• Midland States Bancorp, Inc. Announces 2023 Fourth Quarter Results

    Source: Nasdaq GlobeNewswire / 25 Jan 2024 15:15:01   America/Chicago

    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 assets12.40% 13.20% 10.50%
    Tier 1 capital to risk-weighted assets11.44% 10.91% 8.50%
    Tier 1 leverage ratio10.18% 9.71% 4.00%
    Common equity Tier 1 capital11.44% 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 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)
               
      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.


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