Midland States Bancorp, Inc. Announces 2019 Third Quarter Results

Net income of $12.7 million, or $0.51 diluted earnings per share, which included $5.3 million, or $0.15 per diluted share, of integration and acquisition expenses
Acquisition of HomeStar Financial Group, Inc. completed on July 17, 2019
Total assets surpassed $6 billion at September 30, 2019
Efficiency ratio improved to 60.6% from 61.6% in prior quarter

EFFINGHAM, Ill., Oct. 24, 2019 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (Nasdaq: MSBI) (the “Company”) today reported net income of $12.7 million, or $0.51 diluted earnings per share, for the third quarter of 2019, which included $5.3 million, or $0.15 per diluted share, in integration and acquisition expenses. This compares to net income of $16.4 million, or $0.67 diluted earnings per share, for the second quarter of 2019, which included $0.3 million in integration and acquisition expenses, and net income of $8.5 million, or $0.35 diluted earnings per share, for the third quarter of 2018, which included $9.6 million in integration and acquisition expenses.

Jeffrey G. Ludwig, President and Chief Executive Officer of the Company, said, “Our third quarter results reflect the initial benefits of our acquisition of HomeStar Financial Group, Inc., which has provided us a leading position in the Kankakee, Illinois market and improved our deposit base. We continued to execute well on our strategic priorities in the quarter, which resulted in strong inflows of core deposits, further improvement in our operational efficiencies, and maintaining a relatively stable net interest margin, excluding accretion income. During the third quarter, we also issued $100 million of subordinated notes that will put us in a position to reduce our cost of borrowings over the next year and authorized a $25 million stock repurchase program. We believe these capital management actions, along with our history of increasing our quarterly dividend by at least 10% each year, will contribute in our efforts to efficiently manage our capital and deliver a strong total return for our shareholders.”

Factors Affecting Comparability

The Company acquired HomeStar Financial Group, Inc. (“HomeStar”) in July 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 third quarter of 2019 included $5.3 million in integration and acquisition expenses. Excluding these and other expenses and certain income, adjusted earnings were $16.4 million, or $0.66 diluted earnings per share, for the third quarter of 2019.

Financial results for the third quarter of 2018 included $9.6 million in integration and acquisition expenses. Excluding these and other expenses and certain income, adjusted earnings were $15.6 million, or $0.64 diluted earnings per share, for the third quarter of 2018.

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 third quarter of 2019 was $49.5 million, an increase of 7.3% from $46.1 million for the second quarter of 2019. Excluding accretion income, net interest income increased $3.7 million from the prior quarter. Accretion income associated with purchased loan portfolios totaled $3.1 million for the third quarter of 2019, compared with $3.4 million for the second quarter of 2019. The increase in net interest income excluding accretion income was primarily attributable to the contribution from HomeStar.

Relative to the third quarter of 2018, net interest income increased $4.4 million, or 9.7%. Accretion income for the third quarter of 2018 was $1.7 million. Excluding the impact of accretion income, net interest income increased primarily due to the contribution of HomeStar.

Net Interest Margin

Net interest margin for the third quarter of 2019 was 3.70%, compared to 3.76% for the second quarter of 2019. The Company’s net interest margin benefits from accretion income on purchased loan portfolios, which contributed 20 and 25 basis points to net interest margin in the third quarter of 2019 and second quarter of 2019, respectively. Excluding the impact of accretion income, net interest margin decreased one basis point from the second quarter of 2019.

Relative to the third quarter of 2018, net interest margin increased from 3.59%. Accretion income on purchased loan portfolios contributed 10 basis points to net interest margin in the third quarter of 2018. Excluding the impact of accretion income, net interest margin increased one basis point compared to the third quarter of 2018.

Noninterest Income

Noninterest income for the third quarter of 2019 was $19.6 million, unchanged from $19.6 million for the second quarter of 2019.

Relative to the third quarter of 2018, noninterest income increased 7.3% from $18.3 million. The increase was attributable to higher wealth management revenue, interchange revenue and other income, partially offset by a decline in commercial FHA and residential mortgage banking revenue.

Wealth management revenue for the third quarter of 2019 was $6.0 million, an increase of 9.0% from $5.5 million in the second quarter of 2019, primarily due to an increase in estate fees. Compared to the third quarter of 2018, wealth management revenue increased 9.7%.

Commercial FHA revenue for the third quarter of 2019 was $2.9 million, compared to $4.9 million in the second quarter of 2019. Commercial FHA revenue in the third quarter of 2019 included a $1.1 million mortgage servicing rights (“MSR”) impairment, while the second quarter of 2019 included a $0.6 million recapture of MSR impairment. The Company originated $112.8 million in rate lock commitments during the third quarter of 2019, compared to $42.2 million in the prior quarter. Compared to the third quarter of 2018, commercial FHA revenue decreased $0.2 million.

Noninterest Expense

Noninterest expense for the third quarter of 2019 was $48.0 million, which included $5.3 million in integration and acquisition expenses and a $0.1 million gain on MSR held for sale, compared with $40.2 million for the second quarter of 2019, which included $0.3 million in integration and acquisition expenses and a $0.5 million gain on MSR held for sale. Excluding integration and acquisition expenses and gain on MSR held for sale, the increase in noninterest expense primarily reflects the addition of HomeStar’s operations.

Relative to the third quarter of 2018, noninterest expense decreased 4.6% from $50.3 million, which included $9.6 million in integration and acquisition expenses and a $0.3 million loss on MSR held for sale. Excluding these items, noninterest expense increased 5.7% from $40.5 million, primarily due to the addition of HomeStar’s operations.

Loan Portfolio

Total loans outstanding were $4.33 billion at September 30, 2019, compared with $4.07 billion at June 30, 2019 and $4.16 billion at September 30, 2018. The increase in total loans from June 30, 2019 was primarily due to the addition of HomeStar’s loan portfolio. Excluding the impact of HomeStar’s loan portfolio, total loans increased $44.1 million, or 1.1%, from June 30, 2019, primarily due to growth in the commercial loan portfolio. Equipment finance balances increased $57.1 million from June 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 September 30, 2018 was primarily attributable to the addition of HomeStar’s loan portfolio.

Deposits

Total deposits were $4.45 billion at September 30, 2019, compared with $4.01 billion at June 30, 2019, and $4.14 billion at September 30, 2018. The increases in total deposits from June 30, 2019 and September 30, 2018 were primarily attributable to the addition of HomeStar’s deposits. Excluding the impact of HomeStar’s deposits, total deposits increased $112.2 million, or 2.8%, from June 30, 2019.

Asset Quality

Nonperforming loans totaled $45.2 million, or 1.04% of total loans, at September 30, 2019, compared with $50.7 million, or 1.24% of total loans, at June 30, 2019, and $38.6 million, or 0.93% of total loans, at September 30, 2018.

Net charge-offs for the third quarter of 2019 were $5.4 million, or 0.49% of average loans on an annualized basis.

The Company recorded a provision for loan losses of $4.4 million for the third quarter of 2019, which included an increase of $2.3 million to the specific reserve established for an existing nonperforming loan. The Company’s allowance for loan losses was 0.58% of total loans and 55.3% of nonperforming loans at September 30, 2019, compared with 0.64% of total loans and 51.2% of nonperforming loans at June 30, 2019. Fair market value discounts recorded in connection with acquired loan portfolios represented 0.51% of total loans at September 30, 2019, compared with 0.39% of total loans at June 30, 2019.

Capital

At September 30, 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:

	September 30, 2019	Well Capitalized Regulatory Requirements
Total capital to risk-weighted assets	14.82%	10.00%
Tier 1 capital to risk-weighted assets	10.35%	8.00%
Tier 1 leverage ratio	8.77%	5.00%
Common equity Tier 1 capital	9.02%	6.50%
Tangible common equity to tangible assets ⁽¹⁾	7.58%	NA

(1) A non-GAAP financial measure. Refer to page 14 for a reconciliation to the comparable GAAP financial measure.

Stock Repurchase Program

During the third quarter of 2019, the Company repurchased 71,603 shares of its common stock at a weighted average price of $25.58 under its stock repurchase program, which authorized the repurchase of up to $25 million of its common stock. As of September 30, 2019, the Company had $23.2 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, October 25, 2019 to discuss its financial results. The call can be accessed via telephone at (877) 516-3531; conference ID: 3089402. A recorded replay can be accessed through November 2, 2019 by dialing (855) 859-2056; conference ID: 3089402.

A slide presentation relating to the third 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 September 30, 2019, the Company had total assets of approximately $6.11 billion and its Wealth Management Group had assets under administration of approximately $3.28 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" or "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
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
	September 30,			June 30,			March 31,			December 31,			September 30,
(dollars in thousands, except per share data)	2019			2019			2019			2018			2018
Earnings Summary
Net interest income	$	49,450		$	46,077		$	45,601		$	48,535		$	45,081
Provision for loan losses		4,361			4,076			3,243			3,467			2,103
Noninterest income		19,606			19,587			17,075			21,170			18,272
Noninterest expense		48,025			40,194			41,097			45,375			50,317
Income before income taxes		16,670			21,394			18,336			20,863			10,933
Income taxes		4,015			5,039			4,354			4,527			2,436
Net income		12,655			16,355			13,982			16,336			8,497
Preferred stock dividends, net		(22)			34			34			34			35
Net income available to common shareholders	$	12,677		$	16,321		$	13,948		$	16,302		$	8,462

Diluted earnings per common share	$	0.51		$	0.67		$	0.57		$	0.67		$	0.35
Weighted average shares outstanding - diluted		24,684,529			24,303,211			24,204,661			24,200,346			24,325,743
Return on average assets		0.84	%		1.17	%		1.01	%		1.14	%		0.59	%
Return on average shareholders' equity		7.71	%		10.43	%		9.23	%		10.81	%		5.68	%
Return on average tangible common equity ⁽¹⁾		11.19	%		15.34	%		13.79	%		16.40	%		8.69	%
Net interest margin		3.70	%		3.76	%		3.73	%		3.85	%		3.59	%
Efficiency ratio ⁽¹⁾		60.63	%		61.58	%		64.73	%		65.50	%		63.02	%

Adjusted Earnings Performance Summary
Adjusted earnings ⁽¹⁾	$	16,422		$	16,196		$	14,098		$	16,397		$	15,632
Adjusted diluted earnings per common share ⁽¹⁾	$	0.66		$	0.66		$	0.58		$	0.67		$	0.64
Adjusted return on average assets ⁽¹⁾		1.09	%		1.16	%		1.02	%		1.14	%		1.09	%
Adjusted return on average shareholders' equity ⁽¹⁾		10.01	%		10.33	%		9.31	%		10.85	%		10.45	%
Adjusted return on average tangible common equity ⁽¹⁾		14.52	%		15.19	%		13.90	%		16.46	%		16.02	%

(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
	September 30,			June 30,			March 31,		December 31,		September 30,
(in thousands, except per share data)	2019			2019			2019		2018		2018
Net interest income:
Total interest income	$	65,006		$	60,636		$	59,432	$	61,592	$	56,987
Total interest expense		15,556			14,559			13,831		13,057		11,906
Net interest income		49,450			46,077			45,601		48,535		45,081
Provision for loan losses		4,361			4,076			3,243		3,467		2,103
Net interest income after provision for loan losses		45,089			42,001			42,358		45,068		42,978
Noninterest income:
Wealth management revenue		5,998			5,504			4,953		5,651		5,467
Commercial FHA revenue		2,894			4,917			3,270		4,194		3,130
Residential mortgage banking revenue		720			611			834		1,041		1,154
Service charges on deposit accounts		3,008			2,639			2,520		2,976		2,804
Interchange revenue		3,249			3,010			2,680		2,941		2,759
Gain on sales of investment securities, net		25			14			-		469		-
Other income		3,712			2,892			2,818		3,898		2,958
Total noninterest income		19,606			19,587			17,075		21,170		18,272
Noninterest expense:
Salaries and employee benefits		25,083			21,134			22,039		23,020		22,528
Occupancy and equipment		4,793			4,500			4,832		4,914		5,040
Data processing		5,443			4,987			4,891		5,660		10,817
Professional		2,348			2,410			2,073		2,752		3,087
Amortization of intangible assets		1,803			1,673			1,810		1,852		1,853
(Gain) loss on mortgage servicing rights held for sale		(70	)		(515	)		-		-		270
Other expense		8,625			6,005			5,452		7,177		6,722
Total noninterest expense		48,025			40,194			41,097		45,375		50,317
Income before income taxes		16,670			21,394			18,336		20,863		10,933
Income taxes		4,015			5,039			4,354		4,527		2,436
Net income		12,655			16,355			13,982		16,336		8,497
Preferred stock dividends, net		(22	)		34			34		34		35
Net income available to common shareholders	$	12,677		$	16,321		$	13,948	$	16,302	$	8,462

Basic earnings per common share	$	0.51		$	0.67		$	0.58	$	0.68	$	0.35
Diluted earnings per common share	$	0.51		$	0.67		$	0.57	$	0.67	$	0.35



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

	As of
	September 30,			June 30,			March 31,			December 31,			September 30,
(in thousands)	2019			2019			2019			2018			2018
Assets
Cash and cash equivalents	$	409,346		$	245,415		$	276,480		$	213,700		$	242,433
Investment securities		668,630			613,026			656,152			660,785			685,753
Loans		4,328,835			4,073,527			4,092,106			4,137,551			4,156,282
Allowance for loan losses		(24,917	)		(25,925	)		(23,091	)		(20,903	)		(19,631	)
Total loans, net		4,303,918			4,047,602			4,069,015			4,116,648			4,136,651
Loans held for sale, at fair value		88,322			22,143			16,851			30,401			35,246
Premises and equipment, net		93,896			94,824			94,514			94,840			95,062
Other real estate owned		4,890			3,797			2,020			3,483			3,684
Loan servicing rights, at lower of cost or fair value		54,124			54,191			52,957			53,447			51,626
Mortgage servicing rights held for sale		1,860			159			257			3,545			4,419
Intangible assets		36,690			33,893			35,566			37,376			39,228
Goodwill		171,074			164,673			164,673			164,673			164,044
Cash surrender value of life insurance policies		141,510			140,593			139,686			138,783			138,600
Other assets		139,644			125,739			133,609			119,992			127,866
Total assets	$	6,113,904		$	5,546,055		$	5,641,780		$	5,637,673		$	5,724,612

Liabilities and Shareholders' Equity
Noninterest-bearing deposits	$	1,015,081		$	902,286		$	941,344		$	972,164		$	991,311
Interest-bearing deposits		3,430,090			3,108,921			3,094,944			3,102,006			3,151,895
Total deposits		4,445,171			4,011,207			4,036,288			4,074,170			4,143,206
Short-term borrowings		122,294			113,844			115,832			124,235			145,450
FHLB advances and other borrowings		559,932			582,387			669,009			640,631			652,253
Subordinated debt		192,689			94,215			94,174			94,134			94,093
Trust preferred debentures		48,165			48,041			47,918			47,794			47,676
Other liabilities		90,131			56,473			54,391			48,184			47,788
Total liabilities		5,458,382			4,906,167			5,017,612			5,029,148			5,130,466
Total shareholders’ equity		655,522			639,888			624,168			608,525			594,146
Total liabilities and shareholders’ equity	$	6,113,904		$	5,546,055		$	5,641,780		$	5,637,673		$	5,724,612



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

	As of
	September 30,		June 30,		March 31,		December 31,		September 30,
(in thousands)	2019		2019		2019		2018		2018
Loan Portfolio
Commercial loans and leases	$	1,292,511	$	1,149,370	$	1,122,621	$	1,074,935	$	1,034,546
Commercial real estate loans		1,622,363		1,524,369		1,560,427		1,639,155		1,711,926
Construction and land development loans		215,978		250,414		239,376		232,229		239,480
Residential real estate loans		587,984		552,406		569,051		578,048		586,134
Consumer loans		609,999		596,968		600,631		613,184		584,196
Total loans	$	4,328,835	$	4,073,527	$	4,092,106	$	4,137,551	$	4,156,282

Deposit Portfolio
Noninterest-bearing demand deposits	$	1,015,081	$	902,286	$	941,344	$	972,164	$	991,311
Interest-bearing:
Checking accounts		1,222,599		1,009,023		968,844		1,002,275		1,047,914
Money market accounts		753,869		732,573		802,036		862,171		836,151
Savings accounts		526,938		442,017		457,176		442,132		445,640
Time deposits		833,038		785,337		685,700		633,787		633,654
Brokered time deposits		93,646		139,971		181,188		161,641		188,536
Total deposits	$	4,445,171	$	4,011,207	$	4,036,288	$	4,074,170	$	4,143,206



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

	For the Quarter Ended
	September 30,			June 30,			March 31,			December 31,			September 30,
(dollars in thousands)	2019			2019			2019			2018			2018
Average Balance Sheets
Cash and cash equivalents	$	259,427		$	162,110		$	152,078		$	155,280		$	154,526
Investment securities		666,157			636,946			654,764			676,483			700,018
Loans		4,352,635			4,086,720			4,128,893			4,139,831			4,106,367
Loans held for sale		31,664			40,177			30,793			51,981			48,715
Nonmarketable equity securities		44,010			44,217			44,279			42,708			42,770
Total interest-earning assets		5,353,893			4,970,170			5,010,807			5,066,283			5,052,396
Non-earning assets		636,028			618,023			618,996			624,378			639,323
Total assets	$	5,989,921		$	5,588,193		$	5,629,803		$	5,690,661		$	5,691,719

Interest-bearing deposits	$	3,429,063		$	3,107,660		$	3,093,979		$	3,123,134		$	3,172,422
Short-term borrowings		124,183			120,859			135,337			143,869			139,215
FHLB advances and other borrowings		591,516			607,288			673,250			645,642			608,153
Subordinated debt		106,090			94,196			94,156			94,115			94,075
Trust preferred debentures		48,105			47,982			47,848			47,737			47,601
Total interest-bearing liabilities		4,298,957			3,977,985			4,044,570			4,054,497			4,061,466
Noninterest-bearing deposits		967,192			921,115			919,185			989,954			989,142
Other noninterest-bearing liabilities		72,610			60,363			51,838			46,487			47,654
Shareholders' equity		651,162			628,730			614,210			599,723			593,457
Total liabilities and shareholders' equity	$	5,989,921		$	5,588,193		$	5,629,803		$	5,690,661		$	5,691,719

Yields
Cash and cash equivalents		2.14	%		2.43	%		2.42	%		2.24	%		1.96	%
Investment securities		3.00	%		3.11	%		3.07	%		3.04	%		3.01	%
Loans		5.31	%		5.32	%		5.22	%		5.28	%		4.88	%
Loans held for sale		3.02	%		4.50	%		3.94	%		3.92	%		4.17	%
Nonmarketable equity securities		5.33	%		5.42	%		5.69	%		5.20	%		5.01	%
Total interest-earning assets		4.85	%		4.94	%		4.85	%		4.87	%		4.52	%
Interest-bearing deposits		1.08	%		1.09	%		0.97	%		0.86	%		0.77	%
Short-term borrowings		0.68	%		0.70	%		0.71	%		0.67	%		0.61	%
FHLB advances and other borrowings		2.36	%		2.34	%		2.32	%		2.26	%		2.09	%
Subordinated debt		6.30	%		6.43	%		6.43	%		6.43	%		6.44	%
Trust preferred debentures		6.83	%		7.17	%		7.38	%		6.93	%		6.81	%
Total interest-bearing liabilities		1.44	%		1.47	%		1.39	%		1.28	%		1.16	%
Net interest margin		3.70	%		3.76	%		3.73	%		3.85	%		3.59	%



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

	As of and for the Quarter Ended
	September 30,			June 30,			March 31,			December 31,			September 30,
(dollars in thousands, except per share data)	2019			2019			2019			2018			2018
Asset Quality
Loans 30-89 days past due	$	23,118		$	21,554		$	23,999		$	25,213		$	22,678
Nonperforming loans		45,168			50,676			49,262			42,899			38,561
Nonperforming assets		50,058			54,473			51,282			45,899			41,638
Net charge-offs		5,369			1,242			1,055			2,195			718
Loans 30-89 days past due to total loans		0.53	%		0.53	%		0.59	%		0.61	%		0.55	%
Nonperforming loans to total loans		1.04	%		1.24	%		1.20	%		1.04	%		0.93	%
Nonperforming assets to total assets		0.82	%		0.98	%		0.91	%		0.81	%		0.73	%
Allowance for loan losses to total loans		0.58	%		0.64	%		0.56	%		0.51	%		0.47	%
Allowance for loan losses to nonperforming loans		55.29	%		51.16	%		46.87	%		48.73	%		50.91	%
Net charge-offs to average loans		0.49	%		0.12	%		0.10	%		0.21	%		0.07	%

Wealth Management
Trust assets under administration	$	3,281,260		$	3,125,869		$	3,097,091		$	2,945,084		$	3,218,013

Market Data
Book value per share at period end	$	26.93		$	26.66		$	26.08		$	25.50		$	24.96
Tangible book value per share at period end ⁽¹⁾	$	18.40		$	18.36		$	17.68		$	17.00		$	16.38
Market price at period end	$	26.05		$	26.72		$	24.06		$	22.34		$	32.10
Shares outstanding at period end		24,338,748			23,897,038			23,827,438			23,751,798			23,694,637

Capital
Total capital to risk-weighted assets		14.82	%		13.49	%		13.25	%		12.79	%		12.35	%
Tier 1 capital to risk-weighted assets		10.35	%		10.85	%		10.65	%		10.25	%		9.85	%
Tier 1 leverage ratio		8.77	%		9.27	%		8.92	%		8.53	%		8.24	%
Tier 1 common capital to risk-weighted assets		9.02	%		9.38	%		9.16	%		8.76	%		8.37	%
Tangible common equity to tangible assets ⁽¹⁾		7.58	%		8.20	%		7.74	%		7.43	%		7.03	%

(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
	September 30,				June 30,				March 31,			December 31,				September 30,
(dollars in thousands, except per share data)	2019				2019				2019			2018				2018
Income before income taxes - GAAP	$	16,670			$	21,394			$	18,336		$	20,863			$	10,933
Adjustments to noninterest income:
Gain on sales of investment securities, net		25				14				-			469				-
Other		-				(23	)			-			(1	)			(12	)
Total adjustments to noninterest income		25				(9	)			-			468				(12	)
Adjustments to noninterest expense:
(Gain) loss on mortgage servicing rights held for sale		(70	)			(515	)			-			-				270
Integration and acquisition expenses		5,292				286				160			553				9,559
Total adjustments to noninterest expense		5,222				(229	)			160			553				9,829
Adjusted earnings pre tax		21,867				21,174				18,496			20,948				20,774
Adjusted earnings tax		5,445				4,978				4,398			4,551				5,142
Adjusted earnings - non-GAAP		16,422				16,196				14,098			16,397				15,632
Preferred stock dividends, net		(22	)			34				34			34				35
Adjusted earnings available to common shareholders - non-GAAP	$	16,444			$	16,162			$	14,064		$	16,363			$	15,597
Adjusted diluted earnings per common share	$	0.66			$	0.66			$	0.58		$	0.67			$	0.64
Adjusted return on average assets		1.09		%		1.16		%		1.02	%		1.14		%		1.09		%
Adjusted return on average shareholders' equity		10.01		%		10.33		%		9.31	%		10.85		%		10.45		%
Adjusted return on average tangible common equity		14.52		%		15.19		%		13.90	%		16.46		%		16.02		%


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


Efficiency Ratio Reconciliation
	For the Quarter Ended
	September 30,				June 30,				March 31,				December 31,				September 30,
(dollars in thousands)	2019				2019				2019				2018				2018
Noninterest expense - GAAP	$	48,025			$	40,194			$	41,097			$	45,375			$	50,317
Gain (loss) on mortgage servicing rights held for sale		70				515				-				-				(270	)
Integration and acquisition expenses		(5,292	)			(286	)			(160	)			(553	)			(9,559	)
Adjusted noninterest expense	$	42,803			$	40,423			$	40,937			$	44,822			$	40,488

Net interest income - GAAP	$	49,450			$	46,077			$	45,601			$	48,535			$	45,081
Effect of tax-exempt income		502				526				543				574				585
Adjusted net interest income		49,952				46,603				46,144				49,109				45,666

Noninterest income - GAAP	$	19,606			$	19,587			$	17,075			$	21,170			$	18,272
Loan servicing rights impairment (recapture)		1,060				(559	)			25				(1,380	)			297
Gain on sales of investment securities, net		(25	)			(14	)			-				(469	)			-
Other		-				23				-				1				12
Adjusted noninterest income		20,641				19,037				17,100				19,322				18,581

Adjusted total revenue	$	70,593			$	65,640			$	63,244			$	68,431			$	64,247

Efficiency ratio		60.63		%		61.58		%		64.73		%		65.50		%		63.02		%



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
	September 30,				June 30,				March 31,				December 31,				September 30,
(dollars in thousands, except per share data)	2019				2019				2019				2018				2018
Shareholders' Equity to Tangible Common Equity
Total shareholders' equity—GAAP	$	655,522			$	639,888			$	624,168			$	608,525			$	594,146
Adjustments:
Preferred stock		-				(2,684	)			(2,733	)			(2,781	)			(2,829	)
Goodwill		(171,074	)			(164,673	)			(164,673	)			(164,673	)			(164,044	)
Other intangibles		(36,690	)			(33,893	)			(35,566	)			(37,376	)			(39,228	)
Tangible common equity	$	447,758			$	438,638			$	421,196			$	403,695			$	388,045

Total Assets to Tangible Assets:
Total assets—GAAP	$	6,113,904			$	5,546,055			$	5,641,780			$	5,637,673			$	5,724,612
Adjustments:
Goodwill		(171,074	)			(164,673	)			(164,673	)			(164,673	)			(164,044	)
Other intangibles		(36,690	)			(33,893	)			(35,566	)			(37,376	)			(39,228	)
Tangible assets	$	5,906,140			$	5,347,489			$	5,441,541			$	5,435,624			$	5,521,340

Common Shares Outstanding		24,338,748				23,897,038				23,827,438				23,751,798				23,694,637

Tangible Common Equity to Tangible Assets		7.58		%		8.20		%		7.74		%		7.43		%		7.03		%
Tangible Book Value Per Share	$	18.40			$	18.36			$	17.68			$	17.00			$	16.38

Return on Average Tangible Common Equity (ROATCE)

	For the Quarter Ended
	September 30,				June 30,				March 31,				December 31,				September 30,
(dollars in thousands)	2019				2019				2019				2018				2018
Net income available to common shareholders	$	12,677			$	16,321			$	13,948			$	16,302			$	8,462

Average total shareholders' equity—GAAP	$	651,162			$	628,730			$	614,210			$	599,723			$	593,457
Adjustments:
Preferred stock		(814	)			(2,708	)			(2,759	)			(2,812	)			(2,859	)
Goodwill		(166,389	)			(164,673	)			(164,673	)			(164,051	)			(164,044	)
Other intangibles		(34,519	)			(34,689	)			(36,438	)			(38,394	)			(40,228	)
Average tangible common equity	$	449,440			$	426,660			$	410,340			$	394,466			$	386,326
ROATCE		11.19		%		15.34		%		13.79		%		16.40		%		8.69		%

Source: Midland States Bancorp, Inc.

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Press Release

Midland States Bancorp, Inc. Announces 2019 Third Quarter Results