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): July 26, 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 July 26, 2018, Midland States Bancorp, Inc. (the “Company”) issued a press release announcing its financial results for the second quarter of 2018. The press release is attached as Exhibit 99.1.
Item 7.01. Regulation FD Disclosure.
On July 26, 2018, the Company made available on its website a slide presentation regarding the Company's second quarter 2018 financial results, which will be used as part of a publicly accessible conference call on July 27, 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 July 26, 2018 99.2 Slide Presentation of Midland States Bancorp, Inc. regarding second quarter 2018 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: July 26, 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 July 26, 2018 | |||
| 99.2 | Slide Presentation of Midland States Bancorp, Inc. regarding second quarter 2018 financial results |
EXHIBIT 99.1
Midland States Bancorp, Inc. Announces 2018 Second Quarter Results
Highlights
- Net income of $12.8 million, or $0.52 diluted earnings per share
- Adjusted earnings of $14.5 million, or $0.59 diluted earnings per share, primarily reflects the exclusion of $2.0 million of integration and acquisition expenses
- Total loans increased $66.7 million from end of prior quarter, or 6.6% annualized
- Efficiency ratio improved to 67.8%
- Wealth management revenue surpassed $5.0 million for the quarter
EFFINGHAM, Ill., July 26, 2018 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (Nasdaq:MSBI) (the “Company”) today reported net income of $12.8 million, or $0.52 diluted earnings per share, for the second quarter of 2018, which included $2.0 million of integration and acquisition expenses. This compares to net income of $1.8 million, or $0.08 diluted earnings per share, for the first quarter of 2018, which included $11.9 million of integration and acquisition expenses, and net income of $3.5 million, or $0.20 diluted earnings per share, for the second quarter of 2017, which included $7.5 million of integration and acquisition expenses.
“Our second quarter results reflected the initial full quarter benefits of the Alpine Bancorporation acquisition, which resulted in improved profitability and a more favorable revenue mix weighted towards recurring income generated from our core community banking and wealth management operations,” said Leon J. Holschbach, Chief Executive Officer of the Company. “While we continue to prudently manage our balance sheet in order to maintain stability in our net interest margin, we saw a pick-up in loan growth during the second quarter driven by our expanded equipment financing business and our consumer lending programs. We recently completed the Alpine system conversion and are ahead of schedule in realizing the projected cost savings from the Alpine acquisition. These cost savings have helped us to drive improvement in our level of efficiency, and we believe we are well-positioned to deliver additional earnings growth in 2019.”
Factors Affecting Comparability
The Company acquired Alpine Bancorporation, Inc. (“Alpine”), and Centrue Financial Corporation (“Centrue”) in February 2018 and June 2017, respectively. The financial position and results of operations of these entities prior to their acquisition dates are not included in the Company’s financial results.
Adjusted Earnings
Adjusted earnings were $14.5 million, or $0.59 diluted earnings per share, for the second quarter of 2018, which primarily reflects the exclusion of $2.0 million in integration and acquisition expenses. This compares to adjusted earnings of $11.3 million, or $0.52 diluted earnings per share, for the first quarter of 2018, which primarily reflects the exclusion of $11.9 million in integration and acquisition expenses.
The increase in adjusted earnings per share was primarily attributable to the earnings contribution from Alpine.
A reconciliation of adjusted earnings to net income according to accounting principles generally accepted in the United States (“GAAP”) is provided in the financial tables at the end of this press release.
Net Interest Income
Net interest income for the second quarter of 2018 was $48.3 million, an increase of 26.5% from $38.2 million for the first quarter of 2018. The increase in net interest income was primarily attributable to the full quarter of net interest income contributed by Alpine.
The Company’s net interest income benefits from accretion income associated with purchased loan portfolios. Accretion income totaled $5.5 million for the second quarter of 2018, compared with $2.0 million for the first quarter of 2018.
Relative to the second quarter of 2017, net interest income increased $18.9 million, or 64.2%. Accretion income for the second quarter of 2017 was $1.3 million. The increase in net interest income resulted from the increase in accretion income and a $23.8 million increase in interest income on interest-earning assets, offset in part by a $4.9 million increase in interest expense. These increases were due to the full quarter impact of Alpine and Centrue, as well as organic growth.
Net Interest Margin
Net interest margin for the second quarter of 2018 was 3.91%, compared to 3.69% for the first quarter of 2018. The Company’s net interest margin benefits from accretion income on purchased loan portfolios, which contributed 40 and 16 basis points to net interest margin in the second quarter of 2018 and first quarter of 2018, respectively. Excluding the impact of accretion income, net interest margin was relatively unchanged compared to the first quarter of 2018.
Relative to the second quarter of 2017, net interest margin increased from 3.70%. Accretion income on purchased loan portfolios contributed 13 basis points to net interest margin in the second quarter of 2017. Excluding the impact of accretion income, the net interest margin declined due to non-deposit funding costs increasing faster than the yield on earning assets.
Noninterest Income
Noninterest income for the second quarter of 2018 was $15.9 million, a decrease of 4.0% from $16.6 million for the first quarter of 2018. The decrease was primarily attributable to a decline in commercial FHA revenue, which was partially offset by increases in most of the Company’s other fee generating areas due to the full quarter benefit of Alpine.
Wealth management revenue for the second quarter of 2018 was $5.4 million, an increase of 29.5% from $4.2 million in the first quarter of 2018. The increase was primarily attributable to the full quarter contribution of Alpine’s wealth management business, which added $1.1 billion in assets under administration. Compared to the second quarter of 2017, wealth management revenue increased 59.0%, which was attributable to 7.9% organic growth in assets under administration and the addition of Alpine’s wealth management business.
Commercial FHA revenue for the second quarter of 2018 was $0.3 million, a decrease of 90.2% from $3.3 million in the first quarter of 2018. The Company originated $11.1 million in rate lock commitments during the second quarter of 2018, compared to $80.4 million in the prior quarter. Compared to the second quarter of 2017, commercial FHA revenue decreased 92.2%.
In response to the recent performance in the commercial FHA business, the Company has made changes in the leadership at Love Funding and implemented cost reductions to better align expenses with the current level of revenue being generated. On a long-term basis, Midland expects annual commercial FHA revenue to range between $12 million and $20 million, with a pre-tax margin of 20% to 40%.
Relative to the second quarter of 2017, noninterest income increased 17.1% from $13.6 million. The increase was primarily due to greater wealth management and core banking fees, partially offset by lower commercial FHA and residential mortgage banking revenue.
Noninterest Expense
Noninterest expense for the second quarter of 2018 was $46.6 million, which included $2.0 million in integration and acquisition expense, compared with $49.6 million for the first quarter of 2018, which included $11.9 million in integration and acquisition expense. Excluding integration and acquisition expense, noninterest expense increased $6.8 million, or 18.1%, from the prior quarter. The increase was primarily due to a full quarter of expenses associated with the addition of Alpine’s operations.
Relative to the second quarter of 2017, noninterest expense, excluding integration and acquisition expenses, increased 47.5% from $30.2 million. The increase was primarily due to the addition of personnel and facilities from the two acquisitions completed over the past year.
Loan Portfolio
Total loans outstanding were $4.10 billion at June 30, 2018, compared with $4.03 billion at March 31, 2018 and $3.18 billion at June 30, 2017. The increase in total loans from March 31, 2018, was primarily attributable to growth in equipment financing, consumer lending and residential real estate. Equipment financing balances increased $38.1 million from March 31, 2018, which are booked within either the commercial or the lease financing portfolios. The increase in total loans from June 30, 2017 was primarily attributable to the addition of Alpine’s loans.
Deposits
Total deposits were $4.16 billion at June 30, 2018, compared with $4.23 billion at March 31, 2018, and $3.33 billion at June 30, 2017. The decrease in total deposits from March 31, 2018 was primarily attributable to normal fluctuations in servicing deposits and a reduction in brokered time deposits. The increase in total deposits from June 30, 2017 was primarily attributable to the addition of Alpine’s deposits.
Asset Quality
Non-performing loans totaled $28.3 million, or 0.69% of total loans, at June 30, 2018, compared with $26.5 million, or 0.66% of total loans, at March 31, 2018, and $27.6 million, or 0.87% of total loans, at June 30, 2017.
Net charge-offs for the second quarter of 2018 were $1.3 million, or 0.13% of average loans on an annualized basis.
The Company recorded a provision for loan losses of $1.9 million for the second quarter of 2018. The Company’s allowance for loan losses was 0.45% of total loans and 64.4% of non-performing loans at June 30, 2018, compared with 0.44% of total loans and 66.8% of non-performing loans at March 31, 2018. Fair market value discounts recorded in connection with acquired loan portfolios represented 0.81% of total loans at June 30, 2018, compared with 0.65% of total loans at March 31, 2018.
Capital
At June 30, 2018, 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:
| June 30, 2018 | Well Capitalized Regulatory Requirements | |||
| Total capital to risk-weighted assets | 12.27% | 10.00% | ||
| Tier 1 capital to risk-weighted assets | 9.78% | 8.00% | ||
| Tier 1 leverage ratio | 8.16% | 5.00% | ||
| Common equity Tier 1 capital | 8.28% | 6.50% | ||
| Tangible common equity to tangible assets | 6.96% | 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, July 27, 2018 to discuss its financial results. The call can be accessed via telephone at (877) 516-3531; passcode: 4999299. A recorded replay can be accessed through August 3, 2018 by dialing (855) 859-2056; passcode: 4999299.
A slide presentation relating to the second quarter 2018 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 June 30, 2018, the Company had total assets of approximately $5.7 billion and its Wealth Management Group had assets under administration of approximately $3.2 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 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 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," including but not limited to statements about the Company’s plans, objectives, future performance, goals and future earnings levels. These statements are subject to many risks and uncertainties, including changes in interest rates and other general economic, business and political conditions, including changes in the financial markets; changes in business plans as circumstances warrant; 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, President, at jludwig@midlandsb.com or (217) 342-7321
Stephen A. Erickson, Chief Financial Officer, at serickson@midlandsb.com or (217) 540-1712
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 | |||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||||
| (dollars in thousands, except per share data) | 2018 | 2018 | 2017 | 2017 | 2017 | ||||||||||||||||
| Earnings Summary | |||||||||||||||||||||
| Net interest income | $ | 48,286 | $ | 38,185 | $ | 36,036 | $ | 36,765 | $ | 29,400 | |||||||||||
| Provision for loan losses | 1,854 | 2,006 | 6,076 | 1,489 | 458 | ||||||||||||||||
| Noninterest income | 15,948 | 16,605 | 13,998 | 15,403 | 13,619 | ||||||||||||||||
| Noninterest expense | 46,553 | 49,602 | 36,192 | 48,363 | 37,645 | ||||||||||||||||
| Income before income taxes | 15,827 | 3,182 | 7,766 | 2,316 | 4,916 | ||||||||||||||||
| Income taxes | 3,045 | 1,376 | 5,775 | 280 | 1,377 | ||||||||||||||||
| Net income | 12,782 | 1,806 | 1,991 | 2,036 | 3,539 | ||||||||||||||||
| Preferred stock dividends, net | 36 | 36 | 37 | 27 | 19 | ||||||||||||||||
| Net income available to common shareholders | $ | 12,746 | $ | 1,770 | $ | 1,954 | $ | 2,009 | $ | 3,520 | |||||||||||
| Diluted earnings per common share | $ | 0.52 | $ | 0.08 | $ | 0.10 | $ | 0.10 | $ | 0.20 | |||||||||||
| Weighted average shares outstanding - diluted | 24,268,111 | 21,351,511 | 19,741,833 | 19,704,217 | 17,320,089 | ||||||||||||||||
| Return on average assets | 0.91 | % | 0.15 | % | 0.18 | % | 0.18 | % | 0.39 | % | |||||||||||
| Return on average shareholders' equity | 8.77 | % | 1.47 | % | 1.74 | % | 1.78 | % | 3.93 | % | |||||||||||
| Return on average tangible common equity (1) | 13.48 | % | 2.05 | % | 2.31 | % | 2.38 | % | 4.89 | % | |||||||||||
| Net interest margin | 3.91 | % | 3.69 | % | 3.73 | % | 3.78 | % | 3.70 | % | |||||||||||
| Efficiency ratio (1) | 67.81 | % | 68.45 | % | 64.64 | % | 69.00 | % | 66.54 | % | |||||||||||
| Adjusted Earnings Performance Summary | |||||||||||||||||||||
| Adjusted earnings (1) | $ | 14,486 | $ | 11,301 | $ | 8,403 | $ | 9,173 | $ | 8,076 | |||||||||||
| Adjusted diluted earnings per common share (1) | $ | 0.59 | $ | 0.52 | $ | 0.42 | $ | 0.46 | $ | 0.46 | |||||||||||
| Adjusted return on average assets (1) | 1.03 | % | 0.96 | % | 0.76 | % | 0.82 | % | 0.89 | % | |||||||||||
| Adjusted return on average shareholders' equity (1) | 9.94 | % | 9.19 | % | 7.34 | % | 8.03 | % | 8.97 | % | |||||||||||
| Adjusted return on average tangible common equity (1) | 15.28 | % | 13.06 | % | 9.88 | % | 10.83 | % | 11.20 | % | |||||||||||
| (1) Non-GAAP financial measures. Refer to pages 12 - 14 for a reconciliation to the comparable GAAP financial measures. | |||||||||||||||||||||
| MIDLAND STATES BANCORP, INC. | |||||||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | |||||||||||||||||||||||
| For the Quarter Ended | |||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||||||
| (in thousands, except per share data) | 2018 | 2018 | 2017 | 2017 | 2017 | ||||||||||||||||||
| Net interest income: | |||||||||||||||||||||||
| Total interest income | $ | 58,283 | $ | 46,505 | $ | 43,500 | $ | 43,246 | $ | 34,528 | |||||||||||||
| Total interest expense | 9,997 | 8,320 | 7,464 | 6,481 | 5,128 | ||||||||||||||||||
| Net interest income | 48,286 | 38,185 | 36,036 | 36,765 | 29,400 | ||||||||||||||||||
| Provision for loan losses | 1,854 | 2,006 | 6,076 | 1,489 | 458 | ||||||||||||||||||
| Net interest income after provision for loan losses | 46,432 | 36,179 | 29,960 | 35,276 | 28,942 | ||||||||||||||||||
| Noninterest income: | |||||||||||||||||||||||
| Commercial FHA revenue | 326 | 3,330 | 3,127 | 3,777 | 4,153 | ||||||||||||||||||
| Residential mortgage banking revenue | 2,116 | 1,418 | 1,556 | 2,317 | 2,330 | ||||||||||||||||||
| Wealth management revenue | 5,417 | 4,182 | 3,587 | 3,475 | 3,406 | ||||||||||||||||||
| Service charges on deposit accounts | 2,693 | 1,967 | 1,828 | 2,133 | 1,122 | ||||||||||||||||||
| Interchange revenue | 2,929 | 2,045 | 1,538 | 1,724 | 1,114 | ||||||||||||||||||
| (Loss) gain on sales of investment securities, net | (70 | ) | 65 | 2 | 98 | 55 | |||||||||||||||||
| Other income | 2,537 | 3,598 | 2,360 | 1,879 | 1,439 | ||||||||||||||||||
| Total noninterest income | 15,948 | 16,605 | 13,998 | 15,403 | 13,619 | ||||||||||||||||||
| Noninterest expense: | |||||||||||||||||||||||
| Salaries and employee benefits | 23,467 | 28,395 | 17,344 | 22,411 | 21,842 | ||||||||||||||||||
| Occupancy and equipment | 4,708 | 4,252 | 3,859 | 4,144 | 3,472 | ||||||||||||||||||
| Data processing | 4,852 | 4,286 | 3,640 | 5,786 | 2,949 | ||||||||||||||||||
| Professional | 3,575 | 4,074 | 3,611 | 4,151 | 3,142 | ||||||||||||||||||
| Amortization of intangible assets | 1,576 | 1,675 | 1,035 | 1,187 | 579 | ||||||||||||||||||
| Loss on mortgage servicing rights held for sale | 188 | - | 442 | 3,617 | - | ||||||||||||||||||
| Other | 8,187 | 6,920 | 6,261 | 7,067 | 5,661 | ||||||||||||||||||
| Total noninterest expense | 46,553 | 49,602 | 36,192 | 48,363 | 37,645 | ||||||||||||||||||
| Income before income taxes | 15,827 | 3,182 | 7,766 | 2,316 | 4,916 | ||||||||||||||||||
| Income taxes | 3,045 | 1,376 | 5,775 | 280 | 1,377 | ||||||||||||||||||
| Net income | 12,782 | 1,806 | 1,991 | 2,036 | 3,539 | ||||||||||||||||||
| Preferred stock dividends, net | 36 | 36 | 37 | 27 | 19 | ||||||||||||||||||
| Net income available to common shareholders | $ | 12,746 | $ | 1,770 | $ | 1,954 | $ | 2,009 | $ | 3,520 | |||||||||||||
| Basic earnings per common share | $ | 0.53 | $ | 0.08 | $ | 0.10 | $ | 0.10 | $ | 0.21 | |||||||||||||
| Diluted earnings per common share | $ | 0.52 | $ | 0.08 | $ | 0.10 | $ | 0.10 | $ | 0.20 | |||||||||||||
| MIDLAND STATES BANCORP, INC. | |||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | |||||||||||||||||||||||||
| As of | |||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||||||||
| (in thousands) | 2018 | 2018 | 2017 | 2017 | 2017 | ||||||||||||||||||||
| Assets | |||||||||||||||||||||||||
| Cash and cash equivalents | $ | 276,331 | $ | 331,183 | $ | 215,202 | $ | 183,572 | $ | 334,356 | |||||||||||||||
| Investment securities | 708,001 | 738,172 | 450,525 | 467,852 | 460,711 | ||||||||||||||||||||
| Loans | 4,095,811 | 4,029,150 | 3,226,678 | 3,157,972 | 3,184,063 | ||||||||||||||||||||
| Allowance for loan losses | (18,246 | ) | (17,704 | ) | (16,431 | ) | (16,861 | ) | (15,424 | ) | |||||||||||||||
| Total loans, net | 4,077,565 | 4,011,446 | 3,210,247 | 3,141,111 | 3,168,639 | ||||||||||||||||||||
| Loans held for sale at fair value | 41,449 | 25,267 | 50,089 | 35,874 | 41,689 | ||||||||||||||||||||
| Premises and equipment, net | 94,783 | 95,332 | 76,162 | 80,941 | 76,598 | ||||||||||||||||||||
| Other real estate owned | 3,911 | 5,059 | 5,708 | 6,379 | 7,036 | ||||||||||||||||||||
| Mortgage servicing rights at lower of cost or market | 52,381 | 56,427 | 56,352 | 56,299 | 70,277 | ||||||||||||||||||||
| Mortgage servicing rights held for sale | 4,806 | 3,962 | 10,176 | 10,618 | - | ||||||||||||||||||||
| Intangible assets | 41,081 | 46,473 | 16,932 | 17,966 | 18,459 | ||||||||||||||||||||
| Goodwill | 164,044 | 155,674 | 98,624 | 97,351 | 96,940 | ||||||||||||||||||||
| Cash surrender value of life insurance policies | 137,681 | 136,766 | 113,366 | 112,591 | 111,802 | ||||||||||||||||||||
| Other assets | 128,567 | 117,611 | 109,318 | 137,207 | 105,135 | ||||||||||||||||||||
| Total assets | $ | 5,730,600 | $ | 5,723,372 | $ | 4,412,701 | $ | 4,347,761 | $ | 4,491,642 | |||||||||||||||
| Liabilities and Shareholders' Equity | |||||||||||||||||||||||||
| Noninterest-bearing deposits | $ | 1,001,802 | $ | 1,037,710 | $ | 724,443 | $ | 674,118 | $ | 780,803 | |||||||||||||||
| Interest-bearing deposits | 3,158,055 | 3,196,105 | 2,406,646 | 2,440,349 | 2,552,228 | ||||||||||||||||||||
| Total deposits | 4,159,857 | 4,233,815 | 3,131,089 | 3,114,467 | 3,333,031 | ||||||||||||||||||||
| Short-term borrowings | 114,536 | 130,693 | 156,126 | 153,443 | 170,629 | ||||||||||||||||||||
| FHLB advances and other borrowings | 678,873 | 587,493 | 496,436 | 488,870 | 400,304 | ||||||||||||||||||||
| Subordinated debt | 94,053 | 94,013 | 93,972 | 54,581 | 54,556 | ||||||||||||||||||||
| Trust preferred debentures | 47,559 | 47,443 | 47,330 | 47,218 | 47,107 | ||||||||||||||||||||
| Other liabilities | 43,187 | 44,530 | 38,203 | 38,493 | 34,063 | ||||||||||||||||||||
| Total liabilities | 5,138,065 | 5,137,987 | 3,963,156 | 3,897,072 | 4,039,690 | ||||||||||||||||||||
| Total shareholders’ equity | 592,535 | 585,385 | 449,545 | 450,689 | 451,952 | ||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 5,730,600 | $ | 5,723,372 | $ | 4,412,701 | $ | 4,347,761 | $ | 4,491,642 | |||||||||||||||
| MIDLAND STATES BANCORP, INC. | |||||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | |||||||||||||||||||||
| As of | |||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||||
| (in thousands) | 2018 | 2018 | 2017 | 2017 | 2017 | ||||||||||||||||
| Loan Portfolio | |||||||||||||||||||||
| Commercial loans | $ | 762,549 | $ | 802,752 | $ | 555,930 | $ | 513,544 | $ | 571,111 | |||||||||||
| Commercial real estate loans | 1,711,296 | 1,773,510 | 1,440,011 | 1,472,284 | 1,470,487 | ||||||||||||||||
| Construction and land development loans | 247,889 | 234,837 | 200,587 | 182,513 | 176,098 | ||||||||||||||||
| Residential real estate loans | 601,808 | 570,321 | 453,552 | 445,747 | 428,464 | ||||||||||||||||
| Consumer loans | 543,654 | 424,229 | 371,455 | 343,038 | 335,902 | ||||||||||||||||
| Lease financing loans | 228,615 | 223,501 | 205,143 | 200,846 | 202,001 | ||||||||||||||||
| Total loans | $ | 4,095,811 | $ | 4,029,150 | $ | 3,226,678 | $ | 3,157,972 | $ | 3,184,063 | |||||||||||
| Deposit Portfolio | |||||||||||||||||||||
| Noninterest-bearing demand deposits | $ | 1,001,802 | $ | 1,037,710 | $ | 724,443 | $ | 674,118 | $ | 780,803 | |||||||||||
| Checking accounts | 1,024,506 | 993,253 | 785,934 | 800,649 | 841,640 | ||||||||||||||||
| Money market accounts | 843,984 | 840,415 | 646,426 | 633,844 | 578,077 | ||||||||||||||||
| Savings accounts | 460,560 | 466,887 | 281,212 | 278,977 | 291,912 | ||||||||||||||||
| Time deposits | 638,215 | 672,034 | 502,810 | 493,777 | 525,647 | ||||||||||||||||
| Brokered deposits | 190,790 | 223,516 | 190,264 | 233,102 | 314,952 | ||||||||||||||||
| Total deposits | $ | 4,159,857 | $ | 4,233,815 | $ | 3,131,089 | $ | 3,114,467 | $ | 3,333,031 | |||||||||||
| MIDLAND STATES BANCORP, INC. | |||||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | |||||||||||||||||||||
| For the Quarter Ended | |||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||||
| (dollars in thousands) | 2018 | 2018 | 2017 | 2017 | 2017 | ||||||||||||||||
| Average Balance Sheets | |||||||||||||||||||||
| Cash and cash equivalents | $ | 227,499 | $ | 138,275 | $ | 173,540 | $ | 202,407 | $ | 192,483 | |||||||||||
| Investment securities | 731,017 | 548,168 | 461,475 | 474,216 | 362,268 | ||||||||||||||||
| Loans | 3,982,958 | 3,477,917 | 3,198,036 | 3,173,027 | 2,621,139 | ||||||||||||||||
| Loans held for sale | 31,220 | 40,841 | 40,615 | 46,441 | 61,718 | ||||||||||||||||
| Nonmarketable equity securities | 38,872 | 34,890 | 33,703 | 31,224 | 22,246 | ||||||||||||||||
| Total interest-earning assets | 5,011,566 | 4,240,091 | 3,907,369 | 3,927,315 | 3,259,854 | ||||||||||||||||
| Non-earning assets | 639,864 | 536,750 | 497,502 | 498,364 | 372,473 | ||||||||||||||||
| Total assets | $ | 5,651,430 | $ | 4,776,841 | $ | 4,404,871 | $ | 4,425,679 | $ | 3,632,327 | |||||||||||
| Interest-bearing deposits | $ | 3,158,816 | $ | 2,675,339 | $ | 2,433,461 | $ | 2,527,490 | $ | 2,116,565 | |||||||||||
| Short-term borrowings | 120,794 | 148,703 | 181,480 | 182,015 | 146,144 | ||||||||||||||||
| FHLB advances and other borrowings | 573,107 | 489,567 | 472,709 | 434,860 | 290,401 | ||||||||||||||||
| Subordinated debt | 94,035 | 93,993 | 88,832 | 54,570 | 54,542 | ||||||||||||||||
| Trust preferred debentures | 47,488 | 47,373 | 47,263 | 47,152 | 40,820 | ||||||||||||||||
| Total interest-bearing liabilities | 3,994,240 | 3,454,975 | 3,223,745 | 3,246,087 | 2,648,472 | ||||||||||||||||
| Noninterest-bearing deposits | 1,025,308 | 782,164 | 684,907 | 688,986 | 579,977 | ||||||||||||||||
| Other noninterest-bearing liabilities | 47,229 | 40,761 | 42,251 | 37,289 | 42,372 | ||||||||||||||||
| Shareholders' equity | 584,653 | 498,941 | 453,968 | 453,317 | 361,506 | ||||||||||||||||
| Total liabilities and shareholders' equity | $ | 5,651,430 | $ | 4,776,841 | $ | 4,404,871 | $ | 4,425,679 | $ | 3,632,327 | |||||||||||
| Yields | |||||||||||||||||||||
| Cash and cash equivalents | 1.79 | % | 1.53 | % | 1.28 | % | 1.19 | % | 1.02 | % | |||||||||||
| Investment securities | 2.91 | % | 2.87 | % | 3.01 | % | 2.86 | % | 3.33 | % | |||||||||||
| Loans | 5.21 | % | 4.85 | % | 4.88 | % | 4.90 | % | 4.71 | % | |||||||||||
| Loans held for sale | 3.79 | % | 4.25 | % | 3.62 | % | 3.74 | % | 4.68 | % | |||||||||||
| Nonmarketable equity securities | 4.97 | % | 4.64 | % | 4.78 | % | 4.20 | % | 4.31 | % | |||||||||||
| Total interest-earning assets | 4.71 | % | 4.49 | % | 4.48 | % | 4.44 | % | 4.33 | % | |||||||||||
| Interest-bearing deposits | 0.64 | % | 0.62 | % | 0.58 | % | 0.53 | % | 0.53 | % | |||||||||||
| Short-term borrowings | 0.38 | % | 0.34 | % | 0.26 | % | 0.22 | % | 0.23 | % | |||||||||||
| FHLB advances and other borrowings | 1.81 | % | 1.55 | % | 1.42 | % | 1.36 | % | 1.16 | % | |||||||||||
| Subordinated debt | 6.44 | % | 6.44 | % | 6.46 | % | 6.40 | % | 6.40 | % | |||||||||||
| Trust preferred debentures | 6.59 | % | 5.94 | % | 5.51 | % | 5.37 | % | 5.15 | % | |||||||||||
| Total interest-bearing liabilities | 1.00 | % | 0.98 | % | 0.92 | % | 0.79 | % | 0.78 | % | |||||||||||
| Net interest margin | 3.91 | % | 3.69 | % | 3.73 | % | 3.78 | % | 3.70 | % | |||||||||||
| MIDLAND STATES BANCORP, INC. | |||||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | |||||||||||||||||||||
| As of and for the Quarter Ended | |||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||||
| (dollars in thousands, except per share data) | 2018 | 2018 | 2017 | 2017 | 2017 | ||||||||||||||||
| Asset Quality | |||||||||||||||||||||
| Loans 30-89 days past due | $ | 19,362 | $ | 20,138 | $ | 15,405 | $ | 13,526 | $ | 13,566 | |||||||||||
| Nonperforming loans | 28,342 | 26,499 | 26,760 | 33,431 | 27,615 | ||||||||||||||||
| Nonperforming assets | 31,542 | 29,938 | 30,894 | 38,109 | 33,150 | ||||||||||||||||
| Net charge-offs | 1,312 | 732 | 6,506 | 52 | 839 | ||||||||||||||||
| Loans 30-89 days past due to total loans | 0.47 | % | 0.50 | % | 0.48 | % | 0.43 | % | 0.43 | % | |||||||||||
| Nonperforming loans to total loans | 0.69 | % | 0.66 | % | 0.83 | % | 1.06 | % | 0.87 | % | |||||||||||
| Nonperforming assets to total assets | 0.55 | % | 0.52 | % | 0.70 | % | 0.88 | % | 0.74 | % | |||||||||||
| Allowance for loan losses to total loans | 0.45 | % | 0.44 | % | 0.51 | % | 0.53 | % | 0.48 | % | |||||||||||
| Allowance for loan losses to nonperforming loans | 64.38 | % | 66.81 | % | 61.40 | % | 50.43 | % | 55.81 | % | |||||||||||
| Net charge-offs to average loans | 0.13 | % | 0.09 | % | 0.81 | % | 0.01 | % | 0.13 | % | |||||||||||
| Wealth Management | |||||||||||||||||||||
| Trust assets under administration | $ | 3,188,909 | $ | 3,125,051 | $ | 2,051,249 | $ | 2,001,106 | $ | 1,929,513 | |||||||||||
| Market Data | |||||||||||||||||||||
| Book value per share at period end | $ | 24.92 | $ | 24.67 | $ | 23.35 | $ | 23.45 | $ | 23.51 | |||||||||||
| Tangible book value per share at period end (1) | $ | 16.25 | $ | 16.11 | $ | 17.31 | $ | 17.41 | $ | 17.47 | |||||||||||
| Market price at period end | $ | 34.26 | $ | 31.56 | $ | 32.48 | $ | 31.68 | $ | 33.52 | |||||||||||
| Shares outstanding at period end | 23,664,596 | 23,612,430 | 19,122,049 | 19,093,153 | 19,087,409 | ||||||||||||||||
| Capital | |||||||||||||||||||||
| Total capital to risk-weighted assets | 12.27 | % | 12.37 | % | 13.26 | % | 12.21 | % | 11.98 | % | |||||||||||
| Tier 1 capital to risk-weighted assets | 9.78 | % | 9.84 | % | 10.19 | % | 10.20 | % | 10.05 | % | |||||||||||
| Tier 1 leverage ratio | 8.16 | % | 9.55 | % | 8.63 | % | 8.54 | % | 10.45 | % | |||||||||||
| Tier 1 common capital to risk-weighted assets | 8.28 | % | 8.30 | % | 8.45 | % | 8.50 | % | 8.36 | % | |||||||||||
| Tangible common equity to tangible assets (1) | 6.96 | % | 6.89 | % | 7.70 | % | 7.85 | % | 7.62 | % | |||||||||||
| (1) Non-GAAP financial measures. Refer to pages 12 - 14 for a reconciliation to the comparable GAAP financial measures. | |||||||||||||||||||||
| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||||||
| RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES | ||||||||||||||||||||||||
| Adjusted Earnings Reconciliation | ||||||||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||||||
| (dollars in thousands, except per share data) | 2018 | 2018 | 2017 | 2017 | 2017 | |||||||||||||||||||
| Income before income taxes - GAAP | $ | 15,827 | $ | 3,182 | $ | 7,766 | $ | 2,316 | $ | 4,916 | ||||||||||||||
| Adjustments to noninterest income: | ||||||||||||||||||||||||
| (Loss) gain on sales of investment securities, net | (70 | ) | 65 | 2 | 98 | 55 | ||||||||||||||||||
| Other | (48 | ) | 150 | 37 | 45 | (91 | ) | |||||||||||||||||
| Total adjustments to noninterest income | (118 | ) | 215 | 39 | 143 | (36 | ) | |||||||||||||||||
| Adjustments to noninterest expense: | ||||||||||||||||||||||||
| Loss on mortgage servicing rights held for sale | 188 | - | 442 | 3,617 | - | |||||||||||||||||||
| Integration and acquisition expenses | 2,019 | 11,884 | 2,686 | 8,303 | 7,450 | |||||||||||||||||||
| Total adjustments to noninterest expense | 2,207 | 11,884 | 3,128 | 11,920 | 7,450 | |||||||||||||||||||
| Adjusted earnings pre tax | 18,152 | 14,851 | 10,855 | 14,093 | 12,402 | |||||||||||||||||||
| Adjusted earnings tax | 3,666 | 3,550 | 6,992 | 4,920 | 4,326 | |||||||||||||||||||
| Revaluation of net deferred tax assets | - | - | (4,540 | ) | - | - | ||||||||||||||||||
| Adjusted earnings - non-GAAP | 14,486 | 11,301 | 8,403 | 9,173 | 8,076 | |||||||||||||||||||
| Preferred stock dividends, net | 36 | 36 | 37 | 27 | 19 | |||||||||||||||||||
| Adjusted earnings - available to common shareholders - non-GAAP | $ | 14,450 | $ | 11,265 | $ | 8,366 | $ | 9,146 | $ | 8,057 | ||||||||||||||
| Adjusted diluted earnings per common share | $ | 0.59 | $ | 0.52 | $ | 0.42 | $ | 0.46 | $ | 0.46 | ||||||||||||||
| Adjusted return on average assets | 1.03 | % | 0.96 | % | 0.76 | % | 0.82 | % | 0.89 | % | ||||||||||||||
| Adjusted return on average shareholders' equity | 9.94 | % | 9.19 | % | 7.34 | % | 8.03 | % | 8.97 | % | ||||||||||||||
| Adjusted return on average tangible common equity | 15.28 | % | 13.06 | % | 9.88 | % | 10.83 | % | 11.20 | % | ||||||||||||||
| MIDLAND STATES BANCORP, INC. | |||||||||||||||||||||||||||
| RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (continued) | |||||||||||||||||||||||||||
| Efficiency Ratio Reconciliation | |||||||||||||||||||||||||||
| For the Quarter Ended | |||||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||||||||||
| (dollars in thousands) | 2018 | 2018 | 2017 | 2017 | 2017 | ||||||||||||||||||||||
| Noninterest expense - GAAP | $ | 46,553 | $ | 49,602 | $ | 36,192 | $ | 48,363 | $ | 37,645 | |||||||||||||||||
| Loss on mortgage servicing rights held for sale | (188 | ) | - | (442 | ) | (3,617 | ) | - | |||||||||||||||||||
| Integration and acquisition expenses | (2,019 | ) | (11,884 | ) | (2,686 | ) | (8,303 | ) | (7,450 | ) | |||||||||||||||||
| Adjusted noninterest expense | $ | 44,346 | $ | 37,718 | $ | 33,064 | $ | 36,443 | $ | 30,195 | |||||||||||||||||
| Net interest income - GAAP | $ | 48,286 | $ | 38,185 | $ | 36,036 | $ | 36,765 | $ | 29,400 | |||||||||||||||||
| Effect of tax-exempt income | 541 | 394 | 659 | 687 | 674 | ||||||||||||||||||||||
| Adjusted net interest income | 48,827 | 38,579 | 36,695 | 37,452 | 30,074 | ||||||||||||||||||||||
| Noninterest income - GAAP | $ | 15,948 | $ | 16,605 | $ | 13,998 | $ | 15,403 | $ | 13,619 | |||||||||||||||||
| Mortgage servicing rights impairment | 500 | 133 | 494 | 104 | 1,650 | ||||||||||||||||||||||
| Loss (gain) on sales of investment securities, net | 70 | (65 | ) | (2 | ) | (98 | ) | (55 | ) | ||||||||||||||||||
| Other | 48 | (150 | ) | (37 | ) | (45 | ) | 91 | |||||||||||||||||||
| Adjusted noninterest income | 16,566 | 16,523 | 14,453 | 15,364 | 15,305 | ||||||||||||||||||||||
| Adjusted total revenue | $ | 65,393 | $ | 55,102 | $ | 51,148 | $ | 52,816 | $ | 45,379 | |||||||||||||||||
| Efficiency ratio | 67.81 | % | 68.45 | % | 64.64 | % | 69.00 | % | 66.54 | % | |||||||||||||||||
| 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 | |||||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||||||||||
| (dollars in thousands, except per share data) | 2018 | 2018 | 2017 | 2017 | 2017 | ||||||||||||||||||||||
| Shareholders' Equity to Tangible Common Equity | |||||||||||||||||||||||||||
| Total shareholders' equity—GAAP | $ | 592,535 | $ | 585,385 | $ | 449,545 | $ | 450,689 | $ | 451,952 | |||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||
| Preferred stock | (2,876 | ) | (2,923 | ) | (2,970 | ) | (3,015 | ) | (3,134 | ) | |||||||||||||||||
| Goodwill | (164,044 | ) | (155,674 | ) | (98,624 | ) | (97,351 | ) | (96,940 | ) | |||||||||||||||||
| Other intangibles | (41,081 | ) | (46,473 | ) | (16,932 | ) | (17,966 | ) | (18,459 | ) | |||||||||||||||||
| Tangible common equity | $ | 384,534 | $ | 380,315 | $ | 331,019 | $ | 332,357 | $ | 333,419 | |||||||||||||||||
| Total Assets to Tangible Assets: | |||||||||||||||||||||||||||
| Total assets—GAAP | $ | 5,730,600 | $ | 5,723,372 | $ | 4,412,701 | $ | 4,347,761 | $ | 4,491,642 | |||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||
| Goodwill | (164,044 | ) | (155,674 | ) | (98,624 | ) | (97,351 | ) | (96,940 | ) | |||||||||||||||||
| Other intangibles | (41,081 | ) | (46,473 | ) | (16,932 | ) | (17,966 | ) | (18,459 | ) | |||||||||||||||||
| Tangible assets | $ | 5,525,475 | $ | 5,521,225 | $ | 4,297,145 | $ | 4,232,444 | $ | 4,376,243 | |||||||||||||||||
| Common Shares Outstanding | 23,664,596 | 23,612,430 | 19,122,049 | 19,093,153 | 19,087,409 | ||||||||||||||||||||||
| Tangible Common Equity to Tangible Assets | 6.96 | % | 6.89 | % | 7.70 | % | 7.85 | % | 7.62 | % | |||||||||||||||||
| Tangible Book Value Per Share | $ | 16.25 | $ | 16.11 | $ | 17.31 | $ | 17.41 | $ | 17.47 | |||||||||||||||||
| Return on Average Tangible Common Equity (ROATCE) | |||||||||||||||||||||||||||
| For the Quarter Ended | |||||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||||||||||
| (dollars in thousands) | 2018 | 2018 | 2017 | 2017 | 2017 | ||||||||||||||||||||||
| Net income available to common shareholders | $ | 12,746 | $ | 1,770 | $ | 1,954 | $ | 2,009 | $ | 3,520 | |||||||||||||||||
| Average total shareholders' equity—GAAP | $ | 584,653 | $ | 498,941 | $ | 453,968 | $ | 453,317 | $ | 361,335 | |||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||
| Preferred stock | (2,905 | ) | (2,952 | ) | (2,997 | ) | (3,126 | ) | (654 | ) | |||||||||||||||||
| Goodwill | (158,461 | ) | (118,996 | ) | (97,406 | ) | (97,129 | ) | (61,424 | ) | |||||||||||||||||
| Other intangibles | (44,098 | ) | (27,156 | ) | (17,495 | ) | (18,153 | ) | (10,812 | ) | |||||||||||||||||
| Average tangible common equity | $ | 379,189 | $ | 349,837 | $ | 336,070 | $ | 334,909 | $ | 288,445 | |||||||||||||||||
| ROATCE | 13.48 | % | 2.05 | % | 2.31 | % | 2.38 | % | 4.89 | % | |||||||||||||||||
EXHIBIT 99.2
Midland States Bancorp, Inc. NASDAQ: MSBI Second Quarter 2018 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,” “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 2Q18 3 Improving Revenue Mix 2Q18 Earnings Key Operating Trends Addition of Alpine shifts business mix toward more stable sources of revenue • Increase in loan growth • Stable net interest margin (excluding accretion income) • Solid expense management and improving efficiency ratio Positive Impact from Alpine First full quarter with Alpine’s operations • Positive impact on earnings • Ahead of schedule in realizing synergies • Approximately 80% of cost savings achieved in 2Q18 (1) Represents a non - GAAP financial measure. See “Non - GAAP Reconciliation” in the appendix. Net income of $12.8 million, or $ 0.52 diluted EPS • Integration and acquisition expenses of $2.0 million • Adjusted earnings 1 of $ 0.59 per diluted share
Loan Portfolio Total Loans 4 • Organic loan growth of $67 million or 6.6% annualized • Strongest growth in equipment financing, consumer lending and residential real estate • Equipment financing balances increased $38.1 million from March 31, 2018 » Production booked within either commercial or lease financing portfolios • Fluctuation in large commercial FHA warehouse line impacted commercial loan portfolio Loan Portfolio Mix (in millions, as of quarter - end) (in millions, as of quarter - end) 2Q 2018 1Q 2018 2Q 2017 Commercial $ 763 $ 803 $ 571 Commercial real estate 1,711 1,774 1,471 Construction and land development 248 235 176 Residential real estate 602 570 428 Consumer 544 424 336 Lease financing 229 224 202 Total $ 4,096 $ 4,029 $ 3,184 $3,184 $3,158 $3,227 $4,029 $4,096 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018
Total Deposits Total Deposits 5 • Total deposits decreased $74 million to $4.16 billion • Decline in DDA primarily attributable to normal fluctuations in servicing deposits • Decline in interest - bearing deposits primarily attributable to reduction in time and brokered deposits Deposit Mix (in millions, as of quarter - end) (in millions, as of quarter - end) 2Q 2018 1Q 2018 2Q 2017 Noninterest - bearing demand $ 1,002 $ 1,038 $ 781 Checking 1,025 993 842 Money market 844 840 578 Savings 461 467 292 Time 638 672 526 Brokered 191 224 315 Total deposits $ 4,160 $ 4,234 $ 3,333 $3,333 $3,114 $3,131 $4,234 $4,160 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018
$3.41 $3.48 $3.59 $4.18 $5.42 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018 $1,930 $2,001 $2,051 $3,125 $3,189 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018 • Wealth Management group offers Trust and Estate services, Investment Management, Financial Planning and Employer Sponsored Retirement Plans • Full quarter impact of Alpine’s wealth management group drove increase in revenue • Total revenue increased 30% from the prior quarter and surpassed $5.0 million • Year - over - year organic growth in assets under administration was $153 million , or 7.9%, excluding Alpine acquisition Wealth Management Wealth Management Revenue 6 Assets Under Administration (in millions) (in millions)
Love Funding – Commercial FHA Review 7 • Change in leadership » Jon Camps, Senior Vice President, promoted to President of Love Funding » Reporting to Jeff Mefford, President of Midland States Bank • Expense levels adjusted for new revenue expectations » Approximately $2.0 million in annualized cost savings • Long - term annual expectations » Total revenue of $12 million to $20 million » Pre - tax margin of 20% to 40%
0.13% 0.27% 0.26% 0.16% 0.40% 3.70% 3.78% 3.73% 3.69% 3.91% 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018 NIM Accretion Income • Net interest income increased due to full quarter contribution of Alpine • Net interest margin increased due to higher accretion income • Excluding the impact of accretion income, net interest margin was relatively unchanged • Scheduled accretion income: $3.1 million in 3Q18; $2.3 million in 4Q18; $7.2 million in FY 2019 Net Interest Income/Margin Net Interest Margin 8 Net Interest Income (in millions) $5.9 $2.6 $4.4 $1.9 $4.9 $1.3 $3.0 $2.7 $2.0 $5.5 $29.4 $36.8 $36.0 $38.2 $48.3 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018 NII Accretion Income
Non - Interest Income 9 • Non - interest income declined 4.0% due to drop in commercial FHA revenue • All other major fee generating areas increased primarily due to full quarter contribution of Alpine • Increase in residential mortgage banking revenue driven by seasonal strength Non - Interest Income (in millions) $13.6 $15.4 $14.0 $16.6 $15.9 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018 All Other Community Banking Revenue Wealth Management Residential Mortgage Commercial FHA (1) Represents service charges, interchange revenue, net gain - on - sale of investment securities, and other income (1)
Non - Interest Expense and Operating Efficiency 10 • Efficiency Ratio 1 was 67.8% in 2Q18 vs. 68.5% in 1Q18 • Integration and acquisition related expenses » $2.0 million in 2Q18 » $11.9 million in 1Q18 • Excluding these items, non - interest expense increased 18.1% on a linked - quarter basis due to the full quarter impact of Alpine’s operations • 2019 quarterly run - rate for non - interest expense projected to be approximately $43 million Non - Interest Expense and Efficiency Ratio 1 (Non - Interest expense in millions) $37.6 $48.4 $36.2 $49.6 $46.6 $7.5 $11.9 $3.1 $11.9 $2.2 66.5% 69.0% 64.6% 68.5% 67.8% 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018 Total Non-Interest Expense Adjustments to Non-Interest Expense Efficiency Ratio (1) Represents a non - GAAP financial measure. See “Non - GAAP Reconciliation” in the appendix.
Asset Quality NCO / Average Loans 11 • Stable asset quality in 2Q18 and modest net charge - offs • Slight increase in non - performing loans • Provision for loan losses of $1.9 million in 2Q18 • ALLL/total loans of 0.45% and credit marks/total loans of 0.81% at June 30, 2018 Non - Performing Loans / Total Loans (Total Loans as of quarter - end) 0.87% 1.06% 0.83% 0.66% 0.69% 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018 0.13% 0.01% 0.81% 0.09% 0.13% 2Q 2017 3Q 2017 4Q 2017 1Q 2018 2Q 2018
Outlook • Continued discipline in balance sheet growth to manage liquidity and protect net interest margin • Alpine system conversion completed in mid - July • Completion of Alpine integration expected to drive additional cost savings and improved efficiencies • Well positioned to deliver additional earnings growth in 2019 12
APPENDIX
14 Adjusted Earnings Reconciliation (dollars in thousands, except per share data) Income before income taxes - GAAP $ 15,827 $ 3,182 $ 7,766 $ 2,316 $ 4,916 Adjustments to noninterest income: (Loss) gain on sales of investment securities, net (70) 65 2 98 55 Other (48) 150 37 45 (91) Total adjustments to noninterest income (118) 215 39 143 (36) Adjustments to noninterest expense: Loss on mortgage servicing rights held for sale 188 - 442 3,617 - Integration and acquisition expenses 2,019 11,884 2,686 8,303 7,450 Total adjustments to noninterest expense 2,207 11,884 3,128 11,920 7,450 Adjusted earnings pre tax 18,152 14,851 10,855 14,093 12,402 Adjusted earnings tax 3,666 3,550 6,992 4,920 4,326 Revaluation of net deferred tax assets - - (4,540) - - Adjusted earnings - non-GAAP 14,486 11,301 8,403 9,173 8,076 Preferred stock dividends, net 36 36 37 27 19 Adjusted earnings - available to common shareholders - non-GAAP $ 14,450 $ 11,265 $ 8,366 $ 9,146 $ 8,057 Adjusted diluted earnings per common share $ 0.59 $ 0.52 $ 0.42 $ 0.46 $ 0.46 Adjusted return on average assets 1.03 % 0.96 % 0.76 % 0.82 % 0.89 % Adjusted return on average shareholders' equity 9.94 % 9.19 % 7.34 % 8.03 % 8.97 % Adjusted return on average tangible common equity 15.28 % 13.06 % 9.88 % 10.83 % 11.20 % 2018 2018 2017 2017 2017 June 30, March 31, December 31, September 30, June 30, MIDLAND STATES BANCORP, INC.RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES For the Quarter Ended
15 Efficiency Ratio Reconciliation (dollars in thousands) Noninterest expense - GAAP $ 46,553 $ 49,602 $ 36,192 $ 48,363 $ 37,645 Loss on mortgage servicing rights held for sale (188) - (442) (3,617) - Integration and acquisition expenses (2,019) (11,884) (2,686) (8,303) (7,450) Adjusted noninterest expense $ 44,346 $ 37,718 $ 33,064 $ 36,443 $ 30,195 Net interest income - GAAP $ 48,286 $ 38,185 $ 36,036 $ 36,765 $ 29,400 Effect of tax-exempt income 541 394 659 687 674 Adjusted net interest income 48,827 38,579 36,695 37,452 30,074 Noninterest income - GAAP $ 15,948 $ 16,605 $ 13,998 $ 15,403 $ 13,619 Mortgage servicing rights impairment 500 133 494 104 1,650 Loss (gain) on sales of investment securities, net 70 (65) (2) (98) (55) Other 48 (150) (37) (45) 91 Adjusted noninterest income 16,566 16,523 14,453 15,364 15,305 Adjusted total revenue $ 65,393 $ 55,102 $ 51,148 $ 52,816 $ 45,379 Efficiency ratio 67.81 % 68.45 % 64.64 % 69.00 % 66.54 % 2018 2018 2017 2017 2017 June 30, March 31, December 31, September 30, June 30, MIDLAND STATES BANCORP, INC.RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (continued) For the Quarter Ended
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 $ 592,535 $ 585,385 $ 449,545 $ 450,689 $ 451,952 Adjustments: Preferred stock (2,876) (2,923) (2,970) (3,015) (3,134) Goodwill (164,044) (155,674) (98,624) (97,351) (96,940) Other intangibles (41,081) (46,473) (16,932) (17,966) (18,459) Tangible common equity $ 384,534 $ 380,315 $ 331,019 $ 332,357 $ 333,419 Total Assets to Tangible Assets: Total assets—GAAP $ 5,730,600 $ 5,723,372 $ 4,412,701 $ 4,347,761 $ 4,491,642 Adjustments: Goodwill (164,044) (155,674) (98,624) (97,351) (96,940) Other intangibles (41,081) (46,473) (16,932) (17,966) (18,459) Tangible assets $ 5,525,475 $ 5,521,225 $ 4,297,145 $ 4,232,444 $ 4,376,243 Common Shares Outstanding 23,664,596 23,612,430 19,122,049 19,093,153 19,087,409 Tangible Common Equity to Tangible Assets 6.96 % 6.89 % 7.70 % 7.85 % 7.62 % Tangible Book Value Per Share $ 16.25 $ 16.11 $ 17.31 $ 17.41 $ 17.47 Return on Average Tangible Common Equity (ROATCE) (dollars in thousands) Net income available to common shareholders $ 12,746 $ 1,770 $ 1,954 $ 2,009 $ 3,520 Average total shareholders' equity—GAAP $ 584,653 $ 498,941 $ 453,968 $ 453,317 $ 361,335 Adjustments: Preferred stock (2,905) (2,952) (2,997) (3,126) (654) Goodwill (158,461) (118,996) (97,406) (97,129) (61,424) Other intangibles (44,098) (27,156) (17,495) (18,153) (10,812) Average tangible common equity $ 379,189 $ 349,837 $ 336,070 $ 334,909 $ 288,445 ROATCE 13.48 % 2.05 % 2.31 % 2.38 % 4.89 % June 30, March 31, December 31, September 30, June 30, 2018 2018 2017 2017 2017 For the Quarter Ended MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (continued) As of June 30, March 31, December 31, September 30, June 30, 2018 2018 2017 2017 2017