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Midland States Bancorp, Inc. Announces 2023 Third Quarter Results
ソース: Nasdaq GlobeNewswire / 26 10 2023 16:30:01 America/New_York
Third Quarter 2023 Highlights:
- Net income available to common shareholders of $15.8 million, or $0.71 per diluted share
- Adjusted earnings per diluted share of $0.78 reflects impact of balance sheet repositioning that is expected to be accretive to earnings prospectively
- Common equity tier 1 capital ratio improved to 8.16%
- Efficiency ratio of 55.8% compared to 55.0% in prior quarter
EFFINGHAM, Ill., Oct. 26, 2023 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (Nasdaq: MSBI) (the “Company”) today reported net income available to common shareholders of $15.8 million, or $0.71 per diluted share, for the third quarter of 2023, compared to $19.3 million, or $0.86 per diluted share, for the second quarter of 2023. This also compares to net income available to common shareholders of $23.5 million, or $1.04 per diluted share, for the third quarter of 2022.
Financial results for the third quarter of 2023 included a one-time enhancement fee of $6.6 million related to the surrender and purchase of company-owned life insurance, a $4.5 million tax charge related to the surrender, and $5.0 million of losses on the sale of investment securities. Excluding these transactions, adjusted earnings available to common shareholders were $17.3 million, or $0.78 per diluted share.
Jeffrey G. Ludwig, President and Chief Executive Officer of the Company, said, “We delivered another quarter of strong financial results highlighted by good stability in our deposit base, net interest margin, and asset quality, as well as disciplined expense control that resulted in a decline in our non-interest expense from the prior quarter. Due to our strong financial performance and prudent balance sheet management, we had increases in all of our regulatory capital ratios, while also continuing to repurchase our common stock at below tangible book value, which we believe is in the best long-term interests of shareholders.
“While continuing to prioritize prudent risk management and maintaining disciplined expense control, we will continue to be active in our new business development efforts with a focus on adding new core deposit relationships with both retail and commercial customers. We also continue to invest in initiatives that we believe will enhance the long-term value of the franchise, including our Banking-as-a-Service platform with two new partnerships launching in the fourth quarter that will contribute low-cost deposits and generate fee income. We expect the Banking-as-a-Service initiative to begin making a meaningful contribution during 2024, which, along with our continued progress on adding new clients in our markets, should support profitable growth in the future, improve our level of returns, and create additional value for our shareholders,” said Mr. Ludwig.
Balance Sheet Highlights
Total assets were $7.98 billion at September 30, 2023, compared to $8.03 billion at June 30, 2023, and $7.82 billion at September 30, 2022. At September 30, 2023, portfolio loans were $6.28 billion, compared to $6.37 billion as of June 30, 2023, and $6.20 billion as of September 30, 2022.
Loans
During the third quarter of 2023, outstanding loans declined slightly as the Company continued to originate loans in a more selective and deliberate approach to balance liquidity and funding costs. Increases in construction and land development loans, commercial FHA warehouse lines, and residential real estate loans of $50.2 million, $18.0 million, and $3.7 million, respectively, were offset by decreases in all other loan categories. Consumer loans decreased $56.8 million due to loan payoffs and a decrease in loans originated through GreenSky.
As of September 30, June 30, March 31, December 31, September 30, (in thousands) 2023 2023 2023 2022 2022 Loan Portfolio Commercial loans $ 943,761 $ 962,756 $ 937,920 $ 872,794 $ 907,651 Equipment finance loans 578,931 614,633 632,205 616,751 577,323 Equipment finance leases 485,460 500,485 510,029 491,744 457,611 Commercial FHA warehouse lines 48,547 30,522 10,275 25,029 51,309 Total commercial loans and leases 2,056,699 2,108,396 2,090,429 2,006,318 1,993,894 Commercial real estate 2,412,164 2,443,995 2,448,158 2,433,159 2,466,303 Construction and land development 416,801 366,631 326,836 320,882 225,549 Residential real estate 375,211 371,486 369,910 366,094 356,225 Consumer 1,020,008 1,076,836 1,118,938 1,180,014 1,156,480 Total loans $ 6,280,883 $ 6,367,344 $ 6,354,271 $ 6,306,467 $ 6,198,451 Loan Quality
Credit quality metrics remained steady during the third quarter of 2023. Loans 30-89 days past due totaled $46.6 million as of September 30, 2023, compared to $44.2 million as of June 30, 2023. Non-performing loans were $56.0 million at September 30, 2023, compared to $54.8 million as of June 30, 2023, and non-performing assets were 0.74% of total assets at the end of the third quarter of 2023, compared to 0.72% at June 30, 2023.
At September 30, 2022, loans 30-89 days past due totaled $28.3 million, non-performing loans were $46.9 million, and non-performing assets as a percentage of total assets were 0.76%.
As of and for the Three Months Ended (in thousands) September 30, June 30, March 31, December 31, September 30, 2023 2023 2023 2022 2022 Asset Quality Loans 30-89 days past due $ 46,608 $ 44,161 $ 30,895 $ 32,372 $ 28,275 Nonperforming loans 55,981 54,844 50,713 49,423 46,882 Nonperforming assets 58,677 57,688 58,806 57,824 59,524 Substandard loans 143,793 130,707 99,819 101,044 98,517 Net charge-offs 3,449 2,996 2,119 538 3,233 Loans 30-89 days past due to total loans 0.74 % 0.69 % 0.49 % 0.51 % 0.46 % Nonperforming loans to total loans 0.89 % 0.86 % 0.80 % 0.78 % 0.76 % Nonperforming assets to total assets 0.74 % 0.72 % 0.74 % 0.74 % 0.76 % Allowance for credit losses to total loans 1.06 % 1.02 % 0.98 % 0.97 % 0.95 % Allowance for credit losses to nonperforming loans 119.09 % 118.43 % 122.39 % 123.53 % 125.08 % Net charge-offs to average loans 0.22 % 0.19 % 0.14 % 0.03 % 0.21 % The Company continued to increase its allowance for credit losses on loans due to increased delinquencies and losses within our equipment finance portfolio. The allowance totaled $66.7 million at September 30, 2023, compared to $65.0 million at June 30, 2023, and $58.6 million at September 30, 2022. The allowance as a percentage of portfolio loans was 1.06% at September 30, 2023, compared to 1.02% at June 30, 2023, and 0.95% at September 30, 2022.
Deposits
Total deposits were $6.41 billion at September 30, 2023, compared with $6.43 billion at June 30, 2023 and $6.40 billion at September 30, 2022. The deposit mix continues to shift from noninterest-bearing deposits to interest-bearing deposits due to the recent rate increases announced by the Federal Reserve and the expectation that rates will remain high for a longer period.
As of September 30, June 30, March 31, December 31, September 30, (in thousands) 2023 2023 2023 2022 2022 Deposit Portfolio Noninterest-bearing demand $ 1,154,515 $ 1,162,909 $ 1,215,758 $ 1,362,158 $ 1,362,481 Interest-bearing: Checking 2,572,224 2,499,693 2,502,827 2,494,073 2,568,195 Money market 1,090,962 1,226,470 1,263,813 1,184,101 1,125,333 Savings 582,359 624,005 636,832 661,932 704,245 Time 885,858 840,734 766,884 649,552 620,960 Brokered time 119,084 72,737 39,087 12,836 14,038 Total deposits $ 6,405,002 $ 6,426,548 $ 6,425,201 $ 6,364,652 $ 6,395,252 The Company estimates that uninsured deposits(1) totaled $1.28 billion, or 20% of total deposits, at September 30, 2023 compared to $1.21 billion, or 19%, at June 30, 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.
Results of Operations Highlights
Net Interest Income and Margin
During the third quarter of 2023, net interest income, on a tax-equivalent basis, totaled $58.8 million, a decrease of $0.2 million, or 0.4%, compared to $59.0 million for the second quarter of 2023. The tax-equivalent net interest margin for the third quarter of 2023 was 3.20%, compared with 3.23% in the second quarter of 2023. Net interest income and related margin, on a tax-equivalent basis, was $64.3 million and 3.63%, respectively, in the third 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 yield on earning assets.
Average interest-earning assets for the third quarter of 2023 were $7.28 billion, compared to $7.33 billion for the second quarter of 2023. The yield increased 14 basis points to 5.65% compared to the second quarter of 2023. Interest-earning assets averaged $7.03 billion for the third quarter of 2022.
Average loans were $6.30 billion for the third quarter of 2023, compared to $6.36 billion for the second quarter of 2023 and $6.04 billion for the third quarter of 2022. The yield on loans was 5.93% and 5.80% for the third and second quarters of 2023, respectively.
Investment securities averaged $863.0 million for the third quarter of 2023, and yielded 3.60%, compared to an average balance and yield of $861.4 million and 3.39%, respectively, for the second quarter of 2023. The Company purchased additional investments and repositioned out of lower-yielding securities in favor of higher-yielding instruments resulting in the increased average balance and yield. The Company incurred net losses on sales of $5.0 million in the third quarter of 2023. The repositioning is expected to improve the overall margin, liquidity, and capital allocations. Investment securities averaged $749.0 million for the third quarter of 2022.
Average interest-bearing deposits were $5.35 billion for the third quarter of 2023, compared to $5.26 billion for the second quarter of 2023, and $4.92 billion for the third quarter of 2022. Cost of interest-bearing deposits was 2.80% in the third quarter of 2023, which represents a 24 basis point increase from the second quarter of 2023. A competitive market, driven by rising interest rates and increased competition, were contributing factors to the increase in deposit costs.
For the Three Months Ended September 30, June 30, September 30, (dollars in thousands) 2023 2023 2022 Interest-earning assets Average
BalanceInterest &
FeesYield/
RateAverage
BalanceInterest &
FeesYield/
RateAverage
BalanceInterest &
FeesYield/
RateCash and cash equivalents $ 78,391 $ 1,036 5.24 % $ 67,377 $ 852 5.07 % $ 195,657 $ 1,125 2.28 % Investment securities 862,998 7,822 3.60 861,409 7,286 3.39 749,022 4,560 2.44 Loans 6,297,568 94,118 5.93 6,356,012 91,890 5.80 6,040,358 73,568 4.83 Loans held for sale 6,078 104 6.80 4,067 59 5.79 6,044 60 3.87 Nonmarketable equity securities 39,347 710 7.16 45,028 599 5.33 37,765 550 5.78 Total interest-earning assets $ 7,284,382 $ 103,790 5.65 % $ 7,333,893 $ 100,686 5.51 % $ 7,028,846 $ 79,863 4.51 % Noninterest-earning assets 622,969 612,238 618,138 Total assets $ 7,907,351 $ 7,946,131 $ 7,646,984 Interest-Bearing Liabilities Interest-bearing deposits $ 5,354,356 $ 37,769 2.80 % $ 5,259,188 $ 33,617 2.56 % $ 4,922,345 $ 10,249 0.83 % Short-term borrowings 20,127 14 0.28 22,018 14 0.26 58,271 28 0.19 FHLB advances & other borrowings 402,500 4,557 4.49 471,989 5,396 4.59 340,163 2,424 2.83 Subordinated debt 93,441 1,280 5.43 97,278 1,335 5.51 139,324 2,010 5.77 Trust preferred debentures 50,379 1,369 10.78 50,218 1,289 10.29 49,751 821 6.54 Total interest-bearing liabilities $ 5,920,803 $ 44,989 3.01 % $ 5,900,691 $ 41,651 2.83 % $ 5,509,854 $ 15,532 1.12 % Noninterest-bearing deposits 1,116,988 1,187,584 1,372,626 Other noninterest-bearing liabilities 97,935 81,065 63,638 Shareholders’ equity 771,625 776,791 700,866 Total liabilities and shareholder’s equity $ 7,907,351 $ 7,946,131 $ 7,646,984 Net Interest Margin $ 58,801 3.20 % $ 59,035 3.23 % $ 64,331 3.63 % Cost of Deposits 2.32 % 2.09 % 0.65 % (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 September 30, 2023, June 30, 2023 and September 30, 2022, respectively.
During the nine months ended September 30, 2023, net interest income, on a tax-equivalent basis, decreased to $178.6 million, with a tax-equivalent net interest margin of 3.27%, compared to net interest income, on a tax-equivalent basis, of $183.2 million, and a tax-equivalent net interest margin of 3.60% for the nine months ended September 30, 2022.
The yield on earning assets increased 133 basis points to 5.50% for the nine months ended September 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 203 basis points to 2.77% for the nine months ended September 30, 2023.
For the Nine Months Ended September 30, September 30, (dollars in thousands) 2023 2022 Interest-earning assets Average
BalanceInterest &
FeesYield/
RateAverage
BalanceInterest &
FeesYield/
RateCash and cash equivalents $ 76,939 $ 2,868 4.98 % $ 268,111 $ 1,764 0.88 % Investment securities 844,946 21,103 3.33 820,328 14,453 2.35 Loans 6,324,578 274,005 5.79 5,666,874 194,442 4.59 Loans held for sale 3,900 179 6.14 15,629 357 3.05 Nonmarketable equity securities 44,034 2,104 6.39 36,832 1,521 5.52 Total interest-earning assets $ 7,294,397 $ 300,259 5.50 % $ 6,807,774 $ 212,537 4.17 % Noninterest-earning assets 615,383 621,510 Total assets $ 7,909,780 $ 7,429,284 Interest-Bearing Liabilities Interest-bearing deposits $ 5,223,852 $ 97,791 2.50 % $ 4,717,610 $ 16,220 0.46 % Short-term borrowings 26,865 53 0.26 62,495 73 0.16 FHLB advances & other borrowings 471,084 15,959 4.53 319,791 5,071 2.12 Subordinated debt 96,820 3,985 5.49 139,233 6,032 5.78 Trust preferred debentures 50,216 3,887 10.35 49,603 1,959 5.28 Total interest-bearing liabilities $ 5,868,837 $ 121,675 2.77 % $ 5,288,732 $ 29,355 0.74 % Noninterest-bearing deposits 1,184,410 1,402,900 Other noninterest-bearing liabilities 84,650 70,427 Shareholders’ equity 771,883 667,225 Total liabilities and shareholder’s equity $ 7,909,780 $ 7,429,284 Net Interest Margin $ 178,584 3.27 % $ 183,182 3.60 % Cost of Deposits 2.04 % 0.35 % (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 $0.6 million and $1.0 million for the nine months ended September 30, 2023 and 2022, respectively.
Noninterest Income
Noninterest income was $18.2 million for the third quarter of 2023, compared to $18.8 million for the second quarter of 2023. Noninterest income for the third quarter of 2023 included a one-time enhancement fee of $6.6 million related to the surrender and purchase of company-owned life insurance, partially offset by $5.0 million of losses on the sale of investment securities. 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. Excluding these transactions, noninterest income for the third quarter of 2023 and the second quarter of 2023 was $16.5 million and $18.2 million, respectively. Noninterest income for the third quarter of 2022 was $15.8 million and included $0.1 million loss on the sale of investment securities.
For the Three Months Ended For the Nine Months Ended September 30, June 30, September 30, September 30, September 30, (in thousands) 2023 2023 2022 2023 2022 Noninterest income Wealth management revenue $ 6,288 $ 6,269 $ 6,199 $ 18,968 $ 19,481 Residential mortgage banking revenue 507 540 210 1,452 1,193 Service charges on deposit accounts 3,149 2,849 2,783 8,744 7,544 Interchange revenue 3,609 3,696 3,531 10,717 10,401 Loss on sales of investment securities, net (4,961 ) (869 ) (129 ) (6,478 ) (230 ) Gain on repurchase of subordinated debt, net — 676 — 676 — Gain (loss) on sales of other real estate owned, net — 819 — 819 (131 ) Impairment on commercial mortgage servicing rights — — — — (1,263 ) Company-owned life insurance 7,558 891 929 9,325 2,788 Other income 2,035 3,882 2,303 8,494 6,269 Total noninterest income $ 18,185 $ 18,753 $ 15,826 $ 52,717 $ 46,052 Noninterest Expense
Noninterest expense was $42.0 million in the third quarter of 2023, compared to $42.9 million in the second quarter of 2023, and $43.5 million in the third quarter of 2022. The efficiency ratio was 55.82% for the quarter ended September 30, 2023, compared to 55.01% for the quarter ended June 30, 2023, and 54.26% for the quarter ended September 30, 2022.
For the Three Months Ended For the Nine Months Ended September 30, June 30, September 30, September 30, September 30, (in thousands) 2023 2023 2022 2023 2022 Noninterest expense Salaries and employee benefits $ 22,307 $ 22,857 $ 22,889 $ 69,407 $ 67,404 Occupancy and equipment 3,730 3,879 3,850 12,052 11,094 Data processing 6,468 6,544 6,093 19,323 18,048 Professional 1,554 1,663 1,693 4,977 5,181 Amortization of intangible assets 1,129 1,208 1,361 3,628 4,077 FDIC insurance 1,107 1,196 977 3,632 2,633 Other expense 5,743 5,547 6,633 16,395 17,282 Total noninterest expense $ 42,038 $ 42,894 $ 43,496 $ 129,414 $ 125,719 Salaries and employee benefits expenses were $22.3 million in the third quarter of 2023, compared to $22.9 million in both the second quarter of 2023 and the third quarter of 2022. Employees numbered 911 at September 30, 2023, compared to 915 at June 30, 2023, and 930 at September 30, 2022. The third quarter of 2023 included a decline in medical insurance expense of $0.7 million.
Income Tax Expense
Income tax expense was $11.5 million for the third quarter of 2023, as compared to $7.2 million for the second quarter of 2023 and $5.9 million for the third quarter of 2022. The resulting effective tax rates were 39.0%, 25.1% and 19.9% respectively. The third quarter of 2023 included tax charges of $4.5 million associated with the surrender of company-owned life insurance and $1.4 million related to the finalization of the 2022 federal and state tax returns. Exclusive of these items our effective tax rate is 25.1% for the third quarter of 2023.
Capital
At September 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 September 30, 2023 Midland States Bank Midland States
Bancorp, Inc.Minimum Regulatory
Requirements (2)Total capital to risk-weighted assets 12.13% 12.84% 10.50% Tier 1 capital to risk-weighted assets 11.21% 10.62% 8.50% Tier 1 leverage ratio 10.21% 9.67% 4.00% Common equity Tier 1 capital 11.21% 8.16% 7.00% Tangible common equity to tangible assets (1) N/A 6.09% 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 a $101.2 million accumulated other comprehensive loss at September 30, 2023, which impacts tangible book value by $4.68 per share.
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 third quarter of 2023, the Company repurchased 271,059 shares of its common stock at a weighted average price of $22.14 under its stock repurchase program. As of September 30, 2023, the Company had $10.1 million remaining under the current stock repurchase authorization.
About Midland States Bancorp, Inc.
Midland States Bancorp, Inc. is a community-based financial holding company headquartered in Effingham, Illinois, and is the sole shareholder of Midland States Bank. As of September 30, 2023, the Company had total assets of approximately $7.98 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.
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, the measures in this press release 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 failures of Silicon Valley Bank and Signature Bank, increased deposit volatility and potential regulatory developments; changes in the financial markets; changes in business plans as circumstances warrant; risks relating to acquisitions; 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) 342-7321MIDLAND STATES BANCORP, INC. CONSOLIDATED FINANCIAL SUMMARY (unaudited) (dollars in thousands, except per share data) As of and for the Three Months Ended As of and
for the Nine Months EndedSeptember 30, June 30, September 30, September 30, September 30, 2023 2023 2022 2023 2022 Earnings Summary Net interest income $ 58,596 $ 58,840 $ 64,024 $ 177,940 $ 182,185 Provision for credit losses 5,168 5,879 6,974 14,182 16,582 Noninterest income 18,185 18,753 15,826 52,717 46,052 Noninterest expense 42,038 42,894 43,496 129,414 125,719 Income before income taxes 29,575 28,820 29,380 87,061 85,936 Income taxes 11,533 7,245 5,859 25,672 19,783 Net income 18,042 21,575 23,521 61,389 66,153 Preferred dividends 2,229 2,228 — 6,685 — Net income available to common shareholders $ 15,813 $ 19,347 $ 23,521 $ 54,704 $ 66,153 Diluted earnings per common share $ 0.71 $ 0.86 $ 1.04 $ 2.43 $ 2.92 Weighted average common shares outstanding - diluted 21,977,196 22,205,079 22,390,438 22,223,986 22,367,095 Return on average assets 0.91 % 1.09 % 1.22 % 1.04 % 1.19 % Return on average shareholders' equity 9.28 % 11.14 % 13.31 % 10.63 % 13.26 % Return on average tangible common equity (1) 13.03 % 15.99 % 20.20 % 15.22 % 19.06 % Net interest margin 3.20 % 3.23 % 3.63 % 3.27 % 3.60 % Efficiency ratio (1) 55.82 % 55.01 % 54.26 % 56.15 % 54.34 % Adjusted Earnings Performance Summary (1) Adjusted earnings available to common shareholders $ 17,278 $ 19,488 $ 23,568 $ 56,783 $ 66,574 Adjusted diluted earnings per common share $ 0.78 $ 0.87 $ 1.04 $ 2.53 $ 2.94 Adjusted return on average assets 0.98 % 1.10 % 1.22 % 1.07 % 1.20 % Adjusted return on average shareholders' equity 10.03 % 11.21 % 13.34 % 10.99 % 13.34 % Adjusted return on average tangible common equity 14.24 % 16.10 % 20.24 % 15.80 % 19.18 % Adjusted pre-tax, pre-provision earnings $ 33,064 $ 34,892 $ 36,415 $ 100,405 $ 104,358 Adjusted pre-tax, pre-provision return on average assets 1.66 % 1.76 % 1.89 % 1.70 % 1.88 % Market Data Book value per share at period end $ 30.27 $ 30.49 $ 28.48 Tangible book value per share at period end (1) $ 21.98 $ 22.24 $ 20.14 Tangible book value per share excluding accumulated other comprehensive income at period end (1) $ 26.66 $ 26.11 $ 23.69 Market price at period end $ 20.54 $ 19.91 $ 23.57 Common shares outstanding at period end 21,594,546 21,854,800 22,074,740 Capital Total capital to risk-weighted assets 12.84 % 12.65 % 12.79 % Tier 1 capital to risk-weighted assets 10.62 % 10.47 % 10.05 % Tier 1 common capital to risk-weighted assets 8.16 % 8.03 % 7.56 % Tier 1 leverage ratio 9.67 % 9.57 % 9.40 % Tangible common equity to tangible assets (1) 6.09 % 6.19 % 5.82 % Wealth Management Trust assets under administration $ 3,501,225 $ 3,594,727 $ 3,355,019 (1) Non-GAAP financial measures. Refer to pages 14 - 16 for a reconciliation to the comparable GAAP financial measures.
MIDLAND STATES BANCORP, INC. CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) As of September 30, June 30, March 31, December 31, September 30, (in thousands) 2023 2023 2023 2022 2022 Assets Cash and cash equivalents $ 132,132 $ 160,695 $ 138,310 $ 160,631 $ 313,188 Investment securities 839,344 887,003 821,005 776,860 690,504 Loans 6,280,883 6,367,344 6,354,271 6,306,467 6,198,451 Allowance for credit losses on loans (66,669 ) (64,950 ) (62,067 ) (61,051 ) (58,639 ) Total loans, net 6,214,214 6,302,394 6,292,204 6,245,416 6,139,812 Loans held for sale 6,089 5,632 2,747 1,286 4,338 Premises and equipment, net 82,741 81,006 80,582 78,293 77,519 Other real estate owned 480 202 6,729 6,729 11,141 Loan servicing rights, at lower of cost or fair value 20,933 21,611 1,117 1,205 1,297 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 17,238 18,367 19,575 20,866 22,198 Company-owned life insurance 208,390 152,210 151,319 150,443 149,648 Other assets 292,460 243,697 233,937 231,123 226,333 Total assets $ 7,975,925 $ 8,034,721 $ 7,930,174 $ 7,855,501 $ 7,821,877 Liabilities and Shareholders' Equity Noninterest-bearing demand deposits $ 1,154,515 $ 1,162,909 $ 1,215,758 $ 1,362,158 $ 1,362,481 Interest-bearing deposits 5,250,487 5,263,639 5,209,443 5,002,494 5,032,771 Total deposits 6,405,002 6,426,548 6,425,201 6,364,652 6,395,252 Short-term borrowings 17,998 21,783 31,173 42,311 58,518 FHLB advances and other borrowings 538,000 575,000 482,000 460,000 360,000 Subordinated debt 93,475 93,404 99,849 99,772 139,370 Trust preferred debentures 50,457 50,296 50,135 49,975 49,824 Other liabilities 106,743 90,869 66,173 80,217 79,634 Total liabilities 7,211,675 7,257,900 7,154,531 7,096,927 7,082,598 Total shareholders’ equity 764,250 776,821 775,643 758,574 739,279 Total liabilities and shareholders’ equity $ 7,975,925 $ 8,034,721 $ 7,930,174 $ 7,855,501 $ 7,821,877 MIDLAND STATES BANCORP, INC. CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) For the Three Months Ended For the Nine Months Ended September 30, June 30, September 30, September 30, September 30, (in thousands, except per share data) 2023 2023 2022 2023 2022 Net interest income: Interest income $ 103,585 $ 100,491 $ 79,556 $ 299,615 $ 211,540 Interest expense 44,989 41,651 15,532 121,675 29,355 Net interest income 58,596 58,840 64,024 177,940 182,185 Provision for credit losses: Provision for credit losses on loans 5,168 5,879 6,974 14,182 15,847 Provision for credit losses on unfunded commitments — — — — 956 Provision for other credit losses — — — — (221 ) Total provision for credit losses 5,168 5,879 6,974 14,182 16,582 Net interest income after provision for credit losses 53,428 52,961 57,050 163,758 165,603 Noninterest income: Wealth management revenue 6,288 6,269 6,199 18,968 19,481 Residential mortgage banking revenue 507 540 210 1,452 1,193 Service charges on deposit accounts 3,149 2,849 2,783 8,744 7,544 Interchange revenue 3,609 3,696 3,531 10,717 10,401 Loss on sales of investment securities, net (4,961 ) (869 ) (129 ) (6,478 ) (230 ) Gain on repurchase of subordinated debt, net — 676 — 676 — Gain (loss) on sales of other real estate owned, net — 819 — 819 (131 ) Impairment on commercial mortgage servicing rights — — — — (1,263 ) Company-owned life insurance 7,558 891 929 9,325 2,788 Other income 2,035 3,882 2,303 8,494 6,269 Total noninterest income 18,185 18,753 15,826 52,717 46,052 Noninterest expense: Salaries and employee benefits 22,307 22,857 22,889 69,407 67,404 Occupancy and equipment 3,730 3,879 3,850 12,052 11,094 Data processing 6,468 6,544 6,093 19,323 18,048 Professional 1,554 1,663 1,693 4,977 5,181 Amortization of intangible assets 1,129 1,208 1,361 3,628 4,077 FDIC insurance 1,107 1,196 977 3,632 2,633 Other expense 5,743 5,547 6,633 16,395 17,282 Total noninterest expense 42,038 42,894 43,496 129,414 125,719 Income before income taxes 29,575 28,820 29,380 87,061 85,936 Income taxes 11,533 7,245 5,859 25,672 19,783 Net income 18,042 21,575 23,521 61,389 66,153 Preferred stock dividends 2,229 2,228 — 6,685 — Net income available to common shareholders $ 15,813 $ 19,347 $ 23,521 $ 54,704 $ 66,153 Basic earnings per common share $ 0.71 $ 0.86 $ 1.04 $ 2.43 $ 2.93 Diluted earnings per common share $ 0.71 $ 0.86 $ 1.04 $ 2.43 $ 2.92 MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) Adjusted Earnings Reconciliation For the Three Months Ended For the Nine Months Ended September 30, June 30, September 30, September 30, September 30, (dollars in thousands, except per share data) 2023 2023 2022 2023 2022 Income before income taxes - GAAP $ 29,575 $ 28,820 $ 29,380 $ 87,061 $ 85,936 Adjustments to noninterest income: Loss on sales of investment securities, net 4,961 869 129 6,478 230 (Gain) on repurchase of subordinated debt — (676 ) — (676 ) — Company-owned life insurance enhancement fee (6,640 ) — — (6,640 ) — Total adjustments to noninterest income (1,679 ) 193 129 (838 ) 230 Adjustments to noninterest expense: Integration and acquisition expenses — — 68 — (347 ) Total adjustments to noninterest expense — — 68 — (347 ) Adjusted earnings pre tax - non-GAAP 27,896 29,013 29,441 86,223 86,513 Adjusted earnings tax 8,389 7,297 5,873 22,755 19,939 Adjusted earnings - non-GAAP 19,507 21,716 23,568 63,468 66,574 Preferred stock dividends 2,229 2,228 — 6,685 — Adjusted earnings available to common shareholders $ 17,278 $ 19,488 $ 23,568 $ 56,783 $ 66,574 Adjusted diluted earnings per common share $ 0.78 $ 0.87 $ 1.04 $ 2.53 $ 2.94 Adjusted return on average assets 0.98 % 1.10 % 1.22 % 1.07 % 1.20 % Adjusted return on average shareholders' equity 10.03 % 11.21 % 13.34 % 10.99 % 13.34 % Adjusted return on average tangible common equity 14.24 % 16.10 % 20.24 % 15.80 % 19.18 % Adjusted Pre-Tax, Pre-Provision Earnings Reconciliation For the Three Months Ended For the Nine Months Ended September 30, June 30, September 30, September 30, September 30, (dollars in thousands) 2023 2023 2022 2023 2022 Adjusted earnings pre tax - non-GAAP $ 27,896 $ 29,013 $ 29,441 $ 86,223 $ 86,513 Provision for credit losses 5,168 5,879 6,974 14,182 16,582 Impairment on commercial mortgage servicing rights — — — — 1,263 Adjusted pre-tax, pre-provision earnings - non-GAAP $ 33,064 $ 34,892 $ 36,415 $ 100,405 $ 104,358 Adjusted pre-tax, pre-provision return on average assets 1.66 % 1.76 % 1.89 % 1.70 % 1.88 % MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued) Efficiency Ratio Reconciliation For the Three Months Ended For the Nine Months Ended September 30, June 30, September 30, September 30, September 30, (dollars in thousands) 2023 2023 2022 2023 2022 Noninterest expense - GAAP $ 42,038 $ 42,894 $ 43,496 $ 129,414 $ 125,719 Integration and acquisition expenses — — 68 — (347 ) Adjusted noninterest expense $ 42,038 $ 42,894 $ 43,564 $ 129,414 $ 125,372 Net interest income - GAAP $ 58,596 $ 58,840 $ 64,024 $ 177,940 $ 182,185 Effect of tax-exempt income 205 195 307 644 997 Adjusted net interest income 58,801 59,035 64,331 178,584 183,182 Noninterest income - GAAP 18,185 18,753 15,826 52,717 46,052 Impairment on commercial mortgage servicing rights — — — — 1,263 Loss on sales of investment securities, net 4,961 869 129 6,478 230 (Gain) on repurchase of subordinated debt — (676 ) — (676 ) — Company-owned life insurance enhancement fee (6,640 ) — — (6,640 ) — Adjusted noninterest income 16,506 18,946 15,955 51,879 47,545 Adjusted total revenue $ 75,307 $ 77,981 $ 80,286 $ 230,463 $ 230,727 Efficiency ratio 55.82 % 55.01 % 54.26 % 56.15 % 54.34 % Return on Average Tangible Common Equity (ROATCE) For the Three Months Ended For the Nine Months Ended September 30, June 30, September 30, September 30, September 30, (dollars in thousands) 2023 2023 2022 2023 2022 Net income available to common shareholders $ 15,813 $ 19,347 $ 23,521 $ 54,704 $ 66,153 Average total shareholders' equity—GAAP $ 771,625 $ 776,791 $ 700,866 $ 771,883 $ 667,225 Adjustments: Preferred Stock (110,548 ) (110,548 ) (54,072 ) (110,548 ) — Goodwill (161,904 ) (161,904 ) (161,904 ) (161,904 ) (161,904 ) Other intangible assets, net (17,782 ) (18,937 ) (22,859 ) (18,959 ) (23,019 ) Average tangible common equity $ 481,391 $ 485,402 $ 462,031 $ 480,472 $ 482,302 ROATCE 13.03 % 15.99 % 20.20 % 15.22 % 19.06 % MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued) Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share As of September 30, June 30, March 31, December 31, September 30, (dollars in thousands, except per share data) 2023 2023 2023 2022 2022 Shareholders' Equity to Tangible Common Equity Total shareholders' equity—GAAP $ 764,250 $ 776,821 $ 775,643 $ 758,574 $ 739,279 Adjustments: Preferred Stock (110,548 ) (110,548 ) (110,548 ) (110,548 ) (110,548 ) Goodwill (161,904 ) (161,904 ) (161,904 ) (161,904 ) (161,904 ) Other intangible assets, net (17,238 ) (18,367 ) (19,575 ) (20,866 ) (22,198 ) Tangible common equity $ 474,560 $ 486,002 $ 483,616 $ 465,256 $ 444,629 Less: Accumulated other comprehensive income (AOCI) (101,181 ) (84,719 ) (77,797 ) (83,797 ) (78,383 ) Tangible common equity excluding AOCI 575,741 570,721 561,413 549,053 523,012 Total Assets to Tangible Assets: Total assets—GAAP $ 7,975,925 $ 8,034,721 $ 7,930,174 $ 7,855,501 $ 7,821,877 Adjustments: Goodwill (161,904 ) (161,904 ) (161,904 ) (161,904 ) (161,904 ) Other intangible assets, net (17,238 ) (18,367 ) (19,575 ) (20,866 ) (22,198 ) Tangible assets $ 7,796,783 $ 7,854,450 $ 7,748,695 $ 7,672,731 $ 7,637,775 Common Shares Outstanding 21,594,546 21,854,800 22,111,454 22,214,913 22,074,740 Tangible Common Equity to Tangible Assets 6.09 % 6.19 % 6.24 % 6.06 % 5.82 % Tangible Book Value Per Share $ 21.98 $ 22.24 $ 21.87 $ 20.94 $ 20.14 Tangible Book Value Per Share excluding AOCI $ 26.66 $ 26.11 $ 25.39 $ 24.72 $ 23.69 
