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Press Release


Midland States Bancorp, Inc. Announces 2023 Fourth Quarter Results

Fourth Quarter 2023 Highlights:

  • Net income available to common shareholders of $18.5 million, or $0.84 per diluted share
  • Adjusted earnings available to common shareholders of $19.8 million, or $0.89 per diluted share
  • Tangible book value per share increased 7.8% from prior quarter to $23.35
  • Common equity tier 1 capital ratio improved to 8.40% from 8.07%
  • Net interest margin of 3.21%, compared to 3.20% in prior quarter
  • Efficiency ratio of 55.2% compared to 55.8% in prior quarter

EFFINGHAM, Ill., Jan. 25, 2024 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (Nasdaq: MSBI) (the “Company”) today reported net income available to common shareholders of $18.5 million, or $0.84 per diluted share, for the fourth quarter of 2023, compared to $9.2 million, or $0.41 per diluted share, for the third quarter of 2023. This also compares to net income available to common shareholders of $29.7 million, or $1.30 per diluted share, for the fourth quarter of 2022.

Financial results for the fourth quarter of 2023 included a $1.1 million gain on the sale of shares of VISA B stock, offset by $2.9 million of losses on the sale of investment securities. Results for the third quarter of 2023 included a $4.5 million tax charge related to the surrender of certain company-owned life insurance policies, and $5.0 million of losses on the sale of investment securities. Results for the fourth quarter of 2022 included a $17.5 million gain on the termination of forward starting interest rate swaps and a $3.3 million loss on commercial mortgage servicing rights held for sale.

Excluding these transactions, adjusted earnings available to common shareholders were $19.8 million and $17.3 million, or $0.89 and $0.78 per diluted share, for the fourth and third quarters of 2023, respectively. Adjusted earnings available to common shareholders for the fourth quarter of 2022 was $19.3 million or $0.85 per diluted share.

The Company revised its accounting for the one-time enhancement fee related to the surrender and purchase of company-owned life insurance policies acquired in the third quarter of 2023. As a result, the $6.6 million enhancement fee on the replacement policies that was previously recorded in income on company-owned life insurance in the third quarter of 2023 has been reversed. The revision did not have an impact on adjusted earnings (a non-GAAP financial measure) for that period. The Company reflected this revision in its September 30, 2023 quarter to date and December 31, 2023 year to date income on company-owned life insurance. Additionally, the revision impacts the company-owned life insurance asset for the applicable period.

Jeffrey G. Ludwig, President and Chief Executive Officer of the Company, said, “While continuing to prioritize prudent risk management, we delivered another quarter of strong financial results with a higher level of earnings and returns than the prior quarter, as well as a slight increase in our net interest margin and improvement in our efficiency ratio. Our strong financial performance and prudent balance sheet management helped us to achieve our objective to further increase our capital ratios, while we also had a 7.8% increase in tangible book value per share during the quarter.

“Our business development focus remains on high quality commercial relationships in our markets, and the new clients we are adding in our targeted areas helped to offset the intentional runoff of equipment finance and consumer loans. The new and expanded client relationships are also resulting in inflows of commercial deposits, which has enabled us to improve our overall deposit mix by running off higher cost time deposits.

“While we will remain conservative in our new loan production until economic conditions improve, we believe that we can continue to deliver strong financial performance for our shareholders, particularly given our relatively neutral interest rate sensitivity that positions us well for whatever rate environment we see going forward. We will remain disciplined in our expense management while also investing in areas that we believe will enhance the long-term value of our franchise. One area is our Wealth Management business, where we have made improvements to our technology platform that we believe will enhance our business development capabilities. A second area is expanding our presence in the higher growth St. Louis market where we recently added a new market president that we believe will help accelerate our efforts to add new commercial, retail and wealth management clients. And a third area is our Banking-as-a-Service initiative, which we expect to begin making a meaningful contribution to our deposit gathering and fee income during 2024. Given the strength of the franchise we have built, we believe we are well positioned to continue delivering strong financial results in the near-term while continuing to operate with a long-term approach and executing on the strategies that we believe will further enhance shareholder value in the coming years,” said Mr. Ludwig.

Balance Sheet Highlights

Total assets were $7.87 billion at December 31, 2023, compared to $7.97 billion at September 30, 2023, and $7.86 billion at December 31, 2022. At December 31, 2023, portfolio loans were $6.13 billion, compared to $6.28 billion at September 30, 2023, and $6.31 billion at December 31, 2022.

Loans

During the fourth quarter of 2023, outstanding loans declined by $149.8 million, or 2.4%, from September 30, 2023, as the Company continued to originate loans in a more selective and deliberate approach to balance liquidity and funding costs. Increases in construction and land development loans, and residential real estate loans of $35.8 million and $5.4 million, respectively, were offset by decreases in all other loan categories. Equipment finance loan and lease balances decreased $59.9 million during the fourth quarter of 2023 as the Company continued to reduce its concentration of this product within the overall loan portfolio. Consumer loans decreased $84.8 million due to loan payoffs and a cessation in loans originated through GreenSky. Our Greensky-originated loan balances decreased $70.4 million during the fourth quarter to $688.0 million at December 31, 2023. In addition, during the fourth quarter, the Company ceased originating loans through LendingPoint. As of December 31, 2023, the Company had $121.0 million in loans that were originated through LendingPoint, which will continue to be serviced by LendingPoint.

    As of
    December 31,   September 30,   June 30,   March 31,   December 31,
(in thousands)   2023   2023   2023   2023   2022
Loan Portfolio                    
Commercial loans   $ 951,387   $ 943,761   $ 962,756   $ 937,920   $ 872,794
Equipment finance loans     531,143     578,931     614,633     632,205     616,751
Equipment finance leases     473,350     485,460     500,485     510,029     491,744
Commercial FHA warehouse lines         48,547     30,522     10,275     25,029
Total commercial loans and leases     1,955,880     2,056,699     2,108,396     2,090,429     2,006,318
Commercial real estate     2,406,845     2,412,164     2,443,995     2,448,158     2,433,159
Construction and land development     452,593     416,801     366,631     326,836     320,882
Residential real estate     380,583     375,211     371,486     369,910     366,094
Consumer     935,178     1,020,008     1,076,836     1,118,938     1,180,014
Total loans   $ 6,131,079   $ 6,280,883   $ 6,367,344   $ 6,354,271   $ 6,306,467


Loan Quality

Credit quality metrics declined this quarter compared the third quarter of 2023. Loans 30-89 days past due increased $36.2 million to $82.8 million as of December 31, 2023, compared to prior quarter end. Four commercial loans totaling $42.0 million accounted for this increase, of which $16.9 million was brought current in early January. Non-performing loans remained flat at $56.4 million at December 31, 2023, compared to $56.0 million as of September 30, 2023, and non-performing assets were 0.86% of total assets at the end of the fourth quarter of 2023, compared to 0.74% at September 30, 2023. An $8.7 million non-performing loan was transferred to OREO, and three commercial real estate loans totaling $9.0 million were placed on non-accrual in the fourth quarter of 2023.

At December 31, 2022, loans 30-89 days past due totaled $32.4 million, non-performing loans were $49.4 million, and non-performing assets as a percentage of total assets were 0.74%.

    As of and for the Three Months Ended
(in thousands)

  December 31,   September 30,   June 30,   March 31,   December 31,
    2023       2023       2023       2023       2022  
Asset Quality                    
Loans 30-89 days past due   $ 82,778     $ 46,608     $ 44,161     $ 30,895     $ 32,372  
Nonperforming loans     56,351       55,981       54,844       50,713       49,423  
Nonperforming assets     67,701       58,677       57,688       58,806       57,824  
Substandard loans     184,224       143,793       130,707       99,819       101,044  
Net charge-offs     5,117       3,449       2,996       2,119       538  
Loans 30-89 days past due to total loans     1.35 %     0.74 %     0.69 %     0.49 %     0.51 %
Nonperforming loans to total loans     0.92 %     0.89 %     0.86 %     0.80 %     0.78 %
Nonperforming assets to total assets     0.86 %     0.74 %     0.72 %     0.74 %     0.74 %
Allowance for credit losses to total loans     1.12 %     1.06 %     1.02 %     0.98 %     0.97 %
Allowance for credit losses to nonperforming loans     121.56 %     119.09 %     118.43 %     122.39 %     123.53 %
Net charge-offs to average loans     0.33 %     0.22 %     0.19 %     0.14 %     0.03 %


The Company continued to increase its allowance for credit losses on loans due to increased delinquencies and losses within our equipment finance portfolio. The allowance totaled $68.5 million at December 31, 2023, compared to $66.7 million at September 30, 2023, and $61.1 million at December 31, 2022. The allowance as a percentage of portfolio loans was 1.12% at December 31, 2023, compared to 1.06% at September 30, 2023, and 0.97% at December 31, 2022.

Deposits

Total deposits were $6.31 billion at December 31, 2023, compared with $6.41 billion at September 30, 2023 and $6.36 billion at December 31, 2022. The deposit mix continues to shift from noninterest-bearing deposits to interest-bearing deposits due to the rate increases announced by the Federal Reserve in 2023 and the expectation that rates will remain high for a longer period. Interest rate promotions offered during the fourth quarter of 2023 on money market deposit products contributed to the increase in balances of $44.7 million at December 31, 2023, compared to September 30, 2023.

    As of
    December 31,   September 30,   June 30,   March 31,   December 31,
(in thousands)   2023   2023   2023   2023   2022
Deposit Portfolio                    
Noninterest-bearing demand   $ 1,145,395   $ 1,154,515   $ 1,162,909   $ 1,215,758   $ 1,362,158
Interest-bearing:                    
Checking     2,511,840     2,572,224     2,499,693     2,502,827     2,494,073
Money market     1,135,629     1,090,962     1,226,470     1,263,813     1,184,101
Savings     559,267     582,359     624,005     636,832     661,932
Time     862,865     885,858     840,734     766,884     649,552
Brokered time     94,533     119,084     72,737     39,087     12,836
Total deposits   $ 6,309,529   $ 6,405,002   $ 6,426,548   $ 6,425,201   $ 6,364,652


The Company estimates that uninsured deposits(1) totaled $1.22 billion, or 19% of total deposits, at December 31, 2023 compared to $1.28 billion, or 20% of total deposits, at September 30, 2023.

(1)   Uninsured deposits include the Call Report estimate of uninsured deposits less affiliate company deposits, estimated insured portion of servicing deposits, additional structured FDIC coverage and collateralized deposits.

Results of Operations Highlights

Net Interest Income and Margin

During the fourth quarter of 2023, net interest income, on a tax-equivalent basis, totaled $58.3 million, a decrease of $0.5 million, or 0.9%, compared to $58.8 million for the third quarter of 2023. The tax-equivalent net interest margin for the fourth quarter of 2023 was 3.21%, compared with 3.20% in the third quarter of 2023. Net interest income and related margin, on a tax-equivalent basis, was $63.8 million and 3.50%, respectively, in the fourth quarter of 2022. The decline in the net interest income and margin was largely attributable to increased market interest rates resulting in the cost of funding liabilities increasing at a faster rate than the yield on earning assets.

Average interest-earning assets for the fourth quarter of 2023 were $7.20 billion, compared to $7.28 billion for the third quarter of 2023. The yield increased 13 basis points to 5.78% compared to the third quarter of 2023. Interest-earning assets averaged $7.25 billion for the fourth quarter of 2022.

Average loans were $6.20 billion for the fourth quarter of 2023, compared to $6.30 billion for the third quarter of 2023 and $6.24 billion for the fourth quarter of 2022. The yield on loans was 6.00% and 5.93% for the fourth and third quarters of 2023, respectively.

Investment securities averaged $883.2 million for the fourth quarter of 2023, and yielded 4.16%, compared to an average balance and yield of $863.0 million and 3.60%, respectively, for the third quarter of 2023. The Company purchased additional investments and repositioned out of lower-yielding securities in favor of higher-yielding instruments resulting in the increased average balance and yield. The Company incurred net losses on sales of investments of $2.9 million and $5.0 million in the fourth and third quarters of 2023, respectively. The repositioning is expected to improve the overall margin, liquidity, and capital allocations. Investment securities averaged $736.6 million for the fourth quarter of 2022.

Average interest-bearing deposits were $5.30 billion for the fourth quarter of 2023, compared to $5.35 billion for the third quarter of 2023, and $5.05 billion for the fourth quarter of 2022. Cost of interest-bearing deposits was 2.93% in the fourth quarter of 2023, which represented a 13 basis point increase from the third quarter of 2023. A competitive market, driven by rising interest rates and increased competition, contributed to the increase in deposit costs.

    For the Three Months Ended
(dollars in thousands)     December 31,
2023
      September 30,
2023
      December 31,
2022
 
Interest-earning assets   Average Balance   Interest & Fees   Yield/Rate   Average Balance   Interest & Fees   Yield/Rate   Average Balance   Interest & Fees   Yield/Rate
Cash and cash equivalents   $ 77,363   $ 1,054   5.41 %   $ 78,391   $ 1,036   5.24 %   $ 220,938   $ 2,143   3.85 %
Investment securities     883,153     9,257   4.16       862,998     7,822   3.60       736,579     4,824   2.62  
Loans     6,196,362     93,757   6.00       6,297,568     94,118   5.93       6,240,277     82,810   5.26  
Loans held for sale     4,429     81   7.26       6,078     104   6.80       3,883     47   4.86  
Nonmarketable equity securities     41,192     715   6.89       39,347     710   7.16       43,618     677   6.16  
Total interest-earning assets   $ 7,202,499   $ 104,864   5.78 %   $ 7,284,382   $ 103,790   5.65 %   $ 7,245,295   $ 90,501   4.96 %
Noninterest-earning assets     695,293             622,969             609,866        
Total assets   $ 7,897,792           $ 7,907,351           $ 7,855,161        
                                     
Interest-Bearing Liabilities                                    
Interest-bearing deposits   $ 5,295,296   $ 39,156   2.93 %   $ 5,354,356   $ 37,769   2.80 %   $ 5,053,158   $ 19,841   1.56 %
Short-term borrowings     13,139     15   0.47       20,127     14   0.28       47,391     31   0.26  
FHLB advances & other borrowings     430,207     4,750   4.38       402,500     4,557   4.49       460,598     4,264   3.67  
Subordinated debt     93,512     1,281   5.43       93,441     1,280   5.43       107,374     1,463   5.45  
Trust preferred debentures     50,541     1,402   11.00       50,379     1,369   10.78       49,902     1,066   8.47  
Total interest-bearing liabilities   $ 5,882,695   $ 46,604   3.14 %   $ 5,920,803   $ 44,989   3.01 %   $ 5,718,423   $ 26,665   1.85 %
Noninterest-bearing deposits     1,142,062             1,116,988             1,336,620        
Other noninterest-bearing liabilities     108,245             97,935             50,935        
Shareholders’ equity     764,790             771,625             749,183        
Total liabilities and shareholder’s equity   $ 7,897,792           $ 7,907,351           $ 7,855,161        
                                     
Net Interest Margin       $ 58,260   3.21 %       $ 58,801   3.20 %       $ 63,836   3.50 %
                                     
Cost of Deposits           2.41 %           2.32 %           1.23 %

(1) Interest income and average rates for tax-exempt loans and investment securities are presented on a tax-equivalent basis, assuming a federal income tax rate of 21%. Tax-equivalent adjustments totaled $0.2 million, $0.2 million and $0.3 million for the three months ended December 31, 2023, September 30, 2023 and December 31, 2022, respectively.

For the year ended December 31, 2023, net interest income, on a tax-equivalent basis, decreased to $236.8 million, with a tax-equivalent net interest margin of 3.26%, compared to net interest income, on a tax-equivalent basis, of $247.0 million, and a tax-equivalent net interest margin of 3.57% for the year ended December 31, 2022.

The yield on earning assets increased 119 basis points to 5.57% for the year ended December 31, 2023 compared to prior year. However, the cost of interest-bearing liabilities increased at a faster rate during this period, increasing 183 basis points to 2.87% for the year ended December 31, 2023.

    For the Years Ended
    December 31,   December 31,
(dollars in thousands)     2023       2022  
Interest-earning assets   Average Balance   Interest & Fees   Yield/Rate   Average Balance   Interest & Fees   Yield/Rate
Cash and cash equivalents   $ 77,046   $ 3,922   5.09 %   $ 256,221   $ 3,907   1.52 %
Investment securities     854,576     30,361   3.55       799,218     19,277   2.41  
Loans     6,292,260     367,762   5.84       5,811,403     277,252   4.77  
Loans held for sale     4,034     260   6.45       12,669     404   3.19  
Nonmarketable equity securities     43,318     2,819   6.51       38,543     2,198   5.70  
Total interest-earning assets   $ 7,271,234   $ 405,124   5.57 %   $ 6,918,054   $ 303,038   4.38 %
Noninterest-earning assets     635,490             618,593        
Total assets   $ 7,906,724           $ 7,536,647        
                         
Interest-Bearing Liabilities                        
Interest-bearing deposits   $ 5,241,723   $ 136,947   2.61 %   $ 4,802,130   $ 36,061   0.75 %
Short-term borrowings     23,406     68   0.29       58,688     104   0.18  
FHLB advances & other borrowings     460,781     20,709   4.49       355,282     9,335   2.63  
Subordinated debt     95,986     5,266   5.49       131,203     7,495   5.71  
Trust preferred debentures     50,298     5,289   10.52       49,678     3,025   6.09  
Total interest-bearing liabilities   $ 5,872,194   $ 168,279   2.87 %   $ 5,396,981   $ 56,020   1.04 %
Noninterest-bearing deposits     1,173,873             1,386,251        
Other noninterest-bearing liabilities     90,562             65,539        
Shareholders’ equity     770,095             687,876        
Total liabilities and shareholders’ equity   $ 7,906,724           $ 7,536,647        
                         
Net Interest Margin       $ 236,845   3.26 %       $ 247,018   3.57 %
                         
Cost of Deposits           2.13 %           0.58 %

(1) Interest income and average rates for tax-exempt loans and investment securities are presented on a tax-equivalent basis, assuming a federal income tax rate of 21%. Tax-equivalent adjustments totaled $0.8 million and $1.3 million for the years ended December 31, 2023 and 2022, respectively.

Noninterest Income

Noninterest income was $20.5 million for the fourth quarter of 2023, compared to $11.5 million for the third quarter of 2023. Noninterest income for the fourth quarter of 2023 included incremental servicing revenues of $2.2 million and $1.6 million related to our commercial FHA servicing portfolio and the Greensky portfolio, respectively. Also included was a $1.1 million one-time gain from the sale of Visa B stock, offset by $2.9 million of losses on the sale of investment securities. The third quarter of 2023 included $5.0 million of losses on the sale of investment securities. Excluding these transactions, noninterest income for the fourth quarter of 2023 and the third quarter of 2023 was $18.5 million and $16.5 million, respectively. Noninterest income for the fourth quarter of 2022 was $33.8 million and included $17.5 million gain on the termination of hedged interest rate swaps.

    For the Three Months Ended   For the Years Ended
    December 31,   September 30,   December 31,   December 31,   December 31,
(in thousands)     2023     2023(1)     2022     2023       2022  
Noninterest income                    
Wealth management revenue   $ 6,604     $ 6,288     $ 6,227   $ 25,572     $ 25,708  
Residential mortgage banking revenue     451       507       316     1,903       1,509  
Service charges on deposit accounts     3,246       3,149       2,879     11,990       10,237  
Interchange revenue     3,585       3,609       3,478     14,302       13,879  
Income on company-owned life insurance     1,753       918       796     4,439       3,584  
Loss on sales of investment securities, net     (2,894 )     (4,961 )         (9,372 )     (230 )
Gain (loss) on sales of other real estate owned, net     6                 825       (118 )
Gain on termination of hedged interest rate swaps                 17,531           17,531  
Gain on repurchase of subordinated debt, net                     676        
Impairment on commercial mortgage servicing rights                           (1,263 )
Other income     7,762       2,035       2,612     16,255       9,054  
Total noninterest income   $ 20,513     $ 11,545     $ 33,839   $ 66,590     $ 79,891  

(1) September 30, 2023 amounts include the impact of the revision previously mentioned in this earnings release.

Noninterest Expense

Noninterest expense was $44.5 million in the fourth quarter of 2023, compared to $42.0 million in the third quarter of 2023, and $49.9 million in the fourth quarter of 2022. The efficiency ratio improved to 55.22% for the quarter ended December 31, 2023, compared to 55.82% for the quarter ended September 30, 2023, and 58.26% for the quarter ended December 31, 2022.

    For the Three Months Ended   For the Years Ended
    December 31,   September 30,   December 31,   December 31,   December 31,
(in thousands)   2023   2023   2022   2023   2022
Noninterest expense                    
Salaries and employee benefits   $ 24,031   $ 22,307   $ 22,901   $ 93,438   $ 90,305
Occupancy and equipment     3,934     3,730     3,748     15,986     14,842
Data processing     6,963     6,468     6,302     26,286     24,350
Professional     2,072     1,554     1,726     7,049     6,907
Amortization of intangible assets     1,130     1,129     1,333     4,758     5,410
Other real estate owned     8         3,779     333     5,188
Loss on mortgage servicing rights held for sale             3,250         3,250
FDIC insurance     1,147     1,107     703     4,779     3,336
Other expense     5,203     5,743     6,201     21,273     22,074
Total noninterest expense   $ 44,488   $ 42,038   $ 49,943   $ 173,902   $ 175,662


Salaries and employee benefits expenses were $24.0 million in the fourth quarter of 2023, compared to $22.3 million in the third quarter of 2023 and $22.9 million in the fourth quarter of 2022. The Company recognized a $1.1 million benefit related to claiming the Employees Retention Tax Credit in the fourth quarter of 2023. This was offset by increased incentive and performance-based expense accruals and increased medical costs of $1.7 million and $0.6 million, respectively. Employees numbered 914 at December 31, 2023, compared to 911 at September 30, 2023, and 935 at December 31, 2022.

Income Tax Expense

Income tax expense was $6.4 million for the fourth quarter of 2023, as compared to $11.5 million for the third quarter of 2023 and $11.0 million for the fourth quarter of 2022. The resulting effective tax rates were 23.7%, 50.3% and 25.1% respectively. The third quarter of 2023 included tax charges of $4.5 million associated with the surrender of certain company-owned life insurance policies and $1.4 million related to the finalization of the 2022 federal and state tax returns. Exclusive of these items our effective tax rate was 24.6% for the third quarter of 2023.

Capital

At December 31, 2023, 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:

  As of December 31, 2023
  Midland States Bank   Midland States Bancorp, Inc.   Minimum Regulatory Requirements(2)
Total capital to risk-weighted assets 12.40%   13.20%   10.50%
Tier 1 capital to risk-weighted assets 11.44%   10.91%   8.50%
Tier 1 leverage ratio 10.18%   9.71%   4.00%
Common equity Tier 1 capital 11.44%   8.40%   7.00%
Tangible common equity to tangible assets(1) N/A   6.55%   N/A

(1) A non-GAAP financial measure. Refer to page 15 for a reconciliation to the comparable GAAP financial measure.
(2) Includes the capital conservation buffer of 2.5%.

The impact of rising interest rates on the Company’s investment portfolio and cash flow hedges resulted in a $76.8 million accumulated other comprehensive loss at December 31, 2023, which reduces tangible book value by $3.56 per share.

Stock Repurchase Program

On December 5, 2023, the Company’s board of directors authorized a new share repurchase program, pursuant to which the Company is authorized to repurchase up to $25.0 million of common stock through December 31, 2024. The new stock repurchase program became effective on January 1, 2024. The Company’s previous stock repurchase program expired on December 31, 2023. During the fourth quarter of 2023, the Company repurchased 135,685 shares of its common stock at a weighted average price of $21.11 under its stock repurchase program.

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, 2023, the Company had total assets of approximately $7.87 billion, and its Wealth Management Group had assets under administration of approximately $3.73 billion. The Company 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 Earnings Available to Common Shareholders,” “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,” “Tangible Book Value Per Share excluding Accumulated Other Comprehensive Income,” 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, the measures in this press release 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, continuing effects of the failures of Silicon Valley Bank and Signature Bank, increased deposit volatility and potential regulatory developments; changes in the financial markets; changes in business plans as circumstances warrant; risks relating to acquisitions; 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)
                     
    As of and for the Three Months Ended   As of and
for the Years Ended
(dollars in thousands, except per share data)   December 31,
 2023 
  September 30,
2023
(2)
   December 31,
2022
 
   December 31,
2023
 
   December 31,
2022
 
Earnings Summary                    
Net interest income   $ 58,077     $ 58,596     $ 63,550     $ 236,017     $ 245,735  
Provision for credit losses     6,950       5,168       3,544       21,132       20,126  
Noninterest income     20,513       11,545       33,839       66,590       79,891  
Noninterest expense     44,488       42,038       49,943       173,902       175,662  
Income before income taxes     27,152       22,935       43,902       107,573       129,838  
Income taxes     6,441       11,533       11,030       32,113       30,813  
Net income     20,711       11,402       32,872       75,460       99,025  
Preferred dividends     2,228       2,229       3,169       8,913       3,169  
Net income available to common shareholders   $ 18,483     $ 9,173     $ 29,703     $ 66,547     $ 95,856  
                     
Diluted earnings per common share   $ 0.84     $ 0.41     $ 1.30     $ 2.97     $ 4.23  
Weighted average common shares outstanding - diluted     21,822,328       21,977,196       22,503,611       22,124,402       22,395,698  
Return on average assets     1.04 %     0.57 %     1.66 %     0.95 %     1.31 %
Return on average shareholders' equity     10.74 %     5.86 %     17.41 %     9.80 %     14.40 %
Return on average tangible common equity(1)     15.41 %     7.56 %     25.89 %     13.89 %     20.76 %
Net interest margin     3.21 %     3.20 %     3.50 %     3.26 %     3.57 %
Efficiency ratio(1)     55.22 %     55.82 %     58.26 %     55.91 %     55.35 %
                     
Adjusted Earnings Performance Summary(1)                    
Adjusted earnings available to common shareholders   $ 19,793     $ 17,278     $ 19,278     $ 76,576     $ 85,852  
Adjusted diluted earnings per common share   $ 0.89     $ 0.78     $ 0.85     $ 3.42     $ 3.79  
Adjusted return on average assets     1.11 %     0.98 %     1.13 %     1.08 %     1.18 %
Adjusted return on average shareholders' equity     11.42 %     10.03 %     11.89 %     11.10 %     12.94 %
Adjusted return on average tangible common equity     16.51 %     14.24 %     16.80 %     15.98 %     18.59 %
Adjusted pre-tax, pre-provision earnings   $ 35,898     $ 33,064     $ 33,165     $ 136,303     $ 137,523  
Adjusted pre-tax, pre-provision return on average assets     1.80 %     1.66 %     1.68 %     1.72 %     1.82 %
                     
Market Data                    
Book value per share at period end   $ 31.61     $ 29.96     $ 29.17          
Tangible book value per share at period end(1)   $ 23.35     $ 21.67     $ 20.94          
Tangible book value per share excluding accumulated other comprehensive income at period end(1)   $ 26.91     $ 26.35     $ 24.72          
Market price at period end   $ 27.56     $ 20.54     $ 26.62          
Common shares outstanding at period end     21,551,402       21,594,546       22,214,913          
                     
Capital                    
Total capital to risk-weighted assets     13.20 %     12.76 %     12.38 %        
Tier 1 capital to risk-weighted assets     10.91 %     10.53 %     10.21 %        
Tier 1 common capital to risk-weighted assets     8.40 %     8.07 %     7.77 %        
Tier 1 leverage ratio     9.71 %     9.59 %     9.43 %        
Tangible common equity to tangible assets(1)     6.55 %     6.01 %     6.06 %        
                     
Wealth Management                    
Trust assets under administration   $ 3,733,355     $ 3,501,225     $ 3,505,372          

(1) Non-GAAP financial measures. Refer to pages 13 - 15 for a reconciliation to the comparable GAAP financial measures.
(2) September 30, 2023 amounts include the impact of the revision previously mentioned in this earnings release.


MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
                     
    As of
    December 31,   September 30,   June 30,   March 31,   December 31,
(in thousands)     2023     2023(1)     2023       2023       2022  
Assets                    
Cash and cash equivalents   $ 135,061     $ 132,132     $ 160,695     $ 138,310     $ 160,631  
Investment securities     920,396       839,344       887,003       821,005       776,860  
Loans     6,131,079       6,280,883       6,367,344       6,354,271       6,306,467  
Allowance for credit losses on loans     (68,502 )     (66,669 )     (64,950 )     (62,067 )     (61,051 )
Total loans, net     6,062,577       6,214,214       6,302,394       6,292,204       6,245,416  
Loans held for sale     3,811       6,089       5,632       2,747       1,286  
Premises and equipment, net     82,814       82,741       81,006       80,582       78,293  
Other real estate owned     9,112       480       202       6,729       6,729  
Loan servicing rights, at lower of cost or fair value     20,253       20,933       21,611       1,117       1,205  
Commercial FHA mortgage loan servicing rights held for sale                       20,745       20,745  
Goodwill     161,904       161,904       161,904       161,904       161,904  
Other intangible assets, net     16,108       17,238       18,367       19,575       20,866  
Company-owned life insurance     203,485       201,750       152,210       151,319       150,443  
Other assets     251,347       292,460       243,697       233,937       231,123  
Total assets   $ 7,866,868     $ 7,969,285     $ 8,034,721     $ 7,930,174     $ 7,855,501  
                     
Liabilities and Shareholders' Equity                    
Noninterest-bearing demand deposits   $ 1,145,395     $ 1,154,515     $ 1,162,909     $ 1,215,758     $ 1,362,158  
Interest-bearing deposits     5,164,134       5,250,487       5,263,639       5,209,443       5,002,494  
Total deposits     6,309,529       6,405,002       6,426,548       6,425,201       6,364,652  
Short-term borrowings     34,865       17,998       21,783       31,173       42,311  
FHLB advances and other borrowings     476,000       538,000       575,000       482,000       460,000  
Subordinated debt     93,546       93,475       93,404       99,849       99,772  
Trust preferred debentures     50,616       50,457       50,296       50,135       49,975  
Other liabilities     110,459       106,743       90,869       66,173       80,217  
Total liabilities     7,075,015       7,211,675       7,257,900       7,154,531       7,096,927  
Total shareholders’ equity     791,853       757,610       776,821       775,643       758,574  
Total liabilities and shareholders’ equity   $ 7,866,868     $ 7,969,285     $ 8,034,721     $ 7,930,174     $ 7,855,501  

(1) September 30, 2023 amounts include the impact of the revision previously mentioned in this earnings release.


MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
                     
    For the Three Months Ended   For the Years Ended
    December 31,   September 30,   December 31,   December 31,   December 31,
(in thousands, except per share data)     2023     2023(1)     2022     2023       2022  
Net interest income:                    
Interest income   $ 104,681     $ 103,585     $ 90,215   $ 404,296     $ 301,755  
Interest expense     46,604       44,989       26,665     168,279       56,020  
Net interest income     58,077       58,596       63,550     236,017       245,735  
Provision for credit losses:                    
Provision for credit losses on loans     6,950       5,168       2,950     21,132       18,797  
Provision for credit losses on unfunded commitments                 594           1,550  
Provision for other credit losses                           (221 )
Total provision for credit losses     6,950       5,168       3,544     21,132       20,126  
Net interest income after provision for credit losses     51,127       53,428       60,006     214,885       225,609  
Noninterest income:                    
Wealth management revenue     6,604       6,288       6,227     25,572       25,708  
Residential mortgage banking revenue     451       507       316     1,903       1,509  
Service charges on deposit accounts     3,246       3,149       2,879     11,990       10,237  
Interchange revenue     3,585       3,609       3,478     14,302       13,879  
Income on company-owned life insurance     1,753       918       796     4,439       3,584  
Loss on sales of investment securities, net     (2,894 )     (4,961 )         (9,372 )     (230 )
Gain (loss) on sales of other real estate owned, net     6                 825       (118 )
Gain on termination of hedged interest rate swaps                 17,531           17,531  
Gain on repurchase of subordinated debt, net                     676        
Impairment on commercial mortgage servicing rights                           (1,263 )
Other income     7,762       2,035       2,612     16,255       9,054  
Total noninterest income     20,513       11,545       33,839     66,590       79,891  
Noninterest expense:                    
Salaries and employee benefits     24,031       22,307       22,901     93,438       90,305  
Occupancy and equipment     3,934       3,730       3,748     15,986       14,842  
Data processing     6,963       6,468       6,302     26,286       24,350  
Professional     2,072       1,554       1,726     7,049       6,907  
Amortization of intangible assets     1,130       1,129       1,333     4,758       5,410  
Other real estate owned     8             3,779     333       5,188  
Loss on mortgage servicing rights held for sale                 3,250           3,250  
FDIC insurance     1,147       1,107       703     4,779       3,336  
Other expense     5,203       5,743       6,201     21,273       22,074  
Total noninterest expense     44,488       42,038       49,943     173,902       175,662  
Income before income taxes     27,152       22,935       43,902     107,573       129,838  
Income taxes     6,441       11,533       11,030     32,113       30,813  
Net income     20,711       11,402       32,872     75,460       99,025  
Preferred stock dividends     2,228       2,229       3,169     8,913       3,169  
Net income available to common shareholders   $ 18,483     $ 9,173     $ 29,703   $ 66,547     $ 95,856  
                     
Basic earnings per common share   $ 0.84     $ 0.41     $ 1.31   $ 2.97     $ 4.24  
Diluted earnings per common share   $ 0.84     $ 0.41     $ 1.30   $ 2.97     $ 4.23  

(1) September 30, 2023 amounts include the impact of the revision previously mentioned in this earnings release.

MIDLAND STATES BANCORP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited)
                     
Adjusted Earnings Reconciliation
                     
    For the Three Months Ended   For the Years Ended
(dollars in thousands, except per share data)   December 31,
 2023 
  September 30,
2023(1)
  December 31,
 2022 
  December 31,
2023 
  December 31,
 2022 
Income before income taxes - GAAP   $ 27,152     $ 22,935     $ 43,902     $ 107,573     $ 129,838  
Adjustments to noninterest income:                    
Loss on sales of investment securities, net     2,894       4,961             9,372       230  
(Gain) on termination of hedged interest rate swaps                 (17,531 )           (17,531 )
(Gain) on sale of Visa B shares     (1,098 )                 (1,098 )      
(Gain) on repurchase of subordinated debt                       (676 )      
Total adjustments to noninterest income     1,796       4,961       (17,531 )     7,598       (17,301 )
Adjustments to noninterest expense:                    
(Loss) on mortgage servicing rights held for sale                 (3,250 )           (3,250 )
Integration and acquisition expenses                             (347 )
Total adjustments to noninterest expense                 (3,250 )           (3,597 )
Adjusted earnings pre tax - non-GAAP     28,948       27,896       29,621       115,171       116,134  
Adjusted earnings tax     6,927       8,389       7,174       29,682       27,113  
Adjusted earnings - non-GAAP     22,021       19,507       22,447       85,489       89,021  
Preferred stock dividends     2,228       2,229       3,169       8,913       3,169  
Adjusted earnings available to common shareholders   $ 19,793     $ 17,278     $ 19,278     $ 76,576     $ 85,852  
Adjusted diluted earnings per common share   $ 0.89     $ 0.78     $ 0.85     $ 3.42     $ 3.79  
Adjusted return on average assets     1.11 %     0.98 %     1.13 %     1.08 %     1.18 %
Adjusted return on average shareholders' equity     11.42 %     10.03 %     11.89 %     11.10 %     12.94 %
Adjusted return on average tangible common equity     16.51 %     14.24 %     16.80 %     15.98 %     18.59 %
(1) September 30, 2023 amounts include the impact of the revision previously mentioned in this earnings release.
                     
                     
Adjusted Pre-Tax, Pre-Provision Earnings Reconciliation
                     
    For the Three Months Ended   For the Years Ended
    December 31,   September 30,   December 31,   December 31,   December 31,
(dollars in thousands)     2023       2023       2022       2023       2022  
Adjusted earnings pre tax - non-GAAP   $ 28,948     $ 27,896     $ 29,621     $ 115,171     $ 116,134  
Provision for credit losses     6,950       5,168       3,544       21,132       20,126  
Impairment on commercial mortgage servicing rights                             1,263  
Adjusted pre-tax, pre-provision earnings - non-GAAP   $ 35,898     $ 33,064     $ 33,165     $ 136,303     $ 137,523  
Adjusted pre-tax, pre-provision return on average assets     1.80 %     1.66 %     1.68 %     1.72 %     1.82 %


MIDLAND STATES BANCORP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued)
                     
Efficiency Ratio Reconciliation
                     
    For the Three Months Ended   For the Years Ended
    December 31,   September 30,   December 31,   December 31,   December 31,
(dollars in thousands)     2023     2023(1)     2022       2023       2022  
Noninterest expense - GAAP   $ 44,488     $ 42,038     $ 49,943     $ 173,902     $ 175,662  
Loss on mortgage servicing rights held for sale                 (3,250 )           (3,250 )
Integration and acquisition expenses                             (347 )
Adjusted noninterest expense   $ 44,488     $ 42,038     $ 46,693     $ 173,902     $ 172,065  
                     
Net interest income - GAAP   $ 58,077     $ 58,596     $ 63,550     $ 236,017     $ 245,735  
Effect of tax-exempt income     183       205       286       828       1,283  
Adjusted net interest income     58,260       58,801       63,836       236,845       247,018  
                     
Noninterest income - GAAP     20,513       11,545       33,839       66,590       79,891  
Impairment on commercial mortgage servicing rights                             1,263  
Loss on sales of investment securities, net     2,894       4,961             9,372       230  
(Gain) on termination of hedged interest rate swaps                 (17,531 )           (17,531 )
(Gain) on repurchase of subordinated debt                       (676 )      
(Gain) on sale of Visa B shares     (1,098 )                 (1,098 )      
Adjusted noninterest income     22,309       16,506       16,308       74,188       63,853  
                     
Adjusted total revenue   $ 80,569     $ 75,307     $ 80,144     $ 311,033     $ 310,871  
                     
Efficiency ratio     55.22 %     55.82 %     58.26 %     55.91 %     55.35 %
                     
Return on Average Tangible Common Equity (ROATCE)
                     
    For the Three Months Ended   For the Years Ended
    December 31,   September 30,   December 31,   December 31,   December 31,
(dollars in thousands)     2023     2023(1)     2022       2023       2022  
Net income available to common shareholders   $ 18,483     $ 9,173     $ 29,703     $ 66,547     $ 95,856  
                     
Average total shareholders' equity—GAAP   $ 764,790     $ 771,625     $ 749,183     $ 770,095     $ 687,876  
Adjustments:                    
Preferred Stock     (110,548 )     (110,548 )     (110,548 )     (110,548 )     (41,493 )
Goodwill     (161,904 )     (161,904 )     (161,904 )     (161,904 )     (161,904 )
Other intangible assets, net     (16,644 )     (17,782 )     (22,859 )     (18,376 )     (22,637 )
Average tangible common equity   $ 475,694     $ 481,391     $ 453,872     $ 479,267     $ 461,842  
ROATCE     15.41 %     7.56 %     25.89 %     13.89 %     20.76 %

(1) September 30, 2023 amounts include the impact of the revision previously mentioned in this earnings release.


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
(dollars in thousands, except per share data)   December 31,
 2023 
  September 30,
2023(1)
  June 30,
 2023 
  March 31,
 2023 
  December 31,
 2022 
Shareholders' Equity to Tangible Common Equity                
Total shareholders' equity—GAAP   $ 791,853     $ 757,610     $ 776,821     $ 775,643     $ 758,574  
Adjustments:                    
Preferred Stock     (110,548 )     (110,548 )     (110,548 )     (110,548 )     (110,548 )
Goodwill     (161,904 )     (161,904 )     (161,904 )     (161,904 )     (161,904 )
Other intangible assets, net     (16,108 )     (17,238 )     (18,367 )     (19,575 )     (20,866 )
Tangible common equity     503,293       467,920       486,002       483,616       465,256  
                     
Less: Accumulated other comprehensive income (AOCI)     (76,753 )     (101,181 )     (84,719 )     (77,797 )     (83,797 )
Tangible common equity excluding AOCI   $ 580,046     $ 569,101     $ 570,721     $ 561,413     $ 549,053  
                     
Total Assets to Tangible Assets:                    
Total assets—GAAP   $ 7,866,868     $ 7,969,285     $ 8,034,721     $ 7,930,174     $ 7,855,501  
Adjustments:                    
Goodwill     (161,904 )     (161,904 )     (161,904 )     (161,904 )     (161,904 )
Other intangible assets, net     (16,108 )     (17,238 )     (18,367 )     (19,575 )     (20,866 )
Tangible assets   $ 7,688,856     $ 7,790,143     $ 7,854,450     $ 7,748,695     $ 7,672,731  
                     
Common Shares Outstanding     21,551,402       21,594,546       21,854,800       22,111,454       22,214,913  
                     
Tangible Common Equity to Tangible Assets     6.55 %     6.01 %     6.19 %     6.24 %     6.06 %
Tangible Book Value Per Share   $ 23.35     $ 21.67     $ 22.24     $ 21.87     $ 20.94  
Tangible Book Value Per Share, excluding AOCI   $ 26.91     $ 26.35     $ 26.11     $ 25.39     $ 24.72  

(1) September 30, 2023 amounts include the impact of the revision previously mentioned in this earnings release.


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Source: Midland States Bancorp, Inc.

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