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): April 27, 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 April 27, 2023 , Midland States Bancorp, Inc. (the “Company”) issued a press release announcing its financial results for the first quarter of 2023. The press release is attached as Exhibit 99.1.
Item 7.01. Regulation FD Disclosure.
On April 27, 2023 , the Company made available on its website a slide presentation regarding the Company's first quarter 2023 financial results. 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 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description | ||||||||||
Press Release of Midland States Bancorp, Inc., dated | |||||||||||
Slide Presentation of Midland States Bancorp, Inc. regarding first quarter 2023 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: | By: | /s/ Eric T. Lemke | ||||||
| Eric T. Lemke | ||||||||
| Chief Financial Officer | ||||||||
EXHIBIT 99.1
Midland States Bancorp, Inc. Announces 2023 First Quarter Results
First Quarter 2023 Highlights:
•Net income available to common shareholders of $19.5 million, or $0.86 per diluted share
•Total loan growth of $47.8 million, or 3.0% annualized from prior quarter
•Total deposits increased $60.5 million, or 3.8% annualized from prior quarter, with uninsured deposits of 21%
•Tangible book value per share of $21.87, an increase of 4.4% from prior quarter
Effingham, IL, April 27, 2023 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (Nasdaq: MSBI) (the “Company”) today reported net income available to common shareholders of $19.5 million, or $0.86 per diluted share, for the first quarter of 2023 compared to $29.7 million, or $1.30 per diluted share, for the fourth quarter of 2022. This also compares to net income available to common shareholders of $20.7 million, or $0.92 per diluted share, for the first quarter of 2022.
Jeffrey G. Ludwig, President and Chief Executive Officer of the Company, said, “The strength of the franchise we have built has enabled us to effectively manage through the recent troubles in the banking industry and continue delivering strong financial performance. Due to the strong relationships we have with our clients, our deposit base has been exceptionally stable, and we have not needed to take any extraordinary measures to prevent deposit outflows or increase our level of liquidity beyond the usual prudent level that we maintain.
“While becoming more selective in our new loan production given the uncertain economic conditions, we still grew our total loans at a 3% annualized rate in the first quarter, largely driven by growth in our commercial loan portfolio, which offset a decline in consumer loans as we see the planned reduction in loan balances in our GreenSky portfolio. We delivered another quarter of strong financial performance that further increased our capital ratios and tangible book value per share.
“We will continue to prioritize prudent risk management and be conservative in our new loan production to build capital and liquidity. We expect to see continued reductions in our consumer portfolio that will be used to add to our security portfolio and pay off higher cost funding sources, with the net impact likely being earnings neutral, but capital accretive. We have a strong balance sheet with healthy asset quality, and we believe we can capitalize on the current environment to add new commercial and retail deposit relationships. Our focus on continuing to grow and strengthen our core deposit base will help us to generate long-term profitable growth and continue enhancing the value of our franchise,” said Mr. Ludwig.
Balance Sheet Highlights
Total assets were $7.93 billion at March 31, 2023, compared to $7.86 billion at December 31, 2022, and $7.34 billion at March 31, 2022. At March 31, 2023, portfolio loans were $6.35 billion, compared to $6.31 billion as of December 31, 2022, and $5.54 billion as of March 31, 2022. During the first quarter of 2023, the Company experienced another quarter of growth of $47.8 million, consisting of growth in
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commercial loan and lease balances of $84.1 million and commercial real estate loans of $15.0 million. The Company’s consumer loan balances declined $61.1 million, primarily due to a decrease in loans originated through the program with GreenSky.
Loans
| As of | ||||||||||||||||||||
| March 31, | December 31, | March 31, | ||||||||||||||||||
| (in thousands) | 2023 | 2022 | 2022 | |||||||||||||||||
| Loan Portfolio | ||||||||||||||||||||
| Commercial loans | $ | 937,920 | $ | 872,794 | $ | 825,554 | ||||||||||||||
| Equipment finance loans | 632,205 | 616,751 | 528,572 | |||||||||||||||||
| Equipment finance leases | 510,029 | 491,744 | 429,000 | |||||||||||||||||
| Commercial FHA warehouse lines | 10,275 | 25,029 | 83,999 | |||||||||||||||||
| Total commercial loans and leases | 2,090,429 | 2,006,318 | 1,867,125 | |||||||||||||||||
| Commercial real estate | 2,448,158 | 2,433,159 | 2,114,041 | |||||||||||||||||
| Construction and land development | 326,836 | 320,882 | 188,668 | |||||||||||||||||
| Residential real estate | 369,910 | 366,094 | 329,331 | |||||||||||||||||
| Consumer | 1,118,938 | 1,180,014 | 1,040,796 | |||||||||||||||||
| Total loans | $ | 6,354,271 | $ | 6,306,467 | $ | 5,539,961 | ||||||||||||||
Loan Quality
Credit quality remained steady during the first quarter of 2023. Loans 30-89 days past due totaled $30.9 million as of March 31, 2023, compared to $32.4 million as of December 31, 2022, and $29.0 million as of March 31, 2022. Non-performing loans were $50.7 million at March 31, 2023, compared to $49.4 million as of December 31, 2022, and $52.9 million as of March 31, 2022. Non-performing loans as a percentage of portfolio loans was 0.80% at March 31, 2023 compared with 0.78% at December 31, 2022, and 0.95% at March 31, 2022. Non-performing assets were 0.74% of total assets at the end of the first quarter of 2023, compared to 0.74% at December 31, 2022 and 0.90% at March 31, 2022.
| As of and for the Quarter Ended | ||||||||||||||||||||
| March 31, | December 31, | March 31, | ||||||||||||||||||
| (dollars in thousands, except per share data) | 2023 | 2022 | 2022 | |||||||||||||||||
| Asset Quality | ||||||||||||||||||||
| Loans 30-89 days past due | $ | 30,895 | $ | 32,372 | $ | 29,044 | ||||||||||||||
| Nonperforming loans | 50,713 | 49,423 | 52,900 | |||||||||||||||||
| Nonperforming assets | 58,806 | 57,824 | 66,164 | |||||||||||||||||
| Substandard loans | 99,819 | 101,044 | 120,837 | |||||||||||||||||
| Net charge-offs | 2,119 | 538 | 2,256 | |||||||||||||||||
| Loans 30-89 days past due to total loans | 0.49 | % | 0.51 | % | 0.52 | % | ||||||||||||||
| Nonperforming loans to total loans | 0.80 | % | 0.78 | % | 0.95 | % | ||||||||||||||
| Nonperforming assets to total assets | 0.74 | % | 0.74 | % | 0.90 | % | ||||||||||||||
| Allowance for credit losses to total loans | 0.98 | % | 0.97 | % | 0.96 | % | ||||||||||||||
| Allowance for credit losses to nonperforming loans | 122.39 | % | 123.53 | % | 100.07 | % | ||||||||||||||
| Net charge-offs to average loans | 0.14 | % | 0.03 | % | 0.17 | % | ||||||||||||||
The Company’s allowance for credit losses totaled $62.1 million at March 31, 2023, compared to $61.1 million at December 31, 2022, and $52.9 million at March 31, 2022. The allowance as a percentage of portfolio loans was 0.98% at March 31, 2023, compared to 0.97% at December 31, 2022, and 0.96% at March 31, 2022.
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Deposits
Total deposits were $6.43 billion at March 31, 2023, compared with $6.36 billion at December 31, 2022, and $6.06 billion at March 31, 2022. Interest rate promotions offered during the first quarter of 2023 on money market and time deposit products resulted in increases in balances of $79.7 million and $117.3 million, respectively, at March 31, 2023, compared to December 31, 2022.
| As of | ||||||||||||||||||||
| March 31, | December 31, | March 31, | ||||||||||||||||||
| (in thousands) | 2023 | 2022 | 2022 | |||||||||||||||||
| Deposit Portfolio | ||||||||||||||||||||
| Noninterest-bearing demand | $ | 1,215,758 | $ | 1,362,158 | $ | 1,393,825 | ||||||||||||||
| Interest-bearing: | ||||||||||||||||||||
| Checking | 2,502,827 | 2,494,073 | 2,350,225 | |||||||||||||||||
| Money market | 1,263,813 | 1,184,101 | 964,352 | |||||||||||||||||
| Savings | 636,832 | 661,932 | 710,955 | |||||||||||||||||
| Time | 766,884 | 649,552 | 619,386 | |||||||||||||||||
| Brokered time | 39,087 | 12,836 | 18,796 | |||||||||||||||||
| Total deposits | $ | 6,425,201 | $ | 6,364,652 | $ | 6,057,539 | ||||||||||||||
The Company estimates that uninsured deposits(1) totaled $1.32 billion, or 21% of total deposits, at March 31, 2023 compared to $1.55 billion, or 24%, at December 31, 2022.
(1) Uninsured deposits include the Call Report estimate of uninsured deposits less affiliate deposits, estimated insured portion of servicing deposits, additional structured FDIC coverage and collateralized deposits.
Results of Operations Highlights
During the first quarter of 2023, net interest income, on a tax-equivalent basis, totaled $60.7 million, a decrease of $3.1 million, or 4.8%, compared to $63.8 million for the fourth quarter of 2022, and an increase of $3.6 million, or 6.2%, compared to the first quarter of 2022 net interest income of $57.2 million.
Net Interest Income and Margin
The tax equivalent net interest margin for the first quarter of 2023 was 3.39%, compared with 3.50% in both the fourth and first quarters of 2022. The decline in the net interest margin during the first quarter of 2023 was largely attributable to increased market interest rates resulting in the cost of funding liabilities increasing at a faster rate than the yields on earning assets.
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| For the Quarter Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| March 31, | December 31, | March 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2023 | 2022 | 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-earning assets | Average Balance | Interest & Fees | Yield/Rate | Average Balance | Interest & Fees | Yield/Rate | Average Balance | Interest & Fees | Yield/Rate | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 85,123 | $ | 980 | 4.67 | % | $ | 220,938 | $ | 2,143 | 3.85 | % | $ | 384,231 | $ | 171 | 0.18 | % | ||||||||||||||||||||||||||||||||||||||
| Investment securities | 809,848 | 5,995 | 3.00 | % | 736,579 | 4,824 | 2.62 | % | 894,634 | 4,962 | 2.22 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Loans | 6,320,402 | 87,997 | 5.65 | % | 6,240,277 | 82,810 | 5.26 | % | 5,274,051 | 57,280 | 4.40 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Loans held for sale | 1,506 | 16 | 4.41 | % | 3,883 | 47 | 4.86 | % | 31,256 | 220 | 2.86 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Nonmarketable equity securities | 47,819 | 795 | 6.75 | % | 43,618 | 677 | 6.16 | % | 36,378 | 484 | 5.40 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Total interest-earning assets | $ | 7,264,698 | $ | 95,783 | 5.35 | % | $ | 7,245,295 | $ | 90,501 | 4.96 | % | $ | 6,620,550 | $ | 63,117 | 3.87 | % | ||||||||||||||||||||||||||||||||||||||
| Interest-Bearing Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-bearing deposits | $ | 5,053,941 | $ | 26,405 | 2.12 | % | $ | 5,053,158 | $ | 19,841 | 1.56 | % | $ | 4,507,642 | $ | 2,161 | 0.19 | % | ||||||||||||||||||||||||||||||||||||||
| Short-term borrowings | 38,655 | 25 | 0.26 | % | 47,391 | 31 | 0.26 | % | 70,043 | 23 | 0.14 | % | ||||||||||||||||||||||||||||||||||||||||||||
| FHLB advances & other borrowings | 540,278 | 6,006 | 4.51 | % | 460,598 | 4,264 | 3.67 | % | 311,282 | 1,212 | 1.58 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Subordinated debt | 99,812 | 1,370 | 5.57 | % | 107,374 | 1,463 | 5.45 | % | 139,139 | 2,011 | 5.78 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Trust preferred debentures | 50,047 | 1,229 | 9.96 | % | 49,902 | 1,066 | 8.47 | % | 49,451 | 514 | 4.21 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | $ | 5,782,733 | $ | 35,035 | 2.46 | % | $ | 5,718,423 | $ | 26,665 | 1.85 | % | $ | 5,077,557 | $ | 5,921 | 0.47 | % | ||||||||||||||||||||||||||||||||||||||
| Net Interest Margin | $ | 60,748 | 3.39 | % | $ | 63,836 | 3.50 | % | $ | 57,196 | 3.50 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Cost of Deposits | 1.70 | % | 1.23 | % | 0.15 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
Average interest-earning assets for the first quarter of 2023 were $7.26 billion, compared to $7.25 billion for the fourth quarter of 2022, and $6.62 billion for the first quarter of 2022. Average loans were $6.32 billion for the first quarter of 2023, compared to $6.24 billion for the fourth quarter of 2022 and $5.27 billion for the first quarter of 2022. The average balance of PPP loans for the first quarter of 2022 was $36.2 million.
Average investment securities for the first quarter of 2023 were $809.8 million, compared to $736.6 million for the fourth quarter of 2022, and $894.6 million for the first quarter of 2022. The Company took advantage of certain market conditions during the quarter to reposition out of lower yielding tax-exempt securities in favor of other structures and to purchase additional investments, increasing average investment securities by $73.3 million. These changes should result in improved overall margin, liquidity, and capital allocations. These transactions resulted in losses of $0.6 million in the current quarter, with expected paybacks to occur within the calendar year.
Average interest-bearing deposits were $5.05 billion for the first quarter of 2023, compared to $5.05 billion for the fourth quarter of 2022, and $4.51 billion for the first quarter of 2022. Cost of interest-bearing deposits was 2.12% in the first quarter of 2023, which represents a 56 basis point increase from the fourth quarter of 2022. A competitive market driven by rising interest rates was a contributing factor to the increase in deposit costs.
Noninterest Income
Noninterest income was $15.8 million for the first quarter of 2023, compared to $33.8 million for the fourth quarter of 2022, and $15.6 million for the first quarter of 2022. Noninterest income for the first quarter of 2023 was negatively impacted by $0.6 million of losses on the sales of investment securities, while the fourth quarter of 2022 was positively impacted by a $17.5 million gain on the termination of forward starting interest rate swaps, and the first quarter of 2022 was negatively impacted by $0.4 million
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of impairment on commercial servicing rights. Excluding these transactions, noninterest income for the first quarter of 2023, the fourth quarter of 2022 and the first quarter of 2022 was $16.4 million, $16.3 million, and $16.0 million, respectively.
| For the Quarter Ended | ||||||||||||||||||||
| March 31, | December 31, | March 31, | ||||||||||||||||||
| (in thousands) | 2023 | 2022 | 2022 | |||||||||||||||||
| Noninterest income | ||||||||||||||||||||
| Wealth management revenue | $ | 6,411 | $ | 6,227 | $ | 7,139 | ||||||||||||||
| Residential mortgage banking revenue | 405 | 316 | 599 | |||||||||||||||||
| Service charges on deposit accounts | 2,568 | 2,511 | 2,068 | |||||||||||||||||
| Interchange revenue | 3,412 | 3,478 | 3,280 | |||||||||||||||||
| Loss on sales of investment securities, net | (648) | — | — | |||||||||||||||||
| Gain on termination of hedged interest rate swaps | — | 17,531 | — | |||||||||||||||||
| Impairment on commercial mortgage servicing rights | — | — | (394) | |||||||||||||||||
| Company-owned life insurance | 876 | 796 | 1,019 | |||||||||||||||||
| Other income | 2,755 | 2,980 | 1,902 | |||||||||||||||||
| Total noninterest income | $ | 15,779 | $ | 33,839 | $ | 15,613 | ||||||||||||||
Noninterest Expense
Noninterest expense was $44.5 million in the first quarter of 2023, compared to $49.9 million in the fourth quarter of 2022, and $40.9 million in the first quarter of 2022. Noninterest expense for the fourth quarter of 2022 included a $3.3 million charge on commercial FHA loan servicing rights held for sale and $3.3 million of impairment charges on two OREO properties. Noninterest expense, excluding these adjustments, was $44.5 million in the first quarter of 2023, compared to $43.2 million in the fourth quarter of 2022, and $40.9 million in the first quarter of 2022. As a result, the efficiency ratio was 57.64% for the quarter ended March 31, 2023, compared to 58.26% for the quarter ended December 31, 2022, and 55.73% for the quarter ended March 31, 2022.
| For the Quarter Ended | ||||||||||||||||||||
| March 31, | December 31, | March 31, | ||||||||||||||||||
| (in thousands) | 2023 | 2022 | 2022 | |||||||||||||||||
| Noninterest expense | ||||||||||||||||||||
| Salaries and employee benefits | $ | 24,243 | $ | 22,901 | $ | 21,870 | ||||||||||||||
| Occupancy and equipment | 4,443 | 3,748 | 3,755 | |||||||||||||||||
| Data processing | 6,311 | 6,302 | 5,873 | |||||||||||||||||
| Professional | 1,760 | 1,726 | 1,972 | |||||||||||||||||
| Amortization of intangible assets | 1,291 | 1,333 | 1,398 | |||||||||||||||||
| Other real estate owned | — | 3,779 | — | |||||||||||||||||
| Loss on mortgage servicing rights held for sale | — | 3,250 | — | |||||||||||||||||
| FDIC insurance | 1,329 | 703 | 830 | |||||||||||||||||
| Other expense | 5,105 | 6,201 | 5,186 | |||||||||||||||||
| Total noninterest expense | $ | 44,482 | $ | 49,943 | $ | 40,884 | ||||||||||||||
Noteworthy components of noninterest expense are as follows:
•Salaries and employee benefits expenses were $24.2 million in the first quarter of 2023, compared to $22.9 million in the fourth quarter of 2022, and $21.9 million in the first quarter of 2022. Employees numbered 931 at March 31, 2023, compared to 935 at December 31, 2022, and 920 at March 31, 2022. Increased payroll taxes and medical insurance of $0.6 million and $0.5
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million, respectively, contributed to increased expense in the first quarter of 2023 compared to the fourth quarter of 2022. Annual salary increases and the modest increase in staffing levels contributed to increased salaries and benefits expenses from the first quarter of 2022, along with a $0.7 million increase in medical insurance.
•Occupancy and equipment increased $0.7 million in the first quarter of 2023 compared to the fourth quarter of 2022, primarily due to seasonal related expenses, including snow removal and utilities expenses.
•FDIC insurance expense was $1.3 million in the first quarter of 2023, compared to $0.7 million in the fourth quarter of 2022, and $0.8 million in the first quarter of 2022. The increase is primarily related to the FDIC’s 2 basis point increase to the initial base deposit insurance assessment rate schedules effective January 1, 2023.
Income Tax Expense
Income tax expense was $6.9 million for the first quarter of 2023, as compared to $11.0 million for the fourth quarter of 2022 and $6.6 million for the first quarter of 2022. The resulting effective tax rates were 24.0%, 25.1% and 24.2% respectively.
Capital
At March 31, 2023, Midland States Bank and the Company exceeded all regulatory capital requirements under Basel III, and Midland States Bank met the qualifications to be a ‘‘well-capitalized’’ financial institution, as summarized in the following table:
As of March 31, 2023 | |||||||||||||||||
| Midland States Bank | Midland States Bancorp, Inc. | Minimum Regulatory Requirements (2) | |||||||||||||||
| Total capital to risk-weighted assets | 11.59% | 12.46% | 10.50% | ||||||||||||||
| Tier 1 capital to risk-weighted assets | 10.76% | 10.25% | 8.50% | ||||||||||||||
| Tier 1 leverage ratio | 10.02% | 9.54% | 4.00% | ||||||||||||||
| Common equity Tier 1 capital | 10.76% | 7.84% | 7.00% | ||||||||||||||
Tangible common equity to tangible assets (1) | N/A | 6.24% | N/A | ||||||||||||||
(1) A non-GAAP financial measure. Refer to page 13 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 $83.0 million decline in accumulated other comprehensive income, which has negatively impacted tangible book value per share by $3.76, and the tangible common equity to tangible assets ratio by 108 basis points.
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. During the first quarter of 2023, the Company repurchased 124,266 shares of its common stock at a weighted average price of $22.54 under its stock repurchase program. As of March 31, 2023, the Company had $22.2 million remaining under the current stock repurchase authorization.
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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 March 31, 2023, the Company had total assets of approximately $7.93 billion, and its Wealth Management Group had assets under administration of approximately $3.50 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.
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Non-GAAP Financial Measures
Some of the financial measures included in this press release are not measures of financial performance recognized in accordance with GAAP.
These non-GAAP financial measures include “Adjusted Earnings,” “Adjusted Earnings Available to Common Shareholders,” “Adjusted Diluted Earnings Per Common Share,” “Adjusted Return on Average Assets,” “Adjusted Return on Average Shareholders’ Equity,” “Adjusted Return on Average Tangible Common Equity,” “Adjusted Pre-Tax, Pre-Provision Earnings,” “Adjusted Pre-Tax, Pre-Provision Return on Average Assets,” “Efficiency Ratio,” “Tangible Common Equity to Tangible Assets,” “Tangible Book Value Per Share,” “Tangible Book Value Per Share excluding Accumulated Other Comprehensive Income,” and “Return on Average Tangible Common Equity.” The Company believes these non-GAAP financial measures provide both management and investors a more complete understanding of the Company’s funding profile and profitability. These non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP financial measures. Not all companies use the same calculation of these measures; therefore, 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, continuing effects of the recent failures of Silicon Valley Bank and Signature Bank, including anticipated effects on FDIC premiums, increased deposit volatility and potential regulatory developments; 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
8
| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) | ||||||||||||||||||||
| As of and for the Quarter Ended | ||||||||||||||||||||
| March 31, | December 31, | March 31, | ||||||||||||||||||
| (dollars in thousands, except per share data) | 2023 | 2022 | 2022 | |||||||||||||||||
| Earnings Summary | ||||||||||||||||||||
| Net interest income | $ | 60,504 | $ | 63,550 | $ | 56,827 | ||||||||||||||
| Provision for credit losses | 3,135 | 3,544 | 4,167 | |||||||||||||||||
| Noninterest income | 15,779 | 33,839 | 15,613 | |||||||||||||||||
| Noninterest expense | 44,482 | 49,943 | 40,884 | |||||||||||||||||
| Income before income taxes | 28,666 | 43,902 | 27,389 | |||||||||||||||||
| Income taxes | 6,894 | 11,030 | 6,640 | |||||||||||||||||
| Net income | 21,772 | 32,872 | 20,749 | |||||||||||||||||
| Preferred dividends | 2,228 | 3,169 | — | |||||||||||||||||
| Net income available to common shareholders | $ | 19,544 | $ | 29,703 | $ | 20,749 | ||||||||||||||
| Diluted earnings per common share | $ | 0.86 | $ | 1.30 | $ | 0.92 | ||||||||||||||
| Weighted average common shares outstanding - diluted | 22,501,970 | 22,503,611 | 22,350,307 | |||||||||||||||||
| Return on average assets | 1.12 | % | 1.66 | % | 1.16 | % | ||||||||||||||
| Return on average shareholders' equity | 11.51 | % | 17.41 | % | 12.80 | % | ||||||||||||||
Return on average tangible common equity (1) | 16.70 | % | 25.89 | % | 17.84 | % | ||||||||||||||
| Net interest margin | 3.39 | % | 3.50 | % | 3.50 | % | ||||||||||||||
Efficiency ratio (1) | 57.64 | % | 58.26 | % | 55.73 | % | ||||||||||||||
Adjusted Earnings Performance Summary (1) | ||||||||||||||||||||
| Adjusted earnings available to common shareholders | $ | 20,017 | $ | 19,278 | $ | 20,815 | ||||||||||||||
| Adjusted diluted earnings per common share | $ | 0.88 | $ | 0.85 | $ | 0.92 | ||||||||||||||
| Adjusted return on average assets | 1.15 | % | 1.13 | % | 1.16 | % | ||||||||||||||
| Adjusted return on average shareholders' equity | 11.76 | % | 11.89 | % | 12.84 | % | ||||||||||||||
| Adjusted return on average tangible common equity | 17.11 | % | 16.80 | % | 17.89 | % | ||||||||||||||
| Adjusted pre-tax, pre-provision earnings | $ | 32,449 | $ | 33,165 | $ | 32,041 | ||||||||||||||
| Adjusted pre-tax, pre-provision return on average assets | 1.67 | % | 1.68 | % | 1.79 | % | ||||||||||||||
| Wealth Management | ||||||||||||||||||||
| Trust assets under administration | $ | 3,502,635 | $ | 3,505,372 | $ | 3,934,140 | ||||||||||||||
| Market Data | ||||||||||||||||||||
| Book value per share at period end | $ | 30.08 | $ | 29.17 | $ | 29.26 | ||||||||||||||
Tangible book value per share at period end (1) | $ | 21.87 | $ | 20.94 | $ | 20.87 | ||||||||||||||
Tangible book value per share excluding accumulated other comprehensive income at period end (1) | $ | 25.39 | $ | 24.72 | $ | 22.14 | ||||||||||||||
| Market price at period end | $ | 21.42 | $ | 26.62 | $ | 28.86 | ||||||||||||||
| Common shares outstanding at period end | 22,111,454 | 22,214,913 | 22,044,626 | |||||||||||||||||
| Capital | ||||||||||||||||||||
| Total capital to risk-weighted assets | 12.46 | % | 12.38 | % | 11.74 | % | ||||||||||||||
| Tier 1 capital to risk-weighted assets | 10.25 | % | 10.21 | % | 8.82 | % | ||||||||||||||
| Tier 1 common capital to risk-weighted assets | 7.84 | % | 7.77 | % | 7.80 | % | ||||||||||||||
| Tier 1 leverage ratio | 9.54 | % | 9.43 | % | 7.96 | % | ||||||||||||||
Tangible common equity to tangible assets (1) | 6.24 | % | 6.06 | % | 6.43 | % | ||||||||||||||
(1) Non-GAAP financial measures. Refer to pages 11 - 13 for a reconciliation to the comparable GAAP financial measures.
9
| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | ||||||||||||||||||||
| As of | ||||||||||||||||||||
| March 31, | December 31, | March 31, | ||||||||||||||||||
| (in thousands) | 2023 | 2022 | 2022 | |||||||||||||||||
| Assets | ||||||||||||||||||||
| Cash and cash equivalents | $ | 138,310 | $ | 160,631 | $ | 332,264 | ||||||||||||||
| Investment securities | 821,005 | 776,860 | 858,246 | |||||||||||||||||
| Loans | 6,354,271 | 6,306,467 | 5,539,961 | |||||||||||||||||
| Allowance for credit losses on loans | (62,067) | (61,051) | (52,938) | |||||||||||||||||
| Total loans, net | 6,292,204 | 6,245,416 | 5,487,023 | |||||||||||||||||
| Loans held for sale | 2,747 | 1,286 | 8,931 | |||||||||||||||||
| Premises and equipment, net | 80,582 | 78,293 | 77,857 | |||||||||||||||||
| Other real estate owned | 6,729 | 6,729 | 11,537 | |||||||||||||||||
| Loan servicing rights, at lower of cost or fair value | 1,117 | 1,205 | 27,484 | |||||||||||||||||
| Commercial FHA mortgage loan servicing rights held for sale | 20,745 | 20,745 | — | |||||||||||||||||
| Goodwill | 161,904 | 161,904 | 161,904 | |||||||||||||||||
| Other intangible assets, net | 19,575 | 20,866 | 22,976 | |||||||||||||||||
| Company-owned life insurance | 151,319 | 150,443 | 148,060 | |||||||||||||||||
| Other assets | 233,937 | 231,123 | 202,433 | |||||||||||||||||
| Total assets | $ | 7,930,174 | $ | 7,855,501 | $ | 7,338,715 | ||||||||||||||
| Liabilities and Shareholders' Equity | ||||||||||||||||||||
| Noninterest-bearing demand deposits | $ | 1,215,758 | $ | 1,362,158 | $ | 1,393,825 | ||||||||||||||
| Interest-bearing deposits | 5,209,443 | 5,002,494 | 4,663,714 | |||||||||||||||||
| Total deposits | 6,425,201 | 6,364,652 | 6,057,539 | |||||||||||||||||
| Short-term borrowings | 31,173 | 42,311 | 60,352 | |||||||||||||||||
| FHLB advances and other borrowings | 482,000 | 460,000 | 310,171 | |||||||||||||||||
| Subordinated debt | 99,849 | 99,772 | 139,184 | |||||||||||||||||
| Trust preferred debentures | 50,135 | 49,975 | 49,524 | |||||||||||||||||
| Other liabilities | 66,173 | 80,217 | 76,959 | |||||||||||||||||
| Total liabilities | 7,154,531 | 7,096,927 | 6,693,729 | |||||||||||||||||
| Total shareholders’ equity | 775,643 | 758,574 | 644,986 | |||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 7,930,174 | $ | 7,855,501 | $ | 7,338,715 | ||||||||||||||
10
| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | ||||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||||
| March 31, | December 31, | March 31, | ||||||||||||||||||
| (in thousands, except per share data) | 2023 | 2022 | 2022 | |||||||||||||||||
| Net interest income: | ||||||||||||||||||||
| Interest income | $ | 95,539 | $ | 90,215 | $ | 62,748 | ||||||||||||||
| Interest expense | 35,035 | 26,665 | 5,921 | |||||||||||||||||
| Net interest income | 60,504 | 63,550 | 56,827 | |||||||||||||||||
| Provision for credit losses: | ||||||||||||||||||||
| Provision for credit losses on loans | 3,135 | 2,950 | 4,132 | |||||||||||||||||
| Provision for credit losses on unfunded commitments | — | 594 | 256 | |||||||||||||||||
| Provision for other credit losses | — | — | (221) | |||||||||||||||||
| Total provision for credit losses | 3,135 | 3,544 | 4,167 | |||||||||||||||||
| Net interest income after provision for credit losses | 57,369 | 60,006 | 52,660 | |||||||||||||||||
| Noninterest income: | ||||||||||||||||||||
| Wealth management revenue | 6,411 | 6,227 | 7,139 | |||||||||||||||||
| Residential mortgage banking revenue | 405 | 316 | 599 | |||||||||||||||||
| Service charges on deposit accounts | 2,568 | 2,511 | 2,068 | |||||||||||||||||
| Interchange revenue | 3,412 | 3,478 | 3,280 | |||||||||||||||||
| Loss on sales of investment securities, net | (648) | — | — | |||||||||||||||||
| Gain on termination of hedged interest rate swaps | — | 17,531 | — | |||||||||||||||||
| Impairment on commercial mortgage servicing rights | — | — | (394) | |||||||||||||||||
| Company-owned life insurance | 876 | 796 | 1,019 | |||||||||||||||||
| Other income | 2,755 | 2,980 | 1,902 | |||||||||||||||||
| Total noninterest income | 15,779 | 33,839 | 15,613 | |||||||||||||||||
| Noninterest expense: | ||||||||||||||||||||
| Salaries and employee benefits | 24,243 | 22,901 | 21,870 | |||||||||||||||||
| Occupancy and equipment | 4,443 | 3,748 | 3,755 | |||||||||||||||||
| Data processing | 6,311 | 6,302 | 5,873 | |||||||||||||||||
| Professional | 1,760 | 1,726 | 1,972 | |||||||||||||||||
| Amortization of intangible assets | 1,291 | 1,333 | 1,398 | |||||||||||||||||
| Other real estate owned | — | 3,779 | — | |||||||||||||||||
| Loss on mortgage servicing rights held for sale | — | 3,250 | — | |||||||||||||||||
| FDIC insurance | 1,329 | 703 | 830 | |||||||||||||||||
| Other expense | 5,105 | 6,201 | 5,186 | |||||||||||||||||
| Total noninterest expense | 44,482 | 49,943 | 40,884 | |||||||||||||||||
| Income before income taxes | 28,666 | 43,902 | 27,389 | |||||||||||||||||
| Income taxes | 6,894 | 11,030 | 6,640 | |||||||||||||||||
| Net income | 21,772 | 32,872 | 20,749 | |||||||||||||||||
| Preferred stock dividends | 2,228 | 3,169 | — | |||||||||||||||||
| Net income available to common shareholders | $ | 19,544 | $ | 29,703 | $ | 20,749 | ||||||||||||||
| Basic earnings per common share | $ | 0.86 | $ | 1.31 | $ | 0.92 | ||||||||||||||
| Diluted earnings per common share | $ | 0.86 | $ | 1.30 | $ | 0.92 | ||||||||||||||
11
| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||
| RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) | ||||||||||||||||||||
| Adjusted Earnings Reconciliation | ||||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||||
| March 31, | December 31, | March 31, | ||||||||||||||||||
| (dollars in thousands, except per share data) | 2023 | 2022 | 2022 | |||||||||||||||||
| Income before income taxes - GAAP | $ | 28,666 | $ | 43,902 | $ | 27,389 | ||||||||||||||
| Adjustments to noninterest income: | ||||||||||||||||||||
| Loss on sales of investment securities, net | 648 | — | — | |||||||||||||||||
| (Gain) on termination of hedged interest rate swaps | — | (17,531) | — | |||||||||||||||||
| Total adjustments to noninterest income | 648 | (17,531) | — | |||||||||||||||||
| Adjustments to noninterest expense: | ||||||||||||||||||||
| (Loss) on mortgage servicing rights held for sale | — | (3,250) | — | |||||||||||||||||
| Integration and acquisition expenses | — | — | (91) | |||||||||||||||||
| Total adjustments to noninterest expense | — | (3,250) | (91) | |||||||||||||||||
| Adjusted earnings pre tax | 29,314 | 29,621 | 27,480 | |||||||||||||||||
| Adjusted earnings tax | 7,069 | 7,174 | 6,665 | |||||||||||||||||
| Adjusted earnings - non-GAAP | 22,245 | 22,447 | 20,815 | |||||||||||||||||
| Preferred stock dividends | 2,228 | 3,169 | — | |||||||||||||||||
| Adjusted earnings available to common shareholders | $ | 20,017 | $ | 19,278 | $ | 20,815 | ||||||||||||||
| Adjusted diluted earnings per common share | $ | 0.88 | $ | 0.85 | $ | 0.92 | ||||||||||||||
| Adjusted return on average assets | 1.15 | % | 1.13 | % | 1.16 | % | ||||||||||||||
| Adjusted return on average shareholders' equity | 11.76 | % | 11.89 | % | 12.84 | % | ||||||||||||||
| Adjusted return on average tangible common equity | 17.11 | % | 16.80 | % | 17.89 | % | ||||||||||||||
| Adjusted Pre-Tax, Pre-Provision Earnings Reconciliation | ||||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||||
| March 31, | December 31, | March 31, | ||||||||||||||||||
| (dollars in thousands) | 2023 | 2022 | 2022 | |||||||||||||||||
| Adjusted earnings pre tax - non-GAAP | $ | 29,314 | $ | 29,621 | $ | 27,480 | ||||||||||||||
| Provision for credit losses | 3,135 | 3,544 | 4,167 | |||||||||||||||||
| Impairment on commercial mortgage servicing rights | — | — | 394 | |||||||||||||||||
| Adjusted pre-tax, pre-provision earnings - non-GAAP | $ | 32,449 | $ | 33,165 | $ | 32,041 | ||||||||||||||
| Adjusted pre-tax, pre-provision return on average assets | 1.67 | % | 1.68 | % | 1.79 | % | ||||||||||||||
12
| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||
| RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued) | ||||||||||||||||||||
| Efficiency Ratio Reconciliation | ||||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||||
| March 31, | December 31, | March 31, | ||||||||||||||||||
| (dollars in thousands) | 2023 | 2022 | 2022 | |||||||||||||||||
| Noninterest expense - GAAP | $ | 44,482 | $ | 49,943 | $ | 40,884 | ||||||||||||||
| Loss on mortgage servicing rights held for sale | — | (3,250) | — | |||||||||||||||||
| Integration and acquisition expenses | — | — | (91) | |||||||||||||||||
| Adjusted noninterest expense | $ | 44,482 | $ | 46,693 | $ | 40,793 | ||||||||||||||
| Net interest income - GAAP | $ | 60,504 | $ | 63,550 | $ | 56,827 | ||||||||||||||
| Effect of tax-exempt income | 244 | 286 | 369 | |||||||||||||||||
| Adjusted net interest income | 60,748 | 63,836 | 57,196 | |||||||||||||||||
| Noninterest income - GAAP | 15,779 | 33,839 | 15,613 | |||||||||||||||||
| Impairment on commercial mortgage servicing rights | — | — | 394 | |||||||||||||||||
| Loss on sales of investment securities, net | 648 | — | — | |||||||||||||||||
| (Gain) on termination of hedged interest rate swaps | — | (17,531) | — | |||||||||||||||||
| Adjusted noninterest income | 16,427 | 16,308 | 16,007 | |||||||||||||||||
| Adjusted total revenue | $ | 77,175 | $ | 80,144 | $ | 73,203 | ||||||||||||||
| Efficiency ratio | 57.64 | % | 58.26 | % | 55.73 | % | ||||||||||||||
| Return on Average Tangible Common Equity (ROATCE) | ||||||||||||||||||||
| For the Quarter Ended | ||||||||||||||||||||
| March 31, | December 31, | March 31, | ||||||||||||||||||
| (dollars in thousands) | 2023 | 2022 | 2022 | |||||||||||||||||
| Net income | $ | 21,772 | $ | 32,872 | $ | 20,749 | ||||||||||||||
| Average total shareholders' equity—GAAP | $ | 767,186 | $ | 749,183 | $ | 657,327 | ||||||||||||||
| Adjustments: | ||||||||||||||||||||
| Preferred Stock | (110,548) | (110,548) | — | |||||||||||||||||
| Goodwill | (161,904) | (161,904) | (161,904) | |||||||||||||||||
| Other intangible assets, net | (20,184) | (22,859) | (23,638) | |||||||||||||||||
| Average tangible common equity | $ | 474,550 | $ | 453,872 | $ | 471,785 | ||||||||||||||
| ROATCE | 16.70 | % | 25.89 | % | 17.84 | % | ||||||||||||||
13
| 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 | ||||||||||||||||||||
| March 31, | December 31, | March 31, | ||||||||||||||||||
| (dollars in thousands, except per share data) | 2023 | 2022 | 2022 | |||||||||||||||||
| Shareholders' Equity to Tangible Common Equity | ||||||||||||||||||||
| Total shareholders' equity—GAAP | $ | 775,643 | $ | 758,574 | $ | 644,986 | ||||||||||||||
| Adjustments: | ||||||||||||||||||||
| Preferred Stock | (110,548) | (110,548) | — | |||||||||||||||||
| Goodwill | (161,904) | (161,904) | (161,904) | |||||||||||||||||
| Other intangible assets, net | (19,575) | (20,866) | (22,976) | |||||||||||||||||
| Tangible common equity | $ | 483,616 | $ | 465,256 | $ | 460,106 | ||||||||||||||
| Less: Accumulated other comprehensive income (AOCI) | (77,797) | (83,797) | (28,035) | |||||||||||||||||
| Tangible common equity excluding AOCI | 561,413 | 549,053 | 488,141 | |||||||||||||||||
| Total Assets to Tangible Assets: | ||||||||||||||||||||
| Total assets—GAAP | $ | 7,930,174 | $ | 7,855,501 | $ | 7,338,715 | ||||||||||||||
| Adjustments: | ||||||||||||||||||||
| Goodwill | (161,904) | (161,904) | (161,904) | |||||||||||||||||
| Other intangible assets, net | (19,575) | (20,866) | (22,976) | |||||||||||||||||
| Tangible assets | $ | 7,748,695 | $ | 7,672,731 | $ | 7,153,835 | ||||||||||||||
| Common Shares Outstanding | 22,111,454 | 22,214,913 | 22,044,626 | |||||||||||||||||
| Tangible Common Equity to Tangible Assets | 6.24 | % | 6.06 | % | 6.43 | % | ||||||||||||||
| Tangible Book Value Per Share | $ | 21.87 | $ | 20.94 | $ | 20.87 | ||||||||||||||
| Tangible Book Value Per Share excluding AOCI | $ | 25.39 | $ | 24.72 | $ | 22.14 | ||||||||||||||
14
1 Midland States Bancorp, Inc. NASDAQ: MSBI First Quarter 2023 Earnings Presentation
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 changes in interest rates and other general economic, business and political conditions, the impact of inflation, continuing effects of the recent failures of Silicon Valley Bank and Signature Bank, including anticipated effects on FDIC premiums, increased deposit volatility and potential regulatory developments. 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,” “Tangible Book Value Per Share excluding Accumulated Other Comprehensive Income,”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 Company Snapshot 3 • Illinois state-chartered community bank founded in 1881 • $7.9 billion in assets - largest Illinois-based community bank(1) • $3.5 billion Wealth Management business • Commercial bank focused on in-market relationships with national diversification in equipment finance • 53 branches in Illinois and Missouri • 16 successful acquisitions since 2008 Notes: (1) Community bank defined as banks with less than $10 billion in assets; Source: S&P Capital IQ
4 Business and Corporate Strategy 4 Customer-Centric Culture Drive organic growth by focusing on customer service and accountability to our clients and colleagues; seek to develop bankers who create dynamic relationships; pursue continual investment in people; maintain a core set of institutional values, and build a robust technology platform that provides customers with a superior banking experience Operational Excellence A corporate-wide focus on driving improvements in people, processes and technology in order to generate further improvement in Midland's operating efficiency and financial performance Enterprise-Wide Risk Management Maintain a program designed to integrate controls, monitoring and risk-assessment at all key levels and stages of our operations and growth; ensure that all employee are fully engaged Accretive Acquisitions Maintain experienced acquisition team capable of identifying and executing transactions that build shareholder value through a disciplined approach to pricing; take advantage of relative strength in periods of market disruption Revenue Diversification Generate a diversified revenue mix and focus on growing businesses that generate strong recurring revenues such as wealth management
5 Successful Execution of Strategic Plan... 5 Total Assets (at period-end in billions) $1.1 $1.6 $1.5 $1.6 $1.7 $2.7 $2.9 $3.2 $4.4 $5.6 $6.1 $6.9 $7.4 $7.9 $7.9 Selected Acquisitions 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Q1 2023 CAG R si nce 201 6 IP O: 1 5% CAGR: 16% Selected Acquisitions: Total Assets at Time of Acquisition (in millions) 2009: Strategic Capital Bank ($540) 2010: AMCORE Bank ($500) 2014: Love Savings/Heartland Bank ($889) 2017: Centrue Financial ($990) 2018: Alpine Bancorp ($1,243) 2019: HomeStar Financial Group ($366)
6 ...Leads to Creation of Shareholder Value 6 Tangible Book Value Per Share(1) 22 Consecutive Years of Dividend Increases $17.31 $17.00 $18.64 $19.31 $21.66 $20.94 $21.87 $17.22 $17.09 $18.34 $18.80 $21.42 $24.72 $25.39 Tangible Book Value Per Share TBV/Share ex. AOCI 2017 2018 2019 2020 2021 2022 Q1 2023 TBV/Share ex. AOCI CAGR: 7.7% Dividends Declared Per Share $0.80 $0.88 $0.97 $1.07 $1.12 $1.16 $1.20 2017 2018 2019 2020 2021 2022 Q1 2023 (annualized) CAGR: 8.0% Notes: (1) Represents a non-GAAP financial measure. See “Non-GAAP Reconciliation” in the appendix.
7 ...And Increased Profitability 7 Adjusted Diluted EPS(1) CAGR: 14.9% Adjusted ROATCE(1) 11.32% 15.00% 14.44% 9.24% 18.33% 18.59% 17.11% 2017 2018 2019 2020 2021 2022 Q1 2023 Notes: (1) Represents a non-GAAP financial measure. See “Non-GAAP Reconciliation” in the appendix. $1.89 $2.39 $2.54 $1.70 $3.65 $3.79 2017 2018 2019 2020 2021 2022 Adjusted Diluted EPS data and CAGR through 2022
8 Overview of 1Q23 Strong Financial Performance No Impact from Issues in Banking Industry Continued Loan Growth and Healthy Asset Quality Increase in TBV and Capital Ratios 8 • Net income available to common shareholders of $19.5 million, or $0.86 diluted EPS • Pre-tax, pre-provision earnings(1) of $32.4 million • GAAP ROAA of 1.12% and Adjusted ROAA(1) of 1.15% • Deposit base was stable following announcement of bank failures • Uninsured deposits comprise 21% of total deposits • No extraordinary measures were needed to prevent deposit outflows • Total deposits increased during 1Q23 • Level of borrowings and cash balances remained consistent with typical levels • Total loans increased 3% annualized despite more selective approach to new loan production • Growth in commercial loans offset decline in consumer loans resulting from planned reduction in loans originated through GreenSky partnership • New investment securities purchased with GreenSky runoff had an average rate that was 75 basis points higher than loans that paid off in 1Q23 • No meaningful change in delinquent or nonperforming loans • Net charge-offs to average loans of 0.14% • Tangible book value per share increased 4% from end of prior quarter • Strong financial performance resulted in increase in all capital ratios Notes: (1) Represents a non-GAAP financial measure. See “Non-GAAP Reconciliation” in the appendix.
9 Loan Portfolio 9 • Total loans increased $47.8 million from prior quarter to $6.35 billion • Growth primarily driven by increases in commercial loans, partially offset by decline in consumer loans resulting from planned reduction of loans originated through GreenSky partnership • Equipment finance balances increased $33.7 million, or 3% from end of prior quarter • Expect continued decreases as GreenSky originations slow and official end of program in October 2023 Loan Portfolio Mix (in millions, as of quarter-end) 1Q 2023 4Q 2022 1Q 2022 Commercial loans and leases $ 2,090 $ 2,006 $ 1,867 Commercial real estate 2,448 2,433 2,114 Construction and land development 327 321 189 Residential real estate 370 366 329 Consumer 1,119 1,180 1,041 Total Loans $ 6,354 $ 6,306 $ 5,540 Total Loans ex. Commercial FHA Lines and PPP $ 6,344 $ 6,281 $ 5,456 $5,540 $5,796 $6,198 $6,306 $6,354 4.40% 4.49% 4.83% 5.26% 5.65% Total Loans Average Loan Yield 1Q 2022 2Q 2022 3Q 2022 4Q 2022 1Q 2023 Total Loans and Average Loan Yield (in millions, as of quarter-end)
10 Total Deposits 10 • Total deposits increased $60 million from end of prior quarter, primarily related to interest rate promotions offered on money market and time deposit products • Noninterest-bearing deposits decline primarily attributable to commercial depositors moving excess liquidity into interest-bearing accounts and other seasonal outflows • Managing rates on deposits in order to continue growing our deposit base through new and expanded relationships with retail and commercial clients Deposit Mix (in millions, as of quarter-end) 1Q 2023 4Q 2022 1Q 2022 Noninterest-bearing demand $ 1,216 $ 1,362 $ 1,394 Interest-bearing: Checking $ 2,503 $ 2,494 $ 2,350 Money market $ 1,264 $ 1,184 $ 964 Savings $ 637 $ 662 $ 711 Time $ 767 $ 650 $ 619 Brokered time $ 39 $ 13 $ 19 Total Deposits $ 6,425 $ 6,365 $ 6,058 $6,058 $6,184 $6,395 $6,365 $6,425 0.15% 0.25% 0.65% 1.23% 1.70% Total Deposits Cost of Deposits 1Q 2022 2Q 2022 3Q 2022 4Q 2022 1Q 2023 Total Deposits and Cost of Deposits (in millions, as of quarter-end)
11 Deposit Type Trend 11 Deposits by Type Trend (in millions) $4,074 $4,544 $5,101 $6,111 $6,365 $6,425 Non Int Bearing Demand Interest Bearing Checking Money Market Savings Time Brokered Time 2018 2019 2020 2021 2022 1Q 2023 11% CAG R
12 Deposit Summary as of March 31, 2023 12 Deposits by Channel (in millions) Commercial Deposits by NAICS Code (in millions) $2,829 44.0% $1,001 15.6% $1,016 15.8% $312 4.9% $142 2.2% $544 8.5% $581 9.0% Retail Deposits Commercial Deposits Servicing Deposits Public Funds Brokered Deposits ICS Reciprocal Other $197 19.6% $149 14.9% 4.8% 9.5%7.9% 1.2% 4.1% 2.6% 3.9% 4.5% 2.8% $180 18.0% 6.2% Finance & Insurance RE, Rental & Leasing Manufacturing Other Services Construction Admin, Support, Waste Mgmt & Remediation Retail Trade Agriculture, Forestry, Fishing & Hunting Wholesale Trade Professional, Scientific & Tech Services Accom & Food NAICS code unavailable All Other All Other category made up of over 155 NAICS with Executive Offices being the largest at $10 million $6.43 billion $1.00 billion
13 Uninsured Deposits 13 Average Deposit Balance per Account = $33,000 *Excludes $645 million and $569 million, respectively, of fully insured funds in Insured Cash Sweep (ICS) accounts Uninsured Deposits (in millions) March 31, 2023 December 31, 2022 Call Report Uninsured Estimate(1) $ 1,793 $ 2,269 Call Report Estimated Uninsured Deposits to Total Deposits 28 % 36 % Less: Affiliate Deposits (MSB owned funds) (32) (29) Less: Estimated insured portion of servicing deposits(1) — (218) Less: Additional structured FDIC coverage (56) (66) Less: Collateralized Deposits (384) (405) Estimated uninsured deposits excluding items above $ 1,321 $ 1,551 Estimated Uninsured Deposits to Total Deposits 21 % 24 % Total Deposits $ 6,425 $ 6,365 Notes: (1) Call Report uninsured estimate was refined at March 31, 2023 to exclude the estimated insured portion of servicing deposits
14 Investment Portfolio As of March 31, 2023 14 Fair Value of Investments by Type 6.5% 6.7% 60.3% 5.2% 8.1% 2.8% 10.4% Treasuries US GSE & US Agency MSB - agency MSB - non agency State & Muni CLOs Corporate • All Investments are classified as Available for Sale • Average T/E Yield is 3.00% • Average Duration is 5.10 years Investments by Yield and DurationInvestment Mix & Unrealized Gain (Loss) (in millions) Fair Value Book Value Unrealized Gain (Loss) Treasuries $ 53 $ 57 $ (4) US GSE & US Agency 54 58 (4) MBS - agency 489 559 (70) MBS - non agency 43 46 (3) State & Municipal 66 73 (7) CLOs 23 23 — Corporate 84 95 (11) Total Investments $ 812 $ 911 $ (99) Duration Yi el d 0 1 2 3 4 5 6 7 8 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% $812 million
15 Liquidity Overview 15 Liquidity Sources (in millions) March 31, 2023 December 31, 2022 Cash and Cash Equivalents $ 138.3 $ 160.6 Unpledged Securities 310.3 209.2 FHLB Committed Liquidity 932.8 997.4 FRB Discount Window Availability 207.7 12.2 Total Estimated Liquidity $ 1,589.1 $ 1,379.4 Conditional Funding Based on Market Conditions Additional Credit Facility $ 250.0 $ 250.0 Brokered CDs (additional capacity) $ 500.0 $ 500.0
16 Net Interest Income/Margin 16 • 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 11 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 34 bps to 7.44% in March 2023 from 7.10% in December 2022 • Net interest margin expected to stabilize as the pace of Fed rate increases slow and loan portfolio continues to reprice Net Interest Income (in millions) Net Interest Margin $56.8 $61.3 $64.0 $63.6 $60.5 $0.6 $0.6 $0.5 $0.3 $0.4 NII Accretion Income 1Q 2022 2Q 2022 3Q 2022 4Q 2022 1Q 2023 3.50% 3.65% 3.63% 3.50% 3.39% 0.03% 0.03% 0.03% 0.02% 0.02% NIM Accretion Income 1Q 2022 2Q 2022 3Q 2022 4Q 2022 1Q 2023
17 Wealth Management 17 • Assets under administration relatively unchanged in 1Q23 • Increase in Wealth Management revenue compared to the prior quarter primarily related to seasonal tax preparation fees Assets Under Administration (in millions) Wealth Management Revenue (in millions) $3,934 $3,503 $3,355 $3,505 $3,503 1Q 2022 2Q 2022 3Q 2022 4Q 2022 1Q 2023 $7.14 $6.14 $6.20 $6.23 $6.41 1Q 2022 2Q 2022 3Q 2022 4Q 2022 1Q 2023
18 Noninterest Income 18 • Excluding gain on termination of forward starting interest rate swaps in 4Q22, noninterest income was relatively consistent with prior quarter • 1Q23 noninterest income included $0.6 million loss on sale of investment securities as part of repositioning of portfolio that will positively impact net interest margin, liquidity, and capital allocations • Sale of commercial MSR portfolio still expected to close during second half of 2023 Noninterest Income (in millions) $15.6 $14.6 $15.8 $33.8 $15.8 Wealth Management Interchange Service Charges on Deposits Residential Mortgage All Other 1Q 2022 2Q 2022 3Q 2022 4Q 2022 1Q 2023
19 Noninterest Expense and Operating Efficiency 19 Noninterest Expense and Efficiency Ratio (1) (Noninterest expense in millions) $43.5 $44.5 $40.9 $41.3 $49.9 $0.1 $0.3 $3.3 55.7% 53.1% 54.3% 58.3% 57.6% Total Noninterest Expense Adjustments to Noninterest Expense Efficiency Ratio 1Q 2022 2Q 2022 3Q 2022 4Q 2022 1Q 2023 • Efficiency Ratio (1) was 57.6% in 1Q22 vs. 58.3% in 4Q22 • Adjustments to non-interest expense: ($ in millions) 1Q 2023 4Q 2022 Loss on mortgage servicing rights held for sale -- $3.3 • 4Q22 included a $3.5 million impairment on other real estate owned • Excluding loss on MSRs and OREO impairment in 4Q22, noninterest expense increased primarily due to: ◦ Higher salaries and employee benefits resulting from seasonal impact of payroll taxes and medical insurance ◦ Higher FDIC insurance expense resulting from higher assessment rate now in place • 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.
20 Asset Quality 20 • Nonperforming loans increased $1.3 million primarily due to one commercial real estate loan • Payment of $5.4 million received in early April on nonperforming loan, would have decreased nonperforming loans to total loans ratio by 8bps • Delinquencies in consumer portfolio remain low • Net charge-offs to average loans was 0.14% • Provision for credit losses on loans of $3.1 million, primarily related to the growth in total loans and changes in the portfolio mix Nonperforming Loans / Total Loans (Total Loans as of quarter-end) NCO / Average Loans 0.95% 0.98% 0.76% 0.78% 0.80% 1Q 2022 2Q 2022 3Q 2022 4Q 2022 1Q 2023 0.17% 0.20% 0.21% 0.03% 0.14% 1Q 2022 2Q 2022 3Q 2022 4Q 2022 1Q 2023
21 Changes in Allowance for Credit Losses 21 ($ in thousands) ▪ 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 $61,051 $281 $586 $149 $62,067 ACL December 31, 2022 Specific Reserves Portfolio Changes Economic Factors ACL March 31, 2023
22 ACL by Portfolio 22 ($ in thousands) March 31, 2023 December 31, 2022 Portfolio Loans ACL % of Total Loans Loans ACL % of Total Loans Commercial $ 823,847 $ 5,365 0.65 % $ 786,877 $ 4,706 0.60 % Warehouse Lines 10,275 — — % 25,029 — — % Commercial Other 756,553 10,397 1.37 % 727,697 9,933 1.36 % Equipment Finance Loans 632,205 9,997 1.58 % 616,751 9,666 1.57 % Paycheck Protection Program 90 — — % 1,916 3 0.16 % Equipment Finance Leases 510,029 7,168 1.41 % 491,744 6,788 1.38 % CRE non-owner occupied 1,636,316 18,049 1.10 % 1,591,399 18,649 1.17 % CRE owner occupied 460,133 6,945 1.51 % 496,786 7,447 1.50 % Multi-family 281,559 2,730 0.97 % 277,889 2,702 0.97 % Farmland 70,150 492 0.70 % 67,085 491 0.73 % Construction and Land Development 326,836 2,442 0.75 % 320,882 2,435 0.76 % Residential RE First Lien 309,637 3,773 1.22 % 304,243 3,717 1.22 % Other Residential 60,273 577 0.96 % 61,851 584 0.94 % Consumer 112,882 1,074 0.95 % 105,880 636 0.60 % Consumer Other(1) 1,006,056 3,055 0.30 % 1,074,134 2,963 0.28 % Total Loans 6,354,271 62,067 0.98 % 6,306,467 61,051 0.97 % Loans (excluding GreenSky, PPP and warehouse lines) 5,228,082 58,643 1.12 % 5,143,343 57,897 1.13 % Notes: (1) Primarily consists of loans originated through GreenSky relationship
23 Outlook 23 • Prudent risk management will remain top priority while economic uncertainty remains • Continue generating strong financial performance while maintaining conservative approach to new loan production to build capital and liquidity • Planned reduction of GreenSky portfolio will be utilized to add to the securities portfolio and pay off higher cost funding sources with net impact likely being earnings neutral, but capital accretive • Maintain disciplined expense management while getting further leverage from investments in talent and technology made over the past few years • Business development efforts focused on adding new commercial and retail deposit relationships, supplemented with new Banking-as-a-Service partnerships focused on deposit generation • Strength of balance sheet expected to provide opportunities to capitalize on current environment to add new clients that will contribute to continued long-term profitable growth and increase in franchise value
24 APPENDIX 24
2525 Industries as a percentage of Commercial, CRE and Equipment Finance Loans and Leases with outstanding balances of $4.87 billion as of 3/31/2023 ($s in millions) RE/Rental & Leasing $1,467.8 30.2% All Others $631.5 13.0% Skilled Nursing $462.1 9.5% Construction - General $330.7 6.8% Manufacturing $272.8 5.6% Finance and Insurance $257.0 5.3% Accommodation & Food Svcs $226.8 4.7% Trans./Ground Passenger $224.0 4.6% Assisted Living $153.7 3.2% Ag., Forestry, & Fishing $153.4 3.2% General Freight Trucking $240.3 4.9% Retail Trade $165.7 3.4% Wholesale Trade $109.8 2.3% Other Services $99.7 2.0% Commercial Loans and Leases by Industry Health Care $70.1 1.4%
26 Commercial Real Estate Portfolio by Collateral Type 26 CRE Concentration (as of March 31, 2023) CRE as a % of Total Loans 38.5% CRE as a % of Total Risk-Based Capital (1) 261.5% 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 $2.77 billion as of March 31, 2023 ($s in millions) Skilled Nursing $477 17.2% Retail $433 15.6% Multi-Family $422 15.2% Industrial/Warehouse $226 8.1% Assisted Living $182 6.6% Hotel/Motel $168 6.1% All Other $184 6.6% Office $155 5.6% Farmland $69 2.5% Residential 1-4 Family $86 3.1% Raw Land $18 0.6% Restaurant $38 1.4% Mixed Use/Other $64 2.3% Medical Building $104 3.8% Special Purpose $84 3.0% C-Store/Gas Station $66 2.4%
27 Capital Ratios and Strategy 27 • 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 2022 • Gain from forward starting swaps increased capital for fourth quarter 2022 • 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 March 31, 2023) 6.24% 7.84% 9.54% 10.25% 12.46% 10.76% 10.02% 10.76% 11.59% Consolidated Bank Level TCE/TA Common Eq. Tier 1 Tier 1 Leverage Tier 1 RBC Total RBC
2828 MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) Tangible Book Value Per Share For the Year Ended (dollars in thousands, except per share data) 2017 2018 2019 2020 2021 2022 Shareholders' Equity to Tangible Common Equity Total shareholders' equity—GAAP $ 449,545 $ 608,525 $ 661,911 $ 621,391 $ 663,837 $ 758,574 Adjustments: Preferred Stock (2,970) (2,781) — — — (110,548) Goodwill (98,624) (164,673) (171,758) (161,904) (161,904) (161,904) Other intangible assets, net (16,932) (37,376) (34,886) (28,382) (24,374) (20,866) Tangible common equity 331,019 403,695 455,267 431,105 477,559 465,256 Less: Accumulated other comprehensive income (AOCI) 1,758 (2,108) 7,442 11,431 5,237 (83,797) Tangible common equity excluding AOCI $ 329,261 $ 405,803 $ 447,825 $ 419,674 $ 472,322 $ 549,053 Common Shares Outstanding 19,122,049 23,751,798 24,420,345 22,325,471 22,050,537 22,214,913 Tangible Book Value Per Share $ 17.31 $ 17.00 $ 18.64 $ 19.31 $ 21.66 $ 20.94 Tangible Book Value Per Share excluding AOCI $ 17.22 $ 17.09 $ 18.34 $ 18.80 $ 21.42 $ 24.72
2929 MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) Adjusted Earnings Reconciliation For The Year Ended (dollars in thousands, except per share data) 2017 2018 2019 2020 2021 2022 Income before income taxes - GAAP $ 26,471 $ 50,805 $ 72,471 $ 32,014 $ 99,112 $ 129,838 Adjustments to noninterest income: (Gain) on sales of investment securities, net (222) (464) (674) (1,721) (537) 230 (Gain) on termination of hedged interest rate swaps — — — — (2,159) (17,531) Other income 67 (89) 29 17 (48) — Total adjustments to noninterest income (155) (553) (645) (1,704) (2,744) (17,301) Adjustments to noninterest expense: Impairment related to facilities optimization (1,952) — (3,577) (12,847) — — (Loss) gain on mortgage servicing rights held for sale (4,059) (458) 490 (1,692) (222) (3,250) FHLB advances prepayment fees — — — (4,872) (8,536) — Loss on repurchase of subordinated debt — — (1,778) (193) — — Integration and acquisition expenses (17,738) (24,015) (5,493) (2,309) (4,356) (347) Total adjustments to noninterest expense (23,749) (24,473) (10,358) (21,913) (13,114) (3,597) Adjusted earnings pre tax 50,065 74,725 82,184 52,223 109,482 116,134 Adjusted earnings tax 15,170 17,962 19,358 12,040 26,261 27,113 Adjusted earnings - non-GAAP 34,895 56,763 62,826 40,183 83,221 89,021 Preferred stock dividends, net 83 141 46 — — 3,169 Adjusted earnings available to common shareholders $ 34,812 $ 56,622 $ 62,780 $ 40,183 $ 83,221 $ 85,852 Adjusted diluted earnings per common share $ 1.89 $ 2.39 $ 2.54 $ 1.70 $ 3.65 $ 3.79 Adjusted return on average tangible common equity 11.32 % 15.00 % 14.44 % 9.24 % 18.33 % 18.59 %
3030 MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) Adjusted Earnings Reconciliation For The Quarter Ended March 31, December 31, September 30, June 30, March 31, (dollars in thousands, except per share data) 2023 2022 2022 2022 2022 Income before income taxes - GAAP $ 28,666 $ 43,902 $ 29,380 $ 29,167 $ 27,389 Adjustments to noninterest income: Loss on sales of investment securities, net 648 — 129 101 — (Gain) on termination of hedged interest rate swaps — (17,531) — — — Total adjustments to noninterest income 648 (17,531) 129 101 — Adjustments to noninterest expense: (Loss) on mortgage servicing rights held for sale — (3,250) — — — FHLB advances prepayment fees — — — — — Integration and acquisition expenses — — 68 (324) (91) Total adjustments to noninterest expense — (3,250) 68 (324) (91) Adjusted earnings pre tax 29,314 29,621 29,441 29,592 27,480 Adjusted earnings tax 7,069 7,174 5,873 7,401 6,665 Adjusted earnings - non-GAAP 22,245 22,447 23,568 22,191 20,815 Preferred stock dividends 2,228 3,169 — — — Adjusted earnings available to common shareholders $ 20,017 $ 19,278 $ 23,568 $ 22,191 $ 20,815 Adjusted diluted earnings per common share $ 0.88 $ 0.85 $ 1.04 $ 0.98 $ 0.92 Adjusted return on average assets 1.15 % 1.13 % 1.22 % 1.21 % 1.16 % Adjusted return on average shareholders' equity 11.76 % 11.89 % 13.34 % 13.84 % 12.84 % Adjusted return on average tangible common equity 17.11 % 16.80 % 20.24 % 19.41 % 17.89 % Adjusted Pre-Tax, Pre-Provision Earnings Reconciliation For the Quarter Ended March 31, December 31, September 30, June 30, March 31, (dollars in thousands) 2023 2022 2022 2022 2022 Adjusted earnings pre tax - non-GAAP $ 29,314 $ 29,621 $ 29,441 $ 29,592 $ 27,480 Provision for credit losses 3,135 3,544 6,974 5,441 4,167 Impairment on commercial mortgage servicing rights — — — 869 394 Adjusted pre-tax, pre-provision earnings - non-GAAP $ 32,449 $ 33,165 $ 36,415 $ 35,902 $ 32,041 Adjusted pre-tax, pre-provision return on average assets 1.67 % 1.68 % 1.89 % 1.95 % 1.79 %
3131 MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued) Efficiency Ratio Reconciliation For the Quarter Ended March 31, December 31, September 30, June 30, March 31, 2023 2022 2022 2022 2022 (dollars in thousands) Noninterest expense - GAAP $ 44,482 $ 49,943 $ 43,496 $ 41,339 $ 40,884 Loss on mortgage servicing rights held for sale — (3,250) — — — FHLB advances prepayment fees — — — — — Integration and acquisition expenses — — 68 (324) (91) Adjusted noninterest expense $ 44,482 $ 46,693 $ 43,564 $ 41,015 $ 40,793 Net interest income - GAAP $ 60,504 $ 63,550 $ 64,024 $ 61,334 $ 56,827 Effect of tax-exempt income 244 286 307 321 369 Adjusted net interest income 60,748 63,836 64,331 61,655 57,196 Noninterest income - GAAP 15,779 33,839 15,826 14,613 15,613 Impairment on commercial mortgage servicing rights — — — 869 394 Loss on sales of investment securities, net 648 — 129 101 — (Gain) on termination of hedged interest rate swaps — (17,531) — — — Adjusted noninterest income 16,427 16,308 15,955 15,583 16,007 Adjusted total revenue $ 77,175 $ 80,144 $ 80,286 $ 77,238 $ 73,203 Efficiency ratio 57.64 % 58.26 % 54.26 % 53.10 % 55.73 %
3232 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 March 31, December 31, September 30, June 30, March 31, (dollars in thousands, except per share data) 2023 2022 2022 2022 2022 Shareholders' Equity to Tangible Common Equity Total shareholders' equity—GAAP $ 775,643 $ 758,574 $ 739,279 $ 636,188 $ 644,986 Adjustments: Preferred Stock (110,548) (110,548) (110,548) — — Goodwill (161,904) (161,904) (161,904) (161,904) (161,904) Other intangible assets, net (19,575) (20,866) (22,198) (23,559) (22,976) Tangible common equity $ 483,616 $ 465,256 $ 444,629 $ 450,725 $ 460,106 Less: Accumulated other comprehensive income (AOCI) (77,797) (83,797) (78,383) (53,097) (28,035) Tangible common equity excluding AOCI $ 561,413 $ 549,053 $ 523,012 $ 503,822 $ 488,141 Total Assets to Tangible Assets: Total assets—GAAP $ 7,930,174 $ 7,855,501 $ 7,821,877 $ 7,435,812 $ 7,338,715 Adjustments: Goodwill (161,904) (161,904) (161,904) (161,904) (161,904) Other intangible assets, net (19,575) (20,866) (22,198) (23,559) (22,976) Tangible assets $ 7,748,695 $ 7,672,731 $ 7,637,775 $ 7,250,349 $ 7,153,835 Common Shares Outstanding 22,111,454 22,214,913 22,074,740 22,060,255 22,044,626 Tangible Common Equity to Tangible Assets 6.24 % 6.06 % 5.82 % 6.22 % 6.43 % Tangible Book Value Per Share $ 21.87 $ 20.94 $ 20.14 $ 20.43 $ 20.87 Tangible Book Value Per Share excluding AOCI $ 25.39 $ 24.72 $ 23.69 $ 22.84 $ 22.14 Return on Average Tangible Common Equity (ROATCE) For the Quarter Ended March 31, December 31, September 30, June 30, March 31, (dollars in thousands) 2023 2022 2022 2022 2022 Net income $ 21,772 $ 32,872 $ 23,521 $ 21,883 $ 20,749 Average total shareholders' equity—GAAP $ 767,186 $ 749,183 $ 700,866 $ 643,004 $ 657,327 Adjustments: Preferred Stock (110,548) (110,548) (54,072) — — Goodwill (161,904) (161,904) (161,904) (161,904) (161,904) Other intangible assets, net (20,184) (22,859) 22,589 (22,570) (23,638) Average tangible common equity $ 474,550 $ 453,872 $ 507,479 $ 458,530 $ 471,785 ROATCE 16.70 % 25.89 % 20.20 % 19.14 % 17.84 %