Form 8-K
0001466026 False 0001466026 2022-10-20 2022-10-20 iso4217:USD xbrli:shares iso4217:USD xbrli:shares
 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________

FORM 8-K

_________________

CURRENT REPORT

Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  October 20, 2022

_______________________________

Midland States Bancorp, Inc.

(Exact name of registrant as specified in its charter)

_______________________________

Illinois001-3527237-1233196
(State or Other Jurisdiction of Incorporation)(Commission File Number)(I.R.S. Employer Identification No.)

1201 Network Centre Drive

Effingham, Illinois 62401

(Address of Principal Executive Offices) (Zip Code)

(217) 342-7321

(Registrant's telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

_______________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $0.01 par valueMSBINasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 
 
Item 2.02. Results of Operations and Financial Condition.

On October 20, 2022, Midland States Bancorp, Inc. (the “Company”) issued a press release announcing its financial results for the third quarter of 2022. The press release is attached as Exhibit 99.1.

Item 7.01. Regulation FD Disclosure.

On October 20, 2022, the Company made available on its website a slide presentation regarding the Company's third quarter 2022 financial results, which will be used as part of a publicly accessible conference call on October 21, 2022.  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.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.  

Exhibit No. Description
   
99.1 Press Release of Midland States Bancorp, Inc., dated October 20, 2022  
99.2 Slide Presentation of Midland States Bancorp, Inc. regarding third quarter 2022 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: October 20, 2022By: /s/ Eric T. Lemke        
  Eric T. Lemke
  Chief Financial Officer
  

 

EdgarFiling

EXHIBIT 99.1

Midland States Bancorp, Inc. Announces 2022 Third Quarter Results

Summary

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

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

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

Net Interest Margin

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

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

Net Interest Income

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

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

Noninterest Income

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

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

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

Noninterest Expense

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

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

Loan Portfolio

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

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

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

Deposits

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

Asset Quality

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

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

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

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

Capital

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

 Bank Level
Ratios as of
Sept. 30, 2022
Consolidated
Ratios as of
Sept. 30, 2022
Minimum
Regulatory
Requirements (2)
Total capital to risk-weighted assets11.19%12.79%10.50%
Tier 1 capital to risk-weighted assets10.43%10.05%8.50%
Tier 1 leverage ratio9.75%9.40%4.00%
Common equity Tier 1 capital10.43%7.56%7.00%
Tangible common equity to tangible assets (1)NA5.82%NA

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

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

Stock Repurchase Program

During the third quarter of 2022, the Company did not repurchase any shares under its stock repurchase program. As of September 30, 2022, the Company had $18.6 million remaining under the current stock repurchase authorization.

Conference Call, Webcast and Slide Presentation

The Company will host a conference call and webcast at 7:30 a.m. Central Time on Friday, October 21, 2022, to discuss its financial results.

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

A slide presentation relating to the third quarter 2022 financial results will be accessible prior to the scheduled conference call. This earnings release should be read together with the slide presentation. The slide presentation and webcast of the conference call can be accessed on the Webcasts and Presentations page of the Company’s investor relations website at investors.midlandsb.com under the “News and Events” tab.

About Midland States Bancorp, Inc.

Midland States Bancorp, Inc. is a community-based financial holding company headquartered in Effingham, Illinois, and is the sole shareholder of Midland States Bank. As of September 30, 2022, the Company had total assets of approximately $7.81 billion, and its Wealth Management Group had assets under administration of approximately $3.45 billion. Midland provides a full range of commercial and consumer banking products and services and business equipment financing, merchant credit card services, trust and investment management, insurance and financial planning services. For additional information, visit https://www.midlandsb.com/ or https://www.linkedin.com/company/midland-states-bank.

Non-GAAP Financial Measures

Some of the financial measures included in this press release are not measures of financial performance recognized in accordance with GAAP. These non-GAAP financial measures include “Adjusted Earnings,” “Adjusted Diluted Earnings Per Common Share,” “Adjusted Return on Average Assets,” “Adjusted Return on Average Shareholders’ Equity,” “Adjusted Return on Average Tangible Common Equity,” “Adjusted Pre-Tax, Pre-Provision Earnings,” “Adjusted Pre-Tax, Pre-Provision Return on Average Assets,” “Efficiency Ratio,” “Tangible Common Equity to Tangible Assets,” “Tangible Book Value Per Share” and “Return on Average Tangible Common Equity.” The Company believes these non-GAAP financial measures provide both management and investors a more complete understanding of the Company’s funding profile and profitability. These non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP financial measures. Not all companies use the same calculation of these measures; therefore, this presentation may not be comparable to other similarly titled measures as presented by other companies.

Forward-Looking Statements

Readers should note that in addition to the historical information contained herein, this press release includes "forward-looking statements" within the meanings of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including but not limited to statements about the Company’s plans, objectives, future performance, goals and future earnings levels. These statements are subject to many risks and uncertainties, including changes in interest rates and other general economic, business and political conditions, the impact of inflation, the effects of the COVID-19 pandemic and its potential effects on the economic environment; changes in the financial markets; changes in business plans as circumstances warrant; risks relating to acquisitions; developments and uncertainty related to the future use and availability of some reference rates, such as the London Inter-Bank Offered Rate, as well as other alternative reference rates, and the adoption of a substitute; changes to U.S. tax laws, regulations and guidance; and other risks detailed from time to time in filings made by the Company with the Securities and Exchange Commission. Readers should note that the forward-looking statements included in this press release are not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "will," "propose," "may," "plan," "seek," "expect," "intend," "estimate," "anticipate," "believe," "continue," or similar terminology. Any forward-looking statements presented herein are made only as of the date of this press release, and the Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

CONTACTS:
Jeffrey G. Ludwig, President and CEO, at jludwig@midlandsb.com or (217) 342-7321
Eric T. Lemke, Chief Financial Officer, at elemke@midlandsb.com or (217) 342-7321
Douglas J. Tucker, SVP and Corporate Counsel, at dtucker@midlandsb.com or (217) 342-7321

                     
MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited)
                     
  For the Quarter Ended
  September 30, June 30, March 31, December 31, September 30,
(dollars in thousands, except per share data) 2022 2022 2022 2021 2021
Earnings Summary                    
Net interest income $64,024  $61,334  $56,827  $54,301  $51,396 
Provision for credit losses  6,974   5,441   4,167   467   (184)
Noninterest income  15,826   14,613   15,613   22,523   15,143 
Noninterest expense  43,496   41,339   40,884   45,757   41,292 
Income before income taxes  29,380   29,167   27,389   30,600   25,431 
Income taxes  5,859   7,284   6,640   7,493   5,883 
Net income $23,521  $21,883  $20,749  $23,107  $19,548 
                     
Diluted earnings per common share $1.04  $0.97  $0.92  $1.02  $0.86 
Weighted average shares outstanding - diluted  22,390,438   22,360,819   22,350,307   22,350,771   22,577,880 
Return on average assets  1.22%  1.19%  1.16%  1.26%  1.15%
Return on average shareholders' equity  13.31%  13.65%  12.80%  14.04%  11.90%
Return on average tangible common equity (1)  20.20%  19.14%  17.84%  19.69%  16.76%
Net interest margin  3.63%  3.65%  3.50%  3.25%  3.34%
Efficiency ratio (1)  54.26%  53.10%  55.73%  52.61%  58.78%
                     
Adjusted Earnings Performance Summary (1)                    
Adjusted earnings $23,568  $22,191  $20,815  $25,416  $19,616 
Adjusted diluted earnings per common share $1.04  $0.98  $0.92  $1.12  $0.86 
Adjusted return on average assets  1.22%  1.21%  1.16%  1.39%  1.15%
Adjusted return on average shareholders' equity  13.34%  13.84%  12.84%  15.44%  11.94%
Adjusted return on average tangible common equity  20.24%  19.41%  17.89%  21.65%  16.82%
Adjusted pre-tax, pre-provision earnings $36,415  $35,902  $32,041  $36,324  $28,379 
Adjusted pre-tax, pre-provision return on average assets  1.89%  1.95%  1.79%  1.98%  1.67%
                     
(1) Non-GAAP financial measures. Refer to pages 12 - 14 for a reconciliation to the comparable GAAP financial measures. 
                     


                
MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
                
  For the Quarter Ended
  September 30, June 30, March 31, December 31, September 30,
(in thousands, except per share data) 2022 2022 2022 2021 2021
Net interest income:               
Interest income $79,556  $69,236  $62,748  $60,427  $58,490 
Interest expense  15,532   7,902   5,921   6,126   7,094 
Net interest income  64,024   61,334   56,827   54,301   51,396 
Provision for credit losses:               
Provision for credit losses on loans  6,974   4,741   4,132       
Provision for credit losses on unfunded commitments     700   256   388    
Provision for other credit losses        (221)  79   (184)
Total provision for credit losses  6,974   5,441   4,167   467   (184)
Net interest income after provision for credit losses  57,050   55,893   52,660   53,834   51,580 
Noninterest income:               
Wealth management revenue  6,199   6,143   7,139   7,176   7,175 
Residential mortgage banking revenue  210   384   599   1,103   1,287 
Service charges on deposit accounts  2,597   2,304   2,068   2,338   2,268 
Interchange revenue  3,531   3,590   3,280   3,677   3,651 
(Loss) gain on sales of investment securities, net  (129)  (101)        160 
Gain on termination of hedged interest swap           1,845    
Impairment on commercial mortgage servicing rights     (869)  (394)  (2,072)  (3,037)
Company-owned life insurance  929   840   1,019   1,904   869 
Other income  2,489   2,322   1,902   6,552   2,770 
Total noninterest income  15,826   14,613   15,613   22,523   15,143 
Noninterest expense:               
Salaries and employee benefits  22,889   22,645   21,870   22,109   22,175 
Occupancy and equipment  3,850   3,489   3,755   3,429   3,701 
Data processing  6,093   6,082   5,873   5,819   6,495 
Professional  1,693   1,516   1,972   1,499   1,738 
Amortization of intangible assets  1,361   1,318   1,398   1,425   1,445 
Loss on mortgage servicing rights held for sale              79 
FHLB advances prepayment fees           4,859    
Other expense  7,610   6,289   6,016   6,617   5,659 
Total noninterest expense  43,496   41,339   40,884   45,757   41,292 
Income before income taxes  29,380   29,167   27,389   30,600   25,431 
Income taxes  5,859   7,284   6,640   7,493   5,883 
Net income $23,521  $21,883  $20,749  $23,107  $19,548 
                
Basic earnings per common share $1.04  $0.97  $0.92  $1.03  $0.86 
Diluted earnings per common share $1.04  $0.97  $0.92  $1.02  $0.86 
                


                
MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
                
  As of
  September 30, June 30, March 31, December 31, September 30,
(in thousands) 2022 2022 2022 2021 2021
Assets               
Cash and cash equivalents $313,188  $270,117  $332,264  $680,371  $662,643 
Investment securities  690,504   769,278   858,246   916,132   900,319 
Loans  6,198,451   5,795,544   5,539,961   5,224,801   4,915,554 
Allowance for credit losses on loans  (58,639)  (54,898)  (52,938)  (51,062)  (55,675)
Total loans, net  6,139,812   5,740,646   5,487,023   5,173,739   4,859,879 
Loans held for sale  4,338   5,298   8,931   32,045   26,621 
Premises and equipment, net  77,519   77,668   77,857   79,220   79,701 
Other real estate owned  11,141   11,131   11,537   12,059   11,931 
Loan servicing rights, at lower of cost or fair value  1,297   25,879   27,484   28,865   30,916 
Commercial FHA mortgage loan servicing rights held for sale  23,995             
Goodwill  161,904   161,904   161,904   161,904   161,904 
Other intangible assets, net  22,198   23,559   22,976   24,374   26,065 
Company-owned life insurance  149,648   148,900   148,060   148,378   149,146 
Other assets  226,333   201,432   202,433   186,718   184,834 
Total assets $7,821,877  $7,435,812  $7,338,715  $7,443,805  $7,093,959 
                
Liabilities and Shareholders' Equity               
Noninterest-bearing demand deposits $2,025,237  $1,972,261  $1,965,032  $2,245,701  $1,672,901 
Interest-bearing deposits  4,370,015   4,212,177   4,092,507   3,864,947   3,928,475 
Total deposits  6,395,252   6,184,438   6,057,539   6,110,648   5,601,376 
Short-term borrowings  58,518   67,689   60,352   76,803   66,666 
FHLB advances and other borrowings  360,000   285,000   310,171   310,171   440,171 
Subordinated debt  139,370   139,277   139,184   139,091   138,998 
Trust preferred debentures  49,824   49,674   49,524   49,374   49,235 
Other liabilities  79,634   73,546   76,959   93,881   139,669 
Total liabilities  7,082,598   6,799,624   6,693,729   6,779,968   6,436,115 
Total shareholders’ equity  739,279   636,188   644,986   663,837   657,844 
Total liabilities and shareholders’ equity $7,821,877  $7,435,812  $7,338,715  $7,443,805  $7,093,959 
                


                     
MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
                     
  As of
  September 30, June 30, March 31, December 31, September 30,
(in thousands) 2022 2022 2022 2021 2021
Loan Portfolio                    
Equipment finance loans $577,323  $546,267  $528,572  $521,973  $486,623 
Equipment finance leases  457,611   439,202   429,000   423,280   412,430 
Commercial FHA warehouse lines  51,309   23,872   83,999   91,927   180,248 
SBA PPP loans  2,810   6,409   22,862   52,477   82,410 
Other commercial loans  904,840   814,710   802,692   783,811   718,054 
Total commercial loans and leases  1,993,893   1,830,460   1,867,125   1,873,468   1,879,765 
Commercial real estate  2,466,303   2,335,655   2,114,041   1,816,828   1,562,013 
Construction and land development  225,550   203,955   188,668   193,749   200,792 
Residential real estate  356,225   340,103   329,331   338,151   344,414 
Consumer  1,156,480   1,085,371   1,040,796   1,002,605   928,570 
Total loans $6,198,451  $5,795,544  $5,539,961  $5,224,801  $4,915,554 
                     
Deposit Portfolio                    
Noninterest-bearing demand $2,025,237  $1,972,261  $1,965,032  $2,245,701  $1,672,901 
Interest-bearing:                    
Checking  1,905,439   1,808,885   1,779,018   1,663,021   1,697,326 
Money market  1,125,333   1,027,547   964,352   869,067   852,836 
Savings  704,245   740,364   710,955   679,115   665,710 
Time  620,960   620,363   619,386   630,583   688,693 
Brokered time  14,038   15,018   18,796   23,161   23,910 
Total deposits $6,395,252  $6,184,438  $6,057,539  $6,110,648  $5,601,376 
                     


                     
MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
                     
  For the Quarter Ended
  September 30, June 30, March 31, December 31, September 30,
(dollars in thousands) 2022 2022 2022 2021 2021
Average Balance Sheets                    
Cash and cash equivalents $195,657  $226,517  $384,231  $685,655  $525,848 
Investment securities  749,022   818,927   894,634   915,707   773,372 
Loans  6,040,358   5,677,791   5,274,051   4,995,794   4,800,063 
Loans held for sale  6,044   9,865   31,256   34,272   15,204 
Nonmarketable equity securities  37,765   36,338   36,378   39,203   43,873 
Total interest-earning assets  7,028,846   6,769,438   6,620,550   6,670,631   6,158,360 
Non-earning assets  618,138   615,348   631,187   605,060   597,153 
Total assets $7,646,984  $7,384,786  $7,251,737  $7,275,691  $6,755,513 
                     
Interest-bearing deposits $4,325,098  $4,152,764  $3,953,249  $3,913,475  $3,895,970 
Short-term borrowings  58,271   59,301   70,044   66,677   68,103 
FHLB advances and other borrowings  340,163   307,611   311,282   319,954   440,171 
Subordinated debt  139,324   139,232   139,139   139,046   138,954 
Trust preferred debentures  49,751   49,602   49,451   49,307   49,167 
Total interest-bearing liabilities  4,912,607   4,708,510   4,523,165   4,488,459   4,592,365 
Noninterest-bearing deposits  1,969,873   1,967,263   1,989,413   2,049,802   1,434,193 
Other noninterest-bearing liabilities  63,638   66,009   81,832   84,538   77,204 
Shareholders' equity  700,866   643,004   657,327   652,892   651,751 
Total liabilities and shareholders' equity $7,646,984  $7,384,786  $7,251,737  $7,275,691  $6,755,513 
                     
Yields                    
Earning Assets                    
Cash and cash equivalents  2.28%  0.83%  0.18%  0.16%  0.16%
Investment securities  2.44%  2.41%  2.22%  2.12%  2.34%
Loans  4.83%  4.49%  4.40%  4.36%  4.42%
Loans held for sale  3.87%  3.15%  2.86%  3.53%  2.79%
Nonmarketable equity securities  5.78%  5.38%  5.40%  5.07%  5.05%
Total interest-earning assets  4.51%  4.12%  3.87%  3.62%  3.79%
                     
Interest-Bearing Liabilities                    
Interest-bearing deposits  0.94%  0.37%  0.22%  0.22%  0.26%
Short-term borrowings  0.19%  0.15%  0.14%  0.12%  0.12%
FHLB advances and other borrowings  2.83%  1.87%  1.58%  1.75%  1.80%
Subordinated debt  5.77%  5.78%  5.78%  5.78%  5.79%
Trust preferred debentures  6.54%  5.05%  4.21%  3.90%  3.92%
Total interest-bearing liabilities  1.25%  0.67%  0.53%  0.54%  0.61%
                     
Cost of Deposits  0.65%  0.25%  0.15%  0.15%  0.19%
                     
Net Interest Margin  3.63%  3.65%  3.50%  3.25%  3.34%
                     


                     
MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
                     
  As of and for the Quarter Ended
  September 30, June 30, March 31, December 31, September 30,
(dollars in thousands, except per share data) 2022 2022 2022 2021 2021
Asset Quality                    
Loans 30-89 days past due $28,275  $16,212  $29,044  $17,514  $16,772 
Nonperforming loans  46,882   56,883   52,900   42,580   54,620 
Nonperforming assets  59,524   69,344   66,164   57,068   69,261 
Net charge-offs  3,233   2,781   2,256   4,613   2,989 
Loans 30-89 days past due to total loans  0.46%  0.28%  0.52%  0.34%  0.34%
Nonperforming loans to total loans  0.76%  0.98%  0.95%  0.81%  1.11%
Nonperforming assets to total assets  0.76%  0.93%  0.90%  0.77%  0.98%
Allowance for credit losses to total loans  0.95%  0.95%  0.96%  0.98%  1.13%
Allowance for credit losses to nonperforming loans  125.08%  96.51%  100.07%  119.92%  101.93%
Net charge-offs to average loans  0.21%  0.20%  0.17%  0.37%  0.25%
                     
Wealth Management                    
Trust assets under administration $3,445,244  $3,597,944  $4,044,138  $4,217,412  $4,058,168 
                     
Market Data                    
Book value per share at period end $28.48  $28.84  $29.26  $30.11  $29.64 
Tangible book value per share at period end (1) $20.14  $20.43  $20.87  $21.66  $21.17 
Market price at period end $23.57  $24.04  $28.86  $24.79  $24.73 
Common shares outstanding at period end  22,074,740   22,060,255   22,044,626   22,050,537   22,193,141 
                     
Capital                    
Total capital to risk-weighted assets  12.79%  11.44%  11.74%  12.19%  13.10%
Tier 1 capital to risk-weighted assets  10.05%  8.63%  8.82%  9.16%  9.73%
Tier 1 common capital to risk-weighted assets  7.56%  7.66%  7.80%  8.08%  8.55%
Tier 1 leverage ratio  9.40%  7.98%  7.96%  7.75%  8.16%
Tangible common equity to tangible assets (1)  5.82%  6.22%  6.43%  6.58%  6.80%
                     
(1) Non-GAAP financial measures. Refer to pages 12 - 14 for a reconciliation to the comparable GAAP financial measures.         
                     


                 
MIDLAND STATES BANCORP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited)
                 
Adjusted Earnings Reconciliation
                 
  For the Quarter Ended
  September 30, June 30, March 31, December 31, September 30,
(dollars in thousands, except per share data) 2022 2022 2022 2021 2021
Income before income taxes - GAAP $29,380  $29,167  $27,389  $30,600  $25,431 
Adjustments to noninterest income:                    
Loss (gain) on sales of investment securities, net  129   101         (160)
(Gain) on termination of hedged interest rate swap           (1,845)   
Total adjustments to noninterest income  129   101      (1,845)  (160)
Adjustments to noninterest expense:                    
(Loss) on mortgage servicing rights held for sale              (79)
FHLB advances prepayment fees           (4,859)   
Integration and acquisition expenses  68   (324)  (91)  (171)  (176)
Total adjustments to noninterest expense  68   (324)  (91)  (5,030)  (255)
Adjusted earnings pre tax  29,441   29,592   27,480   33,785   25,526 
Adjusted earnings tax  5,873   7,401   6,665   8,369   5,910 
Adjusted earnings - non-GAAP $23,568  $22,191  $20,815  $25,416  $19,616 
Adjusted diluted earnings per common share $1.04  $0.98  $0.92  $1.12  $0.86 
Adjusted return on average assets  1.22%  1.21%  1.16%  1.39%  1.15%
Adjusted return on average shareholders' equity  13.34%  13.84%  12.84%  15.44%  11.94%
Adjusted return on average tangible common equity  20.24%  19.41%  17.89%  21.65%  16.82%
                     
                     
Adjusted Pre-Tax, Pre-Provision Earnings Reconciliation
                 
  For the Quarter Ended
  September 30, June 30, March 31, December 31, September 30,
(dollars in thousands) 2022 2022 2022 2021 2021
Adjusted earnings pre tax - non-GAAP $29,441  $29,592  $27,480  $33,785  $25,526 
Provision for credit losses  6,974   5,441   4,167   467   (184)
Impairment on commercial mortgage servicing rights     869   394   2,072   3,037 
Adjusted pre-tax, pre-provision earnings - non-GAAP $36,415  $35,902  $32,041  $36,324  $28,379 
Adjusted pre-tax, pre-provision return on average assets  1.89%  1.95%  1.79  1.98%  1.67%
                 


                 
MIDLAND STATES BANCORP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued)
                 
                 
Efficiency Ratio Reconciliation
                 
  For the Quarter Ended
  September 30, June 30, March 31, December 31, September 30,
(dollars in thousands) 2022 2022 2022 2021 2021
Noninterest expense - GAAP $43,496  $41,339  $40,884  $45,757  $41,292 
Loss on mortgage servicing rights held for sale              (79)
FHLB advances prepayment fees           (4,859)   
Integration and acquisition expenses  68   (324)  (91)  (171)  (176)
Adjusted noninterest expense $43,564  $41,015  $40,793  $40,727  $41,037 
                 
Net interest income - GAAP $64,024  $61,334  $56,827  $54,301  $51,396 
Effect of tax-exempt income  307   321   369   372   402 
Adjusted net interest income  64,331   61,655   57,196   54,673   51,798 
                 
Noninterest income - GAAP  15,826   14,613   15,613   22,523   15,143 
Impairment on commercial mortgage servicing rights     869   394   2,072   3,037 
Loss (gain) on sales of investment securities, net  129   101         (160)
(Gain) on termination of hedged interest rate swap           (1,845)   
Adjusted noninterest income  15,955   15,583   16,007   22,750   18,020 
                 
Adjusted total revenue $80,286  $77,238  $73,203  $77,423  $69,818 
                 
Efficiency ratio  54.26%  53.10%  55.73%  52.61%  58.78%
                 


                
MIDLAND STATES BANCORP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued)
                
Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share
                
  As of
  September 30, June 30, March 31, December 31, September 30,
(dollars in thousands, except per share data) 2022 2022 2022 2021 2021
Shareholders' Equity to Tangible Common Equity               
Total shareholders' equity—GAAP $739,279  $636,188  $644,986  $663,837  $657,844 
Adjustments:               
Preferred Stock  (110,548)            
Goodwill  (161,904)  (161,904)  (161,904)  (161,904)  (161,904)
Other intangible assets, net  (22,198)  (23,559)  (22,976)  (24,374)  (26,065)
Tangible common equity $444,629  $450,725  $460,106  $477,558  $469,875 
                
Total Assets to Tangible Assets:               
Total assets—GAAP $7,821,877  $7,435,812  $7,338,715  $7,443,805  $7,093,959 
Adjustments:               
Goodwill  (161,904)  (161,904)  (161,904)  (161,904)  (161,904)
Other intangible assets, net  (22,198)  (23,559)  (22,976)  (24,374)  (26,065)
Tangible assets $7,637,775  $7,250,349  $7,153,835  $7,257,527  $6,905,990 
                
Common Shares Outstanding  22,074,740   22,060,255   22,044,626   22,050,537   22,193,141 
                
Tangible Common Equity to Tangible Assets  5.82%  6.22%  6.43%  6.58%  6.80%
Tangible Book Value Per Share $20.14  $20.43  $20.87  $21.66  $21.17 
                
Return on Average Tangible Common Equity (ROATCE)
                
  For the Quarter Ended
  September 30, June 30, March 31, December 31, September 30,
(dollars in thousands) 2022 2022 2022 2021 2021
Net income $23,521  $21,883  $20,749  $23,107  $19,548 
                
Average total shareholders' equity—GAAP $700,866  $643,004  $657,327  $652,892  $651,751 
Adjustments:               
Preferred Stock  (54,072)            
Goodwill  (161,904)  (161,904)  (161,904)  (161,904)  (161,904)
Other intangible assets, net  (22,859)  (22,570)  (23,638)  (25,311)  (27,132)
Average tangible common equity $462,031  $458,530  $471,785  $465,677  $462,715 
ROATCE  20.20%  19.14%  17.84%  19.69%  16.76%


EdgarFiling

Exhibit 99.2

 

1 Midland States Bancorp, Inc. NASDAQ: MSBI Third Quarter 2022 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 and its potential effects on the economic environment, changes in interest rates and other general economic, business and political conditions, and the impact of inflation. These risks and uncertainties should be consi dered in evaluating forward - looking statements, and undue reliance should not be placed on such statements. Additional information concerning Midland and its businesses, including additional factors that could materially affect Midland’s financial results, ar e 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,” “Adjusted Pre - Tax, Pre - Provision Income,” “Adjusted Pre - Tax, Pre - Provision Return on Average Assets,” “Efficiency Ratio,” “Tangible Common Equity to Tangible Assets,” “Tangible Book Value Per Share,” and “Return on Average Tangible Common Equity.” The Company believes that 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 financ ial 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. Reconciliations of these non - GAAP measures are provided in the Appendix section of this presentation.

 
 

3 Overview of 3Q22 3 Strengthened Capital Ratios Higher Earnings and Improved Returns • $115 million preferred stock offering completed in August • Combination of preferred stock offering and strong financial performance positively impacted capital ratios • Total capital ratio and Tier 1 leverage ratio both increased from prior quarter Positive Trends Across Key Metrics • Average loan yields increased 34 bps from prior quarter • Continued growth in noninterest - bearing and interest - bearing deposits • Nonperforming assets declined 14% from end of prior quarter • Net income of $23.5 million, or $1.04 diluted EPS, up from $0.97 in prior quarter • Pre - tax, pre - provision earnings (1) of $36.4 million, up from $35.9 million in prior quarter • ROAA of 1.22% and ROATCE (1) of 20.20%, both increased from prior quarter Notes: (1) Represents a non - GAAP financial measure. See “Non - GAAP Reconciliation” in the appendix. Strong, Well Balanced Loan Growth • Total loans increased 27.8% annualized • Growth in all portfolios with largest increases in commercial and CRE loans • Equipment financing portfolio surpasses $1.0 billion

 
 

4 Loan Portfolio Total Loans and Average Loan Yield • Total loans increased $402.9 million from prior quarter to $6.20 billion • Growth in all portfolios with the exception of SBA PPP loans • Largest increases came in commercial and CRE loans, which increased at 36% annualized and 22% annualized, respectively • Equipment finance balances increased $49.5 million, or 5.0% from end of prior quarter Loan Portfolio Mix (in millions, as of quarter - end) (in millions, as of quarter - end) $4,916 $5,225 $5,540 $5,796 $6,198 4.42% 4.36% 4.40% 4.49% 4.83% 3Q 2021 4Q 2021 1Q 2022 2Q 2022 3Q 2022 Total Loans Average Loan Yield 3Q 2022 2Q 2022 3Q 2021 Commercial loans and leases $ 1,994 $ 1,830 $ 1,880 Commercial real estate 2,466 2,336 1,562 Construction and land development 226 204 201 Residential real estate 356 340 344 Consumer 1,156 1,085 929 Total Loans $6,198 $5,796 $4,916 Total Loans ex. Commercial FHA Lines and PPP $6,144 $5,765 $4,653

 
 

5 Total Deposits Total Deposits and Cost of Deposits • Total deposits increased $210.8 million from prior quarter to $6.40 billion • Increase driven by higher balances of noninterest - bearing and lower - cost interest - bearing deposits • Continued improvement in deposit mix with noninterest - bearing deposits increasing to 31.7% of total deposits from 29.9% of total deposits in 3Q21 • Strengthened commercial banking and treasury management teams consistently generating new relationships that provide steady inflow of commercial deposits Deposit Mix (in millions, as of quarter - end) (in millions, as of quarter - end) $5,601 $6,111 $6,057 $6,184 $6,395 0.19% 0.15% 0.15% 0.25% 0.65% 3Q 2021 4Q 2021 1Q 2022 2Q 2022 3Q 2022 Total Deposits Cost of Deposits 3Q 2022 2Q 2022 3Q 2021 Noninterest - bearing demand $ 2,025 $ 1,972 $ 1,673 Interest - bearing: Checking 1,905 1,809 1,697 Money market 1,125 1,028 853 Savings 704 740 666 Time 621 620 689 Brokered time 14 15 24 Total Deposits $6,395 $6,184 $5,601

 
 

6 • Net interest income increased 4.4% from the prior quarter due primarily to higher average loan balances • Net interest margin decreased 2 bps from prior quarter as increase in cost of deposits exceeded the increase in the average yield on earning assets • Planned redemption of $40 million of sub debt in October will eliminate higher cost source of funds • Average rate on new and renewed loan originations increased 74 bps to 5.53% in September 2022 from 4.79% in June 2022 » Midland Equipment Finance yields increased 46 bps; other commercial loan yields increased 55 bps Net Interest Income/Margin Net Interest Margin Net Interest Income (in millions) $1.0 $0.8 $0.6 $0.6 $0.5 $51.4 $54.3 $56.8 $61.3 $64.0 3Q 2021 4Q 2021 1Q 2022 2Q 2022 3Q 2022 NII Accretion Income 0.07% 0.04% 0.03% 0.03% 0.03% 3.34% 3.25% 3.50% 3.65% 3.63% 3Q 2021 4Q 2021 1Q 2022 2Q 2022 3Q 2022 NIM Accretion Income

 
 

7 • During 3Q22, assets under administration decreased $152.7 million, primarily due to market performance • Wealth Management revenue relatively consistent with prior quarter Wealth Management Wealth Management Revenue Assets Under Administration (in millions) (in millions ) $4,058 $4,217 $4,044 $3,598 $3,445 3Q 2021 4Q 2021 1Q 2022 2Q 2022 3Q 2022 $7.18 $7.18 $7.14 $6.14 $6.20 3Q 2021 4Q 2021 1Q 2022 2Q 2022 3Q 2022

 
 

8 Noninterest Income • Noninterest income increased 8.3% from prior quarter, primarily due to impairment on commercial MSRs that negatively impacted noninterest income in 2Q22 • Most fee generating areas were relatively consistent with prior quarter • Commercial MSR portfolio in the process of being sold, which will eliminate a source of earnings volatility and provide a small benefit to capital ratios Noninterest Income (in millions) $15.1 $22.5 $15.6 $14.6 $15.8 3Q 2021 4Q 2021 1Q 2022 2Q 2022 3Q 2022 Wealth Management Interchange Service Charges on Deposits Residential Mortgage All Other

 
 

9 Noninterest Expense and Operating Efficiency • Efficiency Ratio (1) was 54.3% in 3Q22 vs. 53.1% in 2Q22 • Adjustments to non - interest expense: • Excluding these adjustments, noninterest expense was up from the prior quarter primarily due to: » Increase in compensation including incentive compensation and commissions » General increase in expenses due to greater loan and deposit activity » Full quarter impact of branch acquisition in June 2022 • Near - term operating expense run - rate expected to be $42.5 - $43.5 million Noninterest Expense and Efficiency Ratio (1) (Noninterest expense in millions) Notes: (1) Represents a non - GAAP financial measure. See “Non - GAAP Reconciliation” in the appendix. ($ in millions) 3Q22 2Q22 Integration and acquisition related expenses -- ($0.3) $0.3 $5.0 $0.1 $0.3 $41.3 $45.8 $40.9 $41.3 $43.5 58.8% 52.6% 55.7% 53.1% 54.3% 50.0% 55.0% 60.0% 65.0% 70.0% $20.0 $25.0 $30.0 $35.0 $40.0 $45.0 $50.0 3Q 2021 4Q 2021 1Q 2022 2Q 2022 3Q 2022 Total Noninterest Expense Adjustments to Noninterest Expense Efficiency Ratio

 
 

10 Asset Quality NCO / Average Loans • Nonperforming loans decreased $10.0 million due to a combination of payoffs, note sale, and a charge - off on a previously reserved loan relationship • Generally positive trends in the loan portfolio with continued upgrades of watch list loans • Delinquencies in consumer portfolio remain low • Provision for credit losses on loans of $7.0 million primarily related to the growth in total loans and impact of negative economic forecasts Nonperforming Loans / Total Loans (Total Loans as of quarter - end) 1.11% 0.81% 0.95% 0.98% 0.76% 3Q 2021 4Q 2021 1Q 2022 2Q 2022 3Q 2022 0.25% 0.37% 0.17% 0.20% 0.21% 3Q 2021 4Q 2021 1Q 2022 2Q 2022 3Q 2022

 
 

11 Changes in Allowance for Credit Losses ACL 6/30/22 ACL 9/30/22 ($ in thousands) Specific Reserves Portfolio Changes Economic Factors ▪ Changes to specific reserves ▪ New loans ▪ Changes in credit quality including risk ratings ▪ Changes in portfolio mix ▪ Aging of existing portfolio ▪ Other charge - offs and recoveries ▪ Changes to macro - economic variables and forecasts ▪ Changes to other economic qualitative factors

 
 

12 ACL by Portfolio Portfolio Loans ACL % of Total Loans Loans ACL % of Total Loans Commercial $ 852,930 $ 5,745 0.67% $ 747,782 $ 5,412 0.72% Warehouse Lines 51,309 - 0.00% 23,872 - 0.00% Commercial Other 683,353 8,620 1.26% 643,477 7,336 1.14% Equipment Finance Loans 577,323 8,307 1.44% 546,267 7,068 1.29% Paycheck Protection Program 2,810 4 0.14% 6,409 10 0.15% Equipment Finance Leases 457,611 6,678 1.46% 439,202 6,765 1.54% CRE non - owner occupied 1,567,308 19,141 1.22% 1,480,031 18,861 1.27% CRE owner occupied 505,174 5,818 1.15% 524,587 6,037 1.15% Multi - family 328,473 3,105 0.95% 265,749 2,610 0.98% Farmland 65,348 366 0.56% 65,288 366 0.56% Construction and Land Development 225,550 1,591 0.71% 203,955 1,101 0.54% Residential RE First Lien 294,432 3,686 1.25% 279,628 3,025 1.08% Other Residential 61,793 485 0.78% 60,474 391 0.65% Consumer 110,226 594 0.54% 98,558 379 0.38% Consumer Other (1) 1,046,254 2,810 0.27% 986,813 2,615 0.26% Total Loans 6,198,451 58,639 0.95% 5,795,544 54,898 0.95% Loans (excluding GreenSky, PPP and warehouse lines) 5,036,227 55,636 1.10% 4,716,721 52,080 1.10% September 30, 2022 Notes: (1) Primarily consists of loans originated through GreenSky relationship ($ in thousands) June 30, 2022

 
 

13 Outlook • Strengthened capital ratios will support continued balance sheet growth • Loan pipeline remains strong, but loan growth expected to moderate as higher rates and uncertain economic conditions have a greater impact on loan demand • Continued loan growth, higher net interest margin, and improved efficiencies expected to result in consistently strong financial performance • Continued progress on Banking - as - a - Service initiative building foundation for positive impact on loan production, deposit gathering and fee income generation in 2023 13

 
 

14 APPENDIX

 
 

15 Commercial Loans and Leases by Industry RE / Rental & Leasing $1,353 28.9% All Others $562 12.0% Skilled Nursing $478 10.2% Construction - General $310 6.6% Finance and Insurance $306 6.5% Manufacturing $262 5.6% Accommodation & Food Svcs $211 4.5% Trans. / Ground Passenger $208 4.4% General Freight Trucking $197 4.2% Assisted Living $180 3.8% Ag., Forestry, & Fishing $171 3.6% Retail Trade $170 3.6% Wholesale Trade $100 2.1% Other Services $100 2.1% Health Care $77 1.6% Industries as a percentage of Commercial, CRE and Equipment Finance Loans and Leases with outstanding balances of $4.69 billion as of 9/30/22 ($s in millions)

 
 

16 Commercial Real Estate Portfolio by Collateral Type Skilled Nursing $508 18.9% Retail $436 16.2% Multi - Family $364 13.5% Industrial / Warehouse $219 8.1% Assisted Living $185 6.9% All Others $176 6.5% Hotel/Motel $160 5.9% Office $157 5.8% Residential 1 - 4 Family $84 3.1% Medical Building $79 2.9% Special Purpose $74 2.7% C - Store / Gas Station $69 2.6% Farmland $64 2.4% Mixed Use / Other $64 2.4% Restaurant $37 1.4% Raw Land $17 0.6% Collateral type as a percentage of the Commercial Real Estate and Construction Portfolio with outstanding balances of $2.69 billion as of 9/30/22 CRE Concentration (as of 9/30/22) CRE as a % of Total Loans 39.8% CRE as a % of Total Risk - Based Capital (1) 263.5% Notes: (1) Represents non - owner occupied CRE loans only ($s in millions)

 
 

17 Capital Ratios and Strategy Capital Ratios (as of 9/30/22) 5.82% 7.56% 9.40% 10.05% 12.79% 10.43% 9.75% 10.43% 11.19% 0.00% 5.00% 10.00% 15.00% TCE/TA Common Eq. Tier 1 Tier 1 Leverage Tier 1 RBC Total RBC Consolidated Bank Level Capital Strategy » Strengthened capital ratios with issuance of $115 million of non - cumulative preferred stock in August 2022 ▪ Included as Tier 1 Regulatory Capital ▪ 7.75% with reset at 5 years » Reduce cost of funds by redeeming $40 million of sub - debt with rate of 6.25% in October » Internal capital generated from strong profitability and slower balance sheet growth expected to raise TCE ratio to 7.00% - 7.75% by the end of 2023 » Capital actions and strong profitability expected to enable MSBI to raise capital ratios while maintaining current dividend payout

 
 

18 Liquidity Overview Liquidity Sources (as of 9/30/22) ($ in millions) Cash and Cash Equivalents $ 313.2 Unpledged Securities 153.5 FHLB Committed Liquidity 1,148.9 FRB Discount Window Availability 13.5 Total Estimated Liquidity $ 1,629.1 Conditional Funding Based on Market Conditions Additional Credit Facility $ 250.0 Brokered CDs (additional capacity) $ 500.0 Other Liquidity Holding Company Cash Position of $93.5 Million

 
 

19 (dollars in thousands, except per share data) Income before income taxes - GAAP $ 29,380 $ 29,167 $ 27,389 $ 30,600 $ 25,431 Adjustments to noninterest income: Loss (gain) on sales of investment securities, net 129 101 — — (160) (Gain) on termination of hedged interest rate swap — — — (1,845) — Total adjustments to noninterest income 129 101 — (1,845) (160) Adjustments to noninterest expense: (Loss) on mortgage servicing rights held for sale — — — — (79) FHLB advances prepayment fees — — — (4,859) — Integration and acquisition expenses 68 (324) (91) (171) (176) Total adjustments to noninterest expense 68 (324) (91) (5,030) (255) Adjusted earnings pre tax 29,441 29,592 27,480 33,785 25,526 Adjusted earnings tax 5,873 7,401 6,665 8,369 5,910 Adjusted earnings - non-GAAP $ 23,568 $ 22,191 $ 20,815 $ 25,416 $ 19,616 Adjusted diluted earnings per common share $ 1.04 $ 0.98 $ 0.92 $ 1.12 $ 0.86 Adjusted return on average assets 1.22% 1.21% 1.16% 1.39% 1.15% Adjusted return on average shareholders' equity 13.34% 13.84% 12.84% 15.44% 11.94% Adjusted return on average tangible common equity 20.24% 19.41% 17.89% 21.65% 16.82% (dollars in thousands) Adjusted earnings pre tax - non-GAAP $ 29,441 $ 29,592 $ 27,480 $ 33,785 $ 25,526 Provision for credit losses 6,974 5,441 4,167 467 (184) Impairment on commercial mortgage servicing rights — 869 394 2,072 3,037 Adjusted pre-tax, pre-provision earnings - non-GAAP $ 36,415 $ 35,902 $ 32,041 $ 36,324 $ 28,379 Adjusted pre-tax, pre-provision return on average assets 1.89% 1.95% 1.79% 1.98% 1.67% September 30, 20212021 December 31, Adjusted Pre-Tax, Pre-Provision Earnings Reconciliation For the Quarter Ended March 31, 20222022 June 30,September 30, 2022 MIDLAND STATES BANCORP, INC. Adjusted Earnings Reconciliation RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) 2022 March 31, For the Quarter Ended December 31, 20212022 June 30, 2022 September 30, 2021 September 30,

 
 

20 (dollars in thousands) Noninterest expense - GAAP $ 43,496 $ 41,339 $ 40,884 $ 45,757 $ 41,292 Loss on mortgage servicing rights held for sale — — — — (79) FHLB advances prepayment fees — — — (4,859) — Integration and acquisition expenses 68 (324) (91) (171) (176) Adjusted noninterest expense $ 43,564 $ 41,015 $ 40,793 $ 40,727 $ 41,037 Net interest income - GAAP $ 64,024 $ 61,334 $ 56,827 $ 54,301 $ 51,396 Effect of tax-exempt income 307 321 369 372 402 Adjusted net interest income 64,331 61,655 57,196 54,673 51,798 Noninterest income - GAAP 15,826 14,613 15,613 22,523 15,143 Impairment on commercial mortgage servicing rights — 869 394 2,072 3,037 Loss (gain) on sales of investment securities, net 129 101 — — (160) (Gain) on termination of hedged interest rate swap — — — (1,845) — Adjusted noninterest income 15,955 15,583 16,007 22,750 18,020 Adjusted total revenue $ 80,286 $ 77,238 $ 73,203 $ 77,423 $ 69,818 Efficiency ratio 54.26% 53.10% 55.73% 52.61% 58.78% 2021 September 30, MIDLAND STATES BANCORP, INC. Efficiency Ratio Reconciliation RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued) 2022 March 31, For the Quarter Ended December 31, 20212022 June 30, 2022 September 30,

 
 

21 (dollars in thousands, except per share data) Shareholders' Equity to Tangible Common Equity Total shareholders' equity—GAAP $ 739,279 $ 636,188 $ 644,986 $ 663,837 $ 657,844 Adjustments: Preferred Stock (110,548) — — — — Goodwill (161,904) (161,904) (161,904) (161,904) (161,904) Other intangible assets, net (22,198) (23,559) (22,976) (24,374) (26,065) Tangible common equity $ 444,629 $ 450,725 $ 460,106 $ 477,558 $ 469,875 Total Assets to Tangible Assets: Total assets—GAAP $ 7,821,877 $ 7,435,812 $ 7,338,715 $ 7,443,805 $ 7,093,959 Adjustments: Goodwill (161,904) (161,904) (161,904) (161,904) (161,904) Other intangible assets, net (22,198) (23,559) (22,976) (24,374) (26,065) Tangible assets $ 7,637,775 $ 7,250,349 $ 7,153,835 $ 7,257,527 $ 6,905,990 Common Shares Outstanding 22,074,740 22,060,255 22,044,626 22,050,537 22,193,141 Tangible Common Equity to Tangible Assets 5.82% 6.22% 6.43% 6.58% 6.80% Tangible Book Value Per Share $ 20.14 $ 20.43 $ 20.87 $ 21.66 $ 21.17 (dollars in thousands) Net income $ 23,521 $ 21,883 $ 20,749 $ 23,107 $ 19,548 Average total shareholders' equity—GAAP $ 700,866 $ 643,004 $ 657,327 $ 652,892 $ 651,751 Adjustments: Preferred Stock (54,072) — — — — Goodwill (161,904) (161,904) (161,904) (161,904) (161,904) Other intangible assets, net (22,859) (22,570) (23,638) (25,311) (27,132) Average tangible common equity $ 462,031 $ 458,530 $ 471,785 $ 465,677 $ 462,715 ROATCE 20.20% 19.14% 17.84% 19.69% 16.76% MIDLAND STATES BANCORP, INC. Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued) 2022 March 31, As of December 31, 20212022 June 30, 2022 September 30, Return on Average Tangible Common Equity (ROATCE) 2021 September 30, 2021 September 30, 2021 December 31, 2022 March 31, For the Quarter Ended 2022 June 30, 2022 September 30,