Midland States Bancorp, Inc. Announces 2018 Second Quarter Results

Highlights

Net income of $12.8 million, or $0.52 diluted earnings per share
Adjusted earnings of $14.5 million, or $0.59 diluted earnings per share, primarily reflects the exclusion of $2.0 million of integration and acquisition expenses
Total loans increased $66.7 million from end of prior quarter, or 6.6% annualized
Efficiency ratio improved to 67.8%
Wealth management revenue surpassed $5.0 million for the quarter

EFFINGHAM, Ill., July 26, 2018 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (Nasdaq:MSBI) (the “Company”) today reported net income of $12.8 million, or $0.52 diluted earnings per share, for the second quarter of 2018, which included $2.0 million of integration and acquisition expenses. This compares to net income of $1.8 million, or $0.08 diluted earnings per share, for the first quarter of 2018, which included $11.9 million of integration and acquisition expenses, and net income of $3.5 million, or $0.20 diluted earnings per share, for the second quarter of 2017, which included $7.5 million of integration and acquisition expenses.

“Our second quarter results reflected the initial full quarter benefits of the Alpine Bancorporation acquisition, which resulted in improved profitability and a more favorable revenue mix weighted towards recurring income generated from our core community banking and wealth management operations,” said Leon J. Holschbach, Chief Executive Officer of the Company. “While we continue to prudently manage our balance sheet in order to maintain stability in our net interest margin, we saw a pick-up in loan growth during the second quarter driven by our expanded equipment financing business and our consumer lending programs. We recently completed the Alpine system conversion and are ahead of schedule in realizing the projected cost savings from the Alpine acquisition. These cost savings have helped us to drive improvement in our level of efficiency, and we believe we are well-positioned to deliver additional earnings growth in 2019.”

Factors Affecting Comparability

The Company acquired Alpine Bancorporation, Inc. (“Alpine”), and Centrue Financial Corporation (“Centrue”) in February 2018 and June 2017, respectively. The financial position and results of operations of these entities prior to their acquisition dates are not included in the Company’s financial results.

Adjusted Earnings

Adjusted earnings were $14.5 million, or $0.59 diluted earnings per share, for the second quarter of 2018, which primarily reflects the exclusion of $2.0 million in integration and acquisition expenses. This compares to adjusted earnings of $11.3 million, or $0.52 diluted earnings per share, for the first quarter of 2018, which primarily reflects the exclusion of $11.9 million in integration and acquisition expenses.

The increase in adjusted earnings per share was primarily attributable to the earnings contribution from Alpine.

A reconciliation of adjusted earnings to net income according to accounting principles generally accepted in the United States (“GAAP”) is provided in the financial tables at the end of this press release.

Net Interest Income

Net interest income for the second quarter of 2018 was $48.3 million, an increase of 26.5% from $38.2 million for the first quarter of 2018. The increase in net interest income was primarily attributable to the full quarter of net interest income contributed by Alpine.

The Company’s net interest income benefits from accretion income associated with purchased loan portfolios. Accretion income totaled $5.5 million for the second quarter of 2018, compared with $2.0 million for the first quarter of 2018.

Relative to the second quarter of 2017, net interest income increased $18.9 million, or 64.2%. Accretion income for the second quarter of 2017 was $1.3 million. The increase in net interest income resulted from the increase in accretion income and a $23.8 million increase in interest income on interest-earning assets, offset in part by a $4.9 million increase in interest expense. These increases were due to the full quarter impact of Alpine and Centrue, as well as organic growth.

Net Interest Margin

Net interest margin for the second quarter of 2018 was 3.91%, compared to 3.69% for the first quarter of 2018. The Company’s net interest margin benefits from accretion income on purchased loan portfolios, which contributed 40 and 16 basis points to net interest margin in the second quarter of 2018 and first quarter of 2018, respectively. Excluding the impact of accretion income, net interest margin was relatively unchanged compared to the first quarter of 2018.

Relative to the second quarter of 2017, net interest margin increased from 3.70%. Accretion income on purchased loan portfolios contributed 13 basis points to net interest margin in the second quarter of 2017. Excluding the impact of accretion income, the net interest margin declined due to non-deposit funding costs increasing faster than the yield on earning assets.

Noninterest Income

Noninterest income for the second quarter of 2018 was $15.9 million, a decrease of 4.0% from $16.6 million for the first quarter of 2018. The decrease was primarily attributable to a decline in commercial FHA revenue, which was partially offset by increases in most of the Company’s other fee generating areas due to the full quarter benefit of Alpine.

Wealth management revenue for the second quarter of 2018 was $5.4 million, an increase of 29.5% from $4.2 million in the first quarter of 2018. The increase was primarily attributable to the full quarter contribution of Alpine’s wealth management business, which added $1.1 billion in assets under administration. Compared to the second quarter of 2017, wealth management revenue increased 59.0%, which was attributable to 7.9% organic growth in assets under administration and the addition of Alpine’s wealth management business.

Commercial FHA revenue for the second quarter of 2018 was $0.3 million, a decrease of 90.2% from $3.3 million in the first quarter of 2018. The Company originated $11.1 million in rate lock commitments during the second quarter of 2018, compared to $80.4 million in the prior quarter. Compared to the second quarter of 2017, commercial FHA revenue decreased 92.2%.

In response to the recent performance in the commercial FHA business, the Company has made changes in the leadership at Love Funding and implemented cost reductions to better align expenses with the current level of revenue being generated. On a long-term basis, Midland expects annual commercial FHA revenue to range between $12 million and $20 million, with a pre-tax margin of 20% to 40%.

Relative to the second quarter of 2017, noninterest income increased 17.1% from $13.6 million. The increase was primarily due to greater wealth management and core banking fees, partially offset by lower commercial FHA and residential mortgage banking revenue.

Noninterest Expense

Noninterest expense for the second quarter of 2018 was $46.6 million, which included $2.0 million in integration and acquisition expense, compared with $49.6 million for the first quarter of 2018, which included $11.9 million in integration and acquisition expense. Excluding integration and acquisition expense, noninterest expense increased $6.8 million, or 18.1%, from the prior quarter. The increase was primarily due to a full quarter of expenses associated with the addition of Alpine’s operations.

Relative to the second quarter of 2017, noninterest expense, excluding integration and acquisition expenses, increased 47.5% from $30.2 million. The increase was primarily due to the addition of personnel and facilities from the two acquisitions completed over the past year.

Loan Portfolio

Total loans outstanding were $4.10 billion at June 30, 2018, compared with $4.03 billion at March 31, 2018 and $3.18 billion at June 30, 2017. The increase in total loans from March 31, 2018, was primarily attributable to growth in equipment financing, consumer lending and residential real estate. Equipment financing balances increased $38.1 million from March 31, 2018, which are booked within either the commercial or the lease financing portfolios. The increase in total loans from June 30, 2017 was primarily attributable to the addition of Alpine’s loans.

Deposits

Total deposits were $4.16 billion at June 30, 2018, compared with $4.23 billion at March 31, 2018, and $3.33 billion at June 30, 2017. The decrease in total deposits from March 31, 2018 was primarily attributable to normal fluctuations in servicing deposits and a reduction in brokered time deposits. The increase in total deposits from June 30, 2017 was primarily attributable to the addition of Alpine’s deposits.

Asset Quality

Non-performing loans totaled $28.3 million, or 0.69% of total loans, at June 30, 2018, compared with $26.5 million, or 0.66% of total loans, at March 31, 2018, and $27.6 million, or 0.87% of total loans, at June 30, 2017.

Net charge-offs for the second quarter of 2018 were $1.3 million, or 0.13% of average loans on an annualized basis.

The Company recorded a provision for loan losses of $1.9 million for the second quarter of 2018. The Company’s allowance for loan losses was 0.45% of total loans and 64.4% of non-performing loans at June 30, 2018, compared with 0.44% of total loans and 66.8% of non-performing loans at March 31, 2018. Fair market value discounts recorded in connection with acquired loan portfolios represented 0.81% of total loans at June 30, 2018, compared with 0.65% of total loans at March 31, 2018.

Capital

At June 30, 2018, the Company exceeded all regulatory capital requirements under Basel III and was considered to be a ‘‘well-capitalized’’ financial institution, as summarized in the following table:

	June 30, 2018	Well Capitalized Regulatory Requirements
Total capital to risk-weighted assets	12.27%	10.00%
Tier 1 capital to risk-weighted assets	9.78%	8.00%
Tier 1 leverage ratio	8.16%	5.00%
Common equity Tier 1 capital	8.28%	6.50%
Tangible common equity to tangible assets	6.96%	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, July 27, 2018 to discuss its financial results. The call can be accessed via telephone at (877) 516-3531; passcode: 4999299. A recorded replay can be accessed through August 3, 2018 by dialing (855) 859-2056; passcode: 4999299.

A slide presentation relating to the second quarter 2018 results will be accessible prior to the scheduled conference call. The slide presentation and webcast of the conference call can be accessed on the Webcasts and Presentations page of the Company’s investor relations website.

About Midland States Bancorp, Inc.

Midland States Bancorp, Inc. is a community-based financial holding company headquartered in Effingham, Illinois, and is the sole shareholder of Midland States Bank. As of June 30, 2018, the Company had total assets of approximately $5.7 billion and its Wealth Management Group had assets under administration of approximately $3.2 billion. Midland provides a full range of commercial and consumer banking products and services, business equipment financing, merchant credit card services, trust and investment management, and insurance and financial planning services. In addition, multi-family and healthcare facility FHA financing is provided through Love Funding, Midland’s non-bank subsidiary. For additional information, visit www.midlandsb.com or follow Midland on LinkedIn at https://www.linkedin.com/company/midland-states-bank.

Non-GAAP Financial Measures

Some of the financial measures included in this press release are not measures of financial performance recognized in accordance with GAAP. These non-GAAP financial measures include “Adjusted Earnings,” “Adjusted Diluted Earnings Per Share,” “Adjusted Return on Average Assets,” “Adjusted Return on Average Shareholders’ Equity,” “Adjusted Return on Average Tangible Common Equity,” “Efficiency Ratio,” “Tangible Common Equity to Tangible Assets,” “Tangible Book Value Per Share” and “Return on Average Tangible Common Equity.” The Company believes these non-GAAP financial measures provide both management and investors a more complete understanding of the Company’s funding profile and profitability. These non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP financial measures. Not all companies use the same calculation of these measures; therefore, this presentation may not be comparable to other similarly titled measures as presented by other companies.

Forward-Looking Statements

Readers should note that in addition to the historical information contained herein, this press release includes "forward-looking statements," including but not limited to statements about the Company’s plans, objectives, future performance, goals and future earnings levels. These statements are subject to many risks and uncertainties, including changes in interest rates and other general economic, business and political conditions, including changes in the financial markets; changes in business plans as circumstances warrant; 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, President, at jludwig@midlandsb.com or (217) 342-7321
Stephen A. Erickson, Chief Financial Officer, at serickson@midlandsb.com or (217) 540-1712
Douglas J. Tucker, 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
	June 30,			March 31,			December 31,					September 30,			June 30,
(dollars in thousands, except per share data)	2018			2018			2017				2017			2017
Earnings Summary
Net interest income	$	48,286		$	38,185		$	36,036		$		36,765		$	29,400
Provision for loan losses		1,854			2,006			6,076				1,489			458
Noninterest income		15,948			16,605			13,998				15,403			13,619
Noninterest expense		46,553			49,602			36,192				48,363			37,645
Income before income taxes		15,827			3,182			7,766				2,316			4,916
Income taxes		3,045			1,376			5,775				280			1,377
Net income		12,782			1,806			1,991				2,036			3,539
Preferred stock dividends, net		36			36			37				27			19
Net income available to common shareholders	$	12,746		$	1,770		$	1,954			$	2,009		$	3,520

Diluted earnings per common share	$	0.52		$	0.08		$	0.10			$	0.10		$	0.20
Weighted average shares outstanding - diluted		24,268,111			21,351,511			19,741,833				19,704,217			17,320,089
Return on average assets		0.91	%		0.15	%		0.18	%			0.18	%		0.39	%
Return on average shareholders' equity		8.77	%		1.47	%		1.74	%			1.78	%		3.93	%
Return on average tangible common equity ⁽¹⁾		13.48	%		2.05	%		2.31	%			2.38	%		4.89	%
Net interest margin		3.91	%		3.69	%		3.73	%			3.78	%		3.70	%
Efficiency ratio ⁽¹⁾		67.81	%		68.45	%		64.64	%			69.00	%		66.54	%

Adjusted Earnings Performance Summary
Adjusted earnings ⁽¹⁾	$	14,486		$	11,301		$	8,403			$	9,173		$	8,076
Adjusted diluted earnings per common share ⁽¹⁾	$	0.59		$	0.52		$	0.42			$	0.46		$	0.46
Adjusted return on average assets ⁽¹⁾		1.03	%		0.96	%		0.76	%			0.82	%		0.89	%
Adjusted return on average shareholders' equity ⁽¹⁾		9.94	%		9.19	%		7.34	%			8.03	%		8.97	%
Adjusted return on average tangible common equity ⁽¹⁾		15.28	%		13.06	%		9.88	%			10.83	%		11.20	%

(1) Non-GAAP financial measures. Refer to pages 12 - 14 for a reconciliation to the comparable GAAP financial measures.


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

	For the Quarter Ended
	June 30,			March 31,		December 31,		September 30,		June 30,
(in thousands, except per share data)	2018			2018		2017		2017		2017
Net interest income:
Total interest income	$	58,283		$	46,505	$	43,500	$	43,246	$	34,528
Total interest expense		9,997			8,320		7,464		6,481		5,128
Net interest income		48,286			38,185		36,036		36,765		29,400
Provision for loan losses		1,854			2,006		6,076		1,489		458
Net interest income after provision for loan losses		46,432			36,179		29,960		35,276		28,942
Noninterest income:
Commercial FHA revenue		326			3,330		3,127		3,777		4,153
Residential mortgage banking revenue		2,116			1,418		1,556		2,317		2,330
Wealth management revenue		5,417			4,182		3,587		3,475		3,406
Service charges on deposit accounts		2,693			1,967		1,828		2,133		1,122
Interchange revenue		2,929			2,045		1,538		1,724		1,114
(Loss) gain on sales of investment securities, net		(70	)		65		2		98		55
Other income		2,537			3,598		2,360		1,879		1,439
Total noninterest income		15,948			16,605		13,998		15,403		13,619
Noninterest expense:
Salaries and employee benefits		23,467			28,395		17,344		22,411		21,842
Occupancy and equipment		4,708			4,252		3,859		4,144		3,472
Data processing		4,852			4,286		3,640		5,786		2,949
Professional		3,575			4,074		3,611		4,151		3,142
Amortization of intangible assets		1,576			1,675		1,035		1,187		579
Loss on mortgage servicing rights held for sale		188			-		442		3,617		-
Other		8,187			6,920		6,261		7,067		5,661
Total noninterest expense		46,553			49,602		36,192		48,363		37,645
Income before income taxes		15,827			3,182		7,766		2,316		4,916
Income taxes		3,045			1,376		5,775		280		1,377
Net income		12,782			1,806		1,991		2,036		3,539
Preferred stock dividends, net		36			36		37		27		19
Net income available to common shareholders	$	12,746		$	1,770	$	1,954	$	2,009	$	3,520

Basic earnings per common share	$	0.53		$	0.08	$	0.10	$	0.10	$	0.21
Diluted earnings per common share	$	0.52		$	0.08	$	0.10	$	0.10	$	0.20


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

	As of
	June 30,			March 31,			December 31,			September 30,			June 30,
(in thousands)	2018			2018			2017			2017			2017
Assets
Cash and cash equivalents	$	276,331		$	331,183		$	215,202		$	183,572		$	334,356
Investment securities		708,001			738,172			450,525			467,852			460,711
Loans		4,095,811			4,029,150			3,226,678			3,157,972			3,184,063
Allowance for loan losses		(18,246	)		(17,704	)		(16,431	)		(16,861	)		(15,424	)
Total loans, net		4,077,565			4,011,446			3,210,247			3,141,111			3,168,639
Loans held for sale at fair value		41,449			25,267			50,089			35,874			41,689
Premises and equipment, net		94,783			95,332			76,162			80,941			76,598
Other real estate owned		3,911			5,059			5,708			6,379			7,036
Mortgage servicing rights at lower of cost or market		52,381			56,427			56,352			56,299			70,277
Mortgage servicing rights held for sale		4,806			3,962			10,176			10,618			-
Intangible assets		41,081			46,473			16,932			17,966			18,459
Goodwill		164,044			155,674			98,624			97,351			96,940
Cash surrender value of life insurance policies		137,681			136,766			113,366			112,591			111,802
Other assets		128,567			117,611			109,318			137,207			105,135
Total assets	$	5,730,600		$	5,723,372		$	4,412,701		$	4,347,761		$	4,491,642

Liabilities and Shareholders' Equity
Noninterest-bearing deposits	$	1,001,802		$	1,037,710		$	724,443		$	674,118		$	780,803
Interest-bearing deposits		3,158,055			3,196,105			2,406,646			2,440,349			2,552,228
Total deposits		4,159,857			4,233,815			3,131,089			3,114,467			3,333,031
Short-term borrowings		114,536			130,693			156,126			153,443			170,629
FHLB advances and other borrowings		678,873			587,493			496,436			488,870			400,304
Subordinated debt		94,053			94,013			93,972			54,581			54,556
Trust preferred debentures		47,559			47,443			47,330			47,218			47,107
Other liabilities		43,187			44,530			38,203			38,493			34,063
Total liabilities		5,138,065			5,137,987			3,963,156			3,897,072			4,039,690
Total shareholders’ equity		592,535			585,385			449,545			450,689			451,952
Total liabilities and shareholders’ equity	$	5,730,600		$	5,723,372		$	4,412,701		$	4,347,761		$	4,491,642


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

	As of
	June 30,		March 31,		December 31,		September 30,		June 30,
(in thousands)	2018		2018		2017		2017		2017
Loan Portfolio
Commercial loans	$	762,549	$	802,752	$	555,930	$	513,544	$	571,111
Commercial real estate loans		1,711,296		1,773,510		1,440,011		1,472,284		1,470,487
Construction and land development loans		247,889		234,837		200,587		182,513		176,098
Residential real estate loans		601,808		570,321		453,552		445,747		428,464
Consumer loans		543,654		424,229		371,455		343,038		335,902
Lease financing loans		228,615		223,501		205,143		200,846		202,001
Total loans	$	4,095,811	$	4,029,150	$	3,226,678	$	3,157,972	$	3,184,063

Deposit Portfolio
Noninterest-bearing demand deposits	$	1,001,802	$	1,037,710	$	724,443	$	674,118	$	780,803
Checking accounts		1,024,506		993,253		785,934		800,649		841,640
Money market accounts		843,984		840,415		646,426		633,844		578,077
Savings accounts		460,560		466,887		281,212		278,977		291,912
Time deposits		638,215		672,034		502,810		493,777		525,647
Brokered deposits		190,790		223,516		190,264		233,102		314,952
Total deposits	$	4,159,857	$	4,233,815	$	3,131,089	$	3,114,467	$	3,333,031


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

	For the Quarter Ended
	June 30,			March 31,			December 31,			September 30,			June 30,
(dollars in thousands)	2018			2018			2017			2017			2017
Average Balance Sheets
Cash and cash equivalents	$	227,499		$	138,275		$	173,540		$	202,407		$	192,483
Investment securities		731,017			548,168			461,475			474,216			362,268
Loans		3,982,958			3,477,917			3,198,036			3,173,027			2,621,139
Loans held for sale		31,220			40,841			40,615			46,441			61,718
Nonmarketable equity securities		38,872			34,890			33,703			31,224			22,246
Total interest-earning assets		5,011,566			4,240,091			3,907,369			3,927,315			3,259,854
Non-earning assets		639,864			536,750			497,502			498,364			372,473
Total assets	$	5,651,430		$	4,776,841		$	4,404,871		$	4,425,679		$	3,632,327

Interest-bearing deposits	$	3,158,816		$	2,675,339		$	2,433,461		$	2,527,490		$	2,116,565
Short-term borrowings		120,794			148,703			181,480			182,015			146,144
FHLB advances and other borrowings		573,107			489,567			472,709			434,860			290,401
Subordinated debt		94,035			93,993			88,832			54,570			54,542
Trust preferred debentures		47,488			47,373			47,263			47,152			40,820
Total interest-bearing liabilities		3,994,240			3,454,975			3,223,745			3,246,087			2,648,472
Noninterest-bearing deposits		1,025,308			782,164			684,907			688,986			579,977
Other noninterest-bearing liabilities		47,229			40,761			42,251			37,289			42,372
Shareholders' equity		584,653			498,941			453,968			453,317			361,506
Total liabilities and shareholders' equity	$	5,651,430		$	4,776,841		$	4,404,871		$	4,425,679		$	3,632,327

Yields
Cash and cash equivalents		1.79	%		1.53	%		1.28	%		1.19	%		1.02	%
Investment securities		2.91	%		2.87	%		3.01	%		2.86	%		3.33	%
Loans		5.21	%		4.85	%		4.88	%		4.90	%		4.71	%
Loans held for sale		3.79	%		4.25	%		3.62	%		3.74	%		4.68	%
Nonmarketable equity securities		4.97	%		4.64	%		4.78	%		4.20	%		4.31	%
Total interest-earning assets		4.71	%		4.49	%		4.48	%		4.44	%		4.33	%
Interest-bearing deposits		0.64	%		0.62	%		0.58	%		0.53	%		0.53	%
Short-term borrowings		0.38	%		0.34	%		0.26	%		0.22	%		0.23	%
FHLB advances and other borrowings		1.81	%		1.55	%		1.42	%		1.36	%		1.16	%
Subordinated debt		6.44	%		6.44	%		6.46	%		6.40	%		6.40	%
Trust preferred debentures		6.59	%		5.94	%		5.51	%		5.37	%		5.15	%
Total interest-bearing liabilities		1.00	%		0.98	%		0.92	%		0.79	%		0.78	%
Net interest margin		3.91	%		3.69	%		3.73	%		3.78	%		3.70	%


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

	As of and for the Quarter Ended
	June 30,			March 31,			December 31,			September 30,			June 30,
(dollars in thousands, except per share data)	2018			2018			2017			2017			2017
Asset Quality
Loans 30-89 days past due	$	19,362		$	20,138		$	15,405		$	13,526		$	13,566
Nonperforming loans		28,342			26,499			26,760			33,431			27,615
Nonperforming assets		31,542			29,938			30,894			38,109			33,150
Net charge-offs		1,312			732			6,506			52			839
Loans 30-89 days past due to total loans		0.47	%		0.50	%		0.48	%		0.43	%		0.43	%
Nonperforming loans to total loans		0.69	%		0.66	%		0.83	%		1.06	%		0.87	%
Nonperforming assets to total assets		0.55	%		0.52	%		0.70	%		0.88	%		0.74	%
Allowance for loan losses to total loans		0.45	%		0.44	%		0.51	%		0.53	%		0.48	%
Allowance for loan losses to nonperforming loans		64.38	%		66.81	%		61.40	%		50.43	%		55.81	%
Net charge-offs to average loans		0.13	%		0.09	%		0.81	%		0.01	%		0.13	%

Wealth Management
Trust assets under administration	$	3,188,909		$	3,125,051		$	2,051,249		$	2,001,106		$	1,929,513

Market Data
Book value per share at period end	$	24.92		$	24.67		$	23.35		$	23.45		$	23.51
Tangible book value per share at period end ⁽¹⁾	$	16.25		$	16.11		$	17.31		$	17.41		$	17.47
Market price at period end	$	34.26		$	31.56		$	32.48		$	31.68		$	33.52
Shares outstanding at period end		23,664,596			23,612,430			19,122,049			19,093,153			19,087,409

Capital
Total capital to risk-weighted assets		12.27	%		12.37	%		13.26	%		12.21	%		11.98	%
Tier 1 capital to risk-weighted assets		9.78	%		9.84	%		10.19	%		10.20	%		10.05	%
Tier 1 leverage ratio		8.16	%		9.55	%		8.63	%		8.54	%		10.45	%
Tier 1 common capital to risk-weighted assets		8.28	%		8.30	%		8.45	%		8.50	%		8.36	%
Tangible common equity to tangible assets ⁽¹⁾		6.96	%		6.89	%		7.70	%		7.85	%		7.62	%

(1) Non-GAAP financial measures. Refer to pages 12 - 14 for a reconciliation to the comparable GAAP financial measures.


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

Adjusted Earnings Reconciliation

	For the Quarter Ended
	June 30,				March 31,			December 31,				September 30,			June 30,
(dollars in thousands, except per share data)	2018				2018			2017				2017			2017
Income before income taxes - GAAP	$	15,827			$	3,182		$	7,766			$	2,316		$	4,916
Adjustments to noninterest income:
(Loss) gain on sales of investment securities, net		(70	)			65			2				98			55
Other		(48	)			150			37				45			(91	)
Total adjustments to noninterest income		(118	)			215			39				143			(36	)
Adjustments to noninterest expense:
Loss on mortgage servicing rights held for sale		188				-			442				3,617			-
Integration and acquisition expenses		2,019				11,884			2,686				8,303			7,450
Total adjustments to noninterest expense		2,207				11,884			3,128				11,920			7,450
Adjusted earnings pre tax		18,152				14,851			10,855				14,093			12,402
Adjusted earnings tax		3,666				3,550			6,992				4,920			4,326
Revaluation of net deferred tax assets		-				-			(4,540	)			-			-
*Adjusted earnings - non-GAAP*		14,486				11,301			8,403				9,173			8,076
Preferred stock dividends, net		36				36			37				27			19
*Adjusted earnings - available to common shareholders - non-GAAP*	$	14,450			$	11,265		$	8,366			$	9,146		$	8,057
Adjusted diluted earnings per common share	$	0.59			$	0.52		$	0.42			$	0.46		$	0.46
Adjusted return on average assets		1.03		%		0.96	%		0.76		%		0.82	%		0.89		%
Adjusted return on average shareholders' equity		9.94		%		9.19	%		7.34		%		8.03	%		8.97		%
Adjusted return on average tangible common equity		15.28		%		13.06	%		9.88		%		10.83	%		11.20		%

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

Efficiency Ratio Reconciliation
	For the Quarter Ended
	June 30,				March 31,				December 31,				September 30,				June 30,
(dollars in thousands)	2018				2018				2017				2017				2017
Noninterest expense - GAAP	$	46,553			$	49,602			$	36,192			$	48,363			$	37,645
Loss on mortgage servicing rights held for sale		(188	)			-				(442	)			(3,617	)			-
Integration and acquisition expenses		(2,019	)			(11,884	)			(2,686	)			(8,303	)			(7,450	)
Adjusted noninterest expense	$	44,346			$	37,718			$	33,064			$	36,443			$	30,195

Net interest income - GAAP	$	48,286			$	38,185			$	36,036			$	36,765			$	29,400
Effect of tax-exempt income		541				394				659				687				674
Adjusted net interest income		48,827				38,579				36,695				37,452				30,074

Noninterest income - GAAP	$	15,948			$	16,605			$	13,998			$	15,403			$	13,619
Mortgage servicing rights impairment		500				133				494				104				1,650
Loss (gain) on sales of investment securities, net		70				(65	)			(2	)			(98	)			(55	)
Other		48				(150	)			(37	)			(45	)			91
Adjusted noninterest income		16,566				16,523				14,453				15,364				15,305

Adjusted total revenue	$	65,393			$	55,102			$	51,148			$	52,816			$	45,379

*Efficiency ratio*		67.81		%		68.45		%		64.64		%		69.00		%		66.54		%


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

Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share

		As of
		June 30,				March 31,				December 31,				September 30,				June 30,
(dollars in thousands, except per share data)		2018				2018				2017				2017				2017
*Shareholders' Equity to Tangible Common Equity*
Total shareholders' equity—GAAP		$	592,535			$	585,385			$	449,545			$	450,689			$	451,952
Adjustments:
Preferred stock			(2,876	)			(2,923	)			(2,970	)			(3,015	)			(3,134	)
Goodwill			(164,044	)			(155,674	)			(98,624	)			(97,351	)			(96,940	)
Other intangibles			(41,081	)			(46,473	)			(16,932	)			(17,966	)			(18,459	)
Tangible common equity		$	384,534			$	380,315			$	331,019			$	332,357			$	333,419

Total Assets to Tangible Assets:
Total assets—GAAP		$	5,730,600			$	5,723,372			$	4,412,701			$	4,347,761			$	4,491,642
Adjustments:
Goodwill			(164,044	)			(155,674	)			(98,624	)			(97,351	)			(96,940	)
Other intangibles			(41,081	)			(46,473	)			(16,932	)			(17,966	)			(18,459	)
Tangible assets		$	5,525,475			$	5,521,225			$	4,297,145			$	4,232,444			$	4,376,243

Common Shares Outstanding			23,664,596				23,612,430				19,122,049				19,093,153				19,087,409

*Tangible Common Equity to Tangible Assets*			6.96		%		6.89		%		7.70		%		7.85		%		7.62		%
*Tangible Book Value Per Share*		$	16.25			$	16.11			$	17.31			$	17.41			$	17.47

Return on Average Tangible Common Equity (ROATCE)

	For the Quarter Ended
		June 30,				March 31,				December 31,				September 30,				June 30,
(dollars in thousands)		2018				2018				2017				2017				2017
Net income available to common shareholders		$	12,746			$	1,770			$	1,954			$	2,009			$	3,520

Average total shareholders' equity—GAAP		$	584,653			$	498,941			$	453,968			$	453,317			$	361,335
Adjustments:
Preferred stock			(2,905	)			(2,952	)			(2,997	)			(3,126	)			(654	)
Goodwill			(158,461	)			(118,996	)			(97,406	)			(97,129	)			(61,424	)
Other intangibles			(44,098	)			(27,156	)			(17,495	)			(18,153	)			(10,812	)
Average tangible common equity		$	379,189			$	349,837			$	336,070			$	334,909			$	288,445
ROATCE			13.48		%		2.05		%		2.31		%		2.38		%		4.89		%

Midland States Bancorp, Inc.

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Midland States Bancorp, Inc. Announces 2018 Second Quarter Results