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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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
On April 23, 2020, Midland States Bancorp, Inc. (the "Company") issued a press release announcing its financial results for the first quarter of 2020. The press release is attached as Exhibit 99.1.
On April 23, 2020, the Company made available on its website a slide presentation regarding the Company's first quarter 2020 financial results, which will be used as part of a publicly accessible conference call on April 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 | |||
| 99.1 | Press Release of Midland States Bancorp, Inc., dated April 23, 2020 | |||
| 99.2 | Slide Presentation of Midland States Bancorp, Inc. regarding first quarter 2020 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: April 23, 2020 | By: | /s/ Douglas J. Tucker |
| Douglas J. Tucker | ||
| Senior Vice President and Corporate Counsel | ||
EXHIBIT 99.1
Midland States Bancorp, Inc. Announces 2020 First Quarter Results
Summary
- Net income of $1.5 million, or $0.06 diluted earnings per share
- New CECL accounting standard adopted as of January 1, 2020, resulting in increase to allowance for credit losses on loans of $12.8 million and higher provision for credit losses on loans
- Financial results include $8.5 million impairment on commercial mortgage servicing rights
- Total deposits increased $106.4 million from the end of the prior quarter, or 9.4% annualized
- $263 million in Paycheck Protection Program loans approved through April 16, 2020
EFFINGHAM, Ill., April 23, 2020 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (Nasdaq: MSBI) (the “Company”) today reported net income of $1.5 million, or $0.06 diluted earnings per share, for the first quarter of 2020, which was impacted by an $8.5 million impairment on commercial mortgage servicing rights (“MSR”) and $1.0 million in integration and acquisition expenses, as well as additional provision for credit losses on loans resulting from the Company’s adoption of the new Current Expected Credit Loss (CECL) accounting standard. This compares to net income of $12.8 million, or $0.51 diluted earnings per share, for the fourth quarter of 2019, which was impacted by $3.3 million in integration and acquisition expenses and a $1.8 million loss on the repurchase of subordinated debt, and net income of $14.0 million, or $0.57 diluted earnings per share, for the first quarter of 2019.
Jeffrey G. Ludwig, President and Chief Executive Officer of the Company, said, “I am very pleased with the response of our organization to the challenges presented by the COVID-19 pandemic. With the health and safety of our employees and customers being our top priority, we were able to effectively leverage the investments we have made in technology to efficiently transition to remote working for many of our employees and handle the increased use of our digital banking platform by our customers.
“For 140 years, the communities we serve have counted on Midland to help them manage through difficult times, and this current crisis will be no different. We are actively working with our customers that have been impacted by COVID-19 to support them through this temporary downturn in the economy. We were able to quickly establish our process for participating in the Small Business Administration’s Paycheck Protection Program, and through April 16, 2020, we had 1,292 applications approved by the SBA totaling $263 million in loans for our customers, which will help support more than 26,000 employees in our markets.
“While the duration of the pandemic and the timing and strength of the eventual economic recovery remain uncertain, we believe we are well positioned from a capital and liquidity standpoint to play a critical role in supporting our communities as we work together to manage through this crisis,” said Mr. Ludwig.
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.
In addition, effective January 1, 2020, the Company adopted the new CECL accounting standard, which replaces the incurred loss methodology with an expected loss methodology.
Adjusted Earnings
Financial results for the first quarter of 2020 were impacted by $1.0 million in integration and acquisition expenses, a $0.5 million loss on residential mortgage servicing rights held-for-sale, and a $0.2 million loss on the repurchase of subordinated debt. Excluding these amounts and certain income, adjusted earnings were $2.8 million, or $0.11 diluted earnings per share, for the first quarter of 2020.
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.
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 first quarter of 2020 was 3.48%, compared to 3.56% for the fourth quarter of 2019. The Company’s net interest margin benefits from accretion income on purchased loan portfolios, which contributed 16 and 23 basis points to net interest margin in the first quarter of 2020 and fourth quarter of 2019, respectively. Excluding the impact of accretion income, net interest margin decreased 1 basis point from the fourth quarter of 2019, as a decline in the yield on earning assets was largely offset by a decline in the cost of deposits.
Relative to the first quarter of 2019, net interest margin decreased from 3.73%. Accretion income on purchased loan portfolios contributed 17 basis points to net interest margin in the first quarter of 2019. Excluding the impact of accretion income, net interest margin decreased 24 basis points compared to the first 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.
Net Interest Income
Net interest income for the first quarter of 2020 was $46.7 million, a decrease of 4.2% from $48.7 million for the fourth quarter of 2019. Excluding accretion income, net interest income decreased $0.6 million from the prior quarter. Accretion income associated with purchased loan portfolios totaled $2.2 million for the first quarter of 2020, compared with $3.6 million for the fourth quarter of 2019.
Relative to the first quarter of 2019, net interest income increased $1.1 million, or 2.3%. Accretion income for the first quarter of 2019 was $2.5 million. Excluding the impact of accretion income, net interest income increased primarily due to the acquisition of HomeStar’s loans and securities.
Noninterest Income
Noninterest income for the first quarter of 2020 was $8.6 million, a decrease of 54.8% from $19.0 million for the fourth quarter of 2019. The decrease was primarily attributable to an $8.5 million impairment on commercial MSRs in connection with decreases in market interest rates and lower commercial FHA revenue due to decreased loan originations, partially offset by higher wealth management and residential mortgage banking revenue.
Relative to the first quarter of 2019, noninterest income decreased 49.6% from $17.1 million. The decrease was primarily attributable to the impairment on commercial MSRs and lower commercial FHA revenue.
Wealth management revenue for the first quarter of 2020 was $5.7 million, an increase of 5.6% from $5.4 million in the fourth quarter of 2019, primarily due to higher trust fees related to tax preparation and higher estate fees. Compared to the first quarter of 2019, wealth management revenue increased 14.6%.
Commercial FHA revenue for the first quarter of 2020 was $1.3 million, compared to $3.7 million in the fourth quarter of 2019. During the first quarter of 2020, the Company recorded an $8.5 million commercial MSR impairment, compared to a $1.6 million MSR impairment recorded in the fourth quarter of 2019. The Company originated $13.3 million in rate lock commitments during the first quarter of 2020, compared to $84.9 million in the prior quarter. Compared to the first quarter of 2019, commercial FHA revenue decreased $2.0 million.
Noninterest Expense
Noninterest expense for the first quarter of 2020 was $42.7 million, which included $1.0 million in integration and acquisition expenses, a $0.5 million loss on residential MSRs held for sale, and a $0.2 million loss on the repurchase of subordinated debt, compared with $46.3 million for the fourth quarter of 2019, 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 residential MSRs held for sale. Excluding integration and acquisition expenses, the loss on the repurchase of subordinated debt, and losses on residential MSRs held for sale, the $0.2 million decrease in noninterest expense primarily reflects the initial cost savings from the staffing level adjustments made during the first quarter of 2020. These staffing level adjustments were part of the strategic plan of the Company and unrelated to COVID-19.
First quarter 2020 noninterest expense also included a $0.9 million increase in reserves for off-balance sheet exposures.
Relative to the first quarter of 2019, noninterest expense increased 3.8% from $41.1 million, which included $0.2 million in integration and acquisition expenses. Excluding integration and acquisition expenses, the loss on the repurchase of subordinated debt, and loss on MSRs held for sale, noninterest expense was essentially unchanged from the prior year period.
Loan Portfolio
Total loans outstanding were $4.38 billion at March 31, 2020, compared with $4.40 billion at December 31, 2019 and $4.09 billion at March 31, 2019. The decrease in total loans from December 31, 2019 was primarily attributable to declines in the consumer, commercial real estate and residential real estate portfolios, partially offset by growth in commercial loans and leases.
The decline in the consumer portfolio was mainly attributable to the transfer of approximately $99.7 million of loans to held-for-sale, which are being sold at par as part of the Company’s balance sheet management strategies.
Equipment finance balances increased $40.9 million from December 31, 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 March 31, 2019 was primarily attributable to the addition of HomeStar’s loan portfolio.
Deposits
Total deposits were $4.65 billion at March 31, 2020, compared with $4.54 billion at December 31, 2019, and $4.04 billion at March 31, 2019. The increase in total deposits from December 31, 2019 was primarily attributable to growth in the Company’s lower-cost deposit categories, while the increase from March 31, 2019 was primarily attributable to the addition of HomeStar’s deposits.
Asset Quality
Effective January 1, 2020, the Company adopted the new CECL accounting standard. The adoption of CECL resulted in the Company’s allowance for credit losses on loans increasing by approximately $12.8 million relative to the allowance held as of December 31, 2019. In addition, acquired loans totaling $9.8 million previously accounted for as purchased credit impaired and excluded from impaired loans were reclassified as purchased credit deteriorated and are now included in impaired loans as of the adoption date of CECL.
Nonperforming loans totaled $58.2 million, or 1.33% of total loans, at March 31, 2020, compared with $42.1 million, or 0.96% of total loans, at December 31, 2019, and $49.3 million, or 1.20% of total loans, at March 31, 2019. The increase in non-performing loans was primarily attributable to two commercial real estate relationships coupled with the impact of the reclassification of purchased credit deteriorated loans, partially offset by charge-offs of $10.2 million of non-accrual loans.
Net charge-offs for the first quarter of 2020 were $12.8 million, or 1.18% of average loans on an annualized basis. Approximately $10.2 million of the net charge-offs in the first quarter of 2020 were related to three loans that had been on non-performing status with specific reserves held against them for at least one year. These charge-offs were unrelated to the impact of the COVID-19 pandemic.
The Company recorded a provision for credit losses on loans of $10.6 million for the first quarter of 2020, which reflects the higher level of net charge-offs experienced in the first quarter and a downgrade in the economic forecast due to the impact of the COVID-19 pandemic.
The Company’s allowance for credit losses on loans was 0.88% of total loans and 66.3% of nonperforming loans at March 31, 2020, compared with 0.64% of total loans and 66.6% of nonperforming loans at December 31, 2019. Following the charge-off of approximately $10.2 million in specific reserves held against three non-performing credits in the first quarter, approximately 95% of the allowance for credit losses on loans at March 31, 2020 was allocated to general reserves.
Capital
At March 31, 2020, Midland States Bank and the Company exceeded all regulatory capital requirements under Basel III and Midland States Bank was considered to be a ‘‘well-capitalized’’ financial institution, as summarized in the following table:
| Bank Level Ratios as of March 31, 2020 | Consolidated Ratios as of March 31, 2020 | Minimum Regulatory Requirements (2) | ||||
| Total capital to risk-weighted assets | 12.38% | 13.73% | 10.50% | |||
| Tier 1 capital to risk-weighted assets | 11.76% | 9.76% | 8.50% | |||
| Tier 1 leverage ratio | 10.12% | 8.39% | 4.00% | |||
| Common equity Tier 1 capital | 11.76% | 8.47% | 7.00% | |||
| Tangible common equity to tangible assets (1) | NA | 7.08% | NA | |||
- A non-GAAP financial measure. Refer to page 15 for a reconciliation to the comparable GAAP financial measure.
- Includes the capital conservation buffer of 2.5%.
Stock Repurchase Program
During the first quarter of 2020, the Company repurchased 1,062,592 shares of its common stock at a weighted average price of $19.35 under its stock repurchase program, which authorized the repurchase of up to $50 million of its common stock. As of March 31, 2020, the Company had $25.4 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, April 24, 2020, to discuss its financial results. The call can be accessed via telephone at (877) 516-3531; conference ID: 8169438. A recorded replay can be accessed through May 1, 2020, by dialing (855) 859-2056; conference ID: 8169438.
A slide presentation relating to the first quarter 2020 results will be accessible prior to the scheduled conference call. This earnings release should be read together with the slide presentation which contains important information related to the impact of COVID-19. 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 March 31, 2020, the Company had total assets of approximately $6.21 billion, and its Wealth Management Group had assets under administration of approximately $2.97 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 the effects of the COVID-19 pandemic including its potential effects on the economic environment, our customers and our operations, as well as any changes to federal, state and local government laws, regulations and orders in connection with the pandemic, 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 | ||||||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||||
| (dollars in thousands, except per share data) | 2020 | 2019 | 2019 | 2019 | 2019 | |||||||||||||||||
| Earnings Summary | ||||||||||||||||||||||
| Net interest income | $ | 46,651 | $ | 48,687 | $ | 49,450 | $ | 46,077 | $ | 45,601 | ||||||||||||
| Provision for credit losses on loans | 10,569 | 5,305 | 4,361 | 4,076 | 3,243 | |||||||||||||||||
| Noninterest income | 8,598 | 19,014 | 19,606 | 19,587 | 17,075 | |||||||||||||||||
| Noninterest expense | 42,675 | 46,325 | 48,025 | 40,194 | 41,097 | |||||||||||||||||
| Income before income taxes | 2,005 | 16,071 | 16,670 | 21,394 | 18,336 | |||||||||||||||||
| Income taxes | 456 | 3,279 | 4,015 | 5,039 | 4,354 | |||||||||||||||||
| Net income | 1,549 | 12,792 | 12,655 | 16,355 | 13,982 | |||||||||||||||||
| Preferred stock dividends, net | - | - | (22 | ) | 34 | 34 | ||||||||||||||||
| Net income available to common shareholders | $ | 1,549 | $ | 12,792 | $ | 12,677 | $ | 16,321 | $ | 13,948 | ||||||||||||
| Diluted earnings per common share | $ | 0.06 | $ | 0.51 | $ | 0.51 | $ | 0.67 | $ | 0.57 | ||||||||||||
| Weighted average shares outstanding - diluted | 24,538,002 | 24,761,960 | 24,684,529 | 24,303,211 | 24,204,661 | |||||||||||||||||
| Return on average assets | 0.10 | % | 0.83 | % | 0.84 | % | 1.17 | % | 1.01 | % | ||||||||||||
| Return on average shareholders' equity | 0.96 | % | 7.71 | % | 7.71 | % | 10.43 | % | 9.23 | % | ||||||||||||
| Return on average tangible common equity (1) | 1.39 | % | 11.24 | % | 11.19 | % | 15.34 | % | 13.79 | % | ||||||||||||
| Net interest margin | 3.48 | % | 3.56 | % | 3.70 | % | 3.76 | % | 3.73 | % | ||||||||||||
| Efficiency ratio (1) | 63.78 | % | 59.46 | % | 60.63 | % | 61.58 | % | 64.73 | % | ||||||||||||
| Adjusted Earnings Performance Summary | ||||||||||||||||||||||
| Adjusted earnings (1) | $ | 2,806 | $ | 16,110 | $ | 16,422 | $ | 16,196 | $ | 14,098 | ||||||||||||
| Adjusted diluted earnings per common share (1) | $ | 0.11 | $ | 0.64 | $ | 0.66 | $ | 0.66 | $ | 0.58 | ||||||||||||
| Adjusted return on average assets (1) | 0.19 | % | 1.04 | % | 1.09 | % | 1.16 | % | 1.02 | % | ||||||||||||
| Adjusted return on average shareholders' equity (1) | 1.73 | % | 9.71 | % | 10.01 | % | 10.33 | % | 9.31 | % | ||||||||||||
| Adjusted return on average tangible common equity (1) | 2.53 | % | 14.15 | % | 14.52 | % | 15.19 | % | 13.90 | % | ||||||||||||
| (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 | ||||||||||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||||||||
| (in thousands, except per share data) | 2020 | 2019 | 2019 | 2019 | 2019 | |||||||||||||||||||||
| Net interest income: | ||||||||||||||||||||||||||
| Interest income | $ | 61,314 | $ | 64,444 | $ | 65,006 | $ | 60,636 | $ | 59,432 | ||||||||||||||||
| Interest expense | 14,663 | 15,757 | 15,556 | 14,559 | 13,831 | |||||||||||||||||||||
| Net interest income | 46,651 | 48,687 | 49,450 | 46,077 | 45,601 | |||||||||||||||||||||
| Provision for credit losses on loans | 10,569 | 5,305 | 4,361 | 4,076 | 3,243 | |||||||||||||||||||||
| Net interest income after provision for credit losses on loans | 36,082 | 43,382 | 45,089 | 42,001 | 42,358 | |||||||||||||||||||||
| Noninterest income: | ||||||||||||||||||||||||||
| Wealth management revenue | 5,677 | 5,377 | 5,998 | 5,504 | 4,953 | |||||||||||||||||||||
| Commercial FHA revenue | 1,267 | 3,702 | 3,954 | 4,358 | 3,295 | |||||||||||||||||||||
| Residential mortgage banking revenue | 1,755 | 763 | 720 | 611 | 834 | |||||||||||||||||||||
| Service charges on deposit accounts | 2,656 | 2,860 | 3,008 | 2,639 | 2,520 | |||||||||||||||||||||
| Interchange revenue | 2,833 | 3,053 | 3,249 | 3,010 | 2,680 | |||||||||||||||||||||
| Gain on sales of investment securities, net | - | 635 | 25 | 14 | - | |||||||||||||||||||||
| (Impairment) recapture on commercial mortgage servicing rights | (8,468 | ) | (1,613 | ) | (1,060 | ) | 559 | (25 | ) | |||||||||||||||||
| Other income | 2,878 | 4,237 | 3,712 | 2,892 | 2,818 | |||||||||||||||||||||
| Total noninterest income | 8,598 | 19,014 | 19,606 | 19,587 | 17,075 | |||||||||||||||||||||
| Noninterest expense: | ||||||||||||||||||||||||||
| Salaries and employee benefits | 21,063 | 23,650 | 25,083 | 21,134 | 22,039 | |||||||||||||||||||||
| Occupancy and equipment | 4,869 | 4,654 | 4,793 | 4,511 | 4,853 | |||||||||||||||||||||
| Data processing | 5,334 | 6,074 | 5,271 | 4,821 | 4,724 | |||||||||||||||||||||
| Professional | 1,855 | 1,952 | 2,348 | 2,410 | 2,073 | |||||||||||||||||||||
| Amortization of intangible assets | 1,762 | 1,804 | 1,803 | 1,673 | 1,810 | |||||||||||||||||||||
| Loss (gain) on mortgage servicing rights held for sale | 496 | 95 | (70 | ) | (515 | ) | - | |||||||||||||||||||
| Other expense | 7,296 | 8,096 | 8,797 | 6,160 | 5,598 | |||||||||||||||||||||
| Total noninterest expense | 42,675 | 46,325 | 48,025 | 40,194 | 41,097 | |||||||||||||||||||||
| Income before income taxes | 2,005 | 16,071 | 16,670 | 21,394 | 18,336 | |||||||||||||||||||||
| Income taxes | 456 | 3,279 | 4,015 | 5,039 | 4,354 | |||||||||||||||||||||
| Net income | 1,549 | 12,792 | 12,655 | 16,355 | 13,982 | |||||||||||||||||||||
| Preferred stock dividends, net | - | - | (22 | ) | 34 | 34 | ||||||||||||||||||||
| Net income available to common shareholders | $ | 1,549 | $ | 12,792 | $ | 12,677 | $ | 16,321 | $ | 13,948 | ||||||||||||||||
| Basic earnings per common share | $ | 0.06 | $ | 0.52 | $ | 0.51 | $ | 0.67 | $ | 0.58 | ||||||||||||||||
| Diluted earnings per common share | $ | 0.06 | $ | 0.51 | $ | 0.51 | $ | 0.67 | $ | 0.57 | ||||||||||||||||
| MIDLAND STATES BANCORP, INC. | |||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | |||||||||||||||||||||||||
| As of | |||||||||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||||||||
| (in thousands) | 2020 | 2019 | 2019 | 2019 | 2019 | ||||||||||||||||||||
| Assets | |||||||||||||||||||||||||
| Cash and cash equivalents | $ | 449,396 | $ | 394,505 | $ | 409,346 | $ | 245,415 | $ | 276,480 | |||||||||||||||
| Investment securities | 661,894 | 655,054 | 668,630 | 613,026 | 656,152 | ||||||||||||||||||||
| Loans | 4,376,204 | 4,401,410 | 4,328,835 | 4,073,527 | 4,092,106 | ||||||||||||||||||||
| Allowance for credit losses on loans | (38,545 | ) | (28,028 | ) | (24,917 | ) | (25,925 | ) | (23,091 | ) | |||||||||||||||
| Total loans, net | 4,337,659 | 4,373,382 | 4,303,918 | 4,047,602 | 4,069,015 | ||||||||||||||||||||
| Loans held for sale | 113,852 | 16,431 | 88,322 | 22,143 | 16,851 | ||||||||||||||||||||
| Premises and equipment, net | 90,118 | 91,055 | 93,896 | 94,824 | 94,514 | ||||||||||||||||||||
| Other real estate owned | 7,892 | 6,745 | 4,890 | 3,797 | 2,020 | ||||||||||||||||||||
| Loan servicing rights, at lower of cost or fair value | 44,566 | 53,824 | 54,124 | 54,191 | 52,957 | ||||||||||||||||||||
| Mortgage servicing rights held for sale | 1,460 | 1,972 | 1,860 | 159 | 257 | ||||||||||||||||||||
| Goodwill | 172,796 | 171,758 | 171,074 | 164,673 | 164,673 | ||||||||||||||||||||
| Other intangible assets, net | 33,124 | 34,886 | 36,690 | 33,893 | 35,566 | ||||||||||||||||||||
| Cash surrender value of life insurance policies | 143,323 | 142,423 | 141,510 | 140,593 | 139,686 | ||||||||||||||||||||
| Other assets | 152,150 | 144,982 | 139,644 | 125,739 | 133,609 | ||||||||||||||||||||
| Total assets | $ | 6,208,230 | $ | 6,087,017 | $ | 6,113,904 | $ | 5,546,055 | $ | 5,641,780 | |||||||||||||||
| Liabilities and Shareholders' Equity | |||||||||||||||||||||||||
| Noninterest-bearing deposits | $ | 1,052,726 | $ | 1,019,472 | $ | 1,015,081 | $ | 902,286 | $ | 941,344 | |||||||||||||||
| Interest-bearing deposits | 3,597,914 | 3,524,782 | 3,430,090 | 3,108,921 | 3,094,944 | ||||||||||||||||||||
| Total deposits | 4,650,640 | 4,544,254 | 4,445,171 | 4,011,207 | 4,036,288 | ||||||||||||||||||||
| Short-term borrowings | 43,578 | 82,029 | 122,294 | 113,844 | 115,832 | ||||||||||||||||||||
| FHLB advances and other borrowings | 593,089 | 493,311 | 559,932 | 582,387 | 669,009 | ||||||||||||||||||||
| Subordinated debt | 169,505 | 176,653 | 192,689 | 94,215 | 94,174 | ||||||||||||||||||||
| Trust preferred debentures | 48,420 | 48,288 | 48,165 | 48,041 | 47,918 | ||||||||||||||||||||
| Other liabilities | 71,838 | 80,571 | 90,131 | 56,473 | 54,391 | ||||||||||||||||||||
| Total liabilities | 5,577,070 | 5,425,106 | 5,458,382 | 4,906,167 | 5,017,612 | ||||||||||||||||||||
| Total shareholders’ equity | 631,160 | 661,911 | 655,522 | 639,888 | 624,168 | ||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 6,208,230 | $ | 6,087,017 | $ | 6,113,904 | $ | 5,546,055 | $ | 5,641,780 | |||||||||||||||
| MIDLAND STATES BANCORP, INC. | |||||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | |||||||||||||||||||||
| As of | |||||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||||
| (in thousands) | 2020 | 2019 | 2019 | 2019 | 2019 | ||||||||||||||||
| Loan Portfolio | |||||||||||||||||||||
| Commercial loans and leases | $ | 1,439,145 | $ | 1,387,766 | $ | 1,292,511 | $ | 1,149,370 | $ | 1,122,621 | |||||||||||
| Commercial real estate | 1,507,280 | 1,526,504 | 1,622,363 | 1,524,369 | 1,560,427 | ||||||||||||||||
| Construction and land development | 208,361 | 208,733 | 215,978 | 250,414 | 239,376 | ||||||||||||||||
| Residential real estate | 548,014 | 568,291 | 587,984 | 552,406 | 569,051 | ||||||||||||||||
| Consumer | 673,404 | 710,116 | 609,999 | 596,968 | 600,631 | ||||||||||||||||
| Total loans | $ | 4,376,204 | $ | 4,401,410 | $ | 4,328,835 | $ | 4,073,527 | $ | 4,092,106 | |||||||||||
| Deposit Portfolio | |||||||||||||||||||||
| Noninterest-bearing demand | $ | 1,052,726 | $ | 1,019,472 | $ | 1,015,081 | $ | 902,286 | $ | 941,344 | |||||||||||
| Interest-bearing: | |||||||||||||||||||||
| Checking | 1,425,022 | 1,342,788 | 1,222,599 | 1,009,023 | 968,844 | ||||||||||||||||
| Money market | 849,642 | 787,662 | 753,869 | 732,573 | 802,036 | ||||||||||||||||
| Savings | 534,457 | 522,456 | 526,938 | 442,017 | 457,176 | ||||||||||||||||
| Time | 765,870 | 822,160 | 833,038 | 785,337 | 685,700 | ||||||||||||||||
| Brokered time | 22,923 | 49,716 | 93,646 | 139,971 | 181,188 | ||||||||||||||||
| Total deposits | $ | 4,650,640 | $ | 4,544,254 | $ | 4,445,171 | $ | 4,011,207 | $ | 4,036,288 | |||||||||||
| MIDLAND STATES BANCORP, INC. | |||||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | |||||||||||||||||||||
| For the Quarter Ended | |||||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||||
| (dollars in thousands) | 2020 | 2019 | 2019 | 2019 | 2019 | ||||||||||||||||
| Average Balance Sheets | |||||||||||||||||||||
| Cash and cash equivalents | $ | 337,851 | $ | 406,526 | $ | 259,427 | $ | 162,110 | $ | 152,078 | |||||||||||
| Investment securities | 662,450 | 631,294 | 666,157 | 636,946 | 654,764 | ||||||||||||||||
| Loans | 4,384,206 | 4,359,144 | 4,352,635 | 4,086,720 | 4,128,893 | ||||||||||||||||
| Loans held for sale | 19,844 | 36,974 | 31,664 | 40,177 | 30,793 | ||||||||||||||||
| Nonmarketable equity securities | 45,124 | 43,745 | 44,010 | 44,217 | 44,279 | ||||||||||||||||
| Total interest-earning assets | 5,449,475 | 5,477,683 | 5,353,893 | 4,970,170 | 5,010,807 | ||||||||||||||||
| Non-earning assets | 624,594 | 649,169 | 636,028 | 618,023 | 618,996 | ||||||||||||||||
| Total assets | $ | 6,074,069 | $ | 6,126,852 | $ | 5,989,921 | $ | 5,588,193 | $ | 5,629,803 | |||||||||||
| Interest-bearing deposits | $ | 3,549,515 | $ | 3,490,165 | $ | 3,429,063 | $ | 3,107,660 | $ | 3,093,979 | |||||||||||
| Short-term borrowings | 55,616 | 104,598 | 124,183 | 120,859 | 135,337 | ||||||||||||||||
| FHLB advances and other borrowings | 532,733 | 531,419 | 591,516 | 607,288 | 673,250 | ||||||||||||||||
| Subordinated debt | 170,026 | 182,149 | 106,090 | 94,196 | 94,156 | ||||||||||||||||
| Trust preferred debentures | 48,357 | 48,229 | 48,105 | 47,982 | 47,848 | ||||||||||||||||
| Total interest-bearing liabilities | 4,356,247 | 4,356,560 | 4,298,957 | 3,977,985 | 4,044,570 | ||||||||||||||||
| Noninterest-bearing deposits | 986,178 | 1,028,670 | 967,192 | 921,115 | 919,185 | ||||||||||||||||
| Other noninterest-bearing liabilities | 78,943 | 83,125 | 72,610 | 60,363 | 51,838 | ||||||||||||||||
| Shareholders' equity | 652,701 | 658,497 | 651,162 | 628,730 | 614,210 | ||||||||||||||||
| Total liabilities and shareholders' equity | $ | 6,074,069 | $ | 6,126,852 | $ | 5,989,921 | $ | 5,588,193 | $ | 5,629,803 | |||||||||||
| Yields | |||||||||||||||||||||
| Earning Assets | |||||||||||||||||||||
| Cash and cash equivalents | 1.26 | % | 1.62 | % | 2.14 | % | 2.43 | % | 2.42 | % | |||||||||||
| Investment securities | 3.23 | % | 3.10 | % | 3.00 | % | 3.11 | % | 3.07 | % | |||||||||||
| Loans | 5.01 | % | 5.22 | % | 5.31 | % | 5.32 | % | 5.22 | % | |||||||||||
| Loans held for sale | 3.87 | % | 4.12 | % | 3.02 | % | 4.50 | % | 3.94 | % | |||||||||||
| Nonmarketable equity securities | 5.39 | % | 5.31 | % | 5.33 | % | 5.42 | % | 5.69 | % | |||||||||||
| Total interest-earning assets | 4.56 | % | 4.70 | % | 4.85 | % | 4.94 | % | 4.85 | % | |||||||||||
| Interest-Bearing Liabilities | |||||||||||||||||||||
| Interest-bearing deposits | 0.95 | % | 1.03 | % | 1.08 | % | 1.09 | % | 0.97 | % | |||||||||||
| Short-term borrowings | 0.73 | % | 0.67 | % | 0.68 | % | 0.70 | % | 0.71 | % | |||||||||||
| FHLB advances and other borrowings | 2.24 | % | 2.26 | % | 2.36 | % | 2.34 | % | 2.32 | % | |||||||||||
| Subordinated debt | 5.90 | % | 5.94 | % | 6.30 | % | 6.43 | % | 6.43 | % | |||||||||||
| Trust preferred debentures | 6.02 | % | 6.41 | % | 6.83 | % | 7.17 | % | 7.38 | % | |||||||||||
| Total interest-bearing liabilities | 1.35 | % | 1.43 | % | 1.44 | % | 1.47 | % | 1.39 | % | |||||||||||
| Cost of Deposits | 0.74 | % | 0.80 | % | 0.84 | % | 0.84 | % | 0.74 | % | |||||||||||
| Net Interest Margin | 3.48 | % | 3.56 | % | 3.70 | % | 3.76 | % | 3.73 | % | |||||||||||
| MIDLAND STATES BANCORP, INC. | |||||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | |||||||||||||||||||||
| As of and for the Quarter Ended | |||||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||||
| (dollars in thousands, except per share data) | 2020 | 2019 | 2019 | 2019 | 2019 | ||||||||||||||||
| Asset Quality | |||||||||||||||||||||
| Loans 30-89 days past due | $ | 40,392 | $ | 29,876 | $ | 23,118 | $ | 21,554 | $ | 23,999 | |||||||||||
| Nonperforming loans | 58,166 | 42,082 | 45,168 | 50,676 | 49,262 | ||||||||||||||||
| Nonperforming assets | 67,158 | 50,027 | 50,058 | 54,473 | 51,282 | ||||||||||||||||
| Net charge-offs | 12,835 | 2,194 | 5,369 | 1,242 | 1,055 | ||||||||||||||||
| Loans 30-89 days past due to total loans | 0.92 | % | 0.68 | % | 0.53 | % | 0.53 | % | 0.59 | % | |||||||||||
| Nonperforming loans to total loans | 1.33 | % | 0.96 | % | 1.04 | % | 1.24 | % | 1.20 | % | |||||||||||
| Nonperforming assets to total assets | 1.08 | % | 0.82 | % | 0.82 | % | 0.98 | % | 0.91 | % | |||||||||||
| Allowance for credit losses to total loans | 0.88 | % | 0.64 | % | 0.58 | % | 0.64 | % | 0.56 | % | |||||||||||
| Allowance for credit losses to nonperforming loans | 66.27 | % | 66.60 | % | 55.29 | % | 51.16 | % | 46.87 | % | |||||||||||
| Net charge-offs to average loans | 1.18 | % | 0.20 | % | 0.49 | % | 0.12 | % | 0.10 | % | |||||||||||
| Wealth Management | |||||||||||||||||||||
| Trust assets under administration | $ | 2,967,536 | $ | 3,409,959 | $ | 3,281,260 | $ | 3,125,869 | $ | 3,097,091 | |||||||||||
| Market Data | |||||||||||||||||||||
| Book value per share at period end | $ | 26.99 | $ | 27.10 | $ | 26.93 | $ | 26.66 | $ | 26.08 | |||||||||||
| Tangible book value per share at period end (1) | $ | 18.19 | $ | 18.64 | $ | 18.40 | $ | 18.36 | $ | 17.68 | |||||||||||
| Market price at period end | $ | 17.49 | $ | 28.96 | $ | 26.05 | $ | 26.72 | $ | 24.06 | |||||||||||
| Shares outstanding at period end | 23,381,496 | 24,420,345 | 24,338,748 | 23,897,038 | 23,827,438 | ||||||||||||||||
| Capital | |||||||||||||||||||||
| Total capital to risk-weighted assets | 13.73 | % | 14.72 | % | 14.82 | % | 13.49 | % | 13.25 | % | |||||||||||
| Tier 1 capital to risk-weighted assets | 9.76 | % | 10.52 | % | 10.35 | % | 10.85 | % | 10.65 | % | |||||||||||
| Tier 1 leverage ratio | 8.39 | % | 8.74 | % | 8.77 | % | 9.27 | % | 8.92 | % | |||||||||||
| Tier 1 common capital to risk-weighted assets | 8.47 | % | 9.20 | % | 9.02 | % | 9.38 | % | 9.16 | % | |||||||||||
| Tangible common equity to tangible assets (1) | 7.08 | % | 7.74 | % | 7.58 | % | 8.20 | % | 7.74 | % | |||||||||||
| (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 | |||||||||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||||||||
| (dollars in thousands, except per share data) | 2020 | 2019 | 2019 | 2019 | 2019 | ||||||||||||||||||||
| Income before income taxes - GAAP | $ | 2,005 | $ | 16,071 | $ | 16,670 | $ | 21,394 | $ | 18,336 | |||||||||||||||
| Adjustments to noninterest income: | |||||||||||||||||||||||||
| Gain on sales of investment securities, net | - | 635 | 25 | 14 | - | ||||||||||||||||||||
| Other | (13 | ) | (6 | ) | - | (23 | ) | - | |||||||||||||||||
| Total adjustments to noninterest income | (13 | ) | 629 | 25 | (9 | ) | - | ||||||||||||||||||
| Adjustments to noninterest expense: | |||||||||||||||||||||||||
| Loss (gain) on mortgage servicing rights held for sale | 496 | 95 | (70 | ) | (515 | ) | - | ||||||||||||||||||
| Loss on repurchase of subordinated debt | 193 | 1,778 | - | - | - | ||||||||||||||||||||
| Integration and acquisition expenses | 1,031 | 3,332 | 5,292 | 286 | 160 | ||||||||||||||||||||
| Total adjustments to noninterest expense | 1,720 | 5,205 | 5,222 | (229 | ) | 160 | |||||||||||||||||||
| Adjusted earnings pre tax | 3,738 | 20,647 | 21,867 | 21,174 | 18,496 | ||||||||||||||||||||
| Adjusted earnings tax | 932 | 4,537 | 5,445 | 4,978 | 4,398 | ||||||||||||||||||||
| Adjusted earnings - non-GAAP | 2,806 | 16,110 | 16,422 | 16,196 | 14,098 | ||||||||||||||||||||
| Preferred stock dividends, net | - | - | (22 | ) | 34 | 34 | |||||||||||||||||||
| Adjusted earnings available to common shareholders - non-GAAP | $ | 2,806 | $ | 16,110 | $ | 16,444 | $ | 16,162 | $ | 14,064 | |||||||||||||||
| Adjusted diluted earnings per common share | $ | 0.11 | $ | 0.64 | $ | 0.66 | $ | 0.66 | $ | 0.58 | |||||||||||||||
| Adjusted return on average assets | 0.19 | % | 1.04 | % | 1.09 | % | 1.16 | % | 1.02 | % | |||||||||||||||
| Adjusted return on average shareholders' equity | 1.73 | % | 9.71 | % | 10.01 | % | 10.33 | % | 9.31 | % | |||||||||||||||
| Adjusted return on average tangible common equity | 2.53 | % | 14.15 | % | 14.52 | % | 15.19 | % | 13.90 | % | |||||||||||||||
| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||||||||
| RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (continued) | ||||||||||||||||||||||||||
| Efficiency Ratio Reconciliation | ||||||||||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||||||||
| (dollars in thousands) | 2020 | 2019 | 2019 | 2019 | 2019 | |||||||||||||||||||||
| Noninterest expense - GAAP | $ | 42,675 | $ | 46,325 | $ | 48,025 | $ | 40,194 | $ | 41,097 | ||||||||||||||||
| (Loss) gain on mortgage servicing rights held for sale | (496 | ) | (95 | ) | 70 | 515 | - | |||||||||||||||||||
| Loss on repurchase of subordinated debt | (193 | ) | (1,778 | ) | - | - | - | |||||||||||||||||||
| Integration and acquisition expenses | (1,031 | ) | (3,332 | ) | (5,292 | ) | (286 | ) | (160 | ) | ||||||||||||||||
| Adjusted noninterest expense | $ | 40,955 | $ | 41,120 | $ | 42,803 | $ | 40,423 | $ | 40,937 | ||||||||||||||||
| Net interest income - GAAP | $ | 46,651 | $ | 48,687 | $ | 49,450 | $ | 46,077 | $ | 45,601 | ||||||||||||||||
| Effect of tax-exempt income | 485 | 474 | 502 | 526 | 543 | |||||||||||||||||||||
| Adjusted net interest income | 47,136 | 49,161 | 49,952 | 46,603 | 46,144 | |||||||||||||||||||||
| Noninterest income - GAAP | $ | 8,598 | $ | 19,014 | $ | 19,606 | $ | 19,587 | $ | 17,075 | ||||||||||||||||
| Loan servicing rights impairment (recapture) | 8,468 | 1,613 | 1,060 | (559 | ) | 25 | ||||||||||||||||||||
| Gain on sales of investment securities, net | - | (635 | ) | (25 | ) | (14 | ) | - | ||||||||||||||||||
| Other | 13 | 6 | - | 23 | - | |||||||||||||||||||||
| Adjusted noninterest income | 17,079 | 19,998 | 20,641 | 19,037 | 17,100 | |||||||||||||||||||||
| Adjusted total revenue | $ | 64,215 | $ | 69,159 | $ | 70,593 | $ | 65,640 | $ | 63,244 | ||||||||||||||||
| Efficiency ratio | 63.78 | % | 59.46 | % | 60.63 | % | 61.58 | % | 64.73 | % | ||||||||||||||||
| 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 | ||||||||||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||||||||
| (dollars in thousands, except per share data) | 2020 | 2019 | 2019 | 2019 | 2019 | |||||||||||||||||||||
| Shareholders' Equity to Tangible Common Equity | ||||||||||||||||||||||||||
| Total shareholders' equity—GAAP | $ | 631,160 | $ | 661,911 | $ | 655,522 | $ | 639,888 | $ | 624,168 | ||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
| Preferred stock | - | - | - | (2,684 | ) | (2,733 | ) | |||||||||||||||||||
| Goodwill | (172,796 | ) | (171,758 | ) | (171,074 | ) | (164,673 | ) | (164,673 | ) | ||||||||||||||||
| Other intangibles, net | (33,124 | ) | (34,886 | ) | (36,690 | ) | (33,893 | ) | (35,566 | ) | ||||||||||||||||
| Tangible common equity | $ | 425,240 | $ | 455,267 | $ | 447,758 | $ | 438,638 | $ | 421,196 | ||||||||||||||||
| Total Assets to Tangible Assets: | ||||||||||||||||||||||||||
| Total assets—GAAP | $ | 6,208,230 | $ | 6,087,017 | $ | 6,113,904 | $ | 5,546,055 | $ | 5,641,780 | ||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
| Goodwill | (172,796 | ) | (171,758 | ) | (171,074 | ) | (164,673 | ) | (164,673 | ) | ||||||||||||||||
| Other intangibles, net | (33,124 | ) | (34,886 | ) | (36,690 | ) | (33,893 | ) | (35,566 | ) | ||||||||||||||||
| Tangible assets | $ | 6,002,310 | $ | 5,880,373 | $ | 5,906,140 | $ | 5,347,489 | $ | 5,441,541 | ||||||||||||||||
| Common Shares Outstanding | 23,381,496 | 24,420,345 | 24,338,748 | 23,897,038 | 23,827,438 | |||||||||||||||||||||
| Tangible Common Equity to Tangible Assets | 7.08 | % | 7.74 | % | 7.58 | % | 8.20 | % | 7.74 | % | ||||||||||||||||
| Tangible Book Value Per Share | $ | 18.19 | $ | 18.64 | $ | 18.40 | $ | 18.36 | $ | 17.68 | ||||||||||||||||
| Return on Average Tangible Common Equity (ROATCE) | ||||||||||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||||||||||
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||||||||
| (dollars in thousands) | 2020 | 2019 | 2019 | 2019 | 2019 | |||||||||||||||||||||
| Net income available to common shareholders | $ | 1,549 | $ | 12,792 | $ | 12,677 | $ | 16,321 | $ | 13,948 | ||||||||||||||||
| Average total shareholders' equity—GAAP | $ | 652,701 | $ | 658,497 | $ | 651,162 | $ | 628,730 | $ | 614,210 | ||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
| Preferred stock | - | - | (814 | ) | (2,708 | ) | (2,759 | ) | ||||||||||||||||||
| Goodwill | (171,890 | ) | (171,082 | ) | (166,389 | ) | (164,673 | ) | (164,673 | ) | ||||||||||||||||
| Other intangibles, net | (33,951 | ) | (35,745 | ) | (34,519 | ) | (34,689 | ) | (36,438 | ) | ||||||||||||||||
| Average tangible common equity | $ | 446,860 | $ | 451,670 | $ | 449,440 | $ | 426,660 | $ | 410,340 | ||||||||||||||||
| ROATCE | 1.39 | % | 11.24 | % | 11.19 | % | 15.34 | % | 13.79 | % | ||||||||||||||||
EXHIBIT 99.2
1 Midland States Bancorp, Inc. NASDAQ: MSBI First Quarter 2020 Earnings Call
2 Forward - Looking Statements. This presentation may contain forward - looking statements within the meaning of the federal securities laws. Forward - looking statements expressing management’s current expectations, forecasts of future events or long - te rm goals may be based upon beliefs, expectations and assumptions of Midland’s management, and are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “intend,” “estimate,” “may,” “will,” “would,” “could,” “should” o r o ther similar expressions. All statements in this presentation speak only as of the date they are made, and Midland undertakes no obligation to update any statement. A number of factors, many of which are beyond the ability of Midland to control or predic t, could cause actual results to differ materially from those in its forward - looking statements including the effects of the Corona virus Disease 2019 (COVID - 19) pandemic, including its potential effects on the economic environment, our customers and our operations, as well as any changes to federal, state or local government laws, regulations or orders in connection with the pandemic. These risks and uncertainties should be considered in evaluating forward - looking statements, and undue reliance should not be placed o n such statements. Additional information concerning Midland and its businesses, including additional factors that could materi all y affect Midland’s financial results, are included in Midland’s filings with the Securities and Exchange 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 COVID - 19 RESPONSE OVERVIEW
4 Our COVID - 19 Response: Employees • Regular meetings of Pandemic Response Team • Employee awareness campaign initiated based on CDC guidelines • All non - essential business travel suspended • Free COVID - 19 testing added to health care plans and sick time benefits expanded • 9 temporary branch closures • Remaining branches operating with reduced schedules • Bank branch lobbies temporarily closed with customer needs primarily serviced by drive - through facilities • Rotating staff model implemented at branches to minimize employee exposure • Approximately 95% of non - retail employees working from home
5 Our COVID - 19 Response: Clients • $263 million in PPP loans approved through April 16, 2020 • $665 million in loan payment deferral requests received, including equipment finance loans and leases • Credit line utilization rates remained steady at 66 - 68% throughout March • New consumer deposit and commercial treasury management account openings remaining relatively consistent with pre - crisis levels • Debit card transaction and check processing volumes down notably during last week of March • 1Q20 residential mortgage loan locks more than doubled from prior quarter • Discussions held with approximately 80% of wealth management clients with vast majority remaining consistent with investment strategy
6 ▪ Broadly diversified loan portfolio by type of customer and loan type ▪ 67% of portfolio is fixed; 33% is floating ▪ Portfolio is 72% Commercial Loans and 28% Consumer Loans as of 3/31/20 Loan Portfolio Overview Loan Portfolio Mix Non - Owner Occupied CRE $810M 18% Owner - Occupied CRE $698M 16% Commercial Loans and Leases $1,439M 33% Construction and Land Development $208M 5% Consumer $673M 15% Residential Real Estate $548M 13% $434 $508 $565 $632 $672 1Q19 2Q19 3Q19 4Q19 1Q20 Commercial vs Consumer Loans ($ in millions) Equipment Finance Portfolio 1Q20 % of Total Commercial Loans & Leases $1,439 33% Commercial Real Estate $1,508 34% Construction and Land Development $208 5% Total Commercial $3,155 72% Residential Real Estate $548 13% Consumer $673 15% Total Consumer $1,221 28% Total Loans $4,376 100%
7 Commercial Loans and Leases by Industry 7 RE / Rental & Leasing 25% All Others 12% Manufacturing 8% Retail Trade 8% Accommodation & Food Svcs 7% Social Services 7% Construction - General 6% Health Care 5% Ag., Forestry, & Fishing 5% Trucking 5% Finance and Insurance 4% Trans. / Warehousing 3% Other Services 3% Wholesale Trade 2% Industries as a percentage of Commercial, CRE and Equipment Finance Loans and Leases as of 3/31/20
8 Commercial Real Estate Portfolio by Collateral Type 8 Retail 18% All Others 10% Elder Care Facility 10% Hotel / Restaurant 10% Industrial / Warehouse 10% Multi - Family 9% Office 7% Residential 1 - 4 Family 6% Farmland 5% Medical Building 4% C - Store / Gas Station 4% Car Dealerships 3% Arts, Entertainment and Recreation 1% Mixed Use / Other 1% Raw Land 1% Church 1% Collateral type as a percentage of the Commercial Real Estate Portfolio as of 3/31/20
9 CECL Adoption – Drivers of Change from ALLL ALLL 12/31/19 ACL 3/31/20 Day 1 Adjustment Specific Reserves Portfolio Changes Economic Factors ▪ CECL Day 1 Adjustment ▪ Includes ACL for loans and leases ▪ $7.2 million impact to capital ▪ Changes to specific reserves from 12/31/19 ▪ New loans ▪ Changes in credit quality ▪ Aging of existing portfolio ▪ Other charge - offs and recoveries ▪ Changes to macro - economic variables and forecasts ▪ Changes to other economic qualitative factors ($ in thousands)
10 Net Interest Margin • Normalized net interest margin was stable from prior quarter, down 1 bp • Overall cost of deposits decreased 6 bps in 1Q20 • Average rate on new and renewed loans in 1Q20 declined to 4.59% from 4.86% in 4Q19 • $193.8 million in time deposits scheduled to mature in 2Q20 with weighted average rate of 2.14% • Building liquidity on balance sheet will put pressure on NIM going forward • Additional subordinated debt continues to impact NIM » Now expect to retain subordinated debt that is callable in June 2020 » $30 million in subordinated debt will move to floating rate in June 2020 resulting in reduction of approximately 50 bps through the end of the year • PPP loans will impact NIM in 2Q20 and 3Q20
11 Capital and Liquidity Overview Capital Ratios (as of 3/31/20) Liquidity Sources (as of 3/31/20) 7.08% 8.47% 8.39% 9.76% 13.73% 11.76% 10.12% 11.76% 12.38% 0.00% 5.00% 10.00% 15.00% TCE/TA Tier 1 Common Tier 1 Leverage Tier 1 RBC Total RBC Consolidated Bank Level ($ in millions) Cash and Cash Equivalents $ 449.4 Unpledged Securities 309.0 FHLB Committed Liquidity 436.6 FRB Discount Window Availability 17.7 Primary Liquidity 1,212.7 Proceeds from Loan Sale 100.0 FRB – Additional Loans to Discount Window 85.0 Secondary Liquidity 185.0 Total Estimated Liquidity $ 1,397.7* *PPP Liquidity Facility represents additional source of liquidity Conditional Funding Based on Market Conditions Additional Credit Facility $ 250.0 Brokered CDs (additional capacity) $ 500.0 Other Liquidity Holding Company Cash Position of $47.8 Million
12 FIRST QUARTER 2020 FINANCIAL REVIEW
13 1Q 2020 4Q 2019 1Q 2019 Commercial loans and leases $ 1,439 $ 1,388 $ 1,123 Commercial real estate 1,508 1,526 1,560 Construction and land development 208 209 239 Residential real estate 548 568 569 Consumer 673 710 601 Total Loans $ 4,376 $ 4,401 $ 4,092 Loan Portfolio Total Loans and Average Loan Yield • Total loans decreased $25.2 million to $4.38 billion • Decrease primarily attributable to declines in consumer, residential real estate and commercial real estate portfolios; partially offset by growth in the commercial loans and leases portfolio • Decline in consumer portfolio due to $99.7 million in loans moved to held - for - sale • Equipment finance balances increased $40.9 million, or 6.5%, from December 31, 2019 Loan Portfolio Mix (in millions, as of quarter - end) (in millions, as of quarter - end) $4,092 $4,074 $4,329 $4,401 $4,376 5.22% 5.32% 5.31% 5.22% 5.01% Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Total Loans Average Loan Yield
14 1Q 2020 4Q 2019 1Q 2019 Noninterest - bearing demand $ 1,053 $ 1,019 $ 941 Interest - bearing: Checking 1,425 1,343 969 Money market 850 788 802 Savings 534 522 457 Time 766 822 686 Brokered time 23 50 181 Total Deposits $4,651 $ 4,544 $ 4,036 Total Deposits Total Deposits and Cost of Deposits • Total deposits increased $106.4 million to $4.65 billion, or 9.4% on an annualized basis • Growth in deposits attributable to increase in core deposits, primarily from commercial customers • Continued intentional run - off of higher - cost time deposits, replaced with lower - cost core deposits • Time deposits decreased $56.3 million due to run - off of higher - cost CDs with promotional rates Deposit Mix (in millions, as of quarter - end) (in millions, as of quarter - end) $4,036 $4,011 $4,445 $4,544 $4,651 0.74% 0.84% 0.84% 0.80% 0.74% Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Total Deposits Cost of Deposits
15 $2.5 $3.4 $3.1 $3.6 $2.2 $45.6 $46.1 $49.5 $48.7 $46.7 1Q 2019 2Q 2019 3Q 2019 4Q 2019 1Q 2020 NII Accretion Income 0.17% 0.25% 0.20% 0.23% 0.16% 3.73% 3.76% 3.70% 3.56% 3.48% 1Q 2019 2Q 2019 3Q 2019 4Q 2019 1Q 2020 NIM Accretion Income • Net interest income decreased 4.2% • Excluding the impact of accretion income, net interest margin declined 1 basis point • Accretion income declined primarily due to adoption of CECL • Decline in earning asset yields largely offset by decline in cost of deposits • Decline in earning asset yields primarily driven by Fed rate cuts • PPP loans expected to provide positive impact in 2Q20 and 3Q20 Net Interest Income/Margin Net Interest Margin Net Interest Income (in millions)
16 $4.95 $5.50 $6.00 $5.38 $5.68 1Q 2019 2Q 2019 3Q 2019 4Q 2019 1Q 2020 $3,097 $3,126 $3,281 $3,410 $2,968 1Q 2019 2Q 2019 3Q 2019 4Q 2019 1Q 2020 • During 1Q20, assets under administration decreased $442.5 million, primarily due to market performance • Total Wealth Management revenue increased 5.6% from the prior quarter • Increase primarily attributable to higher trust fees related to tax preparation and higher estate fees Wealth Management Wealth Management Revenue Assets Under Administration (in millions) (in millions )
17 Noninterest Income • Noninterest income decreased 54.8% from prior quarter • Decline primarily related to $8.5 million impairment of commercial mortgage servicing rights and lower commercial FHA revenue • Wealth management and residential mortgage banking revenue increased from the prior quarter Noninterest Income (in millions) $17.1 $19.6 $19.6 $19.0 $17.1 1Q 2019 2Q 2019 3Q 2019 4Q 2019 1Q 2020 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 (2) Excludes $8.5 million impairment of commercial mortgage servicing rights (1) (2)
18 Noninterest Expense and Operating Efficiency • Efficiency Ratio (1) was 63.8% in 1Q20 vs. 59.5% in 4Q19 • Adjustments to non - interest expense: • Excluding these adjustments, noninterest expense was essentially unchanged on a linked - quarter basis • 1Q20 noninterest expense included $0.9 million increase in reserve for unfunded commitments • Two additional branches consolidated in 1Q20 • Staffing level adjustments implemented in 1Q20 expected to result in $3.9 million in annualized savings, beginning in 2Q20 Noninterest Expense and Efficiency Ratio (1) (Noninterest expense in millions) $0.2 $(0.2) $5.2 $5.2 $1.7 $41.1 $40.2 $48.0 $46.3 $42.7 64.7% 61.6% 60.6% 59.5% 63.8% ($1.00) 1Q 2019 2Q 2019 3Q 2019 4Q 2019 1Q 2020 Total Noninterest Expense Adjustments to Noninterest Expense Efficiency Ratio Notes: (1) Represents a non - GAAP financial measure. See “Non - GAAP Reconciliation” in the appendix. ($ in millions) 1Q20 4Q19 Integration and acquisition related expenses ($1.0) ($3.3) Loss on repurchase of subordinated debt ($0.2) ($1.8) Loss on MSRs held for sale $(0.5) $(0.1)
19 Asset Quality NCO / Average Loans • Adoption of new CECL accounting standard resulted in approximately $12.8 million increase in ACL, relative to ALLL as of 12/31/19 • $12.8 million in net charge - offs in 1Q20, of which approximately $10.2 million related to three NPLs with specific reserves established against them for at least one year (unrelated to COVID - 19 stress) • Provision for loan losses of $10.6 million in 1Q20 reflects higher level of NCOs and a downgrade in economic forecast due to the impact of COVID - 19 pandemic • Increase in NPLs primarily attributable to addition of PCI loans upon adoption of CECL and two large CRE relationships totali ng $13.5 million • At 3/31/20, approximately 95% of ACL was allocated to general reserves Nonperforming Loans / Total Loans (Total Loans as of quarter - end) 1.20% 1.24% 1.04% 0.96% 1.33% 1Q 2019 2Q 2019 3Q 2019 4Q 2019 1Q 2020 0.10% 0.12% 0.49% 0.20% 1.18% 1Q 2019 2Q 2019 3Q 2019 4Q 2019 1Q 2020
20 APPENDIX
21 21 Adjusted Earnings Reconciliation (dollars in thousands, except per share data) Income before income taxes - GAAP $ 2,005 $ 16,071 $ 16,670 $ 21,394 $ 18,336 Adjustments to noninterest income: Gain on sales of investment securities, net - 635 25 14 - Other (13) (6) - (23) - Total adjustments to noninterest income (13) 629 25 (9) - Adjustments to noninterest expense: Loss (gain) on mortgage servicing rights held for sale 496 95 (70) (515) - Loss on repurchase of subordinated debt 193 1,778 - - - Integration and acquisition expenses 1,031 3,332 5,292 286 160 Total adjustments to noninterest expense 1,720 5,205 5,222 (229) 160 Adjusted earnings pre tax 3,738 20,647 21,867 21,174 18,496 Adjusted earnings tax 932 4,537 5,445 4,978 4,398 Adjusted earnings - non-GAAP 2,806 16,110 16,422 16,196 14,098 Preferred stock dividends, net - - (22) 34 34 Adjusted earnings available to common shareholders - non-GAAP $ 2,806 $ 16,110 $ 16,444 $ 16,162 $ 14,064 Adjusted diluted earnings per common share $ 0.11 $ 0.64 $ 0.66 $ 0.66 $ 0.58 Adjusted return on average assets 0.19 % 1.04 % 1.09 % 1.16 % 1.02 % Adjusted return on average shareholders' equity 1.73 % 9.71 % 10.01 % 10.33 % 9.31 % Adjusted return on average tangible common equity 2.53 % 14.15 % 14.52 % 15.19 % 13.90 % MIDLAND STATES BANCORP, INC.RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES For the Quarter Ended 2020 2019 2019 2019 2019 March 31, December 31, September 30, June 30, March 31,
22 22 Efficiency Ratio Reconciliation (dollars in thousands) Noninterest expense - GAAP $ 42,675 $ 46,325 $ 48,025 $ 40,194 $ 41,097 (Loss) gain on mortgage servicing rights held for sale (496) (95) 70 515 - Loss on repurchase of subordinated debt (193) (1,778) - - - Integration and acquisition expenses (1,031) (3,332) (5,292) (286) (160) Adjusted noninterest expense $ 40,955 $ 41,120 $ 42,803 $ 40,423 $ 40,937 Net interest income - GAAP $ 46,651 $ 48,687 $ 49,450 $ 46,077 $ 45,601 Effect of tax-exempt income 485 474 502 526 543 Adjusted net interest income 47,136 49,161 49,952 46,603 46,144 Noninterest income - GAAP $ 8,598 $ 19,014 $ 19,606 $ 19,587 $ 17,075 Loan servicing rights impairment (recapture) 8,468 1,613 1,060 (559) 25 Gain on sales of investment securities, net - (635) (25) (14) - Other 13 6 - 23 - Adjusted noninterest income 17,079 19,998 20,641 19,037 17,100 Adjusted total revenue $ 64,215 $ 69,159 $ 70,593 $ 65,640 $ 63,244 Efficiency ratio 63.78 % 59.46 % 60.63 % 61.58 % 64.73 % MIDLAND STATES BANCORP, INC.RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (continued) For the Quarter Ended 2020 2019 2019 2019 2019 March 31, December 31, September 30, June 30, March 31,
23 23 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 $ 631,160 $ 661,911 $ 655,522 $ 639,888 $ 624,168 Adjustments: Preferred stock - - - (2,684) (2,733) Goodwill (172,796) (171,758) (171,074) (164,673) (164,673) Other intangibles, net (33,124) (34,886) (36,690) (33,893) (35,566) Tangible common equity $ 425,240 $ 455,267 $ 447,758 $ 438,638 $ 421,196 Total Assets to Tangible Assets: Total assets—GAAP $ 6,208,230 $ 6,087,017 $ 6,113,904 $ 5,546,055 $ 5,641,780 Adjustments: Goodwill (172,796) (171,758) (171,074) (164,673) (164,673) Other intangibles, net (33,124) (34,886) (36,690) (33,893) (35,566) Tangible assets $ 6,002,310 $ 5,880,373 $ 5,906,140 $ 5,347,489 $ 5,441,541 Common Shares Outstanding 23,381,496 24,420,345 24,338,748 23,897,038 23,827,438 Tangible Common Equity to Tangible Assets 7.08 % 7.74 % 7.58 % 8.20 % 7.74 % Tangible Book Value Per Share $ 18.19 $ 18.64 $ 18.40 $ 18.36 $ 17.68 Return on Average Tangible Common Equity (ROATCE) (dollars in thousands) Net income available to common shareholders $ 1,549 $ 12,792 $ 12,677 $ 16,321 $ 13,948 Average total shareholders' equity—GAAP $ 652,701 $ 658,497 $ 651,162 $ 628,730 $ 614,210 Adjustments: Preferred stock - - (814) (2,708) (2,759) Goodwill (171,890) (171,082) (166,389) (164,673) (164,673) Other intangibles, net (33,951) (35,745) (34,519) (34,689) (36,438) Average tangible common equity $ 446,860 $ 451,670 $ 449,440 $ 426,660 $ 410,340 ROATCE 1.39 % 11.24 % 11.19 % 15.34 % 13.79 % MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (continued) As of March 31, December 31, September 30, June 30, March 31, 2020 2019 2019 2019 2019 For the Quarter Ended 2020 2019 2019 2019 2019 March 31, December 31, September 30, June 30, March 31,