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Midland States Bancorp, Inc. Announces 2017 First Quarter Results

Highlights

  • Net income of $8.5 million for first quarter of 2017
  • Earnings per share of $0.52, an increase of 24% over prior year period
  • Total loans increased $135 million, or 23.3% annualized
  • Return on average assets of 1.05%; Return on average tangible equity of 12.78%
  • Acquisition of CedarPoint Investment Advisors added $180 million in assets under administration

EFFINGHAM, Ill., April 27, 2017 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (NASDAQ:MSBI) (the “Company”) today reported net income of $8.5 million, or $0.52 diluted earnings per share, for the first quarter of 2017, compared with net income of $11.6 million, or $0.72 diluted earnings per share, for the fourth quarter of 2016, and net income of $5.1 million, or $0.42 diluted earnings per share, for the first quarter of 2016. 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.

“We had strong performances across all of our major business lines in the first quarter, resulting in 24% earnings per share growth over the prior year,” said Leon J. Holschbach, President and Chief Executive Officer of the Company. “We are seeing positive trends in all of our key metrics including well diversified loan growth, an expanding net interest margin, higher non-interest income and strong credit quality. We are also executing well on our Operational Excellence initiative, which is delivering the cost savings and efficiency improvements that we are targeting. Collectively, these positive trends helped us to more than offset the loss of the interest income previously generated from the portfolio of private label CMOs that we sold during the fourth quarter of 2016.

“We are seeing good opportunities to continue driving organic growth going forward. Combined with the strategic and financial benefits projected for our pending acquisition of Centrue Financial Corporation, we believe that Midland is well positioned to continue increasing our level of profitability and enhancing the value of our franchise,” said Mr. Holschbach.

Net Interest Income

Net interest income for the first quarter of 2017 was $27.5 million, an increase of 5.8% from $26.0 million for the fourth quarter of 2016. The increase in net interest income was primarily attributable to higher interest income on loans due to a 2.1% increase in the average balance of loans and an increase in net interest margin.

The Company’s net interest income benefits from accretion income associated with purchased loan portfolios. Accretion income totaled $2.7 million for the first quarter of 2017, compared with $2.2 million for the fourth quarter of 2016.

Relative to the first quarter of 2016, net interest income increased 14.2%. Excluding the impact of a $0.8 million increase in accretion income, net interest income increased $2.6 million. This increase resulted from a $4.5 million increase in interest income on loans (excluding the effect of accretion income) due to growth in the average balance of loans, partially offset by a $1.5 million decline in interest income on investment securities due to the sale of the portfolio of CMOs.

Net Interest Margin

Net interest margin for the first quarter of 2017 was 3.87%, compared to 3.70% for the fourth quarter of 2016. The Company’s net interest margin benefits from accretion income on purchased loan portfolios. Excluding accretion income, net interest margin was 3.52% for the first quarter of 2017, compared with 3.42% for the fourth quarter of 2016. The increase in net interest margin excluding accretion income was primarily attributable to an increase in average loan yields.

Relative to the first quarter of 2016, the net interest margin increased from 3.80%, primarily due to an increase in accretion income. Excluding accretion income, the net interest margin declined slightly from 3.55%, 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 first quarter of 2017 was $16.3 million, a decrease of 46.4% from $30.5 million for the fourth quarter of 2016. Excluding the $14.3 million gain on sale of the CMOs recognized in the fourth quarter of 2016, non-interest income was essentially unchanged from the prior quarter.

Commercial FHA revenue for the first quarter of 2017 was $6.7 million, an increase of 80.8% from $3.7 million in the fourth quarter of 2016. The Company originated $216.9 million in rate lock commitments during the first quarter of 2017, compared to $159.0 million in the prior quarter. Compared to the first quarter of 2016, commercial FHA revenue increased 2.0%.

Residential mortgage banking revenue for the first quarter of 2017 was $2.9 million, a decrease of 53.3% from $6.2 million in the fourth quarter of 2016. The decrease was attributable to the recapture of previously recorded mortgage servicing rights (“MSR”) impairment totaling $3.6 million that positively impacted residential mortgage banking revenue in the fourth quarter of 2016. Compared to the first quarter of 2016, residential mortgage banking revenue increased 160.1%, primarily due to MSR impairment charges recorded in the prior year period.

Wealth management revenue for the first quarter of 2017 was $2.9 million, an increase of 15.1% from $2.5 million in the fourth quarter of 2016. The increase was attributable to the full quarter impact of the increase in assets under administration resulting from the acquisition of Sterling Trust in November 2016. Compared to the first quarter of 2016, wealth management revenue increased 60.9%, which was attributable to 9% organic growth in assets under management and the acquisition of Sterling Trust.

Relative to the first quarter of 2016, noninterest income increased 29.4% from $12.6 million. The increase was primarily due to higher residential mortgage banking and wealth management revenue, while commercial FHA revenue was consistent with the prior year period.

Noninterest Expense

Noninterest expense for the first quarter of 2017 was $30.8 million, compared with $34.1 million for the fourth quarter of 2016. Noninterest expense for the first quarter of 2017 included $1.3 million of integration and acquisition-related expenses, while noninterest expense for the fourth quarter of 2016 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 decreased $0.9 million or 3.0% from the prior quarter. The decrease was attributable to minor declines across most of the Company’s major expense line items.

Relative to the first quarter of 2016, noninterest expense excluding integration and acquisition-related expenses increased 8.1% from $27.3 million. The increase was primarily due to higher salaries and benefits expense, as well as higher professional fees.

Income Tax Expense

Income tax expense was $3.0 million for the first quarter of 2017, compared to $8.3 million for the fourth quarter of 2016. The effective tax rate for the first quarter of 2017 was 26.0%, compared to 41.8% in the prior quarter. The 26.0% effective tax rate used for the first quarter of 2017 reflects the recognition of tax benefits related to the exercise of employee stock options and the recent establishment of a captive insurance subsidiary.

Loan Portfolio

Total loans outstanding were $2.45 billion at March 31, 2017, compared with $2.32 billion at December 31, 2016, representing an annualized increase of 23.3%. Over the prior 12 month period, total loans increased 21.8% from $2.02 billion at March 31, 2016. The $135.0 million increase in the loan portfolio from December 31, 2016 was primarily driven by a $67.1 million increase in consumer loans, a $27.6 million increase in commercial real estate loans, a $23.7 million increase in residential real estate loans, and a $17.6 million increase in commercial loans.

Deposits

Total deposits were $2.53 billion at March 31, 2017, compared with $2.40 billion at December 31, 2016, and $2.39 billion at March 31, 2016. The increase was primarily driven by growth in checking accounts, money market accounts and brokered deposits.

Asset Quality

Non-performing loans totaled $28.9 million, or 1.18% of total loans, at March 31, 2017, compared with $31.6 million, or 1.36% of total loans, at December 31, 2016, and $18.8 million, or 0.93% of total loans, at March 31, 2016.

Net charge-offs for the first quarter of 2017 were $0.6 million, or 0.10% of average loans on an annualized basis.

The Company recorded a provision for loan losses of $1.5 million for the first quarter of 2017, primarily reflecting the growth in the loan portfolio.

The Company’s allowance for loan losses was 0.64% of total loans and 54.6% of non-performing loans at March 31, 2017, compared with 0.64% and 47.0%, respectively, at December 31, 2016. Including the fair market value discounts recorded in connection with acquired loan portfolios, the allowance for loan losses to total loans ratio was 0.92% at March 31, 2017, compared with 1.02% at December 31, 2016.

Capital

At March 31, 2017, the Company exceeded all regulatory capital requirements under Basel III and was considered to be a ‘‘well-capitalized’’ financial institution, as summarized in the following table:

March 31, 2017 Well Capitalized
Regulatory Requirements
Total capital to risk-weighted assets13.48%10.00%
Tier 1 capital to risk-weighted assets10.97%8.00%
Tier 1 leverage ratio9.61%5.00%
Common equity Tier 1 capital9.10%6.50%
Tangible common equity to tangible assets 8.29% 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, April 28, 2017 to discuss its financial results. The call can be accessed via telephone at (877) 516-3531 (passcode: 3106625). A recorded replay can be accessed through May 5, 2017 by dialing (855) 859-2056; passcode: 3106625.

A slide presentation relating to the first quarter 2017 results will be accessible prior to the scheduled conference call. The slide presentation and webcast of the conference call can be accessed on the Webcasts and Presentations page of the Company’s investor relations website.

About Midland States Bancorp, Inc.

Midland States Bancorp, Inc. is a community-based financial holding company headquartered in Effingham, Illinois, and is the sole shareholder of Midland States Bank. Midland had assets of approximately $3.4 billion, and its Midland Wealth Management Group had assets under administration of approximately $1.9 billion as of March 31, 2017. 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 70 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
March 31, December 31, September 30, June 30, March 31,
(dollars in thousands, except per share data) 2017 2016 2016 2016 2016
Earnings Summary
Net interest income $27,461 $25,959 $27,265 $27,989 $24,041
Provision for loan losses 1,533 2,445 1,392 629 1,125
Noninterest income 16,330 30,486 14,937 14,016 12,618
Noninterest expense 30,785 34,090 28,657 30,904 27,638
Income before income taxes 11,473 19,910 12,153 10,472 7,896
Income taxes 2,983 8,327 4,102 3,683 2,777
Net income $8,490 $11,583 $8,051 $6,789 $5,119
Diluted earnings per common share $0.52 $0.72 $0.51 $0.50 $0.42
Weighted average shares outstanding - diluted 16,351,637 16,032,016 15,858,273 13,635,074 12,229,293
Return on average assets 1.05% 1.44% 1.03% 0.89% 0.70%
Return on average shareholders' equity 10.58% 14.05% 10.04% 10.18% 8.70%
Return on average tangible common shareholders' equity 12.78% 16.84% 12.01% 12.67% 11.22%
Net interest margin 3.87% 3.70% 4.00% 4.20% 3.80%
Efficiency ratio 66.26% 76.64% 64.56% 66.46% 67.72%
Adjusted Earnings Performance Summary
Adjusted earnings $9,436 $6,302 $8,277 $7,106 $5,768
Adjusted diluted earnings per common share $0.57 $0.39 $0.52 $0.52 $0.47
Adjusted return on average assets 1.17% 0.78% 1.06% 0.93% 0.79%
Adjusted return on average shareholders' equity 11.76% 7.64% 10.33% 10.66% 9.80%
Adjusted return on average tangible common shareholders' equity 14.20% 9.16% 12.35% 13.27% 12.64%
Net interest margin excluding accretion income 3.52% 3.42% 3.66% 3.52% 3.55%

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
For the Quarter Ended
March 31, December 31, September 30, June 30, March 31,
(in thousands, except per share data) 2017 2016 2016 2016 2016
Net interest income:
Total interest income $31,839 $29,981 $31,186 $32,115 $27,967
Total interest expense 4,378 4,022 3,921 4,126 3,926
Net interest income 27,461 25,959 27,265 27,989 24,041
Provision for loan losses 1,533 2,445 1,392 629 1,125
Net interest income after provision for loan losses 25,928 23,514 25,873 27,360 22,916
Noninterest income:
Commercial FHA revenue 6,695 3,704 3,260 8,538 6,562
Residential mortgage banking revenue 2,916 6,241 4,990 1,037 1,121
Wealth management revenue 2,872 2,495 1,941 1,870 1,785
Service charges on deposit accounts 892 988 1,044 965 907
Interchange revenue 977 921 920 945 964
FDIC loss sharing expense - - - (1,608) (53)
Gain on sales of investment securities, net 67 14,387 39 72 204
Other-than-temporary impairment on investment securities - - - - (824)
Other income 1,911 1,750 2,743 2,197 1,952
Total noninterest income 16,330 30,486 14,937 14,016 12,618
Noninterest expense:
Salaries and employee benefits 17,115 17,326 16,568 17,012 15,387
Occupancy and equipment 3,184 3,266 3,271 3,233 3,310
Data processing 2,796 2,828 2,586 2,624 2,620
Professional 2,992 2,898 1,877 1,573 1,701
Amortization of intangible assets 525 534 514 519 580
Other 4,173 7,238 3,841 5,943 4,040
Total noninterest expense 30,785 34,090 28,657 30,904 27,638
Income before income taxes 11,473 19,910 12,153 10,472 7,896
Income taxes 2,983 8,327 4,102 3,683 2,777
Net income $8,490 $11,583 $8,051 $6,789 $5,119
Basic earnings per common share $0.54 $0.74 $0.51 $0.51 $0.43
Diluted earnings per common share $0.52 $0.72 $0.51 $0.50 $0.42

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
At Quarter Ended
March 31, December 31, September 30, June 30, March 31,
(in thousands) 2017 2016 2016 2016 2016
Assets
Cash and cash equivalents $218,096 $190,716 $228,030 $123,366 $162,416
Investment securities available-for-sale at fair value 259,332 246,339 252,212 238,781 232,074
Investment securities held to maturity at amortized cost 76,276 78,672 82,941 84,756 88,085
Loans 2,454,950 2,319,976 2,312,778 2,161,041 2,016,034
Allowance for loan losses (15,805) (14,862) (15,559) (14,752) (14,571)
Total loans, net 2,439,145 2,305,114 2,297,219 2,146,289 2,001,463
Loans held for sale at fair value 39,900 70,565 61,363 101,782 103,365
Premises and equipment, net 66,914 66,692 70,727 72,147 72,421
Other real estate owned 3,680 3,560 4,828 3,540 4,740
Mortgage servicing rights at lower of cost or market 68,557 68,008 64,689 62,808 65,486
Intangible assets 8,633 7,187 5,391 5,905 6,424
Goodwill 50,807 48,836 46,519 46,519 46,519
Cash surrender value of life insurance policies 74,806 74,226 74,276 73,665 53,173
Other assets 67,431 73,808 59,532 62,226 61,914
Total assets $3,373,577 $3,233,723 $3,247,727 $3,021,784 $2,898,080
Liabilities and Shareholders' Equity
Noninterest bearing deposits $528,021 $562,333 $629,113 $528,966 $546,664
Interest bearing deposits 1,999,455 1,842,033 1,790,919 1,825,586 1,843,046
Total deposits 2,527,476 2,404,366 2,420,032 2,354,552 2,389,710
Short-term borrowings 124,035 131,557 138,289 125,014 101,649
FHLB advances and other borrowings 250,353 237,518 237,543 97,588 40,133
Subordinated debt 54,532 54,508 54,484 54,459 61,903
Trust preferred debentures 37,496 37,405 37,316 37,229 37,142
Other liabilities 45,352 46,599 38,314 36,674 29,157
Total liabilities 3,039,244 2,911,953 2,925,978 2,705,516 2,659,694
Total shareholders’ equity 334,333 321,770 321,749 316,268 238,386
Total liabilities and shareholders’ equity $3,373,577 $3,233,723 $3,247,727 $3,021,784 $2,898,080

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
As of
March 31, December 31, September 30, June 30, March 31,
(in thousands) 2017 2016 2016 2016 2016
Loan Portfolio
Commercial loans $475,408 $457,827 $545,069 $489,228 $484,618
Commercial real estate loans 997,200 969,615 956,298 929,399 897,099
Construction and land development loans 171,047 177,325 163,900 181,667 159,507
Residential real estate loans 277,402 253,713 216,935 179,184 158,221
Consumer loans 337,081 270,017 248,131 205,060 158,938
Lease financing loans 196,812 191,479 182,445 176,503 157,651
Total loans $2,454,950 $2,319,976 $2,312,778 $2,161,041 $2,016,034
Deposit Portfolio
Noninterest-bearing demand deposits $528,021 $562,333 $629,113 $528,966 $546,664
Checking accounts 751,193 656,248 658,021 627,003 612,475
Money market accounts 415,322 399,851 366,193 374,537 415,130
Savings accounts 169,715 166,910 162,742 164,792 163,163
Time deposits 394,508 400,304 420,779 431,173 433,386
Brokered deposits 268,717 218,720 183,184 228,081 218,892
Total deposits $2,527,476 $2,404,366 $2,420,032 $2,354,552 $2,389,710

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
For the Quarter Ended
March 31, December 31, September 30, June 30, March 31,
(in thousands) 2017 2016 2016 2016 2016
Average Balance Sheets
Cash and cash equivalents $163,595 $140,439 $154,764 $232,362 $223,951
Investment securities 328,880 315,511 329,900 321,424 311,806
Loans 2,361,380 2,299,115 2,177,517 2,092,248 2,004,191
Loans held for sale 73,914 86,665 90,661 79,566 59,377
Nonmarketable equity securities 20,047 18,927 18,365 16,800 15,461
Total interest-earning assets 2,947,816 2,860,657 2,771,207 2,742,400 2,614,786
Non-earning assets 336,761 337,566 329,504 324,880 317,728
Total assets $3,284,577 $3,198,223 $3,100,711 $3,067,280 $2,932,514
Interest-bearing deposits $1,896,569 $1,838,760 $1,803,189 $1,844,493 $1,832,599
Short-term borrowings 143,583 151,191 134,052 114,651 120,753
FHLB advances and other borrowings 248,045 183,614 165,774 185,195 99,499
Subordinated debt 54,518 54,495 54,470 61,677 61,878
Trust preferred debentures 37,443 37,357 37,266 37,182 37,094
Total interest-bearing liabilities 2,380,158 2,265,417 2,194,751 2,243,198 2,151,823
Noninterest-bearing deposits 525,868 562,958 550,816 522,632 511,019
Other noninterest-bearing liabilities 53,109 41,962 36,284 33,309 32,935
Shareholders' equity 325,442 327,886 318,860 268,141 236,737
Total liabilities and shareholders' equity $3,284,577 $3,198,223 $3,100,711 $3,067,280 $2,932,514
Yields
Cash and cash equivalents 0.77% 0.53% 0.50% 0.50% 0.50%
Investment securities 3.21% 3.10% 5.02% 5.15% 5.34%
Loans 4.91% 4.65% 4.83% 5.24% 4.70%
Loans held for sale 4.22% 4.22% 3.77% 4.65% 4.22%
Nonmarketable equity securities 4.41% 3.85% 3.77% 4.16% 4.06%
Total interest-earning assets 4.47% 4.26% 4.57% 4.81% 4.40%
Interest-bearing deposits 0.51% 0.48% 0.48% 0.50% 0.49%
Short-term borrowings 0.23% 0.22% 0.24% 0.24% 0.23%
FHLB advances and other borrowings 0.93% 0.78% 0.73% 0.56% 0.55%
Subordinated debt 6.40% 6.41% 6.41% 6.84% 6.84%
Trust preferred debentures 5.12% 4.99% 5.03% 4.95% 4.80%
Total interest-bearing liabilities 0.75% 0.71% 0.71% 0.74% 0.73%
Net interest margin 3.87% 3.70% 4.00% 4.20% 3.80%


MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
As of and for the Quarter Ended
March 31, December 31, September 30, June 30, March 31,
(dollars in thousands, except per share data) 2017 2016 2016 2016 2016
Asset Quality
Loans 30-89 days past due $14,075 $10,767 $10,318 $10,453 $6,616
Nonperforming loans 28,933 31,603 29,926 18,430 18,787
Nonperforming assets 31,684 34,550 34,304 21,469 22,312
Net charge-offs 590 3,142 585 448 2,542
Loans 30-89 days past due to total loans 0.57% 0.46% 0.45% 0.48% 0.33%
Nonperforming loans to total loans 1.18% 1.36% 1.29% 0.85% 0.93%
Nonperforming assets to total assets 0.94% 1.07% 1.06% 0.71% 0.77%
Allowance for loan losses to total loans 0.64% 0.64% 0.67% 0.68% 0.72%
Allowance for loan losses to nonperforming loans 54.62% 47.03% 51.99% 80.04% 77.56%
Net charge-offs to average loans 0.10% 0.54% 0.11% 0.09% 0.51%
Wealth Management
Trust assets under administration $1,869,314 $1,658,235 $1,235,132 $1,198,044 $1,189,693
Market Data
Book value per share at period end $21.19 $20.78 $20.89 $20.53 $20.19
Tangible book value per share at period end $17.42 $17.16 $17.52 $17.13 $15.71
Market price at period end $34.39 $36.18 $25.34 $21.69 $N/A
Shares outstanding at period end 15,780,651 15,483,499 15,404,423 15,402,946 11,804,779
Capital
Total capital to risk-weighted assets 13.48% 13.85% 13.53% 13.91% 11.67%
Tier 1 capital to risk-weighted assets 10.97% 11.27% 10.94% 11.23% 8.48%
Tier 1 leverage ratio 9.61% 9.76% 9.82% 9.77% 7.25%
Tier 1 common capital to risk-weighted assets 9.10% 9.35% 9.03% 9.24% 6.40%
Tangible common equity to tangible assets 8.29% 8.36% 8.44% 8.89% 6.52%

MIDLAND STATES BANCORP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
For the Quarter Ended
March 31, December 31, September 30, June 30, March 31,
(dollars in thousands, except per share data) 2017 2016 2016 2016 2016
Adjusted Earnings Reconciliation
Income before income taxes - GAAP $11,473 $19,910 $12,153 $10,472 $7,896
Adjustments to other income:
Gain on sales of investment securities, net 67 14,387 39 72 204
Other than-temporary-impairment on investment securities - - - - (824)
Reversal of contingent consideration accrual - - - 350 -
Total adjusted other income 67 14,387 39 422 (620)
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 1,346 1,200 352 406 385
Total adjusted other expense 1,346 3,650 352 917 385
Adjusted earnings pre tax 12,752 9,173 12,466 10,967 8,901
Adjusted earnings tax 3,316 2,871 4,189 3,861 3,133
Adjusted earnings - non-GAAP $9,436 $6,302 $8,277 $7,106 $5,768
Adjusted diluted EPS $0.57 $0.39 $0.52 $0.52 $0.47
Adjusted return on average assets 1.17 % 0.78 % 1.06 % 0.93 % 0.79 %
Adjusted return on average shareholders' equity 11.76 % 7.64 % 10.33 % 10.66 % 9.80 %
Adjusted return on average tangible common equity 14.20 % 9.16 % 12.35 % 13.27 % 12.64 %
Yield on Loans
Reported yield on loans 4.91 % 4.65 % 4.83 % 5.24 % 4.70 %
Effect of accretion income on acquired loans (0.43)% (0.33)% (0.43)% (0.88)% (0.31)%
Yield on loans excluding accretion income 4.48 % 4.32 % 4.40 % 4.36 % 4.39 %
Net Interest Margin
Reported net interest margin 3.87 % 3.70 % 4.00 % 4.20 % 3.80 %
Effect of accretion income on acquired loans (0.35)% (0.28)% (0.34)% (0.68)% (0.25)%
Net interest margin excluding accretion income 3.52 % 3.42 % 3.66 % 3.52 % 3.55 %

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
March 31, December 31, September 30, June 30, March 31,
(dollars in thousands, except per share data) 2017 2016 2016 2016 2016
Shareholders' Equity to Tangible Common Equity
Total shareholders' equity—GAAP $334,333 $321,770 $321,749 $316,268 $238,386
Adjustments:
Goodwill (50,807) (48,836) (46,519) (46,519) (46,519)
Other intangibles (8,633) (7,187) (5,391) (5,905) (6,424)
Tangible common equity $274,893 $265,747 $269,839 $263,844 $185,443
Total Assets to Tangible Assets:
Total assets—GAAP 3,373,577 3,233,723 3,247,727 3,021,784 2,898,080
Adjustments:
Goodwill (50,807) (48,836) (46,519) (46,519) (46,519)
Other intangibles (8,633) (7,187) (5,391) (5,905) (6,424)
Tangible assets $3,314,137 $3,177,700 $3,195,817 $2,969,360 $2,845,137
Common Shares Outstanding 15,780,651 15,483,499 15,404,423 15,402,946 11,804,779
Tangible Common Equity to Tangible Assets 8.29 % 8.36 % 8.44 % 8.89 % 6.52 %
Tangible Book Value Per Share $17.42 $17.16 $17.52 $17.13 $15.71
Return on Average Tangible Common Equity (ROATCE)
As of
March 31, December 31, September 30, June 30, March 31,
(in thousands) 2017 2016 2016 2016 2016
Net Income $8,490 $11,583 $8,051 $6,789 $5,119
Average total shareholders' equity—GAAP $325,442 $327,886 $318,860 $268,141 $236,737
Adjustments:
Goodwill (48,836) (46,594) (46,519) (46,519) (46,519)
Other intangibles (7,144) (7,718) (5,656) (6,184) (6,740)
Average tangible common equity $269,462 $273,574 $266,685 $215,438 $183,478
ROATCE 12.78 % 16.84 % 12.01 % 12.67 % 11.22 %

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.