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 January 23, 2020, Midland States Bancorp, Inc. (the “Company”) issued a press release announcing its financial results for the fourth quarter of 2019. The press release is attached as Exhibit 99.1.
On January 23, 2020, the Company made available on its website a slide presentation regarding the Company's fourth quarter 2019 financial results, which will be used as part of a publicly accessible conference call on January 24, 2020. 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 |
Press Release of Midland States Bancorp, Inc., dated January 23, 2020 | |
| 99.2 | Slide Presentation of Midland States Bancorp, Inc. regarding fourth 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: January 23, 2020 | By: | /s/ Douglas J. Tucker |
| Douglas J. Tucker | ||
| Senior Vice President and Corporate Counsel | ||
EXHIBIT 99.1
Midland States Bancorp, Inc. Announces 2019 Fourth Quarter Results
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 |
- A non-GAAP financial measure. Refer to page 14 for a reconciliation to the comparable GAAP financial measure.
- 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 | % | |||||||||||||||
EXHIBIT 99.2
1 Midland States Bancorp, Inc. NASDAQ: MSBI Fourth 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 th at 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 4Q19 3 Continued Execution on Strategic Priorities 4Q19 Earnings Capital Management • Further improvement in deposit mix • Net non - core funding dependence ratio declined to 7.8% from 17.9% at end of prior year • Efficiency ratio (1) improved to 59.5% from 60.6% in prior quarter • Strong profitability continues to rebuild TCE ratio • Long track record of increasing dividend by at least 10% annually • 85,146 shares of common stock repurchased during 4Q19 at a weighted average price of $25.69 Solid Balance Sheet Growth • Loan growth of 6.7% on an annualized basis • Deposit growth of 8.8% on an annualized basis • Net income of $12.8 million, or $0.51 diluted EPS • 4Q19 results include a $1.6 million, or $0.05 per diluted share, MSR valuation adjustment in the commercial FHA business Notes: (1) Represents a non - GAAP financial measure. See “Non - GAAP Reconciliation” in the appendix. Adjusted Earnings (1) • Adjusted earnings (1) of $0.64 per diluted share excludes: • $3.3 million in integration and acquisition expenses • $1.8 million loss on the repurchase of subordinated debt • $0.6 million net gain on sales of investment securities
4 4Q 2019 3Q 2019 4Q 2018 Commercial loans and leases $ 1,388 $ 1,293 $ 1,075 Commercial real estate 1,527 1,622 1,639 Construction and land development 209 216 232 Residential real estate 568 588 578 Consumer 710 610 613 Total Loans $ 4,401 $ 4,329 $ 4,138 Loan Portfolio Total Loans and Average Loan Yield 4 • Total loans increased $72.6 million to $4.40 billion, or 6.7% on an annualized basis • Increase primarily attributable to growth in commercial and consumer portfolios; partially offset by a decline in the commercial real estate portfolio • Equipment finance balances increased $66.8 million, or 11.8%, from September 30, 2019 Loan Portfolio Mix (in millions, as of quarter - end) (in millions, as of quarter - end) $4,138 $4,092 $4,074 $4,329 $4,401 5.28% 5.22% 5.32% 5.31% 5.22% Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Total Loans Average Loan Yield
5 4Q 2019 3Q 2019 4Q 2018 Noninterest - bearing demand $ 1,019 $ 1,015 $ 972 Interest - bearing: Checking 1,343 1,223 1,002 Money market 788 754 862 Savings 522 527 442 Time 822 833 634 Brokered time 50 94 162 Total Deposits $ 4,544 $ 4,445 $ 4,074 Total Deposits Total Deposits and Cost of Deposits 5 • Total deposits increased $99.1 million to $4.54 billion, or 8.8% on an annualized basis • Growth in deposits attributable to increase of $130.9 million in core deposits, primarily from commercial customers • Continued intentional run - off of brokered time deposits Deposit Mix (in millions, as of quarter - end) (in millions, as of quarter - end) $4,074 $4,036 $4,011 $4,445 $4,544 0.65% 0.74% 0.84% 0.84% 0.80% Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Total Deposits Cost of Deposits
6 $4.3 $2.5 $3.4 $3.1 $3.6 $48.5 $45.6 $46.1 $49.5 $48.7 4Q 2018 1Q 2019 2Q 2019 3Q 2019 4Q 2019 NII Accretion Income 0.31% 0.17% 0.25% 0.20% 0.23% 3.85% 3.73% 3.76% 3.70% 3.56% 4Q 2018 1Q 2019 2Q 2019 3Q 2019 4Q 2019 NIM Accretion Income • Net interest income decreased 1.5% • Excluding the impact of accretion income, net interest margin declined 17 basis points due to: • 8 basis point impact from increased volume of subordinated debt; • 7 basis point impact from increased volume and lower rate earned on cash balances; • 4 basis point impact from lower average loan yields; • Partially offset by lower rates on deposits Net Interest Income/Margin Net Interest Margin 6 Net Interest Income (in millions)
7 $5.65 $4.95 $5.50 $6.00 $5.38 4Q 2018 1Q 2019 2Q 2019 3Q 2019 4Q 2019 $2,945 $3,097 $3,126 $3,281 $3,410 4Q 2018 1Q 2019 2Q 2019 3Q 2019 4Q 2019 • During 4Q19, assets under administration increased $128.7 million, primarily due to improved market performance • Total Wealth Management revenue decreased 10.4% from the prior quarter • Decrease primarily attributable to lower estate fees Wealth Management Wealth Management Revenue 7 Assets Under Administration (in millions) (in millions )
8 Noninterest Income 8 • Noninterest income decreased 3.0% from prior quarter • 4Q19 noninterest income included $0.6 million in net gain on sales of investment securities • Commercial FHA revenue negatively impacted by $1.6 million MSR impairment, compared to $1.1 million MSR impairment in prior quarter Noninterest Income (in millions) $21.2 $17.1 $19.6 $19.6 $19.0 4Q 2018 1Q 2019 2Q 2019 3Q 2019 4Q 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 59.5% in 4Q19 vs. 60.6% in 3Q19 • Adjustments to non - interest expense: • Excluding these adjustments, noninterest expense decreased 3.9% on a linked - quarter basis • Decrease in noninterest expense primarily attributable to additional cost savings following the HomeStar system conversion • Branch network reduced by four locations in 4Q19 • Two additional locations to be consolidated in 1Q20 Noninterest Expense and Efficiency Ratio (1) (Noninterest expense in millions) $0.6 $0.2 $(0.2) $5.2 $5.2 $45.4 $41.1 $40.2 $48.0 $46.3 65.5% 64.7% 61.6% 60.6% 59.5% ($1.00) 4Q 2018 1Q 2019 2Q 2019 3Q 2019 4Q 2019 Total Noninterest Expense Adjustments to Noninterest Expense Efficiency Ratio Notes: (1) Represents a non - GAAP financial measure. See “Non - GAAP Reconciliation” in the appendix. ($ in millions) 4Q19 3Q19 Integration and acquisition related expenses ($3.3) ($5.3) Loss on repurchase of subordinated debt ($1.8) - Gain (loss) on MSRs held for sale $(0.1) $0.1
10 Asset Quality NCO / Average Loans 10 • General improvement in asset quality as nonperforming loans/total loans and net charge - offs/average loans both declined from prior quarter • Provision for loan losses of $5.3 million in 4Q19 includes a $1.4 million specific reserve allocated to an existing nonperforming loan • ALLL/total loans of 0.64% and credit marks/total loans of 0.39% at December 31, 2019 Nonperforming Loans / Total Loans (Total Loans as of quarter - end) 1.04% 1.20% 1.24% 1.04% 0.96% 4Q 2018 1Q 2019 2Q 2019 3Q 2019 4Q 2019 0.21% 0.10% 0.12% 0.49% 0.20% 4Q 2018 1Q 2019 2Q 2019 3Q 2019 4Q 2019
11 Outlook • Continue to generate low - single - digit organic loan growth and further improve deposit mix • Fully capitalize on synergies from HomeStar acquisition • Complete branch consolidation plan and leverage technology investments to drive additional efficiencies throughout the organization • Continue to optimize staffing levels and maintain non - interest expense runrate of $42 - $43 million per quarter in 2020 • Expand net interest margin through a reduction in funding costs and continued growth in loans and leases with more attractive risk - adjusted yields • Deliver strong earnings growth in 2020 and further improve level of returns 11
12 APPENDIX
13 13 Adjusted Earnings Reconciliation (dollars in thousands, except per share data) 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 For the Quarter Ended 2019 2019 2019 2019 2018 December 31, September 30, June 30, March 31, December 31,
14 14 Efficiency Ratio Reconciliation (dollars in thousands) 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) For the Quarter Ended 2019 2019 2019 2019 2018 December 31, September 30, June 30, March 31, December 31,
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 $ 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) (dollars in thousands) 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 % For the Quarter Ended 2019 2019 2019 2019 2018 December 31, September 30, June 30, March 31, December 31, 2019 2019 2019 2019 2018 MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (continued) As of December 31, September 30, June 30, March 31, December 31,