The CMOs, which were below investment grade, were acquired through an FDIC-assisted transaction in 2009 and were covered by a loss-sharing agreement with the FDIC. The loss-coverage component of the loss-sharing agreement expired on July 1, 2016, and the recovery-sharing component ended on October 3, 2016 with the early termination of the loss-sharing agreement with the FDIC.The proceeds from the CMO sale are expected to be primarily redeployed into higher quality, lower yielding investments. As a result, the Company expects its net interest income to be reduced in the fourth quarter of 2016 and in 2017. The Company anticipates that the reduction in net interest income will be substantially or fully offset by cost savings in 2017 resulting from the implementation of the Operational Excellence strategic initiative. "The CMO portfolio was below the investment grade we prefer for holdings in our securities portfolio," said Mr. Holschbach. "Once the FDIC loss-coverage on this portfolio expired on July 1, 2016, a significant portion of the CMOs were required to be reclassified as substandard assets. As a result, we determined that it would be prudent to sell the portfolio, lock-in the unrealized gain we had on these securities, and improve the overall credit quality of our investment portfolio. The sale of the portfolio and the redeployment of the proceeds into higher grade securities will also have a positive impact on our capital ratios." On a pro forma basis, giving effect to the impact of the sale of the CMO portfolio, at September 30, 2016, the Company's Tier 1 risk-based capital ratio would have increased to 11.48% from 10.94% and the Total risk-based capital ratio would have increased to 14.11% from 13.53%. 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 $1.2 billion as of September 30, 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. 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 changes in net interest margin, cost savings and future earnings levels. These statements are subject to many risks and uncertainties, including the overall success of the Company's Operational Excellence initiative, 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.
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