msbi_Current_Folio_10Q

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 


 

                        

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2017

 

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______________ to _______________

 

Commission File Number 001-35272

 


 

MIDLAND STATES BANCORP, INC.

(Exact name of registrant as specified in its charter)

 


 

 

 

 

 

 

 

ILLINOIS

 

37-1233196

(State of other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

 

1201 Network Centre Drive

Effingham, IL

 

 

62401

(Address of principal executive offices)

 

(Zip Code)

 

(217) 342-7321

(Registrant’s telephone number, including area code)

 


 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ☒ Yes   ☐ No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  ☒ Yes  ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Large accelerated filer ☐

 

Accelerated filer ☐

 

Non-accelerated filer ☒

 

Smaller reporting company ☐

Emerging growth company ☒

 

 

 

 

 

 

 

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. ☒

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  ☐ Yes  ☒ No

 

As of July 31, 2017, the Registrant had 19,095,237 shares of outstanding common stock, $0.01 par value.

 

 

 


 

 

 

 

MIDLAND STATES BANCORP, INC.

TABLE OF CONTENTS

 

 

 

 

 

 

 

 

Page

PART I.        FINANCIAL INFORMATION

 

 

 

 

Item 1. 

Financial Statements

 

 

 

 

 

Consolidated Balance Sheets at June 30, 2017 (Unaudited) and December 31, 2016

1

 

 

 

 

Consolidated Statements of Income (Unaudited) for the three and six months ended June 30, 2017 and 2016

2

 

 

 

 

Consolidated Statements of Comprehensive Income (Unaudited) for the three and six months ended June 30, 2017 and 2016

3

 

 

 

 

Consolidated Statements of Shareholders’ Equity (Unaudited) for the three and six months ended June 30, 2017 and 2016

4

 

 

 

 

Consolidated Statements of Cash Flows (Unaudited) for the three and six months ended June 30, 2017 and 2016

5

 

 

 

 

Notes to Consolidated Financial Statements (Unaudited)

6

 

 

 

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

42

 

 

 

Item 3. 

Quantitative and Qualitative Disclosures about Market Risk

68

 

 

 

Item 4. 

Controls and Procedures

68

 

 

 

PART II.     OTHER INFORMATION

 

 

 

 

Item 1. 

Legal Proceedings

68

 

 

 

Item 1A. 

Risk Factors

69

 

 

 

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

69

 

 

 

Item 6. 

Exhibits

70

 

 

 

SIGNATURES 

71

 

 

 

 

 

 

 

 

 

 

 

 


 

Table of Contents

 

 

 

 

PART I – FINANCIAL INFORMATION

ITEM 1 – FINANCIAL STATEMENTS

MIDLAND STATES BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

    

June 30, 

    

December 31, 

 

 

    

2017

    

2016

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

 

Cash and due from banks

 

$

332,422

 

$

189,543

 

Federal funds sold

 

 

1,934

 

 

1,173

 

Cash and cash equivalents

 

 

334,356

 

 

190,716

 

Investment securities available for sale, at fair value

 

 

385,340

 

 

246,339

 

Investment securities held to maturity, at amortized cost (fair value of $79,612 and $81,952 at June 30, 2017 and December 31, 2016, respectively)

 

 

75,371

 

 

78,672

 

Loans

 

 

3,184,063

 

 

2,319,976

 

Allowance for loan losses

 

 

(15,424)

 

 

(14,862)

 

Total loans, net

 

 

3,168,639

 

 

2,305,114

 

Loans held for sale, at fair value

 

 

41,689

 

 

70,565

 

Premises and equipment, net

 

 

76,598

 

 

66,692

 

Other real estate owned

 

 

7,036

 

 

3,560

 

Nonmarketable equity securities

 

 

28,891

 

 

19,485

 

Accrued interest receivable

 

 

10,322

 

 

8,202

 

Mortgage servicing rights, at lower of cost or market

 

 

70,277

 

 

68,008

 

Intangible assets

 

 

18,459

 

 

7,187

 

Goodwill

 

 

96,940

 

 

48,836

 

Cash surrender value of life insurance policies

 

 

111,802

 

 

74,226

 

Accrued income taxes receivable

 

 

2,709

 

 

5,862

 

Deferred tax assets, net

 

 

22,802

 

 

 —

 

Other assets

 

 

40,411

 

 

40,259

 

Total assets

 

$

4,491,642

 

$

3,233,723

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

Noninterest-bearing

 

$

780,803

 

$

562,333

 

Interest-bearing

 

 

2,552,228

 

 

1,842,033

 

Total deposits

 

 

3,333,031

 

 

2,404,366

 

Short-term borrowings

 

 

170,629

 

 

131,557

 

FHLB advances and other borrowings

 

 

400,304

 

 

237,518

 

Subordinated debt

 

 

54,556

 

 

54,508

 

Trust preferred debentures

 

 

45,156

 

 

37,405

 

Accrued interest payable

 

 

1,555

 

 

1,045

 

Deferred tax liabilities, net

 

 

 —

 

 

8,598

 

Other liabilities

 

 

34,459

 

 

36,956

 

Total liabilities

 

 

4,039,690

 

 

2,911,953

 

 

 

 

 

 

 

 

 

Shareholders’ Equity:

 

 

 

 

 

 

 

Preferred stock, Series H, $2 par value, $1,000 liquidation value; 2,636 shares authorized, issued and outstanding at June 30, 2017

 

 

3,134

 

 

 —

 

Common stock, $0.01 par value; 40,000,000 shares authorized; 19,087,409 and 15,483,499 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively

 

 

191

 

 

155

 

Capital surplus

 

 

329,347

 

 

209,712

 

Retained earnings

 

 

118,201

 

 

112,513

 

Accumulated other comprehensive income (loss)

 

 

1,079

 

 

(610)

 

Total shareholders’ equity

 

 

451,952

 

 

321,770

 

Total liabilities and shareholders’ equity

 

$

4,491,642

 

$

3,233,723

 

The accompanying notes are an integral part of the consolidated financial statements.

1


 

Table of Contents

MIDLAND STATES BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME—(UNAUDITED)

(dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Three Months Ended

    

Six Months Ended

 

 

 

June 30, 

 

June 30, 

 

 

    

2017

    

2016

    

2017

    

2016

 

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

$

30,254

 

$

26,777

 

$

58,327

 

$

49,694

 

Tax exempt

 

 

323

 

 

322

 

 

640

 

 

645

 

Loans held for sale

 

 

720

 

 

919

 

 

1,489

 

 

1,543

 

Investment securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

1,560

 

 

2,710

 

 

2,799

 

 

5,456

 

Tax exempt

 

 

945

 

 

926

 

 

1,857

 

 

1,847

 

Nonmarketable equity securities

 

 

239

 

 

174

 

 

457

 

 

330

 

Federal funds sold and cash investments

 

 

487

 

 

287

 

 

798

 

 

567

 

Total interest income

 

 

34,528

 

 

32,115

 

 

66,367

 

 

60,082

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

2,807

 

 

2,290

 

 

5,193

 

 

4,512

 

Short-term borrowings

 

 

82

 

 

68

 

 

162

 

 

136

 

FHLB advances and other borrowings

 

 

841

 

 

256

 

 

1,407

 

 

392

 

Subordinated debt

 

 

873

 

 

1,054

 

 

1,746

 

 

2,112

 

Trust preferred debentures

 

 

525

 

 

458

 

 

998

 

 

901

 

Total interest expense

 

 

5,128

 

 

4,126

 

 

9,506

 

 

8,053

 

Net interest income

 

 

29,400

 

 

27,989

 

 

56,861

 

 

52,029

 

Provision for loan losses

 

 

458

 

 

629

 

 

1,991

 

 

1,754

 

Net interest income after provision for loan losses

 

 

28,942

 

 

27,360

 

 

54,870

 

 

50,275

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial FHA revenue

 

 

4,153

 

 

8,538

 

 

10,848

 

 

15,100

 

Residential mortgage banking revenue

 

 

2,330

 

 

1,037

 

 

5,246

 

 

2,158

 

Wealth management revenue

 

 

3,406

 

 

1,870

 

 

6,279

 

 

3,655

 

Service charges on deposit accounts

 

 

1,122

 

 

965

 

 

2,014

 

 

1,872

 

Interchange revenue

 

 

1,114

 

 

945

 

 

2,092

 

 

1,909

 

FDIC loss-sharing expense

 

 

 —

 

 

(1,608)

 

 

 —

 

 

(1,661)

 

Gain on sales of investment securities, net

 

 

55

 

 

72

 

 

122

 

 

276

 

Other-than-temporary impairment on investment securities

 

 

 —

 

 

 —

 

 

 —

 

 

(824)

 

(Loss) gain on sales of other real estate owned

 

 

(4)

 

 

83

 

 

32

 

 

79

 

Other income

 

 

1,443

 

 

2,114

 

 

3,328

 

 

4,071

 

Total noninterest income

 

 

13,619

 

 

14,016

 

 

29,961

 

 

26,635

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

21,842

 

 

17,012

 

 

38,957

 

 

32,399

 

Occupancy and equipment

 

 

3,472

 

 

3,233

 

 

6,655

 

 

6,544

 

Data processing

 

 

2,949

 

 

2,624

 

 

5,746

 

 

5,244

 

FDIC insurance

 

 

468

 

 

498

 

 

838

 

 

962

 

Professional

 

 

3,142

 

 

1,573

 

 

6,134

 

 

3,274

 

Marketing

 

 

804

 

 

649

 

 

1,446

 

 

1,292

 

Communications

 

 

386

 

 

547

 

 

932

 

 

1,063

 

Loan expense

 

 

482

 

 

552

 

 

902

 

 

1,037

 

Other real estate owned

 

 

167

 

 

417

 

 

579

 

 

569

 

Amortization of intangible assets

 

 

579

 

 

519

 

 

1,104

 

 

1,099

 

Other expense

 

 

3,354

 

 

3,280

 

 

5,149

 

 

5,059

 

Total noninterest expense

 

 

37,645

 

 

30,904

 

 

68,442

 

 

58,542

 

Income before income taxes

 

 

4,916

 

 

10,472

 

 

16,389

 

 

18,368

 

Income taxes

 

 

1,377

 

 

3,683

 

 

4,360

 

 

6,460

 

Net income

 

 

3,539

 

 

6,789

 

 

12,029

 

 

11,908

 

Preferred stock dividends

 

 

19

 

 

 —

 

 

19

 

 

 —

 

Net income available to common shareholders

 

$

3,520

 

$

6,789

 

$

12,010

 

$

11,908

 

Per common share data:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

 

$

0.21

 

$

0.51

 

$

0.73

 

$

0.94

 

Diluted earnings per common share

 

$

0.20

 

$

0.50

 

$

0.71

 

$

0.92

 

Weighted average common shares outstanding

 

 

16,803,724

 

 

13,358,289

 

 

16,272,929

 

 

12,657,552

 

Weighted average diluted common shares outstanding

 

 

17,320,089

 

 

13,635,074

 

 

16,838,416

 

 

12,936,995

 

The accompanying notes are an integral part of the consolidated financial statements.

2


 

Table of Contents

MIDLAND STATES BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME—(UNAUDITED)

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30, 

 

June 30, 

 

 

    

2017

    

2016

    

2017

    

2016

 

Net income

 

$

3,539

 

$

6,789

 

$

12,029

 

$

11,908

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains that occurred during the period

 

 

2,173

 

 

2,283

 

 

2,941

 

 

6,022

 

Reclassification adjustment for realized net gains on sales of investment securities included in net income

 

 

(55)

 

 

(72)

 

 

(122)

 

 

(276)

 

Income tax effect

 

 

(822)

 

 

(890)

 

 

(1,095)

 

 

(2,313)

 

Change in investment securities available for sale, net of tax

 

 

1,296

 

 

1,321

 

 

1,724

 

 

3,433

 

Investment securities held to maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of unrealized gain on investment securities transferred from available-for-sale

 

 

(33)

 

 

(14)

 

 

(58)

 

 

(39)

 

Income tax effect

 

 

13

 

 

 6

 

 

23

 

 

16

 

Change in investment securities held to maturity, net of tax

 

 

(20)

 

 

(8)

 

 

(35)

 

 

(23)

 

Cash flow hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of interest rate swap

 

 

 —

 

 

31

 

 

 —

 

 

61

 

Income tax effect

 

 

 —

 

 

(13)

 

 

 —

 

 

(25)

 

Change in cash flow hedges, net of tax

 

 

 —

 

 

18

 

 

 —

 

 

36

 

Other comprehensive income, net of tax

 

 

1,276

 

 

1,331

 

 

1,689

 

 

3,446

 

Total comprehensive income

 

$

4,815

 

$

8,120

 

$

13,718

 

$

15,354

 

The accompanying notes are an integral part of the consolidated financial statements.

 

3


 

Table of Contents

MIDLAND STATES BANCORP, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY—(UNAUDITED)

SIX MONTHS ENDED JUNE 30, 2017 AND 2016

(dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

 

 

 

    

 

 

    

 

 

    

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

other

 

Total

 

 

Preferred

 

Common

 

Capital

 

Retained

 

comprehensive

 

shareholders'

 

 

stock

 

stock

 

surplus

 

earnings

 

(loss) income

 

equity

Balances, December 31, 2016

 

$

 —

 

$

155

 

$

209,712

 

$

112,513

 

$

(610)

 

$

321,770

Net income

 

 

 —

 

 

 —

 

 

 —

 

 

12,029

 

 

 —

 

 

12,029

Compensation expense for stock option grants

 

 

 —

 

 

 —

 

 

273

 

 

 —

 

 

 —

 

 

273

Amortization of restricted stock awards

 

 

 —

 

 

 —

 

 

393

 

 

 —

 

 

 —

 

 

393

Preferred dividends declared

 

 

 —

 

 

 —

 

 

 —

 

 

(19)

 

 

 —

 

 

(19)

Common dividends declared ($0.40 per share)

 

 

 —

 

 

 —

 

 

 —

 

 

(6,322)

 

 

 —

 

 

(6,322)

Acquisition of CedarPoint Investment Advisors, Inc.

 

 

 —

 

 

 1

 

 

3,350

 

 

 —

 

 

 —

 

 

3,351

Acquisition of Centrue Financial Corporation

 

 

3,134

 

 

32

 

 

112,480

 

 

 —

 

 

 —

 

 

115,646

Issuance of common stock under employee benefit plans

 

 

 —

 

 

 3

 

 

3,139

 

 

 —

 

 

 —

 

 

3,142

Other comprehensive income

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

1,689

 

 

1,689

Balances, June 30, 2017

 

$

3,134

 

$

191

 

$

329,347

 

$

118,201

 

$

1,079

 

$

451,952

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, December 31, 2015

 

$

 —

 

$

118

 

$

135,822

 

$

90,911

 

$

6,029

 

$

232,880

Cumulative effect of change in accounting principle

 

 

 —

 

 

 —

 

 

87

 

 

(87)

 

 

 —

 

 

 —

Balances, January 1, 2016

 

 

 —

 

 

118

 

 

135,909

 

 

90,824

 

 

6,029

 

 

232,880

Net income

 

 

 —

 

 

 —

 

 

 —

 

 

11,908

 

 

 —

 

 

11,908

Compensation expense for stock option grants

 

 

 —

 

 

 —

 

 

212

 

 

 —

 

 

 —

 

 

212

Amortization of restricted stock awards

 

 

 —

 

 

 —

 

 

251

 

 

 —

 

 

 —

 

 

251

Common dividends declared ($0.36 per share)

 

 

 —

 

 

 —

 

 

 —

 

 

(4,272)

 

 

 —

 

 

(4,272)

Initial public offering of 3,590,065 shares of common stock, net of issuance costs

 

 

 —

 

 

36

 

 

71,662

 

 

 —

 

 

 —

 

 

71,698

Issuance of common stock under employee benefit plans

 

 

 —

 

 

 —

 

 

145

 

 

 —

 

 

 —

 

 

145

Other comprehensive income

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

3,446

 

 

3,446

Balances, June 30, 2016

 

$

 —

 

$

154

 

$

208,179

 

$

98,460

 

$

9,475

 

$

316,268

The accompanying notes are an integral part of the consolidated financial statements. 

4


 

Table of Contents

MIDLAND STATES BANCORP, INC.

CONSOLIDATED STATEMENTS OF  CASH FLOWS—(UNAUDITED)

(dollars in thousands)

(dollars in thousands)

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

 

June 30, 

 

 

    

2017

    

2016

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

 

$

12,029

 

$

11,908

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

Provision for loan losses

 

 

1,991

 

 

1,754

 

Depreciation on premises and equipment

 

 

2,339

 

 

2,542

 

Amortization of intangible assets

 

 

1,104

 

 

1,099

 

FDIC loss-sharing expense

 

 

 —

 

 

1,661

 

Amortization of restricted stock awards

 

 

393

 

 

251

 

Compensation expense for stock option grants

 

 

273

 

 

212

 

Increase in cash surrender value of life insurance

 

 

(1,227)

 

 

(936)

 

Investment securities amortization, net

 

 

671

 

 

531

 

Other-than-temporary impairment on investment securities

 

 

 —

 

 

824

 

Gain on sales of investment securities, net

 

 

(122)

 

 

(276)

 

Gain on sales of other real estate owned

 

 

(32)

 

 

(79)

 

Write-down of other real estate owned

 

 

171

 

 

215

 

Origination of loans held for sale

 

 

(434,547)

 

 

(492,995)

 

Proceeds from sales of loans held for sale

 

 

472,979

 

 

456,368

 

Gain on loans sold and held for sale

 

 

(15,679)

 

 

(20,294)

 

Amortization of mortgage servicing rights

 

 

2,747

 

 

2,733

 

Impairment of mortgage servicing rights

 

 

1,726

 

 

5,020

 

Net change in operating assets and liabilities:

 

 

 

 

 

 

 

Accrued interest receivable

 

 

256

 

 

(663)

 

Accrued interest payable

 

 

235

 

 

74

 

Accrued income taxes receivable

 

 

3,153

 

 

5,208

 

Other assets

 

 

8,616

 

 

1,434

 

Other liabilities

 

 

(5,526)

 

 

(1,954)

 

Net cash provided by (used in) operating activities

 

 

51,550

 

 

(25,363)

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Investment securities available for sale:

 

 

 

 

 

 

 

Purchases

 

 

(134,037)

 

 

(44,029)

 

Sales

 

 

8,623

 

 

30,326

 

Maturities and payments

 

 

137,464

 

 

16,409

 

Investment securities held to maturity:

 

 

 

 

 

 

 

Purchases

 

 

(2,707)

 

 

(2,190)

 

Maturities

 

 

5,835

 

 

4,723

 

Net increase in loans

 

 

(179,387)

 

 

(170,595)

 

Purchases of premises and equipment

 

 

(2,667)

 

 

(1,556)

 

Purchase of bank-owned life insurance

 

 

 —

 

 

(20,000)

 

Purchases of nonmarketable equity securities

 

 

(5,056)

 

 

(2,003)

 

Sales of nonmarketable equity securities

 

 

3,818

 

 

90

 

Proceeds from sales of other real estate owned

 

 

3,340

 

 

3,628

 

Net cash paid in acquisitions

 

 

(18,519)

 

 

 —

 

Net cash used in investing activities

 

 

(183,293)

 

 

(185,197)

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Net increase (decrease) in deposits

 

 

186,821

 

 

(13,096)

 

Net increase in short-term borrowings

 

 

24,638

 

 

17,476

 

Proceeds from FHLB borrowings

 

 

177,357

 

 

495,000

 

Payments made on FHLB borrowings

 

 

(149,857)

 

 

(437,500)

 

Proceeds from other borrowings, net of issuance costs

 

 

39,964

 

 

 —

 

Payments made on other borrowings

 

 

(341)

 

 

 —

 

Payments made on subordinated debt

 

 

 —

 

 

(8,000)

 

Cash dividends paid on common stock

 

 

(6,322)

 

 

(4,272)

 

Cash dividends paid on preferred stock

 

 

(19)

 

 

 —

 

Proceeds from issuance of common stock in initial public offering, net of issuance costs

 

 

 —

 

 

71,698

 

Proceeds from issuance of common stock under employee benefit plans

 

 

3,142

 

 

145

 

Net cash provided by financing activities

 

 

275,383

 

 

121,451

 

Net increase (decrease) in cash and cash equivalents

 

$

143,640

 

$

(89,109)

 

Cash and cash equivalents:

 

 

 

 

 

 

 

Beginning of period

 

$

190,716

 

$

212,475

 

End of period

 

$

334,356

 

$

123,366

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

Cash payments for:

 

 

 

 

 

 

 

Interest paid on deposits and borrowed funds

 

$

8,996

 

$

7,979

 

Income tax paid

 

 

630

 

 

157

 

Supplemental disclosures of noncash investing and financing activities:

 

 

 

 

 

 

 

Transfer of loans to other real estate owned

 

$

2,004

 

$

2,153

 

Transfer of premises and equipment to assets held for sale

 

$

1,748

 

$

 —

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

5


 

Table of Contents

MIDLAND STATES BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(UNAUDITED)

 

Note 1 – Business Description

Midland States Bancorp, Inc. (the “Company,” “we,” “our,” or “us”) is a diversified financial holding company headquartered in Effingham, Illinois. Our 136-year old banking subsidiary, Midland States Bank (the “Bank”), has branches across Illinois and in Missouri and Colorado, and provides a broad array of traditional community banking and other complementary financial services, including commercial lending, residential mortgage origination, wealth management, merchant services and prime consumer lending. We also originate and service government sponsored mortgages for multifamily and healthcare facilities through our subsidiary, Love Funding Corporation (“Love Funding”), based in Washington, D.C. and operate a commercial equipment leasing business on a nationwide basis through our subsidiary, Heartland Business Credit Corporation (“Business Credit”), based in Denver, Colorado.

On June 9, 2017, we completed the acquisition of Centrue Financial Corporation (“Centrue”) and its banking subsidiary, Centrue Bank, as more fully described in Note 3 to the consolidated financial statements. We intend to merge Centrue Bank into the Bank in the third quarter of 2017. Through the Centrue acquisition, we greatly expanded our commercial and retail banking presence in northern and central Illinois.

Our principal business activity has been lending to and accepting deposits from individuals, businesses, municipalities and other entities. We have derived income principally from interest charged on loans and, to a lesser extent, from interest and dividends earned on investment securities. We have also derived income from noninterest sources, such as: fees received in connection with various lending and deposit services; wealth management services; residential mortgage loan originations, sales and servicing; and, from time to time, gains on sales of assets. Our income sources also include Love Funding’s commercial Federal Housing Administration (“FHA”) loan origination and servicing income and Business Credit’s interest income on indirect financing leases. Our principal expenses include interest expense on deposits and borrowings, operating expenses, such as salaries and employee benefits, occupancy and equipment expenses, data processing costs, professional fees and other noninterest expenses, provisions for loan losses and income tax expense.

Initial Public Offering

On May 24, 2016, we completed our initial public offering and received gross proceeds of $67.0 million for the 3,044,252 shares of common stock sold by us in the offering. On June 6, 2016, we received additional gross proceeds of $12.0 million for the 545,813 shares of common stock sold when the underwriters fully exercised their option to purchase additional shares of common stock. After deducting underwriting discounts and offering expenses, we received total net proceeds of $71.5 million from the initial public offering.

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation    

The consolidated financial statements of the Company are unaudited and should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed with the Securities and Exchange Commission (the “SEC”) on March 10, 2017. The consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”) and conform to predominant practices within the banking industry. Management of the Company has made a number of estimates and assumptions related to the reporting of assets and liabilities to prepare the consolidated financial statements in conformity with GAAP. Actual results may differ from those estimates. In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair presentation of the results of operations for the interim periods presented herein, have been included. Certain reclassifications of 2016 amounts have been made to conform to the 2017 presentation. Management has evaluated subsequent events for potential recognition or disclosure. Operating results for the three and six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

Principles of Consolidation