Midland States Bancorp, Inc. Announces 2019 Second Quarter Results

Highlights

Net income of $16.4 million, or $0.67 diluted earnings per share
Book value per share increased 2.2% to $26.66
Tangible book value per share increased 3.8% to $18.36
Acquisition of HomeStar Financial Group, Inc. completed on July 17, 2019

EFFINGHAM, Ill., July 25, 2019 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (Nasdaq: MSBI) (the “Company”) today reported net income of $16.4 million, or $0.67 diluted earnings per share, for the second quarter of 2019. This compares to net income of $14.0 million, or $0.57 diluted earnings per share, for the first quarter of 2019, and net income of $12.8 million, or $0.52 diluted earnings per share, for the second quarter of 2018, which included $2.0 million in integration and acquisition expenses.

Jeffrey G. Ludwig, President and Chief Executive Officer of the Company, said, “We continue to execute well on our strategic priorities and deliver solid financial results for our shareholders. We had another strong quarter of production in our equipment finance business, generated significant non-interest income from a diverse range of business lines, and continued to drive improved efficiencies throughout our organization. We were very pleased to complete our acquisition of HomeStar Financial Group, Inc. in just over three months after announcing the transaction. With its leading market position in Kankakee, Illinois, attractive deposit base, excess liquidity, and strong team of community bankers, we believe that HomeStar adds significant value to our franchise.”

Net Interest Income

Net interest income for the second quarter of 2019 was $46.1 million, an increase of 1.0% from $45.6 million for the first quarter of 2019. Excluding accretion income, net interest income decreased $0.4 million from the prior quarter. Accretion income associated with purchased loan portfolios totaled $3.4 million for the second quarter of 2019, compared with $2.5 million for the first quarter of 2019.

Relative to the second quarter of 2018, net interest income decreased $2.2 million, or 4.6%. Accretion income for the second quarter of 2018 was $5.5 million. Excluding the impact of accretion income, net interest income was relatively unchanged compared to the second quarter of 2018.

Net Interest Margin

Net interest margin for the second quarter of 2019 was 3.76%, compared to 3.73% for the first quarter of 2019. The Company’s net interest margin benefits from accretion income on purchased loan portfolios, which contributed 25 and 17 basis points to net interest margin in the second quarter of 2019 and first quarter of 2019, respectively. Excluding the impact of accretion income, net interest margin decreased five basis points from the first quarter of 2019, primarily due to the impact of higher average deposit costs.

Relative to the second quarter of 2018, net interest margin decreased from 3.91%. Accretion income on purchased loan portfolios contributed 40 basis points to net interest margin in the second quarter of 2018. Excluding the impact of accretion income, net interest margin was unchanged compared to the second quarter of 2018.

Noninterest Income

Noninterest income for the second quarter of 2019 was $19.6 million, an increase of 14.7% from $17.1 million for the first quarter of 2019. The increase was attributable to increases in most major noninterest income items.

Relative to the second quarter of 2018, noninterest income increased 23.6% from $15.8 million. The increase was primarily attributable to higher commercial FHA revenue, partially offset by a decline in residential mortgage banking revenue.

Wealth management revenue for the second quarter of 2019 was $5.5 million, an increase of 11.1% from $5.0 million in the first quarter of 2019, primarily due to an increase in trust fees. Compared to the second quarter of 2018, wealth management revenue increased 3.5%.

Commercial FHA revenue for the second quarter of 2019 was $4.9 million, compared to $3.3 million in the first quarter of 2019. Commercial FHA revenue in the second quarter of 2019 included a $0.6 million recapture of mortgage servicing rights impairment, lower loan costs and an increase in gain premiums. The Company originated $42.2 million in rate lock commitments during the second quarter of 2019, compared to $64.5 million in the prior quarter. Compared to the second quarter of 2018, commercial FHA revenue increased $4.6 million.

Noninterest Expense

Noninterest expense for the second quarter of 2019 was $40.2 million, which included $0.3 million in integration and acquisition expenses and a $0.5 million gain on mortgage servicing rights held for sale, compared with $41.1 million for the first quarter of 2019, which included $0.2 million in integration and acquisition expenses. The decrease was primarily attributable to lower salaries and employee benefits expense, partially offset by higher professional fees.

Relative to the second quarter of 2018, noninterest expense decreased 13.5% from $46.5 million, which included $2.0 million in integration and acquisition expenses and a $0.2 million loss on mortgage servicing rights held for sale. Excluding these items, noninterest expense decreased 8.6% from $44.2 million. The decrease was primarily due to lower salaries and employee benefits expense and certain non-recurring items that impacted expense levels in the second quarter of 2018.

Loan Portfolio

Total loans outstanding were $4.07 billion at June 30, 2019, compared with $4.09 billion at March 31, 2019 and $4.10 billion at June 30, 2018. The decrease in total loans from March 31, 2019 was primarily attributable to declines in the commercial real estate and residential real estate portfolios, which was partially offset by organic growth in commercial loans and leases and construction and land development loans. Equipment finance balances increased $74.0 million from March 31, 2019, which are booked within the commercial loans and leases portfolio, reflecting management’s efforts to grow the equipment finance business. The decrease in total loans from June 30, 2018 was primarily attributable to a decline in commercial real estate and residential real estate loans, partially offset by organic growth in commercial loans and leases and consumer loans.

Deposits

Total deposits were $4.01 billion at June 30, 2019, compared with $4.04 billion at March 31, 2019, and $4.16 billion at June 30, 2018. The decrease in total deposits from March 31, 2019 was primarily related to the intentional reduction of $111.7 million in brokered money market deposits and brokered time deposits.

Asset Quality

Nonperforming loans totaled $50.7 million, or 1.24% of total loans, at June 30, 2019, compared with $49.3 million, or 1.20% of total loans, at March 31, 2019, and $28.3 million, or 0.69% of total loans, at June 30, 2018.

Net charge-offs for the second quarter of 2019 were $1.2 million, or 0.12% of average loans on an annualized basis.

The Company recorded a provision for loan losses of $4.1 million for the second quarter of 2019, which included a specific reserve for one credit placed on non-accrual during the prior quarter. The Company’s allowance for loan losses was 0.64% of total loans and 51.2% of nonperforming loans at June 30, 2019, compared with 0.56% of total loans and 46.9% of nonperforming loans at March 31, 2019. Fair market value discounts recorded in connection with acquired loan portfolios represented 0.39% of total loans at June 30, 2019, compared with 0.47% of total loans at March 31, 2019.

Capital

At June 30, 2019, 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, 2019	Well Capitalized Regulatory Requirements
Total capital to risk-weighted assets	13.49%	10.00%
Tier 1 capital to risk-weighted assets	10.85%	8.00%
Tier 1 leverage ratio	9.27%	5.00%
Common equity Tier 1 capital	9.38%	6.50%
Tangible common equity to tangible assets ⁽¹⁾	8.20%	NA

(1) A non-GAAP financial measure. Refer to page 14 for a reconciliation to the comparable GAAP financial measure.

Acquisition of HomeStar Financial Group, Inc.

On July 17, 2019, the Company completed its acquisition of HomeStar Financial Group, Inc. and its banking subsidiary, HomeStar Bank and Financial Services, which operates 5 locations in the Kankakee, Illinois area, and which the Company intends to merge into the Bank. The Company acquired HomeStar for consideration of approximately $1.0 million in cash and the issuance of 405,000 shares of the Company’s common stock. At closing, HomeStar had approximately $374.4 million in assets, $219.5 million in loans, and $321.8 million in deposits.

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 26, 2019 to discuss its financial results. The call can be accessed via telephone at (877) 516-3531; conference ID: 8484268. A recorded replay can be accessed through August 2, 2019 by dialing (855) 859-2056; conference ID: 8484268.

A slide presentation relating to the second quarter 2019 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, 2019, the Company had total assets of approximately $5.55 billion and its Wealth Management Group had assets under administration of approximately $3.13 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 https://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 Common 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" within the meanings of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, 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; risks relating to acquisitions; 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 the Company does 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 and CEO, 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, SVP and 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)	2019			2019			2018			2018			2018
Earnings Summary
Net interest income	$	46,077		$	45,601		$	48,535		$	45,081		$	48,286
Provision for loan losses		4,076			3,243			3,467			2,103			1,854
Noninterest income		19,587			17,075			21,170			18,272			15,847
Noninterest expense		40,194			41,097			45,375			50,317			46,452
Income before income taxes		21,394			18,336			20,863			10,933			15,827
Income taxes		5,039			4,354			4,527			2,436			3,045
Net income		16,355			13,982			16,336			8,497			12,782
Preferred stock dividends, net		34			34			34			35			36
Net income available to common shareholders	$	16,321		$	13,948		$	16,302		$	8,462		$	12,746

Diluted earnings per common share	$	0.67		$	0.57		$	0.67		$	0.35		$	0.52
Weighted average shares outstanding - diluted		24,303,211			24,204,661			24,200,346			24,325,743			24,268,111
Return on average assets		1.17	%		1.01	%		1.14	%		0.59	%		0.91	%
Return on average shareholders' equity		10.43	%		9.23	%		10.81	%		5.68	%		8.77	%
Return on average tangible common equity ⁽¹⁾		15.34	%		13.79	%		16.40	%		8.69	%		13.48	%
Net interest margin		3.76	%		3.73	%		3.85	%		3.59	%		3.91	%
Efficiency ratio ⁽¹⁾		61.58	%		64.73	%		65.50	%		63.02	%		67.76	%

Adjusted Earnings Performance Summary
Adjusted earnings ⁽¹⁾	$	16,196		$	14,098		$	16,397		$	15,632		$	14,469
Adjusted diluted earnings per common share ⁽¹⁾	$	0.66		$	0.58		$	0.67		$	0.64		$	0.59
Adjusted return on average assets ⁽¹⁾		1.16	%		1.02	%		1.14	%		1.09	%		1.03	%
Adjusted return on average shareholders' equity ⁽¹⁾		10.33	%		9.31	%		10.85	%		10.45	%		9.93	%
Adjusted return on average tangible common equity ⁽¹⁾		15.19	%		13.90	%		16.46	%		16.02	%		15.27	%

(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)	2019			2019		2018		2018		2018
Net interest income:
Total interest income	$	60,636		$	59,432	$	61,592	$	56,987	$	58,283
Total interest expense		14,559			13,831		13,057		11,906		9,997
Net interest income		46,077			45,601		48,535		45,081		48,286
Provision for loan losses		4,076			3,243		3,467		2,103		1,854
Net interest income after provision for loan losses		42,001			42,358		45,068		42,978		46,432
Noninterest income:
Wealth management revenue		5,504			4,953		5,651		5,467		5,316
Commercial FHA revenue		4,917			3,270		4,194		3,130		326
Residential mortgage banking revenue		611			834		1,041		1,154		2,116
Service charges on deposit accounts		2,639			2,520		2,976		2,804		2,693
Interchange revenue		3,010			2,680		2,941		2,759		2,929
Gain (loss) on sales of investment securities, net		14			-		469		-		(70	)
Other income		2,892			2,818		3,898		2,958		2,537
Total noninterest income		19,587			17,075		21,170		18,272		15,847
Noninterest expense:
Salaries and employee benefits		21,134			22,039		23,020		22,528		23,467
Occupancy and equipment		4,500			4,832		4,914		5,040		4,708
Data processing		4,987			4,891		5,660		10,817		5,106
Professional		2,410			2,073		2,752		3,087		3,185
Amortization of intangible assets		1,673			1,810		1,852		1,853		1,576
(Gain) loss on mortgage servicing rights held for sale		(515	)		-		-		270		188
Other expense		6,005			5,452		7,177		6,722		8,222
Total noninterest expense		40,194			41,097		45,375		50,317		46,452
Income before income taxes		21,394			18,336		20,863		10,933		15,827
Income taxes		5,039			4,354		4,527		2,436		3,045
Net income		16,355			13,982		16,336		8,497		12,782
Preferred stock dividends, net		34			34		34		35		36
Net income available to common shareholders	$	16,321		$	13,948	$	16,302	$	8,462	$	12,746

Basic earnings per common share	$	0.67		$	0.58	$	0.68	$	0.35	$	0.53
Diluted earnings per common share	$	0.67		$	0.57	$	0.67	$	0.35	$	0.52


MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)

	As of
	June 30,			March 31,			December 31,			September 30,			June 30,
(in thousands)	2019			2019			2018			2018			2018
Assets
Cash and cash equivalents	$	245,415		$	276,480		$	213,700		$	242,433		$	276,331
Investment securities		613,026			656,152			660,785			685,753			708,001
Loans		4,073,527			4,092,106			4,137,551			4,156,282			4,095,811
Allowance for loan losses		(25,925	)		(23,091	)		(20,903	)		(19,631	)		(18,246	)
Total loans, net		4,047,602			4,069,015			4,116,648			4,136,651			4,077,565
Loans held for sale, at fair value		22,143			16,851			30,401			35,246			41,449
Premises and equipment, net		94,824			94,514			94,840			95,062			94,783
Other real estate owned		3,797			2,020			3,483			3,684			3,911
Mortgage servicing rights, at lower of cost or fair value		54,191			52,957			53,447			51,626			52,381
Mortgage servicing rights held for sale		159			257			3,545			4,419			4,806
Intangible assets		33,893			35,566			37,376			39,228			41,081
Goodwill		164,673			164,673			164,673			164,044			164,044
Cash surrender value of life insurance policies		140,593			139,686			138,783			138,600			137,681
Other assets		125,739			133,609			119,992			127,866			128,567
Total assets	$	5,546,055		$	5,641,780		$	5,637,673		$	5,724,612		$	5,730,600

Liabilities and Shareholders' Equity
Noninterest-bearing deposits	$	902,286		$	941,344		$	972,164		$	991,311		$	1,001,802
Interest-bearing deposits		3,108,921			3,094,944			3,102,006			3,151,895			3,158,055
Total deposits		4,011,207			4,036,288			4,074,170			4,143,206			4,159,857
Short-term borrowings		113,844			115,832			124,235			145,450			114,536
FHLB advances and other borrowings		582,387			669,009			640,631			652,253			678,873
Subordinated debt		94,215			94,174			94,134			94,093			94,053
Trust preferred debentures		48,041			47,918			47,794			47,676			47,559
Other liabilities		56,473			54,391			48,184			47,788			43,187
Total liabilities		4,906,167			5,017,612			5,029,148			5,130,466			5,138,065
Total shareholders’ equity		639,888			624,168			608,525			594,146			592,535
Total liabilities and shareholders’ equity	$	5,546,055		$	5,641,780		$	5,637,673		$	5,724,612		$	5,730,600


MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)

	As of
	June 30,		March 31,		December 31,		September 30,		June 30,
(in thousands)	2019		2019		2018		2018		2018
Loan Portfolio
Commercial loans and leases	$	1,149,370	$	1,122,621	$	1,074,935	$	1,034,546	$	991,164
Commercial real estate loans		1,524,369		1,560,427		1,639,155		1,711,926		1,711,296
Construction and land development loans		250,414		239,376		232,229		239,480		247,889
Residential real estate loans		552,406		569,051		578,048		586,134		601,808
Consumer loans		596,968		600,631		613,184		584,196		543,654
Total loans	$	4,073,527	$	4,092,106	$	4,137,551	$	4,156,282	$	4,095,811

Deposit Portfolio
Noninterest-bearing demand deposits	$	902,286	$	941,344	$	972,164	$	991,311	$	1,001,802
Interest-bearing:
Checking accounts		1,009,023		968,844		1,002,275		1,047,914		1,024,506
Money market accounts		732,573		802,036		862,171		836,151		843,984
Savings accounts		442,017		457,176		442,132		445,640		460,560
Time deposits		785,337		685,700		633,787		633,654		638,215
Brokered time deposits		139,971		181,188		161,641		188,536		190,790
Total deposits	$	4,011,207	$	4,036,288	$	4,074,170	$	4,143,206	$	4,159,857


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)	2019			2019			2018			2018			2018
Average Balance Sheets
Cash and cash equivalents	$	162,110		$	152,078		$	155,280		$	154,526		$	227,499
Investment securities		636,946			654,764			676,483			700,018			731,017
Loans		4,086,720			4,128,893			4,139,831			4,106,367			3,982,958
Loans held for sale		40,177			30,793			51,981			48,715			31,220
Nonmarketable equity securities		44,217			44,279			42,708			42,770			38,872
Total interest-earning assets		4,970,170			5,010,807			5,066,283			5,052,396			5,011,566
Non-earning assets		618,023			618,996			624,378			639,323			639,864
Total assets	$	5,588,193		$	5,629,803		$	5,690,661		$	5,691,719		$	5,651,430

Interest-bearing deposits	$	3,107,660		$	3,093,979		$	3,123,134		$	3,172,422		$	3,158,816
Short-term borrowings		120,859			135,337			143,869			139,215			120,794
FHLB advances and other borrowings		607,288			673,250			645,642			608,153			573,107
Subordinated debt		94,196			94,156			94,115			94,075			94,035
Trust preferred debentures		47,982			47,848			47,737			47,601			47,488
Total interest-bearing liabilities		3,977,985			4,044,570			4,054,497			4,061,466			3,994,240
Noninterest-bearing deposits		921,115			919,185			989,954			989,142			1,025,308
Other noninterest-bearing liabilities		60,363			51,838			46,487			47,654			47,229
Shareholders' equity		628,730			614,210			599,723			593,457			584,653
Total liabilities and shareholders' equity	$	5,588,193		$	5,629,803		$	5,690,661		$	5,691,719		$	5,651,430

Yields
Cash and cash equivalents		2.43	%		2.42	%		2.24	%		1.96	%		1.79	%
Investment securities		3.11	%		3.07	%		3.04	%		3.01	%		2.91	%
Loans		5.32	%		5.22	%		5.28	%		4.88	%		5.21	%
Loans held for sale		4.50	%		3.94	%		3.92	%		4.17	%		3.79	%
Nonmarketable equity securities		5.42	%		5.69	%		5.20	%		5.01	%		4.97	%
Total interest-earning assets		4.94	%		4.85	%		4.87	%		4.52	%		4.71	%
Interest-bearing deposits		1.09	%		0.97	%		0.86	%		0.77	%		0.64	%
Short-term borrowings		0.70	%		0.71	%		0.67	%		0.61	%		0.38	%
FHLB advances and other borrowings		2.34	%		2.32	%		2.26	%		2.09	%		1.81	%
Subordinated debt		6.43	%		6.43	%		6.43	%		6.44	%		6.44	%
Trust preferred debentures		7.17	%		7.38	%		6.93	%		6.81	%		6.59	%
Total interest-bearing liabilities		1.47	%		1.39	%		1.28	%		1.16	%		1.00	%
Net interest margin		3.76	%		3.73	%		3.85	%		3.59	%		3.91	%


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)	2019			2019			2018			2018			2018
Asset Quality
Loans 30-89 days past due	$	21,554		$	23,999		$	25,213		$	22,678		$	19,362
Nonperforming loans		50,676			49,262			42,899			38,561			28,342
Nonperforming assets		54,473			51,282			45,899			41,638			31,542
Net charge-offs		1,242			1,055			2,195			718			1,312
Loans 30-89 days past due to total loans		0.53	%		0.59	%		0.61	%		0.55	%		0.47	%
Nonperforming loans to total loans		1.24	%		1.20	%		1.04	%		0.93	%		0.69	%
Nonperforming assets to total assets		0.98	%		0.91	%		0.81	%		0.73	%		0.55	%
Allowance for loan losses to total loans		0.64	%		0.56	%		0.51	%		0.47	%		0.45	%
Allowance for loan losses to nonperforming loans		51.16	%		46.87	%		48.73	%		50.91	%		64.38	%
Net charge-offs to average loans		0.12	%		0.10	%		0.21	%		0.07	%		0.13	%

Wealth Management
Trust assets under administration	$	3,125,869		$	3,097,091		$	2,945,084		$	3,218,013		$	3,188,909

Market Data
Book value per share at period end	$	26.66		$	26.08		$	25.50		$	24.96		$	24.92
Tangible book value per share at period end ⁽¹⁾	$	18.36		$	17.68		$	17.00		$	16.38		$	16.25
Market price at period end	$	26.72		$	24.06		$	22.34		$	32.10		$	34.26
Shares outstanding at period end		23,897,038			23,827,438			23,751,798			23,694,637			23,664,596

Capital
Total capital to risk-weighted assets		13.49	%		13.25	%		12.79	%		12.35	%		12.27	%
Tier 1 capital to risk-weighted assets		10.85	%		10.65	%		10.25	%		9.85	%		9.78	%
Tier 1 leverage ratio		9.27	%		8.92	%		8.53	%		8.24	%		8.16	%
Tier 1 common capital to risk-weighted assets		9.38	%		9.16	%		8.76	%		8.37	%		8.28	%
Tangible common equity to tangible assets ⁽¹⁾		8.20	%		7.74	%		7.43	%		7.03	%		6.96	%

(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)	2019				2019			2018				2018				2018
Income before income taxes - GAAP	$	21,394			$	18,336		$	20,863			$	10,933			$	15,827
Adjustments to noninterest income:
Gain (loss) on sales of investment securities, net		14				-			469				-				(70	)
Other		(23	)			-			(1	)			(12	)			(48	)
Total adjustments to noninterest income		(9	)			-			468				(12	)			(118	)
Adjustments to noninterest expense:
(Gain) loss on mortgage servicing rights held for sale		(515	)			-			-				270				188
Integration and acquisition expenses		286				160			553				9,559				2,019
Total adjustments to noninterest expense		(229	)			160			553				9,829				2,207
Adjusted earnings pre tax		21,174				18,496			20,948				20,774				18,152
Adjusted earnings tax		4,978				4,398			4,551				5,142				3,683
*Adjusted earnings - non-GAAP*		16,196				14,098			16,397				15,632				14,469
Preferred stock dividends, net		34				34			34				35				36
*Adjusted earnings available to common shareholders - non-GAAP*	$	16,162			$	14,064		$	16,363			$	15,597			$	14,433
Adjusted diluted earnings per common share	$	0.66			$	0.58		$	0.67			$	0.64			$	0.59
Adjusted return on average assets		1.16		%		1.02	%		1.14		%		1.09		%		1.03		%
Adjusted return on average shareholders' equity		10.33		%		9.31	%		10.85		%		10.45		%		9.93		%
Adjusted return on average tangible common equity		15.19		%		13.90	%		16.46		%		16.02		%		15.27		%


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)	2019				2019				2018				2018				2018
Noninterest expense - GAAP	$	40,194			$	41,097			$	45,375			$	50,317			$	46,452
Gain (loss) on mortgage servicing rights held for sale		515				-				-				(270	)			(188	)
Integration and acquisition expenses		(286	)			(160	)			(553	)			(9,559	)			(2,019	)
Adjusted noninterest expense	$	40,423			$	40,937			$	44,822			$	40,488			$	44,245

Net interest income - GAAP	$	46,077			$	45,601			$	48,535			$	45,081			$	48,286
Effect of tax-exempt income		526				543				574				585				541
Adjusted net interest income		46,603				46,144				49,109				45,666				48,827

Noninterest income - GAAP	$	19,587			$	17,075			$	21,170			$	18,272			$	15,847
Mortgage servicing rights (recapture) impairment		(559	)			25				(1,380	)			297				500
(Gain) loss on sales of investment securities, net		(14	)			-				(469	)			-				70
Other		23				-				1				12				48
Adjusted noninterest income		19,037				17,100				19,322				18,581				16,465

Adjusted total revenue	$	65,640			$	63,244			$	68,431			$	64,247			$	65,292

*Efficiency ratio*		61.58		%		64.73		%		65.50		%		63.02		%		67.76		%


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)	2019				2019				2018				2018				2018
*Shareholders' Equity to Tangible Common Equity*
Total shareholders' equity—GAAP	$	639,888			$	624,168			$	608,525			$	594,146			$	592,535
Adjustments:
Preferred stock		(2,684	)			(2,733	)			(2,781	)			(2,829	)			(2,876	)
Goodwill		(164,673	)			(164,673	)			(164,673	)			(164,044	)			(164,044	)
Other intangibles		(33,893	)			(35,566	)			(37,376	)			(39,228	)			(41,081	)
Tangible common equity	$	438,638			$	421,196			$	403,695			$	388,045			$	384,534

Total Assets to Tangible Assets:
Total assets—GAAP	$	5,546,055			$	5,641,780			$	5,637,673			$	5,724,612			$	5,730,600
Adjustments:
Goodwill		(164,673	)			(164,673	)			(164,673	)			(164,044	)			(164,044	)
Other intangibles		(33,893	)			(35,566	)			(37,376	)			(39,228	)			(41,081	)
Tangible assets	$	5,347,489			$	5,441,541			$	5,435,624			$	5,521,340			$	5,525,475

Common Shares Outstanding		23,897,038				23,827,438				23,751,798				23,694,637				23,664,596

*Tangible Common Equity to Tangible Assets*		8.20		%		7.74		%		7.43		%		7.03		%		6.96		%
*Tangible Book Value Per Share*	$	18.36			$	17.68			$	17.00			$	16.38			$	16.25

Return on Average Tangible Common Equity (ROATCE)

	For the Quarter Ended
	June 30,				March 31,				December 31,				September 30,				June 30,
(dollars in thousands)	2019				2019				2018				2018				2018
Net income available to common shareholders	$	16,321			$	13,948			$	16,302			$	8,462			$	12,746

Average total shareholders' equity—GAAP	$	628,730			$	614,210			$	599,723			$	593,457			$	584,653
Adjustments:
Preferred stock		(2,708	)			(2,759	)			(2,812	)			(2,859	)			(2,905	)
Goodwill		(164,673	)			(164,673	)			(164,051	)			(164,044	)			(158,461	)
Other intangibles		(34,689	)			(36,438	)			(38,394	)			(40,228	)			(44,098	)
Average tangible common equity	$	426,660			$	410,340			$	394,466			$	386,326			$	379,189
ROATCE		15.34		%		13.79		%		16.40		%		8.69		%		13.48		%