%
Short-term borrowings		0.23	%		0.22	%		0.24	%		0.24	%		0.23	%
FHLB advances and other borrowings		0.93	%		0.78	%		0.73	%		0.56	%		0.55	%
Subordinated debt		6.40	%		6.41	%		6.41	%		6.84	%		6.84	%
Trust preferred debentures		5.12	%		4.99	%		5.03	%		4.95	%		4.80	%
Total interest-bearing liabilities		0.75	%		0.71	%		0.71	%		0.74	%		0.73	%
Net interest margin		3.87	%		3.70	%		4.00	%		4.20	%		3.80	%


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

	As of and for the Quarter Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
(dollars in thousands, except per share data)	2017			2016			2016			2016			2016
Asset Quality
Loans 30-89 days past due	$	14,075		$	10,767		$	10,318		$	10,453		$	6,616
Nonperforming loans		28,933			31,603			29,926			18,430			18,787
Nonperforming assets		31,684			34,550			34,304			21,469			22,312
Net charge-offs		590			3,142			585			448			2,542
Loans 30-89 days past due to total loans		0.57	%		0.46	%		0.45	%		0.48	%		0.33	%
Nonperforming loans to total loans		1.18	%		1.36	%		1.29	%		0.85	%		0.93	%
Nonperforming assets to total assets		0.94	%		1.07	%		1.06	%		0.71	%		0.77	%
Allowance for loan losses to total loans		0.64	%		0.64	%		0.67	%		0.68	%		0.72	%
Allowance for loan losses to nonperforming loans		54.62	%		47.03	%		51.99	%		80.04	%		77.56	%
Net charge-offs to average loans		0.10	%		0.54	%		0.11	%		0.09	%		0.51	%

Wealth Management
Trust assets under administration	$	1,869,314		$	1,658,235		$	1,235,132		$	1,198,044		$	1,189,693

Market Data
Book value per share at period end	$	21.19		$	20.78		$	20.89		$	20.53		$	20.19
Tangible book value per share at period end	$	17.42		$	17.16		$	17.52		$	17.13		$	15.71
Market price at period end	$	34.39		$	36.18		$	25.34		$	21.69		$	N/A
Shares outstanding at period end		15,780,651			15,483,499			15,404,423			15,402,946			11,804,779

Capital
Total capital to risk-weighted assets		13.48	%		13.85	%		13.53	%		13.91	%		11.67	%
Tier 1 capital to risk-weighted assets		10.97	%		11.27	%		10.94	%		11.23	%		8.48	%
Tier 1 leverage ratio		9.61	%		9.76	%		9.82	%		9.77	%		7.25	%
Tier 1 common capital to risk-weighted assets		9.10	%		9.35	%		9.03	%		9.24	%		6.40	%
Tangible common equity to tangible assets		8.29	%		8.36	%		8.44	%		8.89	%		6.52	%


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

	For the Quarter Ended
	March 31,				December 31,				September 30,				June 30,				March 31,
(dollars in thousands, except per share data)	2017				2016				2016				2016				2016
Adjusted Earnings Reconciliation
Income before income taxes - GAAP	$	11,473			$	19,910			$	12,153			$	10,472			$	7,896
Adjustments to other income:
Gain on sales of investment securities, net		67				14,387				39				72				204
Other than-temporary-impairment on investment securities		-				-				-				-				(824	)
Reversal of contingent consideration accrual		-				-				-				350				-
Total adjusted other income		67				14,387				39				422				(620	)
Adjustments to other expense:
Expenses associated with payoff of subordinated debt		-				-				-				511				-
Net expense from loss share termination agreement		-				351				-				-				-
Branch network optimization plan charges		-				2,099				-				-				-
Integration and acquisition expenses		1,346				1,200				352				406				385
Total adjusted other expense		1,346				3,650				352				917				385
Adjusted earnings pre tax		12,752				9,173				12,466				10,967				8,901
Adjusted earnings tax		3,316				2,871				4,189				3,861				3,133
Adjusted earnings - non-GAAP	$	9,436			$	6,302			$	8,277			$	7,106			$	5,768
Adjusted diluted EPS	$	0.57			$	0.39			$	0.52			$	0.52			$	0.47
Adjusted return on average assets		1.17		%		0.78		%		1.06		%		0.93		%		0.79		%
Adjusted return on average shareholders' equity		11.76		%		7.64		%		10.33		%		10.66		%		9.80		%
Adjusted return on average tangible common equity		14.20		%		9.16		%		12.35		%		13.27		%		12.64		%


Yield on Loans
Reported yield on loans		4.91		%		4.65		%		4.83		%		5.24		%		4.70		%
Effect of accretion income on acquired loans		(0.43	)	%		(0.33	)	%		(0.43	)	%		(0.88	)	%		(0.31	)	%
Yield on loans excluding accretion income		4.48		%		4.32		%		4.40		%		4.36		%		4.39		%

Net Interest Margin
Reported net interest margin		3.87		%		3.70		%		4.00		%		4.20		%		3.80		%
Effect of accretion income on acquired loans		(0.35	)	%		(0.28	)	%		(0.34	)	%		(0.68	)	%		(0.25	)	%
Net interest margin excluding accretion income		3.52		%		3.42		%		3.66		%		3.52		%		3.55		%


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
	March 31,				December 31,				September 30,				June 30,				March 31,
(dollars in thousands, except per share data)	2017				2016				2016				2016				2016

*Shareholders' Equity to Tangible Common Equity*
Total shareholders' equity—GAAP	$	334,333			$	321,770			$	321,749			$	316,268			$	238,386
Adjustments:
Goodwill		(50,807	)			(48,836	)			(46,519	)			(46,519	)			(46,519	)
Other intangibles		(8,633	)			(7,187	)			(5,391	)			(5,905	)			(6,424	)
Tangible common equity	$	274,893			$	265,747			$	269,839			$	263,844			$	185,443

*Total Assets to Tangible Assets:*
Total assets—GAAP		3,373,577				3,233,723				3,247,727				3,021,784				2,898,080
Adjustments:
Goodwill		(50,807	)			(48,836	)			(46,519	)			(46,519	)			(46,519	)
Other intangibles		(8,633	)			(7,187	)			(5,391	)			(5,905	)			(6,424	)
Tangible assets	$	3,314,137			$	3,177,700			$	3,195,817			$	2,969,360			$	2,845,137

Common Shares Outstanding		15,780,651				15,483,499				15,404,423				15,402,946				11,804,779

*Tangible Common Equity to Tangible Assets*		8.29		%		8.36		%		8.44		%		8.89		%		6.52		%
*Tangible Book Value Per Share*	$	17.42			$	17.16			$	17.52			$	17.13			$	15.71


Return on Average Tangible Common Equity (ROATCE)
	As of
	March 31,				December 31,				September 30,				June 30,				March 31,
(in thousands)	2017				2016				2016				2016				2016

Net Income	$	8,490			$	11,583			$	8,051			$	6,789			$	5,119

Average total shareholders' equity—GAAP	$	325,442			$	327,886			$	318,860			$	268,141			$	236,737
Adjustments:
Goodwill		(48,836	)			(46,594	)			(46,519	)			(46,519	)			(46,519	)
Other intangibles		(7,144	)			(7,718	)			(5,656	)			(6,184	)			(6,740	)
Average tangible common equity	$	269,462			$	273,574			$	266,685			$	215,438			$	183,478
ROATCE		12.78		%		16.84		%		12.01		%		12.67		%		11.22		%

CONTACTS:
Jeffrey G. Ludwig, Exec. V.P., at jludwig@midlandsb.com or (217) 342-7321
Kevin L. Thompson, Chief Financial Officer, at kthompson@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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Midland States Bancorp, Inc. Announces 2017 First Quarter Results