Midland States Bancorp Announces Settlement of Prior Tax Issue Resulting in a Tax Benefit and Other Items Impacting Second Quarter 2021 Financial Results

Rhea-AI Summary

Midland States Bancorp (NASDAQ: MSBI) announced a $6.75 million tax benefit following the settlement of a tax issue regarding FDIC-assisted transactions. After accounting for $3.6 million in related expenses, the net after-tax gain is approximately $2.9 million. Additionally, the company is taking measures to manage its balance sheet, including the prepayment of an $85 million FHLB advance, which will incur a $3.7 million charge but is expected to save $2.2 million annually in interest costs. Furthermore, redeeming $31 million in subordinated notes will save $1.4 million annually.

Positive

• $6.75 million tax benefit from a settlement.
• Net after-tax gain of approximately $2.9 million.
• $2.2 million annual interest expense reduction from FHLB advance prepayment.
• Four basis point positive impact on net interest margin from the redemption of subordinated notes.

Negative

• $3.7 million charge due to FHLB advance prepayment.

EFFINGHAM, Ill., June 29, 2021 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (NASDAQ: MSBI) today announced the settlement of a prior tax issue related to the treatment of gains recognized on FDIC-assisted transactions that will result in a $6.75 million tax benefit that will be recognized in the second quarter of 2021. The Company will also recognize approximately $3.6 million in consulting and legal expenses related to the settlement of the tax issue, resulting in an after-tax gain of approximately $2.9 million.

The Company also announced the following balance sheet management actions that will reduce future interest expense and positively impact its net interest margin:

• The prepayment of an $85 million longer-term FHLB advance with an interest rate of 2.54%. The prepayment of the FHLB advance will result in a pre-tax charge of approximately $3.7 million in the second quarter of 2021. The prepayment is expected to reduce interest expense by approximately $2.2 million annually and have a six basis point positive impact on the Company’s net interest margin.
• The redemption of $31 million of Fixed-to-Floating Rate Subordinated Notes due June 18, 2025, which paid an interest rate of 4.54% at the time of the redemption. The redemption will reduce interest expense by approximately $1.4 million annually and have a four basis point positive impact on the Company’s net interest margin.

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 March 31, 2021, the Company had total assets of approximately $6.88 billion, and its Wealth Management Group had assets under administration of approximately $3.56 billion. Midland provides a full range of commercial and consumer banking products and services and business equipment financing, merchant credit card services, trust and investment management, insurance and financial planning services. For additional information, visit https://www.midlandsb.com/ or https://www.linkedin.com/company/midland-states-bank.

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, goals, future financial condition 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 the effects of the COVID-19 pandemic and its potential effects on the economic environment, our customers and our operations, as well as any changes to federal, state and local government laws, regulations and orders in connection with the pandemic; 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:
Douglas J. Tucker, Sr. V.P., Corporate Counsel, at dtucker@midlandsb.com or (217) 342-7321

FAQ

What is the significance of Midland States Bancorp's $6.75 million tax benefit?

The $6.75 million tax benefit will positively impact earnings for the second quarter of 2021, resulting in an after-tax gain of approximately $2.9 million.

How will the prepayment of the $85 million FHLB advance affect Midland States Bancorp?

The prepayment will incur a $3.7 million charge in the second quarter but is expected to reduce future interest expenses by about $2.2 million annually.

What are the financial implications of redeeming $31 million of Fixed-to-Floating Rate Subordinated Notes?

Redeeming these notes will reduce interest expenses by approximately $1.4 million annually and enhance the net interest margin by four basis points.

What total assets does Midland States Bancorp have as of March 31, 2021?

Midland States Bancorp had total assets of approximately $6.88 billion as of March 31, 2021.