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Midland States Bancorp, Inc. Announces 2016 Fourth Quarter Results

Highlights

  • Net income of $11.6 million, or $0.72 diluted earnings per share

  • Average loans increased $118 million, or 20.7% annualized

  • Return on average assets of 1.44%; Return on average equity of 14.05%

  • Acquisition of Sterling Trust added $400 million in assets under administration

  • Operational Excellence initiative adopted to drive increased efficiencies

  • Definitive agreement signed to acquire Centrue Financial Corporation

EFFINGHAM, Ill., Jan. 26, 2017 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (NASDAQ:MSBI) (the “Company”) today reported net income of $11.6 million, or $0.72 diluted earnings per share, for the fourth quarter of 2016, compared with net income of $8.1 million, or $0.51 diluted earnings per share, for the third quarter of 2016, and net income of $7.7 million, or $0.63 diluted earnings per share, for the fourth quarter of 2015.

“We continued to see strong loan demand during the fourth quarter, resulting in a 21% annualized increase in average loans,” said Leon J. Holschbach, President and Chief Executive Officer of the Company. “With the exception of commercial loans, which were impacted by fluctuations in warehouse lines of credit, we generated significant growth across all of our major lending areas, with the largest increases coming in our residential mortgage, consumer and construction portfolios.

“During the fourth quarter, we also executed a number of strategic actions designed to strengthen the Company over the longer-term. These actions included expanding our Wealth Management business with the acquisition of Sterling Trust, repositioning our investment securities portfolio to enhance our credit quality and capital ratios, and launching our Operational Excellence initiative to increase efficiencies across the organization.

“Looking ahead to 2017, we are seeing healthy economic conditions across our markets and we are expecting continued growth across all of our major business lines. The pending acquisition of Centrue Financial Corporation will add another catalyst for increasing our earnings power. Combined with the improved efficiencies that we expect to generate from the implementation of our Operational Excellence strategic initiative, we anticipate delivering another year of strong earnings growth and further value creation for our shareholders,” said Mr. Holschbach.

Adjusted Earnings

Financial results for the fourth quarter of 2016 included a $14.3 million gain on sale of a portfolio of private label collateralized mortgage obligations (“CMOs”), $2.1 million in charges related to the Company’s branch network optimization actions, and $1.6 million in other integration and acquisition-related expenses. Excluding these items, adjusted earnings were $6.3 million, or $0.39 diluted earnings per share, for the fourth quarter of 2016, compared with adjusted earnings of $8.3 million, or $0.52 diluted earnings per share, for the third quarter of 2016. The decline in adjusted earnings is primarily attributable to lower interest income from investment securities of $1.7 million following the sale of the portfolio of CMOs, as well as a higher provision for loan losses. A reconciliation of adjusted earnings to net income according to generally accepted accounting principles (“GAAP”) is provided in the financial tables at the end of this press release.

The cost savings resulting from the Operational Excellence initiative are expected to fully offset the reduction in interest income from investment securities in 2017 resulting from the sale of the CMO portfolio. Following the completion of the branch network optimization efforts in the first quarter of 2017, the Company expects non-interest expense to range between $29 million and $30 million per quarter, excluding integration and acquisition-related expenses and prior to the completion of the acquisition of Centrue Financial Corporation.

Net Interest Income

Net interest income for the fourth quarter of 2016 was $26.0 million, a decrease of 4.8% from $27.3 million for the third quarter of 2016. The decrease in net interest income was primarily attributable to lower interest income on investment securities following the sale of the portfolio of private label CMOs. The decrease in interest income on investment securities was partially offset by a $1.0 million increase in interest income on loans (excluding accretion income) due to 20.7% annualized growth in the average balance of loans.

The Company’s net interest income benefits from accretion income associated with purchased loan portfolios. Accretion income totaled $2.2 million for the fourth quarter of 2016, compared with $2.6 million for the third quarter of 2016.

Relative to the fourth quarter of 2015, net interest income decreased $0.5 million. Excluding the impact of a $2.2 million decrease in accretion income, net interest income increased $1.8 million. This increase resulted from a $3.4 million increase in interest income on loans (excluding the effect of accretion income) due to 17.8% growth in the average balance of loans, partially offset by a $1.7 million decline in interest income on investment securities following the sale of the portfolio of CMOs.

Net Interest Margin

Net interest margin for the fourth quarter of 2016 was 3.70%, compared to 4.00% for the third quarter of 2016. The Company’s net interest margin benefits from accretion income on purchased loan portfolios. Excluding accretion income, net interest margin was 3.44% for the fourth quarter of 2016, compared with 3.66% for the third quarter of 2016. The decrease in net interest margin excluding accretion income was primarily attributable to the sale of the CMO portfolio.

Relative to the fourth quarter of 2015, the net interest margin declined from 4.19%, primarily due to a decline in accretion income. Excluding accretion income, the net interest margin declined from 3.56%, which was primarily attributable to lower average yields on investment securities following the sale of the portfolio of CMOs.

Noninterest Income

Noninterest income for the fourth quarter of 2016 was $30.5 million, an increase of 104% from $14.9 million for the third quarter of 2016. The increase was primarily attributable to a $14.3 million gain on the sale of the CMO portfolio. Excluding the gain on sale of the CMOs, non-interest income for the fourth quarter of 2016 was $16.2 million, an increase of 8.4% over the third quarter of 2016. The increase was due to higher commercial FHA, residential mortgage banking, and wealth management revenue, partially offset by lower other income.

Commercial FHA revenue for the fourth quarter of 2016 was $3.7 million, an increase of 13.6% from $3.3 million in the third quarter of 2016. The Company originated $159.0 million in rate lock commitments during the fourth quarter of 2016, compared to $73.4 million in the prior quarter. The Company also recorded mortgage servicing rights impairment of $0.7 million in the fourth quarter of 2016, which negatively impacted the reported commercial FHA revenue.

Residential mortgage banking revenue for the fourth quarter of 2016 was $6.2 million, an increase of 25.1% from $5.0 million in the third quarter of 2016. Residential mortgage banking revenue was positively impacted in the fourth quarter of 2016 by the recapture of previously recorded mortgage servicing rights impairment totaling $3.6 million.

Relative to the fourth quarter of 2015, noninterest income increased 138% from $12.8 million. The increase was due to the gain on sale of the CMOs, as well as increases in all of the Company’s major fee generating businesses.

Noninterest Expense

Noninterest expense for the fourth quarter of 2016 was $34.1 million, which included $2.1 million in charges related to the Company’s branch network optimization actions and $1.6 million in other integration and acquisition-related expenses. Excluding these expenses, noninterest expense for the fourth quarter of 2016 was $30.4 million, an increase of 6.2% from $28.7 million for the third quarter of 2016. The increase was primarily driven by higher salaries and benefits expense resulting from higher bonus accruals and the addition of employees from the Sterling Trust acquisition, as well as an increase in professional fees.

Relative to the fourth quarter of 2015, noninterest expense excluding the charges related to the Company’s branch network optimization actions and other integration and acquisition-related expenses increased 9.9% from $27.7 million. The increase was primarily due to higher salaries and benefits expense resulting from an increase in FTEs over the past 12 months, as well as higher professional fees.

Income Tax Expense

Income tax expense was $8.3 million for the fourth quarter of 2016, compared to $4.1 million for the third quarter of 2016. The effective tax rate for the fourth quarter of 2016 was 41.8%, compared to 33.8% in the prior quarter. The increase in the effective tax rate for the fourth quarter of 2016 was primarily attributable to the write-off of state tax refunds and tax credits obtained through the Heartland acquisition.

For the full year 2017, the Company expects its effective tax rate to return to a level approximate to the effective tax rate in the third quarter of 2016.

Loan Portfolio

Total loans outstanding were $2.32 billion at December 31, 2016, compared with $2.31 billion at September 30, 2016, and $2.00 billion at December 31, 2015. The $7.2 million increase in the loan portfolio from September 30, 2016 was primarily driven by a $13.3 million increase in commercial real estate loans, a $36.8 million increase in residential real estate loans, a $21.9 million increase in consumer loans, a $9.1 million increase in equipment lease financing loans, and a $13.4 million increase in construction loans. These increases were partially offset by an $87.2 million decrease in commercial loans.

Approximately $65 million of the decline in commercial loans was attributable to a decrease in 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 $2.40 billion at December 31, 2016, compared with $2.42 billion at September 30, 2016, and $2.37 billion at December 31, 2015. Total deposits at December 31, 2016 were impacted by $73 million of deposit outflow related to fluctuations in the deposit balances of the warehouse line of credit customer referenced above, as part of their ordinary course of business. This temporary deposit outflow was partially offset by increases in non-interest bearing, money market, and savings deposits from other customers.

Asset Quality

Non-performing loans totaled $31.6 million, or 1.36% of total loans, at December 31, 2016, compared with $29.9 million, or 1.29% of total loans, at September 30, 2016, and $24.9 million, or 1.26% of total loans, at December 31, 2015. The increase in non-performing loans from September 30, 2016 is primarily due to one commercial loan relationship.

Net charge-offs for the fourth quarter of 2016 were $3.1 million, or 0.54% of average loans on an annualized basis. Net charge-offs consisted of $1.6 million in commercial loans, $0.7 million in commercial real estate loans, $0.5 million in residential loans and $0.4 million in lease financing loans. Approximately $1.5 million of the commercial loan charge-offs related to one commercial credit that was fully reserved for in prior quarters.

The Company recorded a provision for loan losses of $2.4 million for the fourth quarter of 2016, primarily reflecting the higher level of net charge-offs in the quarter.

The Company’s allowance for loan losses was 0.64% of total loans and 47.0% of non-performing loans at December 31, 2016, compared with 0.67% and 52.0%, respectively, at September 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 1.02% at December 31, 2016, compared with 1.06% at September 30, 2016.

Capital

At December 31, 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:

December 31,
2016
Well Capitalized
Regulatory Requirements
Total capital to risk-weighted assets13.85%10.00%
Tier 1 capital to risk-weighted assets11.27%8.00%
Tier 1 leverage ratio9.76%5.00%
Tier 1 common capital to risk-weighted assets9.35%6.50%
Tangible common equity to tangible assets8.36%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 27, 2017. During the call, management will review the fourth quarter results, operational highlights and the Centrue transaction. The call can be accessed via telephone at (877) 516-3531 (passcode: 47777304). A recorded replay can be accessed through February 3, 2017 by dialing (855) 859-2056; passcode: 47777304.

A slide presentation relating to the fourth quarter results and the Centrue transaction 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 $1.7 billion as of December 31, 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, operating expenses and future earnings levels including with respect to the planned acquisition of Centrue Financial Corporation. 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
December 31, September 30, June 30, March 31, December 31,
(in thousands, except per share data) 2016 2016 2016 2016 2015
Earnings Summary
Net interest income $25,959 $27,265 $27,989 $24,041 $26,452
Provision for loan losses 2,445 1,392 629 1,125 1,052
Noninterest income 30,486 14,937 14,016 12,618 12,799
Noninterest expense 34,093 28,663 30,903 27,639 27,692
Income before income taxes 19,907 12,147 10,473 7,895 10,507
Income taxes 8,327 4,102 3,683 2,777 2,811
Net income 11,580 8,045 6,790 5,118 7,696
Net income (loss) attributable to noncontrolling interest in subsidiaries (3) (6) 1 (1) 1
Net income attributable to Midland States Bancorp, Inc. $11,583 $8,051 $6,789 $5,119 $7,695
Diluted earnings per common share $0.72 $0.51 $0.50 $0.42 $0.63
Weighted average shares outstanding - diluted 16,032,016 15,858,273 13,635,074 12,229,293 12,181,664
Return on average assets 1.44 % 1.03 % 0.89% 0.70 % 1.06%
Return on average shareholders' equity 14.05 % 10.04 % 10.18% 8.69 % 13.19%
Return on average tangible common shareholders' equity 16.84 % 12.01 % 12.67% 11.22 % 17.26%
Net interest margin 3.70 % 4.00 % 4.20% 3.80 % 4.19%
Efficiency ratio 76.64 % 64.56 % 66.46% 67.73 % 68.83%
Adjusted Earnings Performance Summary
Adjusted earnings $6,300 $8,269 $7,107 $5,767 $7,525
Adjusted diluted earnings per common share $0.39 $0.52 $0.52 $0.47 $0.61
Adjusted return on average assets 0.78 % 1.06 % 0.93% 0.79 % 1.04%
Adjusted return on average shareholders' equity 7.64 % 10.32 % 10.66% 9.79 % 12.90%
Adjusted return on average tangible common shareholders' equity 9.16 % 12.34 % 13.27% 12.64 % 16.88%
Net interest margin excluding accretion income 3.44 % 3.66 % 3.52% 3.55 % 3.56%

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) 2016 2016 2016 2016 2015
Net interest income:
Total interest income $29,981 $31,186 $32,115 $27,967 $30,300
Total interest expense 4,022 3,921 4,126 3,926 3,848
Net interest income 25,959 27,265 27,989 24,041 26,452
Provision for loan losses 2,445 1,392 629 1,125 1,052
Net interest income after provision for loan losses 23,514 25,873 27,360 22,916 25,400
Noninterest income:
Commercial FHA revenue 3,704 3,260 8,538 6,562 3,045
Residential mortgage banking revenue 6,241 4,990 1,037 1,121 3,328
Wealth management revenue 2,495 1,941 1,870 1,785 1,831
Service charges on deposit accounts 988 1,044 965 907 979
Interchange revenue 921 920 945 964 858
FDIC loss sharing expense - - (1,608) (53) (212)
Gain on sales of investment securities, net 14,387 39 72 204 33
Other-than-temporary impairment on investment securities - - - (824) -
Other income 1,750 2,743 2,197 1,952 2,937
Total noninterest income 30,486 14,937 14,016 12,618 12,799
Noninterest expense:
Salaries and employee benefits 17,326 16,568 17,012 15,387 13,725
Occupancy and equipment 3,266 3,271 3,233 3,310 3,424
Data processing 2,828 2,586 2,624 2,620 2,546
Professional 2,898 1,877 1,573 1,701 2,079
Amortization of intangible assets 534 514 519 580 598
Other 7,241 3,847 5,942 4,041 5,320
Total noninterest expense 34,093 28,663 30,903 27,639 27,692
Income before income taxes 19,907 12,147 10,473 7,895 10,507
Income taxes 8,327 4,102 3,683 2,777 2,811
Net income 11,580 8,045 6,790 5,118 7,696
Net (loss) income attributable to noncontrolling interest in subsidiaries (3) (6) 1 (1) 1
Net income attributable to Midland States Bancorp, Inc. $11,583 $8,051 $6,789 $5,119 $7,695
Basic earnings per common share $0.74 $0.51 $0.51 $0.43 $0.64
Diluted earnings per common share $0.72 $0.51 $0.50 $0.42 $0.63

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
As of
December 31, September 30, June 30, March 31, December 31,
(in thousands) 2016 2016 2016 2016 2015
Assets
Cash and cash equivalents $190,716 $228,030 $123,366 $162,416 $212,475
Investment securities available-for-sale at fair value 246,339 252,212 238,781 232,074 236,627
Investment securities held to maturity at amortized cost 78,672 82,941 84,756 88,085 87,521
Loans 2,319,976 2,312,778 2,161,041 2,016,034 1,995,589
Allowance for loan losses (14,862) (15,559) (14,752) (14,571) (15,988)
Total loans, net 2,305,114 2,297,219 2,146,289 2,001,463 1,979,601
Loans held for sale at fair value 70,565 61,363 101,782 103,365 54,413
Premises and equipment, net 66,692 70,727 72,147 72,421 73,133
Other real estate owned 3,560 4,828 3,540 4,740 5,472
Mortgage servicing rights at lower of cost or market 68,008 64,689 62,808 65,486 66,651
Intangible assets 7,187 5,391 5,905 6,424 7,004
Goodwill 48,836 46,519 46,519 46,519 46,519
Cash surrender value of life insurance policies 74,226 74,276 73,665 53,173 52,729
Other assets 73,808 59,532 62,226 61,914 62,679
Total assets $3,233,723 $3,247,727 $3,021,784 $2,898,080 $2,884,824
Liabilities and Shareholders' Equity
Noninterest bearing deposits $562,333 $629,113 $528,966 $546,664 $543,401
Interest bearing deposits 1,842,033 1,790,919 1,825,586 1,843,046 1,824,247
Total deposits 2,404,366 2,420,032 2,354,552 2,389,710 2,367,648
Short-term borrowings 131,557 138,289 125,014 101,649 107,538
FHLB advances and other borrowings 237,518 237,543 97,588 40,133 40,178
Subordinated debt 54,508 54,484 54,459 61,903 61,859
Trust preferred debentures 37,405 37,316 37,229 37,142 37,057
Other liabilities 46,561 38,273 36,627 28,982 37,488
Total liabilities 2,911,915 2,925,937 2,705,469 2,659,519 2,651,768
Midland States Bancorp, Inc. shareholders’ equity 321,770 321,749 316,268 238,386 232,880
Noncontrolling interest in subsidiaries 38 41 47 175 176
Total shareholders’ equity 321,808 321,790 316,315 238,561 233,056
Total liabilities and shareholders’ equity $3,233,723 $3,247,727 $3,021,784 $2,898,080 $2,884,824

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
As of
December 31, September 30, June 30, March 31, December 31,
(in thousands) 2016 2016 2016 2016 2015
Loan Portfolio
Commercial loans $457,827 $545,069 $489,228 $484,618 $499,573
Commercial real estate loans 969,615 956,298 929,399 897,099 876,784
Construction and land development loans 177,325 163,900 181,667 159,507 150,266
Residential real estate loans 253,713 216,935 179,184 158,221 163,224
Consumer loans 270,017 248,131 205,060 158,938 161,512
Lease financing loans 191,479 182,445 176,503 157,651 144,230
Total loans $2,319,976 $2,312,778 $2,161,041 $2,016,034 $1,995,589
Deposit Portfolio
Noninterest-bearing demand deposits $562,333 $629,113 $528,966 $546,664 $543,401
NOW accounts 656,248 658,021 627,003 612,475 621,925
Money market accounts 399,851 366,193 374,537 415,130 377,654
Savings accounts 166,910 162,742 164,792 163,163 155,778
Time deposits 400,304 420,779 431,173 433,386 446,621
Brokered deposits 218,720 183,184 228,081 218,892 222,269
Total deposits $2,404,366 $2,420,032 $2,354,552 $2,389,710 $2,367,648

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) 2016 2016 2016 2016 2015
Average Balance Sheets
Cash and cash equivalents $140,439 $154,764 $232,362 $223,951 $184,072
Investment securities 334,438 348,265 338,224 327,267 345,114
Loans 2,385,780 2,268,178 2,171,814 2,063,568 2,039,046
Total interest-earning assets 2,860,657 2,771,207 2,742,400 2,614,786 2,568,232
Non-earning assets 337,694 329,504 324,880 317,648 312,154
Total assets $3,198,351 $3,100,711 $3,067,280 $2,932,434 $2,880,386
Interest-bearing deposits $1,838,760 $1,803,189 $1,844,493 $1,832,599 $1,813,974
Short-term borrowings 151,191 134,052 114,651 120,753 118,118
FHLB advances and other borrowings 183,614 165,774 185,195 99,499 48,583
Subordinated debt 54,495 54,470 61,677 61,878 61,835
Trust preferred debentures 37,357 37,266 37,182 37,094 37,013
Total interest-bearing liabilities 2,265,417 2,194,751 2,243,198 2,151,823 2,079,523
Noninterest-bearing deposits 562,958 550,816 522,632 511,019 529,196
Other noninterest-bearing liabilities 42,050 36,235 33,188 32,671 40,247
Shareholders' equity 327,926 318,909 268,262 236,921 231,420
Total liabilities and shareholders' equity $3,198,351 $3,100,711 $3,067,280 $2,932,434 $2,880,386
Yields
Cash and cash equivalents 0.53% 0.50% 0.50% 0.50% 0.27%
Investment securities 3.13% 4.93% 5.12% 5.31% 5.02%
Loans 4.63% 4.79% 5.22% 4.68% 5.15%
Total interest-earning assets 4.26% 4.57% 4.81% 4.40% 4.79%
Interest-bearing deposits 0.48% 0.48% 0.50% 0.49% 0.48%
Short-term borrowings 0.22% 0.24% 0.24% 0.23% 0.20%
FHLB advances and other borrowings 0.78% 0.73% 0.56% 0.55% 0.87%
Subordinated debt 6.37% 6.38% 6.87% 6.87% 6.79%
Trust preferred debentures 4.99% 5.03% 4.95% 4.80% 4.60%
Total interest-bearing liabilities 0.71% 0.71% 0.74% 0.73% 0.73%
Net interest margin 3.70% 4.00% 4.20% 3.80% 4.19%

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,
(in thousands, except per share data) 2016 2016 2016 2016 2015
Asset Quality
Loans 30-89 days past due $10,767 $10,318 $10,453 $6,616 $10,120
Nonperforming loans 31,603 29,926 18,430 18,787 24,891
Nonperforming assets 34,550 34,304 21,469 22,312 29,206
Net charge-offs 3,142 585 448 2,542 220
Loans 30-89 days past due to total loans 0.46% 0.45% 0.48% 0.33% 0.51%
Nonperforming loans to total loans 1.36% 1.29% 0.85% 0.93% 1.25%
Nonperforming assets to total assets 1.07% 1.06% 0.71% 0.77% 1.01%
Allowance for loan losses to total loans 0.64% 0.67% 0.68% 0.72% 0.80%
Allowance for loan losses to nonperforming loans 47.03% 51.99% 80.04% 77.56% 64.23%
Net charge-offs to average loans 0.54% 0.11% 0.09% 0.51% 0.04%
Wealth Management
Trust assets under administration $1,658,235 $1,235,132 $1,198,044 $1,189,693 $1,181,128
Market Data
Book value per share at period end $20.78 $20.89 $20.53 $20.19 $19.74
Tangible book value per share at period end $17.16 $17.52 $17.13 $15.71 $15.20
Market price at period end $36.18 $25.34 $21.69 $N/A $N/A
Shares outstanding at period end 15,483,499 15,404,423 15,402,946 11,804,779 11,797,404
Capital
Total capital to risk-weighted assets 13.85% 13.53% 13.91% 11.67% 11.82%
Tier 1 capital to risk-weighted assets 11.27% 10.94% 11.23% 8.48% 8.62%
Tier 1 leverage ratio 9.76% 9.82% 9.77% 7.25% 7.49%
Tier 1 common capital to risk-weighted assets 9.35% 9.03% 9.24% 6.40% 6.50%
Tangible common equity to tangible assets 8.36% 8.44% 8.89% 6.52% 6.33%

MIDLAND STATES BANCORP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
For the Quarter Ended
December 31, September 30, June 30, March 31, December 31,
(in thousands, except per share data) 2016 2016 2016 2016 2015
Adjusted Earnings Reconciliation
Income before income taxes - GAAP $19,907 $12,147 $10,473 $7,895 $10,507
Adjustments to other income:
Gain on sales of investment securities, net 14,387 39 72 204 33
Other than-temporary-impairment on investment securities - - - (824) -
FDIC loss-sharing expense - - - - (212)
Amortization of FDIC indemnification asset, net - - - - (39)
Reversal of contingent consideration accrual - - 350 - -
Total adjusted other income 14,387 39 422 (620) (218)
Adjustments to other expense:
Expenses associated with payoff of subordinated debt - - 511 - -
Net expense from loss share termination agreement 351 - - - -
Branch network optimization plan charges 2,099 - - - -
Integration and acquisition expenses 1,200 352 406 385 214
Total adjusted other expense 3,650 352 917 385 214
Adjusted earnings pre tax 9,170 12,460 10,968 8,900 10,939
Adjusted earnings tax 2,870 4,191 3,861 3,133 3,414
Adjusted earnings - non-GAAP $6,300 $8,269 $7,107 $5,767 $7,525
Adjusted diluted EPS $0.39 $0.52 $0.52 $0.47 $0.61
Adjusted return on average assets 0.78 % 1.06 % 0.93 % 0.79 % 1.04 %
Adjusted return on average shareholders' equity 7.64 % 10.32 % 10.66 % 9.79 % 12.90 %
Adjusted return on average tangible common equity 9.16 % 12.34 % 13.27 % 12.64 % 16.88 %
Yield on Loans
Reported yield on loans 4.63 % 4.79 % 5.22 % 4.68 % 5.15 %
Effect of accretion income on acquired loans (0.30)% (0.41)% (0.85)% (0.30)% (0.78)%
Yield on loans excluding accretion income 4.33 % 4.38 % 4.37 % 4.38 % 4.37 %
Net Interest Margin
Reported net interest margin 3.70 % 4.00 % 4.20 % 3.80 % 4.19 %
Effect of accretion income on acquired loans (0.26)% (0.34)% (0.68)% (0.25)% (0.63)%
Net interest margin excluding accretion income 3.44 % 3.66 % 3.52 % 3.55 % 3.56 %

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,
(in thousands, except per share data) 2016 2016 2016 2016 2015
Shareholders' Equity to Tangible Common Equity
Total shareholders' equity—GAAP $321,808 $321,790 $316,315 $238,561 $233,056
Adjustments:
Noncontrolling interest in subsidiaries (38) (41) (47) (175) (176)
Goodwill (48,836) (46,519) (46,519) (46,519) (46,519)
Other intangibles (7,187) (5,391) (5,905) (6,424) (7,004)
Tangible common equity $265,747 $269,839 $263,844 $185,443 $179,357
Total Assets to Tangible Assets:
Total assets—GAAP 3,233,723 3,247,727 3,021,784 2,898,080 2,884,824
Adjustments:
Goodwill (48,836) (46,519) (46,519) (46,519) (46,519)
Other intangibles (7,187) (5,391) (5,905) (6,424) (7,004)
Tangible assets $3,177,700 $3,195,817 $2,969,360 $2,845,137 $2,831,301
Common Shares Outstanding 15,483,499 15,404,423 15,402,946 11,804,779 11,797,404
Tangible Common Equity to Tangible Assets 8.36 % 8.44 % 8.89 % 6.52 % 6.33 %
Tangible Book Value Per Share $17.16 $17.52 $17.13 $15.71 $15.20
Return on Average Tangible Common Equity (ROATCE)
As of
December 31, September 30, June 30, March 31, December 31,
(in thousands) 2016 2016 2016 2016 2015
Net Income $11,583 $8,051 $6,789 $5,119 $7,695
Average total shareholders' equity—GAAP $327,926 $318,909 $268,262 $236,921 $231,420
Adjustments:
Noncontrolling interest in subsidiaries (40) (49) (121) (184) (204)
Goodwill (46,594) (46,519) (46,519) (46,519) (46,997)
Other intangibles (7,718) (5,656) (6,184) (6,740) (7,324)
Average tangible common equity $273,574 $266,685 $215,438 $183,478 $176,895
ROATCE 16.84 % 12.01 % 12.67 % 11.22 % 17.26 %

CONTACTS: Jeffrey G. Ludwig, Exec. V.P., at jludwig@midlandsb.com or (217) 342-7321 Kevin L. Thompson, Chief Financial Officer, at kthompson@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.