Midland States Bancorp, Inc. Announces 2022 Third Quarter Results

Summary

Net income of $23.5 million, or $1.04 diluted earnings per share
ROAA of 1.22%, ROAE of 13.34% and ROATCE of 20.24%
Total loans increased 27.8% annualized from prior quarter
Continued growth in noninterest-bearing and total deposits
Nonperforming assets declined 14.2% from end of prior quarter
Total capital ratio strengthened with the recent preferred stock offering

EFFINGHAM, Ill., Oct. 20, 2022 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (Nasdaq: MSBI) (the “Company”) today reported net income of $23.5 million, or $1.04 diluted earnings per share, for the third quarter of 2022. This compares to net income of $21.9 million, or $0.97 diluted earnings per share, for the second quarter of 2022. This also compares to net income of $19.5 million, or $0.86 diluted earnings per share, for the third quarter of 2021.

Jeffrey G. Ludwig, President and Chief Executive Officer of the Company, said, “We continue to see healthy economic conditions throughout our markets and strong loan demand. Our commercial banking teams are effectively capitalizing on the loan demand across all areas of our lending, resulting in well balanced loan production and 28% annualized growth in total loans during the third quarter. The strong loan growth helped us to generate further improvement in earnings and our level of returns.

“Following the capital raised through our preferred stock offering in the third quarter, we are well positioned to support continued balance sheet growth, although we expect our level of loan growth to moderate as higher interest rates and economic uncertainty have a greater impact on loan demand. Even with a lower level of loan growth, given our higher net interest margin and increased efficiencies, we believe we can continue to generate strong financial results for our shareholders, which will help us to further increase our capital ratios and support the continued growth of our franchise,” said Mr. Ludwig.

Net Interest Margin

Net interest margin for the third quarter of 2022 was 3.63%, a slight decline from 3.65% for the second quarter of 2022 as an increase in the cost of deposits more than offset the increase in the average yield on earning assets. The Company’s net interest margin benefits from accretion income on purchased loan portfolios, which contributed 3 basis points to net interest margin in both the second and third quarters of 2022.

Relative to the third quarter of 2021, net interest margin increased 29 basis points from 3.34%, primarily due to an increase in the average yield on earning assets. Accretion income on purchased loan portfolios contributed 7 basis points to net interest margin in the third quarter of 2021. Excluding the impact of accretion income, net interest margin increased 33 basis points from the third quarter of 2021.

Net Interest Income

Net interest income for the third quarter of 2022 was $64.0 million, an increase of 4.4% from $61.3 million for the second quarter of 2022, which was primarily due to higher average loan balances. Accretion income associated with purchased loan portfolios totaled $0.5 million for the third quarter of 2022, compared with $0.6 million for the second quarter of 2022.

Relative to the third quarter of 2021, net interest income increased $12.6 million, or 24.6%, due to higher average earning assets and an increase in net interest margin. Accretion income for the third quarter of 2021 was $1.0 million.

Noninterest Income

Noninterest income for the third quarter of 2022 was $15.8 million, an increase of 8.3% from $14.6 million for the second quarter of 2022. The increase in noninterest income was primarily attributable to impairment on commercial mortgage servicing rights of approximately $0.9 million that negatively impacted noninterest income in the second quarter of 2022.

Relative to the third quarter of 2021, noninterest income increased 4.5% from $15.1 million. The increase was primarily attributable to impairment on commercial mortgage servicing rights that negatively impacted noninterest income in the third quarter of 2021.

Wealth management revenue for the third quarter of 2022 was $6.2 million, an increase of 0.9% from $6.1 million in the second quarter of 2022. Compared to the third quarter of 2021, wealth management revenue decreased 13.6%, primarily due to a decline in assets under administration resulting from market performance.

Noninterest Expense

Noninterest expense for the third quarter of 2022 was $43.5 million, an increase of 5.2% from $41.3 million in the second quarter of 2022. The increase was attributable to small increases across most expense items consistent with the growth of the Company including the full quarter impact of the branch purchase completed in June 2022.

Relative to the third quarter of 2021, noninterest expense increased 5.3% from $41.3 million, primarily due to higher marketing, loan, and other expense.

Loan Portfolio

Total loans outstanding were $6.20 billion at September 30, 2022, compared with $5.80 billion at June 30, 2022, and $4.92 billion at September 30, 2021. The increase in total loans from June 30, 2022 was attributable to growth in all portfolios with the exception of the SBA PPP loan portfolio, which continues to decline as loans are forgiven.

Equipment finance balances increased $49.4 million from June 30, 2022 to $1.03 billion at September 30, 2022.

Compared to loan balances at September 30, 2021, growth in equipment finance balances, other commercial loans, commercial real estate loans, and consumer loans was partially offset by declines in commercial FHA warehouse lines and PPP loans.

Deposits

Total deposits were $6.40 billion at September 30, 2022, compared with $6.18 billion at June 30, 2022, and $5.60 billion at September 30, 2021. The increase in total deposits from the end of the prior quarter was primarily attributable to growth in noninterest-bearing and lower-cost interest-bearing deposits.

Asset Quality

Nonperforming loans totaled $46.9 million, or 0.76% of total loans, at September 30, 2022, compared with $56.9 million, or 0.98% of total loans, at June 30, 2022. The decrease in nonperforming loans was attributable to a combination of paydowns, note sale, and a charge off of a previously resolved loan relationship. At September 30, 2021, nonperforming loans totaled $54.6 million, or 1.11% of total loans.

Net charge-offs for the third quarter of 2022 were $3.2 million, or 0.21% of average loans on an annualized basis, compared to net charge-offs of $2.8 million, or 0.20% of average loans on an annualized basis, for the second quarter of 2022, and $3.0 million, or 0.25% of average loans on an annualized basis, for the third quarter of 2021.

The Company recorded a provision for credit losses on loans of $7.0 million for the third quarter of 2022, which was primarily related to the growth in total loans and negative economic forecasts.

The Company’s allowance for credit losses on loans was 0.95% of total loans and 125.1% of nonperforming loans at September 30, 2022, compared with 0.95% of total loans and 96.5% of nonperforming loans at June 30, 2022.

Capital

During the third quarter of 2022, the Company raised $115 million of capital through a preferred stock offering, which increased its total capital, tier 1 capital, and tier 1 leverage ratios. At September 30, 2022, Midland States Bank and the Company exceeded all regulatory capital requirements under Basel III, and Midland States Bank met the qualifications to be a ‘‘well-capitalized’’ financial institution, as summarized in the following table:

	Bank Level Ratios as of Sept. 30, 2022	Consolidated Ratios as of Sept. 30, 2022	Minimum Regulatory Requirements ⁽²⁾
Total capital to risk-weighted assets	11.19%	12.79%	10.50%
Tier 1 capital to risk-weighted assets	10.43%	10.05%	8.50%
Tier 1 leverage ratio	9.75%	9.40%	4.00%
Common equity Tier 1 capital	10.43%	7.56%	7.00%
Tangible common equity to tangible assets ⁽¹⁾	NA	5.82%	NA

(1) A non-GAAP financial measure. Refer to page 14 for a reconciliation to the comparable GAAP financial measure.
(2) Includes the capital conservation buffer of 2.5%.

Since the beginning of 2022, the impact of rising interest rates on the Company’s investment portfolio has resulted in a $83.6 million decline in accumulated other comprehensive income (AOCI), which has negatively impacted tangible book value per share by $3.55, and the tangible common equity to tangible assets ratio by 103 basis points.

Stock Repurchase Program

During the third quarter of 2022, the Company did not repurchase any shares under its stock repurchase program. As of September 30, 2022, the Company had $18.6 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, October 21, 2022, to discuss its financial results.

Telephone Access: https://register.vevent.com/register/BIe092c94fe0b7469db1a7031df0e48485

A slide presentation relating to the third quarter 2022 financial results will be accessible prior to the scheduled conference call. This earnings release should be read together with the slide presentation. 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 September 30, 2022, the Company had total assets of approximately $7.81 billion, and its Wealth Management Group had assets under administration of approximately $3.45 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.

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,” “Adjusted Pre-Tax, Pre-Provision Earnings,” “Adjusted Pre-Tax, Pre-Provision Return on Average Assets,” “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, the impact of inflation, the effects of the COVID-19 pandemic and its potential effects on the economic environment; changes in the financial markets; changes in business plans as circumstances warrant; risks relating to acquisitions; developments and uncertainty related to the future use and availability of some reference rates, such as the London Inter-Bank Offered Rate, as well as other alternative reference rates, and the adoption of a substitute; changes to U.S. tax laws, regulations and guidance; 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 jludwig@midlandsb.com or (217) 342-7321
Eric T. Lemke, Chief Financial Officer, at elemke@midlandsb.com or (217) 342-7321
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
	September 30,			June 30,			March 31,			December 31,			September 30,
(dollars in thousands, except per share data)	2022			2022			2022			2021			2021
Earnings Summary
Net interest income	$	64,024		$	61,334		$	56,827		$	54,301		$	51,396
Provision for credit losses		6,974			5,441			4,167			467			(184	)
Noninterest income		15,826			14,613			15,613			22,523			15,143
Noninterest expense		43,496			41,339			40,884			45,757			41,292
Income before income taxes		29,380			29,167			27,389			30,600			25,431
Income taxes		5,859			7,284			6,640			7,493			5,883
Net income	$	23,521		$	21,883		$	20,749		$	23,107		$	19,548

Diluted earnings per common share	$	1.04		$	0.97		$	0.92		$	1.02		$	0.86
Weighted average shares outstanding - diluted		22,390,438			22,360,819			22,350,307			22,350,771			22,577,880
Return on average assets		1.22	%		1.19	%		1.16	%		1.26	%		1.15	%
Return on average shareholders' equity		13.31	%		13.65	%		12.80	%		14.04	%		11.90	%
Return on average tangible common equity⁽¹⁾		20.20	%		19.14	%		17.84	%		19.69	%		16.76	%
Net interest margin		3.63	%		3.65	%		3.50	%		3.25	%		3.34	%
Efficiency ratio ⁽¹⁾		54.26	%		53.10	%		55.73	%		52.61	%		58.78	%

Adjusted Earnings Performance Summary ⁽¹⁾
Adjusted earnings	$	23,568		$	22,191		$	20,815		$	25,416		$	19,616
Adjusted diluted earnings per common share	$	1.04		$	0.98		$	0.92		$	1.12		$	0.86
Adjusted return on average assets		1.22	%		1.21	%		1.16	%		1.39	%		1.15	%
Adjusted return on average shareholders' equity		13.34	%		13.84	%		12.84	%		15.44	%		11.94	%
Adjusted return on average tangible common equity		20.24	%		19.41	%		17.89	%		21.65	%		16.82	%
Adjusted pre-tax, pre-provision earnings	$	36,415		$	35,902		$	32,041		$	36,324		$	28,379
Adjusted pre-tax, pre-provision return on average assets		1.89	%		1.95	%		1.79	%		1.98	%		1.67	%

(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
	September 30,			June 30,			March 31,			December 31,			September 30,
(in thousands, except per share data)	2022			2022			2022			2021			2021
Net interest income:
Interest income	$	79,556		$	69,236		$	62,748		$	60,427		$	58,490
Interest expense		15,532			7,902			5,921			6,126			7,094
Net interest income		64,024			61,334			56,827			54,301			51,396
Provision for credit losses:
Provision for credit losses on loans		6,974			4,741			4,132			—			—
Provision for credit losses on unfunded commitments		—			700			256			388			—
Provision for other credit losses		—			—			(221	)		79			(184	)
Total provision for credit losses		6,974			5,441			4,167			467			(184	)
Net interest income after provision for credit losses		57,050			55,893			52,660			53,834			51,580
Noninterest income:
Wealth management revenue		6,199			6,143			7,139			7,176			7,175
Residential mortgage banking revenue		210			384			599			1,103			1,287
Service charges on deposit accounts		2,597			2,304			2,068			2,338			2,268
Interchange revenue		3,531			3,590			3,280			3,677			3,651
(Loss) gain on sales of investment securities, net		(129	)		(101	)		—			—			160
Gain on termination of hedged interest swap		—			—			—			1,845			—
Impairment on commercial mortgage servicing rights		—			(869	)		(394	)		(2,072	)		(3,037	)
Company-owned life insurance		929			840			1,019			1,904			869
Other income		2,489			2,322			1,902			6,552			2,770
Total noninterest income		15,826			14,613			15,613			22,523			15,143
Noninterest expense:
Salaries and employee benefits		22,889			22,645			21,870			22,109			22,175
Occupancy and equipment		3,850			3,489			3,755			3,429			3,701
Data processing		6,093			6,082			5,873			5,819			6,495
Professional		1,693			1,516			1,972			1,499			1,738
Amortization of intangible assets		1,361			1,318			1,398			1,425			1,445
Loss on mortgage servicing rights held for sale		—			—			—			—			79
FHLB advances prepayment fees		—			—			—			4,859			—
Other expense		7,610			6,289			6,016			6,617			5,659
Total noninterest expense		43,496			41,339			40,884			45,757			41,292
Income before income taxes		29,380			29,167			27,389			30,600			25,431
Income taxes		5,859			7,284			6,640			7,493			5,883
Net income	$	23,521		$	21,883		$	20,749		$	23,107		$	19,548

Basic earnings per common share	$	1.04		$	0.97		$	0.92		$	1.03		$	0.86
Diluted earnings per common share	$	1.04		$	0.97		$	0.92		$	1.02		$	0.86


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

	As of
	September 30,			June 30,			March 31,			December 31,			September 30,
(in thousands)	2022			2022			2022			2021			2021
Assets
Cash and cash equivalents	$	313,188		$	270,117		$	332,264		$	680,371		$	662,643
Investment securities		690,504			769,278			858,246			916,132			900,319
Loans		6,198,451			5,795,544			5,539,961			5,224,801			4,915,554
Allowance for credit losses on loans		(58,639	)		(54,898	)		(52,938	)		(51,062	)		(55,675	)
Total loans, net		6,139,812			5,740,646			5,487,023			5,173,739			4,859,879
Loans held for sale		4,338			5,298			8,931			32,045			26,621
Premises and equipment, net		77,519			77,668			77,857			79,220			79,701
Other real estate owned		11,141			11,131			11,537			12,059			11,931
Loan servicing rights, at lower of cost or fair value		1,297			25,879			27,484			28,865			30,916
Commercial FHA mortgage loan servicing rights held for sale		23,995			—			—			—			—
Goodwill		161,904			161,904			161,904			161,904			161,904
Other intangible assets, net		22,198			23,559			22,976			24,374			26,065
Company-owned life insurance		149,648			148,900			148,060			148,378			149,146
Other assets		226,333			201,432			202,433			186,718			184,834
Total assets	$	7,821,877		$	7,435,812		$	7,338,715		$	7,443,805		$	7,093,959

Liabilities and Shareholders' Equity
Noninterest-bearing demand deposits	$	2,025,237		$	1,972,261		$	1,965,032		$	2,245,701		$	1,672,901
Interest-bearing deposits		4,370,015			4,212,177			4,092,507			3,864,947			3,928,475
Total deposits		6,395,252			6,184,438			6,057,539			6,110,648			5,601,376
Short-term borrowings		58,518			67,689			60,352			76,803			66,666
FHLB advances and other borrowings		360,000			285,000			310,171			310,171			440,171
Subordinated debt		139,370			139,277			139,184			139,091			138,998
Trust preferred debentures		49,824			49,674			49,524			49,374			49,235
Other liabilities		79,634			73,546			76,959			93,881			139,669
Total liabilities		7,082,598			6,799,624			6,693,729			6,779,968			6,436,115
Total shareholders’ equity		739,279			636,188			644,986			663,837			657,844
Total liabilities and shareholders’ equity	$	7,821,877		$	7,435,812		$	7,338,715		$	7,443,805		$	7,093,959


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

	As of
	September 30,		June 30,		March 31,		December 31,		September 30,
(in thousands)	2022		2022		2022		2021		2021
Loan Portfolio
Equipment finance loans	$	577,323	$	546,267	$	528,572	$	521,973	$	486,623
Equipment finance leases		457,611		439,202		429,000		423,280		412,430
Commercial FHA warehouse lines		51,309		23,872		83,999		91,927		180,248
SBA PPP loans		2,810		6,409		22,862		52,477		82,410
Other commercial loans		904,840		814,710		802,692		783,811		718,054
Total commercial loans and leases		1,993,893		1,830,460		1,867,125		1,873,468		1,879,765
Commercial real estate		2,466,303		2,335,655		2,114,041		1,816,828		1,562,013
Construction and land development		225,550		203,955		188,668		193,749		200,792
Residential real estate		356,225		340,103		329,331		338,151		344,414
Consumer		1,156,480		1,085,371		1,040,796		1,002,605		928,570
Total loans	$	6,198,451	$	5,795,544	$	5,539,961	$	5,224,801	$	4,915,554

Deposit Portfolio
Noninterest-bearing demand	$	2,025,237	$	1,972,261	$	1,965,032	$	2,245,701	$	1,672,901
Interest-bearing:
Checking		1,905,439		1,808,885		1,779,018		1,663,021		1,697,326
Money market		1,125,333		1,027,547		964,352		869,067		852,836
Savings		704,245		740,364		710,955		679,115		665,710
Time		620,960		620,363		619,386		630,583		688,693
Brokered time		14,038		15,018		18,796		23,161		23,910
Total deposits	$	6,395,252	$	6,184,438	$	6,057,539	$	6,110,648	$	5,601,376


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

	For the Quarter Ended
	September 30,			June 30,			March 31,			December 31,			September 30,
(dollars in thousands)	2022			2022			2022			2021			2021
Average Balance Sheets
Cash and cash equivalents	$	195,657		$	226,517		$	384,231		$	685,655		$	525,848
Investment securities		749,022			818,927			894,634			915,707			773,372
Loans		6,040,358			5,677,791			5,274,051			4,995,794			4,800,063
Loans held for sale		6,044			9,865			31,256			34,272			15,204
Nonmarketable equity securities		37,765			36,338			36,378			39,203			43,873
Total interest-earning assets		7,028,846			6,769,438			6,620,550			6,670,631			6,158,360
Non-earning assets		618,138			615,348			631,187			605,060			597,153
Total assets	$	7,646,984		$	7,384,786		$	7,251,737		$	7,275,691		$	6,755,513

Interest-bearing deposits	$	4,325,098		$	4,152,764		$	3,953,249		$	3,913,475		$	3,895,970
Short-term borrowings		58,271			59,301			70,044			66,677			68,103
FHLB advances and other borrowings		340,163			307,611			311,282			319,954			440,171
Subordinated debt		139,324			139,232			139,139			139,046			138,954
Trust preferred debentures		49,751			49,602			49,451			49,307			49,167
Total interest-bearing liabilities		4,912,607			4,708,510			4,523,165			4,488,459			4,592,365
Noninterest-bearing deposits		1,969,873			1,967,263			1,989,413			2,049,802			1,434,193
Other noninterest-bearing liabilities		63,638			66,009			81,832			84,538			77,204
Shareholders' equity		700,866			643,004			657,327			652,892			651,751
Total liabilities and shareholders' equity	$	7,646,984		$	7,384,786		$	7,251,737		$	7,275,691		$	6,755,513

Yields
Earning Assets
Cash and cash equivalents		2.28	%		0.83	%		0.18	%		0.16	%		0.16	%
Investment securities		2.44	%		2.41	%		2.22	%		2.12	%		2.34	%
Loans		4.83	%		4.49	%		4.40	%		4.36	%		4.42	%
Loans held for sale		3.87	%		3.15	%		2.86	%		3.53	%		2.79	%
Nonmarketable equity securities		5.78	%		5.38	%		5.40	%		5.07	%		5.05	%
Total interest-earning assets		4.51	%		4.12	%		3.87	%		3.62	%		3.79	%

Interest-Bearing Liabilities
Interest-bearing deposits		0.94	%		0.37	%		0.22	%		0.22	%		0.26	%
Short-term borrowings		0.19	%		0.15	%		0.14	%		0.12	%		0.12	%
FHLB advances and other borrowings		2.83	%		1.87	%		1.58	%		1.75	%		1.80	%
Subordinated debt		5.77	%		5.78	%		5.78	%		5.78	%		5.79	%
Trust preferred debentures		6.54	%		5.05	%		4.21	%		3.90	%		3.92	%
Total interest-bearing liabilities		1.25	%		0.67	%		0.53	%		0.54	%		0.61	%

Cost of Deposits		0.65	%		0.25	%		0.15	%		0.15	%		0.19	%

Net Interest Margin		3.63	%		3.65	%		3.50	%		3.25	%		3.34	%


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

	As of and for the Quarter Ended
	September 30,			June 30,			March 31,			December 31,			September 30,
(dollars in thousands, except per share data)	2022			2022			2022			2021			2021
Asset Quality
Loans 30-89 days past due	$	28,275		$	16,212		$	29,044		$	17,514		$	16,772
Nonperforming loans		46,882			56,883			52,900			42,580			54,620
Nonperforming assets		59,524			69,344			66,164			57,068			69,261
Net charge-offs		3,233			2,781			2,256			4,613			2,989
Loans 30-89 days past due to total loans		0.46	%		0.28	%		0.52	%		0.34	%		0.34	%
Nonperforming loans to total loans		0.76	%		0.98	%		0.95	%		0.81	%		1.11	%
Nonperforming assets to total assets		0.76	%		0.93	%		0.90	%		0.77	%		0.98	%
Allowance for credit losses to total loans		0.95	%		0.95	%		0.96	%		0.98	%		1.13	%
Allowance for credit losses to nonperforming loans		125.08	%		96.51	%		100.07	%		119.92	%		101.93	%
Net charge-offs to average loans		0.21	%		0.20	%		0.17	%		0.37	%		0.25	%

Wealth Management
Trust assets under administration	$	3,445,244		$	3,597,944		$	4,044,138		$	4,217,412		$	4,058,168

Market Data
Book value per share at period end	$	28.48		$	28.84		$	29.26		$	30.11		$	29.64
Tangible book value per share at period end ⁽¹⁾	$	20.14		$	20.43		$	20.87		$	21.66		$	21.17
Market price at period end	$	23.57		$	24.04		$	28.86		$	24.79		$	24.73
Common shares outstanding at period end		22,074,740			22,060,255			22,044,626			22,050,537			22,193,141

Capital
Total capital to risk-weighted assets		12.79	%		11.44	%		11.74	%		12.19	%		13.10	%
Tier 1 capital to risk-weighted assets		10.05	%		8.63	%		8.82	%		9.16	%		9.73	%
Tier 1 common capital to risk-weighted assets		7.56	%		7.66	%		7.80	%		8.08	%		8.55	%
Tier 1 leverage ratio		9.40	%		7.98	%		7.96	%		7.75	%		8.16	%
Tangible common equity to tangible assets ⁽¹⁾		5.82	%		6.22	%		6.43	%		6.58	%		6.80	%

(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 (unaudited)

Adjusted Earnings Reconciliation

	For the Quarter Ended
	September 30,			June 30,			March 31,			December 31,			September 30,
(dollars in thousands, except per share data)	2022			2022			2022			2021			2021
Income before income taxes - GAAP	$	29,380		$	29,167		$	27,389		$	30,600		$	25,431
Adjustments to noninterest income:
Loss (gain) on sales of investment securities, net		129			101			—			—			(160	)
(Gain) on termination of hedged interest rate swap		—			—			—			(1,845	)		—
Total adjustments to noninterest income		129			101			—			(1,845	)		(160	)
Adjustments to noninterest expense:
(Loss) on mortgage servicing rights held for sale		—			—			—			—			(79	)
FHLB advances prepayment fees		—			—			—			(4,859	)		—
Integration and acquisition expenses		68			(324	)		(91	)		(171	)		(176	)
Total adjustments to noninterest expense		68			(324	)		(91	)		(5,030	)		(255	)
Adjusted earnings pre tax		29,441			29,592			27,480			33,785			25,526
Adjusted earnings tax		5,873			7,401			6,665			8,369			5,910
Adjusted earnings - non-GAAP	$	23,568		$	22,191		$	20,815		$	25,416		$	19,616
Adjusted diluted earnings per common share	$	1.04		$	0.98		$	0.92		$	1.12		$	0.86
Adjusted return on average assets		1.22	%		1.21	%		1.16	%		1.39	%		1.15	%
Adjusted return on average shareholders' equity		13.34	%		13.84	%		12.84	%		15.44	%		11.94	%
Adjusted return on average tangible common equity		20.24	%		19.41	%		17.89	%		21.65	%		16.82	%


Adjusted Pre-Tax, Pre-Provision Earnings Reconciliation

	For the Quarter Ended
	September 30,			June 30,			March 31,			December 31,			September 30,
(dollars in thousands)	2022			2022			2022			2021			2021
Adjusted earnings pre tax - non-GAAP	$	29,441		$	29,592		$	27,480		$	33,785		$	25,526
Provision for credit losses		6,974			5,441			4,167			467			(184	)
Impairment on commercial mortgage servicing rights		—			869			394			2,072			3,037
Adjusted pre-tax, pre-provision earnings - non-GAAP	$	36,415		$	35,902		$	32,041		$	36,324		$	28,379
Adjusted pre-tax, pre-provision return on average assets		1.89	%		1.95	%		1.79	%		1.98	%		1.67	%


MIDLAND STATES BANCORP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued)


Efficiency Ratio Reconciliation

	For the Quarter Ended
	September 30,			June 30,			March 31,			December 31,			September 30,
(dollars in thousands)	2022			2022			2022			2021			2021
Noninterest expense - GAAP	$	43,496		$	41,339		$	40,884		$	45,757		$	41,292
Loss on mortgage servicing rights held for sale		—			—			—			—			(79	)
FHLB advances prepayment fees		—			—			—			(4,859	)		—
Integration and acquisition expenses		68			(324	)		(91	)		(171	)		(176	)
Adjusted noninterest expense	$	43,564		$	41,015		$	40,793		$	40,727		$	41,037

Net interest income - GAAP	$	64,024		$	61,334		$	56,827		$	54,301		$	51,396
Effect of tax-exempt income		307			321			369			372			402
Adjusted net interest income		64,331			61,655			57,196			54,673			51,798

Noninterest income - GAAP		15,826			14,613			15,613			22,523			15,143
Impairment on commercial mortgage servicing rights		—			869			394			2,072			3,037
Loss (gain) on sales of investment securities, net		129			101			—			—			(160	)
(Gain) on termination of hedged interest rate swap		—			—			—			(1,845	)		—
Adjusted noninterest income		15,955			15,583			16,007			22,750			18,020

Adjusted total revenue	$	80,286		$	77,238		$	73,203		$	77,423		$	69,818

Efficiency ratio		54.26	%		53.10	%		55.73	%		52.61	%		58.78	%


MIDLAND STATES BANCORP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued)

Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share

	As of
	September 30,			June 30,			March 31,			December 31,			September 30,
(dollars in thousands, except per share data)	2022			2022			2022			2021			2021
Shareholders' Equity to Tangible Common Equity
Total shareholders' equity—GAAP	$	739,279		$	636,188		$	644,986		$	663,837		$	657,844
Adjustments:
Preferred Stock		(110,548	)		—			—			—			—
Goodwill		(161,904	)		(161,904	)		(161,904	)		(161,904	)		(161,904	)
Other intangible assets, net		(22,198	)		(23,559	)		(22,976	)		(24,374	)		(26,065	)
Tangible common equity	$	444,629		$	450,725		$	460,106		$	477,558		$	469,875

Total Assets to Tangible Assets:
Total assets—GAAP	$	7,821,877		$	7,435,812		$	7,338,715		$	7,443,805		$	7,093,959
Adjustments:
Goodwill		(161,904	)		(161,904	)		(161,904	)		(161,904	)		(161,904	)
Other intangible assets, net		(22,198	)		(23,559	)		(22,976	)		(24,374	)		(26,065	)
Tangible assets	$	7,637,775		$	7,250,349		$	7,153,835		$	7,257,527		$	6,905,990

Common Shares Outstanding		22,074,740			22,060,255			22,044,626			22,050,537			22,193,141

Tangible Common Equity to Tangible Assets		5.82	%		6.22	%		6.43	%		6.58	%		6.80	%
Tangible Book Value Per Share	$	20.14		$	20.43		$	20.87		$	21.66		$	21.17

Return on Average Tangible Common Equity (ROATCE)

	For the Quarter Ended
	September 30,			June 30,			March 31,			December 31,			September 30,
(dollars in thousands)	2022			2022			2022			2021			2021
Net income	$	23,521		$	21,883		$	20,749		$	23,107		$	19,548

Average total shareholders' equity—GAAP	$	700,866		$	643,004		$	657,327		$	652,892		$	651,751
Adjustments:
Preferred Stock		(54,072	)		—			—			—			—
Goodwill		(161,904	)		(161,904	)		(161,904	)		(161,904	)		(161,904	)
Other intangible assets, net		(22,859	)		(22,570	)		(23,638	)		(25,311	)		(27,132	)
Average tangible common equity	$	462,031		$	458,530		$	471,785		$	465,677		$	462,715
ROATCE		20.20	%		19.14	%		17.84	%		19.69	%		16.76	%

Source: Midland States Bancorp, Inc.

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Press Release

Midland States Bancorp, Inc. Announces 2022 Third Quarter Results