UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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): January 26, 2023
(Exact Name of Registrant as Specified in Its Charter)
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||||||||
| (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 (see General Instruction A.2. below):
| 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 class | Trading symbol(s) | Name of each exchange on which registered | ||||||
| Common Stock, $0.01 par value | MSBI | The Nasdaq Market LLC | ||||||
| Depositary Shares, each representing a 1/40th interest in a share of 7.75% fixed rate reset non-cumulative perpetual preferred stock, Series A, $2.00 par value | MSBIP | The Nasdaq Market LLC | ||||||
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 January 26, 2023, Midland States Bancorp, Inc. (the “Company”) issued a press release announcing its financial results for the fourth quarter of 2022. The press release is attached as Exhibit 99.1.
Item 7.01. Regulation FD Disclosure.
On January 26, 2023, the Company made available on its website a slide presentation regarding the Company's fourth quarter 2022 financial results, which will be used as part of a publicly accessible conference call on January 27, 2023. The slide presentation is attached as Exhibit 99.2.
The information set forth under Items 2.02 and 7.01 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, and shall not 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 8.01 Other Events.
On January 24, 2023, the Company notified GreenSky, LLC (“GreenSky”) that, effective October 21, 2023, the Company would terminate its participation in GreenSky’s loan origination program. Following the termination, GreenSky is expected to continue servicing all loans originated through the program.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description | ||||||||||
Press Release of Midland States Bancorp, Inc., dated January 26, 2023 | |||||||||||
Slide Presentation of Midland States Bancorp, Inc. regarding fourth 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 thereunto duly authorized.
Date: January 26, 2023 | By: | /s/ Eric T. Lemke | ||||||
| Eric T. Lemke | ||||||||
| Chief Financial Officer | ||||||||
EXHIBIT 99.1
Midland States Bancorp, Inc. Announces 2022 Fourth Quarter Results
Summary
•Net income available to common shareholders of $29.7 million, or $1.30 per diluted share
•$17.5 million gain on the termination of forward starting interest rate swaps, $3.3 million loss on commercial mortgage servicing rights held for sale and $3.5 million impairment on other real estate owned
•Total loans increased 7.0% annualized from prior quarter
•Tangible book value per share increased 4.0% from end of prior quarter
•Tangible common equity to tangible assets increased 24 basis points from end of prior quarter
Effingham, IL, January 26, 2023 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (Nasdaq: MSBI) (the “Company”) today reported net income available to common shareholders of $29.7 million, or $1.30 per diluted share, for the fourth quarter of 2022 compared to $23.5 million, or $1.04, respectively, for the third quarter of 2022. This also compares to net income available to common shareholders of $23.1 million, or $1.02 per diluted share, for the fourth quarter of 2021.
Jeffrey G. Ludwig, President and Chief Executive Officer of the Company, said, “Our fourth quarter performance completed a very successful year in which we generated a record level of earnings. For the full year, we generated return on assets of 1.31%, up from 1.18% in 2021, and return on tangible common equity of 20.8%, up from 17.9% in 2021. In the fourth quarter, our solid financial performance resulted in significant growth in both book value and tangible book value per share, as well as increases in most of our capital ratios.
“As we begin 2023, we are maintaining our conservative approach to new loan production and expect a relatively low level of loan growth until economic conditions improve. Even with a lower level of loan growth, we believe that we are well positioned to continue generating strong financial performance as we get additional leverage from the investments in talent and technology that we have made over the past few years. While we expect the macro environment to be challenging, particularly in the first half of the year, we believe that we will deliver strong results for our shareholders as we continue executing on our long-term strategies to enhance the value of the Midland franchise,” said Mr. Ludwig.
Net Interest Income and Net Interest Margin
Net interest income for the fourth quarter of 2022 was $63.6 million, a decrease of $0.5 million, or 0.7%, from $64.0 million for the third quarter of 2022, which was primarily due to increased deposit costs. Accretion income associated with purchased loan portfolios totaled $0.3 million for the fourth quarter of 2022, compared to $0.5 million for the third quarter of 2022.
Relative to the fourth quarter of 2021, net interest income increased 17.0%, from $54.3 million. The increase was primarily attributable to higher average balances of interest-earning assets, a more favorable
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asset mix, and higher yields on interest-earning assets. Paycheck Protection Program (“PPP”) loan fees recognized as loan interest income totaled $1.5 million during the fourth quarter of 2021. Accretion income associated with purchased loan portfolios for the fourth quarter of 2021 was $0.8 million.
Net interest margin for the fourth quarter of 2022 was 3.50%, compared to 3.63% for the third quarter of 2022 as an increase in the cost of deposits more than offset the increase in the average yield on earning assets. The contribution of PPP loan fees to net interest margin was 1 basis point during the third quarter of 2022, while the fourth quarter of 2022 had no PPP loan fee impact. Additionally, the contribution of acquired loan discount accretion to net interest margin was 2 basis points during the fourth quarter of 2022 and 3 basis points during the third quarter of 2022.
Relative to the fourth quarter of 2021, net interest margin increased from 3.25%. This increase was primarily attributable to higher yields on interest-earning assets and a more favorable mix of interest-earning assets. PPP loan fees recognized as loan interest income contributed 9 basis points to net interest margin and acquired loan discount accretion contributed 4 basis points to net interest margin during the fourth quarter of 2021.
Noninterest Income
Noninterest income for the fourth quarter of 2022 was $33.8 million and was positively impacted by a $17.5 million gain on the termination of forward starting interest rate swaps. Excluding this transaction, noninterest income for the fourth quarter of 2022 was $16.3 million compared to $15.8 million for the third quarter of 2022.
Noninterest income for the fourth quarter of 2021 was $22.5 million and was positively impacted by $3.9 million in unrealized income on equity investments, a $1.8 million gain on the termination of an FHLB interest rate swap, and a $1.0 million gain on company-owned life insurance. Impairment on commercial mortgage servicing rights negatively impacted noninterest income by $2.1 million in the fourth quarter of 2021. Excluding these transactions, noninterest income decreased from the fourth quarter of 2021 to the fourth quarter of 2022, primarily due to declines in wealth management and residential mortgage banking revenue.
Wealth management revenue was $6.2 million for both the third and fourth quarters of 2022. Compared to the fourth quarter of 2021, wealth management revenue decreased 13.2%, primarily due to a decline in assets under administration resulting from market performance.
Noninterest Expense
Noninterest expense for the fourth quarter of 2022 was $49.9 million, an increase of 14.8% from $43.5 million in the third quarter of 2022. The increase was primarily due to a $3.3 million loss on commercial mortgage servicing rights held for sale and OREO impairment charges of $3.5 million recognized in the fourth quarter of 2022.
Relative to the fourth quarter of 2021, noninterest expense increased 9.1% from $45.8 million. Noninterest expense for the fourth quarter of 2021 included $4.9 million FHLB advance prepayment fees and $0.2 million in integration and acquisition expenses. Excluding these adjustments, noninterest expense for the fourth quarter of 2022 increased $2.4 million, primarily due to a modest increase in staffing levels and 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.
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Loan Portfolio
Total loans outstanding were $6.31 billion at December 31, 2022, compared with $6.20 billion at September 30, 2022, and $5.22 billion at December 31, 2021. The growth in total loans from September 30, 2022 was primarily attributable to higher balances of consumer and construction and land development loans.
Equipment finance balances increased from $1.03 billion at September 30, 2022 to $1.11 billion at December 31, 2022.
Compared to loan balances at December 31, 2021, the Company experienced growth in all loan portfolios with the exception of commercial FHA warehouse lines and PPP loans.
Deposits
Total deposits were $6.36 billion at December 31, 2022, compared with $6.40 billion at September 30, 2022, and $6.11 billion at December 31, 2021. The decrease in total deposits from the end of the prior quarter was primarily attributable to a decline in noninterest-bearing demand partially offset by a small increase in interest-bearing deposits.
Asset Quality
Nonperforming loans totaled $49.4 million, or 0.78% of total loans, at December 31, 2022 compared with $46.9 million, or 0.76% of total loans, at September 30, 2022. At December 31, 2021, nonperforming loans totaled $42.6 million, or 0.81% of total loans.
Net charge-offs for the fourth quarter of 2022 were $0.5 million, or 0.03% of average loans on an annualized basis, compared to net charge-offs of $3.2 million, or 0.21% of average loans on an annualized basis, for the third quarter of 2022, and $4.6 million, or 0.37% of average loans on an annualized basis, for the fourth quarter of 2021.
The Company recorded a provision for credit losses of $3.5 million for the fourth quarter of 2022. Provision for credit losses on loans totaled $3.0 million for the fourth quarter of 2022, which was primarily related to the growth in total loans and negative economic forecasts. Provision for credit losses on unfunded commitments of $0.6 million was also recorded during the quarter.
The Company’s allowance for credit losses on loans was 0.97% of total loans and 123.53% of nonperforming loans at December 31, 2022, compared with 0.95% of total loans and 125.08% of nonperforming loans at September 30, 2022.
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Capital
At December 31, 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:
As of December 31, 2022 | |||||||||||||||||
| Midland States Bank | Midland States Bancorp, Inc. | Minimum Regulatory Requirements (2) | |||||||||||||||
| Total capital to risk-weighted assets | 11.51% | 12.38% | 10.50% | ||||||||||||||
| Tier 1 capital to risk-weighted assets | 10.71% | 10.21% | 8.50% | ||||||||||||||
| Tier 1 leverage ratio | 9.90% | 9.43% | 4.00% | ||||||||||||||
| Common equity Tier 1 capital | 10.71% | 7.77% | 7.00% | ||||||||||||||
Tangible common equity to tangible assets (1) | N/A | 6.06% | N/A | ||||||||||||||
(1) A non-GAAP financial measure. Refer to page 15 for a reconciliation to the comparable GAAP financial measure.
(2) Includes the capital conservation buffer of 2.5%.
Since the beginning of 2022, the impact of rising interest rates on the Company’s investment portfolio has resulted in an $89.0 million decline in accumulated other comprehensive income, which has negatively impacted tangible book value per share by $4.02, and the tangible common equity to tangible assets ratio by 117 basis points.
On August 24, 2022, the Company issued and sold 4,600,000 depositary shares, each representing a 1/40th ownership interest in a share of the Company's 7.75% fixed-rate reset non-cumulative perpetual preferred stock, Series A, par value $2.00 per share (the "Series A preferred stock"), with a liquidation preference of $25 per depositary share (equivalent to $1,000 per share of Series A Preferred Stock). The Series A preferred stock qualifies as Tier 1 capital for purposes of regulatory capital calculations. The gross proceeds were $115.0 million while net proceeds from the issuance of the Series A preferred stock, after deducting $4.5 million of offering costs, including the underwriting discount and other expenses, were $110.5 million. The Company declared and paid $3.2 million of preferred dividends during the fourth quarter of 2022.
Stock Repurchase Program
During the fourth quarter of 2022, the Company did not repurchase any shares under its stock repurchase program. On December 6, 2022, the Company’s board of directors authorized a new share repurchase program, pursuant to which the Company is authorized to repurchase up to $25.0 million of common stock through December 31, 2023. The previous repurchase plan terminated on December 31, 2022.
Conference Call, Webcast and Slide Presentation
The Company will host a conference call and webcast at 7:30 a.m. Central Time on Friday, January 27, 2023, to discuss its financial results.
Telephone Access: https://register.vevent.com/register/BIc01dcecf8df0417783e5b208a72ec906
A slide presentation relating to the fourth 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
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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 December 31, 2022, the Company had total assets of approximately $7.86 billion, and its Wealth Management Group had assets under administration of approximately $3.60 billion. The Company provides a full range of commercial and consumer banking products and services and business equipment financing, merchant credit card services, trust and investment management, insurance and financial planning services. For additional information, visit https://www.midlandsb.com/ or https://www.linkedin.com/company/midland-states-bank.
Non-GAAP Financial Measures
Some of the financial measures included in this press release are not measures of financial performance recognized in accordance with GAAP.
These non-GAAP financial measures include “Adjusted Earnings,” “Adjusted Earnings Available to Common Shareholders,” “Adjusted Diluted Earnings Per Common Share,” “Adjusted Return on Average Assets,” “Adjusted Return on Average Shareholders’ Equity,” “Adjusted Return on Average Tangible Common Equity,” “Adjusted Pre-Tax, Pre-Provision Earnings,” “Adjusted Pre-Tax, Pre-Provision Return on Average Assets,” “Efficiency Ratio,” “Tangible Common Equity to Tangible Assets,” “Tangible Book Value Per Share” 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 Coronavirus Disease 2019 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,"
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"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
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| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) | ||||||||||||||||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||||||||||||||
| (dollars in thousands, except per share data) | 2022 | 2022 | 2022 | 2022 | 2021 | |||||||||||||||||||||||||||
| Earnings Summary | ||||||||||||||||||||||||||||||||
| Net interest income | $ | 63,550 | $ | 64,024 | $ | 61,334 | $ | 56,827 | $ | 54,301 | ||||||||||||||||||||||
| Provision for credit losses | 3,544 | 6,974 | 5,441 | 4,167 | 467 | |||||||||||||||||||||||||||
| Noninterest income | 33,839 | 15,826 | 14,613 | 15,613 | 22,523 | |||||||||||||||||||||||||||
| Noninterest expense | 49,943 | 43,496 | 41,339 | 40,884 | 45,757 | |||||||||||||||||||||||||||
| Income before income taxes | 43,902 | 29,380 | 29,167 | 27,389 | 30,600 | |||||||||||||||||||||||||||
| Income taxes | 11,030 | 5,859 | 7,284 | 6,640 | 7,493 | |||||||||||||||||||||||||||
| Net income | 32,872 | 23,521 | 21,883 | 20,749 | 23,107 | |||||||||||||||||||||||||||
| Preferred dividends | 3,169 | — | — | — | — | |||||||||||||||||||||||||||
| Net income available to common shareholders | $ | 29,703 | $ | 23,521 | $ | 21,883 | $ | 20,749 | $ | 23,107 | ||||||||||||||||||||||
| Diluted earnings per common share | $ | 1.30 | $ | 1.04 | $ | 0.97 | $ | 0.92 | $ | 1.02 | ||||||||||||||||||||||
| Weighted average common shares outstanding - diluted | 22,503,611 | 22,390,438 | 22,360,819 | 22,350,307 | 22,350,771 | |||||||||||||||||||||||||||
| Return on average assets | 1.66 | % | 1.22 | % | 1.19 | % | 1.16 | % | 1.26 | % | ||||||||||||||||||||||
| Return on average shareholders' equity | 17.41 | % | 13.31 | % | 13.65 | % | 12.80 | % | 14.04 | % | ||||||||||||||||||||||
Return on average tangible common equity (1) | 25.89 | % | 20.20 | % | 19.14 | % | 17.84 | % | 19.69 | % | ||||||||||||||||||||||
| Net interest margin | 3.50 | % | 3.63 | % | 3.65 | % | 3.50 | % | 3.25 | % | ||||||||||||||||||||||
Efficiency ratio (1) | 58.26 | % | 54.26 | % | 53.10 | % | 55.73 | % | 52.61 | % | ||||||||||||||||||||||
Adjusted Earnings Performance Summary (1) | ||||||||||||||||||||||||||||||||
| Adjusted earnings available to common shareholders | $ | 19,278 | $ | 23,568 | $ | 22,191 | $ | 20,815 | $ | 25,416 | ||||||||||||||||||||||
| Adjusted diluted earnings per common share | $ | 0.85 | $ | 1.04 | $ | 0.98 | $ | 0.92 | $ | 1.12 | ||||||||||||||||||||||
| Adjusted return on average assets | 1.13 | % | 1.22 | % | 1.21 | % | 1.16 | % | 1.39 | % | ||||||||||||||||||||||
| Adjusted return on average shareholders' equity | 11.89 | % | 13.34 | % | 13.84 | % | 12.84 | % | 15.44 | % | ||||||||||||||||||||||
| Adjusted return on average tangible common equity | 16.80 | % | 20.24 | % | 19.41 | % | 17.89 | % | 21.65 | % | ||||||||||||||||||||||
| Adjusted pre-tax, pre-provision earnings | $ | 33,165 | $ | 36,415 | $ | 35,902 | $ | 32,041 | $ | 36,324 | ||||||||||||||||||||||
| Adjusted pre-tax, pre-provision return on average assets | 1.68 | % | 1.89 | % | 1.95 | % | 1.79 | % | 1.98 | % | ||||||||||||||||||||||
(1) Non-GAAP financial measures. Refer to pages 13 - 15 for a reconciliation to the comparable GAAP financial measures.
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| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | ||||||||||||||||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||||||||||||||
| (in thousands, except per share data) | 2022 | 2022 | 2022 | 2022 | 2021 | |||||||||||||||||||||||||||
| Net interest income: | ||||||||||||||||||||||||||||||||
| Interest income | $ | 90,215 | $ | 79,556 | $ | 69,236 | $ | 62,748 | $ | 60,427 | ||||||||||||||||||||||
| Interest expense | 26,665 | 15,532 | 7,902 | 5,921 | 6,126 | |||||||||||||||||||||||||||
| Net interest income | 63,550 | 64,024 | 61,334 | 56,827 | 54,301 | |||||||||||||||||||||||||||
| Provision for credit losses: | ||||||||||||||||||||||||||||||||
| Provision for credit losses on loans | 2,950 | 6,974 | 4,741 | 4,132 | — | |||||||||||||||||||||||||||
| Provision for credit losses on unfunded commitments | 594 | — | 700 | 256 | 388 | |||||||||||||||||||||||||||
| Provision for other credit losses | — | — | — | (221) | 79 | |||||||||||||||||||||||||||
| Total provision for credit losses | 3,544 | 6,974 | 5,441 | 4,167 | 467 | |||||||||||||||||||||||||||
| Net interest income after provision for credit losses | 60,006 | 57,050 | 55,893 | 52,660 | 53,834 | |||||||||||||||||||||||||||
| Noninterest income: | ||||||||||||||||||||||||||||||||
| Wealth management revenue | 6,227 | 6,199 | 6,143 | 7,139 | 7,176 | |||||||||||||||||||||||||||
| Residential mortgage banking revenue | 316 | 210 | 384 | 599 | 1,103 | |||||||||||||||||||||||||||
| Service charges on deposit accounts | 2,511 | 2,597 | 2,304 | 2,068 | 2,338 | |||||||||||||||||||||||||||
| Interchange revenue | 3,478 | 3,531 | 3,590 | 3,280 | 3,677 | |||||||||||||||||||||||||||
| (Loss) gain on sales of investment securities, net | — | (129) | (101) | — | — | |||||||||||||||||||||||||||
| Gain on termination of hedged interest rate swaps | 17,531 | — | — | — | 1,845 | |||||||||||||||||||||||||||
| Impairment on commercial mortgage servicing rights | — | — | (869) | (394) | (2,072) | |||||||||||||||||||||||||||
| Company-owned life insurance | 796 | 929 | 840 | 1,019 | 1,904 | |||||||||||||||||||||||||||
| Other income | 2,980 | 2,489 | 2,322 | 1,902 | 6,552 | |||||||||||||||||||||||||||
| Total noninterest income | 33,839 | 15,826 | 14,613 | 15,613 | 22,523 | |||||||||||||||||||||||||||
| Noninterest expense: | ||||||||||||||||||||||||||||||||
| Salaries and employee benefits | 22,901 | 22,889 | 22,645 | 21,870 | 22,109 | |||||||||||||||||||||||||||
| Occupancy and equipment | 3,748 | 3,850 | 3,489 | 3,755 | 3,429 | |||||||||||||||||||||||||||
| Data processing | 6,302 | 6,093 | 6,082 | 5,873 | 5,819 | |||||||||||||||||||||||||||
| Professional | 1,726 | 1,693 | 1,516 | 1,972 | 1,499 | |||||||||||||||||||||||||||
| Amortization of intangible assets | 1,333 | 1,361 | 1,318 | 1,398 | 1,425 | |||||||||||||||||||||||||||
| Other real estate owned | 3,779 | 582 | 309 | 518 | 243 | |||||||||||||||||||||||||||
| Loss on mortgage servicing rights held for sale | 3,250 | — | — | — | — | |||||||||||||||||||||||||||
| FHLB advances prepayment fees | — | — | — | — | 4,859 | |||||||||||||||||||||||||||
| Other expense | 6,904 | 7,028 | 5,980 | 5,498 | 6,374 | |||||||||||||||||||||||||||
| Total noninterest expense | 49,943 | 43,496 | 41,339 | 40,884 | 45,757 | |||||||||||||||||||||||||||
| Income before income taxes | 43,902 | 29,380 | 29,167 | 27,389 | 30,600 | |||||||||||||||||||||||||||
| Income taxes | 11,030 | 5,859 | 7,284 | 6,640 | 7,493 | |||||||||||||||||||||||||||
| Net income | 32,872 | 23,521 | 21,883 | 20,749 | 23,107 | |||||||||||||||||||||||||||
| Preferred stock dividends | 3,169 | — | — | — | — | |||||||||||||||||||||||||||
| Net income available to common shareholders | $ | 29,703 | $ | 23,521 | $ | 21,883 | $ | 20,749 | $ | 23,107 | ||||||||||||||||||||||
| Basic earnings per common share | $ | 1.31 | $ | 1.04 | $ | 0.97 | $ | 0.92 | $ | 1.03 | ||||||||||||||||||||||
| Diluted earnings per common share | $ | 1.30 | $ | 1.04 | $ | 0.97 | $ | 0.92 | $ | 1.02 | ||||||||||||||||||||||
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| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | ||||||||||||||||||||||||||||||||
| As of | ||||||||||||||||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||||||||||||||
| (in thousands) | 2022 | 2022 | 2022 | 2022 | 2021 | |||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 150,321 | $ | 313,188 | $ | 270,117 | $ | 332,264 | $ | 680,371 | ||||||||||||||||||||||
| Investment securities | 776,860 | 690,504 | 769,278 | 858,246 | 916,132 | |||||||||||||||||||||||||||
| Loans | 6,306,467 | 6,198,451 | 5,795,544 | 5,539,961 | 5,224,801 | |||||||||||||||||||||||||||
| Allowance for credit losses on loans | (61,051) | (58,639) | (54,898) | (52,938) | (51,062) | |||||||||||||||||||||||||||
| Total loans, net | 6,245,416 | 6,139,812 | 5,740,646 | 5,487,023 | 5,173,739 | |||||||||||||||||||||||||||
| Loans held for sale | 1,286 | 4,338 | 5,298 | 8,931 | 32,045 | |||||||||||||||||||||||||||
| Premises and equipment, net | 78,293 | 77,519 | 77,668 | 77,857 | 79,220 | |||||||||||||||||||||||||||
| Other real estate owned | 6,729 | 11,141 | 11,131 | 11,537 | 12,059 | |||||||||||||||||||||||||||
| Loan servicing rights, at lower of cost or fair value | 1,205 | 1,297 | 25,879 | 27,484 | 28,865 | |||||||||||||||||||||||||||
| Commercial FHA mortgage loan servicing rights held for sale | 20,745 | 23,995 | — | — | — | |||||||||||||||||||||||||||
| Goodwill | 161,904 | 161,904 | 161,904 | 161,904 | 161,904 | |||||||||||||||||||||||||||
| Other intangible assets, net | 20,866 | 22,198 | 23,559 | 22,976 | 24,374 | |||||||||||||||||||||||||||
| Company-owned life insurance | 150,443 | 149,648 | 148,900 | 148,060 | 148,378 | |||||||||||||||||||||||||||
| Other assets | 241,433 | 226,333 | 201,432 | 202,433 | 186,718 | |||||||||||||||||||||||||||
| Total assets | $ | 7,855,501 | $ | 7,821,877 | $ | 7,435,812 | $ | 7,338,715 | $ | 7,443,805 | ||||||||||||||||||||||
| Liabilities and Shareholders' Equity | ||||||||||||||||||||||||||||||||
| Noninterest-bearing demand deposits | $ | 1,935,773 | $ | 2,025,237 | $ | 1,972,261 | $ | 1,965,032 | $ | 2,245,701 | ||||||||||||||||||||||
| Interest-bearing deposits | 4,428,879 | 4,370,015 | 4,212,177 | 4,092,507 | 3,864,947 | |||||||||||||||||||||||||||
| Total deposits | 6,364,652 | 6,395,252 | 6,184,438 | 6,057,539 | 6,110,648 | |||||||||||||||||||||||||||
| Short-term borrowings | 42,311 | 58,518 | 67,689 | 60,352 | 76,803 | |||||||||||||||||||||||||||
| FHLB advances and other borrowings | 460,000 | 360,000 | 285,000 | 310,171 | 310,171 | |||||||||||||||||||||||||||
| Subordinated debt | 99,772 | 139,370 | 139,277 | 139,184 | 139,091 | |||||||||||||||||||||||||||
| Trust preferred debentures | 49,975 | 49,824 | 49,674 | 49,524 | 49,374 | |||||||||||||||||||||||||||
| Other liabilities | 80,217 | 79,634 | 73,546 | 76,959 | 93,881 | |||||||||||||||||||||||||||
| Total liabilities | 7,096,927 | 7,082,598 | 6,799,624 | 6,693,729 | 6,779,968 | |||||||||||||||||||||||||||
| Total shareholders’ equity | 758,574 | 739,279 | 636,188 | 644,986 | 663,837 | |||||||||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 7,855,501 | $ | 7,821,877 | $ | 7,435,812 | $ | 7,338,715 | $ | 7,443,805 | ||||||||||||||||||||||
9
| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | ||||||||||||||||||||||||||||||||
| As of | ||||||||||||||||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||||||||||||||
| (in thousands) | 2022 | 2022 | 2022 | 2022 | 2021 | |||||||||||||||||||||||||||
| Loan Portfolio | ||||||||||||||||||||||||||||||||
| Equipment finance loans | $ | 616,751 | $ | 577,323 | $ | 546,267 | $ | 528,572 | $ | 521,973 | ||||||||||||||||||||||
| Equipment finance leases | 491,744 | 457,611 | 439,202 | 429,000 | 423,280 | |||||||||||||||||||||||||||
| Commercial FHA warehouse lines | 25,029 | 51,309 | 23,872 | 83,999 | 91,927 | |||||||||||||||||||||||||||
| SBA PPP loans | 1,916 | 2,810 | 6,409 | 22,862 | 52,477 | |||||||||||||||||||||||||||
| Other commercial loans | 870,878 | 904,841 | 814,710 | 802,692 | 783,811 | |||||||||||||||||||||||||||
| Total commercial loans and leases | 2,006,318 | 1,993,894 | 1,830,460 | 1,867,125 | 1,873,468 | |||||||||||||||||||||||||||
| Commercial real estate | 2,433,159 | 2,466,303 | 2,335,655 | 2,114,041 | 1,816,828 | |||||||||||||||||||||||||||
| Construction and land development | 320,882 | 225,549 | 203,955 | 188,668 | 193,749 | |||||||||||||||||||||||||||
| Residential real estate | 366,094 | 356,225 | 340,103 | 329,331 | 338,151 | |||||||||||||||||||||||||||
| Consumer | 1,180,014 | 1,156,480 | 1,085,371 | 1,040,796 | 1,002,605 | |||||||||||||||||||||||||||
| Total loans | $ | 6,306,467 | $ | 6,198,451 | $ | 5,795,544 | $ | 5,539,961 | $ | 5,224,801 | ||||||||||||||||||||||
| Deposit Portfolio | ||||||||||||||||||||||||||||||||
| Noninterest-bearing demand | $ | 1,935,773 | $ | 2,025,237 | $ | 1,972,261 | $ | 1,965,032 | $ | 2,245,701 | ||||||||||||||||||||||
| Interest-bearing: | ||||||||||||||||||||||||||||||||
| Checking | 1,920,458 | 1,905,439 | 1,808,885 | 1,779,018 | 1,663,021 | |||||||||||||||||||||||||||
| Money market | 1,184,101 | 1,125,333 | 1,027,547 | 964,352 | 869,067 | |||||||||||||||||||||||||||
| Savings | 661,932 | 704,245 | 740,364 | 710,955 | 679,115 | |||||||||||||||||||||||||||
| Time | 649,552 | 620,960 | 620,363 | 619,386 | 630,583 | |||||||||||||||||||||||||||
| Brokered time | 12,836 | 14,038 | 15,018 | 18,796 | 23,161 | |||||||||||||||||||||||||||
| Total deposits | $ | 6,364,652 | $ | 6,395,252 | $ | 6,184,438 | $ | 6,057,539 | $ | 6,110,648 | ||||||||||||||||||||||
10
| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | ||||||||||||||||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||||||||||||||
| (dollars in thousands) | 2022 | 2022 | 2022 | 2022 | 2021 | |||||||||||||||||||||||||||
| Average Balance Sheets | ||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 220,938 | $ | 195,657 | $ | 226,517 | $ | 384,231 | $ | 685,655 | ||||||||||||||||||||||
| Investment securities | 736,579 | 749,022 | 818,927 | 894,634 | 915,707 | |||||||||||||||||||||||||||
| Loans | 6,240,277 | 6,040,358 | 5,677,791 | 5,274,051 | 4,995,794 | |||||||||||||||||||||||||||
| Loans held for sale | 3,883 | 6,044 | 9,865 | 31,256 | 34,272 | |||||||||||||||||||||||||||
| Nonmarketable equity securities | 43,618 | 37,765 | 36,338 | 36,378 | 39,203 | |||||||||||||||||||||||||||
| Total interest-earning assets | 7,245,295 | 7,028,846 | 6,769,438 | 6,620,550 | 6,670,631 | |||||||||||||||||||||||||||
| Non-earning assets | 609,866 | 618,138 | 615,348 | 631,187 | 605,060 | |||||||||||||||||||||||||||
| Total assets | $ | 7,855,161 | $ | 7,646,984 | $ | 7,384,786 | $ | 7,251,737 | $ | 7,275,691 | ||||||||||||||||||||||
| Interest-bearing deposits | $ | 4,452,801 | $ | 4,325,098 | $ | 4,152,764 | $ | 3,953,249 | $ | 3,913,475 | ||||||||||||||||||||||
| Short-term borrowings | 47,391 | 58,271 | 59,301 | 70,044 | 66,677 | |||||||||||||||||||||||||||
| FHLB advances and other borrowings | 460,598 | 340,163 | 307,611 | 311,282 | 319,954 | |||||||||||||||||||||||||||
| Subordinated debt | 107,374 | 139,324 | 139,232 | 139,139 | 139,046 | |||||||||||||||||||||||||||
| Trust preferred debentures | 49,902 | 49,751 | 49,602 | 49,451 | 49,307 | |||||||||||||||||||||||||||
| Total interest-bearing liabilities | 5,118,066 | 4,912,607 | 4,708,510 | 4,523,165 | 4,488,459 | |||||||||||||||||||||||||||
| Noninterest-bearing deposits | 1,936,977 | 1,969,873 | 1,967,263 | 1,989,413 | 2,049,802 | |||||||||||||||||||||||||||
| Other noninterest-bearing liabilities | 50,935 | 63,638 | 66,009 | 81,832 | 84,538 | |||||||||||||||||||||||||||
| Shareholders' equity | 749,183 | 700,866 | 643,004 | 657,327 | 652,892 | |||||||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 7,855,161 | $ | 7,646,984 | $ | 7,384,786 | $ | 7,251,737 | $ | 7,275,691 | ||||||||||||||||||||||
| Yields | ||||||||||||||||||||||||||||||||
| Earning Assets | ||||||||||||||||||||||||||||||||
| Cash and cash equivalents | 3.85 | % | 2.28 | % | 0.83 | % | 0.18 | % | 0.16 | % | ||||||||||||||||||||||
| Investment securities | 2.62 | % | 2.44 | % | 2.41 | % | 2.22 | % | 2.12 | % | ||||||||||||||||||||||
| Loans | 5.26 | % | 4.83 | % | 4.49 | % | 4.40 | % | 4.36 | % | ||||||||||||||||||||||
| Loans held for sale | 4.86 | % | 3.87 | % | 3.15 | % | 2.86 | % | 3.53 | % | ||||||||||||||||||||||
| Nonmarketable equity securities | 6.16 | % | 5.78 | % | 5.38 | % | 5.40 | % | 5.07 | % | ||||||||||||||||||||||
| Total interest-earning assets | 4.96 | % | 4.51 | % | 4.12 | % | 3.87 | % | 3.62 | % | ||||||||||||||||||||||
| Interest-Bearing Liabilities | ||||||||||||||||||||||||||||||||
| Interest-bearing deposits | 1.77 | % | 0.94 | % | 0.37 | % | 0.22 | % | 0.22 | % | ||||||||||||||||||||||
| Short-term borrowings | 0.26 | % | 0.19 | % | 0.15 | % | 0.14 | % | 0.12 | % | ||||||||||||||||||||||
| FHLB advances and other borrowings | 3.67 | % | 2.83 | % | 1.87 | % | 1.58 | % | 1.75 | % | ||||||||||||||||||||||
| Subordinated debt | 5.45 | % | 5.77 | % | 5.78 | % | 5.78 | % | 5.78 | % | ||||||||||||||||||||||
| Trust preferred debentures | 8.47 | % | 6.54 | % | 5.05 | % | 4.21 | % | 3.90 | % | ||||||||||||||||||||||
| Total interest-bearing liabilities | 2.07 | % | 1.25 | % | 0.67 | % | 0.53 | % | 0.54 | % | ||||||||||||||||||||||
| Cost of Deposits | 1.23 | % | 0.65 | % | 0.25 | % | 0.15 | % | 0.15 | % | ||||||||||||||||||||||
| Net Interest Margin | 3.50 | % | 3.63 | % | 3.65 | % | 3.50 | % | 3.25 | % | ||||||||||||||||||||||
11
| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | ||||||||||||||||||||||||||||||||
| As of and for the Quarter Ended | ||||||||||||||||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||||||||||||||
| (dollars in thousands, except per share data) | 2022 | 2022 | 2022 | 2022 | 2021 | |||||||||||||||||||||||||||
| Asset Quality | ||||||||||||||||||||||||||||||||
| Loans 30-89 days past due | $ | 32,372 | $ | 28,275 | $ | 16,212 | $ | 29,044 | $ | 17,514 | ||||||||||||||||||||||
| Nonperforming loans | 49,423 | 46,882 | 56,883 | 52,900 | 42,580 | |||||||||||||||||||||||||||
| Nonperforming assets | 57,824 | 59,524 | 69,344 | 66,164 | 57,068 | |||||||||||||||||||||||||||
| Net charge-offs | 538 | 3,233 | 2,781 | 2,256 | 4,613 | |||||||||||||||||||||||||||
| Loans 30-89 days past due to total loans | 0.51 | % | 0.46 | % | 0.28 | % | 0.52 | % | 0.34 | % | ||||||||||||||||||||||
| Nonperforming loans to total loans | 0.78 | % | 0.76 | % | 0.98 | % | 0.95 | % | 0.81 | % | ||||||||||||||||||||||
| Nonperforming assets to total assets | 0.74 | % | 0.76 | % | 0.93 | % | 0.90 | % | 0.77 | % | ||||||||||||||||||||||
| Allowance for credit losses to total loans | 0.97 | % | 0.95 | % | 0.95 | % | 0.96 | % | 0.98 | % | ||||||||||||||||||||||
| Allowance for credit losses to nonperforming loans | 123.53 | % | 125.08 | % | 96.51 | % | 100.07 | % | 119.92 | % | ||||||||||||||||||||||
| Net charge-offs to average loans | 0.03 | % | 0.21 | % | 0.20 | % | 0.17 | % | 0.37 | % | ||||||||||||||||||||||
| Wealth Management | ||||||||||||||||||||||||||||||||
| Trust assets under administration | $ | 3,505,372 | $ | 3,355,019 | $ | 3,503,227 | $ | 3,934,140 | $ | 4,100,179 | ||||||||||||||||||||||
| Market Data | ||||||||||||||||||||||||||||||||
| Book value per share at period end | $ | 29.17 | $ | 28.48 | $ | 28.84 | $ | 29.26 | $ | 30.11 | ||||||||||||||||||||||
Tangible book value per share at period end (1) | $ | 20.94 | $ | 20.14 | $ | 20.43 | $ | 20.87 | $ | 21.66 | ||||||||||||||||||||||
| Market price at period end | $ | 26.62 | $ | 23.57 | $ | 24.04 | $ | 28.86 | $ | 24.79 | ||||||||||||||||||||||
| Common shares outstanding at period end | 22,214,913 | 22,074,740 | 22,060,255 | 22,044,626 | 22,050,537 | |||||||||||||||||||||||||||
| Capital | ||||||||||||||||||||||||||||||||
| Total capital to risk-weighted assets | 12.38 | % | 12.79 | % | 11.44 | % | 11.74 | % | 12.19 | % | ||||||||||||||||||||||
| Tier 1 capital to risk-weighted assets | 10.21 | % | 10.05 | % | 8.63 | % | 8.82 | % | 9.16 | % | ||||||||||||||||||||||
| Tier 1 common capital to risk-weighted assets | 7.77 | % | 7.56 | % | 7.66 | % | 7.80 | % | 8.08 | % | ||||||||||||||||||||||
| Tier 1 leverage ratio | 9.43 | % | 9.40 | % | 7.98 | % | 7.96 | % | 7.75 | % | ||||||||||||||||||||||
Tangible common equity to tangible assets (1) | 6.06 | % | 5.82 | % | 6.22 | % | 6.43 | % | 6.58 | % | ||||||||||||||||||||||
(1) Non-GAAP financial measures. Refer to pages 13 - 15 for a reconciliation to the comparable GAAP financial measures.
12
| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||||||||||||||
| RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) | ||||||||||||||||||||||||||||||||
| Adjusted Earnings Reconciliation | ||||||||||||||||||||||||||||||||
| For The Quarter Ended | ||||||||||||||||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||||||||||||||
| (dollars in thousands, except per share data) | 2022 | 2022 | 2022 | 2022 | 2021 | |||||||||||||||||||||||||||
| Income before income taxes - GAAP | $ | 43,902 | $ | 29,380 | $ | 29,167 | $ | 27,389 | $ | 30,600 | ||||||||||||||||||||||
| Adjustments to noninterest income: | ||||||||||||||||||||||||||||||||
| Loss on sales of investment securities, net | — | 129 | 101 | — | — | |||||||||||||||||||||||||||
| (Gain) on termination of hedged interest rate swaps | (17,531) | — | — | — | (1,845) | |||||||||||||||||||||||||||
| Total adjustments to noninterest income | (17,531) | 129 | 101 | — | (1,845) | |||||||||||||||||||||||||||
| Adjustments to noninterest expense: | ||||||||||||||||||||||||||||||||
| (Loss) on mortgage servicing rights held for sale | (3,250) | — | — | — | — | |||||||||||||||||||||||||||
| FHLB advances prepayment fees | — | — | — | — | (4,859) | |||||||||||||||||||||||||||
| Integration and acquisition expenses | — | 68 | (324) | (91) | (171) | |||||||||||||||||||||||||||
| Total adjustments to noninterest expense | (3,250) | 68 | (324) | (91) | (5,030) | |||||||||||||||||||||||||||
| Adjusted earnings pre tax | 29,621 | 29,441 | 29,592 | 27,480 | 33,785 | |||||||||||||||||||||||||||
| Adjusted earnings tax | 7,174 | 5,873 | 7,401 | 6,665 | 8,369 | |||||||||||||||||||||||||||
| Adjusted earnings - non-GAAP | 22,447 | 23,568 | 22,191 | 20,815 | 25,416 | |||||||||||||||||||||||||||
| Preferred stock dividends | 3,169 | — | — | — | — | |||||||||||||||||||||||||||
| Adjusted earnings available to common shareholders | $ | 19,278 | $ | 23,568 | $ | 22,191 | $ | 20,815 | $ | 25,416 | ||||||||||||||||||||||
| Adjusted diluted earnings per common share | $ | 0.85 | $ | 1.04 | $ | 0.98 | $ | 0.92 | $ | 1.12 | ||||||||||||||||||||||
| Adjusted return on average assets | 1.13 | % | 1.22 | % | 1.21 | % | 1.16 | % | 1.39 | % | ||||||||||||||||||||||
| Adjusted return on average shareholders' equity | 11.89 | % | 13.34 | % | 13.84 | % | 12.84 | % | 15.44 | % | ||||||||||||||||||||||
| Adjusted return on average tangible common equity | 16.80 | % | 20.24 | % | 19.41 | % | 17.89 | % | 21.65 | % | ||||||||||||||||||||||
| Adjusted Pre-Tax, Pre-Provision Earnings Reconciliation | ||||||||||||||||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||||||||||||||
| (dollars in thousands) | 2022 | 2022 | 2022 | 2022 | 2021 | |||||||||||||||||||||||||||
| Adjusted earnings pre tax - non-GAAP | $ | 29,621 | $ | 29,441 | $ | 29,592 | $ | 27,480 | $ | 33,785 | ||||||||||||||||||||||
| Provision for credit losses | 3,544 | 6,974 | 5,441 | 4,167 | 467 | |||||||||||||||||||||||||||
| Impairment on commercial mortgage servicing rights | — | — | 869 | 394 | 2,072 | |||||||||||||||||||||||||||
| Adjusted pre-tax, pre-provision earnings - non-GAAP | $ | 33,165 | $ | 36,415 | $ | 35,902 | $ | 32,041 | $ | 36,324 | ||||||||||||||||||||||
| Adjusted pre-tax, pre-provision return on average assets | 1.68 | % | 1.89 | % | 1.95 | % | 1.79 | % | 1.98 | % | ||||||||||||||||||||||
13
| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||||||||||||||
| RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued) | ||||||||||||||||||||||||||||||||
| Efficiency Ratio Reconciliation | ||||||||||||||||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||||||||||||||
| 2022 | 2022 | 2022 | 2022 | 2021 | ||||||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||||||||
| Noninterest expense - GAAP | $ | 49,943 | $ | 43,496 | $ | 41,339 | $ | 40,884 | $ | 45,757 | ||||||||||||||||||||||
| Loss on mortgage servicing rights held for sale | (3,250) | — | — | — | — | |||||||||||||||||||||||||||
| FHLB advances prepayment fees | — | — | — | — | (4,859) | |||||||||||||||||||||||||||
| Integration and acquisition expenses | — | 68 | (324) | (91) | (171) | |||||||||||||||||||||||||||
| Adjusted noninterest expense | $ | 46,693 | $ | 43,564 | $ | 41,015 | $ | 40,793 | $ | 40,727 | ||||||||||||||||||||||
| Net interest income - GAAP | $ | 63,550 | $ | 64,024 | $ | 61,334 | $ | 56,827 | $ | 54,301 | ||||||||||||||||||||||
| Effect of tax-exempt income | 286 | 307 | 321 | 369 | 372 | |||||||||||||||||||||||||||
| Adjusted net interest income | 63,836 | 64,331 | 61,655 | 57,196 | 54,673 | |||||||||||||||||||||||||||
| Noninterest income - GAAP | 33,839 | 15,826 | 14,613 | 15,613 | 22,523 | |||||||||||||||||||||||||||
| Impairment on commercial mortgage servicing rights | — | — | 869 | 394 | 2,072 | |||||||||||||||||||||||||||
| Loss on sales of investment securities, net | — | 129 | 101 | — | — | |||||||||||||||||||||||||||
| (Gain) on termination of hedged interest rate swaps | (17,531) | — | — | — | (1,845) | |||||||||||||||||||||||||||
| Adjusted noninterest income | 16,308 | 15,955 | 15,583 | 16,007 | 22,750 | |||||||||||||||||||||||||||
| Adjusted total revenue | $ | 80,144 | $ | 80,286 | $ | 77,238 | $ | 73,203 | $ | 77,423 | ||||||||||||||||||||||
| Efficiency ratio | 58.26 | % | 54.26 | % | 53.10 | % | 55.73 | % | 52.61 | % | ||||||||||||||||||||||
14
| 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 | ||||||||||||||||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||||||||||||||
| (dollars in thousands, except per share data) | 2022 | 2022 | 2022 | 2022 | 2021 | |||||||||||||||||||||||||||
| Shareholders' Equity to Tangible Common Equity | ||||||||||||||||||||||||||||||||
| Total shareholders' equity—GAAP | $ | 758,574 | $ | 739,279 | $ | 636,188 | $ | 644,986 | $ | 663,837 | ||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Preferred Stock | (110,548) | (110,548) | — | — | — | |||||||||||||||||||||||||||
| Goodwill | (161,904) | (161,904) | (161,904) | (161,904) | (161,904) | |||||||||||||||||||||||||||
| Other intangible assets, net | (20,866) | (22,198) | (23,559) | (22,976) | (24,374) | |||||||||||||||||||||||||||
| Tangible common equity | $ | 465,256 | $ | 444,629 | $ | 450,725 | $ | 460,106 | $ | 477,558 | ||||||||||||||||||||||
| Total Assets to Tangible Assets: | ||||||||||||||||||||||||||||||||
| Total assets—GAAP | $ | 7,855,501 | $ | 7,821,877 | $ | 7,435,812 | $ | 7,338,715 | $ | 7,443,805 | ||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Goodwill | (161,904) | (161,904) | (161,904) | (161,904) | (161,904) | |||||||||||||||||||||||||||
| Other intangible assets, net | (20,866) | (22,198) | (23,559) | (22,976) | (24,374) | |||||||||||||||||||||||||||
| Tangible assets | $ | 7,672,731 | $ | 7,637,775 | $ | 7,250,349 | $ | 7,153,835 | $ | 7,257,527 | ||||||||||||||||||||||
| Common Shares Outstanding | 22,214,913 | 22,074,740 | 22,060,255 | 22,044,626 | 22,050,537 | |||||||||||||||||||||||||||
| Tangible Common Equity to Tangible Assets | 6.06 | % | 5.82 | % | 6.22 | % | 6.43 | % | 6.58 | % | ||||||||||||||||||||||
| Tangible Book Value Per Share | $ | 20.94 | $ | 20.14 | $ | 20.43 | $ | 20.87 | $ | 21.66 | ||||||||||||||||||||||
| Return on Average Tangible Common Equity (ROATCE) | ||||||||||||||||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||||||||||||||
| (dollars in thousands) | 2022 | 2022 | 2022 | 2022 | 2021 | |||||||||||||||||||||||||||
| Net income | $ | 32,872 | $ | 23,521 | $ | 21,883 | $ | 20,749 | $ | 23,107 | ||||||||||||||||||||||
| Average total shareholders' equity—GAAP | $ | 749,183 | $ | 700,866 | $ | 643,004 | $ | 657,327 | $ | 652,892 | ||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Preferred Stock | (110,548) | (54,072) | — | — | — | |||||||||||||||||||||||||||
| Goodwill | (161,904) | (161,904) | (161,904) | (161,904) | (161,904) | |||||||||||||||||||||||||||
| Other intangible assets, net | (22,859) | (22,589) | (22,570) | (23,638) | (25,311) | |||||||||||||||||||||||||||
| Average tangible common equity | $ | 453,872 | $ | 462,301 | $ | 458,530 | $ | 471,785 | $ | 465,677 | ||||||||||||||||||||||
| ROATCE | 25.89 | % | 20.20 | % | 19.14 | % | 17.84 | % | 19.69 | % | ||||||||||||||||||||||
15
1 Midland States Bancorp, Inc. NASDAQ: MSBI Fourth Quarter 2022 Earnings Call
22 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-term goals may be based upon beliefs, expectations and assumptions of the Company’s management, and are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “intend,” “estimate,” “may,” “will,” “would,” “could,” “should” or other similar expressions. All statements in this presentation speak only as of the date they are made, and the Company undertakes no obligation to update any statement. A number of factors, many of which are beyond the ability of the Company to control or predict, could cause actual results to differ materially from those in its forward-looking statements including the effects of the Coronavirus Disease 2019 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 considered in evaluating forward-looking statements, and undue reliance should not be placed on such statements. Additional information concerning the Company and its businesses, including additional factors that could materially affect the Company’s financial results, are included in the Company’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 measures include “Adjusted Earnings,” "Adjusted Earnings Available to Common Shareholders," “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 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. Reconciliations of these non-GAAP measures are provided in the Appendix section of this presentation.
3 Overview of 4Q22 Strong Financial Performance Commercial Banking Continues to Drive Solid Loan Growth Credit Quality Remains Strong Increase in TBV and Capital Ratios 3 • Net income available to common shareholders of $29.7 million, or $1.30 diluted EPS • Results include $17.5 million gain on the termination of forward starting swaps, $3.3 million loss on commercial mortgage servicing rights held for sale and $3.5 million impairment on other real estate owned • Pre-tax, pre-provision earnings(1) of $33.2 million • GAAP ROAA of 1.66% and Adjusted ROAA(1) of 1.13% • Total loans increased 7% annualized despite more selective approach to new loan production • Growth primarily driven by increase in commercial loan portfolio • Equipment financing portfolio surpasses $1.1 billion • Net charge-offs to average loans of 0.03% • Slight increase in nonperforming loans • No meaningful change in delinquencies and watch list loans • Impairment on other real estate owned of $3.5 million • Preferred stock offering completed in August 2022 • Preferred dividend of $3.2 million in the fourth quarter • Tangible book value per share increased 4% from end of prior quarter • Strong financial performance resulted in increase in most capital ratios Notes: (1) Represents a non-GAAP financial measure. See “Non-GAAP Reconciliation” in the appendix.
4 Loan Portfolio 4 • Total loans increased $108.0 million from prior quarter to $6.31 billion • Growth primarily driven by increases in commercial and construction loans • Equipment finance balances increased $73.6 million, or 7% from end of prior quarter Loan Portfolio Mix (in millions, as of quarter-end) 4Q 2022 3Q 2022 4Q 2021 Commercial loans and leases $ 2,006 $ 1,994 $ 1,873 Commercial real estate 2,433 2,466 1,817 Construction and land development 321 226 194 Residential real estate 366 356 338 Consumer 1,180 1,156 1,003 Total Loans $ 6,306 $ 6,198 $ 5,225 Total Loans ex. Commercial FHA Lines and PPP $ 6,280 $ 6,144 $ 5,080 $5,225 $5,540 $5,796 $6,198 $6,306 4.36% 4.40% 4.49% 4.83% 5.26% Total Loans Average Loan Yield 4Q 2021 1Q 2022 2Q 2022 3Q 2022 4Q 2022 Total Loans and Average Loan Yield (in millions, as of quarter-end)
5 Total Deposits 5 • Small decline in total deposits • Decline in noninterest-bearing deposits attributable to lower period-end balances of commercial FHA servicing deposits and commercial depositors moving excess liquidity into interest-bearing accounts • Selectively raising rates on deposits in order to continue funding attractive lending opportunities with new commercial clients Deposit Mix (in millions, as of quarter-end) 4Q 2022 3Q 2022 4Q 2021 Noninterest-bearing demand $ 1,936 $ 2,025 $ 2,246 Interest-bearing: Checking $ 1,920 $ 1,905 $ 1,663 Money market $ 1,184 $ 1,125 $ 869 Savings $ 662 $ 704 $ 679 Time $ 650 $ 621 $ 631 Brokered time $ 13 $ 14 $ 23 Total Deposits $ 6,365 $ 6,395 $ 6,111 $6,111 $6,058 $6,184 $6,395 $6,365 0.15% 0.15% 0.25% 0.65% 1.23% Total Deposits Cost of Deposits 4Q 2021 1Q 2022 2Q 2022 3Q 2022 4Q 2022 Total Deposits and Cost of Deposits (in millions, as of quarter-end)
6 Net Interest Income/Margin 6 • Net interest income down slightly from prior quarter as higher average balance of interest-earning assets was offset by an increase in cost of interest-bearing liabilities • Net interest margin decreased 13 bps from prior quarter as the increase in cost of deposits exceeded the increase in the average yield on earning assets • Average rate on new and renewed loan originations increased 157 bps to 7.10% in December 2022 from 5.53% in September 2022 • Termination of forward starting swaps moved the balance sheet into a more neutral interest rate sensitivity position Net Interest Income (in millions) Net Interest Margin $54.3 $56.8 $61.3 $64.0 $63.6 $0.8 $0.6 $0.6 $0.5 $0.3 NII Accretion Income 4Q 2021 1Q 2022 2Q 2022 3Q 2022 4Q 2022 3.25% 3.50% 3.65% 3.63% 3.50% 0.04% 0.03% 0.03% 0.03% 0.02% NIM Accretion Income 4Q 2021 1Q 2022 2Q 2022 3Q 2022 4Q 2022
7 Wealth Management 7 • During 4Q22, assets under administration increased $150.4 million, primarily due to increased business generation and improved market performance • Increase in AUA resulted in slight increase in Wealth Management revenue compared to the prior quarter Assets Under Administration (in millions) Wealth Management Revenue (in millions) $4,100 $3,934 $3,503 $3,355 $3,505 4Q 2021 1Q 2022 2Q 2022 3Q 2022 4Q 2022 $7.18 $7.14 $6.14 $6.20 $6.23 4Q 2021 1Q 2022 2Q 2022 3Q 2022 4Q 2022
8 Noninterest Income 8 • Noninterest income positively impacted by $17.5 million gain on termination of forward starting interest rate swaps • Excluding gain, most fee generating areas were relatively consistent with prior quarter • Planned sale of commercial MSR portfolio with transaction expected to close during second half of 2023 Noninterest Income (in millions) Wealth Management Interchange Service Charges on Deposits Residential Mortgage All Other 4Q 2021 1Q 2022 2Q 2022 3Q 2022 4Q 2022 $22.5 $15.6 $14.6 $15.8 $33.8
9 Noninterest Expense and Operating Efficiency 9 Noninterest Expense and Efficiency Ratio (1) (Noninterest expense in millions) $43.5 $45.8 $40.9 $41.3 $49.9 $5.0 $0.1 $0.3 $3.3 52.6% 55.7% 53.1% 54.3% 58.3% Total Noninterest Expense Adjustments to Noninterest Expense Efficiency Ratio 4Q 2021 1Q 2022 2Q 2022 3Q 2022 4Q 2022 • Efficiency Ratio (1) was 58.3% in 4Q22 vs. 54.3% in 3Q22 • Adjustments to non-interest expense: ($ in millions) 4Q 2022 3Q 2022 Loss on mortgage servicing rights held for sale $3.3 -- • 4Q22 includes a $3.5 million impairment on other real estate owned • Excluding these items, all other areas of noninterest expense were relatively consistent with the prior quarter • Near-term operating expense run-rate expected to be $43 - $44 million Notes: (1) Represents a non-GAAP financial measure. See “Non-GAAP Reconciliation” in the appendix.
10 Asset Quality 10 • Nonperforming loans increased $2.5 million primarily due to one commercial real estate loan • Delinquencies in consumer portfolio remain low • Net charge-offs to average loans was 0.03% • Provision for credit losses on loans of $3.0 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) NCO / Average Loans 0.81% 0.95% 0.98% 0.76% 0.78% 4Q 2021 1Q 2022 2Q 2022 3Q 2022 4Q 2022 0.37% 0.17% 0.20% 0.21% 0.03% 4Q 2021 1Q 2022 2Q 2022 3Q 2022 4Q 2022
11 Changes in Allowance for Credit Losses 11 $58,639 $162 $1,733 $517 $61,051 ($ in thousands) ACL 9/30/2022 Specific Reserves Portfolio Changes Economic Factors ACL 12/31/2022 ▪ Changes to specific reserves ▪ New Loans ▪ Changes in Credit quality including risk rating ▪ Changes in portfolio mix ▪ Aging of existing portfolio ▪ Other charge-offs and recoveries ▪ Change to macro- economic variables and forecasts ▪ Changes to other economic qualitative factors
12 ACL by Portfolio 12 ($ in thousands) December 31, 2022 September 30, 2022 Portfolio Loans ACL % of Total Loans Loans ACL % of Total Loans Commercial $ 786,877 $ 4,706 0.60 % $ 852,930 $ 5,745 0.67 % Warehouse Lines 25,029 — — % 51,309 — — % Commercial Other 727,697 9,933 1.36 % 683,353 8,620 1.26 % Equipment Finance Loans 616,751 9,666 1.57 % 577,323 8,307 1.44 % Paycheck Protection Program 1,916 3 0.16 % 2,810 4 0.14 % Equipment Finance Leases 491,744 6,788 1.38 % 457,611 6,678 1.46 % CRE non-owner occupied 1,591,399 18,649 1.17 % 1,567,308 19,141 1.22 % CRE owner occupied 496,786 7,447 1.50 % 505,174 5,818 1.15 % Multi-family 277,889 2,702 0.97 % 328,473 3,105 0.95 % Farmland 67,085 491 0.73 % 65,348 366 0.56 % Construction and Land Development 320,882 2,435 0.76 % 225,549 1,591 0.71 % Residential RE First Lien 304,243 3,717 1.22 % 294,432 3,686 1.25 % Other Residential 61,851 584 0.94 % 61,793 485 0.78 % Consumer 105,880 636 0.60 % 110,226 594 0.54 % Consumer Other(1) 1,074,134 2,963 0.28 % 1,046,254 2,810 0.27 % Total Loans 6,306,467 61,051 0.97 % 6,198,451 58,639 0.95 % Loans (excluding GreenSky, PPP and warehouse lines) 5,143,343 57,897 1.13 % 5,036,227 55,636 1.10 % Notes: (1) Primarily consists of loans originated through GreenSky relationship
13 2023 Outlook and Priorities 13 • Continue generating strong financial performance and higher level of profitability while maintaining conservative approach to new loan production • Loan growth will continue to be driven by a more productive commercial banking team, greater exposure to higher growth markets, and equipment finance business • Maintain disciplined expense management while getting further leverage from investments in talent and technology made over the past few years • Accelerated exit planned from GreenSky partnership to positively impact liquidity and capital with minimal impact on earnings • Highly selective approach to adding partnerships in Banking-as-a-Service initiative with primary focus on deposit gathering in 2023 • Investing in Wealth Management business to generate higher rate of organic growth • Loan portfolio expected to continue performing well with minimal exposure to those areas most likely to be impacted by a recession • Continue evaluating small, strategic M&A opportunities • Higher level of profitability and lower level of balance sheet growth should result in further increase in capital ratios
14 APPENDIX 14
1515 Industries as a percentage of Commercial, CRE and Equipment Finance Loans and Leases with outstanding balances of $4.76 billion as of 12/31/2022 ($s in millions) RE/Rental & Leasing $1,426 30.0% All Others $589 12.4% Skilled Nursing $465 9.8% Construction - General $334 7.0% Manufacturing $268 5.6% Finance and Insurance $227 4.8% Accommodation & Food Svcs $225 4.7% Trans./Ground Passenger $219 4.6% Assisted Living $154 3.2% Ag., Forestry, & Fishing $180 3.8% General Freight Trucking $223 4.7% Retail Trade $168 3.5% Wholesale Trade $101 2.1% Other Services $102 2.1% Commercial Loans and Leases by Industry Health Care $77 1.6%
16 Commercial Real Estate Portfolio by Collateral Type 16 CRE Concentration (as of 12/31/2022) CRE as a % of Total Loans 38.6% CRE as a % of Total Risk-Based Capital (1) 259.4% Notes: (1) Represents non-owner occupied CRE loans only Collateral type as a percentage of the Commercial Real Estate and Construction Portfolio with outstanding balances of $2.75 billion as of 12/31/2022 ($s in millions) Skilled Nursing $485 17.6% Retail $453 16.4% Multi-Family $395 14.3% Industrial/Warehouse $228 8.3% Assisted Living $176 6.4% Hotel/Motel $165 6.0% All Other $185 6.7% Office $156 5.7% Farmland $66 2.4% Residential 1-4 Family $84 3.0% Raw Land $18 0.6% Restaurant $35 1.3% Mixed Use/Other $56 2.1% Medical Building $108 3.9% Special Purpose $76 2.8% C-Store/Gas Station $67 2.4%
17 Capital Ratios and Strategy 17 • Strengthened capital ratios with issuance of $115 million of non-cumulative preferred stock in August 2022 ◦ Included in Tier 1 Regulatory Capital ◦ 7.75% with reset at 5 years • Reduced cost of funds by redeeming $40 million of sub-debt with rate of 6.25% in October • Gain from forward starting swaps increased capital for fourth quarter • Internal capital generated from strong profitability and slower balance sheet growth expected to raise TCE ratio to 7.00%-7.75% by the end of 2024 • Capital actions and strong profitability expected to enable MSBI to raise capital ratios while maintaining current dividend payout Capital Strategy Capital Ratios (as of 12/31/2022) 6.06% 7.77% 9.43% 10.21% 12.38% 10.71% 9.90% 10.71% 11.51% Consolidated Bank Level TCE/TA Common Eq. Tier 1 Tier 1 Leverage Tier 1 RBC Total RBC
18 Liquidity Overview 18 Liquidity Sources (as of 12/31/2022) ($ in millions) Cash and Cash Equivalents $ 150.3 Unpledged Securities 209.2 FHLB Committed Liquidity 997.4 FRB Discount Window Availability 12.2 Total Estimated Liquidity $ 1,369.1 Conditional Funding Based on Market Conditions Additional Credit Facility $ 250.0 Brokered CDs (additional capacity) $ 500.0
1919 MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) Adjusted Earnings Reconciliation For The Quarter Ended December 31, September 30, June 30, March 31, December 31, (dollars in thousands, except per share data) 2022 2022 2022 2022 2021 Income before income taxes - GAAP $ 43,902 $ 29,380 $ 29,167 $ 27,389 $ 30,600 Adjustments to noninterest income: Loss on sales of investment securities, net — 129 101 — — (Gain) on termination of hedged interest rate swaps (17,531) — — — (1,845) Total adjustments to noninterest income (17,531) 129 101 — (1,845) Adjustments to noninterest expense: (Loss) on mortgage servicing rights held for sale (3,250) — — — — FHLB advances prepayment fees — — — — (4,859) Integration and acquisition expenses — 68 (324) (91) (171) Total adjustments to noninterest expense (3,250) 68 (324) (91) (5,030) Adjusted earnings pre tax 29,621 29,441 29,592 27,480 33,785 Adjusted earnings tax 7,174 5,873 7,401 6,665 8,369 Adjusted earnings - non-GAAP 22,447 23,568 22,191 20,815 25,416 Preferred stock dividends 3,169 — — — — Adjusted earnings available to common shareholders $ 19,278 $ 23,568 $ 22,191 $ 20,815 $ 25,416 Adjusted diluted earnings per common share $ 0.85 $ 1.04 $ 0.98 $ 0.92 $ 1.12 Adjusted return on average assets 1.13 % 1.22 % 1.21 % 1.16 % 1.39 % Adjusted return on average shareholders' equity 11.89 % 13.34 % 13.84 % 12.84 % 15.44 % Adjusted return on average tangible common equity 16.80 % 20.24 % 19.41 % 17.89 % 21.65 % Adjusted Pre-Tax, Pre-Provision Earnings Reconciliation For the Quarter Ended December 31, September 30, June 30, March 31, December 31, (dollars in thousands) 2022 2022 2022 2022 2021 Adjusted earnings pre tax - non-GAAP $ 29,621 $ 29,441 $ 29,592 $ 27,480 $ 33,785 Provision for credit losses 3,544 6,974 5,441 4,167 467 Impairment on commercial mortgage servicing rights — — 869 394 2,072 Adjusted pre-tax, pre-provision earnings - non-GAAP $ 33,165 $ 36,415 $ 35,902 $ 32,041 $ 36,324 Adjusted pre-tax, pre-provision return on average assets 1.68 % 1.89 % 1.95 % 1.79 % 1.98 %
2020 MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued) Efficiency Ratio Reconciliation For the Quarter Ended December 31, September 30, June 30, March 31, December 31, 2022 2022 2022 2022 2021 (dollars in thousands) Noninterest expense - GAAP $ 49,943 $ 43,496 $ 41,339 $ 40,884 $ 45,757 Loss on mortgage servicing rights held for sale (3,250) — — — — FHLB advances prepayment fees — — — — (4,859) Integration and acquisition expenses — 68 (324) (91) (171) Adjusted noninterest expense $ 46,693 $ 43,564 $ 41,015 $ 40,793 $ 40,727 Net interest income - GAAP $ 63,550 $ 64,024 $ 61,334 $ 56,827 $ 54,301 Effect of tax-exempt income 286 307 321 369 372 Adjusted net interest income 63,836 64,331 61,655 57,196 54,673 Noninterest income - GAAP 33,839 15,826 14,613 15,613 22,523 Impairment on commercial mortgage servicing rights — — 869 394 2,072 Loss on sales of investment securities, net — 129 101 — — (Gain) on termination of hedged interest rate swaps (17,531) — — — (1,845) Adjusted noninterest income 16,308 15,955 15,583 16,007 22,750 Adjusted total revenue $ 80,144 $ 80,286 $ 77,238 $ 73,203 $ 77,423 Efficiency ratio 58.26 % 54.26 % 53.10 % 55.73 % 52.61 %
2121 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 December 31, September 30, June 30, March 31, December 31, (dollars in thousands, except per share data) 2022 2022 2022 2022 2021 Shareholders' Equity to Tangible Common Equity Total shareholders' equity—GAAP $ 758,574 $ 739,279 $ 636,188 $ 644,986 $ 663,837 Adjustments: Preferred Stock (110,548) (110,548) — — — Goodwill (161,904) (161,904) (161,904) (161,904) (161,904) Other intangible assets, net (20,866) (22,198) (23,559) (22,976) (24,374) Tangible common equity $ 465,256 $ 444,629 $ 450,725 $ 460,106 $ 477,558 Total Assets to Tangible Assets: Total assets—GAAP $ 7,855,501 $ 7,821,877 $ 7,435,812 $ 7,338,715 $ 7,443,805 Adjustments: Goodwill (161,904) (161,904) (161,904) (161,904) (161,904) Other intangible assets, net (20,866) (22,198) (23,559) (22,976) (24,374) Tangible assets $ 7,672,731 $ 7,637,775 $ 7,250,349 $ 7,153,835 $ 7,257,527 Common Shares Outstanding 22,214,913 22,074,740 22,060,255 22,044,626 22,050,537 Tangible Common Equity to Tangible Assets 6.06 % 5.82 % 6.22 % 6.43 % 6.58 % Tangible Book Value Per Share $ 20.94 $ 20.14 $ 20.43 $ 20.87 $ 21.66 Return on Average Tangible Common Equity (ROATCE) For the Quarter Ended December 31, September 30, June 30, March 31, December 31, (dollars in thousands) 2022 2022 2022 2022 2021 Net income $ 32,872 $ 23,521 $ 21,883 $ 20,749 $ 23,107 Average total shareholders' equity—GAAP $ 749,183 $ 700,866 $ 643,004 $ 657,327 $ 652,892 Adjustments: Preferred Stock (110,548) (54,072) — — — Goodwill (161,904) (161,904) (161,904) (161,904) (161,904) Other intangible assets, net (22,859) (22,589) (22,570) (23,638) (25,311) Average tangible common equity $ 453,872 $ 462,301 $ 458,530 $ 471,785 $ 465,677 ROATCE 25.89 % 20.20 % 19.14 % 17.84 % 19.69 %