Press Release

Highlights

• Net income of $12.8 million, or $0.51 diluted earnings per share
  
  
• Adjusted earnings of $16.1 million, or $0.64 diluted earnings per share, primarily reflects the exclusion of $3.3 million in integration and acquisition expenses and a $1.8 million loss on the repurchase of subordinated debt
  
  
• Total loans increased $72.6 million from the end of the prior quarter, or 6.7% annualized
  
  
• Total deposits increased $99.1 million from the end of the prior quarter, or 8.8% annualized
  
  
• Efficiency ratio improved to 59.5% from 60.6% in the prior quarter

EFFINGHAM, Ill., Jan. 23, 2020 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (Nasdaq: MSBI) (the “Company”) today reported net income of $12.8 million, or $0.51 diluted earnings per share, for the fourth quarter of 2019, which included $3.3 million in integration and acquisition expenses and a $1.8 million loss on the repurchase of subordinated debt.  This compares to net income of $12.7 million, or $0.51 diluted earnings per share, for the third quarter of 2019, which included $5.3 million in integration and acquisition expenses, and net income of $16.3 million, or $0.67 diluted earnings per share, for the fourth quarter of 2018.

Jeffrey G. Ludwig, President and Chief Executive Officer of the Company, said, “We completed 2019 with a strong quarter of business development highlighted by growth in both loans and deposits.  Our focus on developing new depository products for commercial customers is having a positive impact on our core deposit gathering, resulting in steady improvement in our deposit mix.  We believe we are well positioned to create additional value for shareholders in 2020.  Through a combination of modest balance sheet growth, realizing the full synergies from our acquisition of HomeStar Financial Group, driving additional efficiencies throughout our organization, and expanding our net interest margin through a reduction in our funding costs, we believe we can deliver solid earnings growth and an improvement in our return on assets and equity.”

Adjustment in Staffing Levels

In January 2020, the Company reduced its staffing by approximately 50 full-time employee positions, representing approximately 5% of the Company’s workforce.  The Company expects to record $0.7 - $0.8 million in one-time charges related to the staffing level adjustments in the first quarter of 2020.  The staffing level adjustments are expected to result in approximately $3.9 million in annualized cost savings, beginning in the second quarter of 2020. 

Approximately 30% of the staffing adjustments are within the Company’s retail branches, with the remaining adjustments primarily occurring within back office support and non-revenue generating positions.

Factors Affecting Comparability

The Company acquired HomeStar Financial Group, Inc. (“HomeStar”) in July 2019, with the core system conversion completed in October 2019. The financial position and results of operations of HomeStar prior to its acquisition date are not included in the Company’s financial results.

Adjusted Earnings

Financial results for the fourth quarter of 2019 included $3.3 million in integration and acquisition expenses, a $1.8 million loss on the repurchase of subordinated debt, and a $0.6 million gain on the sale of investment securities.  Excluding these amounts and certain other expenses and income, adjusted earnings were $16.1 million, or $0.64 diluted earnings per share, for the fourth quarter of 2019. 

Financial results for the third quarter of 2019 included $5.3 million in integration and acquisition expenses.  Excluding these amounts and certain other expenses and income, adjusted earnings were $16.4 million, or $0.66 diluted earnings per share, for the third quarter of 2019. 

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 Margin

Net interest margin for the fourth quarter of 2019 was 3.56%, compared to 3.70% for the third quarter of 2019.  The Company’s net interest margin benefits from accretion income on purchased loan portfolios, which contributed 23 and 20 basis points to net interest margin in the fourth quarter of 2019 and third quarter of 2019, respectively.  Excluding the impact of accretion income, net interest margin decreased 17 basis points from the third quarter of 2019, primarily due to the impact of new subordinated debt issued in September 2019 and a decline in the yield on earning assets.

Relative to the fourth quarter of 2018, net interest margin decreased from 3.85%.  Accretion income on purchased loan portfolios contributed 31 basis points to net interest margin in the fourth quarter of 2018.  Excluding the impact of accretion income, net interest margin decreased 21 basis points compared to the fourth quarter of 2018, primarily due to the impact of new subordinated debt issued in September 2019, a decline in the yield on earning assets and an increase in the costs of interest-bearing deposits. 

Net Interest Income

Net interest income for the fourth quarter of 2019 was $48.7 million, a decrease of 1.5% from $49.5 million for the third quarter of 2019.  Excluding accretion income, net interest income decreased $1.3 million from the prior quarter.  Accretion income associated with purchased loan portfolios totaled $3.6 million for the fourth quarter of 2019, compared with $3.1 million for the third quarter of 2019. 

Relative to the fourth quarter of 2018, net interest income increased $0.2 million, or 0.3%.  Accretion income for the fourth quarter of 2018 was $4.3 million.  Excluding the impact of accretion income, net interest income increased primarily due to the contribution of HomeStar.

Noninterest Income

Noninterest income for the fourth quarter of 2019 was $19.0 million, a decrease of 3.0% from $19.6 million for the third quarter of 2019.  The decrease was primarily attributable to declines in most major noninterest income items, partially offset by a $0.6 million gain on sale of investment securities.

Relative to the fourth quarter of 2018, noninterest income decreased 10.2% from $21.2 million.  The decrease was primarily attributable to lower commercial FHA, wealth management and residential mortgage banking revenue.

Wealth management revenue for the fourth quarter of 2019 was $5.4 million, a decrease of 10.4% from $6.0 million in the third quarter of 2019, primarily due to a decline in estate fees.  Compared to the fourth quarter of 2018, wealth management revenue decreased 4.8%.

Commercial FHA revenue for the fourth quarter of 2019 was $2.1 million, compared to $2.9 million in the third quarter of 2019.  Commercial FHA revenue in the fourth quarter of 2019 included a $1.6 million mortgage servicing rights (“MSR”) impairment, compared to a $1.1 million MSR impairment recorded in the third quarter of 2019.  The Company originated $84.9 million in rate lock commitments during the fourth quarter of 2019, compared to $112.8 million in the prior quarter.  Compared to the fourth quarter of 2018, commercial FHA revenue decreased $2.1 million.

Noninterest Expense

Noninterest expense for the fourth quarter of 2019 was $46.3 million, which included $3.3 million in integration and acquisition expenses, a $1.8 million loss on the repurchase of subordinated debt, and a $0.1 million loss on MSR held for sale, compared with $48.0 million for the third quarter of 2019, which included $5.3 million in integration and acquisition expenses and a $0.1 million gain on MSR held for sale.  Excluding integration and acquisition expenses, the loss on the repurchase of subordinated debt, and gain/loss on MSR held for sale, the $1.7 million decrease in noninterest expense primarily reflects additional cost savings realized after the core system conversion of HomeStar in October 2019.

Relative to the fourth quarter of 2018, noninterest expense increased 2.1% from $45.4 million, which included $0.6 million in integration and acquisition expenses.  Excluding integration and acquisition expenses, the loss on the repurchase of subordinated debt, and loss on MSR held for sale, noninterest expense decreased 8.3% from $44.8 million, primarily due to cost reduction initiatives implemented across the organization.

Loan Portfolio

Total loans outstanding were $4.40 billion at December 31, 2019, compared with $4.33 billion at September 30, 2019 and $4.14 billion at December 31, 2018.  The increase in total loans from September 30, 2019 was attributable to growth in the commercial loans and leases and consumer loan portfolios, partially offset by a decline in the commercial real estate loan portfolio.  Equipment finance balances increased $66.8 million from September 30, 2019, which are booked within the commercial loans and leases portfolio, reflecting management’s efforts to grow the equipment finance business.  The increase in total loans from December 31, 2018 was primarily attributable to the addition of HomeStar’s loan portfolio.

Deposits

Total deposits were $4.54 billion at December 31, 2019, compared with $4.45 billion at September 30, 2019, and $4.07 billion at December 31, 2018.  The increase in total deposits from September 30, 2019 was primarily attributable to growth in the Company’s lower-cost deposit categories, while the increase from December 31, 2018 was primarily attributable to the addition of HomeStar’s deposits. 

Asset Quality

Nonperforming loans totaled $42.1 million, or 0.96% of total loans, at December 31, 2019, compared with $45.2 million, or 1.04% of total loans, at September 30, 2019, and $42.9 million, or 1.04% of total loans, at December 31, 2018.  

Net charge-offs for the fourth quarter of 2019 were $2.2 million, or 0.20% of average loans on an annualized basis. 

The Company recorded a provision for loan losses of $5.3 million for the fourth quarter of 2019, which included a $1.4 million specific reserve established for an existing nonperforming loan.  The Company’s allowance for loan losses was 0.64% of total loans and 66.6% of nonperforming loans at December 31, 2019, compared with 0.58% of total loans and 55.3% of nonperforming loans at September 30, 2019.  Fair market value discounts recorded in connection with acquired loan portfolios represented 0.39% of total loans at December 31, 2019, compared with 0.51% of total loans at September 30, 2019.

Capital

At December 31, 2019, the Company exceeded all regulatory capital requirements under Basel III and was considered to be a ‘‘well-capitalized’’ financial institution, as summarized in the following table:

	December 31, 2019	Fully Phased-In Regulatory Guidelines Minimum (2)
Total capital to risk-weighted assets	14.72%	10.50%
Tier 1 capital to risk-weighted assets	10.52%	8.50%
Tier 1 leverage ratio	8.74%	4.00%
Common equity Tier 1 capital	9.20%	7.00%
Tangible common equity to tangible assets (1)	7.74%	NA

1. A non-GAAP financial measure. Refer to page 14 for a reconciliation to the comparable GAAP financial measure.
2. As of January 1, 2019, the capital conservation buffer was fully phased in at 2.5%.

Stock Repurchase Program

During the fourth quarter of 2019, the Company repurchased 85,146 shares of its common stock at a weighted average price of $25.69 under its stock repurchase program, which authorized the repurchase of up to $25 million of its common stock.  As of December 31, 2019, the Company had $21.0 million remaining under the current stock repurchase authorization.

Conference Call, Webcast and Slide Presentation

The Company will host a conference call and webcast at 7:30 a.m. Central Time on Friday, January 24, 2020, to discuss its financial results.  The call can be accessed via telephone at (877) 516-3531; conference ID: 6894396.  A recorded replay can be accessed through January 31, 2020, by dialing (855) 859-2056; conference ID: 6894396.

A slide presentation relating to the fourth quarter 2019 results will be accessible prior to the scheduled conference call.  The slide presentation and webcast of the conference call can be accessed on the Webcasts and Presentations page of the Company’s investor relations website at investors.midlandsb.com under the “News and Events” tab.

About Midland States Bancorp, Inc.

Midland States Bancorp, Inc. is a community-based financial holding company headquartered in Effingham, Illinois, and is the sole shareholder of Midland States Bank. As of December 31, 2019, the Company had total assets of approximately $6.08 billion, and its Wealth Management Group had assets under administration of approximately $3.41 billion. Midland provides a full range of commercial and consumer banking products and services, business equipment financing, merchant credit card services, trust and investment management, and insurance and financial planning services. In addition, multi-family and healthcare facility FHA financing is provided through Love Funding, Midland’s non-bank subsidiary. For additional information, visit https://www.midlandsb.com/ or follow Midland on LinkedIn at https://www.linkedin.com/company/midland-states-bank.

Non-GAAP Financial Measures

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

Forward-Looking Statements

Readers should note that in addition to the historical information contained herein, this press release includes "forward-looking statements" within the meanings of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including but not limited to statements about the Company’s plans, objectives, future performance, goals and future earnings levels.  These statements are subject to many risks and uncertainties, including changes in interest rates and other general economic, business and political conditions, including changes in the financial markets; changes in business plans as circumstances warrant; risks relating to acquisitions; and other risks detailed from time to time in filings made by the Company with the Securities and Exchange Commission.  Readers should note that the forward-looking statements included in this press release are not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking statements.  Forward-looking statements generally can be identified by the use of forward-looking terminology such as "will," "propose," "may," "plan," "seek," "expect," "intend," "estimate," "anticipate," "believe," "continue," or similar terminology.  Any forward-looking statements presented herein are made only as of the date of this press release, and the Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

CONTACTS:
Jeffrey G. Ludwig, President and CEO, at jludwig@midlandsb.com or (217) 342-7321
Eric T. Lemke, Chief Financial Officer, at elemke@midlandsb.com or (217) 342-7321
Douglas J. Tucker, SVP and Corporate Counsel, at dtucker@midlandsb.com or (217) 342-7321

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited)
		For the Quarter Ended
		December 31,				September 30,				June 30,				March 31,				December 31,
(dollars in thousands, except per share data)		2019				2019				2019				2019				2018
Earnings Summary
Net interest income		$	48,687			$	49,450			$	46,077			$	45,601			$	48,535
Provision for loan losses			5,305				4,361				4,076				3,243				3,467
Noninterest income			19,014				19,606				19,587				17,075				21,170
Noninterest expense			46,325				48,025				40,194				41,097				45,375
Income before income taxes			16,071				16,670				21,394				18,336				20,863
Income taxes			3,279				4,015				5,039				4,354				4,527
Net income			12,792				12,655				16,355				13,982				16,336
Preferred stock dividends, net			-				(22)				34				34				34
Net income available to common shareholders		$	12,792			$	12,677			$	16,321			$	13,948			$	16,302
Diluted earnings per common share		$	0.51			$	0.51			$	0.67			$	0.57			$	0.67
Weighted average shares outstanding - diluted			24,761,960				24,684,529				24,303,211				24,204,661				24,200,346
Return on average assets			0.83	%			0.84	%			1.17	%			1.01	%			1.14	%
Return on average shareholders' equity			7.71	%			7.71	%			10.43	%			9.23	%			10.81	%
Return on average tangible common equity (1)			11.24	%			11.19	%			15.34	%			13.79	%			16.40	%
Net interest margin			3.56	%			3.70	%			3.76	%			3.73	%			3.85	%
Efficiency ratio (1)			59.46	%			60.63	%			61.58	%			64.73	%			65.50	%
Adjusted Earnings Performance Summary
Adjusted earnings (1)		$	16,110			$	16,422			$	16,196			$	14,098			$	16,397
Adjusted diluted earnings per common share (1)		$	0.64			$	0.66			$	0.66			$	0.58			$	0.67
Adjusted return on average assets (1)			1.04	%			1.09	%			1.16	%			1.02	%			1.14	%
Adjusted return on average shareholders' equity (1)			9.71	%			10.01	%			10.33	%			9.31	%			10.85	%
Adjusted return on average tangible common equity (1)			14.15	%			14.52	%			15.19	%			13.90	%			16.46	%
(1) Non-GAAP financial measures. Refer to pages 13 - 15 for a reconciliation to the comparable GAAP financial measures.

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
		For the Quarter Ended
		December 31,				September 30,					June 30,					March 31,				December 31,
(in thousands, except per share data)		2019				2019					2019					2019				2018
Net interest income:
Interest income		$	64,444			$	65,006				$	60,636				$	59,432			$	61,592
Interest expense			15,757				15,556					14,559					13,831				13,057
Net interest income			48,687				49,450					46,077					45,601				48,535
Provision for loan losses			5,305				4,361					4,076					3,243				3,467
Net interest income after provision for loan losses			43,382				45,089					42,001					42,358				45,068
Noninterest income:
Wealth management revenue			5,377				5,998					5,504					4,953				5,651
Commercial FHA revenue			2,089				2,894					4,917					3,270				4,194
Residential mortgage banking revenue			763				720					611					834				1,041
Service charges on deposit accounts			2,860				3,008					2,639					2,520				2,976
Interchange revenue			3,053				3,249					3,010					2,680				2,941
Gain on sales of investment securities, net			635				25					14					-				469
Other income			4,237				3,712					2,892					2,818				3,898
Total noninterest income			19,014				19,606					19,587					17,075				21,170
Noninterest expense:
Salaries and employee benefits			23,650				25,083					21,134					22,039				23,020
Occupancy and equipment			4,637				4,793					4,500					4,832				4,914
Data processing			6,261				5,443					4,987					4,891				5,660
Professional			1,952				2,348					2,410					2,073				2,752
Amortization of intangible assets			1,804				1,803					1,673					1,810				1,852
Loss (gain) on mortgage servicing rights held for sale			95				(70	)				(515	)				-				-
Other expense			7,926				8,625					6,005					5,452				7,177
Total noninterest expense			46,325				48,025					40,194					41,097				45,375
Income before income taxes			16,071				16,670					21,394					18,336				20,863
Income taxes			3,279				4,015					5,039					4,354				4,527
Net income			12,792				12,655					16,355					13,982				16,336
Preferred stock dividends, net			-				(22	)				34					34				34
Net income available to common shareholders		$	12,792			$	12,677				$	16,321				$	13,948			$	16,302
Basic earnings per common share		$	0.52			$	0.51				$	0.67				$	0.58			$	0.68
Diluted earnings per common share		$	0.51			$	0.51				$	0.67				$	0.57			$	0.67

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
		As of
		December 31,					September 30,					June 30,					March 31,					December 31,
(in thousands)		2019					2019					2019					2019					2018
Assets
Cash and cash equivalents		$	394,505				$	409,346				$	245,415				$	276,480				$	213,700
Investment securities			655,054					668,630					613,026					656,152					660,785
Loans			4,401,410					4,328,835					4,073,527					4,092,106					4,137,551
Allowance for loan losses			(28,028	)				(24,917	)				(25,925	)				(23,091	)				(20,903	)
Total loans, net			4,373,382					4,303,918					4,047,602					4,069,015					4,116,648
Loans held for sale			16,431					88,322					22,143					16,851					30,401
Premises and equipment, net			91,055					93,896					94,824					94,514					94,840
Other real estate owned			6,745					4,890					3,797					2,020					3,483
Loan servicing rights, at lower of cost or fair value			53,824					54,124					54,191					52,957					53,447
Mortgage servicing rights held for sale			1,972					1,860					159					257					3,545
Goodwill			171,758					171,074					164,673					164,673					164,673
Other intangible assets, net			34,886					36,690					33,893					35,566					37,376
Cash surrender value of life insurance policies			142,423					141,510					140,593					139,686					138,783
Other assets			144,982					139,644					125,739					133,609					119,992
Total assets		$	6,087,017				$	6,113,904				$	5,546,055				$	5,641,780				$	5,637,673
Liabilities and Shareholders' Equity
Noninterest-bearing deposits		$	1,019,472				$	1,015,081				$	902,286				$	941,344				$	972,164
Interest-bearing deposits			3,524,782					3,430,090					3,108,921					3,094,944					3,102,006
Total deposits			4,544,254					4,445,171					4,011,207					4,036,288					4,074,170
Short-term borrowings			82,029					122,294					113,844					115,832					124,235
FHLB advances and other borrowings			493,311					559,932					582,387					669,009					640,631
Subordinated debt			176,653					192,689					94,215					94,174					94,134
Trust preferred debentures			48,288					48,165					48,041					47,918					47,794
Other liabilities			80,571					90,131					56,473					54,391					48,184
Total liabilities			5,425,106					5,458,382					4,906,167					5,017,612					5,029,148
Total shareholders’ equity			661,911					655,522					639,888					624,168					608,525
Total liabilities and shareholders’ equity		$	6,087,017				$	6,113,904				$	5,546,055				$	5,641,780				$	5,637,673

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
		As of
		December 31,				September 30,				June 30,				March 31,				December 31,
(in thousands)		2019				2019				2019				2019				2018
Loan Portfolio
Commercial loans and leases		$	1,387,766			$	1,292,511			$	1,149,370			$	1,122,621			$	1,074,935
Commercial real estate			1,526,504				1,622,363				1,524,369				1,560,427				1,639,155
Construction and land development			208,733				215,978				250,414				239,376				232,229
Residential real estate			568,291				587,984				552,406				569,051				578,048
Consumer			710,116				609,999				596,968				600,631				613,184
Total loans		$	4,401,410			$	4,328,835			$	4,073,527			$	4,092,106			$	4,137,551
Deposit Portfolio
Noninterest-bearing demand		$	1,019,472			$	1,015,081			$	902,286			$	941,344			$	972,164
Interest-bearing:
Checking			1,342,788				1,222,599				1,009,023				968,844				1,002,275
Money market			787,662				753,869				732,573				802,036				862,171
Savings			522,456				526,938				442,017				457,176				442,132
Time			822,160				833,038				785,337				685,700				633,787
Brokered time			49,716				93,646				139,971				181,188				161,641
Total deposits		$	4,544,254			$	4,445,171			$	4,011,207			$	4,036,288			$	4,074,170

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
		For the Quarter Ended
		December 31,				September 30,				June 30,				March 31,				December 31,
(dollars in thousands)		2019				2019				2019				2019				2018
Average Balance Sheets
Cash and cash equivalents		$	406,526			$	259,427			$	162,110			$	152,078			$	155,280
Investment securities			631,294				666,157				636,946				654,764				676,483
Loans			4,359,144				4,352,635				4,086,720				4,128,893				4,139,831
Loans held for sale			36,974				31,664				40,177				30,793				51,981
Nonmarketable equity securities			43,745				44,010				44,217				44,279				42,708
Total interest-earning assets			5,477,683				5,353,893				4,970,170				5,010,807				5,066,283
Non-earning assets			649,169				636,028				618,023				618,996				624,378
Total assets		$	6,126,852			$	5,989,921			$	5,588,193			$	5,629,803			$	5,690,661
Interest-bearing deposits		$	3,490,165			$	3,429,063			$	3,107,660			$	3,093,979			$	3,123,134
Short-term borrowings			104,598				124,183				120,859				135,337				143,869
FHLB advances and other borrowings			531,419				591,516				607,288				673,250				645,642
Subordinated debt			182,149				106,090				94,196				94,156				94,115
Trust preferred debentures			48,229				48,105				47,982				47,848				47,737
Total interest-bearing liabilities			4,356,560				4,298,957				3,977,985				4,044,570				4,054,497
Noninterest-bearing deposits			1,028,670				967,192				921,115				919,185				989,954
Other noninterest-bearing liabilities			83,125				72,610				60,363				51,838				46,487
Shareholders' equity			658,497				651,162				628,730				614,210				599,723
Total liabilities and shareholders' equity		$	6,126,852			$	5,989,921			$	5,588,193			$	5,629,803			$	5,690,661
Yields
Earning Assets
Cash and cash equivalents			1.62	%			2.14	%			2.43	%			2.42	%			2.24	%
Investment securities			3.10	%			3.00	%			3.11	%			3.07	%			3.04	%
Loans			5.22	%			5.31	%			5.32	%			5.22	%			5.28	%
Loans held for sale			4.12	%			3.02	%			4.50	%			3.94	%			3.92	%
Nonmarketable equity securities			5.31	%			5.33	%			5.42	%			5.69	%			5.20	%
Total interest-earning assets			4.70	%			4.85	%			4.94	%			4.85	%			4.87	%
Interest-Bearing Liabilities
Interest-bearing deposits			1.03	%			1.08	%			1.09	%			0.97	%			0.86	%
Short-term borrowings			0.67	%			0.68	%			0.70	%			0.71	%			0.67	%
FHLB advances and other borrowings			2.26	%			2.36	%			2.34	%			2.32	%			2.26	%
Subordinated debt			5.94	%			6.30	%			6.43	%			6.43	%			6.43	%
Trust preferred debentures			6.41	%			6.83	%			7.17	%			7.38	%			6.93	%
Total interest-bearing liabilities			1.43	%			1.44	%			1.47	%			1.39	%			1.28	%
Cost of Deposits			0.80	%			0.84	%			0.84	%			0.74	%			0.65	%
Net Interest Margin			3.56	%			3.70	%			3.76	%			3.73	%			3.85	%

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
		As of and for the Quarter Ended
		December 31,				September 30,				June 30,				March 31,				December 31,
(dollars in thousands, except per share data)		2019				2019				2019				2019				2018
Asset Quality
Loans 30-89 days past due		$	29,876			$	23,118			$	21,554			$	23,999			$	25,213
Nonperforming loans			42,082				45,168				50,676				49,262				42,899
Nonperforming assets			50,027				50,058				54,473				51,282				45,899
Net charge-offs			2,194				5,369				1,242				1,055				2,195
Loans 30-89 days past due to total loans			0.68	%			0.53	%			0.53	%			0.59	%			0.61	%
Nonperforming loans to total loans			0.96	%			1.04	%			1.24	%			1.20	%			1.04	%
Nonperforming assets to total assets			0.82	%			0.82	%			0.98	%			0.91	%			0.81	%
Allowance for loan losses to total loans			0.64	%			0.58	%			0.64	%			0.56	%			0.51	%
Allowance for loan losses to nonperforming loans			66.60	%			55.29	%			51.16	%			46.87	%			48.73	%
Net charge-offs to average loans			0.20	%			0.49	%			0.12	%			0.10	%			0.21	%
Wealth Management
Trust assets under administration		$	3,409,959			$	3,281,260			$	3,125,869			$	3,097,091			$	2,945,084
Market Data
Book value per share at period end		$	27.10			$	26.93			$	26.66			$	26.08			$	25.50
Tangible book value per share at period end (1)		$	18.64			$	18.40			$	18.36			$	17.68			$	17.00
Market price at period end		$	28.96			$	26.05			$	26.72			$	24.06			$	22.34
Shares outstanding at period end			24,420,345				24,338,748				23,897,038				23,827,438				23,751,798
Capital
Total capital to risk-weighted assets			14.72	%			14.82	%			13.49	%			13.25	%			12.79	%
Tier 1 capital to risk-weighted assets			10.52	%			10.35	%			10.85	%			10.65	%			10.25	%
Tier 1 leverage ratio			8.74	%			8.77	%			9.27	%			8.92	%			8.53	%
Tier 1 common capital to risk-weighted assets			9.20	%			9.02	%			9.38	%			9.16	%			8.76	%
Tangible common equity to tangible assets (1)			7.74	%			7.58	%			8.20	%			7.74	%			7.43	%
(1) Non-GAAP financial measures. Refer to pages 13 - 15 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
		December 31,					September 30,					June 30,					March 31,				December 31,
(dollars in thousands, except per share data)		2019					2019					2019					2019				2018
Income before income taxes - GAAP		$	16,071				$	16,670				$	21,394				$	18,336			$	20,863
Adjustments to noninterest income:
Gain on sales of investment securities, net			635					25					14					-				469
Other			(6	)				-					(23	)				-				(1	)
Total adjustments to noninterest income			629					25					(9	)				-				468
Adjustments to noninterest expense:
Loss (gain) on mortgage servicing rights held for sale			95					(70	)				(515	)				-				-
Loss on repurchase of subordinated debt			1,778					-					-					-				-
Integration and acquisition expenses			3,332					5,292					286					160				553
Total adjustments to noninterest expense			5,205					5,222					(229	)				160				553
Adjusted earnings pre tax			20,647					21,867					21,174					18,496				20,948
Adjusted earnings tax			4,537					5,445					4,978					4,398				4,551
Adjusted earnings - non-GAAP			16,110					16,422					16,196					14,098				16,397
Preferred stock dividends, net			-					(22	)				34					34				34
Adjusted earnings available to common shareholders - non-GAAP		$	16,110				$	16,444				$	16,162				$	14,064			$	16,363
Adjusted diluted earnings per common share		$	0.64				$	0.66				$	0.66				$	0.58			$	0.67
Adjusted return on average assets			1.04		%			1.09		%			1.16		%			1.02	%			1.14		%
Adjusted return on average shareholders' equity			9.71		%			10.01		%			10.33		%			9.31	%			10.85		%
Adjusted return on average tangible common equity			14.15		%			14.52		%			15.19		%			13.90	%			16.46		%

MIDLAND STATES BANCORP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (continued)
Efficiency Ratio Reconciliation
		For the Quarter Ended
		December 31,					September 30,					June 30,					March 31,					December 31,
(dollars in thousands)		2019					2019					2019					2019					2018
Noninterest expense - GAAP		$	46,325				$	48,025				$	40,194				$	41,097				$	45,375
(Loss) gain on mortgage servicing rights held for sale			(95	)				70					515					-					-
Loss on repurchase of subordinated debt			(1,778	)				-					-					-					-
Integration and acquisition expenses			(3,332	)				(5,292	)				(286	)				(160	)				(553	)
Adjusted noninterest expense		$	41,120				$	42,803				$	40,423				$	40,937				$	44,822
Net interest income - GAAP		$	48,687				$	49,450				$	46,077				$	45,601				$	48,535
Effect of tax-exempt income			474					502					526					543					574
Adjusted net interest income			49,161					49,952					46,603					46,144					49,109
Noninterest income - GAAP		$	19,014				$	19,606				$	19,587				$	17,075				$	21,170
Loan servicing rights impairment (recapture)			1,613					1,060					(559	)				25					(1,380	)
Gain on sales of investment securities, net			(635	)				(25	)				(14	)				-					(469	)
Other			6					-					23					-					1
Adjusted noninterest income			19,998					20,641					19,037					17,100					19,322
Adjusted total revenue		$	69,159				$	70,593				$	65,640				$	63,244				$	68,431
Efficiency ratio			59.46		%			60.63		%			61.58		%			64.73		%			65.50		%

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
		December 31,					September 30,					June 30,					March 31,					December 31,
(dollars in thousands, except per share data)		2019					2019					2019					2019					2018
Shareholders' Equity to Tangible Common Equity
Total shareholders' equity—GAAP		$	661,911				$	655,522				$	639,888				$	624,168				$	608,525
Adjustments:
Preferred stock			-					-					(2,684	)				(2,733	)				(2,781	)
Goodwill			(171,758	)				(171,074	)				(164,673	)				(164,673	)				(164,673	)
Other intangibles, net			(34,886	)				(36,690	)				(33,893	)				(35,566	)				(37,376	)
Tangible common equity		$	455,267				$	447,758				$	438,638				$	421,196				$	403,695
Total Assets to Tangible Assets:
Total assets—GAAP		$	6,087,017				$	6,113,904				$	5,546,055				$	5,641,780				$	5,637,673
Adjustments:
Goodwill			(171,758	)				(171,074	)				(164,673	)				(164,673	)				(164,673	)
Other intangibles, net			(34,886	)				(36,690	)				(33,893	)				(35,566	)				(37,376	)
Tangible assets		$	5,880,373				$	5,906,140				$	5,347,489				$	5,441,541				$	5,435,624
Common Shares Outstanding			24,420,345					24,338,748					23,897,038					23,827,438					23,751,798
Tangible Common Equity to Tangible Assets			7.74		%			7.58		%			8.20		%			7.74		%			7.43		%
Tangible Book Value Per Share		$	18.64				$	18.40				$	18.36				$	17.68				$	17.00
Return on Average Tangible Common Equity (ROATCE)
		For the Quarter Ended
		December 31,					September 30,					June 30,					March 31,					December 31,
(dollars in thousands)		2019					2019					2019					2019					2018
Net income available to common shareholders		$	12,792				$	12,677				$	16,321				$	13,948				$	16,302
Average total shareholders' equity—GAAP		$	658,497				$	651,162				$	628,730				$	614,210				$	599,723
Adjustments:
Preferred stock			-					(814	)				(2,708	)				(2,759	)				(2,812	)
Goodwill			(171,082	)				(166,389	)				(164,673	)				(164,673	)				(164,051	)
Other intangibles, net			(35,745	)				(34,519	)				(34,689	)				(36,438	)				(38,394	)
Average tangible common equity		$	451,670				$	449,440				$	426,660				$	410,340				$	394,466
ROATCE			11.24		%			11.19		%			15.34		%			13.79		%			16.40		%

Source: Midland States Bancorp, Inc.