UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM
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CURRENT REPORT
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On October 24, 2019, Midland States Bancorp, Inc. (the “Company”) issued a press release announcing its financial results for the third quarter of 2019. The press release is attached as Exhibit 99.1.
On October 24, 2019, the Company made available on its website a slide presentation regarding the Company's third quarter 2019 financial results, which will be used as part of a publicly accessible conference call on October 25, 2019. The slide presentation is attached as Exhibit 99.2.
The information in this Form 8-K and the attached exhibits shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in any such filing.
(d) Exhibits.
| Exhibit No. | Description | |||
| 99.1 | Press Release of Midland States Bancorp, Inc., dated October 24, 2019 | |||
| 99.2 | Slide Presentation of Midland States Bancorp, Inc. regarding third quarter 2019 financial results | |||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Midland States Bancorp, Inc. | ||
| Date: October 24, 2019 | By: | /s/ Douglas J. Tucker |
| Douglas J. Tucker | ||
| Senior Vice President and Corporate Counsel | ||
EXHIBIT 99.1
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 | % | ||||||||||||||
Exhibit 99.2
1 Midland States Bancorp, Inc. NASDAQ: MSBI Third Quarter 2019 Earnings Call
2 Forward - Looking Statements. This presentation may contain forward - looking statements within the meaning of the federal securities laws. Forward - looking statements express management’s current expectations, forecasts of future events or long - term goals, including with respect to pending acquisitions, and may be based upon beliefs, expectations and assumptions of Midland ’s management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “intend,” “esti mat e,” “may,” “will,” “would,” “could,” “should” or other similar expressions. All statements in this presentation speak only as of th e date they are made, and Midland undertakes no obligation to update any statement. A number of factors, many of which are beyond th e ability of Midland to control or predict, could cause actual results to differ materially from those in its forward - looking statements. These risks and uncertainties should be considered in evaluating forward - looking statements and undue reliance shou ld not be placed on such statements. Additional information concerning Midland and its respective businesses, including addition al factors that could materially affect Midland’s financial results, are included in Midland’s filings with the Securities and E xch ange Commission. Use of Non - GAAP Financial Measures. This presentation may contain certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States (“GAAP”). These non - GAAP financial measure s 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 Equ ity to Tangible Assets,” “Tangible Book Value Per Share” and “Return on Average Tangible Common Equity.” The Company believes tha t 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 m ay not be comparable to other similarly titled measures as presented by other companies. Reconciliations of these non - GAAP measures are provided in the Appendix section of this presentation.
3 Overview of 3Q19 3 Solid Execution on Strategic Priorities 3Q19 Earnings Capital Management • Strong inflows of core deposits – growth of $153.2 million • Efficiency ratio (1) improved to 60.6% from 61.6% in prior quarter • Relatively stable net interest margin (excluding accretion income) • Issuance of $100 million in subordinated notes provides flexibility to reduce borrowing costs • Authorization of $25 million stock repurchase program • Long track record of increasing dividend by at least 10% annually HomeStar Acquisition • Closed on July 17, 2019 • System conversion completed in mid - October • Provides low - cost deposit base and leading position in Kankakee, Illinois market • Net income of $12.7 million, or $0.51 diluted EPS • Integration and acquisition expenses of $5.3 million impacted net income by $0.15 per diluted share • Adjusted earnings (1) of $0.66 per diluted share Notes: (1) Represents a non - GAAP financial measure. See “Non - GAAP Reconciliation” in the appendix.
4 3Q 2019 2Q 2019 3Q 2018 Commercial loans and leases $ 1,293 $ 1,149 $ 1,035 Commercial real estate 1,622 1,524 1,712 Construction and land development 216 250 239 Residential real estate 588 552 586 Consumer 610 597 584 Total Loans $ 4,329 $ 4,074 $ 4,156 $4,156 $4,138 $4,092 $4,074 $4,329 3Q 2018 4Q 2018 1Q 2019 2Q 2019 3Q 2019 Loan Portfolio Total Loans 4 • Total loans increased $255.3 million, or 6.3%, to $4.33 billion • Increase primarily attributable to addition of HomeStar loan portfolio • Organic loan growth of $44.1 million, or 1.1%, during 3Q19, primarily due to growth in commercial portfolio • Equipment finance balances increased $57.1 million, or 11.2%, from June 30, 2019 Loan Portfolio Mix (in millions, as of quarter - end) (in millions, as of quarter - end) JB [2]7
5 3Q 2019 2Q 2019 3Q 2018 Noninterest - bearing demand $ 1,015 $ 902 $ 991 Interest - bearing: Checking 1,223 1,009 1,047 Money market 754 733 836 Savings 527 442 446 Time 833 785 634 Brokered time 94 140 189 Total Deposits $ 4,445 $ 4,011 $ 4,143 $4,143 $4,074 $4,036 $4,011 $4,445 3Q 2018 4Q 2018 1Q 2019 2Q 2019 3Q 2019 Total Deposits Total Deposits 5 • Total deposits increased $434.0 million, or 10.8%, to $4.45 billion • Increase in deposits primarily attributable to addition of HomeStar deposits • Organic deposit growth of $112.2 million, or 2.8%, during 3Q19, driven by $153.2 million increase in core deposits • Continued intentional run - off of brokered time deposits Deposit Mix (in millions, as of quarter - end) (in millions, as of quarter - end)
6 $5.47 $5.65 $4.95 $5.50 $6.00 3Q 2018 4Q 2018 1Q 2019 2Q 2019 3Q 2019 $3,218 $2,945 $3,097 $3,126 $3,281 3Q 2018 4Q 2018 1Q 2019 2Q 2019 3Q 2019 • During 3Q19, assets under administration increased $155.4 million, primarily due to the addition of HomeStar’s assets under administration • Total Wealth Management revenue increased 9.0% from the prior quarter • Increase attributable to an increase in estate fees and the contribution from HomeStar Wealth Management Wealth Management Revenue 6 Assets Under Administration (in millions) (in millions )
7 $1.7 $4.3 $2.5 $3.4 $3.1 $49.5 $45.1 $48.5 $45.6 $46.1 3Q 2018 4Q 2018 1Q 2019 2Q 2019 3Q 2019 NII Accretion Income 0.10% 0.31% 0.17% 0.25% 0.20% 3.70% 3.59% 3.85% 3.73% 3.76% 3Q 2018 4Q 2018 1Q 2019 2Q 2019 3Q 2019 NIM Accretion Income • Net interest income increased 7.3%, primarily due to contribution from HomeStar • Excluding the impact of accretion income, net interest margin was relatively unchanged • Average rate on new and renewed loans was 5.39% • Expected scheduled accretion income: $2.4 million in 4Q19 Net Interest Income/Margin Net Interest Margin 7 Net Interest Income (in millions) $5.
8 Noninterest Income 8 • Noninterest income unchanged from prior quarter • Wealth management remains largest single contributor to noninterest income • Commercial FHA revenue negatively impacted by $1.1 million MSR impairment Noninterest Income (in millions) $18.3 $21.2 $17.1 $19.6 $19.6 3Q 2018 4Q 2018 1Q 2019 2Q 2019 3Q 2019 All Other Community Banking Revenue Residential Mortgage Commercial FHA Wealth Management Notes: (1) Represents service charges, interchange revenue, net gain (loss) on sale of investment securities, and other income (1)
9 Noninterest Expense and Operating Efficiency 9 • Efficiency Ratio (1) was 60.6% in 3Q19 vs. 61.6% in 2Q19 • Adjustments to non - interest expense: • Excluding these adjustments, noninterest expense increased 5.9% on a linked - quarter basis • Increase in noninterest expense primarily attributable to addition of HomeStar’s operations • Branch network to be reduced by six locations, which includes three related to the HomeStar acquisition, by the end of the first quarter of 2020 Noninterest Expense and Efficiency Ratio (1) (Noninterest expense in millions) $9.8 $0.6 $0.2 $(0.2) $5.2 63.0% 65.5% 64.7% 61.6% 60.6% $50.3 $45.5 $41.1 $40.2 $48.0 3Q 2018 4Q 2018 1Q 2019 2Q 2019 3Q 2019 Total Noninterest Expense Adjustments to Noninterest Expense Efficiency Ratio Notes: (1) Represents a non - GAAP financial measure. See “Non - GAAP Reconciliation” in the appendix. ($ in millions) 3Q19 2Q19 Integration and acquisition related expenses ($5.3) ($0.3) Gain on MSRs held for sale $0.1 $0.5 JB [2]9
10 Asset Quality NCO / Average Loans 10 • Net charge - offs for 3Q19 was 0.49% of average loans on an annualized basis, driven by the resolution of nonperforming loans • Provision for loan losses of $4.4 million in 3Q19 includes an additional $2.3 million specific reserve allocated to an existing nonperforming loan • ALLL/total loans of 0.58% and credit marks/total loans of 0.51% at September 30, 2019 Nonperforming Loans / Total Loans (Total Loans as of quarter - end) 0.93% 1.04% 1.20% 1.24% 1.04% 3Q 2018 4Q 2018 1Q 2019 2Q 2019 3Q 2019 0.07% 0.21% 0.10% 0.12% 0.49% 3Q 2018 4Q 2018 1Q 2019 2Q 2019 3Q 2019
11 Outlook • Focus on integrating HomeStar acquisition and fully capitalizing on synergies • All cost savings from HomeStar acquisition expected to be phased in by start of 2020 • Additional branch consolidation efforts will further enhance efficiencies • Continue to generate low - single - digit organic loan growth • Earnings accretion from HomeStar acquisition and continued efficiency improvements expected to drive earnings growth in 2020 11
12 APPENDIX
13 13 Adjusted Earnings Reconciliation (dollars in thousands, except per share data) 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 For the Quarter Ended 2019 2019 2019 2018 2018 September 30, June 30, March 31, December 31, September 30,
14 14 Efficiency Ratio Reconciliation (dollars in thousands) 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) For the Quarter Ended 2019 2019 2019 2018 2018 September 30, June 30, March 31, December 31, September 30,
15 15 Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share (dollars in thousands, except per share data) 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) (dollars in thousands) 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 % MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (continued) As of September 30, June 30, March 31, December 31, September 30, 2019 2019 2019 2018 2018 For the Quarter Ended 2019 2019 2019 2018 2018 September 30, June 30, March 31, December 31, September 30,