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): July 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 July 27, 2023 , Midland States Bancorp, Inc. (the “Company”) issued a press release announcing its financial results for the second quarter of 2023. The press release is attached as Exhibit 99.1.
Item 7.01. Regulation FD Disclosure.
On July 27, 2023 , the Company made available on its website a slide presentation regarding the Company's second 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 second 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 Second Quarter Results
Second Quarter 2023 Highlights:
•Net income available to common shareholders of $19.3 million, or $0.86 per diluted share
•Efficiency ratio improved to 55.0% from prior quarter
•Total loan growth of $13.1 million, or 0.8% annualized
•Total deposit growth of $1.3 million or 0.1% annualized
•Common equity tier 1 capital ratio improved to 8.03%
•Tangible book value per share of $22.24, an increase of 1.7% from prior quarter
Effingham, IL, July 27, 2023 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (Nasdaq: MSBI) (the “Company”) today reported net income available to common shareholders of $19.3 million, or $0.86 per diluted share, for the second quarter of 2023, compared to $19.5 million, or $0.86 per diluted share, for the first quarter of 2023. This also compares to net income available to common shareholders of $21.9 million, or $0.97 per diluted share, for the second quarter of 2022.
Jeffrey G. Ludwig, President and Chief Executive Officer of the Company, said, “We executed well in the second quarter and continued to deliver strong financial performance while prioritizing prudent risk management given the challenging operating environment, which resulted in an 8% increase in our pre-tax, pre-provision income compared to the prior quarter. Due to our strong financial performance and prudent balance sheet management, we saw an increase in our capital ratios and tangible book value per share, while also taking advantage of the opportunity to repurchase our common stock at below tangible book value and redeeming some of our higher cost subordinated debt.
“We continue to have success in developing full banking relationships with high quality businesses, which resulted in continued growth in our commercial loan portfolio. As planned, we are funding the new commercial loans and additional securities purchases with the runoff in our GreenSky portfolio, which is contributing to our strong financial performance and increase in capital ratios.
“While economic conditions remain uncertain, we will continue to prioritize prudent risk management and be conservative in our new loan production to build capital and liquidity. We continue to see good opportunities to add core deposit relationships in our markets with both retail and commercial customers, and during the second half of the year, we expect to begin seeing a contribution to deposit gathering from our Banking-as-a-Service initiative, which we believe will further strengthen our deposit base, support profitable growth in the future, and create additional franchise value,” said Mr. Ludwig.
Balance Sheet Highlights
Total assets were $8.03 billion at June 30, 2023, compared to $7.93 billion at March 31, 2023, and $7.44 billion at June 30, 2022. At June 30, 2023, portfolio loans were $6.37 billion, compared to $6.35 billion as of March 31, 2023, and $5.80 billion as of June 30, 2022.
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Loans
During the second quarter of 2023, outstanding loans increased at a slower rate as the Company originated loans in a more selective and deliberate approach to balance liquidity and funding costs. Commercial loan and lease balances and construction and land development loans increased $18.0 million and $39.8 million, respectively, offsetting the decline in consumer loan balances due to a decrease in loans originated through GreenSky.
| As of | ||||||||||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||||||||||||||
| (in thousands) | 2023 | 2023 | 2022 | 2022 | 2022 | |||||||||||||||||||||||||||
| Loan Portfolio | ||||||||||||||||||||||||||||||||
| Commercial loans | $ | 962,756 | $ | 937,920 | $ | 872,794 | $ | 907,651 | $ | 821,119 | ||||||||||||||||||||||
| Equipment finance loans | 614,633 | 632,205 | 616,751 | 577,323 | 546,267 | |||||||||||||||||||||||||||
| Equipment finance leases | 500,485 | 510,029 | 491,744 | 457,611 | 439,202 | |||||||||||||||||||||||||||
| Commercial FHA warehouse lines | 30,522 | 10,275 | 25,029 | 51,309 | 23,872 | |||||||||||||||||||||||||||
| Total commercial loans and leases | 2,108,396 | 2,090,429 | 2,006,318 | 1,993,894 | 1,830,460 | |||||||||||||||||||||||||||
| Commercial real estate | 2,443,995 | 2,448,158 | 2,433,159 | 2,466,303 | 2,335,655 | |||||||||||||||||||||||||||
| Construction and land development | 366,631 | 326,836 | 320,882 | 225,549 | 203,955 | |||||||||||||||||||||||||||
| Residential real estate | 371,486 | 369,910 | 366,094 | 356,225 | 340,103 | |||||||||||||||||||||||||||
| Consumer | 1,076,836 | 1,118,938 | 1,180,014 | 1,156,480 | 1,085,371 | |||||||||||||||||||||||||||
| Total loans | $ | 6,367,344 | $ | 6,354,271 | $ | 6,306,467 | $ | 6,198,451 | $ | 5,795,544 | ||||||||||||||||||||||
Loan Quality
Credit quality metrics declined during the second quarter of 2023. Loans 30-89 days past due totaled $44.2 million as of June 30, 2023, compared to $30.9 million as of March 31, 2023, and $16.2 million as of June 30, 2022. The increase in delinquencies during the most recent quarter was due to a single commercial loan, which has since been brought current, and an increase in delinquencies in equipment finance loans and leases.
Non-performing loans were $54.8 million at June 30, 2023, compared to $50.7 million as of March 31, 2023, and $56.9 million as of June 30, 2022. The increase at June 30, 2023 was related to one commercial real estate loan moving to non-performing at the end of the quarter. Non-performing loans as a percentage of portfolio loans was 0.86% at June 30, 2023, compared with 0.80% at March 31, 2023, and 0.98% at June 30, 2022.
Non-performing assets were 0.72% of total assets at the end of the second quarter of 2023, compared to 0.74% at March 31, 2023 and 0.93% at June 30, 2022. Two other real estate owned (“OREO”) properties were sold during the second quarter of 2023 at a gain of $0.8 million resulting in the decrease in non-performing assets.
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| As of and for the Three Months Ended | ||||||||||||||||||||||||||||||||
| (in thousands) | June 30, | March 31, | December 31, | September 30, | June 30, | |||||||||||||||||||||||||||
| 2023 | 2023 | 2022 | 2022 | 2022 | ||||||||||||||||||||||||||||
| Asset Quality | ||||||||||||||||||||||||||||||||
| Loans 30-89 days past due | $ | 44,161 | $ | 30,895 | $ | 32,372 | $ | 28,275 | $ | 16,212 | ||||||||||||||||||||||
| Nonperforming loans | 54,844 | 50,713 | 49,423 | 46,882 | 56,883 | |||||||||||||||||||||||||||
| Nonperforming assets | 57,688 | 58,806 | 57,824 | 59,524 | 69,344 | |||||||||||||||||||||||||||
| Substandard loans | 130,707 | 99,819 | 101,044 | 98,517 | 114,820 | |||||||||||||||||||||||||||
| Net charge-offs | 2,996 | 2,119 | 538 | 3,233 | 2,781 | |||||||||||||||||||||||||||
| Loans 30-89 days past due to total loans | 0.69 | % | 0.49 | % | 0.51 | % | 0.46 | % | 0.28 | % | ||||||||||||||||||||||
| Nonperforming loans to total loans | 0.86 | % | 0.80 | % | 0.78 | % | 0.76 | % | 0.98 | % | ||||||||||||||||||||||
| Nonperforming assets to total assets | 0.72 | % | 0.74 | % | 0.74 | % | 0.76 | % | 0.93 | % | ||||||||||||||||||||||
| Allowance for credit losses to total loans | 1.02 | % | 0.98 | % | 0.97 | % | 0.95 | % | 0.95 | % | ||||||||||||||||||||||
| Allowance for credit losses to nonperforming loans | 118.43 | % | 122.39 | % | 123.53 | % | 125.08 | % | 96.51 | % | ||||||||||||||||||||||
| Net charge-offs to average loans | 0.19 | % | 0.14 | % | 0.03 | % | 0.21 | % | 0.20 | % | ||||||||||||||||||||||
The Company’s allowance for credit losses totaled $65.0 million at June 30, 2023, compared to $62.1 million at March 31, 2023, and $54.9 million at June 30, 2022. The allowance as a percentage of portfolio loans was 1.02% at June 30, 2023, compared to 0.98% at March 31, 2023, and 0.95% at June 30, 2022.
Deposits
Total deposits were $6.43 billion at both June 30, 2023 and March 31, 2023, compared with $6.18 billion at June 30, 2022. The deposit mix continues to shift from noninterest-bearing deposits to interest-bearing deposits due to the continued rate increases announced by the Federal Reserve. Interest rate promotions offered during the second quarter of 2023 on time deposit products contributed to an increase in balances of $73.9 million at June 30, 2023, compared to March 31, 2023.
| As of | ||||||||||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||||||||||||||
| (in thousands) | 2023 | 2023 | 2022 | 2022 | 2022 | |||||||||||||||||||||||||||
| Deposit Portfolio | ||||||||||||||||||||||||||||||||
| Noninterest-bearing demand | $ | 1,162,909 | $ | 1,215,758 | $ | 1,362,158 | $ | 1,362,481 | $ | 1,403,386 | ||||||||||||||||||||||
| Interest-bearing: | ||||||||||||||||||||||||||||||||
| Checking | 2,499,693 | 2,502,827 | 2,494,073 | 2,568,195 | 2,377,760 | |||||||||||||||||||||||||||
| Money market | 1,226,470 | 1,263,813 | 1,184,101 | 1,125,333 | 1,027,547 | |||||||||||||||||||||||||||
| Savings | 624,005 | 636,832 | 661,932 | 704,245 | 740,364 | |||||||||||||||||||||||||||
| Time | 840,734 | 766,884 | 649,552 | 620,960 | 620,363 | |||||||||||||||||||||||||||
| Brokered time | 72,737 | 39,087 | 12,836 | 14,038 | 15,018 | |||||||||||||||||||||||||||
| Total deposits | $ | 6,426,548 | $ | 6,425,201 | $ | 6,364,652 | $ | 6,395,252 | $ | 6,184,438 | ||||||||||||||||||||||
The Company estimates that uninsured deposits(1) totaled $1.21 billion, or 19% of total deposits, at June 30, 2023 compared to $1.32 billion, or 21%, at March 31, 2023.
(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.
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Results of Operations Highlights
Net Interest Income and Margin
During the second quarter of 2023, net interest income, on a tax-equivalent basis, totaled $59.0 million, a decrease of $1.7 million, or 2.8%, compared to $60.7 million for the first quarter of 2023. The tax-equivalent net interest margin for the second quarter of 2023 was 3.23%, compared with 3.39% in the first quarter of 2023. Net interest income and related margin, on a tax-equivalent basis, was $61.7 million and 3.65%, respectively, in the second quarter of 2022. The decline in the net interest income and margin was largely attributable to increased market interest rates resulting in the cost of funding liabilities increasing at a faster rate than the yields on earning assets.
Average interest-earning assets for the second quarter of 2023 were $7.33 billion, compared to $7.26 billion for the first quarter of 2023. The yield increased 16 basis points to 5.51% compared to the first quarter of 2023. Interest-earning assets averaged $6.77 billion for the second quarter of 2022.
Average loans were $6.36 billion for the second quarter of 2023, compared to $6.32 billion for the first quarter of 2023 and $5.68 billion for the second quarter of 2022. The yield on loans was 5.80% and 5.65% for the second and first quarters of 2023, respectively.
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| For the Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| June 30, | March 31, | June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2023 | 2023 | 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 | $ | 67,377 | $ | 852 | 5.07 | % | $ | 85,123 | $ | 980 | 4.67 | % | $ | 226,517 | $ | 468 | 0.83 | % | ||||||||||||||||||||||||||||||||||||||
| Investment securities | 861,409 | 7,286 | 3.39 | % | 809,848 | 5,995 | 3.00 | % | 818,927 | 4,931 | 2.41 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Loans | 6,356,012 | 91,890 | 5.80 | % | 6,320,402 | 87,997 | 5.65 | % | 5,677,791 | 63,594 | 4.49 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Loans held for sale | 4,067 | 59 | 5.79 | % | 1,506 | 16 | 4.41 | % | 9,865 | 77 | 3.15 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Nonmarketable equity securities | 45,028 | 599 | 5.33 | % | 47,819 | 795 | 6.75 | % | 36,338 | 487 | 5.38 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Total interest-earning assets | $ | 7,333,893 | $ | 100,686 | 5.51 | % | $ | 7,264,698 | $ | 95,783 | 5.35 | % | $ | 6,769,438 | $ | 69,557 | 4.12 | % | ||||||||||||||||||||||||||||||||||||||
| Noninterest-earning assets | 612,238 | 610,811 | 615,348 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 7,946,131 | $ | 7,875,509 | $ | 7,384,786 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-Bearing Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-bearing deposits | $ | 5,259,188 | $ | 33,617 | 2.56 | % | $ | 5,053,941 | $ | 26,405 | 2.12 | % | $ | 4,718,759 | $ | 3,810 | 0.32 | % | ||||||||||||||||||||||||||||||||||||||
| Short-term borrowings | 22,018 | 14 | 0.26 | % | 38,655 | 25 | 0.26 | % | 59,301 | 22 | 0.15 | % | ||||||||||||||||||||||||||||||||||||||||||||
| FHLB advances & other borrowings | 471,989 | 5,396 | 4.59 | % | 540,278 | 6,006 | 4.51 | % | 307,611 | 1,435 | 1.87 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Subordinated debt | 97,278 | 1,335 | 5.51 | % | 99,812 | 1,370 | 5.57 | % | 139,232 | 2,011 | 5.78 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Trust preferred debentures | 50,218 | 1,289 | 10.29 | % | 50,047 | 1,229 | 9.96 | % | 49,602 | 624 | 5.05 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | $ | 5,900,691 | $ | 41,651 | 2.83 | % | $ | 5,782,733 | $ | 35,035 | 2.46 | % | $ | 5,274,505 | $ | 7,902 | 0.60 | % | ||||||||||||||||||||||||||||||||||||||
| Noninterest-bearing deposits | 1,187,584 | 1,250,899 | 1,401,268 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other noninterest-bearing liabilities | 81,065 | 74,691 | 66,009 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shareholders’ equity | 776,791 | 767,186 | 643,004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities and shareholder’s equity | $ | 7,946,131 | $ | 7,875,509 | $ | 7,384,786 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Interest Margin | $ | 59,035 | 3.23 | % | $ | 60,748 | 3.39 | % | $ | 61,655 | 3.65 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Cost of Deposits | 2.09 | % | 1.70 | % | 0.25 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
(1)Interest income and average rates for tax-exempt loans and securities are presented on a tax-equivalent basis, assuming a federal income tax rate of 21%. Tax-equivalent adjustments totaled $0.2 million, $0.2 million and $0.3 million for the three months ended June 30, 2023, March 31, 2023 and 2022, respectively.
Investment securities averaged $861.4 million for the second quarter of 2023, compared to $809.8 million for the first quarter of 2023. The Company purchased additional investments and repositioned out of lower-yielding securities in favor of higher-yielding instruments resulting in increased average balances of $51.6 million and a higher yield. These changes are expected to improve overall margin, liquidity, and capital allocations. The Company incurred net losses on sales of $0.9 million in the second quarter of 2023. Investment securities averaged $818.9 million for the second quarter of 2022.
Average interest-bearing deposits were $5.26 billion for the second quarter of 2023, compared to $5.05 billion for the first quarter of 2023, and $4.72 billion for the second quarter of 2022. Cost of interest-bearing deposits was 2.56% in the second quarter of 2023, which represents a 44 basis point increase from the first quarter of 2023. A competitive market driven by rising interest rates was a contributing factor to the increase in deposit costs.
The Company redeemed $6.6 million of subordinated debt during the second quarter of 2023. The debentures were redeemed at a discount, resulting in a gain of $0.7 million.
During the six months ended June 30, 2023, net interest income, on a tax-equivalent basis, increased to $119.8 million, with a tax-equivalent net interest margin of 3.31%, compared to net interest income, on a
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tax-equivalent basis, of $118.9 million, and a tax-equivalent net interest margin of 3.58% for the six months ended June 30, 2022.
| For the Six Months Ended | ||||||||||||||||||||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2023 | 2022 | ||||||||||||||||||||||||||||||||||||
| Interest-earning assets | Average Balance | Interest & Fees | Yield/Rate | Average Balance | Interest & Fees | Yield/Rate | ||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 76,201 | $ | 1,832 | 4.85 | % | $ | 304,938 | $ | 639 | 0.42 | % | ||||||||||||||||||||||||||
| Investment securities | 835,771 | 13,281 | 3.18 | % | 856,571 | 9,894 | 2.31 | % | ||||||||||||||||||||||||||||||
| Loans | 6,338,305 | 179,887 | 5.72 | % | 5,477,037 | 120,873 | 4.45 | % | ||||||||||||||||||||||||||||||
| Loans held for sale | 2,794 | 75 | 5.42 | % | 20,501 | 297 | 2.93 | % | ||||||||||||||||||||||||||||||
| Nonmarketable equity securities | 46,416 | 1,394 | 6.05 | % | 36,358 | 971 | 5.39 | % | ||||||||||||||||||||||||||||||
| Total interest-earning assets | $ | 7,299,487 | $ | 196,469 | 5.43 | % | $ | 6,695,405 | $ | 132,674 | 4.00 | % | ||||||||||||||||||||||||||
| Noninterest-earning assets | 611,528 | 623,224 | ||||||||||||||||||||||||||||||||||||
| Total assets | $ | 7,911,015 | $ | 7,318,629 | ||||||||||||||||||||||||||||||||||
| Interest-Bearing Liabilities | ||||||||||||||||||||||||||||||||||||||
| Interest-bearing deposits | $ | 5,157,148 | $ | 60,022 | 2.35 | % | $ | 4,613,751 | $ | 5,971 | 0.26 | % | ||||||||||||||||||||||||||
| Short-term borrowings | 30,291 | 39 | 0.26 | % | 64,642 | 45 | 0.14 | % | ||||||||||||||||||||||||||||||
| FHLB advances & other borrowings | 505,945 | 11,402 | 4.54 | % | 309,436 | 2,647 | 1.72 | % | ||||||||||||||||||||||||||||||
| Subordinated debt | 98,538 | 2,705 | 5.54 | % | 139,186 | 4,022 | 5.78 | % | ||||||||||||||||||||||||||||||
| Trust preferred debentures | 50,133 | 2,518 | 10.13 | % | 49,527 | 1,138 | 4.64 | % | ||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | $ | 5,842,055 | $ | 76,686 | 2.65 | % | $ | 5,176,542 | $ | 13,823 | 0.54 | % | ||||||||||||||||||||||||||
| Noninterest-bearing deposits | 1,219,050 | 1,418,083 | ||||||||||||||||||||||||||||||||||||
| Other noninterest-bearing liabilities | 77,895 | 73,878 | ||||||||||||||||||||||||||||||||||||
| Shareholders’ equity | 772,015 | 650,126 | ||||||||||||||||||||||||||||||||||||
| Total liabilities and shareholder’s equity | $ | 7,911,015 | $ | 7,318,629 | ||||||||||||||||||||||||||||||||||
| Net Interest Margin | $ | 119,783 | 3.31 | % | $ | 118,851 | 3.58 | % | ||||||||||||||||||||||||||||||
| Cost of Deposits | 1.90 | % | 0.20 | % | ||||||||||||||||||||||||||||||||||
(1)Interest income and average rates for tax-exempt loans and securities are presented on a tax-equivalent basis, assuming a federal income tax rate of 21%. Tax-equivalent adjustments totaled $0.4 million and $0.7 million for the six months ended June 30, 2023 and 2022, respectively.
The yield on earning assets increased 143 basis points to 5.43% for the six months ended June 30, 2023 compared to the same period one year prior. However, the cost of interest bearing liabilities increased at a faster rate during this period, increasing 211 basis points to 2.65% for the six months ended June 30, 2023.
Noninterest Income
Noninterest income was $18.8 million for the second quarter of 2023, compared to $15.8 million for the first quarter of 2023. Noninterest income for the second quarter of 2023 included an $0.8 million gain on the sale of OREO and a $0.7 million gain on the repurchase of subordinated debt, partially offset by $0.9 million of losses on the sale of investment securities. The first quarter of 2023 was negatively impacted by $0.6 million of losses on the sale of investment securities. Excluding these transactions, noninterest income for the second quarter of 2023 and the first quarter of 2023 was $18.2 million and $16.4 million, respectively. Noninterest income for the second quarter of 2022 was $14.6 million and included $0.9 million impairment charge on commercial servicing rights and a $0.1 million loss on the sale of
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investment securities. Excluding these transactions, noninterest income for the second quarter of 2022 was $15.6 million.
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | June 30, | ||||||||||||||||||||||||||||
| (in thousands) | 2023 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||
| Noninterest income | ||||||||||||||||||||||||||||||||
| Wealth management revenue | $ | 6,269 | $ | 6,411 | $ | 6,143 | $ | 12,680 | $ | 13,282 | ||||||||||||||||||||||
| Residential mortgage banking revenue | 540 | 405 | 384 | 945 | 983 | |||||||||||||||||||||||||||
| Service charges on deposit accounts | 2,677 | 2,568 | 2,304 | 5,245 | 4,372 | |||||||||||||||||||||||||||
| Interchange revenue | 3,696 | 3,412 | 3,590 | 7,108 | 6,870 | |||||||||||||||||||||||||||
| Loss on sales of investment securities, net | (869) | (648) | (101) | (1,517) | (101) | |||||||||||||||||||||||||||
| Gain on repurchase of subordinated debt, net | 676 | — | — | 676 | — | |||||||||||||||||||||||||||
| Gain (loss) on sales of other real estate owned, net | 819 | — | (162) | 819 | (121) | |||||||||||||||||||||||||||
| Impairment on commercial mortgage servicing rights | — | — | (869) | — | (1,263) | |||||||||||||||||||||||||||
| Company-owned life insurance | 891 | 876 | 840 | 1,767 | 1,859 | |||||||||||||||||||||||||||
| Other income | 4,054 | 2,755 | 2,484 | 6,809 | 4,345 | |||||||||||||||||||||||||||
| Total noninterest income | $ | 18,753 | $ | 15,779 | $ | 14,613 | $ | 34,532 | $ | 30,226 | ||||||||||||||||||||||
Noninterest Expense
Noninterest expense was $42.9 million in the second quarter of 2023, compared to $44.5 million in the first quarter of 2023, and $41.3 million in the second quarter of 2022. The efficiency ratio was 55.01% for the quarter ended June 30, 2023, compared to 57.64% for the quarter ended March 31, 2023, and 53.10% for the quarter ended June 30, 2022.
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | June 30, | ||||||||||||||||||||||||||||
| (in thousands) | 2023 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||
| Noninterest expense | ||||||||||||||||||||||||||||||||
| Salaries and employee benefits | $ | 22,857 | $ | 24,243 | $ | 22,645 | $ | 47,100 | $ | 44,515 | ||||||||||||||||||||||
| Occupancy and equipment | 3,879 | 4,443 | 3,489 | 8,322 | 7,244 | |||||||||||||||||||||||||||
| Data processing | 6,544 | 6,311 | 6,082 | 12,855 | 11,955 | |||||||||||||||||||||||||||
| Professional | 1,663 | 1,760 | 1,516 | 3,423 | 3,488 | |||||||||||||||||||||||||||
| Amortization of intangible assets | 1,208 | 1,291 | 1,318 | 2,499 | 2,716 | |||||||||||||||||||||||||||
| FDIC insurance | 1,196 | 1,329 | 826 | 2,525 | 1,656 | |||||||||||||||||||||||||||
| Other expense | 5,547 | 5,105 | 5,463 | 10,652 | 10,649 | |||||||||||||||||||||||||||
| Total noninterest expense | $ | 42,894 | $ | 44,482 | $ | 41,339 | $ | 87,376 | $ | 82,223 | ||||||||||||||||||||||
Noteworthy components of noninterest expense are as follows:
•Salaries and employee benefits expenses were $22.9 million in the second quarter of 2023, compared to $24.2 million in the first quarter of 2023, and $22.6 million in the second quarter of 2022. Employees numbered 915 at June 30, 2023, compared to 931 at March 31, 2023, and 932 at June 30, 2022. Annual salary increases, effective in the second quarter of 2023, were offset by decreased commissions and incentive compensation expense.
7
•Occupancy and equipment expense decreased $0.6 million in the second quarter of 2023 compared to the first quarter of 2023, primarily due to elevated seasonal related expenses incurred in the first quarter, including snow removal and utilities expenses.
•Increases in FDIC insurance expense on a year to date basis 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 $7.2 million for the second quarter of 2023, as compared to $6.9 million for the first quarter of 2023 and $7.3 million for the second quarter of 2022. The resulting effective tax rates were 25.1%, 24.0% and 25.0% respectively.
Capital
At June 30, 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 June 30, 2023 | |||||||||||||||||
| Midland States Bank | Midland States Bancorp, Inc. | Minimum Regulatory Requirements (2) | |||||||||||||||
| Total capital to risk-weighted assets | 11.89% | 12.65% | 10.50% | ||||||||||||||
| Tier 1 capital to risk-weighted assets | 11.01% | 10.47% | 8.50% | ||||||||||||||
| Tier 1 leverage ratio | 10.07% | 9.57% | 4.00% | ||||||||||||||
| Common equity Tier 1 capital | 11.01% | 8.03% | 7.00% | ||||||||||||||
Tangible common equity to tangible assets (1) | N/A | 6.19% | N/A | ||||||||||||||
(1) A non-GAAP financial measure. Refer to page 16 for a reconciliation to the comparable GAAP financial measure.
(2) Includes the capital conservation buffer of 2.5%.
The impact of rising interest rates on the Company’s investment portfolio and cash flow hedges has resulted in an $84.7 million accumulated other comprehensive loss at June 30, 2023, which impacts tangible book value by $3.87.
Stock Repurchase Program
As previously disclosed, 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. During the second quarter of 2023, the Company repurchased 308,543 shares of its common stock at a weighted average price of $19.78 under its stock repurchase program. As of June 30, 2023, the Company had $16.1 million remaining under the current stock repurchase authorization.
8
About Midland States Bancorp, Inc.
Midland States Bancorp, Inc. is a community-based financial holding company headquartered in Effingham, Illinois, and is the sole shareholder of Midland States Bank. As of June 30, 2023, the Company had total assets of approximately $8.03 billion, and its Wealth Management Group had assets under administration of approximately $3.59 billion. The Company provides a full range of commercial and consumer banking products and services and business equipment financing, merchant credit card services, trust and investment management, insurance and financial planning services. For additional information, visit https://www.midlandsb.com/ or https://www.linkedin.com/company/midland-states-bank.
Non-GAAP Financial Measures
Some of the financial measures included in this press release are not measures of financial performance recognized in accordance with GAAP.
These non-GAAP financial measures include “Adjusted Earnings,” “Adjusted Earnings Available to Common Shareholders,” “Adjusted Diluted Earnings Per Common Share,” “Adjusted Return on Average Assets,” “Adjusted Return on Average Shareholders’ Equity,” “Adjusted Return on Average Tangible Common Equity,” “Adjusted Pre-Tax, Pre-Provision Earnings,” “Adjusted Pre-Tax, Pre-Provision Return on Average Assets,” “Efficiency Ratio,” “Tangible Common Equity to Tangible Assets,” “Tangible Book Value Per Share,” “Tangible Book Value Per Share excluding Accumulated Other Comprehensive Income,” and “Return on Average Tangible Common Equity.” The Company believes these non-GAAP financial measures provide both management and investors a more complete understanding of the Company’s funding profile and profitability. These non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP financial measures. Not all companies use the same calculation of these measures; therefore, 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-
9
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
10
| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) | ||||||||||||||||||||||||||||||||
| As of and for the Three Months Ended | As of and for the Six Months Ended | |||||||||||||||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | June 30, | ||||||||||||||||||||||||||||
| (dollars in thousands, except per share data) | 2023 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||
| Earnings Summary | ||||||||||||||||||||||||||||||||
| Net interest income | $ | 58,840 | $ | 60,504 | $ | 61,334 | $ | 119,344 | $ | 118,161 | ||||||||||||||||||||||
| Provision for credit losses | 5,879 | 3,135 | 5,441 | 9,014 | 9,608 | |||||||||||||||||||||||||||
| Noninterest income | 18,753 | 15,779 | 14,613 | 34,532 | 30,226 | |||||||||||||||||||||||||||
| Noninterest expense | 42,894 | 44,482 | 41,339 | 87,376 | 82,223 | |||||||||||||||||||||||||||
| Income before income taxes | 28,820 | 28,666 | 29,167 | 57,486 | 56,556 | |||||||||||||||||||||||||||
| Income taxes | 7,245 | 6,894 | 7,284 | 14,139 | 13,924 | |||||||||||||||||||||||||||
| Net income | 21,575 | 21,772 | 21,883 | 43,347 | 42,632 | |||||||||||||||||||||||||||
| Preferred dividends | 2,228 | 2,228 | — | 4,456 | — | |||||||||||||||||||||||||||
| Net income available to common shareholders | $ | 19,347 | $ | 19,544 | $ | 21,883 | $ | 38,891 | $ | 42,632 | ||||||||||||||||||||||
| Diluted earnings per common share | $ | 0.86 | $ | 0.86 | $ | 0.97 | $ | 1.72 | $ | 1.89 | ||||||||||||||||||||||
| Weighted average common shares outstanding - diluted | 22,205,079 | 22,501,970 | 22,360,819 | 22,348,981 | 22,355,936 | |||||||||||||||||||||||||||
| Return on average assets | 1.09 | % | 1.12 | % | 1.19 | % | 1.10 | % | 1.17 | % | ||||||||||||||||||||||
| Return on average shareholders' equity | 11.14 | % | 11.51 | % | 13.65 | % | 11.32 | % | 13.22 | % | ||||||||||||||||||||||
Return on average tangible common equity (1) | 15.99 | % | 16.70 | % | 19.14 | % | 16.34 | % | 18.48 | % | ||||||||||||||||||||||
| Net interest margin | 3.23 | % | 3.39 | % | 3.65 | % | 3.31 | % | 3.58 | % | ||||||||||||||||||||||
Efficiency ratio (1) | 55.01 | % | 57.64 | % | 53.10 | % | 56.32 | % | 54.38 | % | ||||||||||||||||||||||
Adjusted Earnings Performance Summary (1) | ||||||||||||||||||||||||||||||||
| Adjusted earnings available to common shareholders | $ | 19,488 | $ | 20,017 | $ | 22,191 | $ | 39,505 | $ | 43,006 | ||||||||||||||||||||||
| Adjusted diluted earnings per common share | $ | 0.87 | $ | 0.88 | $ | 0.98 | $ | 1.75 | $ | 1.90 | ||||||||||||||||||||||
| Adjusted return on average assets | 1.10 | % | 1.15 | % | 1.21 | % | 1.12 | % | 1.18 | % | ||||||||||||||||||||||
| Adjusted return on average shareholders' equity | 11.21 | % | 11.76 | % | 13.84 | % | 11.48 | % | 13.34 | % | ||||||||||||||||||||||
| Adjusted return on average tangible common equity | 16.10 | % | 17.11 | % | 19.41 | % | 16.60 | % | 18.65 | % | ||||||||||||||||||||||
| Adjusted pre-tax, pre-provision earnings | $ | 34,892 | $ | 32,449 | $ | 35,902 | $ | 67,341 | $ | 67,943 | ||||||||||||||||||||||
| Adjusted pre-tax, pre-provision return on average assets | 1.76 | % | 1.67 | % | 1.95 | % | 1.72 | % | 1.87 | % | ||||||||||||||||||||||
| Market Data | ||||||||||||||||||||||||||||||||
| Book value per share at period end | $ | 30.49 | $ | 30.08 | $ | 28.84 | ||||||||||||||||||||||||||
Tangible book value per share at period end (1) | $ | 22.24 | $ | 21.87 | $ | 20.43 | ||||||||||||||||||||||||||
Tangible book value per share excluding accumulated other comprehensive income at period end (1) | $ | 26.11 | $ | 25.39 | $ | 22.84 | ||||||||||||||||||||||||||
| Market price at period end | $ | 19.91 | $ | 21.42 | $ | 24.04 | ||||||||||||||||||||||||||
| Common shares outstanding at period end | 21,854,800 | 22,111,454 | 22,060,255 | |||||||||||||||||||||||||||||
| Capital | ||||||||||||||||||||||||||||||||
| Total capital to risk-weighted assets | 12.65 | % | 12.46 | % | 11.44 | % | ||||||||||||||||||||||||||
| Tier 1 capital to risk-weighted assets | 10.47 | % | 10.25 | % | 8.63 | % | ||||||||||||||||||||||||||
| Tier 1 common capital to risk-weighted assets | 8.03 | % | 7.84 | % | 7.66 | % | ||||||||||||||||||||||||||
| Tier 1 leverage ratio | 9.57 | % | 9.54 | % | 7.98 | % | ||||||||||||||||||||||||||
Tangible common equity to tangible assets (1) | 6.19 | % | 6.24 | % | 6.22 | % | ||||||||||||||||||||||||||
| Wealth Management | ||||||||||||||||||||||||||||||||
| Trust assets under administration | $ | 3,594,727 | $ | 3,502,635 | $ | 3,503,227 | ||||||||||||||||||||||||||
(1) Non-GAAP financial measures. Refer to pages 14 - 16 for a reconciliation to the comparable GAAP financial measures.
11
| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | ||||||||||||||||||||||||||||||||
| As of | ||||||||||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||||||||||||||
| (in thousands) | 2023 | 2023 | 2022 | 2022 | 2022 | |||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 160,695 | $ | 138,310 | $ | 160,631 | $ | 313,188 | $ | 270,117 | ||||||||||||||||||||||
| Investment securities | 887,003 | 821,005 | 776,860 | 690,504 | 769,278 | |||||||||||||||||||||||||||
| Loans | 6,367,344 | 6,354,271 | 6,306,467 | 6,198,451 | 5,795,544 | |||||||||||||||||||||||||||
| Allowance for credit losses on loans | (64,950) | (62,067) | (61,051) | (58,639) | (54,898) | |||||||||||||||||||||||||||
| Total loans, net | 6,302,394 | 6,292,204 | 6,245,416 | 6,139,812 | 5,740,646 | |||||||||||||||||||||||||||
| Loans held for sale | 5,632 | 2,747 | 1,286 | 4,338 | 5,298 | |||||||||||||||||||||||||||
| Premises and equipment, net | 81,006 | 80,582 | 78,293 | 77,519 | 77,668 | |||||||||||||||||||||||||||
| Other real estate owned | 202 | 6,729 | 6,729 | 11,141 | 11,131 | |||||||||||||||||||||||||||
| Loan servicing rights, at lower of cost or fair value | 21,611 | 1,117 | 1,205 | 1,297 | 25,879 | |||||||||||||||||||||||||||
| Commercial FHA mortgage loan servicing rights held for sale | — | 20,745 | 20,745 | 23,995 | — | |||||||||||||||||||||||||||
| Goodwill | 161,904 | 161,904 | 161,904 | 161,904 | 161,904 | |||||||||||||||||||||||||||
| Other intangible assets, net | 18,367 | 19,575 | 20,866 | 22,198 | 23,559 | |||||||||||||||||||||||||||
| Company-owned life insurance | 152,210 | 151,319 | 150,443 | 149,648 | 148,900 | |||||||||||||||||||||||||||
| Other assets | 243,697 | 233,937 | 231,123 | 226,333 | 201,432 | |||||||||||||||||||||||||||
| Total assets | $ | 8,034,721 | $ | 7,930,174 | $ | 7,855,501 | $ | 7,821,877 | $ | 7,435,812 | ||||||||||||||||||||||
| Liabilities and Shareholders' Equity | ||||||||||||||||||||||||||||||||
| Noninterest-bearing demand deposits | $ | 1,162,909 | $ | 1,215,758 | $ | 1,362,158 | $ | 1,362,481 | $ | 1,403,386 | ||||||||||||||||||||||
| Interest-bearing deposits | 5,263,639 | 5,209,443 | 5,002,494 | 5,032,771 | 4,781,052 | |||||||||||||||||||||||||||
| Total deposits | 6,426,548 | 6,425,201 | 6,364,652 | 6,395,252 | 6,184,438 | |||||||||||||||||||||||||||
| Short-term borrowings | 21,783 | 31,173 | 42,311 | 58,518 | 67,689 | |||||||||||||||||||||||||||
| FHLB advances and other borrowings | 575,000 | 482,000 | 460,000 | 360,000 | 285,000 | |||||||||||||||||||||||||||
| Subordinated debt | 93,404 | 99,849 | 99,772 | 139,370 | 139,277 | |||||||||||||||||||||||||||
| Trust preferred debentures | 50,296 | 50,135 | 49,975 | 49,824 | 49,674 | |||||||||||||||||||||||||||
| Other liabilities | 90,869 | 66,173 | 80,217 | 79,634 | 73,546 | |||||||||||||||||||||||||||
| Total liabilities | 7,257,900 | 7,154,531 | 7,096,927 | 7,082,598 | 6,799,624 | |||||||||||||||||||||||||||
| Total shareholders’ equity | 776,821 | 775,643 | 758,574 | 739,279 | 636,188 | |||||||||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 8,034,721 | $ | 7,930,174 | $ | 7,855,501 | $ | 7,821,877 | $ | 7,435,812 | ||||||||||||||||||||||
12
| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||||||||||||||
| CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) | ||||||||||||||||||||||||||||||||
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | June 30, | ||||||||||||||||||||||||||||
| (in thousands, except per share data) | 2023 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||
| Net interest income: | ||||||||||||||||||||||||||||||||
| Interest income | $ | 100,491 | $ | 95,539 | $ | 69,236 | $ | 196,030 | $ | 131,984 | ||||||||||||||||||||||
| Interest expense | 41,651 | 35,035 | 7,902 | 76,686 | 13,823 | |||||||||||||||||||||||||||
| Net interest income | 58,840 | 60,504 | 61,334 | 119,344 | 118,161 | |||||||||||||||||||||||||||
| Provision for credit losses: | ||||||||||||||||||||||||||||||||
| Provision for credit losses on loans | 5,879 | 3,135 | 4,741 | 9,014 | 8,873 | |||||||||||||||||||||||||||
| Provision for credit losses on unfunded commitments | — | — | 700 | — | 956 | |||||||||||||||||||||||||||
| Provision for other credit losses | — | — | — | — | (221) | |||||||||||||||||||||||||||
| Total provision for credit losses | 5,879 | 3,135 | 5,441 | 9,014 | 9,608 | |||||||||||||||||||||||||||
| Net interest income after provision for credit losses | 52,961 | 57,369 | 55,893 | 110,330 | 108,553 | |||||||||||||||||||||||||||
| Noninterest income: | ||||||||||||||||||||||||||||||||
| Wealth management revenue | 6,269 | 6,411 | 6,143 | 12,680 | 13,282 | |||||||||||||||||||||||||||
| Residential mortgage banking revenue | 540 | 405 | 384 | 945 | 983 | |||||||||||||||||||||||||||
| Service charges on deposit accounts | 2,677 | 2,568 | 2,304 | 5,245 | 4,372 | |||||||||||||||||||||||||||
| Interchange revenue | 3,696 | 3,412 | 3,590 | 7,108 | 6,870 | |||||||||||||||||||||||||||
| Loss on sales of investment securities, net | (869) | (648) | (101) | (1,517) | (101) | |||||||||||||||||||||||||||
| Gain on repurchase of subordinated debt, net | 676 | — | — | 676 | — | |||||||||||||||||||||||||||
| Gain (loss) on sales of other real estate owned, net | 819 | — | (162) | 819 | (121) | |||||||||||||||||||||||||||
| Impairment on commercial mortgage servicing rights | — | — | (869) | — | (1,263) | |||||||||||||||||||||||||||
| Company-owned life insurance | 891 | 876 | 840 | 1,767 | 1,859 | |||||||||||||||||||||||||||
| Other income | 4,054 | 2,755 | 2,484 | 6,809 | 4,345 | |||||||||||||||||||||||||||
| Total noninterest income | 18,753 | 15,779 | 14,613 | 34,532 | 30,226 | |||||||||||||||||||||||||||
| Noninterest expense: | ||||||||||||||||||||||||||||||||
| Salaries and employee benefits | 22,857 | 24,243 | 22,645 | 47,100 | 44,515 | |||||||||||||||||||||||||||
| Occupancy and equipment | 3,879 | 4,443 | 3,489 | 8,322 | 7,244 | |||||||||||||||||||||||||||
| Data processing | 6,544 | 6,311 | 6,082 | 12,855 | 11,955 | |||||||||||||||||||||||||||
| Professional | 1,663 | 1,760 | 1,516 | 3,423 | 3,488 | |||||||||||||||||||||||||||
| Amortization of intangible assets | 1,208 | 1,291 | 1,318 | 2,499 | 2,716 | |||||||||||||||||||||||||||
| FDIC insurance | 1,196 | 1,329 | 826 | 2,525 | 1,656 | |||||||||||||||||||||||||||
| Other expense | 5,547 | 5,105 | 5,463 | 10,652 | 10,649 | |||||||||||||||||||||||||||
| Total noninterest expense | 42,894 | 44,482 | 41,339 | 87,376 | 82,223 | |||||||||||||||||||||||||||
| Income before income taxes | 28,820 | 28,666 | 29,167 | 57,486 | 56,556 | |||||||||||||||||||||||||||
| Income taxes | 7,245 | 6,894 | 7,284 | 14,139 | 13,924 | |||||||||||||||||||||||||||
| Net income | 21,575 | 21,772 | 21,883 | 43,347 | 42,632 | |||||||||||||||||||||||||||
| Preferred stock dividends | 2,228 | 2,228 | — | 4,456 | — | |||||||||||||||||||||||||||
| Net income available to common shareholders | $ | 19,347 | $ | 19,544 | $ | 21,883 | $ | 38,891 | $ | 42,632 | ||||||||||||||||||||||
| Basic earnings per common share | $ | 0.86 | $ | 0.86 | $ | 0.97 | $ | 1.72 | $ | 1.89 | ||||||||||||||||||||||
| Diluted earnings per common share | $ | 0.86 | $ | 0.86 | $ | 0.97 | $ | 1.72 | $ | 1.89 | ||||||||||||||||||||||
13
| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||||||||||||||
| RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) | ||||||||||||||||||||||||||||||||
| Adjusted Earnings Reconciliation | ||||||||||||||||||||||||||||||||
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | June 30, | ||||||||||||||||||||||||||||
| (dollars in thousands, except per share data) | 2023 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||
| Income before income taxes - GAAP | $ | 28,820 | $ | 28,666 | $ | 29,167 | $ | 57,486 | $ | 56,556 | ||||||||||||||||||||||
| Adjustments to noninterest income: | ||||||||||||||||||||||||||||||||
| Loss on sales of investment securities, net | 869 | 648 | 101 | 1,517 | 101 | |||||||||||||||||||||||||||
| (Gain) on repurchase of subordinated debt | (676) | — | — | (676) | — | |||||||||||||||||||||||||||
| Total adjustments to noninterest income | 193 | 648 | 101 | 841 | 101 | |||||||||||||||||||||||||||
| Adjustments to noninterest expense: | ||||||||||||||||||||||||||||||||
| Integration and acquisition expenses | — | — | (324) | — | (415) | |||||||||||||||||||||||||||
| Total adjustments to noninterest expense | — | — | (324) | — | (415) | |||||||||||||||||||||||||||
| Adjusted earnings pre tax - non-GAAP | 29,013 | 29,314 | 29,592 | 58,327 | 57,072 | |||||||||||||||||||||||||||
| Adjusted earnings tax | 7,297 | 7,069 | 7,401 | 14,366 | 14,066 | |||||||||||||||||||||||||||
| Adjusted earnings - non-GAAP | 21,716 | 22,245 | 22,191 | 43,961 | 43,006 | |||||||||||||||||||||||||||
| Preferred stock dividends | 2,228 | 2,228 | — | 4,456 | — | |||||||||||||||||||||||||||
| Adjusted earnings available to common shareholders | $ | 19,488 | $ | 20,017 | $ | 22,191 | $ | 39,505 | $ | 43,006 | ||||||||||||||||||||||
| Adjusted diluted earnings per common share | $ | 0.87 | $ | 0.88 | $ | 0.98 | $ | 1.75 | $ | 1.90 | ||||||||||||||||||||||
| Adjusted return on average assets | 1.10 | % | 1.15 | % | 1.21 | % | 1.12 | % | 1.18 | % | ||||||||||||||||||||||
| Adjusted return on average shareholders' equity | 11.21 | % | 11.76 | % | 13.84 | % | 11.48 | % | 13.34 | % | ||||||||||||||||||||||
| Adjusted return on average tangible common equity | 16.10 | % | 17.11 | % | 19.41 | % | 16.60 | % | 18.65 | % | ||||||||||||||||||||||
| Adjusted Pre-Tax, Pre-Provision Earnings Reconciliation | ||||||||||||||||||||||||||||||||
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | June 30, | ||||||||||||||||||||||||||||
| (dollars in thousands) | 2023 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||
| Adjusted earnings pre tax - non-GAAP | $ | 29,013 | $ | 29,314 | $ | 29,592 | $ | 58,327 | $ | 57,072 | ||||||||||||||||||||||
| Provision for credit losses | 5,879 | 3,135 | 5,441 | 9,014 | 9,608 | |||||||||||||||||||||||||||
| Impairment on commercial mortgage servicing rights | — | — | 869 | — | 1,263 | |||||||||||||||||||||||||||
| Adjusted pre-tax, pre-provision earnings - non-GAAP | $ | 34,892 | $ | 32,449 | $ | 35,902 | $ | 67,341 | $ | 67,943 | ||||||||||||||||||||||
| Adjusted pre-tax, pre-provision return on average assets | 1.76 | % | 1.67 | % | 1.95 | % | 1.72 | % | 1.87 | % | ||||||||||||||||||||||
14
| MIDLAND STATES BANCORP, INC. | ||||||||||||||||||||||||||||||||
| RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued) | ||||||||||||||||||||||||||||||||
| Efficiency Ratio Reconciliation | ||||||||||||||||||||||||||||||||
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | June 30, | ||||||||||||||||||||||||||||
| (dollars in thousands) | 2023 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||
| Noninterest expense - GAAP | $ | 42,894 | $ | 44,482 | $ | 41,339 | $ | 87,376 | $ | 82,223 | ||||||||||||||||||||||
| Integration and acquisition expenses | — | — | (324) | — | (415) | |||||||||||||||||||||||||||
| Adjusted noninterest expense | $ | 42,894 | $ | 44,482 | $ | 41,015 | $ | 87,376 | $ | 81,808 | ||||||||||||||||||||||
| Net interest income - GAAP | $ | 58,840 | $ | 60,504 | $ | 61,334 | $ | 119,344 | $ | 118,161 | ||||||||||||||||||||||
| Effect of tax-exempt income | 195 | 244 | 321 | 439 | 690 | |||||||||||||||||||||||||||
| Adjusted net interest income | 59,035 | 60,748 | 61,655 | 119,783 | 118,851 | |||||||||||||||||||||||||||
| Noninterest income - GAAP | 18,753 | 15,779 | 14,613 | 34,532 | 30,226 | |||||||||||||||||||||||||||
| Impairment on commercial mortgage servicing rights | — | — | 869 | — | 1,263 | |||||||||||||||||||||||||||
| Loss on sales of investment securities, net | 869 | 648 | 101 | 1,517 | 101 | |||||||||||||||||||||||||||
| (Gain) on repurchase of subordinated debt | (676) | — | — | (676) | — | |||||||||||||||||||||||||||
| Adjusted noninterest income | 18,946 | 16,427 | 15,583 | 35,373 | 31,590 | |||||||||||||||||||||||||||
| Adjusted total revenue | $ | 77,980 | $ | 77,175 | $ | 77,238 | $ | 155,156 | $ | 150,441 | ||||||||||||||||||||||
| Efficiency ratio | 55.01 | % | 57.64 | % | 53.10 | % | 56.32 | % | 54.38 | % | ||||||||||||||||||||||
| Return on Average Tangible Common Equity (ROATCE) | ||||||||||||||||||||||||||||||||
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | June 30, | ||||||||||||||||||||||||||||
| (dollars in thousands) | 2023 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||
| Net income available to common shareholders | $ | 19,347 | $ | 19,544 | $ | 21,883 | $ | 38,891 | $ | 42,632 | ||||||||||||||||||||||
| Average total shareholders' equity—GAAP | $ | 776,791 | $ | 767,186 | $ | 643,004 | $ | 772,015 | $ | 650,126 | ||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Preferred Stock | (110,548) | (110,548) | — | (110,548) | — | |||||||||||||||||||||||||||
| Goodwill | (161,904) | (161,904) | (161,904) | (161,904) | (161,904) | |||||||||||||||||||||||||||
| Other intangible assets, net | (18,937) | (20,184) | (22,570) | (19,557) | (23,101) | |||||||||||||||||||||||||||
| Average tangible common equity | $ | 485,402 | $ | 474,550 | $ | 458,530 | $ | 480,006 | $ | 465,121 | ||||||||||||||||||||||
| ROATCE | 15.99 | % | 16.70 | % | 19.14 | % | 16.34 | % | 18.48 | % | ||||||||||||||||||||||
15
| 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 | ||||||||||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||||||||||||||
| (dollars in thousands, except per share data) | 2023 | 2023 | 2022 | 2022 | 2022 | |||||||||||||||||||||||||||
| Shareholders' Equity to Tangible Common Equity | ||||||||||||||||||||||||||||||||
| Total shareholders' equity—GAAP | $ | 776,821 | $ | 775,643 | $ | 758,574 | $ | 739,279 | $ | 636,188 | ||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Preferred Stock | (110,548) | (110,548) | (110,548) | (110,548) | — | |||||||||||||||||||||||||||
| Goodwill | (161,904) | (161,904) | (161,904) | (161,904) | (161,904) | |||||||||||||||||||||||||||
| Other intangible assets, net | (18,367) | (19,575) | (20,866) | (22,198) | (23,559) | |||||||||||||||||||||||||||
| Tangible common equity | $ | 486,002 | $ | 483,616 | $ | 465,256 | $ | 444,629 | $ | 450,725 | ||||||||||||||||||||||
| Less: Accumulated other comprehensive income (AOCI) | (84,719) | (77,797) | (83,797) | (78,383) | (53,097) | |||||||||||||||||||||||||||
| Tangible common equity excluding AOCI | 570,721 | 561,413 | 549,053 | 523,012 | 503,822 | |||||||||||||||||||||||||||
| Total Assets to Tangible Assets: | ||||||||||||||||||||||||||||||||
| Total assets—GAAP | $ | 8,034,721 | $ | 7,930,174 | $ | 7,855,501 | $ | 7,821,877 | $ | 7,435,812 | ||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||
| Goodwill | (161,904) | (161,904) | (161,904) | (161,904) | (161,904) | |||||||||||||||||||||||||||
| Other intangible assets, net | (18,367) | (19,575) | (20,866) | (22,198) | (23,559) | |||||||||||||||||||||||||||
| Tangible assets | $ | 7,854,450 | $ | 7,748,695 | $ | 7,672,731 | $ | 7,637,775 | $ | 7,250,349 | ||||||||||||||||||||||
| Common Shares Outstanding | 21,854,800 | 22,111,454 | 22,214,913 | 22,074,740 | 22,060,255 | |||||||||||||||||||||||||||
| Tangible Common Equity to Tangible Assets | 6.19 | % | 6.24 | % | 6.06 | % | 5.82 | % | 6.22 | % | ||||||||||||||||||||||
| Tangible Book Value Per Share | $ | 22.24 | $ | 21.87 | $ | 20.94 | $ | 20.14 | $ | 20.43 | ||||||||||||||||||||||
| Tangible Book Value Per Share excluding AOCI | $ | 26.11 | $ | 25.39 | $ | 24.72 | $ | 23.69 | $ | 22.84 | ||||||||||||||||||||||
16
1 Midland States Bancorp, Inc. NASDAQ: MSBI Second 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.
33 Company Snapshot • Illinois state-chartered community bank founded in 1881 • $8.0 billion in assets • $3.6 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 Financial Highlights as of 6/30/2023 $8.0 Billion Total Assets $6.4 Billion Total Loans $6.4 Billion Total Deposits $3.6 Billion Assets Under Administration YTD ROAA: 1.10 % YTD Return on TCE(1): 16.34 % TCE/TA: 6.19 % YTD PTPP(1) ROAA: 1.72 % Dividend Yield: 6.03 % Price/Tangible Book: 0.90x Price/LTM EPS: 4.9x Notes: (1) Represents a non-GAAP financial measure. See “Non-GAAP Reconciliation” in the appendix.
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 employees 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 $8.0 Selected Acquisitions 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2Q 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 $22.24 $17.22 $17.09 $18.34 $18.80 $21.42 $24.72 $26.11 Tangible Book Value Per Share TBV/Share ex. AOCI 2017 2018 2019 2020 2021 2022 2Q 2023 TBV/Share ex. AOCI CAGR: 7.9% Dividends Declared Per Share $0.80 $0.88 $0.97 $1.07 $1.12 $1.16 $1.20 2017 2018 2019 2020 2021 2022 2Q 2023 (annualized) CAGR: 7.0% 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% 16.60% 2017 2018 2019 2020 2021 2022 YTD 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 2Q23 Strong Financial Performance Stable Deposit Base Continued Shift of Portfolio Towards Commercial Loans Increase in TBV and Capital Ratios 8 • Net income available to common shareholders of $19.3 million, or $0.86 diluted EPS • Pre-tax, pre-provision earnings(1) increased 8% from prior quarter to $34.9 million • ROAA of 1.09% and ROTCE of 15.99% • Total deposits up slightly from end of prior quarter • Uninsured deposits comprise 19% of total deposits • Deposit mix reflects continued trend of customers shifting a portion of deposit balances into higher yielding accounts • New loan production focused on full banking relationships with commercial clients that provide both loans and deposits • Total loans up slightly from end of prior quarter, reflecting the more selective approach to new loan production • Growth in commercial loans offset decline in consumer loans resulting from decline in loans originated through GreenSky partnership • Tangible book value per share increased 2% from end of prior quarter • Strong financial performance and prudent balance sheet management resulted in increase in most capital ratios • CET1 ratio increased 19bps to 8.03% at the end of the current quarter Notes: (1) Represents a non-GAAP financial measure. See “Non-GAAP Reconciliation” in the appendix.
9 Loan Portfolio 9 • Total loans increased $13.1 million from prior quarter to $6.37 billion • Growth primarily driven by increases in commercial loans and leases and construction and land development loans, partially offset by decline in consumer loans resulting from planned reduction of loans originated through GreenSky partnership • Growth in construction portfolio driven by fundings on existing lines, primarily for multifamily projects • Equipment finance balances decreased $27.1 million, or 2% from end of prior quarter • Expect continued decreases in the consumer portfolio as GreenSky originations slow and program officially ends in October 2023 Loan Portfolio Mix (in millions, as of quarter-end) 2Q 2023 1Q 2023 2Q 2022 Commercial loans and leases $ 2,108 $ 2,090 $ 1,830 Commercial real estate 2,444 2,448 2,336 Construction and land development 367 327 204 Residential real estate 371 370 340 Consumer 1,077 1,119 1,085 Total Loans $ 6,367 $ 6,354 $ 5,796 Total Loans ex. Commercial FHA Lines and PPP $ 6,337 $ 6,344 $ 5,765 $5,796 $6,198 $6,306 $6,354 $6,367 4.49% 4.83% 5.26% 5.65% 5.80% Total Loans Average Loan Yield 2Q 2022 3Q 2022 4Q 2022 1Q 2023 2Q 2023 Total Loans and Average Loan Yield (in millions, as of quarter-end)
10 Total Deposits 10 • Total deposits increased $1.3 million from end of prior quarter • 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 • Increase in brokered CDs replaced other higher cost fundings Deposit Mix (in millions, as of quarter-end) 2Q 2023 1Q 2023 2Q 2022 Noninterest-bearing demand $ 1,163 $ 1,216 $ 1,403 Interest-bearing: Checking $ 2,500 $ 2,503 $ 2,378 Money market $ 1,226 $ 1,264 $ 1,028 Savings $ 624 $ 637 $ 740 Time $ 841 $ 767 $ 620 Brokered time $ 73 $ 39 $ 15 Total Deposits $ 6,427 $ 6,425 $ 6,184 $6,184 $6,395 $6,365 $6,425 $6,427 0.25% 0.65% 1.23% 1.70% 2.09% Total Deposits Cost of Deposits 2Q 2022 3Q 2022 4Q 2022 1Q 2023 2Q 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 $6,427 Non Int Bearing Demand Interest Bearing Checking Money Market Savings Time Brokered Time 2018 2019 2020 2021 2022 2Q 2023 11% CAG R
12 Deposit Summary as of June 30, 2023 12 Deposits by Channel (in millions) Commercial Deposits by NAICS Code (in millions) 8.1% 14.0% 5.2% 10.1% 1.3% 7.9% 1.3%4.4%4.6% 3.5% 4.2% 1.3% 3.0% 18.8% 9.4% 2.9% Finance & Insurance RE, Rental & Leasing Manufacturing Other Services Skilled/Memory Care Construction Admin, Support, Waste Mgmt & Remediation Retail Trade Agriculture, Forestry, Fishing & Hunting Wholesale Trade Professional, Scientific & Tech Services Gasoline Station & C Stores Accom & Food NAICS code unavailable All Other Health Care All Other category made up of over 155 NAICS with Golf Courses being the largest at $4 million $6.43 billion $0.95 billion $2,780 43.3% $950 14.8% $1,029 16.0% $317 4.9% $270 4.2% $600 9.3% $481 7.5% Retail Deposits Commercial Deposits Servicing Deposits Public Funds Brokered Deposits ICS Reciprocal Other
13 Uninsured Deposits 13 Average Deposit Balance per Account = $33,000 *Excludes $569 million and $645 million, respectively, of fully insured funds in Insured Cash Sweep (ICS) accounts Uninsured Deposits (in millions) June 30, 2023 March 31, 2023 Call Report Uninsured Estimate* $ 1,654 $ 1,793 Call Report Estimated Uninsured Deposits to Total Deposits 26 % 28 % Less: Affiliate Deposits (MSB owned funds) (30) (32) Less: Additional structured FDIC coverage (50) (56) Less: Collateralized Deposits (363) (384) Estimated uninsured deposits excluding items above $ 1,211 $ 1,321 Estimated Uninsured Deposits to Total Deposits 19 % 21 % Total Deposits $ 6,427 $ 6,425
14 Investment Portfolio As of June 30, 2023 14 Fair Value of Investments by Type 4.8% 8.3% 61.0% 7.5% 6.5% 2.6% 9.3% Treasuries US GSE & US Agency MBS - agency MBS - non agency State & Muni CLOs Corporate • All Investments are classified as Available for Sale • Average T/E Yield is 3.39% • Average Duration is 5.46 years • Purchased $109 million with T/E Yield of 5.53%, Sold $15.5 million with T/E Yield of 1.71% in 2Q23 Investments by Yield and DurationInvestment Mix & Unrealized Gain (Loss) (in millions) Fair Value Book Value Unrealized Gain (Loss) Treasuries $ 43 $ 47 $ (4) US GSE & US Agency 73 78 (5) MBS - agency 539 612 (73) MBS - non agency 66 70 (4) State & Municipal 57 64 (7) CLOs 23 23 — Corporate 82 95 (13) Total Investments $ 883 $ 989 $ (106) 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% $883 million
15 Liquidity Overview 15 Liquidity Sources (in millions) June 30, 2023 March 31, 2023 Cash and Cash Equivalents $ 160.7 $ 138.3 Unpledged Securities 343.5 310.3 FHLB Committed Liquidity 857.2 932.8 FRB Discount Window Availability 184.1 207.7 Total Estimated Liquidity $ 1,545.5 $ 1,589.1 Conditional Funding Based on Market Conditions Additional Credit Facility $ 330.0 $ 250.0 Brokered CDs (additional capacity) $ 400.0 $ 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 16 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 57 bps to 8.01% in June 2023 from 7.44% in March 2023 • Net interest margin expected to stabilize as the pace of Fed rate increases slow, loan portfolio continues to reprice, and the impact of repositioning in the investment portfolio is realized Net Interest Income (in millions) Net Interest Margin $61.3 $64.0 $63.6 $60.5 $58.8$0.6 $0.5 $0.3 $0.3 $0.4 NII Accretion Income 2Q 2022 3Q 2022 4Q 2022 1Q 2023 2Q 2023 3.65% 3.63% 3.50% 3.39% 3.23% 0.03% 0.03% 0.02% 0.02% 0.02% NIM Accretion Income 2Q 2022 3Q 2022 4Q 2022 1Q 2023 2Q 2023
17 Wealth Management 17 • Assets under administration up slightly in 2Q23 • 1Q23 increase in Wealth Management fees included seasonal tax preparation fees • Increase in AUA resulted in slight increase in Wealth Management revenue compared to the prior quarter excluding the seasonal tax preparation fees Assets Under Administration (in millions) Wealth Management Revenue (in millions) $3,503 $3,355 $3,505 $3,503 $3,595 2Q 2022 3Q 2022 4Q 2022 1Q 2023 2Q 2023 $6.14 $6.20 $6.23 $6.41 $6.27 2Q 2022 3Q 2022 4Q 2022 1Q 2023 2Q 2023
18 Noninterest Income 18 • Noninterest income increased $3.0 million from prior quarter primarily due to gains on the redemption of subordinated debt and sales of other real estate owned • 2Q23 noninterest income included $0.9 million loss on sale of investment securities as part of repositioning of portfolio that will positively impact net interest margin, liquidity, and capital allocations • Projecting $0.6 million of commercial MSR amortization per quarter going forward Noninterest Income (in millions) $14.6 $15.8 $33.8 $15.8 $18.8 Wealth Management Interchange Service Charges on Deposits Residential Mortgage All Other 2Q 2022 3Q 2022 4Q 2022 1Q 2023 2Q 2023
19 Noninterest Expense and Operating Efficiency 19 Noninterest Expense and Efficiency Ratio (1) (Noninterest expense in millions) $43.5 $44.5 $42.9 $41.3 $49.9 $0.3 $3.3 53.1% 54.3% 58.3% 57.6% 55.0% Total Noninterest Expense Adjustments to Noninterest Expense Efficiency Ratio 2Q 2022 3Q 2022 4Q 2022 1Q 2023 2Q 2023 • Efficiency Ratio (1) was 55.0% in 2Q 2023 vs. 57.6% in 1Q 2023 • Noninterest expense decreased primarily due to: ◦ Decreased commissions and incentive compensation expenses partially offset by annual salary increases ◦ Decreased occupancy and equipment primarily due to elevated seasonal related expenses incurred in 1Q23 • Near-term operating expense run- rate expected to be $43.5 - $44.5 million Notes: (1) Represents a non-GAAP financial measure. See “Non-GAAP Reconciliation” in the appendix.
20 Asset Quality 20 • Nonperforming loans increased $4.1 million primarily due to one commercial loan as well as increases in the equipment finance portfolio • Delinquencies in consumer portfolio remain low • Net charge-offs to average loans was 0.19% • Provision for credit losses on loans of $5.9 million, primarily related to changes in the portfolio mix and increases to specific reserves • Sale of two OREO properties resulted in decrease of nonperforming assets Nonperforming Loans / Total Loans (Total Loans as of quarter-end) NCO / Average Loans 0.98% 0.76% 0.78% 0.80% 0.86% 2Q 2022 3Q 2022 4Q 2022 1Q 2023 2Q 2023 0.20% 0.21% 0.03% 0.14% 0.19% 2Q 2022 3Q 2022 4Q 2022 1Q 2023 2Q 2023
21 Changes in Allowance for Credit Losses 21 ($ 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$62,067 $1,720 $810 $353 $64,950 ACL March 31, 2023 Specific Reserves Portfolio Changes Economic Factors ACL June 30, 2023
22 ACL by Portfolio 22 ($ in thousands) June 30, 2023 March 31, 2023 Portfolio Loans ACL % of Total Loans Loans ACL % of Total Loans Commercial $ 875,295 $ 5,180 0.59 % $ 823,847 $ 5,365 0.65 % Warehouse Lines 30,522 — — % 10,275 — — % Commercial Other 732,616 10,110 1.38 % 756,553 10,397 1.37 % Equipment Finance Loans 614,633 9,743 1.59 % 632,205 9,997 1.58 % Equipment Finance Leases 500,485 7,542 1.51 % 510,029 7,168 1.41 % CRE non-owner occupied 1,647,680 20,544 1.25 % 1,636,316 18,049 1.10 % CRE owner occupied 453,514 5,711 1.26 % 460,133 6,945 1.51 % Multi-family 273,939 2,676 0.98 % 281,559 2,730 0.97 % Farmland 68,862 494 0.72 % 70,150 492 0.70 % Construction and Land Development 366,631 3,189 0.87 % 326,836 2,442 0.75 % Residential RE First Lien 311,796 4,952 1.59 % 309,637 3,773 1.22 % Other Residential 59,690 599 1.00 % 60,273 577 0.96 % Consumer 108,619 804 0.74 % 112,882 1,074 0.95 % Consumer Other(1) 968,217 3,149 0.33 % 1,006,056 3,055 0.30 % Total Loans 6,367,344 64,950 1.02 % 6,354,271 62,067 0.98 % Loans (excluding BaaS portfolio(1) and warehouse lines) 5,276,170 61,436 1.16 % 5,228,172 58,643 1.12 % 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 in the consumer portfolio will continue to be utilized to fund new commercial loan production, add to the securities portfolio and pay off higher cost funding sources with net impact likely being earnings neutral, but capital accretive • Planned sale of commercial MSR portfolio has been terminated and this business will continue to provide a low-cost source of deposits • 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 that are expected to start making a contribution during the second half of 2023 • 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 $4.92 billion as of 6/30/2023 ($s in millions) RE/Rental & Leasing $1,497.8 30.4% All Others $627.4 12.8% Skilled Nursing $485.0 9.9% Construction - General $345.2 7.0% Manufacturing $253.6 5.2% Finance and Insurance $290.9 5.9% Accommodation & Food Svcs $233.0 4.7% Trans./Ground Passenger $218.6 4.4% Assisted Living $133.1 2.7% Ag., Forestry, & Fishing $148.6 3.0% General Freight Trucking $240.6 4.9% Retail Trade $172.6 3.5% Wholesale Trade $98.3 2.0% Other Services $100.3 2.0% Commercial Loans and Leases by Industry Health Care $74.0 1.5%
26 Commercial Real Estate Portfolio by Collateral Type 26 CRE Concentration (as of June 30, 2023) CRE as a % of Total Loans 38.4% CRE as a % of Total Risk-Based Capital (1) 262.7% 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 $2.81 billion as of June 30, 2023 ($s in millions) Skilled Nursing $498.2 17.7% Retail $438.5 15.6% Multi-Family $451.7 16.1% Industrial/Warehouse $213.9 7.6% Assisted Living $161.4 5.7% Hotel/Motel $166.3 5.9% All Other $185.0 6.6% Office $153.2 5.5% Farmland $67.8 2.4% Residential 1-4 Family $85.9 3.1% Raw Land $17.1 0.6% Restaurant $38.7 1.4% Mixed Use/Other $70.6 2.5% Medical Building $110.3 3.9% Special Purpose $83.5 3.0% C-Store/Gas Station $68.5 2.4%
27 Capital Ratios and Strategy 27 • Capital initiatives increased CET1 to 8.03% from 7.77% at 12/31/22 with limited buybacks below TBV • 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 June 30, 2023) 6.19% 8.03% 9.57% 10.47% 12.65% 11.01% 10.07% 11.01% 11.89% 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 - non-GAAP 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 June 30, March 31, December 31, September 30, June 30, (dollars in thousands, except per share data) 2023 2023 2022 2022 2022 Income before income taxes - GAAP $ 28,820 $ 28,666 $ 43,902 $ 29,380 $ 29,167 Adjustments to noninterest income: Loss on sales of investment securities, net 869 648 — 129 101 (Gain) on termination of hedged interest rate swaps — — (17,531) — — (Gain) on repurchase of subordinated debt (676) — — — — Total adjustments to noninterest income 193 648 (17,531) 129 101 Adjustments to noninterest expense: (Loss) on mortgage servicing rights held for sale — — (3,250) — — Integration and acquisition expenses — — — 68 (324) Total adjustments to noninterest expense — — (3,250) 68 (324) Adjusted earnings pre tax - non-GAAP 29,013 29,314 29,621 29,441 29,592 Adjusted earnings tax 7,297 7,069 7,174 5,873 7,401 Adjusted earnings - non-GAAP 21,716 22,245 22,447 23,568 22,191 Preferred stock dividends 2,228 2,228 — — — Adjusted earnings available to common shareholders $ 19,488 $ 20,017 $ 22,447 $ 23,568 $ 22,191 Adjusted diluted earnings per common share $ 0.87 $ 0.88 $ 0.85 $ 1.04 $ 0.98 Adjusted return on average assets 1.10 % 1.15 % 1.13 % 1.22 % 1.21 % Adjusted return on average shareholders' equity 11.21 % 11.76 % 11.89 % 13.34 % 13.84 % Adjusted return on average tangible common equity 16.10 % 17.11 % 16.80 % 20.24 % 19.41 % Adjusted Pre-Tax, Pre-Provision Earnings Reconciliation For the Quarter Ended June 30, March 31, December 31, September 30, June 30, (dollars in thousands) 2023 2023 2022 2022 2022 Adjusted earnings pre tax - non-GAAP $ 29,013 $ 29,314 $ 29,621 $ 29,441 $ 29,592 Provision for credit losses 5,879 3,135 3,544 6,974 5,441 Impairment on commercial mortgage servicing rights — — — — 869 Adjusted pre-tax, pre-provision earnings - non-GAAP $ 34,892 $ 32,449 $ 33,165 $ 36,415 $ 35,902 Adjusted pre-tax, pre-provision return on average assets 1.76 % 1.67 % 1.68 % 1.89 % 1.95 %
3131 MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued) Efficiency Ratio Reconciliation For the Quarter Ended June 30, March 31, December 31, September 30, June 30, 2023 2023 2022 2022 2022 (dollars in thousands) Noninterest expense - GAAP $ 42,894 $ 44,482 $ 49,943 $ 43,496 $ 41,339 Loss on mortgage servicing rights held for sale — — (3,250) — — Integration and acquisition expenses — — — 68 (324) Adjusted noninterest expense $ 42,894 $ 44,482 $ 46,693 $ 43,564 $ 41,015 Net interest income - GAAP $ 58,840 $ 60,504 $ 63,550 $ 64,024 $ 61,334 Effect of tax-exempt income 195 244 286 307 321 Adjusted net interest income 59,035 60,748 63,836 64,331 61,655 Noninterest income - GAAP 18,753 15,779 33,839 15,826 14,613 Impairment on commercial mortgage servicing rights — — — — 869 Loss on sales of investment securities, net 869 648 — 129 101 (Gain) on termination of hedged interest rate swaps — — (17,531) — — (Gain) on repurchase of subordinated debt (676) — — — — Adjusted noninterest income 18,946 16,427 16,308 15,955 15,583 Adjusted total revenue $ 77,980 $ 77,175 $ 80,144 $ 80,286 $ 77,238 Efficiency ratio 55.01 % 57.64 % 58.26 % 54.26 % 53.10 %
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 June 30, March 31, December 31, September 30, June 30, (dollars in thousands, except per share data) 2023 2023 2022 2022 2022 Shareholders' Equity to Tangible Common Equity Total shareholders' equity—GAAP $ 776,821 $ 775,643 $ 758,574 $ 739,279 $ 636,188 Adjustments: Preferred Stock (110,548) (110,548) (110,548) (110,548) — Goodwill (161,904) (161,904) (161,904) (161,904) (161,904) Other intangible assets, net (18,367) (19,575) (20,866) (22,198) (23,559) Tangible common equity $ 486,002 $ 483,616 $ 465,256 $ 444,629 $ 450,725 Less: Accumulated other comprehensive income (AOCI) (77,797) (77,797) (83,797) (78,383) (53,097) Tangible common equity excluding AOCI $ 563,799 $ 561,413 $ 549,053 $ 523,012 $ 503,822 Total Assets to Tangible Assets: Total assets—GAAP $ 8,034,721 $ 7,930,174 $ 7,855,501 $ 7,821,877 $ 7,435,812 Adjustments: Goodwill (161,904) (161,904) (161,904) (161,904) (161,904) Other intangible assets, net (18,367) (19,575) (20,866) (22,198) (23,559) Tangible assets $ 7,854,450 $ 7,748,695 $ 7,672,731 $ 7,637,775 $ 7,250,349 Common Shares Outstanding 21,854,800 22,111,454 22,214,913 22,074,740 22,060,255 Tangible Common Equity to Tangible Assets 6.19 % 6.24 % 6.06 % 5.82 % 6.22 % Tangible Book Value Per Share $ 22.24 $ 21.87 $ 20.94 $ 20.14 $ 20.43 Tangible Book Value Per Share excluding AOCI $ 26.11 $ 25.39 $ 24.72 $ 23.69 $ 22.84 Return on Average Tangible Common Equity (ROATCE) For the Quarter Ended June 30, March 31, December 31, September 30, June 30, (dollars in thousands) 2023 2023 2022 2022 2022 Net income available to common shareholders $ 19,347 $ 19,544 $ 29,703 $ 23,521 $ 21,883 Average total shareholders' equity—GAAP $ 776,791 $ 767,186 $ 749,183 $ 700,866 $ 643,004 Adjustments: Preferred Stock (110,548) (110,548) (110,548) (54,072) — Goodwill (161,904) (161,904) (161,904) (161,904) (161,904) Other intangible assets, net (18,937) (20,184) (21,504) (22,589) (22,570) Average tangible common equity $ 485,402 $ 474,550 $ 455,227 $ 462,301 $ 458,530 ROATCE 15.99 % 16.70 % 25.89 % 20.20 % 19.14 %