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Midland States Bancorp, Inc. Announces 2016 Third Quarter Results

Third Quarter 2016 Summary

  • Net income of $8.1 million, or $0.51 diluted earnings per share

  • Total loans increased $152 million to $2.31 billion at September 30, 2016

  • Average loans increased $96 million, or 17.7% annualized

  • Non-interest income of $14.9 million, or 35.4% of total revenue

  • Return on average assets of 1.03%; Return on average equity of 10.04%

EFFINGHAM, Ill., Oct. 27, 2016 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (NASDAQ:MSBI) (the “Company”) today reported net income of $8.1 million, or $0.51 diluted earnings per share, for the third quarter of 2016, compared with net income of $6.8 million, or $0.50 diluted earnings per share, for the second quarter of 2016, and net income of $3.4 million, or $0.28 diluted earnings per share, for the third quarter of 2015.

“We delivered a solid quarter driven by well-diversified loan production and improved efficiencies,” said Leon J. Holschbach, President and Chief Executive Officer of the Company. “As a result of this performance, we were able to generate a higher level of earnings and an improvement in our return on average assets.

“We had excellent growth across the loan portfolio with double-digit annualized increases in the commercial real estate, residential real estate, consumer and equipment leasing portfolios. We also continued to generate a high level of non-interest income with solid contributions from our residential mortgage banking and wealth management businesses. This offset a light quarter in the commercial FHA business as we had relatively few loans in the latter stages of the pipeline during the third quarter.

“We continue to see strong loan demand throughout our markets. As we continue to generate quality balance sheet growth and maintain disciplined expense control, we expect to see a continuation of the positive trends in the business going forward,” said Mr. Holschbach.

Net Interest Income

Net interest income for the third quarter of 2016 was $27.3 million, a decrease of 2.6% from $28.0 million for the second quarter of 2016. The Company’s net interest income benefits from accretion income associated with purchased loan portfolios. Accretion income totaled $2.6 million for the third quarter of 2016, compared with $4.9 million for the second quarter of 2016. The reduction in accretion income offset the impact of higher average loan balances in the third quarter of 2016.

Relative to the third quarter of 2015, net interest income increased $1.8 million due to an increase in average loan balances.

Net Interest Margin

Net interest margin for the third quarter of 2016 was 4.00%, compared to 4.20% for the second quarter of 2016. The Company’s net interest margin benefits from accretion income on purchased loan portfolios. Excluding accretion income, net interest margin was 3.66% for the third quarter of 2016, compared with 3.52% for the second quarter of 2016. The increase in net interest margin excluding accretion income was primarily attributable to a favorable shift in the mix of both earning assets and funding liabilities within the balance sheet. Average cash balances decreased by $77.6 million and was redeployed into higher yielding loans and investments in the third quarter compared to the second quarter, while at the same time interest bearing liabilities decreased and funding shifted to increased levels of both noninterest bearing deposits and equity.

Relative to the third quarter of 2015, the net interest margin declined from 4.17%, primarily due to lower average yields on loans and investment securities. Excluding accretion income, net interest margin declined from 3.83%, which was primarily attributable to lower average yields on loans and investment securities and an increase in cost of funds.

Noninterest Income

Noninterest income for the third quarter of 2016 was $14.9 million, an increase of 6.6% from $14.0 million for the second quarter of 2016. The increase was primarily attributable to higher residential mortgage banking revenue and the absence of FDIC loss-sharing expense. This was partially offset by lower commercial FHA revenue.

Commercial FHA revenue for the third quarter of 2016 was $3.3 million, a decrease of 61.8% from $8.5 million in the second quarter of 2016. The Company originated $73.4 million in rate lock commitments during the third quarter of 2016, compared to $281.2 million in the prior quarter. The Company also recorded mortgage servicing rights impairment of $1.1 million in the third quarter of 2016.

Residential mortgage banking revenue for the third quarter of 2016 was $5.0 million, an increase from $1.0 million in the second quarter of 2016. During the second quarter of 2016, the Company recorded mortgage servicing rights impairment of $3.0 million, which substantially reduced the residential mortgage banking revenue recognized in that quarter.

Relative to the third quarter of 2015, noninterest income increased 3.3% from $14.5 million. The increase was primarily due to higher residential mortgage banking and wealth management revenue, which was partially offset by lower commercial FHA revenue.

Noninterest Expense

Noninterest expense for the third quarter of 2016 was $28.7 million, a decrease of 7.2% from $30.9 million for the second quarter of 2016. The decrease was primarily driven by lower salaries and benefits expense. Non-interest expense in the second quarter of 2016 also included a $511,000 write-off of accounting discount related to the early payoff of subordinated debt, while no similar write-off occurred in the third quarter of 2016.

Relative to the third quarter of 2015, noninterest expense increased 3.0% from $27.8 million. The increase was primarily due to higher salaries and benefits expense resulting from an increase in FTEs over the past 12 months.

Loan Portfolio

Total loans outstanding were $2.31 billion at September 30, 2016, compared with $2.16 billion at June 30, 2016, and $1.97 billion at September 30, 2015. The $151.7 million increase in the loan portfolio from June 30, 2016 was driven primarily by a $55.8 million increase in commercial loans, a $26.9 million increase in commercial real estate loans, a $37.8 million increase in residential real estate loans, a $43.1 million increase in consumer loans, and a $5.9 million increase in equipment lease financing loans. These increases were partially offset by a $17.8 million decrease in construction and land development loans, most of which migrated to permanent financing in the commercial real estate portfolio.

Approximately $73 million of the increase in total loans outstanding at September 30, 2016 compared to June 30, 2016 was related to advances on a warehouse line of credit to a customer that originates government-guaranteed commercial FHA loans. The advances on this warehouse line of credit are short-term in nature.

Deposits

Total deposits were $2.42 billion at September 30, 2016, compared with $2.35 billion at June 30, 2016, and $2.30 billion at September 30, 2015. The increase in total deposits from June 30, 2016 was primarily due to an increase in demand deposits, partially offset by a decrease in time and brokered deposits. Approximately $101.4 million of the increase in demand deposits during the third quarter of 2016 was attributable to commercial and residential mortgage servicing accounts. Of this increase, approximately $82.3 million represents new loan origination and modification payments received in the commercial FHA banking business that were remitted to GNMA in October 2016.

Asset Quality

Non-performing loans totaled $29.9 million, or 1.29% of total loans, at September 30, 2016, compared with $18.4 million, or 0.85% of total loans, at June 30, 2016. The increase in non-performing loans is primarily due to one commercial real estate loan that was classified as a troubled debt restructuring (“TDR”) during the quarter.

Net charge-offs for the third quarter of 2016 were $585,000, or 0.11% of average loans on an annualized basis.

The Company recorded a provision for loan losses of $1.4 million for the third quarter of 2016, primarily to reflect the growth in the loan portfolio.

The Company’s allowance for loan losses was 0.67% of total loans and 52.0% of non-performing loans at September 30, 2016, compared with 0.68% and 80.0%, respectively, at June 30, 2016. Including the fair market value discounts recorded in connection with acquired loan portfolios, the allowance for loan losses to total loans ratio was 1.06% at September 30, 2016, compared with 1.13% at June 30, 2016.

Capital

At September 30, 2016, 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:

September 30,
2016
Well Capitalized
Regulatory Requirements
Total capital to risk-weighted assets 13.53% 10.00%
Tier 1 capital to risk-weighted assets 10.94% 8.00%
Tier 1 leverage ratio 9.82% 5.00%
Tier 1 common capital to risk-weighted assets 9.03% 6.50%
Tangible common equity to tangible assets 8.44% 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, October 28, 2016. During the call, management will review the third quarter results and operational highlights. The call can be accessed via telephone at (877) 516-3531 (passcode: 85446301). A recorded replay can be accessed through November 3, 2016 by dialing (855) 859-2056; passcode: 85446301.

A slide presentation relating to the third quarter 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. Midland had assets of approximately $3.2 billion, and its Midland Wealth Management Group had assets under administration of approximately $1.2 billion as of September 30, 2016. 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 leasing services are provided through Heartland Business Credit, and multi-family and healthcare facility FHA financing is provided through Love Funding, Midland's non-bank subsidiaries. Midland has more than 80 locations across the United States. 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,” “Yield on Loans Excluding Accretion Income, ” “Net Interest Margin Excluding Accretion Income,” “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.

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 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.

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited)
For the Quarter Ended
September 30, June 30, March 31, December 31, September 30,
(in thousands, except per share data) 2016 2016 2016 2015 2015
Earnings Summary
Net interest income $ 27,265 $27,989 $ 24,041 $26,452 $25,437
Provision for loan losses 1,392 629 1,125 1,052 6,699
Noninterest income 14,937 14,016 12,618 12,799 14,464
Noninterest expense 28,663 30,903 27,639 27,692 27,823
Income before income taxes 12,147 10,473 7,895 10,507 5,379
Income taxes 4,102 3,683 2,777 2,811 1,928
Net income 8,045 6,790 5,118 7,696 3,451
Net income (loss) attributable to noncontrolling interest in subsidiaries (6) 1 (1) 1 6
Net income attributable to Midland States Bancorp, Inc. $ 8,051 $6,789 $ 5,119 $7,695 $3,445
Diluted earnings per common share $ 0.51 $0.50 $ 0.42 $0.63 $0.28
Weighted average shares outstanding - diluted 15,858,273 13,635,074 12,229,293 12,181,664 12,130,529
Return on average assets 1.03 % 0.89% 0.70 % 1.06% 0.49%
Return on average shareholders' equity 10.04 % 10.18% 8.69 % 13.19% 5.88%
Return on average tangible common shareholders' equity 12.01 % 12.67% 11.22 % 17.26% 7.72%
Net interest margin 4.00 % 4.20% 3.80 % 4.19% 4.17%
Efficiency ratio 64.56 % 67.09% 67.73 % 68.83% 64.32%
Adjusted Earnings Performance Summary
Adjusted earnings $ 8,269 $7,107 $ 5,767 $7,525 $4,638
Adjusted diluted earnings per common share $ 0.52 $0.52 $ 0.47 $0.61 $0.38
Adjusted return on average assets 1.06 % 0.93% 0.79 % 1.04% 0.66%
Adjusted return on average shareholders' equity 10.32 % 10.66% 9.79 % 12.90% 7.92%
Adjusted return on average tangible common shareholders' equity 12.34 % 13.27% 12.64 % 16.77% 10.39%
Net interest margin excluding accretion income 3.66 % 3.52% 3.55 % 3.56% 3.83%

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
For the Quarter Ended
September 30, June 30, March 31, December 31, September 30,
(in thousands, except per share data) 2016 2016 2016 2015 2015
Net interest income:
Total interest income $ 31,186 $ 32,115 $ 27,967 $ 30,300 $ 28,949
Total interest expense 3,921 4,126 3,926 3,848 3,512
Net interest income 27,265 27,989 24,041 26,452 25,437
Provision for loan losses 1,392 629 1,125 1,052 6,699
Net interest income after provision for loan losses 25,873 27,360 22,916 25,400 18,738
Noninterest income:
Commercial FHA revenue 3,260 8,538 6,562 3,045 5,914
Residential mortgage banking revenue 4,990 1,037 1,121 3,328 3,490
Wealth management revenue 1,941 1,870 1,785 1,831 1,808
Service charges on deposit accounts 1,044 965 907 979 1,022
Interchange revenue 920 945 964 858 895
FDIC loss sharing expense - (1,608) (53) (212) (57)
Gain on sales of investment securities, net 39 72 204 33 1
Other-than-temporary impairment on investment securities - - (824) - (299)
Other income 2,743 2,197 1,952 2,937 1,690
Total noninterest income 14,937 14,016 12,618 12,799 14,464
Noninterest expense:
Salaries and employee benefits 16,568 17,012 15,387 13,725 14,932
Occupancy and equipment 3,271 3,233 3,310 3,424 3,114
Data processing 2,586 2,624 2,620 2,546 2,541
Professional 1,877 1,573 1,701 2,079 2,075
Amortization of intangible assets 514 519 580 598 597
Other 3,847 5,942 4,041 5,320 4,564
Total noninterest expense 28,663 30,903 27,639 27,692 27,823
Income before income taxes 12,147 10,473 7,895 10,507 5,379
Income taxes 4,102 3,683 2,777 2,811 1,928
Net income 8,045 6,790 5,118 7,696 3,451
Net (loss) income attributable to noncontrolling interest in subsidiaries (6) 1 (1) 1 6
Net income attributable to Midland States Bancorp, Inc. $ 8,051 $ 6,789 $ 5,119 $ 7,695 $ 3,445
Basic earnings per common share $ 0.51 $ 0.51 $ 0.43 $ 0.64 $ 0.29
Diluted earnings per common share $ 0.51 $ 0.50 $ 0.42 $ 0.63 $ 0.28

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
As of
September 30, June 30, March 31, December 31, September 30,
(in thousands) 2016 2016 2016 2015 2015
Assets
Cash and cash equivalents $ 228,030 $ 123,366 $ 162,416 $ 212,475 $ 206,664
Investment securities available-for-sale at fair value 252,212 238,781 232,074 236,627 211,359
Investment securities held to maturity at amortized cost 82,941 84,756 88,085 87,521 92,011
Loans 2,312,778 2,161,041 2,016,034 1,995,589 1,972,844
Allowance for loan losses (15,559) (14,752) (14,571) (15,988) (15,157)
Total loans, net 2,297,219 2,146,289 2,001,463 1,979,601 1,957,687
Loans held for sale at fair value 61,363 101,782 103,365 54,413 53,032
Premises and equipment, net 70,727 72,147 72,421 73,133 73,362
Other real estate owned 4,828 3,540 4,740 5,472 6,471
Mortgage servicing rights at lower of cost or market 64,689 62,808 65,486 66,651 65,417
Intangible assets 5,391 5,905 6,424 7,004 7,601
Goodwill 46,519 46,519 46,519 46,519 47,102
Cash surrender value of life insurance policies 74,276 73,665 53,173 52,729 52,271
Other assets 59,532 62,226 61,914 62,679 59,331
Total assets $ 3,247,727 $ 3,021,784 $ 2,898,080 $ 2,884,824 $ 2,832,308
Liabilities and Shareholders' Equity
Noninterest bearing deposits $ 629,113 $ 528,966 $ 546,664 $ 543,401 $ 512,632
Interest bearing deposits 1,790,919 1,825,586 1,843,046 1,824,247 1,791,846
Total deposits 2,420,032 2,354,552 2,389,710 2,367,648 2,304,478
Short-term borrowings 138,289 125,014 101,649 107,538 108,823
FHLB advances and other borrowings 237,543 97,588 40,133 40,178 50,225
Subordinated debt 54,484 54,459 61,903 61,859 61,814
Trust preferred debentures 37,316 37,229 37,142 37,057 36,973
Other liabilities 38,273 36,627 28,982 37,488 38,370
Total liabilities 2,925,937 2,705,469 2,659,519 2,651,768 2,600,683
Midland States Bancorp, Inc. shareholders’ equity 321,749 316,268 238,386 232,880 231,415
Noncontrolling interest in subsidiaries 41 47 175 176 210
Total shareholders’ equity 321,790 316,315 238,561 233,056 231,625
Total liabilities and shareholders’ equity $ 3,247,727 $ 3,021,784 $ 2,898,080 $ 2,884,824 $ 2,832,308

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
As of
September 30, June 30, March 31, December 31, September 30,
(in thousands) 2016 2016 2016 2015 2015
Loan Portfolio
Commercial loans $545,069 $489,228 $484,618 $499,573 $521,983
Commercial real estate loans 956,298 929,399 897,099 876,784 866,027
Construction and land development loans 163,900 181,667 159,507 150,266 131,083
Residential real estate loans 216,935 179,184 158,221 163,224 168,129
Consumer loans 248,131 205,060 158,938 161,512 157,521
Lease financing loans 182,445 176,503 157,651 144,230 128,101
Total loans $2,312,778 $2,161,041 $2,016,034 $1,995,589 $1,972,844
Deposit Portfolio
Noninterest-bearing demand deposits $629,113 $528,966 $546,664 $543,401 $512,632
NOW accounts 658,021 627,003 612,475 621,925 623,494
Money market accounts 366,193 374,537 415,130 377,654 350,398
Savings accounts 162,742 164,792 163,163 155,778 154,632
Time deposits 420,779 431,173 433,386 446,621 426,762
Brokered deposits 183,184 228,081 218,892 222,269 236,560
Total deposits $2,420,032 $2,354,552 $2,389,710 $2,367,648 $2,304,478

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
For the Quarter Ended
September 30, June 30, March 31, December 31, September 30,
(in thousands) 2016 2016 2016 2015 2015
Average Balance Sheets
Cash and cash equivalents $154,764 $232,362 $223,951 $184,072 $131,272
Investment securities 348,265 338,224 327,267 345,114 317,886
Loans 2,268,178 2,171,814 2,063,568 2,039,046 2,032,122
Total interest-earning assets 2,771,207 2,742,400 2,614,786 2,568,232 2,481,280
Non-earning assets 329,504 324,880 317,648 312,154 314,959
Total assets $3,100,711 $3,067,280 $2,932,434 $2,880,386 $2,796,239
Interest-bearing deposits $1,803,189 $1,844,493 $1,832,599 $1,813,974 $1,733,899
Short-term borrowings 134,052 114,651 120,753 118,118 121,453
FHLB advances and other borrowings 165,774 185,195 99,499 48,583 54,056
Subordinated debt 54,470 61,677 61,878 61,835 62,830
Trust preferred debentures 37,266 37,182 37,094 37,013 37,083
Total interest-bearing liabilities 2,194,751 2,243,198 2,151,823 2,079,523 2,009,321
Noninterest-bearing deposits 550,816 522,632 511,019 529,196 509,259
Other noninterest-bearing liabilities 36,235 33,188 32,671 40,247 45,379
Shareholders' equity 318,909 268,262 236,921 231,420 232,280
Total liabilities and shareholders' equity $3,100,711 $3,067,280 $2,932,434 $2,880,386 $2,796,239
Yields
Cash and cash equivalents 0.50% 0.50% 0.50% 0.27% 0.24%
Investment securities 4.93% 5.12% 5.31% 5.02% 5.33%
Loans 4.79% 5.22% 4.68% 5.15% 4.94%
Total interest-earning assets 4.57% 4.81% 4.40% 4.79% 4.73%
Interest-bearing deposits 0.48% 0.50% 0.49% 0.48% 0.44%
Short-term borrowings 0.24% 0.24% 0.23% 0.20% 0.18%
FHLB advances and other borrowings 0.73% 0.56% 0.55% 0.87% 0.81%
Subordinated debt 6.38% 6.87% 6.87% 6.79% 6.76%
Trust preferred debentures 5.03% 4.95% 4.80% 4.60% 3.97%
Total interest-bearing liabilities 0.71% 0.74% 0.73% 0.73% 0.69%
Net interest margin 4.00% 4.20% 3.80% 4.19% 4.17%

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
As of and for the Quarter Ended
September 30, June 30, March 31, December 31, September 30,
(in thousands, except per share data) 2016 2016 2016 2015 2015
Asset Quality
Loans 30-89 days past due $10,318 $10,453 $6,616 $10,120 $11,079
Nonperforming loans 29,926 18,430 18,787 24,891 24,223
Nonperforming assets 34,304 21,469 22,312 29,206 30,118
Net charge-offs 585 448 2,542 220 7,748
Loans 30-89 days past due to total loans 0.45% 0.48% 0.33% 0.51% 0.56%
Nonperforming loans to total loans 1.29% 0.85% 0.93% 1.25% 1.23%
Nonperforming assets to total assets 1.06% 0.71% 0.77% 1.01% 1.06%
Allowance for loan losses to total loans 0.67% 0.68% 0.72% 0.80% 0.77%
Allowance for loan losses to nonperforming loans 51.99% 80.04% 77.56% 64.23% 62.57%
Net charge-offs to average loans 0.11% 0.09% 0.51% 0.04% 1.57%
Wealth Management
Trust assets under administration $1,235,132 $1,198,044 $1,189,693 $1,181,128 $1,145,056
Market Data
Book value per share at period end $20.89 $20.53 $20.19 $19.74 $19.68
Tangible book value per share at period end $17.52 $17.13 $15.71 $15.20 $15.03
Market price at period end $25.34 $21.69 $N/A $N/A $N/A
Shares outstanding at period end 15,404,423 15,402,946 11,804,779 11,797,404 11,760,589
Weighted average shares outstanding:
Basic 15,578,703 13,358,289 11,957,381 11,924,072 11,911,414
Diluted 15,858,273 13,635,074 12,229,293 12,181,664 12,130,529
Capital
Total capital to risk-weighted assets 13.53% 13.91% 11.67% 11.82% 11.43%
Tier 1 capital to risk-weighted assets 10.94% 11.23% 8.48% 8.62% 8.19%
Tier 1 leverage ratio 9.82% 9.77% 7.25% 7.49% 7.41%
Tier 1 common capital to risk-weighted assets 9.03% 9.24% 6.40% 6.50% 6.16%
Tangible common equity to tangible assets 8.44% 8.89% 6.52% 6.33% 6.36%

MIDLAND STATES BANCORP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
For the Quarter Ended
September 30, June 30, March 31, December 31, September 30,
(in thousands, except per share data) 2016 2016 2016 2015 2015
Adjusted Earnings Reconciliation
Income before income taxes - GAAP $ 12,147 $ 10,473 $ 7,895 $ 10,507 $ 5,379
Adjustments to other income:
Gain on sales of investment securities, net 39 72 204 33 1
Other than-temporary-impairment on investment securities - - (824) - (299)
FDIC loss-sharing expense - - - (212) (57)
Amortization of FDIC indemnification asset, net - - - (39) (121)
Reversal of contingent consideration accrual - 350 - - -
Other income - - - - 12
Total adjusted other income 39 422 (620) (218) (464)
Adjustments to other expense:
Expenses associated with payoff of subordinated debt - 511 - - -
Integration and acquisition expenses 352 406 385 214 898
Total adjusted other expense 352 917 385 214 898
Adjusted earnings pre tax 12,460 10,968 8,900 10,939 6,741
Adjusted earnings tax 4,191 3,861 3,133 3,414 2,103
Adjusted earnings - non-GAAP $ 8,269 $ 7,107 $ 5,767 $ 7,525 $ 4,638
Adjusted diluted EPS $ 0.52 $ 0.52 $ 0.47 $ 0.61 $ 0.38
Adjusted return on average assets 1.06 % 0.93 % 0.79 % 1.04 % 0.66 %
Adjusted return on average shareholders' equity 10.32 % 10.66 % 9.79 % 12.90 % 7.92 %
Adjusted return on average tangible common equity 12.34 % 13.27 % 12.64 % 16.77 % 10.39 %
Yield on Loans
Reported yield on loans 4.79 % 5.22 % 4.68 % 5.15 % 4.94 %
Effect of accretion income on acquired loans (0.41)% (0.85)% (0.30)% (0.78)% (0.41)%
Yield on loans excluding accretion income 4.38 % 4.37 % 4.38 % 4.37 % 4.53 %
Net Interest Margin
Reported net interest margin 4.00 % 4.20 % 3.80 % 4.19 % 4.17 %
Effect of accretion income on acquired loans (0.34)% (0.68)% (0.25)% (0.63)% (0.34)%
Net interest margin excluding accretion income 3.66 % 3.52 % 3.55 % 3.56 % 3.83 %

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
September 30, June 30, March 31, December 31, September 30,
(in thousands, except per share data) 2016 2016 2016 2015 2015
Shareholders' Equity to Tangible Common Equity
Total shareholders' equity—GAAP $ 321,790 $ 316,315 $ 238,561 $ 233,056 $ 231,625
Adjustments:
Noncontrolling interest in subsidiaries (41) (47) (175) (176) (210)
Goodwill (46,519) (46,519) (46,519) (46,519) (47,102)
Other intangibles (5,391) (5,905) (6,424) (7,004) (7,601)
Tangible common equity $ 269,839 $ 263,844 $ 185,443 $ 179,357 $ 176,712
Total Assets to Tangible Assets:
Total assets—GAAP 3,247,727 3,021,784 2,898,080 2,884,824 2,832,308
Adjustments:
Goodwill (46,519) (46,519) (46,519) (46,519) (47,102)
Other intangibles (5,391) (5,905) (6,424) (7,004) (7,601)
Tangible assets $ 3,195,817 $ 2,969,360 $ 2,845,137 $ 2,831,301 $ 2,777,605
Common Shares Outstanding 15,404,423 15,402,946 11,804,779 11,797,404 11,760,589
Tangible Common Equity to Tangible Assets 8.44 % 8.89 % 6.52 % 6.33 % 6.36 %
Tangible Book Value Per Share $ 17.52 $ 17.13 $ 15.71 $ 15.20 $ 15.03
Return on Average Tangible Common Equity (ROATCE)
As of
September 30, June 30, March 31, December 31, September 30,
(in thousands) 2016 2016 2016 2015 2015
Net Income $ 8,051 $ 6,789 $ 5,119 $ 7,695 $ 3,445
Average total shareholders' equity—GAAP $ 318,909 $ 268,262 $ 236,921 $ 231,420 $ 232,287
Adjustments:
Noncontrolling interest in subsidiaries (49) (121) (184) (204) (207)
Goodwill (46,519) (46,519) (46,519) (46,997) (47,102)
Other intangibles (5,656) (6,184) (6,740) (7,324) (7,917)
Average tangible common equity $ 266,685 $ 215,438 $ 183,478 $ 176,895 $ 177,061
ROATCE 12.01 % 12.67 % 11.22 % 17.26 % 7.72 %


CONTACTS: Jeffrey G. Ludwig, Exec. V.P., 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

Source:Midland States Bancorp, Inc.