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Midland States Bancorp, Inc. Announces 2021 Third Quarter Results
Source: Nasdaq GlobeNewswire / 28 Oct 2021 16:15:01 America/New_York
Summary
- Net income of $19.5 million, or $0.86 diluted earnings per share
- Total loans increased 8.2% annualized, excluding commercial FHA lines and PPP loans
- Non-performing loans declined 11.0% from end of prior quarter
- Net interest margin increased 5 bps from prior quarter to 3.34%
- Efficiency ratio improved to 58.78% from 60.19% in prior quarter
- Book value and tangible book value per share increased 2.3% and 3.4%, respectively
EFFINGHAM, Ill., Oct. 28, 2021 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (Nasdaq: MSBI) (the “Company”) today reported net income of $19.5 million, or $0.86 diluted earnings per share, for the third quarter of 2021, which included a $3.0 million impairment charge on commercial mortgage servicing rights (“MSRs”). This compares to net income of $20.1 million, or $0.88 diluted earnings per share, for the second quarter of 2021, which included a $6.8 million tax benefit related to the settlement of a prior tax issue, $3.6 million in professional fees related to the settlement, and a $3.7 million charge related to the prepayment of a longer-term FHLB advance. This also compares to net income of $86 thousand, or $0.00 diluted earnings per share, for the third quarter of 2020, which included $13.9 million of charges primarily related to the Company’s branch and facilities optimization plan.
Jeffrey G. Ludwig, President and Chief Executive Officer of the Company, said, “We delivered another strong quarter driven by positive trends across most areas of our operations. The contribution of new additions to our commercial banking team and increasing demand helped drive another quarter of solid loan growth. We are also seeing improved asset quality, net interest margin expansion as a result of the elimination of higher cost funding sources, and growth in wealth management revenue following our acquisition of ATG Trust Company earlier this year. The higher level of revenue we are generating is driving further improvement in operating leverage and an increase in pre-provision, pre-tax income.
“We expect to see a continuation of these positive trends in the fourth quarter. We are benefitting from our efforts to increase our presence in higher growth markets in Northern Illinois and St. Louis, which is resulting in the consistent addition of full banking relationships with new commercial clients. Our loan and deposit pipelines remain healthy, which should lead to continued quality balance sheet growth that we expect to result in a higher level of net interest income, additional operating leverage, and further improvement in our level of profitability,” said Mr. Ludwig.
Adjusted Earnings
Financial results for the second quarter of 2021 were impacted by a $6.8 million tax benefit related to the settlement of a prior tax issue, $3.8 million of integration and acquisition expenses inclusive of the $3.6 million in professional fees related to the settlement, and a $3.7 million charge related to the prepayment of a longer-term FHLB advance. Excluding these amounts and certain other income and expense, adjusted earnings were $19.8 million, or $0.86 diluted earnings per share, for the second quarter of 2021.
Financial results for the third quarter of 2020 were impacted by $13.9 million in charges primarily related to the branch and facilities optimization plan (integration and acquisition expenses), $1.7 million in gains on sales of investment securities, and a $0.2 million loss on residential MSRs held-for-sale. Excluding these amounts and certain other income and expenses, adjusted earnings were $12.0 million, or $0.52 diluted earnings per share, for the third quarter of 2020.
A reconciliation of adjusted earnings to net income according to accounting principles generally accepted in the United States (“GAAP”) is provided in the financial tables at the end of this press release.
Net Interest Margin
Net interest margin for the third quarter of 2021 was 3.34%, compared to 3.29% for the second quarter of 2021. The Company’s net interest margin benefits from accretion income on purchased loan portfolios, which contributed 7 and 9 basis points to net interest margin in the third and second quarters of 2021, respectively. Excluding the impact of accretion income, net interest margin increased 7 basis points from the second quarter of 2021, due primarily to a reduction in the cost of funds.
Relative to the third quarter of 2020, net interest margin increased from 3.33%. Accretion income on purchased loan portfolios contributed 14 basis points to net interest margin in the third quarter of 2020. Excluding the impact of accretion income, net interest margin increased 8 basis points from the third quarter of 2020, primarily due to a reduction in the cost of funds.
Net Interest Income
Net interest income for the third quarter of 2021 was $51.4 million, an increase of 2.6% from $50.1 million for the second quarter of 2021. Excluding accretion income, net interest income increased $1.6 million from the prior quarter, which was primarily due to a lower cost of funds. Accretion income associated with purchased loan portfolios totaled $1.0 million for the third quarter of 2021, compared with $1.3 million for the second quarter of 2021. PPP loan income totaled $2.4 million, including net loan origination fees of $2.1 million, in the third quarter of 2021, compared to $2.4 million, including net loan origination fees of $1.9 million, in the second quarter of 2021.
Relative to the third quarter of 2020, net interest income increased $1.4 million, or 2.8%. Accretion income for the third quarter of 2020 was $2.1 million. Excluding the impact of accretion income, net interest income increased primarily due to a higher average balance of interest-earning assets and a significant decline in the cost of funds.
Noninterest Income
Noninterest income for the third quarter of 2021 was $15.1 million, a decrease of 13.1% from $17.4 million for the second quarter of 2021. Impairment on commercial MSRs impacted noninterest income by $3.0 million and $1.1 million in the third quarter of 2021 and second quarter of 2021, respectively. Excluding the impairments, noninterest income decreased 2.1% primarily due to gains on the sale of other real estate owned that were recognized in the prior quarter.
Relative to the third quarter of 2020, noninterest income decreased 20.0% from $18.9 million. The decrease was primarily attributable to a larger impairment on commercial MSRs, lower residential mortgage banking revenue, and lower gains on sales of investment securities, partially offset by higher wealth management revenue.
Wealth management revenue for the third quarter of 2021 was $7.2 million, an increase of 9.9% from the second quarter of 2021, primarily due to the full quarter contribution of ATG Trust Company following its acquisition at the beginning of June. Compared to the third quarter of 2020, wealth management revenue increased 29.1%, primarily due to the increase in assets under administration over the past year and the acquisition of ATG Trust Company.
Noninterest Expense
Noninterest expense for the third quarter of 2021 was $41.3 million, compared with $48.9 million in the second quarter of 2021, which included $3.6 million in professional fees related to the settlement of the prior tax issue and $3.7 million in FHLB advance prepayment fees. Excluding the professional fees related to the settlement of the prior tax issue, FHLB advance prepayment fees, integration and acquisition expenses, and losses on residential MSRs held-for-sale, noninterest expense decreased by $0.3 million.
Relative to the third quarter of 2020, noninterest expense decreased 23.4% from $53.9 million, which included $13.9 million in charges primarily related to the branch and facilities optimization plan (integration and acquisition expenses), and a $0.2 million loss on residential MSRs held-for-sale. Excluding the integration and acquisition expenses and losses on residential MSRs held-for-sale, noninterest expense increased $1.2 million, primarily due to higher salaries and employee benefits expense.
Loan Portfolio
Total loans outstanding were $4.92 billion at September 30, 2021, compared with $4.84 billion at June 30, 2021 and $4.94 billion at September 30, 2020. The increase in total loans from June 30, 2021 was primarily attributable to higher balances of commercial, commercial real estate, and consumer loans, partially offset by forgiveness of PPP loans and runoff in the residential real estate portfolio resulting from refinancings.
Equipment finance balances increased $27.5 million from June 30, 2021 to $899.1 million at September 30, 2021, which are booked within the commercial loans and leases portfolio.
Compared to loan balances at September 30, 2020, growth in equipment finance balances, commercial real estate, and consumer loans was offset by declines in residential real estate loans and PPP loans held in the commercial portfolio.
Deposits
Total deposits were $5.60 billion at September 30, 2021, compared with $5.20 billion at June 30, 2021, and $5.03 billion at September 30, 2020. The increase in total deposits from the end of the prior quarter was primarily attributable to an increase in commercial FHA servicing deposits and inflows of other commercial deposits.
Asset Quality
Nonperforming loans totaled $54.6 million, or 1.11% of total loans, at September 30, 2021, compared with $61.4 million, or 1.27% of total loans, at June 30, 2021. The decrease in nonperforming loans was primarily attributable to the disposition of certain loans combined with minimal inflow during the third quarter of 2021. At September 30, 2020, nonperforming loans totaled $67.4 million, or 1.36% of total loans.
Net charge-offs for the third quarter of 2021 were $3.0 million, or 0.25% of average loans on an annualized basis, compared to net charge-offs of $4.0 million, or 0.33% of average loans on an annualized basis, for the second quarter of 2021 and $5.3 million, or 0.44% of average loans on an annualized basis, for the third quarter of 2020.
The Company recorded a negative provision for credit losses of $0.2 million for the third quarter of 2021. No provision for credit losses on loans was recorded due to general improvement in asset quality and economic forecasts, while a negative provision of $0.2 million was recorded for credit losses on available-for-sale securities.
The Company’s allowance for credit losses on loans was 1.13% of total loans and 101.9% of nonperforming loans at September 30, 2021, compared with 1.21% of total loans and 95.6% of nonperforming loans at June 30, 2021. Approximately 96% of the allowance for credit losses on loans at September 30, 2021 was allocated to general reserves.
Capital
At September 30, 2021, Midland States Bank and the Company exceeded all regulatory capital requirements under Basel III, and Midland States Bank met the qualifications to be a ‘‘well-capitalized’’ financial institution, as summarized in the following table:
Bank Level
Ratios as of
Sep. 30, 2021Consolidated
Ratios as of
Sep. 30, 2021Minimum
Regulatory
Requirements (2)Total capital to risk-weighted assets 12.03% 13.10% 10.50% Tier 1 capital to risk-weighted assets 11.17% 9.73% 8.50% Tier 1 leverage ratio 9.38% 8.16% 4.00% Common equity Tier 1 capital 11.17% 8.55% 7.00% Tangible common equity to tangible assets (1) NA 6.80% NA (1) A non-GAAP financial measure. Refer to page 15 for a reconciliation to the comparable GAAP financial measure.
(2) Includes the capital conservation buffer of 2.5%.Stock Repurchase Program
During the third quarter of 2021, the Company repurchased 210,177 shares of its common stock at a weighted average price of $24.93 under its stock repurchase program. On September 7, 2021, the Company announced that its Board of Directors approved modifications to the previously announced stock repurchase program, which increased the aggregate repurchase authority to $75 million from $50 million and extended the expiration date of the program to December 31, 2022. As of September 30, 2021, the Company had $24.9 million remaining under the current stock repurchase authorization.
Conference Call, Webcast and Slide Presentation
The Company will host a conference call and webcast at 7:30 a.m. Central Time on Friday, October 29, 2021, to discuss its financial results. The call can be accessed via telephone at (877) 516-3531; conference ID: 6697900. A recorded replay can be accessed through November 5, 2021, by dialing (855) 859-2056; conference ID: 6697900.
A slide presentation relating to the third quarter 2021 financial results will be accessible prior to the scheduled conference call. This earnings release should be read together with the slide presentation, which contains important information related to the impact of COVID-19. The slide presentation and webcast of the conference call can be accessed on the Webcasts and Presentations page of the Company’s investor relations website at investors.midlandsb.com under the “News and Events” tab.
About Midland States Bancorp, Inc.
Midland States Bancorp, Inc. is a community-based financial holding company headquartered in Effingham, Illinois, and is the sole shareholder of Midland States Bank. As of September 30, 2021, the Company had total assets of approximately $7.09 billion, and its Wealth Management Group had assets under administration of approximately $4.06 billion. Midland provides a full range of commercial and consumer banking products and services and business equipment financing, merchant credit card services, trust and investment management, insurance and financial planning services. For additional information, visit https://www.midlandsb.com/ or https://www.linkedin.com/company/midland-states-bank.
Non-GAAP Financial Measures
Some of the financial measures included in this press release are not measures of financial performance recognized in accordance with GAAP. These non-GAAP financial measures include “Adjusted Earnings,” “Adjusted Diluted Earnings Per Common Share,” “Adjusted Pre-Tax, Pre-Provision Earnings,” “Adjusted Return on Average Assets,” “Adjusted Return on Average Shareholders’ Equity,” “Adjusted Return on Average Tangible Common Equity,” “Adjusted Pre-Tax, Pre-Provision Return on Average Assets,” “Efficiency Ratio,” “Tangible Common Equity to Tangible Assets,” “Tangible Book Value Per Share” and “Return on Average Tangible Common Equity.” The Company believes these non-GAAP financial measures provide both management and investors a more complete understanding of the Company’s funding profile and profitability. These non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP financial measures. Not all companies use the same calculation of these measures; therefore, this presentation may not be comparable to other similarly titled measures as presented by other companies.
Forward-Looking Statements
Readers should note that in addition to the historical information contained herein, this press release includes "forward-looking statements" within the meanings of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including but not limited to statements about the Company’s plans, objectives, future performance, goals and future earnings levels. These statements are subject to many risks and uncertainties, including changes in interest rates and other general economic, business and political conditions, including the effects of the COVID-19 pandemic and its potential effects on the economic environment, our customers and our operations, as well as any changes to federal, state and local government laws, regulations and orders in connection with the pandemic; changes in the financial markets; changes in business plans as circumstances warrant; risks relating to acquisitions; developments and uncertainty related to the future use and availability of some reference rates, such as the London Inter-Bank Offered Rate, as well as other alternative reference rates, and the adoption of a substitute; changes to U.S. tax laws, regulations and guidance; and other risks detailed from time to time in filings made by the Company with the Securities and Exchange Commission. Readers should note that the forward-looking statements included in this press release are not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "will," "propose," "may," "plan," "seek," "expect," "intend," "estimate," "anticipate," "believe," "continue," or similar terminology. Any forward-looking statements presented herein are made only as of the date of this press release, and the Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.
CONTACTS:
Jeffrey G. Ludwig, President and CEO, at jludwig@midlandsb.com or (217) 342-7321
Eric T. Lemke, Chief Financial Officer, at elemke@midlandsb.com or (217) 342-7321
Douglas J. Tucker, SVP and Corporate Counsel, at dtucker@midlandsb.com or (217) 342-7321MIDLAND STATES BANCORP, INC. CONSOLIDATED FINANCIAL SUMMARY (unaudited) For the Quarter Ended September 30, June 30, March 31, December 31, September 30, (dollars in thousands, except per share data) 2021 2021 2021 2020 2020 Earnings Summary Net interest income $ 51,396 $ 50,110 $ 51,868 $ 53,516 $ 49,980 Provision for credit losses (184 ) (455 ) 3,565 10,058 11,728 Noninterest income 15,143 17,417 14,816 14,336 18,919 Noninterest expense 41,292 48,941 39,079 47,048 53,901 Income before income taxes 25,431 19,041 24,040 10,746 3,270 Income taxes 5,883 (1,083 ) 5,502 2,413 3,184 Net income $ 19,548 $ 20,124 $ 18,538 $ 8,333 $ 86 Diluted earnings per common share $ 0.86 $ 0.88 $ 0.81 $ 0.36 $ - Weighted average shares outstanding - diluted 22,577,880 22,677,515 22,578,553 22,656,343 22,937,837 Return on average assets 1.15 % 1.20 % 1.11 % 0.49 % 0.01 % Return on average shareholders' equity 11.90 % 12.59 % 12.04 % 5.32 % 0.05 % Return on average tangible common equity (1) 16.76 % 17.85 % 17.28 % 7.68 % 0.08 % Net interest margin 3.34 % 3.29 % 3.45 % 3.47 % 3.33 % Efficiency ratio (1) 58.78 % 60.19 % 56.88 % 58.55 % 57.74 % Adjusted Earnings Performance Summary (1) Adjusted earnings $ 19,616 $ 19,755 $ 18,662 $ 12,471 $ 12,023 Adjusted diluted earnings per common share $ 0.86 $ 0.86 $ 0.82 $ 0.54 $ 0.52 Adjusted return on average assets 1.15 % 1.17 % 1.12 % 0.73 % 0.72 % Adjusted return on average shareholders' equity 11.94 % 12.36 % 12.12 % 7.97 % 7.56 % Adjusted return on average tangible common equity 16.82 % 17.52 % 17.39 % 11.50 % 11.04 % Adjusted pre-tax, pre-provision earnings $ 28,379 $ 26,967 $ 29,051 $ 28,855 $ 28,751 Adjusted pre-tax, pre-provision return on average assets 1.67 % 1.60 % 1.75 % 1.69 % 1.72 % (1) Non-GAAP financial measures. Refer to pages 13 - 15 for a reconciliation to the comparable GAAP financial measures. MIDLAND STATES BANCORP, INC. CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) For the Quarter Ended September 30, June 30, March 31, December 31, September 30, (in thousands, except per share data) 2021 2021 2021 2020 2020 Net interest income: Interest income $ 58,490 $ 58,397 $ 60,503 $ 62,712 $ 60,314 Interest expense 7,094 8,287 8,635 9,196 10,334 Net interest income 51,396 50,110 51,868 53,516 49,980 Provision for credit losses: Provision for credit losses on loans - - 3,950 10,000 10,970 Provision for credit losses on unfunded commitments - (265 ) (535 ) - 577 Provision for other credit losses (184 ) (190 ) 150 58 181 Total provision for credit losses (184 ) (455 ) 3,565 10,058 11,728 Net interest income after provision for credit losses 51,580 50,565 48,303 43,458 38,252 Noninterest income: Wealth management revenue 7,175 6,529 5,931 5,868 5,559 Commercial FHA revenue 411 342 292 400 926 Residential mortgage banking revenue 1,287 1,562 1,574 2,285 3,049 Service charges on deposit accounts 2,268 1,916 1,826 2,149 2,092 Interchange revenue 3,651 3,797 3,375 3,137 3,283 Gain on sales of investment securities, net 160 377 - - 1,721 Impairment on commercial mortgage servicing rights (3,037 ) (1,148 ) (1,275 ) (2,344 ) (1,418 ) Company-owned life insurance 869 863 860 893 897 Other income 2,359 3,179 2,233 1,948 2,810 Total noninterest income 15,143 17,417 14,816 14,336 18,919 Noninterest expense: Salaries and employee benefits 22,175 22,071 20,528 22,636 21,118 Occupancy and equipment 3,701 3,796 3,940 3,531 4,866 Data processing 6,495 6,288 5,993 5,987 5,721 Professional 1,738 5,549 2,185 1,912 1,861 Amortization of intangible assets 1,445 1,470 1,515 1,556 1,557 Loss on mortgage servicing rights held for sale 79 143 - 617 188 Impairment related to facilities optimization - - - (10 ) 12,651 FHLB advances prepayment fees - 3,669 8 4,872 - Other expense 5,659 5,955 4,910 5,947 5,939 Total noninterest expense 41,292 48,941 39,079 47,048 53,901 Income before income taxes 25,431 19,041 24,040 10,746 3,270 Income taxes 5,883 (1,083 ) 5,502 2,413 3,184 Net income $ 19,548 $ 20,124 $ 18,538 $ 8,333 $ 86 Basic earnings per common share $ 0.86 $ 0.88 $ 0.81 $ 0.36 $ 0.00 Diluted earnings per common share $ 0.86 $ 0.88 $ 0.81 $ 0.36 $ 0.00 MIDLAND STATES BANCORP, INC. CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) As of September 30, June 30, March 31, December 31, September 30, (in thousands) 2021 2021 2021 2020 2020 Assets Cash and cash equivalents $ 662,643 $ 425,100 $ 631,219 $ 341,640 $ 461,196 Investment securities 900,319 756,831 690,390 686,135 618,974 Loans 4,915,554 4,835,866 4,910,806 5,103,331 4,941,466 Allowance for credit losses on loans (55,675 ) (58,664 ) (62,687 ) (60,443 ) (52,771 ) Total loans, net 4,859,879 4,777,202 4,848,119 5,042,888 4,888,695 Loans held for sale 26,621 12,187 55,174 138,090 62,500 Premises and equipment, net 71,241 71,803 73,255 74,124 74,967 Other real estate owned 11,931 12,768 20,304 20,247 15,961 Loan servicing rights, at lower of cost or fair value 30,916 34,577 36,876 39,276 42,465 Goodwill 161,904 161,904 161,904 161,904 161,904 Other intangible assets, net 26,065 27,900 26,867 28,382 29,938 Cash surrender value of life insurance policies 149,146 148,277 146,864 146,004 145,112 Other assets 193,294 201,461 193,814 189,850 198,333 Total assets $ 7,093,959 $ 6,630,010 $ 6,884,786 $ 6,868,540 $ 6,700,045 Liabilities and Shareholders' Equity Noninterest-bearing deposits $ 1,672,901 $ 1,366,453 $ 1,522,433 $ 1,469,579 $ 1,355,188 Interest-bearing deposits 3,928,475 3,829,898 3,818,080 3,631,437 3,673,548 Total deposits 5,601,376 5,196,351 5,340,513 5,101,016 5,028,736 Short-term borrowings 66,666 75,985 71,728 68,957 58,625 FHLB advances and other borrowings 440,171 440,171 529,171 779,171 693,640 Subordinated debt 138,998 138,906 169,888 169,795 169,702 Trust preferred debentures 49,235 49,094 48,954 48,814 48,682 Other liabilities 139,669 81,317 89,065 79,396 78,780 Total liabilities 6,436,115 5,981,824 6,249,319 6,247,149 6,078,165 Total shareholders’ equity 657,844 648,186 635,467 621,391 621,880 Total liabilities and shareholders’ equity $ 7,093,959 $ 6,630,010 $ 6,884,786 $ 6,868,540 $ 6,700,045 MIDLAND STATES BANCORP, INC. CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) As of September 30, June 30, March 31, December 31, September 30, (in thousands) 2021 2021 2021 2020 2020 Loan Portfolio Commercial loans and leases $ 1,879,765 $ 1,831,241 $ 1,977,440 $ 2,095,639 $ 1,938,691 Commercial real estate 1,562,013 1,540,489 1,494,031 1,525,973 1,496,758 Construction and land development 200,792 212,508 191,870 172,737 177,894 Residential real estate 344,414 366,612 398,501 442,880 470,829 Consumer 928,570 885,016 848,964 866,102 857,294 Total loans $ 4,915,554 $ 4,835,866 $ 4,910,806 $ 5,103,331 $ 4,941,466 Deposit Portfolio Noninterest-bearing demand $ 1,672,901 $ 1,366,453 $ 1,522,433 $ 1,469,579 $ 1,355,188 Interest-bearing: Checking 1,697,326 1,619,436 1,601,449 1,568,888 1,581,216 Money market 852,836 787,688 819,455 785,871 826,454 Savings 665,710 669,277 653,256 597,966 580,748 Time 688,693 721,502 718,788 655,620 661,872 Brokered time 23,910 31,995 25,132 23,092 23,258 Total deposits $ 5,601,376 $ 5,196,351 $ 5,340,513 $ 5,101,016 $ 5,028,736 MIDLAND STATES BANCORP, INC. CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) For the Quarter Ended September 30, June 30, March 31, December 31, September 30, (dollars in thousands) 2021 2021 2021 2020 2020 Average Balance Sheets Cash and cash equivalents $ 525,848 $ 509,886 $ 350,061 $ 415,686 $ 491,728 Investment securities 773,372 734,462 680,202 672,937 628,705 Loans 4,800,063 4,826,234 4,992,802 4,998,912 4,803,940 Loans held for sale 15,204 36,299 65,365 45,196 44,880 Nonmarketable equity securities 43,873 49,388 55,935 51,906 50,765 Total interest-earning assets 6,158,360 6,156,269 6,144,365 6,184,637 6,020,018 Non-earning assets 597,153 589,336 602,017 602,716 625,522 Total assets $ 6,755,513 $ 6,745,605 $ 6,746,382 $ 6,787,353 $ 6,645,540 Interest-bearing deposits $ 3,895,970 $ 3,815,179 $ 3,757,108 $ 3,680,645 $ 3,656,833 Short-term borrowings 68,103 65,727 75,544 62,432 64,010 FHLB advances and other borrowings 440,171 519,490 617,504 682,981 693,721 Subordinated debt 138,954 165,155 169,844 169,751 169,657 Trust preferred debentures 49,167 49,026 48,887 48,751 48,618 Total interest-bearing liabilities 4,592,365 4,614,577 4,668,887 4,644,560 4,632,839 Noninterest-bearing deposits 1,434,193 1,411,428 1,370,604 1,446,359 1,303,963 Other noninterest-bearing liabilities 77,204 78,521 82,230 73,840 75,859 Shareholders' equity 651,751 641,079 624,661 622,594 632,879 Total liabilities and shareholders' equity $ 6,755,513 $ 6,745,605 $ 6,746,382 $ 6,787,353 $ 6,645,540 Yields Earning Assets Cash and cash equivalents 0.16 % 0.11 % 0.11 % 0.12 % 0.10 % Investment securities 2.34 % 2.43 % 2.51 % 2.65 % 2.86 % Loans 4.42 % 4.43 % 4.50 % 4.58 % 4.57 % Loans held for sale 2.79 % 2.88 % 2.74 % 3.14 % 2.92 % Nonmarketable equity securities 5.05 % 4.94 % 4.93 % 5.22 % 5.26 % Total interest-earning assets 3.79 % 3.83 % 4.02 % 4.06 % 4.01 % Interest-Bearing Liabilities Interest-bearing deposits 0.26 % 0.31 % 0.34 % 0.36 % 0.46 % Short-term borrowings 0.12 % 0.12 % 0.13 % 0.14 % 0.17 % FHLB advances and other borrowings 1.80 % 1.91 % 1.69 % 1.71 % 1.85 % Subordinated debt 5.79 % 5.61 % 5.57 % 5.60 % 5.58 % Trust preferred debentures 3.92 % 4.00 % 4.08 % 4.03 % 4.16 % Total interest-bearing liabilities 0.61 % 0.72 % 0.75 % 0.79 % 0.89 % Cost of Deposits 0.19 % 0.23 % 0.25 % 0.26 % 0.34 % Net Interest Margin 3.34 % 3.29 % 3.45 % 3.47 % 3.33 % MIDLAND STATES BANCORP, INC. CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) As of and for the Quarter Ended September 30, June 30, March 31, December 31, September 30, (dollars in thousands, except per share data) 2021 2021 2021 2020 2020 Asset Quality Loans 30-89 days past due $ 16,772 $ 20,224 $ 24,819 $ 31,460 $ 28,188 Nonperforming loans 54,620 61,363 52,826 54,070 67,443 Nonperforming assets 69,261 76,926 75,004 75,432 84,795 Net charge-offs 2,989 4,023 1,706 2,328 5,292 Loans 30-89 days past due to total loans 0.34 % 0.42 % 0.51 % 0.62 % 0.57 % Nonperforming loans to total loans 1.11 % 1.27 % 1.08 % 1.06 % 1.36 % Nonperforming assets to total assets 0.98 % 1.16 % 1.09 % 1.10 % 1.27 % Allowance for credit losses to total loans 1.13 % 1.21 % 1.28 % 1.18 % 1.07 % Allowance for credit losses to nonperforming loans 101.93 % 95.60 % 118.67 % 111.79 % 78.25 % Net charge-offs to average loans 0.25 % 0.33 % 0.14 % 0.19 % 0.44 % Wealth Management Trust assets under administration $ 4,058,168 $ 4,077,581 $ 3,560,427 $ 3,480,759 $ 3,260,893 Market Data Book value per share at period end $ 29.64 $ 28.96 $ 28.43 $ 27.83 $ 27.51 Tangible book value per share at period end (1) $ 21.17 $ 20.48 $ 19.98 $ 19.31 $ 19.03 Market price at period end $ 24.73 $ 26.27 $ 27.74 $ 17.87 $ 12.85 Shares outstanding at period end 22,193,141 22,380,492 22,351,740 22,325,471 22,602,844 Capital Total capital to risk-weighted assets 13.10 % 13.11 % 13.73 % 13.24 % 13.34 % Tier 1 capital to risk-weighted assets 9.73 % 9.64 % 9.62 % 9.20 % 9.40 % Tier 1 common capital to risk-weighted assets 8.55 % 8.44 % 8.39 % 7.99 % 8.18 % Tier 1 leverage ratio 8.16 % 8.00 % 7.79 % 7.50 % 7.72 % Tangible common equity to tangible assets (1) 6.80 % 7.12 % 6.67 % 6.46 % 6.61 % (1) Non-GAAP financial measures. Refer to pages 13 - 15 for a reconciliation to the comparable GAAP financial measures. MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) Adjusted Earnings Reconciliation For the Quarter Ended September 30, June 30, March 31, December 31, September 30, (dollars in thousands, except per share data) 2021 2021 2021 2020 2020 Income before income taxes - GAAP $ 25,431 $ 19,041 $ 24,040 $ 10,746 $ 3,270 Adjustments to noninterest income: Gain on sales of investment securities, net 160 377 - - 1,721 Other income - (27 ) 75 3 (17 ) Total adjustments to noninterest income 160 350 75 3 1,704 Adjustments to noninterest expense: Loss on mortgage servicing rights held for sale 79 143 - 617 188 Impairment related to facilities optimization - - - (10 ) 12,651 FHLB advances prepayment fees - 3,669 8 4,872 - Integration and acquisition expenses 176 3,771 238 231 1,200 Total adjustments to noninterest expense 255 7,583 246 5,710 14,039 Adjusted earnings pre tax 25,526 26,274 24,211 16,453 15,605 Adjusted earnings tax 5,910 6,519 5,549 3,982 3,582 Adjusted earnings - non-GAAP $ 19,616 $ 19,755 $ 18,662 $ 12,471 $ 12,023 Adjusted diluted earnings per common share $ 0.86 $ 0.86 $ 0.82 $ 0.54 $ 0.52 Adjusted return on average assets 1.15 % 1.17 % 1.12 % 0.73 % 0.72 % Adjusted return on average shareholders' equity 11.94 % 12.36 % 12.12 % 7.97 % 7.56 % Adjusted return on average tangible common equity 16.82 % 17.52 % 17.39 % 11.50 % 11.04 % Adjusted Pre-Tax, Pre-Provision Earnings Reconciliation For the Quarter Ended September 30, June 30, March 31, December 31, September 30, (dollars in thousands) 2021 2021 2021 2020 2020 Adjusted earnings pre tax - non- GAAP $ 25,526 $ 26,274 $ 24,211 $ 16,453 $ 15,605 Provision for credit losses (184 ) (455 ) 3,565 10,058 11,728 Impairment on commercial mortgage servicing rights 3,037 1,148 1,275 2,344 1,418 Adjusted pre-tax, pre-provision earnings - non-GAAP $ 28,379 $ 26,967 $ 29,051 $ 28,855 $ 28,751 Adjusted pre-tax, pre-provision return on average assets 1.67 % 1.60 % 1.75 % 1.69 % 1.72 % MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued) Efficiency Ratio Reconciliation For the Quarter Ended September 30, June 30, March 31, December 31, September 30, (dollars in thousands) 2021 2021 2021 2020 2020 Noninterest expense - GAAP $ 41,292 $ 48,941 $ 39,079 $ 47,048 $ 53,901 Loss on mortgage servicing rights held for sale (79 ) (143 ) - (617 ) (188 ) Impairment related to facilities optimization - - - 10 (12,651 ) FHLB advances prepayment fees - (3,669 ) (8 ) (4,872 ) - Integration and acquisition expenses (176 ) (3,771 ) (238 ) (231 ) (1,200 ) Adjusted noninterest expense $ 41,037 $ 41,358 $ 38,833 $ 41,338 $ 39,862 Net interest income - GAAP $ 51,396 $ 50,110 $ 51,868 $ 53,516 $ 49,980 Effect of tax-exempt income 402 383 386 413 430 Adjusted net interest income 51,798 50,493 52,254 53,929 50,410 Noninterest income - GAAP 15,143 17,417 14,816 14,336 18,919 Impairment on commercial mortgage servicing rights 3,037 1,148 1,275 2,344 1,418 Gain on sales of investment securities, net (160 ) (377 ) - - (1,721 ) Other - 27 (75 ) (3 ) 17 Adjusted noninterest income 18,020 18,215 16,016 16,677 18,633 Adjusted total revenue $ 69,818 $ 68,709 $ 68,270 $ 70,607 $ 69,043 Efficiency ratio 58.78 % 60.19 % 56.88 % 58.55 % 57.74 % 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) 2021 2021 2021 2020 2020 Shareholders' Equity to Tangible Common Equity Total shareholders' equity—GAAP $ 657,844 $ 648,186 $ 635,467 $ 621,391 $ 621,880 Adjustments: Goodwill (161,904 ) (161,904 ) (161,904 ) (161,904 ) (161,904 ) Other intangible assets, net (26,065 ) (27,900 ) (26,867 ) (28,382 ) (29,938 ) Tangible common equity $ 469,875 $ 458,382 $ 446,696 $ 431,105 $ 430,038 Total Assets to Tangible Assets: Total assets—GAAP $ 7,093,959 $ 6,630,010 $ 6,884,786 $ 6,868,540 $ 6,700,045 Adjustments: Goodwill (161,904 ) (161,904 ) (161,904 ) (161,904 ) (161,904 ) Other intangible assets, net (26,065 ) (27,900 ) (26,867 ) (28,382 ) (29,938 ) Tangible assets $ 6,905,990 $ 6,440,206 $ 6,696,015 $ 6,678,254 $ 6,508,203 Common Shares Outstanding 22,193,141 22,380,492 22,351,740 22,325,471 22,602,844 Tangible Common Equity to Tangible Assets 6.80 % 7.12 % 6.67 % 6.46 % 6.61 % Tangible Book Value Per Share $ 21.17 $ 20.48 $ 19.98 $ 19.31 $ 19.03 Return on Average Tangible Common Equity (ROATCE) For the Quarter Ended September 30, June 30, March 31, December 31, September 30, (dollars in thousands) 2021 2021 2021 2020 2020 Net income available to common shareholders $ 19,548 $ 20,124 $ 18,538 $ 8,333 $ 86 Average total shareholders' equity—GAAP $ 651,751 $ 641,079 $ 624,661 $ 622,594 $ 632,879 Adjustments: Goodwill (161,904 ) (161,904 ) (161,904 ) (161,904 ) (168,771 ) Other intangible assets, net (27,132 ) (26,931 ) (27,578 ) (29,123 ) (30,690 ) Average tangible common equity $ 462,715 $ 452,244 $ 435,179 $ 431,567 $ 433,418 ROATCE 16.76 % 17.85 % 17.28 % 7.68 % 0.08 % 
