$MSBI Midland States Bancorp, Inc. Announces 2021 First Quarter Results

on April 22, 2021 News and Tags: , , , with 0 comments

Summary

Net income of $18.5 million, or $0.81 diluted earnings per share
Efficiency ratio improved to 56.88% from 58.55% in Q4 2020
Return on average shareholders’ equity of 12.04%
Return on average tangible common equity of 17.28%
Tier 1 leverage ratio increased 29 bps to 7.79%
Book value and tangible book value per share increased 2.2% and 3.5%, respectively

EFFINGHAM, Ill., April 22, 2021 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (Nasdaq: MSBI) (the “Company”) today reported net income of $18.5 million, or $0.81 diluted earnings per share, for the first quarter of 2021. This compares to net income of $8.3 million, or $0.36 diluted earnings per share, for the fourth quarter of 2020, which was negatively impacted by $4.9 million of charges related to the prepayment of FHLB advances, a $0.6 million loss on mortgage servicing rights (“MSRs”) held-for-sale, and $0.2 million in integration and acquisition expenses, and to net income of $1.5 million, or $0.06 diluted earnings per share, for the first quarter of 2020, which was negatively impacted by an $8.5 million impairment on commercial MSRs and $0.9 million in integration and acquisition expenses.

Jeffrey G. Ludwig, President and Chief Executive Officer of the Company, said, “Our first quarter results reflect a significant increase in our level of profitability resulting from the actions we took last year to increase efficiencies and optimize our business model. Despite operating in a low growth, low interest rate environment, we are seeing substantial improvement in our performance metrics including our efficiency ratio, return on average assets, and return on average tangible equity, as well as strong increases in our capital ratios and book value.

“We continued to execute on our strategy to increase our recurring fee income with the announcement of our acquisition of ATG Trust Company, which we expect to close during the second quarter of 2021. The addition of ATG Trust will further increase our assets under administration and provide additional expertise in specialized areas that will improve our ability to attract new clients to our wealth management business.

“During the first quarter, we saw an elevated level of loan payoffs and paydowns, which impacted our total loan balances. However, we are seeing encouraging signs of improving economic conditions in our markets and a growing loan pipeline. As a result, we believe that we will see stronger loan production and loan growth as we move through the year. The stronger loan growth and redeployment of our excess liquidity into higher yielding assets should enable us to realize additional operating leverage and generate further improvement in our level of profitability going forward,” said Mr. Ludwig.

Adjusted Earnings

Financial results for the fourth quarter of 2020 were impacted by $4.9 million of charges related to the prepayment of FHLB advances, a $0.6 million loss on residential MSRs held-for sale, and $0.2 million in integration and acquisition expenses. Excluding these amounts and certain income, adjusted earnings were $12.5 million, or $0.54 per share, for the fourth quarter of 2020.

Financial results for the first quarter of 2020 were impacted by $0.9 million in integration and acquisition expenses, a $0.5 million loss on residential MSRs held-for-sale, and a $0.2 million loss on the repurchase of subordinated debt. Excluding these amounts and certain income and other expenses, adjusted earnings were $2.8 million, or $0.11 diluted earnings per share, for the first 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 first quarter of 2021 was 3.45%, compared to 3.47% for the fourth quarter of 2020. The Company’s net interest margin benefits from accretion income on purchased loan portfolios, which contributed 8 and 10 basis points to net interest margin in the first quarter of 2021 and fourth quarter of 2020, respectively. Excluding the impact of accretion income, net interest margin was unchanged from the fourth quarter of 2020, as a favorable shift in the mix of earning assets and a reduction in the average cost of funds was offset by a decline in the average yield on loans and securities.

Relative to the first quarter of 2020, net interest margin decreased from 3.48%. Accretion income on purchased loan portfolios contributed 16 basis points to net interest margin in the first quarter of 2020. Excluding the impact of accretion income, net interest margin increased 5 basis points compared to the first quarter of 2020, primarily due to a reduction in the average cost of deposits and the accelerated recognition of Paycheck Protection Program (“PPP”) loan income upon forgiveness.

Net Interest Income

Net interest income for the first quarter of 2021 was $51.9 million, a decrease of 3.1% from $53.5 million for the fourth quarter of 2020. Excluding accretion income, net interest income decreased $1.2 million from the prior quarter, which was primarily due to lower PPP loan income. Accretion income associated with purchased loan portfolios totaled $1.2 million for the first quarter of 2021, compared with $1.6 million for the fourth quarter of 2020. PPP loan income totaled $2.6 million, including loan origination fees of $2.1 million, in the first quarter of 2021, compared to $3.7 million, including loan origination fees of $3.1 million, in the fourth quarter of 2020.

Relative to the first quarter of 2020, net interest income increased $5.2 million, or 11.2%. Accretion income for the first quarter of 2020 was $2.2 million. Excluding the impact of accretion income, net interest income increased primarily due to organic loan growth and a significant decline in the cost of funds.

Noninterest Income

Noninterest income for the first quarter of 2021 was $14.8 million, an increase of 3.3% from $14.3 million for the fourth quarter of 2020. Impairment on commercial MSRs impacted noninterest income by $1.3 million and $2.3 million in the first quarter of 2021 and fourth quarter of 2020, respectively. Excluding the impairments, noninterest income decreased 3.5% primarily due to lower levels of residential mortgage banking revenue and service charges on deposit accounts.

Relative to the first quarter of 2020, noninterest income increased 72.3% from $8.6 million. The increase was primarily attributable to a lower level of impairment on commercial MSRs.

Wealth management revenue for the first quarter of 2021 was $5.9 million, an increase of 1.1% from the fourth quarter of 2020. Compared to the first quarter of 2020, wealth management revenue increased 4.5%.

Noninterest Expense

Noninterest expense for the first quarter of 2021 was $39.1 million, which included $0.2 million in integration and acquisition expenses, compared with $47.0 million in the fourth quarter of 2020, which included $4.9 million of charges related to the prepayment of FHLB advances, a $0.6 million loss on residential MSRs held-for sale, and $0.2 million in integration and acquisition expenses. Excluding the FHLB prepayment charges, losses on MSRs held-for sale, and integration and acquisition expenses, noninterest expense decreased by $2.5 million, primarily due to lower salaries and employee benefits expense resulting from the Company’s branch network and facilities optimization initiative implemented during the fourth quarter of 2020, as well as a one-time vacation rollover accrual recorded in the prior quarter.

Relative to the first quarter of 2020, noninterest expense decreased 6.2% from $41.7 million, which included $0.9 million in integration and acquisition expenses, a $0.5 million loss on residential MSRs held-for-sale, and a $0.2 million loss on the repurchase of subordinated debt. Excluding the integration and acquisition expenses, the losses on residential MSRs held-for-sale and the loss on the repurchase of subordinated debt, noninterest expense declined $1.1 million, primarily due to lower salaries and employee benefits expense and lower occupancy and equipment expense resulting from the Company’s branch network and facilities optimization initiative.

Loan Portfolio

Total loans outstanding were $4.91 billion at March 31, 2021, compared with $5.10 billion at December 31, 2020 and $4.38 billion at March 31, 2020. The decrease in total loans from December 31, 2020 was primarily attributable to elevated payoffs and paydowns across most of the Company’s major portfolios, as well as lower end-of-period balances on commercial FHA warehouse lines of credit, which was partially offset by an increase in PPP loans following the origination of $79.3 million of loans in the second round of the program.

Equipment finance balances decreased $2.9 million from December 31, 2020 to $858.6 million at March 31, 2021, which are booked within the commercial loans and leases portfolio.

The increase in total loans from March 31, 2020 was primarily attributable to the growth in equipment finance balances, consumer loans, and PPP loans.

Deposits

Total deposits were $5.34 billion at March 31, 2021, compared with $5.10 billion at December 31, 2020, and $4.65 billion at March 31, 2020. The increase in total deposits from the end of the prior quarter was primarily attributable to strong inflows of retail deposits resulting from federal government stimulus payments and PPP-related commercial deposits.

Asset Quality

Nonperforming loans totaled $52.8 million, or 1.08% of total loans, at March 31, 2021, compared with $54.1 million, or 1.06% of total loans, at December 31, 2020. The decrease in nonperforming loans was primarily attributable to the resolution of long-term problem loans. At March 31, 2020, nonperforming loans totaled $58.2 million, or 1.33% of total loans.

Net charge-offs for the first quarter of 2021 were $1.7 million, or 0.14% of average loans on an annualized basis.

The Company recorded a provision for credit losses of $3.6 million for the first quarter of 2021, which was primarily related to additions to specific reserves.

The Company’s allowance for credit losses on loans was 1.28% of total loans and 118.7% of nonperforming loans at March 31, 2021, compared with 1.18% of total loans and 111.8% of nonperforming loans at December 31, 2020. Approximately 90.3% of the allowance for credit losses on loans at March 31, 2021 was allocated to general reserves.

Capital

At March 31, 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
March 31, 2021 Consolidated
Ratios as of
March 31, 2021
Minimum

Regulatory
Requirements (2)
Total capital to risk-weighted assets 12.18% 13.73% 10.50%
Tier 1 capital to risk-weighted assets 11.15% 9.62% 8.50%
Tier 1 leverage ratio 9.03% 7.79% 4.00%
Common equity Tier 1 capital 11.15% 8.39% 7.00%
Tangible common equity to tangible assets (1) NA 6.67% 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 first quarter of 2021, the Company repurchased 65,840 shares of its common stock at a weighted average price of $18.35 under its stock repurchase program, which authorized the repurchase of up to $50 million of its common stock. As of March 31, 2021, the Company had $5.2 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, April 23, 2021, to discuss its financial results. The call can be accessed via telephone at (877) 516-3531; conference ID: 9390877. A recorded replay can be accessed through April 30, 2021, by dialing (855) 859-2056; conference ID: 9390877.

A slide presentation relating to the first 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 March 31, 2021, the Company had total assets of approximately $6.88 billion, and its Wealth Management Group had assets under administration of approximately $3.56 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:// /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; and other risks detailed from time to time in filings made by the Company with the Securities and Exchange Commission. Readers should note that the forward-looking statements included in this press release are not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "will," "propose," "may," "plan," "seek," "expect," "intend," "estimate," "anticipate," "believe," "continue," or similar terminology. Any forward-looking statements presented herein are made only as of the date of this press release, and the Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

CONTACTS:
Jeffrey G. Ludwig, President and CEO, at jludwig@midlandsb.com or (217) 342-7321
Eric T. Lemke, Chief Financial Officer, at elemke@midlandsb.com or (217) 342-7321
Douglas J. Tucker, SVP and Corporate Counsel, at dtucker@midlandsb.com or (217) 342-7321

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited)

For the Quarter Ended
March 31, December 31, September 30, June 30, March 31,
(dollars in thousands, except per share data) 2021 2020 2020 2020 2020
Earnings Summary
Net interest income $ 51,868 $ 53,516 $ 49,980 $ 48,989 $ 46,651
Provision for credit losses 3,565 10,058 11,728 10,997 11,578
Noninterest income 14,816 14,336 18,919 19,396 8,598
Noninterest expense 39,079 47,048 53,901 41,395 41,666
Income before income taxes 24,040 10,746 3,270 15,993 2,005
Income taxes 5,502 2,413 3,184 3,424 456
Net income $ 18,538 $ 8,333 $ 86 $ 12,569 $ 1,549

Diluted earnings per common share $ 0.81 $ 0.36 $ - $ 0.53 $ 0.06
Weighted average shares outstanding - diluted 22,578,553 22,656,343 22,937,837 23,339,964 24,538,002
Return on average assets 1.11 % 0.49 % 0.01 % 0.77 % 0.10 %
Return on average shareholders' equity 12.04 % 5.32 % 0.05 % 8.00 % 0.96 %
Return on average tangible common equity (1) 17.28 % 7.68 % 0.08 % 11.84 % 1.39 %
Net interest margin 3.45 % 3.47 % 3.33 % 3.32 % 3.48 %
Efficiency ratio (1) 56.88 % 58.55 % 57.74 % 59.42 % 62.21 %

Adjusted Earnings Performance Summary (1)
Adjusted earnings $ 18,662 $ 12,471 $ 12,023 $ 12,884 $ 2,806
Adjusted diluted earnings per common share $ 0.82 $ 0.54 $ 0.52 $ 0.55 $ 0.11
Adjusted return on average assets 1.12 % 0.73 % 0.72 % 0.78 % 0.19 %
Adjusted return on average shareholders' equity 12.12 % 7.97 % 7.56 % 8.20 % 1.73 %
Adjusted return on average tangible common equity 17.39 % 11.50 % 11.04 % 12.14 % 2.53 %
Adjusted pre-tax, pre-provision earnings $ 29,051 $ 28,855 $ 28,751 $ 27,531 $ 23,785
Adjusted pre-tax, pre-provision return on average assets 1.75 % 1.69 % 1.72 % 1.68 % 1.58 %

(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
March 31, December 31, September 30, June 30, March 31,
(in thousands, except per share data) 2021 2020 2020 2020 2020
Net interest income:
Interest income $ 60,503 $ 62,712 $ 60,314 $ 60,548 $ 61,314
Interest expense 8,635 9,196 10,334 11,559 14,663
Net interest income 51,868 53,516 49,980 48,989 46,651
Provision for credit losses:
Provision for credit losses on loans 3,950 10,000 10,970 11,610 10,569
Provision for credit losses on unfunded commitments (535 ) - 577 (665 ) 934
Provision for other credit losses 150 58 181 52 75
Total provision for credit losses 3,565 10,058 11,728 10,997 11,578
Net interest income after provision for credit losses 48,303 43,458 38,252 37,992 35,073
Noninterest income:
Wealth management revenue 5,931 5,868 5,559 5,698 5,677
Commercial FHA revenue 292 400 926 3,414 1,267
Residential mortgage banking revenue 1,574 2,285 3,049 2,723 1,755
Service charges on deposit accounts 1,826 2,149 2,092 1,706 2,656
Interchange revenue 3,375 3,137 3,283 3,013 2,833
Gain on sales of investment securities, net - - 1,721 - -
Impairment on commercial mortgage servicing rights (1,275 ) (2,344 ) (1,418 ) (107 ) (8,468 )
Company-owned life insurance 860 893 897 892 900
Other income 2,233 1,948 2,810 2,057 1,978
Total noninterest income 14,816 14,336 18,919 19,396 8,598
Noninterest expense:
Salaries and employee benefits 20,528 22,636 21,118 20,740 21,063
Occupancy and equipment 3,940 3,531 4,866 4,286 4,869
Data processing 5,993 5,987 5,721 5,458 5,477
Professional 2,185 1,912 1,861 1,606 1,855
Amortization of intangible assets 1,515 1,556 1,557 1,629 1,762
Loss on mortgage servicing rights held for sale - 617 188 391 496
Impairment related to facilities optimization - (10 ) 12,651 60 146
FHLB advances prepayment fees 8 4,872 - - -
Other expense 4,910 5,947 5,939 7,225 5,998
Total noninterest expense 39,079 47,048 53,901 41,395 41,666
Income before income taxes 24,040 10,746 3,270 15,993 2,005
Income taxes 5,502 2,413 3,184 3,424 456
Net income $ 18,538 $ 8,333 $ 86 $ 12,569 $ 1,549

Basic earnings per common share $ 0.81 $ 0.36 $ 0.00 $ 0.53 $ 0.06
Diluted earnings per common share $ 0.81 $ 0.36 $ 0.00 $ 0.53 $ 0.06

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)

As of
March 31, December 31, September 30, June 30, March 31,
(in thousands) 2021 2020 2020 2020 2020
Assets
Cash and cash equivalents $ 631,219 $ 341,640 $ 461,196 $ 519,868 $ 449,396
Investment securities 690,390 686,135 618,974 639,693 661,894
Loans 4,910,806 5,103,331 4,941,466 4,839,423 4,376,204
Allowance for credit losses on loans (62,687 ) (60,443 ) (52,771 ) (47,093 ) (38,545 )
Total loans, net 4,848,119 5,042,888 4,888,695 4,792,330 4,337,659
Loans held for sale 55,174 138,090 62,500 32,403 113,852
Premises and equipment, net 73,255 74,124 74,967 89,046 90,118
Other real estate owned 20,304 20,247 15,961 12,728 7,892
Loan servicing rights, at lower of cost or fair value 36,876 39,276 42,465 44,239 44,566
Goodwill 161,904 161,904 161,904 172,796 172,796
Other intangible assets, net 26,867 28,382 29,938 31,495 33,124
Cash surrender value of life insurance policies 146,864 146,004 145,112 144,215 143,323
Other assets 193,814 189,850 198,333 165,685 153,610
Total assets $ 6,884,786 $ 6,868,540 $ 6,700,045 $ 6,644,498 $ 6,208,230

Liabilities and Shareholders' Equity
Noninterest-bearing deposits $ 1,522,433 $ 1,469,579 $ 1,355,188 $ 1,273,267 $ 1,052,726
Interest-bearing deposits 3,818,080 3,631,437 3,673,548 3,669,840 3,597,914
Total deposits 5,340,513 5,101,016 5,028,736 4,943,107 4,650,640
Short-term borrowings 71,728 68,957 58,625 77,136 43,578
FHLB advances and other borrowings 529,171 779,171 693,640 693,865 593,089
Subordinated debt 169,888 169,795 169,702 169,610 169,505
Trust preferred debentures 48,954 48,814 48,682 48,551 48,420
Other liabilities 89,065 79,396 78,780 78,640 71,838
Total liabilities 6,249,319 6,247,149 6,078,165 6,010,909 5,577,070
Total shareholders’ equity 635,467 621,391 621,880 633,589 631,160
Total liabilities and shareholders’ equity $ 6,884,786 $ 6,868,540 $ 6,700,045 $ 6,644,498 $ 6,208,230

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)

As of
March 31,
December 31,
September 30,
June 30, March 31,
(in thousands) 2021
2020
2020
2020 2020
Loan Portfolio
Commercial loans and leases $ 1,977,440 $ 2,095,639 $ 1,938,691 $ 1,856,435 $ 1,439,145
Commercial real estate 1,494,031 1,525,973 1,496,758 1,495,183 1,507,280
Construction and land development 191,870 172,737 177,894 207,593 208,361
Residential real estate 398,501 442,880 470,829 509,453 548,014
Consumer 848,964 866,102 857,294 770,759 673,404
Total loans $ 4,910,806 $ 5,103,331 $ 4,941,466 $ 4,839,423 $ 4,376,204

Deposit Portfolio
Noninterest-bearing demand $ 1,522,433 $ 1,469,579 $ 1,355,188 $ 1,273,267 $ 1,052,726
Interest-bearing:
Checking 1,601,449 1,568,888 1,581,216 1,484,728 1,425,022
Money market 819,455 785,871 826,454 877,675 849,642
Savings 653,256 597,966 580,748 594,685 534,457
Time 718,788 655,620 661,872 689,841 765,870
Brokered time 25,132 23,092 23,258 22,911 22,923
Total deposits $ 5,340,513 $ 5,101,016 $ 5,028,736 $ 4,943,107 $ 4,650,640

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)

For the Quarter Ended
March 31, December 31, September 30, June 30, March 31,
(dollars in thousands) 2021 2020 2020 2020 2020
Average Balance Sheets
Cash and cash equivalents $ 350,061 $ 415,686 $ 491,728 $ 489,941 $ 337,851
Investment securities 680,202 672,937 628,705 650,356 662,450
Loans 4,992,802 4,998,912 4,803,940 4,696,288 4,384,206
Loans held for sale 65,365 45,196 44,880 99,169 19,844
Nonmarketable equity securities 55,935 51,906 50,765 50,661 45,124
Total interest-earning assets 6,144,365 6,184,637 6,020,018 5,986,415 5,449,475
Non-earning assets 602,017 602,716 625,522 619,411 624,594
Total assets $ 6,746,382 $ 6,787,353 $ 6,645,540 $ 6,605,826 $ 6,074,069

Interest-bearing deposits $ 3,757,108 $ 3,680,645 $ 3,656,833 $ 3,651,406 $ 3,549,515
Short-term borrowings 75,544 62,432 64,010 59,103 55,616
FHLB advances and other borrowings 617,504 682,981 693,721 692,470 532,733
Subordinated debt 169,844 169,751 169,657 169,560 170,026
Trust preferred debentures 48,887 48,751 48,618 48,487 48,357
Total interest-bearing liabilities 4,668,887 4,644,560 4,632,839 4,621,026 4,356,247
Noninterest-bearing deposits 1,370,604 1,446,359 1,303,963 1,280,983 986,178
Other noninterest-bearing liabilities 82,230 73,840 75,859 71,853 78,943
Shareholders' equity 624,661 622,594 632,879 631,964 652,701
Total liabilities and shareholders' equity $ 6,746,382 $ 6,787,353 $ 6,645,540 $ 6,605,826 $ 6,074,069

Yields
Earning Assets
Cash and cash equivalents 0.11 % 0.12 % 0.10 % 0.14 % 1.26 %
Investment securities 2.51 % 2.65 % 2.86 % 3.05 % 3.23 %
Loans 4.50 % 4.58 % 4.57 % 4.64 % 5.01 %
Loans held for sale 2.74 % 3.14 % 2.92 % 4.07 % 3.87 %
Nonmarketable equity securities 4.93 % 5.22 % 5.26 % 5.40 % 5.39 %
Total interest-earning assets 4.02 % 4.06 % 4.01 % 4.10 % 4.56 %

Interest-Bearing Liabilities
Interest-bearing deposits 0.34 % 0.36 % 0.46 % 0.61 % 0.95 %
Short-term borrowings 0.13 % 0.14 % 0.17 % 0.19 % 0.73 %
FHLB advances and other borrowings 1.69 % 1.71 % 1.85 % 1.69 % 2.24 %
Subordinated debt 5.57 % 5.60 % 5.58 % 5.85 % 5.90 %
Trust preferred debentures 4.08 % 4.03 % 4.16 % 4.86 % 6.02 %
Total interest-bearing liabilities 0.75 % 0.79 % 0.89 % 1.01 % 1.35 %

Cost of Deposits 0.25 % 0.26 % 0.34 % 0.45 % 0.74 %

Net Interest Margin 3.45 % 3.47 % 3.33 % 3.32 % 3.48 %

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)

As of and for the Quarter Ended
March 31, December 31, September 30, June 30, March 31,
(dollars in thousands, except per share data) 2021 2020 2020 2020 2020
Asset Quality
Loans 30-89 days past due $ 24,819 $ 31,460 $ 28,188 $ 36,551 $ 40,392
Nonperforming loans 52,826 54,070 67,443 60,513 58,166
Nonperforming assets 75,004 75,432 84,795 74,707 67,158
Net charge-offs 1,706 2,328 5,292 3,062 12,835
Loans 30-89 days past due to total loans 0.51 % 0.62 % 0.57 % 0.76 % 0.92 %
Nonperforming loans to total loans 1.08 % 1.06 % 1.36 % 1.25 % 1.33 %
Nonperforming assets to total assets 1.09 % 1.10 % 1.27 % 1.12 % 1.08 %
Allowance for credit losses to total loans 1.28 % 1.18 % 1.07 % 0.97 % 0.88 %
Allowance for credit losses to nonperforming loans 118.67 % 111.79 % 78.25 % 77.82 % 66.27 %
Net charge-offs to average loans 0.14 % 0.19 % 0.44 % 0.26 % 1.18 %

Wealth Management
Trust assets under administration $ 3,560,427 $ 3,480,759 $ 3,260,893 $ 3,253,784 $ 2,967,536

Market Data
Book value per share at period end $ 28.43 $ 27.83 $ 27.51 $ 27.62 $ 26.99
Tangible book value per share at period end (1) $ 19.98 $ 19.31 $ 19.03 $ 18.72 $ 18.19
Market price at period end $ 27.74 $ 17.87 $ 12.85 $ 14.95 $ 17.49
Shares outstanding at period end 22,351,740 22,325,471 22,602,844 22,937,296 23,381,496

Capital
Total capital to risk-weighted assets 13.73 % 13.24 % 13.34 % 13.67 % 13.73 %
Tier 1 capital to risk-weighted assets 9.62 % 9.20 % 9.40 % 9.71 % 9.76 %
Tier 1 common capital to risk-weighted assets 8.39 % 7.99 % 8.18 % 8.44 % 8.47 %
Tier 1 leverage ratio 7.79 % 7.50 % 7.72 % 7.75 % 8.39 %
Tangible common equity to tangible assets (1) 6.67 % 6.46 % 6.61 % 6.67 % 7.08 %

(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
March 31, December 31, September 30, June 30, March 31,
(dollars in thousands, except per share data) 2021 2020 2020 2020 2020
Income before income taxes - GAAP $ 24,040 $ 10,746 $ 3,270 $ 15,993 $ 2,005
Adjustments to noninterest income:
Gain on sales of investment securities, net - - 1,721 - -
Other 75 3 (17 ) 11 (13 )
Total adjustments to noninterest income 75 3 1,704 11 (13 )
Adjustments to noninterest expense:
Loss on mortgage servicing rights held for sale - 617 188 391 496
Loss on repurchase of subordinated debt - - - - 193
Impairment related to facilities optimization - (10 ) 12,651 60 146
FHLB advances prepayment fees 8 4,872 - - -
Integration and acquisition expenses 238 231 1,200 (6 ) 886
Total adjustments to noninterest expense 246 5,710 14,039 445 1,721
Adjusted earnings pre tax 24,211 16,453 15,605 16,427 3,739
Adjusted earnings tax 5,549 3,982 3,582 3,543 933
Adjusted earnings - non-GAAP $ 18,662 $ 12,471 $ 12,023 $ 12,884 $ 2,806
Adjusted diluted earnings per common share $ 0.82 $ 0.54 $ 0.52 $ 0.55 $ 0.11
Adjusted return on average assets 1.12 % 0.73 % 0.72 % 0.78 % 0.19 %
Adjusted return on average shareholders' equity 12.12 % 7.97 % 7.56 % 8.20 % 1.73 %
Adjusted return on average tangible common equity 17.39 % 11.50 % 11.04 % 12.14 % 2.53 %

Adjusted Pre-Tax, Pre-Provision Earnings Reconciliation

For the Quarter Ended
March 31, December 31, September 30, June 30, March 31,
(dollars in thousands) 2021 2020 2020 2020 2020
Adjusted earnings pre tax - non-GAAP $ 24,211 $ 16,453 $ 15,605 $ 16,427 $ 3,739
Provision for credit losses 3,565 10,058 11,728 10,997 11,578
Impairment on commercial mortgage servicing rights 1,275 2,344 1,418 107 8,468
Adjusted pre-tax, pre-provision earnings - non-GAAP $ 29,051 $ 28,855 $ 28,751 $ 27,531 $ 23,785
Adjusted pre-tax, pre-provision return on average assets 1.75 % 1.69 % 1.72 % 1.68 % 1.58 %

MIDLAND STATES BANCORP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued)

Efficiency Ratio Reconciliation
For the Quarter Ended
March 31, December 31, September 30, June 30, March 31,
(dollars in thousands) 2021 2020 2020 2020 2020
Noninterest expense - GAAP $ 39,079 $ 47,048 $ 53,901 $ 41,395 $ 41,666
Loss on mortgage servicing rights held for sale - (617 ) (188 ) (391 ) (496 )
Loss on repurchase of subordinated debt - - - - (193 )
Impairment related to facilities optimization - 10 (12,651 ) (60 ) (146 )
FHLB advances prepayment fees (8 ) (4,872 ) - - -
Integration and acquisition expenses (238 ) (231 ) (1,200 ) 6 (885 )
Adjusted noninterest expense $ 38,833 $ 41,338 $ 39,862 $ 40,950 $ 39,946

Net interest income - GAAP $ 51,868 $ 53,516 $ 49,980 $ 48,989 $ 46,651
Effect of tax-exempt income 386 413 430 438 485
Adjusted net interest income 52,254 53,929 50,410 49,427 47,136

Noninterest income - GAAP 14,816 14,336 18,919 19,396 8,598
Impairment on commercial mortgage servicing rights 1,275 2,344 1,418 107 8,468
Gain on sales of investment securities, net - - (1,721 ) - -
Other (75 ) (3 ) 17 (11 ) 13
Adjusted noninterest income 16,016 16,677 18,633 19,492 17,079

Adjusted total revenue $ 68,270 $ 70,606 $ 69,043 $ 68,919 $ 64,215

Efficiency ratio 56.88 % 58.55 % 57.74 % 59.42 % 62.21 %

MIDLAND STATES BANCORP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued)

Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share

As of
March 31, December 31, September 30, June 30, March 31,
(dollars in thousands, except per share data) 2021 2020 2020 2020 2020
Shareholders' Equity to Tangible Common Equity
Total shareholders' equity—GAAP $ 635,467 $ 621,391 $ 621,880 $ 633,589 $ 631,160
Adjustments:
Goodwill (161,904 ) (161,904 ) (161,904 ) (172,796 ) (172,796 )
Other intangible assets, net (26,867 ) (28,382 ) (29,938 ) (31,495 ) (33,124 )
Tangible common equity $ 446,696 $ 431,105 $ 430,038 $ 429,298 $ 425,240

Total Assets to Tangible Assets:
Total assets—GAAP $ 6,884,786 $ 6,868,540 $ 6,700,045 $ 6,644,498 $ 6,208,230
Adjustments:
Goodwill (161,904 ) (161,904 ) (161,904 ) (172,796 ) (172,796 )
Other intangible assets, net (26,867 ) (28,382 ) (29,938 ) (31,495 ) (33,124 )
Tangible assets $ 6,696,015 $ 6,678,254 $ 6,508,203 $ 6,440,207 $ 6,002,310

Common Shares Outstanding 22,351,740 22,325,471 22,602,844 22,937,296 23,381,496

Tangible Common Equity to Tangible Assets 6.67 % 6.46 % 6.61 % 6.67 % 7.08 %
Tangible Book Value Per Share $ 19.98 $ 19.31 $ 19.03 $ 18.72 $ 18.19

Return on Average Tangible Common Equity (ROATCE)

For the Quarter Ended
March 31, December 31, September 30, June 30, March 31,
(dollars in thousands) 2021 2020 2020 2020 2020
Net income available to common shareholders $ 18,538 $ 8,333 $ 86 $ 12,569 $ 1,549

Average total shareholders' equity—GAAP $ 624,661 $ 622,594 $ 632,879 $ 631,964 $ 652,701
Adjustments:
Goodwill (161,904 ) (161,904 ) (168,771 ) (172,796 ) (171,890 )
Other intangible assets, net (27,578 ) (29,123 ) (30,690 ) (32,275 ) (33,951 )
Average tangible common equity $ 435,179 $ 431,567 $ 433,418 $ 426,893 $ 446,860
ROATCE 17.28 % 7.68 % 0.08 % 11.84 % 1.39 %

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