Highlights
Net income of $12.8 million, or $0.51 diluted earnings per shareAdjusted earnings of $16.1 million, or $0.64 diluted earnings per share, primarily reflects the exclusion of $3.3 million in integration and acquisition expenses and a $1.8 million loss on the repurchase of subordinated debtTotal loans increased $72.6 million from the end of the prior quarter, or 6.7% annualizedTotal deposits increased $99.1 million from the end of the prior quarter, or 8.8% annualizedEfficiency ratio improved to 59.5% from 60.6% in the prior quarterEFFINGHAM, Ill., Jan. 23, 2020 (GLOBE NEWSWIRE) — Midland States Bancorp, Inc. (Nasdaq: MSBI) (the “Company”) today reported net income of $12.8 million, or $0.51 diluted earnings per share, for the fourth quarter of 2019, which included $3.3 million in integration and acquisition expenses and a $1.8 million loss on the repurchase of subordinated debt.  This compares to net income of $12.7 million, or $0.51 diluted earnings per share, for the third quarter of 2019, which included $5.3 million in integration and acquisition expenses, and net income of $16.3 million, or $0.67 diluted earnings per share, for the fourth quarter of 2018.Jeffrey G. Ludwig, President and Chief Executive Officer of the Company, said, “We completed 2019 with a strong quarter of business development highlighted by growth in both loans and deposits.  Our focus on developing new depository products for commercial customers is having a positive impact on our core deposit gathering, resulting in steady improvement in our deposit mix.  We believe we are well positioned to create additional value for shareholders in 2020.  Through a combination of modest balance sheet growth, realizing the full synergies from our acquisition of HomeStar Financial Group, driving additional efficiencies throughout our organization, and expanding our net interest margin through a reduction in our funding costs, we believe we can deliver solid earnings growth and an improvement in our return on assets and equity.”Adjustment in Staffing LevelsIn January 2020, the Company reduced its staffing by approximately 50 full-time employee positions, representing approximately 5% of the Company’s workforce.  The Company expects to record $0.7 – $0.8 million in one-time charges related to the staffing level adjustments in the first quarter of 2020.  The staffing level adjustments are expected to result in approximately $3.9 million in annualized cost savings, beginning in the second quarter of 2020. Approximately 30% of the staffing adjustments are within the Company’s retail branches, with the remaining adjustments primarily occurring within back office support and non-revenue generating positions.Factors Affecting ComparabilityThe Company acquired HomeStar Financial Group, Inc. (“HomeStar”) in July 2019, with the core system conversion completed in October 2019. The financial position and results of operations of HomeStar prior to its acquisition date are not included in the Company’s financial results.Adjusted EarningsFinancial results for the fourth quarter of 2019 included $3.3 million in integration and acquisition expenses, a $1.8 million loss on the repurchase of subordinated debt, and a $0.6 million gain on the sale of investment securities.  Excluding these amounts and certain other expenses and income, adjusted earnings were $16.1 million, or $0.64 diluted earnings per share, for the fourth quarter of 2019. Financial results for the third quarter of 2019 included $5.3 million in integration and acquisition expenses.  Excluding these amounts and certain other expenses and income, adjusted earnings were $16.4 million, or $0.66 diluted earnings per share, for the third quarter of 2019. A reconciliation of adjusted earnings to net income according to accounting principles generally accepted in the United States (“GAAP”) is provided in the financial tables at the end of this press release.Net Interest MarginNet interest margin for the fourth quarter of 2019 was 3.56%, compared to 3.70% for the third quarter of 2019.  The Company’s net interest margin benefits from accretion income on purchased loan portfolios, which contributed 23 and 20 basis points to net interest margin in the fourth quarter of 2019 and third quarter of 2019, respectively.  Excluding the impact of accretion income, net interest margin decreased 17 basis points from the third quarter of 2019, primarily due to the impact of new subordinated debt issued in September 2019 and a decline in the yield on earning assets.Relative to the fourth quarter of 2018, net interest margin decreased from 3.85%.  Accretion income on purchased loan portfolios contributed 31 basis points to net interest margin in the fourth quarter of 2018.  Excluding the impact of accretion income, net interest margin decreased 21 basis points compared to the fourth quarter of 2018, primarily due to the impact of new subordinated debt issued in September 2019, a decline in the yield on earning assets and an increase in the costs of interest-bearing deposits. Net Interest IncomeNet interest income for the fourth quarter of 2019 was $48.7 million, a decrease of 1.5% from $49.5 million for the third quarter of 2019.  Excluding accretion income, net interest income decreased $1.3 million from the prior quarter.  Accretion income associated with purchased loan portfolios totaled $3.6 million for the fourth quarter of 2019, compared with $3.1 million for the third quarter of 2019. Relative to the fourth quarter of 2018, net interest income increased $0.2 million, or 0.3%.  Accretion income for the fourth quarter of 2018 was $4.3 million.  Excluding the impact of accretion income, net interest income increased primarily due to the contribution of HomeStar.Noninterest IncomeNoninterest income for the fourth quarter of 2019 was $19.0 million, a decrease of 3.0% from $19.6 million for the third quarter of 2019.  The decrease was primarily attributable to declines in most major noninterest income items, partially offset by a $0.6 million gain on sale of investment securities.Relative to the fourth quarter of 2018, noninterest income decreased 10.2% from $21.2 million.  The decrease was primarily attributable to lower commercial FHA, wealth management and residential mortgage banking revenue.Wealth management revenue for the fourth quarter of 2019 was $5.4 million, a decrease of 10.4% from $6.0 million in the third quarter of 2019, primarily due to a decline in estate fees.  Compared to the fourth quarter of 2018, wealth management revenue decreased 4.8%.Commercial FHA revenue for the fourth quarter of 2019 was $2.1 million, compared to $2.9 million in the third quarter of 2019.  Commercial FHA revenue in the fourth quarter of 2019 included a $1.6 million mortgage servicing rights (“MSR”) impairment, compared to a $1.1 million MSR impairment recorded in the third quarter of 2019.  The Company originated $84.9 million in rate lock commitments during the fourth quarter of 2019, compared to $112.8 million in the prior quarter.  Compared to the fourth quarter of 2018, commercial FHA revenue decreased $2.1 million.Noninterest ExpenseNoninterest expense for the fourth quarter of 2019 was $46.3 million, which included $3.3 million in integration and acquisition expenses, a $1.8 million loss on the repurchase of subordinated debt, and a $0.1 million loss on MSR held for sale, compared with $48.0 million for the third quarter of 2019, which included $5.3 million in integration and acquisition expenses and a $0.1 million gain on MSR held for sale.  Excluding integration and acquisition expenses, the loss on the repurchase of subordinated debt, and gain/loss on MSR held for sale, the $1.7 million decrease in noninterest expense primarily reflects additional cost savings realized after the core system conversion of HomeStar in October 2019.Relative to the fourth quarter of 2018, noninterest expense increased 2.1% from $45.4 million, which included $0.6 million in integration and acquisition expenses.  Excluding integration and acquisition expenses, the loss on the repurchase of subordinated debt, and loss on MSR held for sale, noninterest expense decreased 8.3% from $44.8 million, primarily due to cost reduction initiatives implemented across the organization.Loan PortfolioTotal loans outstanding were $4.40 billion at December 31, 2019, compared with $4.33 billion at September 30, 2019 and $4.14 billion at December 31, 2018.  The increase in total loans from September 30, 2019 was attributable to growth in the commercial loans and leases and consumer loan portfolios, partially offset by a decline in the commercial real estate loan portfolio.  Equipment finance balances increased $66.8 million from September 30, 2019, which are booked within the commercial loans and leases portfolio, reflecting management’s efforts to grow the equipment finance business.  The increase in total loans from December 31, 2018 was primarily attributable to the addition of HomeStar’s loan portfolio.DepositsTotal deposits were $4.54 billion at December 31, 2019, compared with $4.45 billion at September 30, 2019, and $4.07 billion at December 31, 2018.  The increase in total deposits from September 30, 2019 was primarily attributable to growth in the Company’s lower-cost deposit categories, while the increase from December 31, 2018 was primarily attributable to the addition of HomeStar’s deposits. Asset QualityNonperforming loans totaled $42.1 million, or 0.96% of total loans, at December 31, 2019, compared with $45.2 million, or 1.04% of total loans, at September 30, 2019, and $42.9 million, or 1.04% of total loans, at December 31, 2018.  Net charge-offs for the fourth quarter of 2019 were $2.2 million, or 0.20% of average loans on an annualized basis. The Company recorded a provision for loan losses of $5.3 million for the fourth quarter of 2019, which included a $1.4 million specific reserve established for an existing nonperforming loan.  The Company’s allowance for loan losses was 0.64% of total loans and 66.6% of nonperforming loans at December 31, 2019, compared with 0.58% of total loans and 55.3% of nonperforming loans at September 30, 2019.  Fair market value discounts recorded in connection with acquired loan portfolios represented 0.39% of total loans at December 31, 2019, compared with 0.51% of total loans at September 30, 2019.CapitalAt December 31, 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:A non-GAAP financial measure. Refer to page 14 for a reconciliation to the comparable GAAP financial measure.As of January 1, 2019, the capital conservation buffer was fully phased in at 2.5%.Stock Repurchase ProgramDuring the fourth quarter of 2019, the Company repurchased 85,146 shares of its common stock at a weighted average price of $25.69 under its stock repurchase program, which authorized the repurchase of up to $25 million of its common stock.  As of December 31, 2019, the Company had $21.0 million remaining under the current stock repurchase authorization.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 24, 2020, to discuss its financial results.  The call can be accessed via telephone at (877) 516-3531; conference ID: 6894396.  A recorded replay can be accessed through January 31, 2020, by dialing (855) 859-2056; conference ID: 6894396.A slide presentation relating to the fourth 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 at investors.midlandsb.com under the “News and Events” tab.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 December 31, 2019, the Company had total assets of approximately $6.08 billion, and its Wealth Management Group had assets under administration of approximately $3.41 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 MeasuresSome 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 StatementsReaders 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,” “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 [email protected] or (217) 342-7321
Eric T. Lemke, Chief Financial Officer, at [email protected] or (217) 342-7321
Douglas J. Tucker, SVP and Corporate Counsel, at [email protected] or (217) 342-7321








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