UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM
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CURRENT REPORT
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On July 23, 2020, Midland States Bancorp, Inc. (the "Company") issued a press release announcing its financial results for the second quarter of 2020. The press release is attached as Exhibit 99.1.
On July 23, 2020, the Company made available on its website a slide presentation regarding the Company's second quarter 2020 financial results, which will be used as part of a publicly accessible conference call on July 24, 2020. The slide presentation is attached as Exhibit 99.2.
The information in this Form 8-K and the attached exhibits shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in any such filing.
(d) Exhibits.
| Exhibit No. | Description | |
| 99.1 | Press Release of Midland States Bancorp, Inc., dated July 23, 2020 | |
| 99.2 | Slide Presentation of Midland States Bancorp, Inc. regarding second quarter 2020 financial results | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Midland States Bancorp, Inc. | ||
| Date: July 23, 2020 | By: | /s/ Douglas J. Tucker |
| Douglas J. Tucker | ||
| Senior Vice President and Corporate Counsel | ||
EXHIBIT 99.1
Midland States Bancorp, Inc. Announces 2020 Second Quarter Results
Summary
- Net income of $12.6 million, or $0.53 diluted earnings per share
- Total loans increased $463.2 million, or 10.6%, from the end of the prior quarter
- Total deposits increased $292.5 million, or 6.3%, from the end of the prior quarter
- Efficiency ratio of 58.5%
- Allowance for credit losses strengthened to 0.97% of total loans
- $276.0 million in Paycheck Protection Program loans as of June 30, 2020
EFFINGHAM, Ill., July 23, 2020 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (Nasdaq: MSBI) (the “Company”) today reported net income of $12.6 million, or $0.53 diluted earnings per share, for the second quarter of 2020. This compares to net income of $1.5 million, or $0.06 diluted earnings per share, for the first quarter of 2020, which was impacted by an $8.5 million impairment on commercial mortgage servicing rights (“MSR”) and $1.0 million in integration and acquisition expenses, and net income of $16.4 million, or $0.67 diluted earnings per share, for the second quarter of 2019.
Jeffrey G. Ludwig, President and Chief Executive Officer of the Company, said, “Despite the ongoing impact of the COVID-19 pandemic, we saw a number of positive trends in the quarter including significant balance sheet growth, higher revenue, and lower expense levels, which combined to produce a strong quarter of earnings and an increase in our tangible book value per share.
“While a great deal of uncertainty remains regarding the duration of the pandemic, we are seeing some encouraging signs across our markets and customers. Overall asset quality remained relatively stable during the second quarter while requests for loan deferrals have slowed considerably in June and July. Approximately 60% to 65% of the loans we granted deferrals to in April and May are expected to resume making their scheduled payments once their deferral period ends.
“Our participation in the Small Business Administration’s Paycheck Protection Program (“PPP”) has continued to be a valuable source of support to our communities. Through the end of June, we had more than 2,300 applications approved by the SBA totaling $276.0 million in loans for our customers, which will help support more than 28,000 employees in our markets.
“We continue to increase our allowance for credit losses and maintain strong capital and liquidity positions. We believe our strong balance sheet will enable us to continue supporting our clients through the duration of this crisis, while we focus on building upon the positive trends we are seeing in revenue generation and operating efficiencies,” said Mr. Ludwig.
Factors Affecting Comparability
The Company acquired HomeStar Financial Group, Inc. (“HomeStar”) in July 2019, with the core system conversion completed in October 2019. The financial position and results of operations of HomeStar prior to its acquisition date are not included in the Company’s financial results.
In addition, effective January 1, 2020, the Company adopted the new current expected credit loss (“CECL”) accounting standard, which replaces the incurred loss methodology with an estimated life of loan credit loss methodology.
Adjusted Earnings
Financial results for the second quarter of 2020 were impacted by a $0.4 million loss on residential mortgage servicing rights held-for-sale and $0.1 million in integration and acquisition expenses. Excluding these amounts and certain income, adjusted earnings were $12.9 million, or $0.55 diluted earnings per share, for the second quarter of 2020.
Financial results for the first quarter of 2020 were impacted by $1.0 million in integration and acquisition expenses, a $0.5 million loss on residential mortgage servicing rights held-for-sale, and a $0.2 million loss on the repurchase of subordinated debt. Excluding these amounts and certain income, adjusted earnings were $2.8 million, or $0.11 diluted earnings per share, for the first quarter of 2020.
A reconciliation of adjusted earnings to net income according to accounting principles generally accepted in the United States (“GAAP”) is provided in the financial tables at the end of this press release.
Net Interest Margin
Net interest margin for the second quarter of 2020 was 3.32%, compared to 3.48% for the first quarter of 2020. The Company’s net interest margin benefits from accretion income on purchased loan portfolios, which contributed 12 and 16 basis points to net interest margin in the second quarter of 2020 and first quarter of 2020, respectively. Excluding the impact of accretion income, net interest margin decreased 12 basis points from the first quarter of 2020, which was primarily attributable to excess liquidity invested in lower-yielding earning assets and the addition of low-yielding loans originated through the PPP program.
Relative to the second quarter of 2019, net interest margin decreased from 3.76%. Accretion income on purchased loan portfolios contributed 25 basis points to net interest margin in the second quarter of 2019. Excluding the impact of accretion income, net interest margin decreased 31 basis points compared to the second quarter of 2019, primarily due to the impact of new subordinated debt issued in September 2019 and a decline in the yield on earning assets.
Net Interest Income
Net interest income for the second quarter of 2020 was $49.0 million, an increase of 5.0% from $46.7 million for the first quarter of 2020. Excluding accretion income, net interest income increased $2.8 million from the prior quarter. Accretion income associated with purchased loan portfolios totaled $1.8 million for the second quarter of 2020, compared with $2.2 million for the first quarter of 2020.
Relative to the second quarter of 2019, net interest income increased $2.9 million, or 6.3%. Accretion income for the second quarter of 2019 was $3.4 million. Excluding the impact of accretion income, net interest income increased primarily due to the acquisition of HomeStar’s loans and securities and organic loan growth.
Noninterest Income
Noninterest income for the second quarter of 2020 was $19.4 million, an increase of 125.6% from $8.6 million for the first quarter of 2020, which included an $8.5 million impairment on commercial MSRs. Excluding the impairment, the increase was primarily attributable to higher commercial FHA and residential mortgage banking revenue.
Relative to the second quarter of 2019, noninterest income decreased 1.0% from $19.6 million. The decrease was primarily attributable to lower commercial FHA revenue and service charges on deposit accounts, partially offset by higher residential mortgage banking revenue.
Wealth management revenue for the second quarter of 2020 was $5.7 million, unchanged from the first quarter of 2020. Compared to the second quarter of 2019, wealth management revenue increased 3.5%.
Commercial FHA revenue for the second quarter of 2020 was $3.4 million, compared to $1.3 million in the first quarter of 2020. During the second quarter of 2020, the Company recorded a $0.1 million commercial MSR impairment, compared to a $8.5 million impairment recorded in the first quarter of 2020. The Company originated $134.8 million in rate lock commitments during the second quarter of 2020, compared to $13.3 million in the prior quarter. Compared to the second quarter of 2019, commercial FHA revenue decreased $0.9 million.
Noninterest Expense
Noninterest expense for the second quarter of 2020 was $40.8 million, which included a $0.4 million loss on residential MSRs held for sale and $0.1 million in integration and acquisition expenses, compared with $42.7 million for the first quarter of 2020, which included $1.0 million in integration and acquisition expenses, a $0.5 million loss on residential MSRs held for sale, and a $0.2 million loss on the repurchase of subordinated debt. Excluding losses on residential MSRs held for sale, integration and acquisition expenses, and the loss on the repurchase of subordinated debt, the $0.6 million decrease in noninterest expense primarily reflects lower salaries and employee benefits expense resulting from the staffing level adjustments made during the first quarter of 2020.
Relative to the second quarter of 2019, noninterest expense increased 1.5% from $40.2 million, which included $0.3 million in integration and acquisition expenses and a $0.5 million gain on residential MSRs held for sale. Excluding integration and acquisition expenses and gains/losses on MSRs held for sale, noninterest expense was essentially unchanged from the prior year period.
Loan Portfolio
Total loans outstanding were $4.84 billion at June 30, 2020, compared with $4.38 billion at March 31, 2020 and $4.07 billion at June 30, 2019. The increase in total loans from March 31, 2020 was primarily attributable to loans originated under the PPP program and an increase in consumer loans and equipment finance loans and leases.
Equipment finance balances increased $78.2 million from March 31, 2020, which are booked within the commercial loans and leases portfolio, reflecting management’s efforts to grow the equipment finance business.
The increase in total loans from June 30, 2019 was primarily attributable to the addition of HomeStar’s loan portfolio, the growth in equipment finance balances, and loans originated under the PPP program.
Deposits
Total deposits were $4.94 billion at June 30, 2020, compared with $4.65 billion at March 31, 2020, and $4.01 billion at June 30, 2019. The increase in total deposits from both prior periods was attributable to an increase in core deposits, primarily from commercial customers, partially driven by inflows of PPP-related funds, while the addition of HomeStar’s deposits also contributed to the increase from June 30, 2019.
Asset Quality
Nonperforming loans totaled $60.5 million, or 1.25% of total loans, at June 30, 2020, compared with $58.2 million, or 1.33% of total loans, at March 31, 2020. The increase in non-performing loans was primarily attributable to the addition of one large relationship partially reduced by charge-offs and transfers to other real estate owned. At June 30, 2019, nonperforming loans totaled $50.7 million, or 1.24% of total loans.
Net charge-offs for the second quarter of 2020 were $3.1 million, or 0.26% of average loans on an annualized basis.
The Company recorded a provision for credit losses on loans of $11.6 million for the second quarter of 2020, which reflects the weakened economic outlook due to the impact of the COVID-19 pandemic.
The Company’s allowance for credit losses on loans was 0.97% of total loans and 77.8% of nonperforming loans at June 30, 2020, compared with 0.88% of total loans and 66.3% of nonperforming loans at March 31, 2020. Approximately 96% of the allowance for credit losses on loans at June 30, 2020 was allocated to general reserves.
Capital
At June 30, 2020, 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 June 30, 2020 | Consolidated Ratios as of June 30, 2020 | Minimum Regulatory Requirements (2) | |||
| Total capital to risk-weighted assets | 12.05% | 13.67% | 10.50% | ||
| Tier 1 capital to risk-weighted assets | 11.28% | 9.71% | 8.50% | ||
| Tier 1 leverage ratio | 9.01% | 7.75% | 4.00% | ||
| Common equity Tier 1 capital | 11.28% | 8.44% | 7.00% | ||
| Tangible common equity to tangible assets (1) | NA | 6.67% | NA | ||
(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%.
Stock Repurchase Program
During the second quarter of 2020, the Company repurchased 470,278 shares of its common stock at a weighted average price of $15.22 under its stock repurchase program, which authorized the repurchase of up to $50 million of its common stock. As of June 30, 2020, the Company had $18.3 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, July 24, 2020, to discuss its financial results. The call can be accessed via telephone at (877) 516-3531; conference ID: 1477734. A recorded replay can be accessed through July 31, 2020, by dialing (855) 859-2056; conference ID: 1477734.
A slide presentation relating to the second quarter 2020 results will be accessible prior to the scheduled conference call. This earnings release should be read together with the slide presentation, which contains important information related to the impact of COVID-19. 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 June 30, 2020, the Company had total assets of approximately $6.64 billion, and its Wealth Management Group had assets under administration of approximately $3.25 billion. Midland provides a full range of commercial and consumer banking products and services, business equipment financing, merchant credit card services, trust and investment management, and insurance and financial planning services. In addition, multi-family and healthcare facility FHA financing is provided through Love Funding, Midland’s non-bank subsidiary. For additional information, visit https://www.midlandsb.com/ or follow Midland on LinkedIn at https://www.linkedin.com/company/midland-states-bank.
Non-GAAP Financial 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,” “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, including the effects of the COVID-19 pandemic including 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:
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 | ||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||
| (dollars in thousands, except per share data) | 2020 | 2020 | 2019 | 2019 | 2019 | |||||||||||||||
| Earnings Summary | ||||||||||||||||||||
| Net interest income | $ | 48,989 | $ | 46,651 | $ | 48,687 | $ | 49,450 | $ | 46,077 | ||||||||||
| Provision for credit losses on loans | 11,610 | 10,569 | 5,305 | 4,361 | 4,076 | |||||||||||||||
| Noninterest income | 19,396 | 8,598 | 19,014 | 19,606 | 19,587 | |||||||||||||||
| Noninterest expense | 40,782 | 42,675 | 46,325 | 48,025 | 40,194 | |||||||||||||||
| Income before income taxes | 15,993 | 2,005 | 16,071 | 16,670 | 21,394 | |||||||||||||||
| Income taxes | 3,424 | 456 | 3,279 | 4,015 | 5,039 | |||||||||||||||
| Net income | 12,569 | 1,549 | 12,792 | 12,655 | 16,355 | |||||||||||||||
| Preferred stock dividends, net | - | - | - | (22 | ) | 34 | ||||||||||||||
| Net income available to common shareholders | $ | 12,569 | $ | 1,549 | $ | 12,792 | $ | 12,677 | $ | 16,321 | ||||||||||
| Diluted earnings per common share | $ | 0.53 | $ | 0.06 | $ | 0.51 | $ | 0.51 | $ | 0.67 | ||||||||||
| Weighted average shares outstanding - diluted | 23,339,964 | 24,538,002 | 24,761,960 | 24,684,529 | 24,303,211 | |||||||||||||||
| Return on average assets | 0.77 | % | 0.10 | % | 0.83 | % | 0.84 | % | 1.17 | % | ||||||||||
| Return on average shareholders' equity | 8.00 | % | 0.96 | % | 7.71 | % | 7.71 | % | 10.43 | % | ||||||||||
| Return on average tangible common equity (1) | 11.84 | % | 1.39 | % | 11.24 | % | 11.19 | % | 15.34 | % | ||||||||||
| Net interest margin | 3.32 | % | 3.48 | % | 3.56 | % | 3.70 | % | 3.76 | % | ||||||||||
| Efficiency ratio (1) | 58.53 | % | 63.78 | % | 59.46 | % | 60.63 | % | 61.58 | % | ||||||||||
| Adjusted Earnings Performance Summary | ||||||||||||||||||||
| Adjusted earnings (1) | $ | 12,884 | $ | 2,806 | $ | 16,110 | $ | 16,422 | $ | 16,196 | ||||||||||
| Adjusted diluted earnings per common share (1) | $ | 0.55 | $ | 0.11 | $ | 0.64 | $ | 0.66 | $ | 0.66 | ||||||||||
| Adjusted return on average assets (1) | 0.78 | % | 0.19 | % | 1.04 | % | 1.09 | % | 1.16 | % | ||||||||||
| Adjusted return on average shareholders' equity (1) | 8.20 | % | 1.73 | % | 9.71 | % | 10.01 | % | 10.33 | % | ||||||||||
| Adjusted return on average tangible common equity (1) | 12.14 | % | 2.53 | % | 14.15 | % | 14.52 | % | 15.19 | % | ||||||||||
| (1) Non-GAAP financial measures. Refer to pages 13 - 15 for a reconciliation to the comparable GAAP financial measures. | ||||||||||||||||||||
| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | ||||||||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||||||
| (in thousands, except per share data) | 2020 | 2020 | 2019 | 2019 | 2019 | |||||||||||||||||||
| Net interest income: | ||||||||||||||||||||||||
| Interest income | $ | 60,548 | $ | 61,314 | $ | 64,444 | $ | 65,006 | $ | 60,636 | ||||||||||||||
| Interest expense | 11,559 | 14,663 | 15,757 | 15,556 | 14,559 | |||||||||||||||||||
| Net interest income | 48,989 | 46,651 | 48,687 | 49,450 | 46,077 | |||||||||||||||||||
| Provision for credit losses on loans | 11,610 | 10,569 | 5,305 | 4,361 | 4,076 | |||||||||||||||||||
| Net interest income after provision for credit losses on loans | 37,379 | 36,082 | 43,382 | 45,089 | 42,001 | |||||||||||||||||||
| Noninterest income: | ||||||||||||||||||||||||
| Wealth management revenue | 5,698 | 5,677 | 5,377 | 5,998 | 5,504 | |||||||||||||||||||
| Commercial FHA revenue | 3,414 | 1,267 | 3,702 | 3,954 | 4,358 | |||||||||||||||||||
| Residential mortgage banking revenue | 2,723 | 1,755 | 763 | 720 | 611 | |||||||||||||||||||
| Service charges on deposit accounts | 1,706 | 2,656 | 2,860 | 3,008 | 2,639 | |||||||||||||||||||
| Interchange revenue | 3,013 | 2,833 | 3,053 | 3,249 | 3,010 | |||||||||||||||||||
| Gain on sales of investment securities, net | - | - | 635 | 25 | 14 | |||||||||||||||||||
| (Impairment) recapture on commercial mortgage servicing rights | (107 | ) | (8,468 | ) | (1,613 | ) | (1,060 | ) | 559 | |||||||||||||||
| Other income | 2,949 | 2,878 | 4,237 | 3,712 | 2,892 | |||||||||||||||||||
| Total noninterest income | 19,396 | 8,598 | 19,014 | 19,606 | 19,587 | |||||||||||||||||||
| Noninterest expense: | ||||||||||||||||||||||||
| Salaries and employee benefits | 20,740 | 21,063 | 23,650 | 25,083 | 21,134 | |||||||||||||||||||
| Occupancy and equipment | 4,286 | 4,869 | 4,654 | 4,793 | 4,511 | |||||||||||||||||||
| Data processing | 5,300 | 5,334 | 6,074 | 5,271 | 4,821 | |||||||||||||||||||
| Professional | 1,606 | 1,855 | 1,952 | 2,348 | 2,410 | |||||||||||||||||||
| Amortization of intangible assets | 1,629 | 1,762 | 1,804 | 1,803 | 1,673 | |||||||||||||||||||
| Loss (gain) on mortgage servicing rights held for sale | 391 | 496 | 95 | (70 | ) | (515 | ) | |||||||||||||||||
| Other expense | 6,830 | 7,296 | 8,096 | 8,797 | 6,160 | |||||||||||||||||||
| Total noninterest expense | 40,782 | 42,675 | 46,325 | 48,025 | 40,194 | |||||||||||||||||||
| Income before income taxes | 15,993 | 2,005 | 16,071 | 16,670 | 21,394 | |||||||||||||||||||
| Income taxes | 3,424 | 456 | 3,279 | 4,015 | 5,039 | |||||||||||||||||||
| Net income | 12,569 | 1,549 | 12,792 | 12,655 | 16,355 | |||||||||||||||||||
| Preferred stock dividends, net | - | - | - | (22 | ) | 34 | ||||||||||||||||||
| Net income available to common shareholders | $ | 12,569 | $ | 1,549 | $ | 12,792 | $ | 12,677 | $ | 16,321 | ||||||||||||||
| Basic earnings per common share | $ | 0.53 | $ | 0.06 | $ | 0.52 | $ | 0.51 | $ | 0.67 | ||||||||||||||
| Diluted earnings per common share | $ | 0.53 | $ | 0.06 | $ | 0.51 | $ | 0.51 | $ | 0.67 | ||||||||||||||
| MIDLAND STATES BANCORP, INC. | |||||||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | |||||||||||||||||||||||
| As of | |||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||||||
| (in thousands) | 2020 | 2020 | 2019 | 2019 | 2019 | ||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Cash and cash equivalents | $ | 519,868 | $ | 449,396 | $ | 394,505 | $ | 409,346 | $ | 245,415 | |||||||||||||
| Investment securities | 639,693 | 661,894 | 655,054 | 668,630 | 613,026 | ||||||||||||||||||
| Loans | 4,839,423 | 4,376,204 | 4,401,410 | 4,328,835 | 4,073,527 | ||||||||||||||||||
| Allowance for credit losses on loans | (47,093 | ) | (38,545 | ) | (28,028 | ) | (24,917 | ) | (25,925 | ) | |||||||||||||
| Total loans, net | 4,792,330 | 4,337,659 | 4,373,382 | 4,303,918 | 4,047,602 | ||||||||||||||||||
| Loans held for sale | 32,403 | 113,852 | 16,431 | 88,322 | 22,143 | ||||||||||||||||||
| Premises and equipment, net | 89,046 | 90,118 | 91,055 | 93,896 | 94,824 | ||||||||||||||||||
| Other real estate owned | 12,728 | 7,892 | 6,745 | 4,890 | 3,797 | ||||||||||||||||||
| Loan servicing rights, at lower of cost or fair value | 44,239 | 44,566 | 53,824 | 54,124 | 54,191 | ||||||||||||||||||
| Mortgage servicing rights held for sale | 1,244 | 1,460 | 1,972 | 1,860 | 159 | ||||||||||||||||||
| Goodwill | 172,796 | 172,796 | 171,758 | 171,074 | 164,673 | ||||||||||||||||||
| Other intangible assets, net | 31,495 | 33,124 | 34,886 | 36,690 | 33,893 | ||||||||||||||||||
| Cash surrender value of life insurance policies | 144,215 | 143,323 | 142,423 | 141,510 | 140,593 | ||||||||||||||||||
| Other assets | 164,441 | 152,150 | 144,982 | 139,644 | 125,739 | ||||||||||||||||||
| Total assets | $ | 6,644,498 | $ | 6,208,230 | $ | 6,087,017 | $ | 6,113,904 | $ | 5,546,055 | |||||||||||||
| Liabilities and Shareholders' Equity | |||||||||||||||||||||||
| Noninterest-bearing deposits | $ | 1,273,267 | $ | 1,052,726 | $ | 1,019,472 | $ | 1,015,081 | $ | 902,286 | |||||||||||||
| Interest-bearing deposits | 3,669,840 | 3,597,914 | 3,524,782 | 3,430,090 | 3,108,921 | ||||||||||||||||||
| Total deposits | 4,943,107 | 4,650,640 | 4,544,254 | 4,445,171 | 4,011,207 | ||||||||||||||||||
| Short-term borrowings | 77,136 | 43,578 | 82,029 | 122,294 | 113,844 | ||||||||||||||||||
| FHLB advances and other borrowings | 693,865 | 593,089 | 493,311 | 559,932 | 582,387 | ||||||||||||||||||
| Subordinated debt | 169,610 | 169,505 | 176,653 | 192,689 | 94,215 | ||||||||||||||||||
| Trust preferred debentures | 48,551 | 48,420 | 48,288 | 48,165 | 48,041 | ||||||||||||||||||
| Other liabilities | 78,640 | 71,838 | 80,571 | 90,131 | 56,473 | ||||||||||||||||||
| Total liabilities | 6,010,909 | 5,577,070 | 5,425,106 | 5,458,382 | 4,906,167 | ||||||||||||||||||
| Total shareholders’ equity | 633,589 | 631,160 | 661,911 | 655,522 | 639,888 | ||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 6,644,498 | $ | 6,208,230 | $ | 6,087,017 | $ | 6,113,904 | $ | 5,546,055 | |||||||||||||
| MIDLAND STATES BANCORP, INC. | |||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | |||||||||||||||||||
| As of | |||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||
| (in thousands) | 2020 | 2020 | 2019 | 2019 | 2019 | ||||||||||||||
| Loan Portfolio | |||||||||||||||||||
| Commercial loans and leases | $ | 1,856,435 | $ | 1,439,145 | $ | 1,387,766 | $ | 1,292,511 | $ | 1,149,370 | |||||||||
| Commercial real estate | 1,495,183 | 1,507,280 | 1,526,504 | 1,622,363 | 1,524,369 | ||||||||||||||
| Construction and land development | 207,593 | 208,361 | 208,733 | 215,978 | 250,414 | ||||||||||||||
| Residential real estate | 509,453 | 548,014 | 568,291 | 587,984 | 552,406 | ||||||||||||||
| Consumer | 770,759 | 673,404 | 710,116 | 609,999 | 596,968 | ||||||||||||||
| Total loans | $ | 4,839,423 | $ | 4,376,204 | $ | 4,401,410 | $ | 4,328,835 | $ | 4,073,527 | |||||||||
| Deposit Portfolio | |||||||||||||||||||
| Noninterest-bearing demand | $ | 1,273,267 | $ | 1,052,726 | $ | 1,019,472 | $ | 1,015,081 | $ | 902,286 | |||||||||
| Interest-bearing: | |||||||||||||||||||
| Checking | 1,484,728 | 1,425,022 | 1,342,788 | 1,222,599 | 1,009,023 | ||||||||||||||
| Money market | 877,675 | 849,642 | 787,662 | 753,869 | 732,573 | ||||||||||||||
| Savings | 594,685 | 534,457 | 522,456 | 526,938 | 442,017 | ||||||||||||||
| Time | 689,841 | 765,870 | 822,160 | 833,038 | 785,337 | ||||||||||||||
| Brokered time | 22,911 | 22,923 | 49,716 | 93,646 | 139,971 | ||||||||||||||
| Total deposits | $ | 4,943,107 | $ | 4,650,640 | $ | 4,544,254 | $ | 4,445,171 | $ | 4,011,207 | |||||||||
| MIDLAND STATES BANCORP, INC. | |||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | |||||||||||||||||||
| For the Quarter Ended | |||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||
| (dollars in thousands) | 2020 | 2020 | 2019 | 2019 | 2019 | ||||||||||||||
| Average Balance Sheets | |||||||||||||||||||
| Cash and cash equivalents | $ | 489,941 | $ | 337,851 | $ | 406,526 | $ | 259,427 | $ | 162,110 | |||||||||
| Investment securities | 650,356 | 662,450 | 631,294 | 666,157 | 636,946 | ||||||||||||||
| Loans | 4,696,288 | 4,384,206 | 4,359,144 | 4,352,635 | 4,086,720 | ||||||||||||||
| Loans held for sale | 99,169 | 19,844 | 36,974 | 31,664 | 40,177 | ||||||||||||||
| Nonmarketable equity securities | 50,661 | 45,124 | 43,745 | 44,010 | 44,217 | ||||||||||||||
| Total interest-earning assets | 5,986,415 | 5,449,475 | 5,477,683 | 5,353,893 | 4,970,170 | ||||||||||||||
| Non-earning assets | 619,411 | 624,594 | 649,169 | 636,028 | 618,023 | ||||||||||||||
| Total assets | $ | 6,605,826 | $ | 6,074,069 | $ | 6,126,852 | $ | 5,989,921 | $ | 5,588,193 | |||||||||
| Interest-bearing deposits | $ | 3,651,406 | $ | 3,549,515 | $ | 3,490,165 | $ | 3,429,063 | $ | 3,107,660 | |||||||||
| Short-term borrowings | 59,103 | 55,616 | 104,598 | 124,183 | 120,859 | ||||||||||||||
| FHLB advances and other borrowings | 692,470 | 532,733 | 531,419 | 591,516 | 607,288 | ||||||||||||||
| Subordinated debt | 169,560 | 170,026 | 182,149 | 106,090 | 94,196 | ||||||||||||||
| Trust preferred debentures | 48,487 | 48,357 | 48,229 | 48,105 | 47,982 | ||||||||||||||
| Total interest-bearing liabilities | 4,621,026 | 4,356,247 | 4,356,560 | 4,298,957 | 3,977,985 | ||||||||||||||
| Noninterest-bearing deposits | 1,280,983 | 986,178 | 1,028,670 | 967,192 | 921,115 | ||||||||||||||
| Other noninterest-bearing liabilities | 71,853 | 78,943 | 83,125 | 72,610 | 60,363 | ||||||||||||||
| Shareholders' equity | 631,964 | 652,701 | 658,497 | 651,162 | 628,730 | ||||||||||||||
| Total liabilities and shareholders' equity | $ | 6,605,826 | $ | 6,074,069 | $ | 6,126,852 | $ | 5,989,921 | $ | 5,588,193 | |||||||||
| Yields | |||||||||||||||||||
| Earning Assets | |||||||||||||||||||
| Cash and cash equivalents | 0.14 | % | 1.26 | % | 1.62 | % | 2.14 | % | 2.43 | % | |||||||||
| Investment securities | 3.05 | % | 3.23 | % | 3.10 | % | 3.00 | % | 3.11 | % | |||||||||
| Loans | 4.64 | % | 5.01 | % | 5.22 | % | 5.31 | % | 5.32 | % | |||||||||
| Loans held for sale | 4.07 | % | 3.87 | % | 4.12 | % | 3.02 | % | 4.50 | % | |||||||||
| Nonmarketable equity securities | 5.40 | % | 5.39 | % | 5.31 | % | 5.33 | % | 5.42 | % | |||||||||
| Total interest-earning assets | 4.10 | % | 4.56 | % | 4.70 | % | 4.85 | % | 4.94 | % | |||||||||
| Interest-Bearing Liabilities | |||||||||||||||||||
| Interest-bearing deposits | 0.61 | % | 0.95 | % | 1.03 | % | 1.08 | % | 1.09 | % | |||||||||
| Short-term borrowings | 0.19 | % | 0.73 | % | 0.67 | % | 0.68 | % | 0.70 | % | |||||||||
| FHLB advances and other borrowings | 1.69 | % | 2.24 | % | 2.26 | % | 2.36 | % | 2.34 | % | |||||||||
| Subordinated debt | 5.85 | % | 5.90 | % | 5.94 | % | 6.30 | % | 6.43 | % | |||||||||
| Trust preferred debentures | 4.86 | % | 6.02 | % | 6.41 | % | 6.83 | % | 7.17 | % | |||||||||
| Total interest-bearing liabilities | 1.01 | % | 1.35 | % | 1.43 | % | 1.44 | % | 1.47 | % | |||||||||
| Cost of Deposits | 0.45 | % | 0.74 | % | 0.80 | % | 0.84 | % | 0.84 | % | |||||||||
| Net Interest Margin | 3.32 | % | 3.48 | % | 3.56 | % | 3.70 | % | 3.76 | % | |||||||||
| MIDLAND STATES BANCORP, INC. | |||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | |||||||||||||||||||
| As of and for the Quarter Ended | |||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||
| (dollars in thousands, except per share data) | 2020 | 2020 | 2019 | 2019 | 2019 | ||||||||||||||
| Asset Quality | |||||||||||||||||||
| Loans 30-89 days past due | $ | 36,551 | $ | 40,392 | $ | 29,876 | $ | 23,118 | $ | 21,554 | |||||||||
| Nonperforming loans | 60,513 | 58,166 | 42,082 | 45,168 | 50,676 | ||||||||||||||
| Nonperforming assets | 74,707 | 67,158 | 50,027 | 50,058 | 54,473 | ||||||||||||||
| Net charge-offs | 3,062 | 12,835 | 2,194 | 5,369 | 1,242 | ||||||||||||||
| Loans 30-89 days past due to total loans | 0.76 | % | 0.92 | % | 0.68 | % | 0.53 | % | 0.53 | % | |||||||||
| Nonperforming loans to total loans | 1.25 | % | 1.33 | % | 0.96 | % | 1.04 | % | 1.24 | % | |||||||||
| Nonperforming assets to total assets | 1.12 | % | 1.08 | % | 0.82 | % | 0.82 | % | 0.98 | % | |||||||||
| Allowance for credit losses to total loans | 0.97 | % | 0.88 | % | 0.64 | % | 0.58 | % | 0.64 | % | |||||||||
| Allowance for credit losses to nonperforming loans | 77.82 | % | 66.27 | % | 66.60 | % | 55.29 | % | 51.16 | % | |||||||||
| Net charge-offs to average loans | 0.26 | % | 1.18 | % | 0.20 | % | 0.49 | % | 0.12 | % | |||||||||
| Wealth Management | |||||||||||||||||||
| Trust assets under administration | $ | 3,253,784 | $ | 2,967,536 | $ | 3,409,959 | $ | 3,281,260 | $ | 3,125,869 | |||||||||
| Market Data | |||||||||||||||||||
| Book value per share at period end | $ | 27.62 | $ | 26.99 | $ | 27.10 | $ | 26.93 | $ | 26.66 | |||||||||
| Tangible book value per share at period end (1) | $ | 18.72 | $ | 18.19 | $ | 18.64 | $ | 18.40 | $ | 18.36 | |||||||||
| Market price at period end | $ | 14.95 | $ | 17.49 | $ | 28.96 | $ | 26.05 | $ | 26.72 | |||||||||
| Shares outstanding at period end | 22,937,296 | 23,381,496 | 24,420,345 | 24,338,748 | 23,897,038 | ||||||||||||||
| Capital | |||||||||||||||||||
| Total capital to risk-weighted assets | 13.67 | % | 13.73 | % | 14.72 | % | 14.82 | % | 13.49 | % | |||||||||
| Tier 1 capital to risk-weighted assets | 9.71 | % | 9.76 | % | 10.52 | % | 10.35 | % | 10.85 | % | |||||||||
| Tier 1 leverage ratio | 7.75 | % | 8.39 | % | 8.74 | % | 8.77 | % | 9.27 | % | |||||||||
| Tier 1 common capital to risk-weighted assets | 8.44 | % | 8.47 | % | 9.20 | % | 9.02 | % | 9.38 | % | |||||||||
| Tangible common equity to tangible assets (1) | 6.67 | % | 7.08 | % | 7.74 | % | 7.58 | % | 8.20 | % | |||||||||
| (1) Non-GAAP financial measures. Refer to pages 13 - 15 for a reconciliation to the comparable GAAP financial measures. | |||||||||||||||||||
| MIDLAND STATES BANCORP, INC. | |||||||||||||||||||||||
| RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES | |||||||||||||||||||||||
| Adjusted Earnings Reconciliation | |||||||||||||||||||||||
| For the Quarter Ended | |||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||||||
| (dollars in thousands, except per share data) | 2020 | 2020 | 2019 | 2019 | 2019 | ||||||||||||||||||
| Income before income taxes - GAAP | $ | 15,993 | $ | 2,005 | $ | 16,071 | $ | 16,670 | $ | 21,394 | |||||||||||||
| Adjustments to noninterest income: | |||||||||||||||||||||||
| Gain on sales of investment securities, net | - | - | 635 | 25 | 14 | ||||||||||||||||||
| Other | 11 | (13 | ) | (6 | ) | - | (23 | ) | |||||||||||||||
| Total adjustments to noninterest income | 11 | (13 | ) | 629 | 25 | (9 | ) | ||||||||||||||||
| Adjustments to noninterest expense: | |||||||||||||||||||||||
| Loss (gain) on mortgage servicing rights held for sale | 391 | 496 | 95 | (70 | ) | (515 | ) | ||||||||||||||||
| Loss on repurchase of subordinated debt | - | 193 | 1,778 | - | - | ||||||||||||||||||
| Integration and acquisition expenses | 54 | 1,031 | 3,332 | 5,292 | 286 | ||||||||||||||||||
| Total adjustments to noninterest expense | 445 | 1,720 | 5,205 | 5,222 | (229 | ) | |||||||||||||||||
| Adjusted earnings pre tax | 16,427 | 3,738 | 20,647 | 21,867 | 21,174 | ||||||||||||||||||
| Adjusted earnings tax | 3,543 | 932 | 4,537 | 5,445 | 4,978 | ||||||||||||||||||
| Adjusted earnings - non-GAAP | 12,884 | 2,806 | 16,110 | 16,422 | 16,196 | ||||||||||||||||||
| Preferred stock dividends, net | - | - | - | (22 | ) | 34 | |||||||||||||||||
| Adjusted earnings available to common shareholders - non-GAAP | $ | 12,884 | $ | 2,806 | $ | 16,110 | $ | 16,444 | $ | 16,162 | |||||||||||||
| Adjusted diluted earnings per common share | $ | 0.55 | $ | 0.11 | $ | 0.64 | $ | 0.66 | $ | 0.66 | |||||||||||||
| Adjusted return on average assets | 0.78 | % | 0.19 | % | 1.04 | % | 1.09 | % | 1.16 | % | |||||||||||||
| Adjusted return on average shareholders' equity | 8.20 | % | 1.73 | % | 9.71 | % | 10.01 | % | 10.33 | % | |||||||||||||
| Adjusted return on average tangible common equity | 12.14 | % | 2.53 | % | 14.15 | % | 14.52 | % | 15.19 | % | |||||||||||||
| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||||||
| RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (continued) | ||||||||||||||||||||||||
| Efficiency Ratio Reconciliation | ||||||||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||||||
| (dollars in thousands) | 2020 | 2020 | 2019 | 2019 | 2019 | |||||||||||||||||||
| Noninterest expense - GAAP | $ | 40,782 | $ | 42,675 | $ | 46,325 | $ | 48,025 | $ | 40,194 | ||||||||||||||
| (Loss) gain on mortgage servicing rights held for sale | (391 | ) | (496 | ) | (95 | ) | 70 | 515 | ||||||||||||||||
| Loss on repurchase of subordinated debt | - | (193 | ) | (1,778 | ) | - | - | |||||||||||||||||
| Integration and acquisition expenses | (54 | ) | (1,031 | ) | (3,332 | ) | (5,292 | ) | (286 | ) | ||||||||||||||
| Adjusted noninterest expense | $ | 40,337 | $ | 40,955 | $ | 41,120 | $ | 42,803 | $ | 40,423 | ||||||||||||||
| Net interest income - GAAP | $ | 48,989 | $ | 46,651 | $ | 48,687 | $ | 49,450 | $ | 46,077 | ||||||||||||||
| Effect of tax-exempt income | 438 | 485 | 474 | 502 | 526 | |||||||||||||||||||
| Adjusted net interest income | 49,427 | 47,136 | 49,161 | 49,952 | 46,603 | |||||||||||||||||||
| Noninterest income - GAAP | $ | 19,396 | $ | 8,598 | $ | 19,014 | $ | 19,606 | $ | 19,587 | ||||||||||||||
| Loan servicing rights impairment (recapture) | 107 | 8,468 | 1,613 | 1,060 | (559 | ) | ||||||||||||||||||
| Gain on sales of investment securities, net | - | - | (635 | ) | (25 | ) | (14 | ) | ||||||||||||||||
| Other | (11 | ) | 13 | 6 | - | 23 | ||||||||||||||||||
| Adjusted noninterest income | 19,492 | 17,079 | 19,998 | 20,641 | 19,037 | |||||||||||||||||||
| Adjusted total revenue | $ | 68,919 | $ | 64,215 | $ | 69,159 | $ | 70,593 | $ | 65,640 | ||||||||||||||
| Efficiency ratio | 58.53 | % | 63.78 | % | 59.46 | % | 60.63 | % | 61.58 | % | ||||||||||||||
| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||||||
| RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (continued) | ||||||||||||||||||||||||
| Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share | ||||||||||||||||||||||||
| As of | ||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||||||
| (dollars in thousands, except per share data) | 2020 | 2020 | 2019 | 2019 | 2019 | |||||||||||||||||||
| Shareholders' Equity to Tangible Common Equity | ||||||||||||||||||||||||
| Total shareholders' equity—GAAP | $ | 633,589 | $ | 631,160 | $ | 661,911 | $ | 655,522 | $ | 639,888 | ||||||||||||||
| Adjustments: | ||||||||||||||||||||||||
| Preferred stock | - | - | - | - | (2,684 | ) | ||||||||||||||||||
| Goodwill | (172,796 | ) | (172,796 | ) | (171,758 | ) | (171,074 | ) | (164,673 | ) | ||||||||||||||
| Other intangibles, net | (31,495 | ) | (33,124 | ) | (34,886 | ) | (36,690 | ) | (33,893 | ) | ||||||||||||||
| Tangible common equity | $ | 429,298 | $ | 425,240 | $ | 455,267 | $ | 447,758 | $ | 438,638 | ||||||||||||||
| Total Assets to Tangible Assets: | ||||||||||||||||||||||||
| Total assets—GAAP | $ | 6,644,498 | $ | 6,208,230 | $ | 6,087,017 | $ | 6,113,904 | $ | 5,546,055 | ||||||||||||||
| Adjustments: | ||||||||||||||||||||||||
| Goodwill | (172,796 | ) | (172,796 | ) | (171,758 | ) | (171,074 | ) | (164,673 | ) | ||||||||||||||
| Other intangibles, net | (31,495 | ) | (33,124 | ) | (34,886 | ) | (36,690 | ) | (33,893 | ) | ||||||||||||||
| Tangible assets | $ | 6,440,207 | $ | 6,002,310 | $ | 5,880,373 | $ | 5,906,140 | $ | 5,347,489 | ||||||||||||||
| Common Shares Outstanding | 22,937,296 | 23,381,496 | 24,420,345 | 24,338,748 | 23,897,038 | |||||||||||||||||||
| Tangible Common Equity to Tangible Assets | 6.67 | % | 7.08 | % | 7.74 | % | 7.58 | % | 8.20 | % | ||||||||||||||
| Tangible Book Value Per Share | $ | 18.72 | $ | 18.19 | $ | 18.64 | $ | 18.40 | $ | 18.36 | ||||||||||||||
| Return on Average Tangible Common Equity (ROATCE) | ||||||||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||||||
| (dollars in thousands) | 2020 | 2020 | 2019 | 2019 | 2019 | |||||||||||||||||||
| Net income available to common shareholders | $ | 12,569 | $ | 1,549 | $ | 12,792 | $ | 12,677 | $ | 16,321 | ||||||||||||||
| Average total shareholders' equity—GAAP | $ | 631,964 | $ | 652,701 | $ | 658,497 | $ | 651,162 | $ | 628,730 | ||||||||||||||
| Adjustments: | ||||||||||||||||||||||||
| Preferred stock | - | - | - | (814 | ) | (2,708 | ) | |||||||||||||||||
| Goodwill | (172,796 | ) | (171,890 | ) | (171,082 | ) | (166,389 | ) | (164,673 | ) | ||||||||||||||
| Other intangibles, net | (32,275 | ) | (33,951 | ) | (35,745 | ) | (34,519 | ) | (34,689 | ) | ||||||||||||||
| Average tangible common equity | $ | 426,893 | $ | 446,860 | $ | 451,670 | $ | 449,440 | $ | 426,660 | ||||||||||||||
| ROATCE | 11.84 | % | 1.39 | % | 11.24 | % | 11.19 | % | 15.34 | % | ||||||||||||||
Exhibit 99.2
1 Midland States Bancorp, Inc. NASDAQ: MSBI Second Quarter 2020 Earnings Call
2 Forward - Looking Statements. This presentation may contain forward - looking statements within the meaning of the federal securities laws. Forward - looking statements expressing management’s current expectations, forecasts of future events or long - te rm goals may be based upon beliefs, expectations and assumptions of Midland’s management, and are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “intend,” “estimate,” “may,” “will,” “would,” “could,” “should” o r o ther similar expressions. All statements in this presentation speak only as of the date they are made, and Midland undertakes no obligation to update any statement. A number of factors, many of which are beyond the ability of Midland to control or predic t, could cause actual results to differ materially from those in its forward - looking statements including the effects of the Corona virus Disease 2019 (COVID - 19) pandemic, including its potential effects on the economic environment, our customers and our operations, as well as any changes to federal, state or local government laws, regulations or orders in connection with the pandemic. These risks and uncertainties should be considered in evaluating forward - looking statements, and undue reliance should not be placed o n such statements. Additional information concerning Midland and its businesses, including additional factors that could materi all y affect Midland’s financial results, are included in Midland’s filings with the Securities and Exchange Commission. Use of Non - GAAP Financial Measures. This presentation may contain certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States (“GAAP”). These non - GAAP financial measure s include “Adjusted Earnings,” “Adjusted Diluted Earnings Per Share,” “Adjusted Return on Average Assets,” “Adjusted Return on Average Shareholders’ Equity,” “Adjusted Return on Average Tangible Common Equity,” “Efficiency Ratio,” “Tangible Common Equ ity to Tangible Assets,” “Tangible Book Value Per Share,” and “Return on Average Tangible Common Equity.” The Company believes th at 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 m ay not be comparable to other similarly titled measures as presented by other companies. Reconciliations of these non - GAAP measures are provided in the Appendix section of this presentation.
3 Overview of 2Q20 3 Positive Trends Across Multiple Business Lines 2Q20 Earnings Continued Progress on Strategic Initiatives • Wealth management AUA increased due to improved market performance • Equipment financing group had record quarter of loan closings • Strong quarter of residential mortgage banking revenue driven by demand for refinancings • Commercial FHA loan originations and revenue increased significantly from prior quarter • Further improvement in deposit mix with significant growth in lower - cost categories • Efficiency ratio (1) improved to 58.5% from 63.8% in prior quarter Stable Asset Quality • Slight increase in nonperforming loans • Significant decline in new loan deferral requests with most existing modifications not expected to require a second deferral • Allowance for credit losses strengthened to 0.97% of total loans • Net income of $12.6 million, or $0.53 diluted EPS • 2Q20 results include a $0.4 million loss on residential MSRs held for sale and $54,000 in integration and acquisition expenses, impacting diluted EPS by $0.02 Notes: (1) Represents a non - GAAP financial measure. See “Non - GAAP Reconciliation” in the appendix. Strong Balance Sheet Growth • Loan growth of 10.6% from the end of the prior quarter • Deposit growth of 6.3% from the end of the prior quarter
4 Paycheck Protection Program Overview Paycheck Protection Program (as of 6/30/20) Total Loans Funded $313.1 million Number of Loans 2,311 Average Loan Size $135,482 Loans Outstanding $276.0 million Average Fee 3.5% Total Fees $9.7 million Impact on 2Q20 Financials At or for the Three Months Ended 6/30/20 Metrics Excluding PPP Impact Total Loans $4.84 billion $4.56 billion Average Loans $4.70 billion $4.46 billion Net Interest Income FTE (1) $49.4 million $48.0 million Net Interest Margin (1) 3.32% 3.35% ACL/Total Loans 0.97% 1.02% 1. Loan fees and deferred loan origination costs being amortized over an estimated 24 - month life of PPP loans
5 Loan Deferral Overview C&I and CRE Deferrals by Industry ($ in millions) Commercial $296.6 33% CRE $512.4 57% Consumer $61.2 7% Other $28.1 3% C&I and CRE Loan Deferrals (as of 6/30/20) Total Loans Deferred $809.0 million Number of Loans 2,094 Modification Generally 90 - day payment deferrals % of Total C&I and CRE Loans 22.7% Estimated % of Deferred Loans Resuming Payments 60% - 65% Estimated Need for Second Deferral (1) $299.4 million Deferrals by Portfolio RE Rental & Leasing $153.0 19% Hotels/Motels $146.2 18% Healthcare $68.2 8% Transit and Ground Passenger $62.5 8% General Freight Trucking $59.4 7% Retail Trade $53.4 7% Assisted Living $50.1 6% Industries <5% $216.2 27% ($ in millions) Estimated 2 nd Deferrals by Industry Hotels/Motels $124.2 41% Transit and Ground Passenger $55.5 19% RE Rental & Leasing $27.1 9% Assisted Living $24.8 8% All Others $67.8 23% ($ in millions) 1. Estimated deferrals based on survey and discussions with borrowers through July 17, 2020
6 2Q 2020 1Q 2020 2Q 2019 Commercial loans and leases $ 1,856 $ 1,439 $ 1,149 Commercial real estate 1,495 1,508 1,524 Construction and land development 208 208 250 Residential real estate 509 548 552 Consumer 771 673 597 Total Loans $ 4,839 $ 4,376 $ 4,074 Loan Portfolio Total Loans and Average Loan Yield • Total loans increased $463.2 million, or 10.6% from prior quarter, to $4.84 billion • Increase primarily attributable to growth in commercial and consumer portfolios; partially offset by declines in the commercial real estate and residential real estate portfolios • PPP loans contributed $276.0 million to loan growth • Equipment finance balances increased $78.2 million, or 11.6%, from March 31, 2020 • $104.8 million increase in warehouse credit line utilization by commercial FHA loan originator Loan Portfolio Mix (in millions, as of quarter - end) (in millions, as of quarter - end) $4,074 $4,329 $4,401 $4,376 $4,839 5.32% 5.31% 5.22% 5.01% 4.64% 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 Total Loans Average Loan Yield
7 Midland Equipment Finance Portfolio Overview ($ in millions) Portfolio Characteristics (as of 6/30/20) Nationwide portfolio providing financing solutions to equipment vendors and end - users Total Outstanding Loans and Leases $750.6 million (15.5% of total loans) Number of Loans and Leases 5,694 Average Loan/Lease Size $129,896 Largest Loan/Lease $1.6 million Weighted Average Rate 4.84% Total Deferred Loans/Leases $233.0 million (31.5% of portfolio) Average Size of Deferred Loans/Leases $152,288 Location of Deferred Loans/Leases 16% in CA, 14% in FL; no other state >10% Estimated 2 nd Deferrals by Industry (1) Avg. FICO Score 604 Transit and Ground Passenger $61.4 26% General Freight Trucking $55.6 24% Manufacturing $31.3 14% Healthcare $28.4 12% Construction $20.8 9% All Others <2% of Total $35.5 15% Deferrals by Industry Transit and Ground Passenger $54.4 71% General Freight Trucking $6.4 8% Manufacturing $2.3 3% Arts, Ent. & Rec. $2.2 3% All Others <3% of Total $11.9 15% $77.2 Million in Second Deferrals 1. Estimated deferrals based on survey and discussions with borrowers through July 17, 2020
8 Hotel/Motel Portfolio Overview Estimated 2 nd Deferrals by Chain Scale ($ in millions) Upper Midscale Chain $96.4 78% Upscale Chain $16.7 13% Midscale Chain $10.0 8% Other $1.0 1% Portfolio Characteristics (CRE & C&I) (as of 6/30/20) Total Outstanding $172.5 million (3.6% of total loans) Number of Loans 57 Average Loan Size $3.0 million Largest Loan $11.1 million Average LTV 54% Total Deferred Loans $146.2 million (84.8% of portfolio) Average LTV of Deferred Loans 52% Estimated Need for 2 nd Deferral $124.1 million Portfolio by State IL $93.9 54% MO $55.2 32% WI $11.1 7% CO $11.1 6% Other $1.2 1%
9 GreenSky Consumer Loan Portfolio Overview Delinquency Rate (greater than 60 days) Portfolio Characteristics (as of 6/30/20) Total Outstanding $680.5 million (14.1% of total loans) Number of Loans 297,241 Average Loan Size $2,289 Average FICO Score 746 Total Deferred Loans $35.8 million (5.3% of portfolio) ▪ Average FICO score of 746 ▪ No losses to MSBI in 9 year history of the portfolio ▪ Portfolio can be sold to provide liquidity; Loan sales were executed at par in May and June 2020 Prime Credit 0.81% 0.66% 0.61% 0.50% 0.47% 0.34% Jan 2020 Feb 2020 Mar 2020 Apr 2020 May 2020 Jun 2020 ▪ Cash flow waterfall structure » Cash flow from portfolio covers servicing fee, credit losses and our target margin » Excess cash flow is an incentive fee to GreenSky that could be used to cover additional losses » GreenSky received incentive fees in 17 of past 18 months including every month in 2020 ▪ Escrow deposits » Escrow deposits absorb losses in excess of cash flow waterfall » Escrow account totaled $29.5 million at 6/30/20 or 4.3% of the portfolio Credit Enhancement
10 2Q 2020 1Q 2020 2Q 2019 Noninterest - bearing demand $ 1,273 $ 1,053 $ 902 Interest - bearing: Checking 1,485 1,425 1,009 Money market 877 850 733 Savings 595 534 442 Time 690 766 785 Brokered time 23 23 140 Total Deposits $4,943 $4,651 $4,011 Total Deposits Total Deposits and Cost of Deposits • Total deposits increased $292.5 million, or 6.3% from prior quarter, to $4.94 billion • Growth in deposits attributable to increase in core deposits, primarily from commercial customers, partially driven by inflows of PPP - related funds • Continued intentional run - off of higher - cost time deposits, replaced with lower - cost core deposits • Time deposits decreased $76.0 million due to run - off of higher - cost CDs with promotional rates Deposit Mix (in millions, as of quarter - end) (in millions, as of quarter - end) $4,011 $4,445 $4,544 $4,651 $4,943 0.84% 0.84% 0.80% 0.74% 0.45% 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 Total Deposits Cost of Deposits
11 $3.4 $3.1 $3.6 $2.2 $1.8 $46.1 $49.5 $48.7 $46.7 $49.0 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 NII Accretion Income 0.25% 0.20% 0.23% 0.16% 0.12% 3.76% 3.70% 3.56% 3.48% 3.32% 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 NIM Accretion Income • Net interest income increased 5.0% from the prior quarter due to lower cost of funds and higher average loan balances • Excluding the impact of accretion income, net interest margin declined 12 basis points • Decline in net interest margin was primarily attributable to excess liquidity invested in lower - yielding earning assets and the addition of low - interest PPP loans, which collectively had an 18 bps impact on NIM in 2Q20 • 29 basis point decline in cost of deposits partially offset decline in earning asset yields • PPP loan fees amortized over 24 month term of loans Net Interest Income/Margin Net Interest Margin Net Interest Income (in millions)
12 Factors Impacting Net Interest Margin in 3Q20 • $107.1 million in time deposits scheduled to mature in 3Q20 with weighted average rate of 1.36% • $183.3 million in money market accounts at teaser rates of 1.60% scheduled to reprice in 3Q20 • $31.1 million in subordinated debt moved to floating rate in June 2020, resulting in reduction of approximately 130 bps in 3Q20 • Building liquidity on balance sheet will continue to put pressure on NIM going forward • PPP loans will positively impact NIM upon forgiveness
13 $5.50 $6.00 $5.38 $5.68 $5.70 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 $3,126 $3,281 $3,410 $2,968 $3,254 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 • During 2Q20, assets under administration increased $286.2 million, primarily due to market performance • Total Wealth Management revenue was up slightly from prior quarter • Fees increased due to improved market performance, partially offset by reduction in trust fees related to tax preparation from prior quarter Wealth Management Wealth Management Revenue Assets Under Administration (in millions) (in millions )
14 Noninterest Income • Noninterest income increased 125.6% from prior quarter, which included an $8.5 million impairment of commercial mortgage servicing rights (“MSRs”) • Excluding the impact of the impairment of commercial MSRs, noninterest income increased 13.5% primarily due to higher commercial FHA and residential mortgage banking revenue • Increase was offset by lower retail banking fees including service charges and overdraft fees due to the impact of COVID - 19 pandemic Noninterest Income (in millions) $19.6 $19.6 $19.0 $17.1 $19.4 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 All Other Community Banking Revenue Residential Mortgage Commercial FHA Wealth Management Notes: (1) Represents service charges, interchange revenue, net gain (loss) on sale of investment securities, and other income (2) Excludes $8.5 million impairment of commercial mortgage servicing rights (1) (2)
15 Noninterest Expense and Operating Efficiency • Efficiency Ratio (1) was 58.5% in 2Q20 vs. 63.8% in 1Q20 • Adjustments to non - interest expense: • Excluding these adjustments, noninterest expense declined $0.6 million on a linked - quarter basis • Decrease in noninterest expense was primarily attributable to lower salaries and employee benefits expense resulting from staffing level adjustments made in 1Q20 Noninterest Expense and Efficiency Ratio (1) (Noninterest expense in millions) $(0.2) $5.2 $5.2 $1.7 $0.4 $40.2 $48.0 $46.3 $42.7 $40.8 61.6% 60.6% 59.5% 63.8% 58.5% 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 Total Noninterest Expense Adjustments to Noninterest Expense Efficiency Ratio Notes: (1) Represents a non - GAAP financial measure. See “Non - GAAP Reconciliation” in the appendix. ($ in millions) 2Q20 1Q20 Integration and acquisition related expenses ($0.05) ($1.0) Loss on repurchase of subordinated debt - ($0.2) Loss on MSRs held for sale $(0.4) $(0.5)
16 Asset Quality NCO / Average Loans • Nonperforming loans/total loans declined to 1.25% from 1.33% at the end of the prior quarter • Net charge - offs of $3.1 million, or 0.26% of average loans • Provision for loan losses of $11.6 million in 2Q20 primarily reflects changes in portfolio and a continued downgrade in economic forecast due to the impact of COVID - 19 pandemic • At 6/30/20, approximately 96% of ACL was allocated to general reserves Nonperforming Loans / Total Loans (Total Loans as of quarter - end) 1.24% 1.04% 0.96% 1.33% 1.25% 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 0.12% 0.49% 0.20% 1.18% 0.26% 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020
17 Changes in Allowance for Credit Losses ACL 3/31/20 ACL 6/30/20 Specific Reserves Portfolio Changes Economic Factors ▪ Changes to specific reserves ▪ New loans ▪ Changes in credit quality including risk downgrades and deferrals ▪ Aging of existing portfolio ▪ Other charge - offs and recoveries ▪ Changes to macro - economic variables and forecasts ▪ Changes to other economic qualitative factors ($ in thousands)
18 ACL by Portfolio Portfolio Total Loans at 6/30/20 ACL % of Total Loans Total Loans at 3/31/20 ACL % of Total Loans Commercial $ 715,206 $ 4,916 0.69% $ 649,403 $ 4,900 0.75% Warehouse Lines 127,568 - 0.00% 22,772 - 0.00% Commercial Other 767,175 7,297 0.95% 443,376 6,840 1.54% Equipment Finance 376,499 6,553 1.74% 326,004 6,431 1.97% Paycheck Protection Program 276,007 414 0.15% - - - Lease Financing 374,054 6,155 1.65% 346,366 5,309 1.53% CRE non - owner occupied 804,147 10,247 1.27% 809,628 6,285 0.78% CRE owner occupied 465,217 6,378 1.37% 471,360 4,330 0.92% Multi - family 142,194 2,982 2.10% 142,770 2,486 1.74% Farmland 83,625 689 0.82% 83,522 482 0.58% Construction and Land Development 207,593 1,512 0.73% 208,361 1,321 0.63% Residential RE First Lien 411,635 3,960 0.96% 441,495 3,825 0.87% Other Residential 97,818 870 0.89% 106,519 813 0.76% Consumer 81,447 354 0.43% 85,162 472 0.55% Consumer Other (1) 689,312 1,733 0.25% 588,242 1,482 0.25% Total Loans 4,839,423 47,093 0.97% 4,376,204 38,545 0.88% Loans (excluding GreenSky, PPP and warehouse lines) 3,698,092 44,835 1.21% 3,715,229 36,949 0.99% ($ in thousands) Notes: (1) Primarily consists of loans originated through GreenSky relationship
19 Outlook and Near - Term Priorities • Maintain strong capital and liquidity positions to continue supporting clients and communities through the duration of the COVID - 19 pandemic • Continue executing on technology initiatives to improve customer experience, reduce expenses and increase operational efficiencies » New online residential mortgage application portal » Improvements to mobile banking app » Implementation of new customer experience tool to gather and evaluate customer survey data » New online account opening tool launching in 3Q20 • Continued evaluation of all areas of operations to reduce expenses 19
20 APPENDIX
21 Commercial Loans and Leases by Industry 21 RE / Rental & Leasing 22.2% All Others 10.8% Manufacturing 8.1% Accommodation & Food Svcs 7.5% Retail Trade 7.3% Construction - General 7.0% Assisted Living 6.9% Finance and Insurance 6.1% Health Care 5.1% General Freight Trucking 5.1% Ag., Forestry, & Fishing 5.0% Other Services 3.4% Trans. / Ground Passenger 3.3% Wholesale Trade 2.2% Industries as a percentage of Commercial, CRE and Equipment Finance Loans and Leases as of 6/30/20
22 Commercial Real Estate Portfolio by Collateral Type 22 Retail 15.1% All Others 12.3% Assisted Living 10.9% Multi - Family 9.6% Hotel/Motel 9.3% Industrial / Warehouse 9.0% Office 6.5% Residential 1 - 4 Family 6.2% Farmland 3.9% Medical Building 3.7% C - Store / Gas Station 3.4% Developed Land 2.8% Car Dealerships 2.5% Raw Land 2.2% Mixed Use / Other 2.1% Church 0.5% Collateral type as a percentage of the Commercial Real Estate and Construction Portfolio as of 6/30/20
23 Capital and Liquidity Overview Capital Ratios (as of 6/30/20) Liquidity Sources (as of 6/30/20) 6.67% 8.44% 7.75% 9.71% 13.67% 11.28% 9.01% 11.28% 12.05% 0.00% 5.00% 10.00% 15.00% TCE/TA Tier 1 Common Tier 1 Leverage Tier 1 RBC Total RBC Consolidated Bank Level ($ in millions) Cash and Cash Equivalents $ 519.9 Unpledged Securities 435.0 FHLB Committed Liquidity 329.4 FRB Discount Window Availability 57.2 Primary Liquidity 1,341.5 FRB – PPP Liquidity Facility (1) 250.0 Secondary Liquidity 250.0 Total Estimated Liquidity $ 1,591.5 Conditional Funding Based on Market Conditions Additional Credit Facility $ 250.0 Brokered CDs (additional capacity) $ 500.0 (1) Enrolled in PPP facility – loans available to submit Other Liquidity Holding Company Cash Position of $62.9 Million
24 Adjusted Earnings Reconciliation (dollars in thousands, except per share data) Income before income taxes - GAAP $ 15,993 $ 2,005 $ 16,071 $ 16,670 $ 21,394 Adjustments to noninterest income: Gain on sales of investment securities, net - - 635 25 14 Other 11 (13) (6) - (23) Total adjustments to noninterest income 11 (13) 629 25 (9) Adjustments to noninterest expense: Loss (gain) on mortgage servicing rights held for sale 391 496 95 (70) (515) Loss on repurchase of subordinated debt - 193 1,778 - - Integration and acquisition expenses 54 1,031 3,332 5,292 286 Total adjustments to noninterest expense 445 1,720 5,205 5,222 (229) Adjusted earnings pre tax 16,427 3,738 20,647 21,867 21,174 Adjusted earnings tax 3,543 932 4,537 5,445 4,978 Adjusted earnings - non-GAAP 12,884 2,806 16,110 16,422 16,196 Preferred stock dividends, net - - - (22) 34 Adjusted earnings available to common shareholders - non-GAAP $ 12,884 $ 2,806 $ 16,110 $ 16,444 $ 16,162 Adjusted diluted earnings per common share $ 0.55 $ 0.11 $ 0.64 $ 0.66 $ 0.66 Adjusted return on average assets 0.78 % 0.19 % 1.04 % 1.09 % 1.16 % Adjusted return on average shareholders' equity 8.20 % 1.73 % 9.71 % 10.01 % 10.33 % Adjusted return on average tangible common equity 12.14 % 2.53 % 14.15 % 14.52 % 15.19 % MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES For the Quarter Ended 2020 2020 2019 2019 2019 June 30, March 31, December 31, September 30, June 30,
25 Efficiency Ratio Reconciliation (dollars in thousands) Noninterest expense - GAAP $ 40,782 $ 42,675 $ 46,325 $ 48,025 $ 40,194 (Loss) gain on mortgage servicing rights held for sale (391) (496) (95) 70 515 Loss on repurchase of subordinated debt - (193) (1,778) - - Integration and acquisition expenses (54) (1,031) (3,332) (5,292) (286) Adjusted noninterest expense $ 40,337 $ 40,955 $ 41,120 $ 42,803 $ 40,423 Net interest income - GAAP $ 48,989 $ 46,651 $ 48,687 $ 49,450 $ 46,077 Effect of tax-exempt income 438 485 474 502 526 Adjusted net interest income 49,427 47,136 49,161 49,952 46,603 Noninterest income - GAAP $ 19,396 $ 8,598 $ 19,014 $ 19,606 $ 19,587 Loan servicing rights impairment (recapture) 107 8,468 1,613 1,060 (559) Gain on sales of investment securities, net - - (635) (25) (14) Other (11) 13 6 - 23 Adjusted noninterest income 19,492 17,079 19,998 20,641 19,037 Adjusted total revenue $ 68,919 $ 64,215 $ 69,159 $ 70,593 $ 65,640 Efficiency ratio 58.53 % 63.78 % 59.46 % 60.63 % 61.58 % MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (continued) For the Quarter Ended 2020 2020 2019 2019 2019 June 30, March 31, December 31, September 30, June 30,
26 Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share (dollars in thousands, except per share data) Shareholders' Equity to Tangible Common Equity Total shareholders' equity—GAAP $ 633,589 $ 631,160 $ 661,911 $ 655,522 $ 639,888 Adjustments: Preferred stock - - - - (2,684) Goodwill (172,796) (172,796) (171,758) (171,074) (164,673) Other intangibles, net (31,495) (33,124) (34,886) (36,690) (33,893) Tangible common equity $ 429,298 $ 425,240 $ 455,267 $ 447,758 $ 438,638 Total Assets to Tangible Assets: Total assets—GAAP $ 6,644,498 $ 6,208,230 $ 6,087,017 $ 6,113,904 $ 5,546,055 Adjustments: Goodwill (172,796) (172,796) (171,758) (171,074) (164,673) Other intangibles, net (31,495) (33,124) (34,886) (36,690) (33,893) Tangible assets $ 6,440,207 $ 6,002,310 $ 5,880,373 $ 5,906,140 $ 5,347,489 Common Shares Outstanding 22,937,296 23,381,496 24,420,345 24,338,748 23,897,038 Tangible Common Equity to Tangible Assets 6.67 % 7.08 % 7.74 % 7.58 % 8.20 % Tangible Book Value Per Share $ 18.72 $ 18.19 $ 18.64 $ 18.40 $ 18.36 Return on Average Tangible Common Equity (ROATCE) (dollars in thousands) Net income available to common shareholders $ 12,569 $ 1,549 $ 12,792 $ 12,677 $ 16,321 Average total shareholders' equity—GAAP $ 631,964 $ 652,701 $ 658,497 $ 651,162 $ 628,730 Adjustments: Preferred stock - - - (814) (2,708) Goodwill (172,796) (171,890) (171,082) (166,389) (164,673) Other intangibles, net (32,275) (33,951) (35,745) (34,519) (34,689) Average tangible common equity $ 426,893 $ 446,860 $ 451,670 $ 449,440 $ 426,660 ROATCE 11.84 % 1.39 % 11.24 % 11.19 % 15.34 % MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (continued) As of June 30, March 31, December 31, September 30, June 30, 2020 2020 2019 2019 2019 For the Quarter Ended 2020 2020 2019 2019 2019 June 30, March 31, December 31, September 30, June 30,