Midland States Bancorp, Inc. Announces 2023 Fourth Quarter Results

Fourth Quarter 2023 Highlights:

• Net income available to common shareholders of $18.5 million, or $0.84 per diluted share
• Adjusted earnings available to common shareholders of $19.8 million, or $0.89 per diluted share
• Tangible book value per share increased 7.8% from prior quarter to $23.35
• Common equity tier 1 capital ratio improved to 8.40% from 8.07%
• Net interest margin of 3.21%, compared to 3.20% in prior quarter
• Efficiency ratio of 55.2% compared to 55.8% in prior quarter

EFFINGHAM, Ill., Jan. 25, 2024 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (NASDAQ:MSBI) (the "Company") today reported net income available to common shareholders of $18.5 million, or $0.84 per diluted share, for the fourth quarter of 2023, compared to $9.2 million, or $0.41 per diluted share, for the third quarter of 2023. This also compares to net income available to common shareholders of $29.7 million, or $1.30 per diluted share, for the fourth quarter of 2022.

Financial results for the fourth quarter of 2023 included a $1.1 million gain on the sale of shares of VISA B stock, offset by $2.9 million of losses on the sale of investment securities. Results for the third quarter of 2023 included a $4.5 million tax charge related to the surrender of certain company-owned life insurance policies, and $5.0 million of losses on the sale of investment securities. Results for the fourth quarter of 2022 included a $17.5 million gain on the termination of forward starting interest rate swaps and a $3.3 million loss on commercial mortgage servicing rights held for sale.

Excluding these transactions, adjusted earnings available to common shareholders were $19.8 million and $17.3 million, or $0.89 and $0.78 per diluted share, for the fourth and third quarters of 2023, respectively. Adjusted earnings available to common shareholders for the fourth quarter of 2022 was $19.3 million or $0.85 per diluted share.

The Company revised its accounting for the one-time enhancement fee related to the surrender and purchase of company-owned life insurance policies acquired in the third quarter of 2023. As a result, the $6.6 million enhancement fee on the replacement policies that was previously recorded in income on company-owned life insurance in the third quarter of 2023 has been reversed. The revision did not have an impact on adjusted earnings (a non-GAAP financial measure) for that period. The Company reflected this revision in its September 30, 2023 quarter to date and December 31, 2023 year to date income on company-owned life insurance. Additionally, the revision impacts the company-owned life insurance asset for the applicable period.

Jeffrey G. Ludwig, President and Chief Executive Officer of the Company, said, "While continuing to prioritize prudent risk management, we delivered another quarter of strong financial results with a higher level of earnings and returns than the prior quarter, as well as a slight increase in our net interest margin and improvement in our efficiency ratio. Our strong financial performance and prudent balance sheet management helped us to achieve our objective to further increase our capital ratios, while we also had a 7.8% increase in tangible book value per share during the quarter.

"Our business development focus remains on high quality commercial relationships in our markets, and the new clients we are adding in our targeted areas helped to offset the intentional runoff of equipment finance and consumer loans. The new and expanded client relationships are also resulting in inflows of commercial deposits, which has enabled us to improve our overall deposit mix by running off higher cost time deposits.

"While we will remain conservative in our new loan production until economic conditions improve, we believe that we can continue to deliver strong financial performance for our shareholders, particularly given our relatively neutral interest rate sensitivity that positions us well for whatever rate environment we see going forward. We will remain disciplined in our expense management while also investing in areas that we believe will enhance the long-term value of our franchise. One area is our Wealth Management business, where we have made improvements to our technology platform that we believe will enhance our business development capabilities. A second area is expanding our presence in the higher growth St. Louis market where we recently added a new market president that we believe will help accelerate our efforts to add new commercial, retail and wealth management clients. And a third area is our Banking-as-a-Service initiative, which we expect to begin making a meaningful contribution to our deposit gathering and fee income during 2024. Given the strength of the franchise we have built, we believe we are well positioned to continue delivering strong financial results in the near-term while continuing to operate with a long-term approach and executing on the strategies that we believe will further enhance shareholder value in the coming years," said Mr. Ludwig.

Balance Sheet Highlights

Total assets were $7.87 billion at December 31, 2023, compared to $7.97 billion at September 30, 2023, and $7.86 billion at December 31, 2022. At December 31, 2023, portfolio loans were $6.13 billion, compared to $6.28 billion at September 30, 2023, and $6.31 billion at December 31, 2022.

Loans

During the fourth quarter of 2023, outstanding loans declined by $149.8 million, or 2.4%, from September 30, 2023, 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, and residential real estate loans of $35.8 million and $5.4 million, respectively, were offset by decreases in all other loan categories. Equipment finance loan and lease balances decreased $59.9 million during the fourth quarter of 2023 as the Company continued to reduce its concentration of this product within the overall loan portfolio. Consumer loans decreased $84.8 million due to loan payoffs and a cessation in loans originated through GreenSky. Our Greensky-originated loan balances decreased $70.4 million during the fourth quarter to $688.0 million at December 31, 2023. In addition, during the fourth quarter, the Company ceased originating loans through LendingPoint. As of December 31, 2023, the Company had $121.0 million in loans that were originated through LendingPoint, which will continue to be serviced by LendingPoint.

		As of
		December 31,			September 30,			June 30,			March 31,			December 31,
(in thousands)		2023			2023			2023			2023			2022
Loan Portfolio
Commercial loans		$	951,387		$	943,761		$	962,756		$	937,920		$	872,794
Equipment finance loans			531,143			578,931			614,633			632,205			616,751
Equipment finance leases			473,350			485,460			500,485			510,029			491,744
Commercial FHA warehouse lines			—			48,547			30,522			10,275			25,029
Total commercial loans and leases			1,955,880			2,056,699			2,108,396			2,090,429			2,006,318
Commercial real estate			2,406,845			2,412,164			2,443,995			2,448,158			2,433,159
Construction and land development			452,593			416,801			366,631			326,836			320,882
Residential real estate			380,583			375,211			371,486			369,910			366,094
Consumer			935,178			1,020,008			1,076,836			1,118,938			1,180,014
Total loans		$	6,131,079		$	6,280,883		$	6,367,344		$	6,354,271		$	6,306,467

Loan Quality

Credit quality metrics declined this quarter compared the third quarter of 2023. Loans 30-89 days past due increased $36.2 million to $82.8 million as of December 31, 2023, compared to prior quarter end. Four commercial loans totaling $42.0 million accounted for this increase, of which $16.9 million was brought current in early January. Non-performing loans remained flat at $56.4 million at December 31, 2023, compared to $56.0 million as of September 30, 2023, and non-performing assets were 0.86% of total assets at the end of the fourth quarter of 2023, compared to 0.74% at September 30, 2023. An $8.7 million non-performing loan was transferred to OREO, and three commercial real estate loans totaling $9.0 million were placed on non-accrual in the fourth quarter of 2023.

At December 31, 2022, loans 30-89 days past due totaled $32.4 million, non-performing loans were $49.4 million, and non-performing assets as a percentage of total assets were 0.74%.

		As of and for the Three Months Ended
(in thousands)		December 31,				September 30,				June 30,				March 31,				December 31,
			2023				2023				2023				2023				2022
Asset Quality
Loans 30-89 days past due		$	82,778			$	46,608			$	44,161			$	30,895			$	32,372
Nonperforming loans			56,351				55,981				54,844				50,713				49,423
Nonperforming assets			67,701				58,677				57,688				58,806				57,824
Substandard loans			184,224				143,793				130,707				99,819				101,044
Net charge-offs			5,117				3,449				2,996				2,119				538
Loans 30-89 days past due to total loans			1.35	%			0.74	%			0.69	%			0.49	%			0.51	%
Nonperforming loans to total loans			0.92	%			0.89	%			0.86	%			0.80	%			0.78	%
Nonperforming assets to total assets			0.86	%			0.74	%			0.72	%			0.74	%			0.74	%
Allowance for credit losses to total loans			1.12	%			1.06	%			1.02	%			0.98	%			0.97	%
Allowance for credit losses to nonperforming loans			121.56	%			119.09	%			118.43	%			122.39	%			123.53	%
Net charge-offs to average loans			0.33	%			0.22	%			0.19	%			0.14	%			0.03	%

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 $68.5 million at December 31, 2023, compared to $66.7 million at September 30, 2023, and $61.1 million at December 31, 2022. The allowance as a percentage of portfolio loans was 1.12% at December 31, 2023, compared to 1.06% at September 30, 2023, and 0.97% at December 31, 2022.

Deposits

Total deposits were $6.31 billion at December 31, 2023, compared with $6.41 billion at September 30, 2023 and $6.36 billion at December 31, 2022. The deposit mix continues to shift from noninterest-bearing deposits to interest-bearing deposits due to the rate increases announced by the Federal Reserve in 2023 and the expectation that rates will remain high for a longer period. Interest rate promotions offered during the fourth quarter of 2023 on money market deposit products contributed to the increase in balances of $44.7 million at December 31, 2023, compared to September 30, 2023.

		As of
		December 31,			September 30,			June 30,			March 31,			December 31,
(in thousands)		2023			2023			2023			2023			2022
Deposit Portfolio
Noninterest-bearing demand		$	1,145,395		$	1,154,515		$	1,162,909		$	1,215,758		$	1,362,158
Interest-bearing:
Checking			2,511,840			2,572,224			2,499,693			2,502,827			2,494,073
Money market			1,135,629			1,090,962			1,226,470			1,263,813			1,184,101
Savings			559,267			582,359			624,005			636,832			661,932
Time			862,865			885,858			840,734			766,884			649,552
Brokered time			94,533			119,084			72,737			39,087			12,836
Total deposits		$	6,309,529		$	6,405,002		$	6,426,548		$	6,425,201		$	6,364,652

The Company estimates that uninsured deposits⁽¹⁾ totaled $1.22 billion, or 19% of total deposits, at December 31, 2023 compared to $1.28 billion, or 20% of total deposits, at September 30, 2023.

(1)   Uninsured deposits include the Call Report estimate of uninsured deposits less affiliate company 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 fourth quarter of 2023, net interest income, on a tax-equivalent basis, totaled $58.3 million, a decrease of $0.5 million, or 0.9%, compared to $58.8 million for the third quarter of 2023. The tax-equivalent net interest margin for the fourth quarter of 2023 was 3.21%, compared with 3.20% in the third quarter of 2023. Net interest income and related margin, on a tax-equivalent basis, was $63.8 million and 3.50%, respectively, in the fourth 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 fourth quarter of 2023 were $7.20 billion, compared to $7.28 billion for the third quarter of 2023. The yield increased 13 basis points to 5.78% compared to the third quarter of 2023. Interest-earning assets averaged $7.25 billion for the fourth quarter of 2022.

Average loans were $6.20 billion for the fourth quarter of 2023, compared to $6.30 billion for the third quarter of 2023 and $6.24 billion for the fourth quarter of 2022. The yield on loans was 6.00% and 5.93% for the fourth and third quarters of 2023, respectively.

Investment securities averaged $883.2 million for the fourth quarter of 2023, and yielded 4.16%, compared to an average balance and yield of $863.0 million and 3.60%, respectively, for the third 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 investments of $2.9 million and $5.0 million in the fourth and third quarters of 2023, respectively. The repositioning is expected to improve the overall margin, liquidity, and capital allocations. Investment securities averaged $736.6 million for the fourth quarter of 2022.

Average interest-bearing deposits were $5.30 billion for the fourth quarter of 2023, compared to $5.35 billion for the third quarter of 2023, and $5.05 billion for the fourth quarter of 2022. Cost of interest-bearing deposits was 2.93% in the fourth quarter of 2023, which represented a 13 basis point increase from the third quarter of 2023. A competitive market, driven by rising interest rates and increased competition, contributed to the increase in deposit costs.

		For the Three Months Ended
(dollars in thousands)			December 31, 2023									September 30, 2023									December 31, 2022
Interest-earning assets		Average Balance			Interest & Fees			Yield/Rate			Average Balance			Interest & Fees			Yield/Rate			Average Balance			Interest & Fees			Yield/Rate
Cash and cash equivalents		$	77,363		$	1,054		5.41	%		$	78,391		$	1,036		5.24	%		$	220,938		$	2,143		3.85	%
Investment securities			883,153			9,257		4.16				862,998			7,822		3.60				736,579			4,824		2.62
Loans			6,196,362			93,757		6.00				6,297,568			94,118		5.93				6,240,277			82,810		5.26
Loans held for sale			4,429			81		7.26				6,078			104		6.80				3,883			47		4.86
Nonmarketable equity securities			41,192			715		6.89				39,347			710		7.16				43,618			677		6.16
Total interest-earning assets		$	7,202,499		$	104,864		5.78	%		$	7,284,382		$	103,790		5.65	%		$	7,245,295		$	90,501		4.96	%
Noninterest-earning assets			695,293									622,969									609,866
Total assets		$	7,897,792								$	7,907,351								$	7,855,161
Interest-Bearing Liabilities
Interest-bearing deposits		$	5,295,296		$	39,156		2.93	%		$	5,354,356		$	37,769		2.80	%		$	5,053,158		$	19,841		1.56	%
Short-term borrowings			13,139			15		0.47				20,127			14		0.28				47,391			31		0.26
FHLB advances & other borrowings			430,207			4,750		4.38				402,500			4,557		4.49				460,598			4,264		3.67
Subordinated debt			93,512			1,281		5.43				93,441			1,280		5.43				107,374			1,463		5.45
Trust preferred debentures			50,541			1,402		11.00				50,379			1,369		10.78				49,902			1,066		8.47
Total interest-bearing liabilities		$	5,882,695		$	46,604		3.14	%		$	5,920,803		$	44,989		3.01	%		$	5,718,423		$	26,665		1.85	%
Noninterest-bearing deposits			1,142,062									1,116,988									1,336,620
Other noninterest-bearing liabilities			108,245									97,935									50,935
Shareholders' equity			764,790									771,625									749,183
Total liabilities and shareholder's equity		$	7,897,792								$	7,907,351								$	7,855,161
Net Interest Margin					$	58,260		3.21	%					$	58,801		3.20	%					$	63,836		3.50	%
Cost of Deposits								2.41	%								2.32	%								1.23	%

(1) Interest income and average rates for tax-exempt loans and investment 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 December 31, 2023, September 30, 2023 and December 31, 2022, respectively.

For the year ended December 31, 2023, net interest income, on a tax-equivalent basis, decreased to $236.8 million, with a tax-equivalent net interest margin of 3.26%, compared to net interest income, on a tax-equivalent basis, of $247.0 million, and a tax-equivalent net interest margin of 3.57% for the year ended December 31, 2022.

The yield on earning assets increased 119 basis points to 5.57% for the year ended December 31, 2023 compared to prior year. However, the cost of interest-bearing liabilities increased at a faster rate during this period, increasing 183 basis points to 2.87% for the year ended December 31, 2023.

		For the Years Ended
		December 31,									December 31,
(dollars in thousands)			2023									2022
Interest-earning assets		Average Balance			Interest & Fees			Yield/Rate			Average Balance			Interest & Fees			Yield/Rate
Cash and cash equivalents		$	77,046		$	3,922		5.09	%		$	256,221		$	3,907		1.52	%
Investment securities			854,576			30,361		3.55				799,218			19,277		2.41
Loans			6,292,260			367,762		5.84				5,811,403			277,252		4.77
Loans held for sale			4,034			260		6.45				12,669			404		3.19
Nonmarketable equity securities			43,318			2,819		6.51				38,543			2,198		5.70
Total interest-earning assets		$	7,271,234		$	405,124		5.57	%		$	6,918,054		$	303,038		4.38	%
Noninterest-earning assets			635,490									618,593
Total assets		$	7,906,724								$	7,536,647
Interest-Bearing Liabilities
Interest-bearing deposits		$	5,241,723		$	136,947		2.61	%		$	4,802,130		$	36,061		0.75	%
Short-term borrowings			23,406			68		0.29				58,688			104		0.18
FHLB advances & other borrowings			460,781			20,709		4.49				355,282			9,335		2.63
Subordinated debt			95,986			5,266		5.49				131,203			7,495		5.71
Trust preferred debentures			50,298			5,289		10.52				49,678			3,025		6.09
Total interest-bearing liabilities		$	5,872,194		$	168,279		2.87	%		$	5,396,981		$	56,020		1.04	%
Noninterest-bearing deposits			1,173,873									1,386,251
Other noninterest-bearing liabilities			90,562									65,539
Shareholders' equity			770,095									687,876
Total liabilities and shareholders' equity		$	7,906,724								$	7,536,647
Net Interest Margin					$	236,845		3.26	%					$	247,018		3.57	%
Cost of Deposits								2.13	%								0.58	%

(1) Interest income and average rates for tax-exempt loans and investment securities are presented on a tax-equivalent basis, assuming a federal income tax rate of 21%. Tax-equivalent adjustments totaled $0.8 million and $1.3 million for the years ended December 31, 2023 and 2022, respectively.

Noninterest Income

Noninterest income was $20.5 million for the fourth quarter of 2023, compared to $11.5 million for the third quarter of 2023. Noninterest income for the fourth quarter of 2023 included incremental servicing revenues of $2.2 million and $1.6 million related to our commercial FHA servicing portfolio and the Greensky portfolio, respectively. Also included was a $1.1 million one-time gain from the sale of Visa B stock, offset by $2.9 million of losses on the sale of investment securities. The third quarter of 2023 included $5.0 million of losses on the sale of investment securities. Excluding these transactions, noninterest income for the fourth quarter of 2023 and the third quarter of 2023 was $18.5 million and $16.5 million, respectively. Noninterest income for the fourth quarter of 2022 was $33.8 million and included $17.5 million gain on the termination of hedged interest rate swaps.

		For the Three Months Ended											For the Years Ended
		December 31,				September 30,				December 31,			December 31,				December 31,
(in thousands)			2023			2023(1)					2022			2023				2022
Noninterest income
Wealth management revenue		$	6,604			$	6,288			$	6,227		$	25,572			$	25,708
Residential mortgage banking revenue			451				507				316			1,903				1,509
Service charges on deposit accounts			3,246				3,149				2,879			11,990				10,237
Interchange revenue			3,585				3,609				3,478			14,302				13,879
Income on company-owned life insurance			1,753				918				796			4,439				3,584
Loss on sales of investment securities, net			(2,894	)			(4,961	)			—			(9,372	)			(230	)
Gain (loss) on sales of other real estate owned, net			6				—				—			825				(118	)
Gain on termination of hedged interest rate swaps			—				—				17,531			—				17,531
Gain on repurchase of subordinated debt, net			—				—				—			676				—
Impairment on commercial mortgage servicing rights			—				—				—			—				(1,263	)
Other income			7,762				2,035				2,612			16,255				9,054
Total noninterest income		$	20,513			$	11,545			$	33,839		$	66,590			$	79,891

(1) September 30, 2023 amounts include the impact of the revision previously mentioned in this earnings release.

Noninterest Expense

Noninterest expense was $44.5 million in the fourth quarter of 2023, compared to $42.0 million in the third quarter of 2023, and $49.9 million in the fourth quarter of 2022. The efficiency ratio improved to 55.22% for the quarter ended December 31, 2023, compared to 55.82% for the quarter ended September 30, 2023, and 58.26% for the quarter ended December 31, 2022.

		For the Three Months Ended									For the Years Ended
		December 31,			September 30,			December 31,			December 31,			December 31,
(in thousands)		2023			2023			2022			2023			2022
Noninterest expense
Salaries and employee benefits		$	24,031		$	22,307		$	22,901		$	93,438		$	90,305
Occupancy and equipment			3,934			3,730			3,748			15,986			14,842
Data processing			6,963			6,468			6,302			26,286			24,350
Professional			2,072			1,554			1,726			7,049			6,907
Amortization of intangible assets			1,130			1,129			1,333			4,758			5,410
Other real estate owned			8			—			3,779			333			5,188
Loss on mortgage servicing rights held for sale			—			—			3,250			—			3,250
FDIC insurance			1,147			1,107			703			4,779			3,336
Other expense			5,203			5,743			6,201			21,273			22,074
Total noninterest expense		$	44,488		$	42,038		$	49,943		$	173,902		$	175,662

Salaries and employee benefits expenses were $24.0 million in the fourth quarter of 2023, compared to $22.3 million in the third quarter of 2023 and $22.9 million in the fourth quarter of 2022. The Company recognized a $1.1 million benefit related to claiming the Employees Retention Tax Credit in the fourth quarter of 2023. This was offset by increased incentive and performance-based expense accruals and increased medical costs of $1.7 million and $0.6 million, respectively. Employees numbered 914 at December 31, 2023, compared to 911 at September 30, 2023, and 935 at December 31, 2022.

Income Tax Expense

Income tax expense was $6.4 million for the fourth quarter of 2023, as compared to $11.5 million for the third quarter of 2023 and $11.0 million for the fourth quarter of 2022. The resulting effective tax rates were 23.7%, 50.3% and 25.1% respectively. The third quarter of 2023 included tax charges of $4.5 million associated with the surrender of certain company-owned life insurance policies and $1.4 million related to the finalization of the 2022 federal and state tax returns. Exclusive of these items our effective tax rate was 24.6% for the third quarter of 2023.

Capital

At December 31, 2023, Midland States Bank and the Company exceeded all regulatory capital requirements under Basel III, and Midland States Bank met the qualifications to be a ‘‘well-capitalized'' financial institution, as summarized in the following table:

	As of December 31, 2023
	Midland States Bank		Midland States Bancorp, Inc.		Minimum Regulatory Requirements(2)
Total capital to risk-weighted assets	12.40%		13.20%		10.50%
Tier 1 capital to risk-weighted assets	11.44%		10.91%		8.50%
Tier 1 leverage ratio	10.18%		9.71%		4.00%
Common equity Tier 1 capital	11.44%		8.40%		7.00%
Tangible common equity to tangible assets(1)	N/A		6.55%		N/A

(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%.

The impact of rising interest rates on the Company's investment portfolio and cash flow hedges resulted in a $76.8 million accumulated other comprehensive loss at December 31, 2023, which reduces tangible book value by $3.56 per share.

Stock Repurchase Program

On December 5, 2023, 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, 2024. The new stock repurchase program became effective on January 1, 2024. The Company's previous stock repurchase program expired on December 31, 2023. During the fourth quarter of 2023, the Company repurchased 135,685 shares of its common stock at a weighted average price of $21.11 under its stock repurchase program.

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 December 31, 2023, the Company had total assets of approximately $7.87 billion, and its Wealth Management Group had assets under administration of approximately $3.73 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 [email protected] or (217) 342-7321

Eric T. Lemke, Chief Financial Officer, at [email protected] or (217) 342-7321

Douglas J. Tucker, SVP and Corporate Counsel, at [email protected] or (217) 342-7321

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited)
		As of and for the Three Months Ended												As of and for the Years Ended
(dollars in thousands, except per share data)		December 31,  2023				September 30, 2023(2)				December 31, 2022				December 31, 2023				December 31, 2022
Earnings Summary
Net interest income		$	58,077			$	58,596			$	63,550			$	236,017			$	245,735
Provision for credit losses			6,950				5,168				3,544				21,132				20,126
Noninterest income			20,513				11,545				33,839				66,590				79,891
Noninterest expense			44,488				42,038				49,943				173,902				175,662
Income before income taxes			27,152				22,935				43,902				107,573				129,838
Income taxes			6,441				11,533				11,030				32,113				30,813
Net income			20,711				11,402				32,872				75,460				99,025
Preferred dividends			2,228				2,229				3,169				8,913				3,169
Net income available to common shareholders		$	18,483			$	9,173			$	29,703			$	66,547			$	95,856
Diluted earnings per common share		$	0.84			$	0.41			$	1.30			$	2.97			$	4.23
Weighted average common shares outstanding - diluted			21,822,328				21,977,196				22,503,611				22,124,402				22,395,698
Return on average assets			1.04	%			0.57	%			1.66	%			0.95	%			1.31	%
Return on average shareholders' equity			10.74	%			5.86	%			17.41	%			9.80	%			14.40	%
Return on average tangible common equity(1)			15.41	%			7.56	%			25.89	%			13.89	%			20.76	%
Net interest margin			3.21	%			3.20	%			3.50	%			3.26	%			3.57	%
Efficiency ratio(1)			55.22	%			55.82	%			58.26	%			55.91	%			55.35	%
Adjusted Earnings Performance Summary(1)
Adjusted earnings available to common shareholders		$	19,793			$	17,278			$	19,278			$	76,576			$	85,852
Adjusted diluted earnings per common share		$	0.89			$	0.78			$	0.85			$	3.42			$	3.79
Adjusted return on average assets			1.11	%			0.98	%			1.13	%			1.08	%			1.18	%
Adjusted return on average shareholders' equity			11.42	%			10.03	%			11.89	%			11.10	%			12.94	%
Adjusted return on average tangible common equity			16.51	%			14.24	%			16.80	%			15.98	%			18.59	%
Adjusted pre-tax, pre-provision earnings		$	35,898			$	33,064			$	33,165			$	136,303			$	137,523
Adjusted pre-tax, pre-provision return on average assets			1.80	%			1.66	%			1.68	%			1.72	%			1.82	%
Market Data
Book value per share at period end		$	31.61			$	29.96			$	29.17
Tangible book value per share at period end(1)		$	23.35			$	21.67			$	20.94
Tangible book value per share excluding accumulated other comprehensive income at period end(1)		$	26.91			$	26.35			$	24.72
Market price at period end		$	27.56			$	20.54			$	26.62
Common shares outstanding at period end			21,551,402				21,594,546				22,214,913
Capital
Total capital to risk-weighted assets			13.20	%			12.76	%			12.38	%
Tier 1 capital to risk-weighted assets			10.91	%			10.53	%			10.21	%
Tier 1 common capital to risk-weighted assets			8.40	%			8.07	%			7.77	%
Tier 1 leverage ratio			9.71	%			9.59	%			9.43	%
Tangible common equity to tangible assets(1)			6.55	%			6.01	%			6.06	%
Wealth Management
Trust assets under administration		$	3,733,355			$	3,501,225			$	3,505,372

(1) Non-GAAP financial measures. Refer to pages 13 - 15 for a reconciliation to the comparable GAAP financial measures.

(2) September 30, 2023 amounts include the impact of the revision previously mentioned in this earnings release.

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
		As of
		December 31,				September 30,				June 30,				March 31,				December 31,
(in thousands)			2023			2023(1)					2023				2023				2022
Assets
Cash and cash equivalents		$	135,061			$	132,132			$	160,695			$	138,310			$	160,631
Investment securities			920,396				839,344				887,003				821,005				776,860
Loans			6,131,079				6,280,883				6,367,344				6,354,271				6,306,467
Allowance for credit losses on loans			(68,502	)			(66,669	)			(64,950	)			(62,067	)			(61,051	)
Total loans, net			6,062,577				6,214,214				6,302,394				6,292,204				6,245,416
Loans held for sale			3,811				6,089				5,632				2,747				1,286
Premises and equipment, net			82,814				82,741				81,006				80,582				78,293
Other real estate owned			9,112				480				202				6,729				6,729
Loan servicing rights, at lower of cost or fair value			20,253				20,933				21,611				1,117				1,205
Commercial FHA mortgage loan servicing rights held for sale			—				—				—				20,745				20,745
Goodwill			161,904				161,904				161,904				161,904				161,904
Other intangible assets, net			16,108				17,238				18,367				19,575				20,866
Company-owned life insurance			203,485				201,750				152,210				151,319				150,443
Other assets			251,347				292,460				243,697				233,937				231,123
Total assets		$	7,866,868			$	7,969,285			$	8,034,721			$	7,930,174			$	7,855,501
Liabilities and Shareholders' Equity
Noninterest-bearing demand deposits		$	1,145,395			$	1,154,515			$	1,162,909			$	1,215,758			$	1,362,158
Interest-bearing deposits			5,164,134				5,250,487				5,263,639				5,209,443				5,002,494
Total deposits			6,309,529				6,405,002				6,426,548				6,425,201				6,364,652
Short-term borrowings			34,865				17,998				21,783				31,173				42,311
FHLB advances and other borrowings			476,000				538,000				575,000				482,000				460,000
Subordinated debt			93,546				93,475				93,404				99,849				99,772
Trust preferred debentures			50,616				50,457				50,296				50,135				49,975
Other liabilities			110,459				106,743				90,869				66,173				80,217
Total liabilities			7,075,015				7,211,675				7,257,900				7,154,531				7,096,927
Total shareholders' equity			791,853				757,610				776,821				775,643				758,574
Total liabilities and shareholders' equity		$	7,866,868			$	7,969,285			$	8,034,721			$	7,930,174			$	7,855,501

(1) September 30, 2023 amounts include the impact of the revision previously mentioned in this earnings release.

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
		For the Three Months Ended											For the Years Ended
		December 31,				September 30,				December 31,			December 31,				December 31,
(in thousands, except per share data)			2023			2023(1)					2022			2023				2022
Net interest income:
Interest income		$	104,681			$	103,585			$	90,215		$	404,296			$	301,755
Interest expense			46,604				44,989				26,665			168,279				56,020
Net interest income			58,077				58,596				63,550			236,017				245,735
Provision for credit losses:
Provision for credit losses on loans			6,950				5,168				2,950			21,132				18,797
Provision for credit losses on unfunded commitments			—				—				594			—				1,550
Provision for other credit losses			—				—				—			—				(221	)
Total provision for credit losses			6,950				5,168				3,544			21,132				20,126
Net interest income after provision for credit losses			51,127				53,428				60,006			214,885				225,609
Noninterest income:
Wealth management revenue			6,604				6,288				6,227			25,572				25,708
Residential mortgage banking revenue			451				507				316			1,903				1,509
Service charges on deposit accounts			3,246				3,149				2,879			11,990				10,237
Interchange revenue			3,585				3,609				3,478			14,302				13,879
Income on company-owned life insurance			1,753				918				796			4,439				3,584
Loss on sales of investment securities, net			(2,894	)			(4,961	)			—			(9,372	)			(230	)
Gain (loss) on sales of other real estate owned, net			6				—				—			825				(118	)
Gain on termination of hedged interest rate swaps			—				—				17,531			—				17,531
Gain on repurchase of subordinated debt, net			—				—				—			676				—
Impairment on commercial mortgage servicing rights			—				—				—			—				(1,263	)
Other income			7,762				2,035				2,612			16,255				9,054
Total noninterest income			20,513				11,545				33,839			66,590				79,891
Noninterest expense:
Salaries and employee benefits			24,031				22,307				22,901			93,438				90,305
Occupancy and equipment			3,934				3,730				3,748			15,986				14,842
Data processing			6,963				6,468				6,302			26,286				24,350
Professional			2,072				1,554				1,726			7,049				6,907
Amortization of intangible assets			1,130				1,129				1,333			4,758				5,410
Other real estate owned			8				—				3,779			333				5,188
Loss on mortgage servicing rights held for sale			—				—				3,250			—				3,250
FDIC insurance			1,147				1,107				703			4,779				3,336
Other expense			5,203				5,743				6,201			21,273				22,074
Total noninterest expense			44,488				42,038				49,943			173,902				175,662
Income before income taxes			27,152				22,935				43,902			107,573				129,838
Income taxes			6,441				11,533				11,030			32,113				30,813
Net income			20,711				11,402				32,872			75,460				99,025
Preferred stock dividends			2,228				2,229				3,169			8,913				3,169
Net income available to common shareholders		$	18,483			$	9,173			$	29,703		$	66,547			$	95,856
Basic earnings per common share		$	0.84			$	0.41			$	1.31		$	2.97			$	4.24
Diluted earnings per common share		$	0.84			$	0.41			$	1.30		$	2.97			$	4.23

(1) September 30, 2023 amounts include the impact of the revision previously mentioned in this earnings release.

MIDLAND STATES BANCORP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited)
Adjusted Earnings Reconciliation
		For the Three Months Ended												For the Years Ended
(dollars in thousands, except per share data)		December 31,  2023				September 30, 2023(1)				December 31,  2022				December 31, 2023				December 31,  2022
Income before income taxes - GAAP		$	27,152			$	22,935			$	43,902			$	107,573			$	129,838
Adjustments to noninterest income:
Loss on sales of investment securities, net			2,894				4,961				—				9,372				230
(Gain) on termination of hedged interest rate swaps			—				—				(17,531	)			—				(17,531	)
(Gain) on sale of Visa B shares			(1,098	)			—				—				(1,098	)			—
(Gain) on repurchase of subordinated debt			—				—				—				(676	)			—
Total adjustments to noninterest income			1,796				4,961				(17,531	)			7,598				(17,301	)
Adjustments to noninterest expense:
(Loss) on mortgage servicing rights held for sale			—				—				(3,250	)			—				(3,250	)
Integration and acquisition expenses			—				—				—				—				(347	)
Total adjustments to noninterest expense			—				—				(3,250	)			—				(3,597	)
Adjusted earnings pre tax - non-GAAP			28,948				27,896				29,621				115,171				116,134
Adjusted earnings tax			6,927				8,389				7,174				29,682				27,113
Adjusted earnings - non-GAAP			22,021				19,507				22,447				85,489				89,021
Preferred stock dividends			2,228				2,229				3,169				8,913				3,169
Adjusted earnings available to common shareholders		$	19,793			$	17,278			$	19,278			$	76,576			$	85,852
Adjusted diluted earnings per common share		$	0.89			$	0.78			$	0.85			$	3.42			$	3.79
Adjusted return on average assets			1.11	%			0.98	%			1.13	%			1.08	%			1.18	%
Adjusted return on average shareholders' equity			11.42	%			10.03	%			11.89	%			11.10	%			12.94	%
Adjusted return on average tangible common equity			16.51	%			14.24	%			16.80	%			15.98	%			18.59	%
(1) September 30, 2023 amounts include the impact of the revision previously mentioned in this earnings release.
Adjusted Pre-Tax, Pre-Provision Earnings Reconciliation
		For the Three Months Ended												For the Years Ended
		December 31,				September 30,				December 31,				December 31,				December 31,
(dollars in thousands)			2023				2023				2022				2023				2022
Adjusted earnings pre tax - non-GAAP		$	28,948			$	27,896			$	29,621			$	115,171			$	116,134
Provision for credit losses			6,950				5,168				3,544				21,132				20,126
Impairment on commercial mortgage servicing rights			—				—				—				—				1,263
Adjusted pre-tax, pre-provision earnings - non-GAAP		$	35,898			$	33,064			$	33,165			$	136,303			$	137,523
Adjusted pre-tax, pre-provision return on average assets			1.80	%			1.66	%			1.68	%			1.72	%			1.82	%

MIDLAND STATES BANCORP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued)
Efficiency Ratio Reconciliation
		For the Three Months Ended												For the Years Ended
		December 31,				September 30,				December 31,				December 31,				December 31,
(dollars in thousands)			2023			2023(1)					2022				2023				2022
Noninterest expense - GAAP		$	44,488			$	42,038			$	49,943			$	173,902			$	175,662
Loss on mortgage servicing rights held for sale			—				—				(3,250	)			—				(3,250	)
Integration and acquisition expenses			—				—				—				—				(347	)
Adjusted noninterest expense		$	44,488			$	42,038			$	46,693			$	173,902			$	172,065
Net interest income - GAAP		$	58,077			$	58,596			$	63,550			$	236,017			$	245,735
Effect of tax-exempt income			183				205				286				828				1,283
Adjusted net interest income			58,260				58,801				63,836				236,845				247,018
Noninterest income - GAAP			20,513				11,545				33,839				66,590				79,891
Impairment on commercial mortgage servicing rights			—				—				—				—				1,263
Loss on sales of investment securities, net			2,894				4,961				—				9,372				230
(Gain) on termination of hedged interest rate swaps			—				—				(17,531	)			—				(17,531	)
(Gain) on repurchase of subordinated debt			—				—				—				(676	)			—
(Gain) on sale of Visa B shares			(1,098	)			—				—				(1,098	)			—
Adjusted noninterest income			22,309				16,506				16,308				74,188				63,853
Adjusted total revenue		$	80,569			$	75,307			$	80,144			$	311,033			$	310,871
Efficiency ratio			55.22	%			55.82	%			58.26	%			55.91	%			55.35	%
Return on Average Tangible Common Equity (ROATCE)
		For the Three Months Ended												For the Years Ended
		December 31,				September 30,				December 31,				December 31,				December 31,
(dollars in thousands)			2023			2023(1)					2022				2023				2022
Net income available to common shareholders		$	18,483			$	9,173			$	29,703			$	66,547			$	95,856
Average total shareholders' equity—GAAP		$	764,790			$	771,625			$	749,183			$	770,095			$	687,876
Adjustments:
Preferred Stock			(110,548	)			(110,548	)			(110,548	)			(110,548	)			(41,493	)
Goodwill			(161,904	)			(161,904	)			(161,904	)			(161,904	)			(161,904	)
Other intangible assets, net			(16,644	)			(17,782	)			(22,859	)			(18,376	)			(22,637	)
Average tangible common equity		$	475,694			$	481,391			$	453,872			$	479,267			$	461,842
ROATCE			15.41	%			7.56	%			25.89	%			13.89	%			20.76	%

(1) September 30, 2023 amounts include the impact of the revision previously mentioned in this earnings release.

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
(dollars in thousands, except per share data)		December 31,  2023				September 30, 2023(1)				June 30,  2023				March 31,  2023				December 31,  2022
Shareholders' Equity to Tangible Common Equity
Total shareholders' equity—GAAP		$	791,853			$	757,610			$	776,821			$	775,643			$	758,574
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			(16,108	)			(17,238	)			(18,367	)			(19,575	)			(20,866	)
Tangible common equity			503,293				467,920				486,002				483,616				465,256
Less: Accumulated other comprehensive income (AOCI)			(76,753	)			(101,181	)			(84,719	)			(77,797	)			(83,797	)
Tangible common equity excluding AOCI		$	580,046			$	569,101			$	570,721			$	561,413			$	549,053
Total Assets to Tangible Assets:
Total assets—GAAP		$	7,866,868			$	7,969,285			$	8,034,721			$	7,930,174			$	7,855,501
Adjustments:
Goodwill			(161,904	)			(161,904	)			(161,904	)			(161,904	)			(161,904	)
Other intangible assets, net			(16,108	)			(17,238	)			(18,367	)			(19,575	)			(20,866	)
Tangible assets		$	7,688,856			$	7,790,143			$	7,854,450			$	7,748,695			$	7,672,731
Common Shares Outstanding			21,551,402				21,594,546				21,854,800				22,111,454				22,214,913
Tangible Common Equity to Tangible Assets			6.55	%			6.01	%			6.19	%			6.24	%			6.06	%
Tangible Book Value Per Share		$	23.35			$	21.67			$	22.24			$	21.87			$	20.94
Tangible Book Value Per Share, excluding AOCI		$	26.91			$	26.35			$	26.11			$	25.39			$	24.72

(1) September 30, 2023 amounts include the impact of the revision previously mentioned in this earnings release.