UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
Form 8-K
_____________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event Reported): January 25, 2018
Midland States Bancorp, Inc.
(Exact Name of Registrant as Specified in Charter)
| Illinois | 001-35272 | 37-1233196 |
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) |
| 1201 Network Centre Drive, Effingham, Illinois 62401 |
| (Address of Principal Executive Offices) (Zip Code) |
(217) 342-7321
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
| Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | ||
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company [ X ]
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. [ X ]
Item 2.02. Results of Operations and Financial Condition.
On January 25, 2018, Midland States Bancorp, Inc. (the “Company”) issued a press release announcing its financial results for the fourth quarter of 2017. The press release is attached as Exhibit 99.1.
Item 7.01. Regulation FD Disclosure.
On January 25, 2018, the Company made available on its website a slide presentation regarding the Company's fourth quarter 2017 financial results, which will be used as part of a publicly accessible conference call on January 26, 2018. 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.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits. Exhibit No. Description 99.1 Press Release of Midland States Bancorp, Inc., dated January 25, 2018 99.2 Slide Presentation of Midland States Bancorp, Inc. regarding fourth quarter 2017 financial results
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 25, 2018 | By: | /s/ Douglas J. Tucker |
| Douglas J. Tucker | ||
| Senior Vice President and Corporate Counsel | ||
EXHIBIT INDEX
| Exhibit No. | Description | |||
| 99.1 | Press Release of Midland States Bancorp, Inc., dated January 25, 2018 | |||
| 99.2 | Slide Presentation of Midland States Bancorp, Inc. regarding fourth quarter 2017 financial results |
EXHIBIT 99.1
Midland States Bancorp, Inc. Announces 2017 Fourth Quarter Results
Highlights
· Net income of $2.0 million, or $0.10 diluted earnings per share, included the following significant items
- $0.23 per diluted share in tax expense due to the revaluation of deferred tax assets
- $0.08 per diluted share of integration and acquisition expenses
· Two charge-offs drive $4.6 million increase in provision for loan losses compared to prior quarter, impacting EPS by $0.14 per diluted share
· Total loans increase at 9% annualized rate
· Efficiency ratio improves to 64.6% from 69.0% in third quarter 2017
· Acquisition of Alpine Bancorporation expected to close by the end of February 2018
EFFINGHAM, Ill., Jan. 25, 2018 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (NASDAQ:MSBI) (the “Company”) today reported financial results for the fourth quarter of 2017, which included $2.7 million, or $0.08 per diluted share, in integration and acquisition expenses, and $4.5 million, or $0.23 per diluted share, in tax expense related to the revaluation of the Company’s net deferred tax assets as a result of the decrease in the federal corporate tax rate. Inclusive of these expenses, Midland reported net income of $2.0 million, or $0.10 diluted earnings per share, for the fourth quarter of 2017. This compares to net income of $2.0 million, or $0.10 diluted earnings per share, for the third quarter of 2017, and net income of $11.6 million, or $0.72 diluted earnings per share, for the fourth quarter of 2016.
“While our fourth quarter results were negatively impacted by the revaluation of our deferred tax assets, our level of profitability will benefit from a lower effective tax rate going forward,” said Leon J. Holschbach, President and Chief Executive Officer of the Company. “During the fourth quarter, we saw an improvement in balance sheet growth driven by strong loan production across our portfolio and solid inflows of core deposits. We had 9% annualized loan growth in the quarter with strong increases coming in our commercial, construction and consumer loan portfolios. As we continue to realize the synergies from the Centrue acquisition, we are also seeing an improvement in our efficiency ratio.
“In 2018, we will be focused on integrating our acquisition of Alpine Bancorporation, capturing the synergies we project from this transaction, and expanding our core community banking and wealth management businesses. With the higher earnings resulting from the lowering of our effective tax rate, we intend to strengthen our capital base following the Alpine acquisition, as well as continue to deliver strong dividend growth to our shareholders. Over the past 15 years, we have increased our dividend at an annual rate of more than 10%. With the greater earnings power we are projecting following the Alpine acquisition and the lower effective tax rate, we believe we will maintain our strong track record of returning capital to our shareholders.”
Adjusted Earnings
Financial results for the fourth quarter of 2017 included $4.5 million of additional tax expense related to the revaluation of the Company’s net deferred tax assets, $2.7 million in integration and acquisition-related expenses, and $0.4 million in loss on mortgage servicing rights (“MSRs”) held-for-sale. Financial results for the third quarter of 2017 included $8.3 million in integration and acquisition-related expenses and $3.6 million in loss on MSRs held-for-sale.
Excluding these expenses, adjusted earnings were $8.4 million, or $0.42 diluted earnings per share, for the fourth quarter of 2017, compared with adjusted earnings of $9.2 million, or $0.46 diluted earnings per share, for the third quarter of 2017. The decline in adjusted earnings per share is primarily attributable to an increase in the provision for loan losses. Adjusted pre-tax pre-provision earnings were $16.9 million for the fourth quarter of 2017, compared with $15.6 million for the third quarter of 2017. A reconciliation of adjusted earnings and adjusted pre-tax pre-provision earnings to net income according to generally accepted accounting principles (“GAAP”) is provided in the financial tables at the end of this press release.
Net Interest Income
Net interest income for the fourth quarter of 2017 was $36.0 million, a decrease of 2.0% from $36.8 million for the third quarter of 2017. The decrease in net interest income was primarily attributable to a decline in net interest margin.
The Company’s net interest income benefits from accretion income associated with purchased loan portfolios. Accretion income totaled $2.7 million for the fourth quarter of 2017, compared with $3.0 million for the third quarter of 2017.
Relative to the fourth quarter of 2016, net interest income increased $10.1 million, or 38.8%. Accretion income for the fourth quarter of 2016 was $2.2 million. The increase in net interest income resulted from a $12.5 million increase in interest income on loans due primarily to growth in the average balance of loans. This increase was offset in part by a $3.4 million increase in interest expense primarily due to interest-bearing deposits from Centrue combined with increased usage of FHLB advances and subordinated debt.
Net Interest Margin
Net interest margin for the fourth quarter of 2017 was 3.73%, compared to 3.78% for the third quarter of 2017. The Company’s net interest margin benefits from accretion income on purchased loan portfolios, which contributed 26 and 27 basis points to net interest margin in the fourth and third quarters of 2017, respectively. Excluding the impact of accretion income, the decrease in net interest margin was attributable to the addition of $40 million of subordinated debt issued in preparation for the acquisition of Alpine Bancorporation.
Relative to the fourth quarter of 2016, the net interest margin increased from 3.70%. Accretion income on purchased loan portfolios contributed 28 basis points to net interest margin in the fourth quarter of 2016. Excluding the impact of accretion income, the increase in net interest margin was primarily driven by higher average loans yields.
Noninterest Income
Noninterest income for the fourth quarter of 2017 was $14.0 million, a decrease of 9.1% from $15.4 million for the third quarter of 2017. This decrease was primarily attributable to lower commercial FHA and residential mortgage banking revenue.
Wealth management revenue for the fourth quarter of 2017 was $3.6 million, an increase of 3.2% from $3.5 million in the third quarter of 2017. Compared to the fourth quarter of 2016, wealth management revenue increased 43.8%, which was attributable to 12% organic growth in assets under management and the acquisition of CedarPoint Investment Advisors in March 2017.
Commercial FHA revenue for the fourth quarter of 2017 was $3.1 million, a decrease of 17.2% from $3.8 million in the third quarter of 2017. The Company originated $98.5 million in rate lock commitments during the fourth quarter of 2017, compared to $112.5 million in the prior quarter. Compared to the fourth quarter of 2016, commercial FHA revenue decreased 15.6%.
Residential mortgage banking revenue for the fourth quarter of 2017 was $1.6 million, a decrease of 32.8% from $2.3 million in the third quarter of 2017. Compared to the fourth quarter of 2016, residential mortgage banking revenue decreased 75.1%, primarily due to the recapture of previously recorded mortgage servicing rights impairment totaling $3.6 million during the fourth quarter of 2016.
Relative to the fourth quarter of 2016, noninterest income decreased 54.1% from $30.5 million. During the fourth quarter of 2016, the Company recognized a gain of $14.4 million related to the sale of collateralized mortgage obligations (“CMOs”).
Noninterest Expense
Noninterest expense for the fourth quarter of 2017 was $36.2 million, compared with $48.4 million for the third quarter of 2017. Noninterest expense for the fourth and third quarters of 2017 included $2.7 million and $8.3 million in integration and acquisition-related expenses, respectively, and $0.4 million and $3.6 million losses on MSRs held-for-sale, respectively. Excluding these expenses, noninterest expense decreased $3.4 million, or 9.3%, from the prior quarter. The decrease was attributable to a decline in salaries and employee benefits expense due to a 5.7% decrease in FTEs resulting from the continued integration of Centrue, as well as reduced variable compensation in the commercial FHA and residential mortgage businesses.
Relative to the fourth quarter of 2016, noninterest expense excluding integration and acquisition-related expenses, branch network optimization plan charges, loss share agreement termination expenses, and the loss on mortgage servicing rights held-for-sale increased 8.6% from $30.4 million. The increase was primarily due to personnel and facilities added in the two acquisitions completed over the past year, partially offset by cost savings resulting from the Company’s Operational Excellence initiative.
Income Tax Expense
Income tax expense was $5.8 million for the fourth quarter of 2017, compared to $0.3 million for the third quarter of 2017.
On December 22, 2017, “H.R.1”, formerly known as the “Tax Cuts and Jobs Act”, was signed into law. Among other items, H.R.1 reduces the federal corporate tax rate to 21% effective January 1, 2018. As a result, Midland concluded that the reduction in the federal corporate tax rate required the revaluation of the Company’s net deferred tax assets. The Company’s net deferred tax assets represents net operating loss carryforwards that will be used to reduce corporate taxes expected to be paid in the future as well as differences between the carrying amounts and tax bases of assets and liabilities carried on the Company’s balance sheet. The Company performed an analysis and determined that the value of the deferred tax assets had declined by $4.5 million. To reflect the decline in the value of the deferred tax assets, the Company recorded additional tax expense of $4.5 million during the fourth quarter of 2017.
For 2018, the Company expects its effective tax rate to be approximately 23%.
Loan Portfolio
Total loans outstanding were $3.23 billion at December 31, 2017, compared with $3.16 billion at September 30, 2017 and $2.32 billion at December 31, 2016. The increase in total loans from September 30, 2017 was primarily attributable to increases in the commercial, construction and consumer loan portfolios. The increase in total loans from December 31, 2016, was due to 9.8% organic growth and the addition of $679.9 million of loans from Centrue.
Deposits
Total deposits were $3.13 billion at December 31, 2017, compared with $3.11 billion at September 30, 2017, and $2.40 billion at December 31, 2016. The increase in total deposits from September 30, 2017 was primarily attributable to growth throughout the commercial, retail and servicing portfolios, which was partially offset by the continued reduction of brokered deposits.
Asset Quality
Non-performing loans totaled $26.8 million, or 0.83% of total loans, at December 31, 2017, compared with $33.4 million, or 1.06% of total loans, at September 30, 2017, and $31.6 million, or 1.36% of total loans, at December 31, 2016. The decrease in non-performing loans during the fourth quarter of 2017 was primarily driven by charge-offs.
Net charge-offs for the fourth quarter of 2017 were $6.5 million, or 0.81% of average loans on an annualized basis. The net charge-offs were primarily related to two commercial real estate loans.
The Company recorded a provision for loan losses of $6.1 million for the fourth quarter of 2017, which was driven by the growth in total loans outstanding and the net charge-offs taken in the quarter. The Company’s allowance for loan losses was 0.51% of total loans and 61.4% of non-performing loans at December 31, 2017, compared with 0.53% of total loans and 50.4% of non-performing loans at September 30, 2017. Fair market value discounts recorded in connection with acquired loan portfolios represented 0.51% of total loans at December 31, 2017, compared with 0.45% at September 30, 2017.
Capital
At December 31, 2017, 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, 2017 | Well Capitalized Regulatory Requirements | |
| Total capital to risk-weighted assets | 13.26% | 10.00% |
| Tier 1 capital to risk-weighted assets | 10.19% | 8.00% |
| Tier 1 leverage ratio | 8.63% | 5.00% |
| Common equity Tier 1 capital | 8.45% | 6.50% |
| Tangible common equity to tangible assets | 7.70% | NA |
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 26, 2018 to discuss its financial results. The call can be accessed via telephone at (877) 516-3531 (passcode: 5699319). A recorded replay can be accessed through February 2, 2018 by dialing (855) 859-2056; passcode: 5699319.
A slide presentation relating to the fourth quarter 2017 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.
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, 2017, the Company had total assets of $4.4 billion and its Wealth Management Group had assets under administration of approximately $2.1 billion. Midland provides a full range of commercial and consumer banking products and services, merchant credit card services, trust and investment management, and insurance and financial planning services. In addition, commercial equipment financing is provided through Midland Equipment Finance, and multi-family and healthcare facility FHA financing is provided through Love Funding. For additional information, visit 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 accounting principles generally accepted in the United States (“GAAP”). These non-GAAP financial measures 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,” “Adjusted Pre-Tax, Pre-Provision Earnings,” “Efficiency Ratio,” “Tangible Common Equity to Tangible Assets,” “Tangible Book Value Per Share” and “Return on Average Tangible Common Equity.” The Company believes that 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," including but not limited to statements about the Company’s expected loan production, operating expenses 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; and other risks detailed from time to time in filings made by the Company with the Securities and Exchange Commission. Readers should note that the forward-looking statements included in this press release are not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "will," "propose," "may," "plan," "seek," "expect," "intend," "estimate," "anticipate," "believe" or "continue," or similar terminology. Any forward-looking statements presented herein are made only as of the date of this press release, and we do 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, Chief Financial Officer, at jludwig@midlandsb.com or (217) 342-7321
Douglas J. Tucker, Sr. V.P., 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) | 2017 | 2017 | 2017 | 2017 | 2016 | |||||||||||||||
| Earnings Summary | ||||||||||||||||||||
| Net interest income | $ | 36,036 | $ | 36,765 | $ | 29,400 | $ | 27,461 | $ | 25,959 | ||||||||||
| Provision for loan losses | 6,076 | 1,489 | 458 | 1,533 | 2,445 | |||||||||||||||
| Noninterest income | 13,998 | 15,403 | 13,619 | 16,342 | 30,486 | |||||||||||||||
| Noninterest expense | 36,192 | 48,363 | 37,645 | 30,797 | 34,090 | |||||||||||||||
| Income before income taxes | 7,766 | 2,316 | 4,916 | 11,473 | 19,910 | |||||||||||||||
| Income taxes | 5,775 | 280 | 1,377 | 2,983 | 8,327 | |||||||||||||||
| Net income | $ | 1,991 | $ | 2,036 | $ | 3,539 | $ | 8,490 | $ | 11,583 | ||||||||||
| Diluted earnings per common share | $ | 0.10 | $ | 0.10 | $ | 0.20 | $ | 0.52 | $ | 0.72 | ||||||||||
| Weighted average shares outstanding - diluted | 19,741,833 | 19,704,217 | 17,320,089 | 16,351,637 | 16,032,016 | |||||||||||||||
| Return on average assets | 0.18 | % | 0.18 | % | 0.39 | % | 1.05 | % | 1.44 | % | ||||||||||
| Return on average shareholders' equity | 1.74 | % | 1.78 | % | 3.93 | % | 10.58 | % | 14.05 | % | ||||||||||
| Return on average tangible common shareholders' equity | 2.33 | % | 2.39 | % | 4.91 | % | 12.78 | % | 16.84 | % | ||||||||||
| Net interest margin | 3.73 | % | 3.78 | % | 3.70 | % | 3.87 | % | 3.70 | % | ||||||||||
| Efficiency ratio | 64.64 | % | 69.00 | % | 66.54 | % | 66.34 | % | 76.64 | % | ||||||||||
| Adjusted Earnings Performance Summary | ||||||||||||||||||||
| Adjusted earnings | $ | 8,403 | $ | 9,173 | $ | 8,076 | $ | 9,243 | $ | 6,302 | ||||||||||
| Adjusted diluted earnings per common share | $ | 0.42 | $ | 0.46 | $ | 0.46 | $ | 0.56 | $ | 0.39 | ||||||||||
| Adjusted return on average assets | 0.76 | % | 0.82 | % | 0.89 | % | 1.14 | % | 0.78 | % | ||||||||||
| Adjusted return on average shareholders' equity | 7.34 | % | 8.03 | % | 8.97 | % | 11.52 | % | 7.64 | % | ||||||||||
| Adjusted return on average tangible common shareholders' equity | 9.83 | % | 10.77 | % | 11.21 | % | 13.91 | % | 9.16 | % | ||||||||||
| 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) | 2017 | 2017 | 2017 | 2017 | 2016 | |||||||||||||||
| Net interest income: | ||||||||||||||||||||
| Total interest income | $ | 43,500 | $ | 43,246 | $ | 34,528 | $ | 31,839 | $ | 29,981 | ||||||||||
| Total interest expense | 7,464 | 6,481 | 5,128 | 4,378 | 4,022 | |||||||||||||||
| Net interest income | 36,036 | 36,765 | 29,400 | 27,461 | 25,959 | |||||||||||||||
| Provision for loan losses | 6,076 | 1,489 | 458 | 1,533 | 2,445 | |||||||||||||||
| Net interest income after provision for loan losses | 29,960 | 35,276 | 28,942 | 25,928 | 23,514 | |||||||||||||||
| Noninterest income: | ||||||||||||||||||||
| Commercial FHA revenue | 3,127 | 3,777 | 4,153 | 6,695 | 3,704 | |||||||||||||||
| Residential mortgage banking revenue | 1,556 | 2,317 | 2,330 | 2,916 | 6,241 | |||||||||||||||
| Wealth management revenue | 3,587 | 3,475 | 3,406 | 2,872 | 2,495 | |||||||||||||||
| Service charges on deposit accounts | 1,828 | 2,133 | 1,122 | 892 | 988 | |||||||||||||||
| Interchange revenue | 1,538 | 1,724 | 1,114 | 977 | 921 | |||||||||||||||
| Gain on sales of investment securities, net | 2 | 98 | 55 | 67 | 14,387 | |||||||||||||||
| Other income | 2,360 | 1,879 | 1,439 | 1,923 | 1,750 | |||||||||||||||
| Total noninterest income | 13,998 | 15,403 | 13,619 | 16,342 | 30,486 | |||||||||||||||
| Noninterest expense: | ||||||||||||||||||||
| Salaries and employee benefits | 17,344 | 22,411 | 21,842 | 17,115 | 17,326 | |||||||||||||||
| Occupancy and equipment | 3,859 | 4,144 | 3,472 | 3,184 | 3,266 | |||||||||||||||
| Data processing | 3,640 | 5,786 | 2,949 | 2,796 | 2,828 | |||||||||||||||
| Professional | 3,611 | 4,151 | 3,142 | 2,992 | 2,898 | |||||||||||||||
| Amortization of intangible assets | 1,035 | 1,187 | 579 | 525 | 534 | |||||||||||||||
| Loss on mortgage servicing rights held for sale | 442 | 3,617 | - | - | - | |||||||||||||||
| Other | 6,261 | 7,067 | 5,661 | 4,185 | 7,238 | |||||||||||||||
| Total noninterest expense | 36,192 | 48,363 | 37,645 | 30,797 | 34,090 | |||||||||||||||
| Income before income taxes | 7,766 | 2,316 | 4,916 | 11,473 | 19,910 | |||||||||||||||
| Income taxes | 5,775 | 280 | 1,377 | 2,983 | 8,327 | |||||||||||||||
| Net income | $ | 1,991 | $ | 2,036 | $ | 3,539 | $ | 8,490 | $ | 11,583 | ||||||||||
| Basic earnings per common share | $ | 0.10 | $ | 0.10 | $ | 0.21 | $ | 0.54 | $ | 0.74 | ||||||||||
| Diluted earnings per common share | $ | 0.10 | $ | 0.10 | $ | 0.20 | $ | 0.52 | $ | 0.72 | ||||||||||
| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | ||||||||||||||||||||||||
| At Quarter Ended | ||||||||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||||||
| (in thousands) | 2017 | 2017 | 2017 | 2017 | 2016 | |||||||||||||||||||
| Assets | ||||||||||||||||||||||||
| Cash and cash equivalents | $ | 215,202 | $ | 183,572 | $ | 334,356 | $ | 218,096 | $ | 190,716 | ||||||||||||||
| Investment securities available-for-sale at fair value | 450,525 | 396,985 | 385,340 | 259,332 | 246,339 | |||||||||||||||||||
| Investment securities held to maturity at amortized cost | - | 70,867 | 75,371 | 76,276 | 78,672 | |||||||||||||||||||
| Loans | 3,226,678 | 3,157,972 | 3,184,063 | 2,454,950 | 2,319,976 | |||||||||||||||||||
| Allowance for loan losses | (16,431 | ) | (16,861 | ) | (15,424 | ) | (15,805 | ) | (14,862 | ) | ||||||||||||||
| Total loans, net | 3,210,247 | 3,141,111 | 3,168,639 | 2,439,145 | 2,305,114 | |||||||||||||||||||
| Loans held for sale at fair value | 50,089 | 35,874 | 41,689 | 39,900 | 70,565 | |||||||||||||||||||
| Premises and equipment, net | 76,162 | 80,941 | 76,598 | 66,914 | 66,692 | |||||||||||||||||||
| Other real estate owned | 5,708 | 6,379 | 7,036 | 3,680 | 3,560 | |||||||||||||||||||
| Mortgage servicing rights at lower of cost or market | 56,352 | 56,299 | 70,277 | 68,557 | 68,008 | |||||||||||||||||||
| Mortgage servicing rights held for sale | 10,176 | 10,618 | - | - | - | |||||||||||||||||||
| Intangible assets | 16,932 | 17,966 | 18,459 | 8,633 | 7,187 | |||||||||||||||||||
| Goodwill | 98,624 | 97,351 | 96,940 | 50,807 | 48,836 | |||||||||||||||||||
| Cash surrender value of life insurance policies | 113,366 | 112,591 | 111,802 | 74,806 | 74,226 | |||||||||||||||||||
| Other assets | 109,318 | 137,207 | 105,135 | 67,431 | 73,808 | |||||||||||||||||||
| Total assets | $ | 4,412,701 | $ | 4,347,761 | $ | 4,491,642 | $ | 3,373,577 | $ | 3,233,723 | ||||||||||||||
| Liabilities and Shareholders' Equity | ||||||||||||||||||||||||
| Noninterest bearing deposits | $ | 724,443 | $ | 674,118 | $ | 780,803 | $ | 528,021 | $ | 562,333 | ||||||||||||||
| Interest bearing deposits | 2,406,646 | 2,440,349 | 2,552,228 | 1,999,455 | 1,842,033 | |||||||||||||||||||
| Total deposits | 3,131,089 | 3,114,467 | 3,333,031 | 2,527,476 | 2,404,366 | |||||||||||||||||||
| Short-term borrowings | 156,126 | 153,443 | 170,629 | 124,035 | 131,557 | |||||||||||||||||||
| FHLB advances and other borrowings | 496,436 | 488,870 | 400,304 | 250,353 | 237,518 | |||||||||||||||||||
| Subordinated debt | 93,972 | 54,581 | 54,556 | 54,532 | 54,508 | |||||||||||||||||||
| Trust preferred debentures | 45,379 | 45,267 | 45,156 | 37,496 | 37,405 | |||||||||||||||||||
| Other liabilities | 40,154 | 40,444 | 36,014 | 45,352 | 46,599 | |||||||||||||||||||
| Total liabilities | 3,963,156 | 3,897,072 | 4,039,690 | 3,039,244 | 2,911,953 | |||||||||||||||||||
| Total shareholders’ equity | 449,545 | 450,689 | 451,952 | 334,333 | 321,770 | |||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 4,412,701 | $ | 4,347,761 | $ | 4,491,642 | $ | 3,373,577 | $ | 3,233,723 | ||||||||||||||
| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | ||||||||||||||||||||
| As of | ||||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||
| (in thousands) | 2017 | 2017 | 2017 | 2017 | 2016 | |||||||||||||||
| Loan Portfolio | ||||||||||||||||||||
| Commercial loans | $ | 555,930 | $ | 513,544 | $ | 571,111 | $ | 475,408 | $ | 457,827 | ||||||||||
| Commercial real estate loans | 1,440,011 | 1,472,284 | 1,470,487 | 997,200 | 969,615 | |||||||||||||||
| Construction and land development loans | 200,587 | 182,513 | 176,098 | 171,047 | 177,325 | |||||||||||||||
| Residential real estate loans | 453,552 | 445,747 | 428,464 | 277,402 | 253,713 | |||||||||||||||
| Consumer loans | 371,455 | 343,038 | 335,902 | 337,081 | 270,017 | |||||||||||||||
| Lease financing loans | 205,143 | 200,846 | 202,001 | 196,812 | 191,479 | |||||||||||||||
| Total loans | $ | 3,226,678 | $ | 3,157,972 | $ | 3,184,063 | $ | 2,454,950 | $ | 2,319,976 | ||||||||||
| Deposit Portfolio | ||||||||||||||||||||
| Noninterest-bearing demand deposits | $ | 724,443 | $ | 674,118 | $ | 780,803 | $ | 528,021 | $ | 562,333 | ||||||||||
| Checking accounts | 785,935 | 800,649 | 841,640 | 751,193 | 656,248 | |||||||||||||||
| Money market accounts | 646,426 | 633,844 | 578,077 | 415,322 | 399,851 | |||||||||||||||
| Savings accounts | 281,212 | 278,977 | 291,912 | 169,715 | 166,910 | |||||||||||||||
| Time deposits | 502,810 | 493,777 | 525,647 | 394,508 | 400,304 | |||||||||||||||
| Brokered deposits | 190,263 | 233,102 | 314,952 | 268,717 | 218,720 | |||||||||||||||
| Total deposits | $ | 3,131,089 | $ | 3,114,467 | $ | 3,333,031 | $ | 2,527,476 | $ | 2,404,366 | ||||||||||
| 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) | 2017 | 2017 | 2017 | 2017 | 2016 | |||||||||||||||
| Average Balance Sheets | ||||||||||||||||||||
| Cash and cash equivalents | $ | 173,540 | $ | 202,407 | $ | 192,483 | $ | 163,595 | $ | 140,439 | ||||||||||
| Investment securities | 461,475 | 474,216 | 362,268 | 328,880 | 315,511 | |||||||||||||||
| Loans | 3,198,036 | 3,173,027 | 2,620,875 | 2,361,380 | 2,299,115 | |||||||||||||||
| Loans held for sale | 40,615 | 46,441 | 61,759 | 73,914 | 86,665 | |||||||||||||||
| Nonmarketable equity securities | 33,703 | 31,224 | 22,246 | 20,047 | 18,927 | |||||||||||||||
| Total interest-earning assets | 3,907,369 | 3,927,315 | 3,259,631 | 2,947,816 | 2,860,657 | |||||||||||||||
| Non-earning assets | 497,502 | 498,364 | 372,525 | 336,761 | 337,566 | |||||||||||||||
| Total assets | $ | 4,404,871 | $ | 4,425,679 | $ | 3,632,156 | $ | 3,284,577 | $ | 3,198,223 | ||||||||||
| Interest-bearing deposits | $ | 2,433,461 | $ | 2,527,490 | $ | 2,116,564 | $ | 1,896,569 | $ | 1,838,760 | ||||||||||
| Short-term borrowings | 181,480 | 182,015 | 146,144 | 143,583 | 151,191 | |||||||||||||||
| FHLB advances and other borrowings | 472,709 | 434,860 | 290,401 | 248,045 | 183,614 | |||||||||||||||
| Subordinated debt | 88,832 | 54,570 | 54,542 | 54,518 | 54,495 | |||||||||||||||
| Trust preferred debentures | 45,312 | 45,201 | 39,179 | 37,443 | 37,357 | |||||||||||||||
| Total interest-bearing liabilities | 3,221,794 | 3,244,136 | 2,646,830 | 2,380,158 | 2,265,417 | |||||||||||||||
| Noninterest-bearing deposits | 684,907 | 688,986 | 579,977 | 525,868 | 562,958 | |||||||||||||||
| Other noninterest-bearing liabilities | 44,202 | 39,240 | 44,014 | 53,109 | 41,962 | |||||||||||||||
| Shareholders' equity | 453,968 | 453,317 | 361,335 | 325,442 | 327,886 | |||||||||||||||
| Total liabilities and shareholders' equity | $ | 4,404,871 | $ | 4,425,679 | $ | 3,632,156 | $ | 3,284,577 | $ | 3,198,223 | ||||||||||
| Yields | ||||||||||||||||||||
| Cash and cash equivalents | 1.28 | % | 1.19 | % | 1.02 | % | 0.77 | % | 0.53 | % | ||||||||||
| Investment securities | 3.01 | % | 2.86 | % | 3.33 | % | 3.21 | % | 3.10 | % | ||||||||||
| Loans | 4.88 | % | 4.90 | % | 4.71 | % | 4.91 | % | 4.65 | % | ||||||||||
| Loans held for sale | 3.62 | % | 3.74 | % | 4.67 | % | 4.22 | % | 4.22 | % | ||||||||||
| Nonmarketable equity securities | 4.78 | % | 4.20 | % | 4.31 | % | 4.41 | % | 3.85 | % | ||||||||||
| Total interest-earning assets | 4.48 | % | 4.44 | % | 4.33 | % | 4.47 | % | 4.26 | % | ||||||||||
| Interest-bearing deposits | 0.58 | % | 0.53 | % | 0.53 | % | 0.51 | % | 0.48 | % | ||||||||||
| Short-term borrowings | 0.26 | % | 0.22 | % | 0.23 | % | 0.23 | % | 0.22 | % | ||||||||||
| FHLB advances and other borrowings | 1.42 | % | 1.36 | % | 1.16 | % | 0.93 | % | 0.78 | % | ||||||||||
| Subordinated debt | 6.46 | % | 6.40 | % | 6.40 | % | 6.40 | % | 6.41 | % | ||||||||||
| Trust preferred debentures | 5.75 | % | 5.60 | % | 5.37 | % | 5.12 | % | 4.99 | % | ||||||||||
| Total interest-bearing liabilities | 0.92 | % | 0.79 | % | 0.78 | % | 0.75 | % | 0.71 | % | ||||||||||
| Net interest margin | 3.73 | % | 3.78 | % | 3.70 | % | 3.87 | % | 3.70 | % | ||||||||||
| 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) | 2017 | 2017 | 2017 | 2017 | 2016 | |||||||||||||||
| Asset Quality | ||||||||||||||||||||
| Loans 30-89 days past due | $ | 15,405 | $ | 13,526 | $ | 13,566 | $ | 14,075 | $ | 10,767 | ||||||||||
| Nonperforming loans | 26,760 | 33,431 | 27,615 | 28,933 | 31,603 | |||||||||||||||
| Nonperforming assets | 30,894 | 38,109 | 33,150 | 31,684 | 34,550 | |||||||||||||||
| Net charge-offs | 6,506 | 52 | 839 | 590 | 3,142 | |||||||||||||||
| Loans 30-89 days past due to total loans | 0.48 | % | 0.43 | % | 0.43 | % | 0.57 | % | 0.46 | % | ||||||||||
| Nonperforming loans to total loans | 0.83 | % | 1.06 | % | 0.87 | % | 1.18 | % | 1.36 | % | ||||||||||
| Nonperforming assets to total assets | 0.70 | % | 0.88 | % | 0.74 | % | 0.94 | % | 1.07 | % | ||||||||||
| Allowance for loan losses to total loans | 0.51 | % | 0.53 | % | 0.48 | % | 0.64 | % | 0.64 | % | ||||||||||
| Allowance for loan losses to nonperforming loans | 61.40 | % | 50.43 | % | 55.81 | % | 54.62 | % | 47.03 | % | ||||||||||
| Net charge-offs to average loans | 0.81 | % | 0.01 | % | 0.13 | % | 0.10 | % | 0.54 | % | ||||||||||
| Wealth Management | ||||||||||||||||||||
| Trust assets under administration | $ | 2,051,249 | $ | 2,001,106 | $ | 1,929,513 | $ | 1,869,314 | $ | 1,658,235 | ||||||||||
| Market Data | ||||||||||||||||||||
| Book value per share at period end | $ | 23.35 | $ | 23.45 | $ | 23.51 | $ | 21.19 | $ | 20.78 | ||||||||||
| Tangible book value per share at period end | $ | 17.31 | $ | 17.41 | $ | 17.47 | $ | 17.42 | $ | 17.16 | ||||||||||
| Market price at period end | $ | 32.48 | $ | 31.68 | $ | 33.52 | $ | 34.39 | $ | 36.18 | ||||||||||
| Shares outstanding at period end | 19,122,049 | 19,093,153 | 19,087,409 | 15,780,651 | 15,483,499 | |||||||||||||||
| Capital | ||||||||||||||||||||
| Total capital to risk-weighted assets | 13.26 | % | 12.21 | % | 11.98 | % | 13.48 | % | 13.85 | % | ||||||||||
| Tier 1 capital to risk-weighted assets | 10.19 | % | 10.20 | % | 10.05 | % | 10.97 | % | 11.27 | % | ||||||||||
| Tier 1 leverage ratio | 8.63 | % | 8.54 | % | 10.45 | % | 9.61 | % | 9.76 | % | ||||||||||
| Common equity Tier 1 capital ratio | 8.45 | % | 8.50 | % | 8.36 | % | 9.10 | % | 9.35 | % | ||||||||||
| Tangible common equity to tangible assets | 7.70 | % | 7.85 | % | 7.62 | % | 8.29 | % | 8.36 | % | ||||||||||
| 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, | ||||||||||||||||||
| (in thousands, except per share data) | 2017 | 2017 | 2017 | 2017 | 2016 | |||||||||||||||||
| Income before income taxes - GAAP | $ | 7,766 | $ | 2,316 | $ | 4,916 | $ | 11,473 | $ | 19,910 | ||||||||||||
| Adjustments to noninterest income: | ||||||||||||||||||||||
| Gain on sales of investment securities, net | 2 | 98 | 55 | 67 | 14,387 | |||||||||||||||||
| Gain (loss) on sale of other assets | 37 | 45 | (91 | ) | (58 | ) | - | |||||||||||||||
| Total adjustments to noninterest income | 39 | 143 | (36 | ) | 9 | 14,387 | ||||||||||||||||
| Adjustments to noninterest expense: | ||||||||||||||||||||||
| Net expense from loss share termination agreement | - | - | - | - | 351 | |||||||||||||||||
| Branch network optimization plan charges | 371 | 336 | 1,236 | 9 | 2,099 | |||||||||||||||||
| Loss on mortgage servicing rights held for sale | 442 | 3,617 | - | - | - | |||||||||||||||||
| Integration and acquisition expenses | 2,315 | 7,967 | 6,214 | 1,242 | 1,200 | |||||||||||||||||
| Total adjustments to noninterest expense | 3,128 | 11,920 | 7,450 | 1,251 | 3,650 | |||||||||||||||||
| Adjusted earnings pre tax | 10,855 | 14,093 | 12,402 | 12,715 | 9,173 | |||||||||||||||||
| Adjusted earnings tax (a) | 6,992 | 4,920 | 4,326 | 3,472 | 2,871 | |||||||||||||||||
| Revaluation of net deferred tax assets | (4,540 | ) | - | - | - | - | ||||||||||||||||
| Adjusted earnings - non-GAAP | $ | 8,403 | $ | 9,173 | $ | 8,076 | $ | 9,243 | $ | 6,302 | ||||||||||||
| Adjusted diluted EPS | $ | 0.42 | $ | 0.46 | $ | 0.46 | $ | 0.56 | $ | 0.39 | ||||||||||||
| Adjusted return on average assets | 0.76 | % | 0.82 | % | 0.89 | % | 1.14 | % | 0.78 | % | ||||||||||||
| Adjusted return on average shareholders' equity | 7.34 | % | 8.03 | % | 8.97 | % | 11.52 | % | 7.64 | % | ||||||||||||
| Adjusted return on average tangible common equity | 9.83 | % | 10.77 | % | 11.21 | % | 13.91 | % | 9.16 | % | ||||||||||||
| (a) Tax rate applied to adjustments changed for prior 2017 quarters to statutory tax rate for fiscal 2017. | ||||||||||||||||||||||
| Adjusted Pre-Tax, Pre-Provision Earnings Reconciliation | ||||||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||||
| (in thousands) | 2017 | 2017 | 2017 | 2017 | 2016 | |||||||||||||||||
| Adjusted earnings pre tax | $ | 10,855 | $ | 14,093 | $ | 12,402 | $ | 12,715 | $ | 9,173 | ||||||||||||
| Provision for loan losses | 6,076 | 1,489 | 458 | 1,533 | 2,445 | |||||||||||||||||
| Adjusted pre-tax, pre-provision earnings - non-GAAP | $ | 16,931 | $ | 15,582 | $ | 12,860 | $ | 14,248 | $ | 11,618 | ||||||||||||
| MIDLAND STATES BANCORP, INC. | |||||||||||||||||||||||||
| RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES | |||||||||||||||||||||||||
| Efficiency Ratio Reconciliation | |||||||||||||||||||||||||
| For the Quarter Ended | |||||||||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||||||||||||
| (in thousands) | 2017 | 2017 | 2017 | 2017 | 2016 | ||||||||||||||||||||
| Noninterest expense - GAAP | $ | 36,192 | $ | 48,364 | $ | 37,644 | $ | 30,798 | $ | 34,090 | |||||||||||||||
| Net expense from loss-share termination agreement | - | - | - | - | (351 | ) | |||||||||||||||||||
| Branch network optimization plan charges | (371 | ) | (336 | ) | (1,236 | ) | (9 | ) | (2,099 | ) | |||||||||||||||
| Loss on mortgage servicing rights held for sale | (442 | ) | (3,617 | ) | - | - | - | ||||||||||||||||||
| Integration and acquisition expenses | (2,315 | ) | (7,967 | ) | (6,214 | ) | (1,242 | ) | (1,200 | ) | |||||||||||||||
| Adjusted noninterest expense | $ | 33,064 | $ | 36,444 | $ | 30,194 | $ | 29,547 | $ | 30,440 | |||||||||||||||
| Net interest income - GAAP | $ | 36,036 | $ | 36,765 | $ | 29,400 | $ | 27,461 | $ | 25,959 | |||||||||||||||
| Effect of tax-exempt income | 659 | 687 | 674 | 671 | 620 | ||||||||||||||||||||
| Adjusted net interest income | 36,695 | 37,452 | 30,074 | 28,132 | 26,579 | ||||||||||||||||||||
| Noninterest income - GAAP | $ | 13,998 | $ | 15,403 | $ | 13,619 | $ | 16,342 | $ | 30,485 | |||||||||||||||
| Mortgage servicing rights impairment (recovery) | 494 | 104 | 1,650 | 76 | (2,958 | ) | |||||||||||||||||||
| Gain on sales of investment securities, net | (2 | ) | (98 | ) | (55 | ) | (67 | ) | (14,387 | ) | |||||||||||||||
| Other income | (37 | ) | (45 | ) | 91 | 58 | - | ||||||||||||||||||
| Adjusted noninterest income | 14,453 | 15,364 | 15,305 | 16,409 | 13,140 | ||||||||||||||||||||
| Adjusted total revenue | $ | 51,148 | $ | 52,816 | $ | 45,379 | $ | 44,541 | $ | 39,719 | |||||||||||||||
| Efficiency ratio | 64.64 | % | 69.00 | % | 66.54 | % | 66.34 | % | 76.64 | % | |||||||||||||||
| MIDLAND STATES BANCORP, INC. | |||||||||||||||||||||||||
| RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES | |||||||||||||||||||||||||
| 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) | 2017 | 2017 | 2017 | 2017 | 2016 | ||||||||||||||||||||
| Shareholders' Equity to Tangible Common Equity | |||||||||||||||||||||||||
| Total shareholders' equity—GAAP | $ | 449,545 | $ | 450,689 | $ | 451,952 | $ | 334,333 | $ | 321,770 | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||||
| Preferred stock | (2,970 | ) | (3,015 | ) | (3,134 | ) | - | - | |||||||||||||||||
| Goodwill | (98,624 | ) | (97,351 | ) | (96,940 | ) | (50,807 | ) | (48,836 | ) | |||||||||||||||
| Other intangibles | (16,932 | ) | (17,966 | ) | (18,459 | ) | (8,633 | ) | (7,187 | ) | |||||||||||||||
| Tangible common equity | $ | 331,019 | $ | 332,357 | $ | 333,419 | $ | 274,893 | $ | 265,747 | |||||||||||||||
| Total Assets to Tangible Assets: | |||||||||||||||||||||||||
| Total assets—GAAP | 4,412,701 | 4,347,761 | 4,491,642 | 3,373,577 | 3,233,723 | ||||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||
| Goodwill | (98,624 | ) | (97,351 | ) | (96,940 | ) | (50,807 | ) | (48,836 | ) | |||||||||||||||
| Other intangibles | (16,932 | ) | (17,966 | ) | (18,459 | ) | (8,633 | ) | (7,187 | ) | |||||||||||||||
| Tangible assets | $ | 4,297,145 | $ | 4,232,444 | $ | 4,376,243 | $ | 3,314,137 | $ | 3,177,700 | |||||||||||||||
| Common Shares Outstanding | 19,122,049 | 19,093,153 | 19,087,409 | 15,780,651 | 15,483,499 | ||||||||||||||||||||
| Tangible Common Equity to Tangible Assets | 7.70 | % | 7.85 | % | 7.62 | % | 8.29 | % | 8.36 | % | |||||||||||||||
| Tangible Book Value Per Share | $ | 17.31 | $ | 17.41 | $ | 17.47 | $ | 17.42 | $ | 17.16 | |||||||||||||||
| Return on Average Tangible Common Equity (ROATCE) | |||||||||||||||||||||||||
| As of | |||||||||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||||||||||||
| (in thousands) | 2017 | 2017 | 2017 | 2017 | 2016 | ||||||||||||||||||||
| Net Income | $ | 1,991 | $ | 2,036 | $ | 3,539 | $ | 8,490 | $ | 11,583 | |||||||||||||||
| Average total shareholders' equity—GAAP | $ | 453,968 | $ | 453,317 | $ | 361,335 | $ | 325,442 | $ | 327,886 | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||||
| Goodwill | (97,406 | ) | (97,129 | ) | (61,424 | ) | (48,836 | ) | (46,594 | ) | |||||||||||||||
| Other intangibles | (17,495 | ) | (18,153 | ) | (10,812 | ) | (7,144 | ) | (7,718 | ) | |||||||||||||||
| Average tangible common equity | $ | 339,067 | $ | 338,035 | $ | 289,099 | $ | 269,462 | $ | 273,574 | |||||||||||||||
| ROATCE | 2.33 | % | 2.39 | % | 4.91 | % | 12.78 | % | 16.84 | % | |||||||||||||||
EXHIBIT 99.2
Midland States Bancorp, Inc. NASDAQ: MSBI Fourth Quarter 2017 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, 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,” “estimate,” “may,” “will,” “would,” “could,” “shoul d” or other 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. These risks and uncertainties sho uld be considered in evaluating forward - looking statements and undue reliance should not be placed on such statements. Additional information concerning Midland and its respective businesses, including additional factors that could materially affect Midla nd’ s financial results, are included in Midland’s filings with the Securities and Exchange Commission. Use of Non - GAAP Financial Measures. This presentation contains certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States (“GAAP”). These non - GAAP financial measures 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,” “Adjusted Pre - Tax, Pre - Provision Earnings,” “Efficiency Ratio,” “Tangible Common Equity to Tangible Assets,” “Tangible Book Value Per Share” and “Return on Average Tangible Common Equity.” The Company believes that 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. The Company believes that 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. Reconciliations of these non - GAAP measures are provided in the Appendix section of this presentation.
Overview of 4Q17 3 Improved Efficiency Ratio 4Q17 Earnings Strong Loan Growth Net income of $2.0 million, or $ 0.10 diluted EPS • Two charge - offs drive $4.6 million increase in provision expense from 3Q17, impacting EPS by $0.14 per diluted share • Adjusted pre - tax pre - provision earnings 1 increase 8.7% from 3Q17 Efficiency ratio improves to 64.6% from 69.0% • Continued realization of synergies from Centrue acquisition 9% annualized loan growth • Increases across all major lending areas except CRE • Strongest growth in commercial, construction and consumer portfolios Significant Items Impacting 4Q17 Significant items: • $4.5 million , or $0.23 per diluted share, DTA revaluation • $2.7 million, or $0.08 per diluted share, of integration and acquisition expenses (1) Represents a non - GAAP financial measure. See “Non - GAAP Reconciliation” in the appendix.
0.28% 0.35% 0.13% 0.27% 0.26% 3.70% 3.87% 3.70% 3.78% 3.73% 4Q 2016 1Q 2017 2Q 2017 3Q 2017 4Q 2017 NIM Accretion Income • Net interest income decreased due to lower net interest margin • Net interest margin declined due to $40 million of subordinated debt added in preparation for acquisition of Alpine Bancorporation Net Interest Income/Margin Net Interest Margin 4 Net Interest Income (in millions) $5.9 $2.6 $4.4 $1.9 $4.9 $2.2 $2.7 $1.3 $3.0 $2.7 $26.0 $27.5 $29.4 $36.8 $36.0 4Q 2016 1Q 2017 2Q 2017 3Q 2017 4Q 2017 NII Accretion Income
Non - Interest Income 5 • Fee generating businesses accounted for 28% of total revenue in 4Q17 • Continued increase in wealth management revenue • Soft quarters in commercial FHA and residential mortgage banking Non - Interest Income (in millions) $30.5 $16.3 $13.6 $15.4 $14.0 4Q 2016 1Q 2017 2Q 2017 3Q 2017 4Q 2017 Commercial FHA Residential Mortgage Wealth Management Gain on Sale of CMOs All other, net
$2.50 $2.87 $3.41 $3.48 $3.59 4Q 2016 1Q 2017 2Q 2017 3Q 2017 4Q 2017 $1,658 $1,869 $1,930 $2,001 $2,051 4Q 2016 1Q 2017 2Q 2017 3Q 2017 4Q 2017 • Wealth Management group offers Trust and Estate services, Investment Management, Financial Planning and Employer Sponsored Retirement Plans • Total revenue increased 3% from the prior quarter • Year - over - year organic growth in assets under administration was $191 million , or 12%, excluding CedarPoint acquisition • Acquisition of Alpine Bancorporation will increase AUA by approximately 50% Wealth Management Wealth Management Revenue 6 Assets Under Administration (in millions) (in millions)
$3.9 $6.4 $4.5 $3.4 $3.0 $0.3 $0.1 $3.7 $6.7 $4.2 $3.8 $3.1 4Q 2016 1Q 2017 2Q 2017 3Q 2017 4Q 2017 Gain Servicing $0.4 $159 $217 $152 $113 $99 4Q 2016 1Q 2017 2Q 2017 3Q 2017 4Q 2017 Loan Rate Locks Business Overview • Commercial FHA origination and servicing business for multifamily and healthcare facilities • $18 - $20 million in annual revenue from gain on loan sale and servicing • 20 - 25% pre - tax margins • Servicing deposits provide low - cost funding • Generates high margin bridge loan opportunities Love Funding – Commercial FHA Revenue Commercial FHA Revenue Mix 7 Loan Rate Locks (in millions) (in millions) 4Q17 Highlights • $99 million in rate locks • Average servicing deposits of $295 million, up 9% over the prior year • Average cost of servicing deposits of 10 basis points Full Year 2017 Results • Revenue at low - end of annual range • Pre - tax margin exceeds annual range ($0.3) ($0.2)
Non - Interest Expense and Operating Efficiency 8 • Efficiency Ratio 1 was 64.6% in 4Q17 vs. 69.0% in 3Q17 • Integration and acquisition related expenses » $2.7 million in 4Q17 » $8.3 million in 3Q17 • Loss on MSRs held - for - sale » $0.4 million in 4Q17 » $3.6 million in 3Q17 • Excluding these charges, noninterest expense decreased 9.3% on a linked - quarter basis » Lower salaries and benefits expense resulting from reduction in FTEs » Lower variable comp in commercial FHA and residential mortgage Non - Interest Expense and Efficiency Ratio 1 (Non - Interest expense in millions) $34.1 $30.8 $37.6 $48.4 $36.2 77% 66% 67% 69% 65% 4Q 2016 1Q 2017 2Q 2017 3Q 2017 4Q2017 Non-Interest Expense Efficiency Ratio (1) Represents a non - GAAP financial measure. See “Non - GAAP Reconciliation” in the appendix.
Loan Portfolio Total Loans 9 • Total loans increased $69 million, or 9% annualized, during 4Q17 • Increases in all major lending areas except commercial real estate • Strongest growth in commercial, construction and consumer portfolios Loan Portfolio Mix (in millions, as of quarter - end) (in millions, as of quarter - end) 4Q 2017 3Q 2017 4Q 2016 Commercial $ 556 $ 514 $ 458 Commercial real estate 1,440 1,472 970 Construction and land development 201 183 177 Residential real estate 454 446 254 Consumer 371 343 270 Lease financing 205 201 191 Total $ 3,227 $ 3,158 $ 2,320 $2,320 $2,455 $3,184 $3,158 $3,227 4Q 2016 1Q 2017 2Q 2017 3Q 2017 4Q 2017
Total Deposits Total Deposits 10 • Total deposits increased $17 million in 4Q17 • Strong inflows of core deposits partially offset by continued reduction of brokered CDs • Excluding brokered CDs, total deposits increased by $60 million in 4Q17 Deposit Mix (in millions, as of quarter - end) (in millions, as of quarter - end) 4Q 2017 3Q 2017 4Q 2016 Noninterest - bearing demand $ 724 $ 674 $ 562 Checking 786 801 656 Money market 646 634 400 Savings 281 279 167 Time 503 494 400 Brokered 190 233 219 Total deposits $ 3,131 $ 3,114 $ 2,404 $2,404 $2,527 $3,333 $3,114 $3,131 4Q 2016 1Q 2017 2Q 2017 3Q 2017 4Q 2017
Asset Quality NCO / Average Loans 11 • Net charge - offs primarily comprised of two retail CRE properties • NCOs drive reduction in NPLs to 0.83% of total loans • Provision for loan losses of $6.1 million in 4Q17 reflects growth in loan portfolio and NCOs • ALL/total loans of 0.51% and credit marks/total loans of 0.51% at December 31, 2017 Non - performing Loans / Total Loans (Total Loans as of quarter - end) 1.36% 1.18% 0.87% 1.06% 0.83% 4Q 2016 1Q 2017 2Q 2017 3Q 2017 4Q 2017 0.54% 0.10% 0.13% 0.01% 0.81% 4Q 2016 1Q 2017 2Q 2017 3Q 2017 4Q 2017
Outlook • Alpine acquisition expected to close by end of February 2018 • 2018 will see a significant shift in Midland’s business mix » Core community banking and wealth management becoming larger percentage of revenue mix » Commercial FHA and residential mortgage businesses becoming lower percentage of revenue mix • Increasing scale expected to drive improvement in efficiency ratio • Expanding equipment finance business • Lower effective tax rate: 23% projected for 2018 • Priorities for use of capital generated from lower tax rate » Rebuild capital base following closing of Alpine acquisition » Continue 15 - year track record of increasing dividend by at least 10% annually 12
APPENDIX
14 Adjusted Earnings Reconciliation (in thousands, except per share data) Income before income taxes - GAAP $ 7,766 $ 2,316 $ 4,916 $ 11,473 $ 19,910 Adjustments to noninterest income: Gain on sales of investment securities, net 2 98 55 67 14,387 Gain (loss) on sale of other assets 37 45 (91) (58) - Total adjustments to noninterest income 39 143 (36) 9 14,387 Adjustments to noninterest expense: Net expense from loss share termination agreement - - - - 351 Branch network optimization plan charges 371 336 1,236 9 2,099 Loss on mortgage servicing rights held for sale 442 3,617 - - - Integration and acquisition expenses 2,315 7,967 6,214 1,242 1,200 Total adjustments to noninterest expense 3,128 11,920 7,450 1,251 3,650 Adjusted earnings pre tax 10,855 14,093 12,402 12,715 9,173 Adjusted earnings tax (a) 6,992 4,920 4,326 3,472 2,871 Revaluation of net deferred tax assets (4,540) - - - - Adjusted earnings - non-GAAP $ 8,403 $ 9,173 $ 8,076 $ 9,243 $ 6,302 Adjusted diluted EPS $ 0.42 $ 0.46 $ 0.46 $ 0.56 $ 0.39 Adjusted return on average assets 0.76 % 0.82 % 0.89 % 1.14 % 0.78 % Adjusted return on average shareholders' equity 7.34 % 8.03 % 8.97 % 11.52 % 7.64 % Adjusted return on average tangible common equity 9.83 % 10.77 % 11.21 % 13.91 % 9.16 % (a) Tax rate applied to adjustments changed for prior 2017 quarters to statutory tax rate for fiscal 2017. Adjusted Pre-Tax, Pre-Provision Earnings Reconciliation (in thousands) Adjusted earnings pre tax $ 10,855 $ 14,093 $ 12,402 $ 12,715 $ 9,173 Provision for loan losses 6,076 1,489 458 1,533 2,445 Adjusted pre-tax, pre-provision earnings - non-GAAP $ 16,931 $ 15,582 $ 12,860 $ 14,248 $ 11,618 2017 2017 2017 2017 2016 December 31, September 30, June 30, March 31, December 31, MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES For the Quarter Ended For the Quarter Ended December 31, September 30, June 30, March 31, December 31, 2017 2017 2017 2017 2016
15 Efficiency Ratio Reconciliation (in thousands) Noninterest expense - GAAP $ 36,192 $ 48,364 $ 37,644 $ 30,798 $ 34,090 Net expense from loss-share termination agreement - - - - (351) Branch network optimization plan charges (371) (336) (1,236) (9) (2,099) Loss on mortgage servicing rights held for sale (442) (3,617) - - - Integration and acquisition expenses (2,315) (7,967) (6,214) (1,242) (1,200) Adjusted noninterest expense $ 33,064 $ 36,444 $ 30,194 $ 29,547 $ 30,440 Net interest income - GAAP $ 36,036 $ 36,765 $ 29,400 $ 27,461 $ 25,959 Effect of tax-exempt income 659 687 674 671 620 Adjusted net interest income 36,695 37,452 30,074 28,132 26,579 Noninterest income - GAAP $ 13,998 $ 15,403 $ 13,619 $ 16,342 $ 30,485 Mortgage servicing rights impairment (recovery) 494 104 1,650 76 (2,958) Gain on sales of investment securities, net (2) (98) (55) (67) (14,387) Other income (37) (45) 91 58 - Adjusted noninterest income 14,453 15,364 15,305 16,409 13,140 Adjusted total revenue $ 51,148 $ 52,816 $ 45,379 $ 44,541 $ 39,719 Efficiency ratio 64.64 % 69.00 % 66.54 % 66.34 % 76.64 % MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES For the Quarter Ended 2017 2017 2017 2017 2016 December 31, September 30, June 30, March 31, December 31,
16 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 $ 449,545 $ 450,689 $ 451,952 $ 334,333 $ 321,770 Adjustments: Preferred stock (2,970) (3,015) (3,134) - - Goodwill (98,624) (97,351) (96,940) (50,807) (48,836) Other intangibles (16,932) (17,966) (18,459) (8,633) (7,187) Tangible common equity $ 331,019 $ 332,357 $ 333,419 $ 274,893 $ 265,747 Total Assets to Tangible Assets: Total assets—GAAP 4,412,701 4,347,761 4,491,642 3,373,577 3,233,723 Adjustments: Goodwill (98,624) (97,351) (96,940) (50,807) (48,836) Other intangibles (16,932) (17,966) (18,459) (8,633) (7,187) Tangible assets $ 4,297,145 $ 4,232,444 $ 4,376,243 $ 3,314,137 $ 3,177,700 Common Shares Outstanding 19,122,049 19,093,153 19,087,409 15,780,651 15,483,499 Tangible Common Equity to Tangible Assets 7.70 % 7.85 % 7.62 % 8.29 % 8.36 % Tangible Book Value Per Share $ 17.31 $ 17.41 $ 17.47 $ 17.42 $ 17.16 Return on Average Tangible Common Equity (ROATCE) (in thousands) Net Income $ 1,991 $ 2,036 $ 3,539 $ 8,490 $ 11,583 Average total shareholders' equity—GAAP $ 453,968 $ 453,317 $ 361,335 $ 325,442 $ 327,886 Adjustments: Goodwill (97,406) (97,129) (61,424) (48,836) (46,594) Other intangibles (17,495) (18,153) (10,812) (7,144) (7,718) Average tangible common equity $ 339,067 $ 338,035 $ 289,099 $ 269,462 $ 273,574 ROATCE 2.33 % 2.39 % 4.91 % 12.78 % 16.84 % 2017 2017 2017 2017 2016 As of December 31, September 30, June 30, March 31, December 31, 2017 2017 2017 2017 2016 MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES As of December 31, September 30, June 30, March 31, December 31,