MSBI Midland States Bancorp Inc

Midland States Bancorp, Inc. (Nasdaq: MSBI) (the “Company”) today reported net income available to common shareholders of $15.8 million, or $0.71 per diluted share, for the third quarter of 2023, compared to $19.3 million, or $0.86 per diluted share, for the second quarter of 2023. This also compares to net income available to common shareholders of $23.5 million, or $1.04 per diluted share, for the third quarter of 2022.

Financial results for the third quarter of 2023 included a one-time enhancement fee of $6.6 million related to the surrender and purchase of company-owned life insurance, a $4.5 million tax charge related to the surrender, and $5.0 million of losses on the sale of investment securities. Excluding these transactions, adjusted earnings available to common shareholders were $17.3 million, or $0.78 per diluted share.

Jeffrey G. Ludwig, President and Chief Executive Officer of the Company, said, “We delivered another quarter of strong financial results highlighted by good stability in our deposit base, net interest margin, and asset quality, as well as disciplined expense control that resulted in a decline in our non-interest expense from the prior quarter. Due to our strong financial performance and prudent balance sheet management, we had increases in all of our regulatory capital ratios, while also continuing to repurchase our common stock at below tangible book value, which we believe is in the best long-term interests of shareholders.

“While continuing to prioritize prudent risk management and maintaining disciplined expense control, we will continue to be active in our new business development efforts with a focus on adding new core deposit relationships with both retail and commercial customers. We also continue to invest in initiatives that we believe will enhance the long-term value of the franchise, including our Banking-as-a-Service platform with two new partnerships launching in the fourth quarter that will contribute low-cost deposits and generate fee income. We expect the Banking-as-a-Service initiative to begin making a meaningful contribution during 2024, which, along with our continued progress on adding new clients in our markets, should support profitable growth in the future, improve our level of returns, and create additional value for our shareholders,” said Mr. Ludwig.

Balance Sheet Highlights

Total assets were $7.98 billion at September 30, 2023, compared to $8.03 billion at June 30, 2023, and $7.82 billion at September 30, 2022. At September 30, 2023, portfolio loans were $6.28 billion, compared to $6.37 billion as of June 30, 2023, and $6.20 billion as of September 30, 2022.

Loans

During the third quarter of 2023, outstanding loans declined slightly as the Company continued to originate loans in a more selective and deliberate approach to balance liquidity and funding costs. Increases in construction and land development loans, commercial FHA warehouse lines, and residential real estate loans of $50.2 million, $18.0 million, and $3.7 million, respectively, were offset by decreases in all other loan categories. Consumer loans decreased $56.8 million due to loan payoffs and a decrease in loans originated through GreenSky.

		As of
		September 30,			June 30,			March 31,			December 31,			September 30,
(in thousands)		2023			2023			2023			2022			2022
Loan Portfolio
Commercial loans		$	943,761		$	962,756		$	937,920		$	872,794		$	907,651
Equipment finance loans			578,931			614,633			632,205			616,751			577,323
Equipment finance leases			485,460			500,485			510,029			491,744			457,611
Commercial FHA warehouse lines			48,547			30,522			10,275			25,029			51,309
Total commercial loans and leases			2,056,699			2,108,396			2,090,429			2,006,318			1,993,894
Commercial real estate			2,412,164			2,443,995			2,448,158			2,433,159			2,466,303
Construction and land development			416,801			366,631			326,836			320,882			225,549
Residential real estate			375,211			371,486			369,910			366,094			356,225
Consumer			1,020,008			1,076,836			1,118,938			1,180,014			1,156,480
Total loans		$	6,280,883		$	6,367,344		$	6,354,271		$	6,306,467		$	6,198,451

Loan Quality

Credit quality metrics remained steady during the third quarter of 2023. Loans 30-89 days past due totaled $46.6 million as of September 30, 2023, compared to $44.2 million as of June 30, 2023. Non-performing loans were $56.0 million at September 30, 2023, compared to $54.8 million as of June 30, 2023, and non-performing assets were 0.74% of total assets at the end of the third quarter of 2023, compared to 0.72% at June 30, 2023.

At September 30, 2022, loans 30-89 days past due totaled $28.3 million, non-performing loans were $46.9 million, and non-performing assets as a percentage of total assets were 0.76%.

		As of and for the Three Months Ended
(in thousands)		September 30,				June 30,				March 31,				December 31,				September 30,
		2023				2023				2023				2022				2022
Asset Quality
Loans 30-89 days past due		$	46,608			$	44,161			$	30,895			$	32,372			$	28,275
Nonperforming loans			55,981				54,844				50,713				49,423				46,882
Nonperforming assets			58,677				57,688				58,806				57,824				59,524
Substandard loans			143,793				130,707				99,819				101,044				98,517
Net charge-offs			3,449				2,996				2,119				538				3,233
Loans 30-89 days past due to total loans			0.74	%			0.69	%			0.49	%			0.51	%			0.46	%
Nonperforming loans to total loans			0.89	%			0.86	%			0.80	%			0.78	%			0.76	%
Nonperforming assets to total assets			0.74	%			0.72	%			0.74	%			0.74	%			0.76	%
Allowance for credit losses to total loans			1.06	%			1.02	%			0.98	%			0.97	%			0.95	%
Allowance for credit losses to nonperforming loans			119.09	%			118.43	%			122.39	%			123.53	%			125.08	%
Net charge-offs to average loans			0.22	%			0.19	%			0.14	%			0.03	%			0.21	%

The Company continued to increase its allowance for credit losses on loans due to increased delinquencies and losses within our equipment finance portfolio. The allowance totaled $66.7 million at September 30, 2023, compared to $65.0 million at June 30, 2023, and $58.6 million at September 30, 2022. The allowance as a percentage of portfolio loans was 1.06% at September 30, 2023, compared to 1.02% at June 30, 2023, and 0.95% at September 30, 2022.

Deposits

Total deposits were $6.41 billion at September 30, 2023, compared with $6.43 billion at June 30, 2023 and $6.40 billion at September 30, 2022. The deposit mix continues to shift from noninterest-bearing deposits to interest-bearing deposits due to the recent rate increases announced by the Federal Reserve and the expectation that rates will remain high for a longer period.

		As of
		September 30,			June 30,			March 31,			December 31,			September 30,
(in thousands)		2023			2023			2023			2022			2022
Deposit Portfolio
Noninterest-bearing demand		$	1,154,515		$	1,162,909		$	1,215,758		$	1,362,158		$	1,362,481
Interest-bearing:
Checking			2,572,224			2,499,693			2,502,827			2,494,073			2,568,195
Money market			1,090,962			1,226,470			1,263,813			1,184,101			1,125,333
Savings			582,359			624,005			636,832			661,932			704,245
Time			885,858			840,734			766,884			649,552			620,960
Brokered time			119,084			72,737			39,087			12,836			14,038
Total deposits		$	6,405,002		$	6,426,548		$	6,425,201		$	6,364,652		$	6,395,252

The Company estimates that uninsured deposits(1) totaled $1.28 billion, or 20% of total deposits, at September 30, 2023 compared to $1.21 billion, or 19%, at June 30, 2023.

(1)   Uninsured deposits include the Call Report estimate of uninsured deposits less affiliate deposits, estimated insured portion of servicing deposits, additional structured FDIC coverage and collateralized deposits.

Results of Operations Highlights

Net Interest Income and Margin

During the third quarter of 2023, net interest income, on a tax-equivalent basis, totaled $58.8 million, a decrease of $0.2 million, or 0.4%, compared to $59.0 million for the second quarter of 2023. The tax-equivalent net interest margin for the third quarter of 2023 was 3.20%, compared with 3.23% in the second quarter of 2023. Net interest income and related margin, on a tax-equivalent basis, was $64.3 million and 3.63%, respectively, in the third quarter of 2022. The decline in the net interest income and margin was largely attributable to increased market interest rates resulting in the cost of funding liabilities increasing at a faster rate than the yield on earning assets.

Average interest-earning assets for the third quarter of 2023 were $7.28 billion, compared to $7.33 billion for the second quarter of 2023. The yield increased 14 basis points to 5.65% compared to the second quarter of 2023. Interest-earning assets averaged $7.03 billion for the third quarter of 2022.

Average loans were $6.30 billion for the third quarter of 2023, compared to $6.36 billion for the second quarter of 2023 and $6.04 billion for the third quarter of 2022. The yield on loans was 5.93% and 5.80% for the third and second quarters of 2023, respectively.

Investment securities averaged $863.0 million for the third quarter of 2023, and yielded 3.60%, compared to an average balance and yield of $861.4 million and 3.39%, respectively, for the second quarter of 2023. The Company purchased additional investments and repositioned out of lower-yielding securities in favor of higher-yielding instruments resulting in the increased average balance and yield. The Company incurred net losses on sales of $5.0 million in the third quarter of 2023. The repositioning is expected to improve the overall margin, liquidity, and capital allocations. Investment securities averaged $749.0 million for the third quarter of 2022.

Average interest-bearing deposits were $5.35 billion for the third quarter of 2023, compared to $5.26 billion for the second quarter of 2023, and $4.92 billion for the third quarter of 2022. Cost of interest-bearing deposits was 2.80% in the third quarter of 2023, which represents a 24 basis point increase from the second quarter of 2023. A competitive market, driven by rising interest rates and increased competition, were contributing factors to the increase in deposit costs.

		For the Three Months Ended
		September 30,									June 30,									September 30,
(dollars in thousands)		2023									2023									2022
Interest-earning assets		Average Balance			Interest & Fees			Yield/Rate			Average Balance			Interest & Fees			Yield/Rate			Average Balance			Interest & Fees			Yield/Rate
Cash and cash equivalents		$	78,391		$	1,036		5.24	%		$	67,377		$	852		5.07	%		$	195,657		$	1,125		2.28	%
Investment securities			862,998			7,822		3.60				861,409			7,286		3.39				749,022			4,560		2.44
Loans			6,297,568			94,118		5.93				6,356,012			91,890		5.80				6,040,358			73,568		4.83
Loans held for sale			6,078			104		6.80				4,067			59		5.79				6,044			60		3.87
Nonmarketable equity securities			39,347			710		7.16				45,028			599		5.33				37,765			550		5.78
Total interest-earning assets		$	7,284,382		$	103,790		5.65	%		$	7,333,893		$	100,686		5.51	%		$	7,028,846		$	79,863		4.51	%
Noninterest-earning assets			622,969									612,238									618,138
Total assets		$	7,907,351								$	7,946,131								$	7,646,984
Interest-Bearing Liabilities
Interest-bearing deposits		$	5,354,356		$	37,769		2.80	%		$	5,259,188		$	33,617		2.56	%		$	4,922,345		$	10,249		0.83	%
Short-term borrowings			20,127			14		0.28				22,018			14		0.26				58,271			28		0.19
FHLB advances & other borrowings			402,500			4,557		4.49				471,989			5,396		4.59				340,163			2,424		2.83
Subordinated debt			93,441			1,280		5.43				97,278			1,335		5.51				139,324			2,010		5.77
Trust preferred debentures			50,379			1,369		10.78				50,218			1,289		10.29				49,751			821		6.54
Total interest-bearing liabilities		$	5,920,803		$	44,989		3.01	%		$	5,900,691		$	41,651		2.83	%		$	5,509,854		$	15,532		1.12	%
Noninterest-bearing deposits			1,116,988									1,187,584									1,372,626
Other noninterest-bearing liabilities			97,935									81,065									63,638
Shareholders’ equity			771,625									776,791									700,866
Total liabilities and shareholder’s equity		$	7,907,351								$	7,946,131								$	7,646,984
Net Interest Margin					$	58,801		3.20	%					$	59,035		3.23	%					$	64,331		3.63	%
Cost of Deposits								2.32	%								2.09	%								0.65	%

(1)   Interest income and average rates for tax-exempt loans and securities are presented on a tax-equivalent basis, assuming a federal income tax rate of 21%. Tax-equivalent adjustments totaled $0.2 million, $0.2 million and $0.3 million for the three months ended September 30, 2023, June 30, 2023 and September 30, 2022, respectively.

During the nine months ended September 30, 2023, net interest income, on a tax-equivalent basis, decreased to $178.6 million, with a tax-equivalent net interest margin of 3.27%, compared to net interest income, on a tax-equivalent basis, of $183.2 million, and a tax-equivalent net interest margin of 3.60% for the nine months ended September 30, 2022.

The yield on earning assets increased 133 basis points to 5.50% for the nine months ended September 30, 2023 compared to the same period one year prior. However, the cost of interest-bearing liabilities increased at a faster rate during this period, increasing 203 basis points to 2.77% for the nine months ended September 30, 2023.

		For the Nine Months Ended
		September 30,									September 30,
(dollars in thousands)		2023									2022
Interest-earning assets		Average Balance			Interest & Fees			Yield/Rate			Average Balance			Interest & Fees			Yield/Rate
Cash and cash equivalents		$	76,939		$	2,868		4.98	%		$	268,111		$	1,764		0.88	%
Investment securities			844,946			21,103		3.33				820,328			14,453		2.35
Loans			6,324,578			274,005		5.79				5,666,874			194,442		4.59
Loans held for sale			3,900			179		6.14				15,629			357		3.05
Nonmarketable equity securities			44,034			2,104		6.39				36,832			1,521		5.52
Total interest-earning assets		$	7,294,397		$	300,259		5.50	%		$	6,807,774		$	212,537		4.17	%
Noninterest-earning assets			615,383									621,510
Total assets		$	7,909,780								$	7,429,284
Interest-Bearing Liabilities
Interest-bearing deposits		$	5,223,852		$	97,791		2.50	%		$	4,717,610		$	16,220		0.46	%
Short-term borrowings			26,865			53		0.26				62,495			73		0.16
FHLB advances & other borrowings			471,084			15,959		4.53				319,791			5,071		2.12
Subordinated debt			96,820			3,985		5.49				139,233			6,032		5.78
Trust preferred debentures			50,216			3,887		10.35				49,603			1,959		5.28
Total interest-bearing liabilities		$	5,868,837		$	121,675		2.77	%		$	5,288,732		$	29,355		0.74	%
Noninterest-bearing deposits			1,184,410									1,402,900
Other noninterest-bearing liabilities			84,650									70,427
Shareholders’ equity			771,883									667,225
Total liabilities and shareholder’s equity		$	7,909,780								$	7,429,284
Net Interest Margin					$	178,584		3.27	%					$	183,182		3.60	%
Cost of Deposits								2.04	%								0.35	%

(1)   Interest income and average rates for tax-exempt loans and securities are presented on a tax-equivalent basis, assuming a federal income tax rate of 21%. Tax-equivalent adjustments totaled $0.6 million and $1.0 million for the nine months ended September 30, 2023 and 2022, respectively.

Noninterest Income

Noninterest income was $18.2 million for the third quarter of 2023, compared to $18.8 million for the second quarter of 2023. Noninterest income for the third quarter of 2023 included a one-time enhancement fee of $6.6 million related to the surrender and purchase of company-owned life insurance, partially offset by $5.0 million of losses on the sale of investment securities. The second quarter of 2023 included an $0.8 million gain on the sale of OREO and a $0.7 million gain on the repurchase of subordinated debt, partially offset by $0.9 million of losses on the sale of investment securities. Excluding these transactions, noninterest income for the third quarter of 2023 and the second quarter of 2023 was $16.5 million and $18.2 million, respectively. Noninterest income for the third quarter of 2022 was $15.8 million and included $0.1 million loss on the sale of investment securities.

		For the Three Months Ended												For the Nine Months Ended
		September 30,				June 30,				September 30,				September 30,				September 30,
(in thousands)		2023				2023				2022				2023				2022
Noninterest income
Wealth management revenue		$	6,288			$	6,269			$	6,199			$	18,968			$	19,481
Residential mortgage banking revenue			507				540				210				1,452				1,193
Service charges on deposit accounts			3,149				2,849				2,783				8,744				7,544
Interchange revenue			3,609				3,696				3,531				10,717				10,401
Loss on sales of investment securities, net			(4,961	)			(869	)			(129	)			(6,478	)			(230	)
Gain on repurchase of subordinated debt, net			—				676				—				676				—
Gain (loss) on sales of other real estate owned, net			—				819				—				819				(131	)
Impairment on commercial mortgage servicing rights			—				—				—				—				(1,263	)
Company-owned life insurance			7,558				891				929				9,325				2,788
Other income			2,035				3,882				2,303				8,494				6,269
Total noninterest income		$	18,185			$	18,753			$	15,826			$	52,717			$	46,052

Noninterest Expense

Noninterest expense was $42.0 million in the third quarter of 2023, compared to $42.9 million in the second quarter of 2023, and $43.5 million in the third quarter of 2022. The efficiency ratio was 55.82% for the quarter ended September 30, 2023, compared to 55.01% for the quarter ended June 30, 2023, and 54.26% for the quarter ended September 30, 2022.

		For the Three Months Ended									For the Nine Months Ended
		September 30,			June 30,			September 30,			September 30,			September 30,
(in thousands)		2023			2023			2022			2023			2022
Noninterest expense
Salaries and employee benefits		$	22,307		$	22,857		$	22,889		$	69,407		$	67,404
Occupancy and equipment			3,730			3,879			3,850			12,052			11,094
Data processing			6,468			6,544			6,093			19,323			18,048
Professional			1,554			1,663			1,693			4,977			5,181
Amortization of intangible assets			1,129			1,208			1,361			3,628			4,077
FDIC insurance			1,107			1,196			977			3,632			2,633
Other expense			5,743			5,547			6,633			16,395			17,282
Total noninterest expense		$	42,038		$	42,894		$	43,496		$	129,414		$	125,719

Salaries and employee benefits expenses were $22.3 million in the third quarter of 2023, compared to $22.9 million in both the second quarter of 2023 and the third quarter of 2022. Employees numbered 911 at September 30, 2023, compared to 915 at June 30, 2023, and 930 at September 30, 2022. The third quarter of 2023 included a decline in medical insurance expense of $0.7 million.

Income Tax Expense

Income tax expense was $11.5 million for the third quarter of 2023, as compared to $7.2 million for the second quarter of 2023 and $5.9 million for the third quarter of 2022. The resulting effective tax rates were 39.0%, 25.1% and 19.9% respectively. The third quarter of 2023 included tax charges of $4.5 million associated with the surrender of company-owned life insurance and $1.4 million related to the finalization of the 2022 federal and state tax returns. Exclusive of these items our effective tax rate is 25.1% for the third quarter of 2023.

Capital

At September 30, 2023, Midland States Bank and the Company exceeded all regulatory capital requirements under Basel III, and Midland States Bank met the qualifications to be a ‘‘well-capitalized’’ financial institution, as summarized in the following table:

	As of September 30, 2023
	Midland States Bank		Midland States Bancorp, Inc.		Minimum Regulatory Requirements (2)
Total capital to risk-weighted assets	12.13%		12.84%		10.50%
Tier 1 capital to risk-weighted assets	11.21%		10.62%		8.50%
Tier 1 leverage ratio	10.21%		9.67%		4.00%
Common equity Tier 1 capital	11.21%		8.16%		7.00%
Tangible common equity to tangible assets (1)	N/A		6.09%		N/A

(1) A non-GAAP financial measure. Refer to page 16 for a reconciliation to the comparable GAAP financial measure.(2) Includes the capital conservation buffer of 2.5%.

The impact of rising interest rates on the Company’s investment portfolio and cash flow hedges has resulted in a $101.2 million accumulated other comprehensive loss at September 30, 2023, which impacts tangible book value by $4.68 per share.

Stock Repurchase Program

As previously disclosed, on December 6, 2022, the Company’s board of directors authorized a new share repurchase program, pursuant to which the Company is authorized to repurchase up to $25.0 million of common stock through December 31, 2023. During the third quarter of 2023, the Company repurchased 271,059 shares of its common stock at a weighted average price of $22.14 under its stock repurchase program. As of September 30, 2023, the Company had $10.1 million remaining under the current stock repurchase authorization.

About Midland States Bancorp, Inc.

Midland States Bancorp, Inc. is a community-based financial holding company headquartered in Effingham, Illinois, and is the sole shareholder of Midland States Bank. As of September 30, 2023, the Company had total assets of approximately $7.98 billion, and its Wealth Management Group had assets under administration of approximately $3.50 billion. The Company provides a full range of commercial and consumer banking products and services and business equipment financing, merchant credit card services, trust and investment management, insurance and financial planning services. For additional information, visit https://www.midlandsb.com/ or https://www.linkedin.com/company/midland-states-bank.

Non-GAAP Financial Measures

Some of the financial measures included in this press release are not measures of financial performance recognized in accordance with GAAP.

These non-GAAP financial measures include “Adjusted Earnings,” “Adjusted Earnings Available to Common Shareholders,” “Adjusted Diluted Earnings Per Common Share,” “Adjusted Return on Average Assets,” “Adjusted Return on Average Shareholders’ Equity,” “Adjusted Return on Average Tangible Common Equity,” “Adjusted Pre-Tax, Pre-Provision Earnings,” “Adjusted Pre-Tax, Pre-Provision Return on Average Assets,” “Efficiency Ratio,” “Tangible Common Equity to Tangible Assets,” “Tangible Book Value Per Share,” “Tangible Book Value Per Share excluding Accumulated Other Comprehensive Income,” and “Return on Average Tangible Common Equity.” The Company believes these non-GAAP financial measures provide both management and investors a more complete understanding of the Company’s funding profile and profitability. These non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP financial measures. Not all companies use the same calculation of these measures; therefore, the measures in this press release may not be comparable to other similarly titled measures as presented by other companies.

Forward-Looking Statements

Readers should note that in addition to the historical information contained herein, this press release includes "forward-looking statements" within the meanings of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including but not limited to statements about the Company’s plans, objectives, future performance, goals and future earnings levels. These statements are subject to many risks and uncertainties, including changes in interest rates and other general economic, business and political conditions, the impact of inflation, continuing effects of the failures of Silicon Valley Bank and Signature Bank, increased deposit volatility and potential regulatory developments; changes in the financial markets; changes in business plans as circumstances warrant; risks relating to acquisitions; changes to U.S. tax laws, regulations and guidance; and other risks detailed from time to time in filings made by the Company with the Securities and Exchange Commission. Readers should note that the forward-looking statements included in this press release are not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "will," "propose," "may," "plan," "seek," "expect," "intend," "estimate," "anticipate," "believe," "continue," or similar terminology. Any forward-looking statements presented herein are made only as of the date of this press release, and the Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

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

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited)
(dollars in thousands, except per share data)		As of and for the Three Months Ended												As of andfor the Nine Months Ended
		September 30,				June 30,				September 30,				September 30,				September 30,
		2023				2023				2022				2023				2022
Earnings Summary
Net interest income		$	58,596			$	58,840			$	64,024			$	177,940			$	182,185
Provision for credit losses			5,168				5,879				6,974				14,182				16,582
Noninterest income			18,185				18,753				15,826				52,717				46,052
Noninterest expense			42,038				42,894				43,496				129,414				125,719
Income before income taxes			29,575				28,820				29,380				87,061				85,936
Income taxes			11,533				7,245				5,859				25,672				19,783
Net income			18,042				21,575				23,521				61,389				66,153
Preferred dividends			2,229				2,228				—				6,685				—
Net income available to common shareholders		$	15,813			$	19,347			$	23,521			$	54,704			$	66,153
Diluted earnings per common share		$	0.71			$	0.86			$	1.04			$	2.43			$	2.92
Weighted average common shares outstanding - diluted			21,977,196				22,205,079				22,390,438				22,223,986				22,367,095
Return on average assets			0.91	%			1.09	%			1.22	%			1.04	%			1.19	%
Return on average shareholders' equity			9.28	%			11.14	%			13.31	%			10.63	%			13.26	%
Return on average tangible common equity (1)			13.03	%			15.99	%			20.20	%			15.22	%			19.06	%
Net interest margin			3.20	%			3.23	%			3.63	%			3.27	%			3.60	%
Efficiency ratio (1)			55.82	%			55.01	%			54.26	%			56.15	%			54.34	%
Adjusted Earnings Performance Summary (1)
Adjusted earnings available to common shareholders		$	17,278			$	19,488			$	23,568			$	56,783			$	66,574
Adjusted diluted earnings per common share		$	0.78			$	0.87			$	1.04			$	2.53			$	2.94
Adjusted return on average assets			0.98	%			1.10	%			1.22	%			1.07	%			1.20	%
Adjusted return on average shareholders' equity			10.03	%			11.21	%			13.34	%			10.99	%			13.34	%
Adjusted return on average tangible common equity			14.24	%			16.10	%			20.24	%			15.80	%			19.18	%
Adjusted pre-tax, pre-provision earnings		$	33,064			$	34,892			$	36,415			$	100,405			$	104,358
Adjusted pre-tax, pre-provision return on average assets			1.66	%			1.76	%			1.89	%			1.70	%			1.88	%
Market Data
Book value per share at period end		$	30.27			$	30.49			$	28.48
Tangible book value per share at period end (1)		$	21.98			$	22.24			$	20.14
Tangible book value per share excluding accumulated other comprehensive income at period end (1)		$	26.66			$	26.11			$	23.69
Market price at period end		$	20.54			$	19.91			$	23.57
Common shares outstanding at period end			21,594,546				21,854,800				22,074,740
Capital
Total capital to risk-weighted assets			12.84	%			12.65	%			12.79	%
Tier 1 capital to risk-weighted assets			10.62	%			10.47	%			10.05	%
Tier 1 common capital to risk-weighted assets			8.16	%			8.03	%			7.56	%
Tier 1 leverage ratio			9.67	%			9.57	%			9.40	%
Tangible common equity to tangible assets (1)			6.09	%			6.19	%			5.82	%
Wealth Management
Trust assets under administration		$	3,501,225			$	3,594,727			$	3,355,019

(1) Non-GAAP financial measures. Refer to pages 14 - 16 for a reconciliation to the comparable GAAP financial measures.

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
		As of
		September 30,				June 30,				March 31,				December 31,				September 30,
(in thousands)		2023				2023				2023				2022				2022
Assets
Cash and cash equivalents		$	132,132			$	160,695			$	138,310			$	160,631			$	313,188
Investment securities			839,344				887,003				821,005				776,860				690,504
Loans			6,280,883				6,367,344				6,354,271				6,306,467				6,198,451
Allowance for credit losses on loans			(66,669	)			(64,950	)			(62,067	)			(61,051	)			(58,639	)
Total loans, net			6,214,214				6,302,394				6,292,204				6,245,416				6,139,812
Loans held for sale			6,089				5,632				2,747				1,286				4,338
Premises and equipment, net			82,741				81,006				80,582				78,293				77,519
Other real estate owned			480				202				6,729				6,729				11,141
Loan servicing rights, at lower of cost or fair value			20,933				21,611				1,117				1,205				1,297
Commercial FHA mortgage loan servicing rights held for sale			—				—				20,745				20,745				23,995
Goodwill			161,904				161,904				161,904				161,904				161,904
Other intangible assets, net			17,238				18,367				19,575				20,866				22,198
Company-owned life insurance			208,390				152,210				151,319				150,443				149,648
Other assets			292,460				243,697				233,937				231,123				226,333
Total assets		$	7,975,925			$	8,034,721			$	7,930,174			$	7,855,501			$	7,821,877
Liabilities and Shareholders' Equity
Noninterest-bearing demand deposits		$	1,154,515			$	1,162,909			$	1,215,758			$	1,362,158			$	1,362,481
Interest-bearing deposits			5,250,487				5,263,639				5,209,443				5,002,494				5,032,771
Total deposits			6,405,002				6,426,548				6,425,201				6,364,652				6,395,252
Short-term borrowings			17,998				21,783				31,173				42,311				58,518
FHLB advances and other borrowings			538,000				575,000				482,000				460,000				360,000
Subordinated debt			93,475				93,404				99,849				99,772				139,370
Trust preferred debentures			50,457				50,296				50,135				49,975				49,824
Other liabilities			106,743				90,869				66,173				80,217				79,634
Total liabilities			7,211,675				7,257,900				7,154,531				7,096,927				7,082,598
Total shareholders’ equity			764,250				776,821				775,643				758,574				739,279
Total liabilities and shareholders’ equity		$	7,975,925			$	8,034,721			$	7,930,174			$	7,855,501			$	7,821,877

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
		For the Three Months Ended												For the Nine Months Ended
		September 30,				June 30,				September 30,				September 30,				September 30,
(in thousands, except per share data)		2023				2023				2022				2023				2022
Net interest income:
Interest income		$	103,585			$	100,491			$	79,556			$	299,615			$	211,540
Interest expense			44,989				41,651				15,532				121,675				29,355
Net interest income			58,596				58,840				64,024				177,940				182,185
Provision for credit losses:
Provision for credit losses on loans			5,168				5,879				6,974				14,182				15,847
Provision for credit losses on unfunded commitments			—				—				—				—				956
Provision for other credit losses			—				—				—				—				(221	)
Total provision for credit losses			5,168				5,879				6,974				14,182				16,582
Net interest income after provision for credit losses			53,428				52,961				57,050				163,758				165,603
Noninterest income:
Wealth management revenue			6,288				6,269				6,199				18,968				19,481
Residential mortgage banking revenue			507				540				210				1,452				1,193
Service charges on deposit accounts			3,149				2,849				2,783				8,744				7,544
Interchange revenue			3,609				3,696				3,531				10,717				10,401
Loss on sales of investment securities, net			(4,961	)			(869	)			(129	)			(6,478	)			(230	)
Gain on repurchase of subordinated debt, net			—				676				—				676				—
Gain (loss) on sales of other real estate owned, net			—				819				—				819				(131	)
Impairment on commercial mortgage servicing rights			—				—				—				—				(1,263	)
Company-owned life insurance			7,558				891				929				9,325				2,788
Other income			2,035				3,882				2,303				8,494				6,269
Total noninterest income			18,185				18,753				15,826				52,717				46,052
Noninterest expense:
Salaries and employee benefits			22,307				22,857				22,889				69,407				67,404
Occupancy and equipment			3,730				3,879				3,850				12,052				11,094
Data processing			6,468				6,544				6,093				19,323				18,048
Professional			1,554				1,663				1,693				4,977				5,181
Amortization of intangible assets			1,129				1,208				1,361				3,628				4,077
FDIC insurance			1,107				1,196				977				3,632				2,633
Other expense			5,743				5,547				6,633				16,395				17,282
Total noninterest expense			42,038				42,894				43,496				129,414				125,719
Income before income taxes			29,575				28,820				29,380				87,061				85,936
Income taxes			11,533				7,245				5,859				25,672				19,783
Net income			18,042				21,575				23,521				61,389				66,153
Preferred stock dividends			2,229				2,228				—				6,685				—
Net income available to common shareholders		$	15,813			$	19,347			$	23,521			$	54,704			$	66,153
Basic earnings per common share		$	0.71			$	0.86			$	1.04			$	2.43			$	2.93
Diluted earnings per common share		$	0.71			$	0.86			$	1.04			$	2.43			$	2.92

MIDLAND STATES BANCORP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited)
Adjusted Earnings Reconciliation
		For the Three Months Ended												For the Nine Months Ended
		September 30,				June 30,				September 30,				September 30,				September 30,
(dollars in thousands, except per share data)		2023				2023				2022				2023				2022
Income before income taxes - GAAP		$	29,575			$	28,820			$	29,380			$	87,061			$	85,936
Adjustments to noninterest income:
Loss on sales of investment securities, net			4,961				869				129				6,478				230
(Gain) on repurchase of subordinated debt			—				(676	)			—				(676	)			—
Company-owned life insurance enhancement fee			(6,640	)			—				—				(6,640	)			—
Total adjustments to noninterest income			(1,679	)			193				129				(838	)			230
Adjustments to noninterest expense:
Integration and acquisition expenses			—				—				68				—				(347	)
Total adjustments to noninterest expense			—				—				68				—				(347	)
Adjusted earnings pre tax - non-GAAP			27,896				29,013				29,441				86,223				86,513
Adjusted earnings tax			8,389				7,297				5,873				22,755				19,939
Adjusted earnings - non-GAAP			19,507				21,716				23,568				63,468				66,574
Preferred stock dividends			2,229				2,228				—				6,685				—
Adjusted earnings available to common shareholders		$	17,278			$	19,488			$	23,568			$	56,783			$	66,574
Adjusted diluted earnings per common share		$	0.78			$	0.87			$	1.04			$	2.53			$	2.94
Adjusted return on average assets			0.98	%			1.10	%			1.22	%			1.07	%			1.20	%
Adjusted return on average shareholders' equity			10.03	%			11.21	%			13.34	%			10.99	%			13.34	%
Adjusted return on average tangible common equity			14.24	%			16.10	%			20.24	%			15.80	%			19.18	%
Adjusted Pre-Tax, Pre-Provision Earnings Reconciliation
		For the Three Months Ended												For the Nine Months Ended
		September 30,				June 30,				September 30,				September 30,				September 30,
(dollars in thousands)		2023				2023				2022				2023				2022
Adjusted earnings pre tax - non-GAAP		$	27,896			$	29,013			$	29,441			$	86,223			$	86,513
Provision for credit losses			5,168				5,879				6,974				14,182				16,582
Impairment on commercial mortgage servicing rights			—				—				—				—				1,263
Adjusted pre-tax, pre-provision earnings - non-GAAP		$	33,064			$	34,892			$	36,415			$	100,405			$	104,358
Adjusted pre-tax, pre-provision return on average assets			1.66	%			1.76	%			1.89	%			1.70	%			1.88	%

MIDLAND STATES BANCORP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued)
Efficiency Ratio Reconciliation
		For the Three Months Ended												For the Nine Months Ended
		September 30,				June 30,				September 30,				September 30,				September 30,
(dollars in thousands)		2023				2023				2022				2023				2022
Noninterest expense - GAAP		$	42,038			$	42,894			$	43,496			$	129,414			$	125,719
Integration and acquisition expenses			—				—				68				—				(347	)
Adjusted noninterest expense		$	42,038			$	42,894			$	43,564			$	129,414			$	125,372
Net interest income - GAAP		$	58,596			$	58,840			$	64,024			$	177,940			$	182,185
Effect of tax-exempt income			205				195				307				644				997
Adjusted net interest income			58,801				59,035				64,331				178,584				183,182
Noninterest income - GAAP			18,185				18,753				15,826				52,717				46,052
Impairment on commercial mortgage servicing rights			—				—				—				—				1,263
Loss on sales of investment securities, net			4,961				869				129				6,478				230
(Gain) on repurchase of subordinated debt			—				(676	)			—				(676	)			—
Company-owned life insurance enhancement fee			(6,640	)			—				—				(6,640	)			—
Adjusted noninterest income			16,506				18,946				15,955				51,879				47,545
Adjusted total revenue		$	75,307			$	77,981			$	80,286			$	230,463			$	230,727
Efficiency ratio			55.82	%			55.01	%			54.26	%			56.15	%			54.34	%
Return on Average Tangible Common Equity (ROATCE)
		For the Three Months Ended												For the Nine Months Ended
		September 30,				June 30,				September 30,				September 30,				September 30,
(dollars in thousands)		2023				2023				2022				2023				2022
Net income available to common shareholders		$	15,813			$	19,347			$	23,521			$	54,704			$	66,153
Average total shareholders' equity—GAAP		$	771,625			$	776,791			$	700,866			$	771,883			$	667,225
Adjustments:
Preferred Stock			(110,548	)			(110,548	)			(54,072	)			(110,548	)			—
Goodwill			(161,904	)			(161,904	)			(161,904	)			(161,904	)			(161,904	)
Other intangible assets, net			(17,782	)			(18,937	)			(22,859	)			(18,959	)			(23,019	)
Average tangible common equity		$	481,391			$	485,402			$	462,031			$	480,472			$	482,302
ROATCE			13.03	%			15.99	%			20.20	%			15.22	%			19.06	%

MIDLAND STATES BANCORP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued)
Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share
		As of
		September 30,				June 30,				March 31,				December 31,				September 30,
(dollars in thousands, except per share data)		2023				2023				2023				2022				2022
Shareholders' Equity to Tangible Common Equity
Total shareholders' equity—GAAP		$	764,250			$	776,821			$	775,643			$	758,574			$	739,279
Adjustments:
Preferred Stock			(110,548	)			(110,548	)			(110,548	)			(110,548	)			(110,548	)
Goodwill			(161,904	)			(161,904	)			(161,904	)			(161,904	)			(161,904	)
Other intangible assets, net			(17,238	)			(18,367	)			(19,575	)			(20,866	)			(22,198	)
Tangible common equity		$	474,560			$	486,002			$	483,616			$	465,256			$	444,629
Less: Accumulated other comprehensive income (AOCI)			(101,181	)			(84,719	)			(77,797	)			(83,797	)			(78,383	)
Tangible common equity excluding AOCI			575,741				570,721				561,413				549,053				523,012
Total Assets to Tangible Assets:
Total assets—GAAP		$	7,975,925			$	8,034,721			$	7,930,174			$	7,855,501			$	7,821,877
Adjustments:
Goodwill			(161,904	)			(161,904	)			(161,904	)			(161,904	)			(161,904	)
Other intangible assets, net			(17,238	)			(18,367	)			(19,575	)			(20,866	)			(22,198	)
Tangible assets		$	7,796,783			$	7,854,450			$	7,748,695			$	7,672,731			$	7,637,775
Common Shares Outstanding			21,594,546				21,854,800				22,111,454				22,214,913				22,074,740
Tangible Common Equity to Tangible Assets			6.09	%			6.19	%			6.24	%			6.06	%			5.82	%
Tangible Book Value Per Share		$	21.98			$	22.24			$	21.87			$	20.94			$	20.14
Tangible Book Value Per Share excluding AOCI		$	26.66			$	26.11			$	25.39			$	24.72			$	23.69