Midland States Bancorp, Inc. Announces 2021 Second Quarter Results

Summary

• Net income of $20.1 million, or $0.88 diluted earnings per share
• Return on average shareholders’ equity of 12.59%
• Return on average tangible common equity of 17.85%
• Tangible common equity to tangible assets ratio increased 45 bps to 7.12%
• Book value and tangible book value per share increased 1.9% and 2.5%, respectively
• Acquisition of ATG Trust Company completed in June 2021

EFFINGHAM, Ill., July 22, 2021 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (Nasdaq: MSBI) (the “Company”) today reported net income of $20.1 million, or $0.88 diluted earnings per share, for the second quarter of 2021, which included a $6.8 million tax benefit related to the settlement of a prior tax issue, $3.6 million in professional fees related to the settlement, and a $3.7 million charge related to the prepayment of a longer-term FHLB advance. This compares to net income of $18.5 million, or $0.81 diluted earnings per share, for the first quarter of 2021, and to net income of $12.6 million, or $0.53 diluted earnings per share, for the second quarter of 2020.

Jeffrey G. Ludwig, President and Chief Executive Officer of the Company, said, “We continue to see strong improvement in our level of profitability resulting from the changes we have made in our operations to generate a more consistent revenue mix and increase our focus on businesses that produce higher returns. The higher level of profitability we are generating is strengthening our capital ratios and enhancing our ability to support organic and acquisitive growth in the future.

“Economic conditions are steadily improving and creating more loan demand. During the second quarter, we saw increased production in our equipment finance, construction, and commercial real estate lending areas, which helped offset continued runoff in PPP loans and a decline in utilization of commercial FHA warehouse lines of credit. Excluding PPP loans and commercial FHA warehouse lines of credit, total loans increased at an annualized rate of 6% during the second quarter, which was at the high end of our expected range. The increased economic activity is also leading to higher levels of non-interest income, which increased 18% from the prior quarter. The increase in non-interest income was partially driven by a 10% increase in wealth management revenue resulting from our acquisition of ATG Trust Company in June.

“We continue to expect an increase in loan growth during the second half of the year. The loan pipeline in our Community Banking group is approximately 14% higher than it was at the end of the first quarter, which reflects improving loan demand and the contributions we are seeing from new bankers added over the past several months. As loan growth increases, we expect that we will see further improvement in our level of profitability driven by additional operating leverage and a favorable shift in our mix of earning assets,” said Mr. Ludwig.

Adjusted Earnings

Financial results for the second quarter of 2021 were impacted by a $6.8 million tax benefit related to the settlement of a prior tax issue, $3.8 million of integration and acquisition expenses inclusive of the $3.6 million in professional fees related to the settlement, and a $3.7 million charge related to the prepayment of a longer-term FHLB advance. Excluding these amounts and certain other income and expense, adjusted earnings were $19.8 million, or $0.86 diluted earnings per share, for the second quarter of 2021.

Financial results for the second quarter of 2020 were impacted by a $0.4 million loss on residential mortgage servicing rights (“MSRs”) held-for-sale and $0.1 million in integration and acquisition expenses. Excluding these amounts and certain income, adjusted earnings were $12.9 million, or $0.55 diluted earnings per share, for the second quarter of 2020.

A reconciliation of adjusted earnings to net income according to accounting principles generally accepted in the United States (“GAAP”) is provided in the financial tables at the end of this press release.

Net Interest Margin

Net interest margin for the second quarter of 2021 was 3.29%, compared to 3.45% for the first quarter of 2021. The Company’s net interest margin benefits from accretion income on purchased loan portfolios, which contributed 9 and 8 basis points to net interest margin in the second quarter of 2021 and first quarter of 2021, respectively. Excluding the impact of accretion income, net interest margin declined 17 basis points from the first quarter of 2021, due primarily to an unfavorable shift in the mix of earning assets.

Relative to the second quarter of 2020, net interest margin decreased from 3.32%. Accretion income on purchased loan portfolios contributed 12 basis points to net interest margin in the second quarter of 2020. Excluding the impact of accretion income, net interest margin was unchanged compared to the second quarter of 2020.  

Net Interest Income

Net interest income for the second quarter of 2021 was $50.1 million, a decrease of 3.4% from $51.9 million for the first quarter of 2021. Excluding accretion income, net interest income decreased $1.9 million from the prior quarter, which was primarily due to lower levels of loan prepayment fees, an unfavorable shift in the mix of earning assets, and the recovery of interest on a previously charged-off loan during the first quarter of 2021. Accretion income associated with purchased loan portfolios totaled $1.3 million for the second quarter of 2021, compared with $1.2 million for the first quarter of 2021. PPP loan income totaled $2.5 million, including loan origination fees of $2.0 million, in the second quarter of 2021, compared to $2.6 million, including loan origination fees of $2.1 million, in the first quarter of 2021.

Relative to the second quarter of 2020, net interest income increased $1.1 million, or 2.3%. Accretion income for the second quarter of 2020 was $1.8 million. Excluding the impact of accretion income, net interest income increased primarily due to organic loan growth and a significant decline in the cost of funds.

Noninterest Income

Noninterest income for the second quarter of 2021 was $17.4 million, an increase of 17.6% from $14.8 million for the first quarter of 2021.   Impairment on commercial MSRs impacted noninterest income by $1.1 million and $1.3 million in the second quarter of 2021 and first quarter of 2021, respectively. Excluding the impairments, noninterest income increased 15.4% primarily due to higher levels of wealth management and interchange revenue, as well as gains on the sale of investment securities and other real estate owned.

Relative to the second quarter of 2020, noninterest income decreased 10.2% from $19.4 million. The decrease was primarily attributable to a lower level of commercial FHA revenue due to the sale of the loan origination platform, partially offset by higher wealth management revenue.

Wealth management revenue for the second quarter of 2021 was $6.5 million, an increase of 10.1% from the first quarter of 2021, primarily due to the one month contribution of ATG Trust Company following its acquisition at the beginning of June. Compared to the second quarter of 2020, wealth management revenue increased 14.6%, primarily due to the increase in assets under administration over the past year and the one month contribution of ATG Trust Company.

Noninterest Expense

Noninterest expense for the second quarter of 2021 was $48.9 million, which included $3.6 million in professional fees related to the settlement of the prior tax issue and $3.7 million in FHLB advance prepayment fees, compared with $39.1 million in the first quarter of 2021, which included $0.2 million in integration and acquisition expenses. Excluding the professional fees related to the settlement of the prior tax issue, FHLB advance prepayment fees, and integration and acquisition expenses, noninterest expense increased by $2.5 million, primarily due to an increase in salaries and employees benefit expense resulting from higher incentive compensation.

Relative to the second quarter of 2020, noninterest expense increased 18.2% from $41.4 million, which included a $0.4 million loss on residential MSRs held for sale and $0.1 million in integration and acquisition expenses. Excluding the professional fees related to the settlement of the prior tax issue, FHLB advance prepayment fees, loss on residential MSRs held for sale, and integration and acquisition expenses, noninterest expense increased $0.4 million, primarily due to higher salaries and employee benefits expense.

Loan Portfolio

Total loans outstanding were $4.84 billion at June 30, 2021, compared with $4.91 billion at March 31, 2021 and $4.84 billion at June 30, 2020. The decrease in total loans from March 31, 2021 was primarily attributable to lower end-of-period balances on commercial FHA warehouse lines of credit, forgiveness of PPP loans, and runoff in the residential real estate portfolio resulting from refinancings, which was partially offset by higher commercial real estate, construction and consumer loans.

Equipment finance balances increased $12.9 million from March 31, 2021 to $871.5 million at June 30, 2021, which are booked within the commercial loans and leases portfolio.  

Compared to loan balances at June 30, 2020, growth in equipment finance balances, commercial real estate, and consumer loans was offset by declines in residential real estate loans and PPP loans held in the commercial portfolio.

Deposits

Total deposits were $5.20 billion at June 30, 2021, compared with $5.34 billion at March 31, 2021, and $4.94 billion at June 30, 2020. The decrease in total deposits from the end of the prior quarter was primarily attributable to a decline in commercial FHA servicing deposits and outflows of retail deposits consistent with the increase in economic activity in the Company’s markets.

Asset Quality

Nonperforming loans totaled $61.4 million, or 1.27% of total loans, at June 30, 2021, compared with $52.8 million, or 1.08% of total loans, at March 31, 2021. The increase in nonperforming loans was primarily attributable to three loans in the hotel/motel portfolio placed on nonaccrual during the quarter. At June 30, 2020, nonperforming loans totaled $60.5 million, or 1.25% of total loans.

Net charge-offs for the second quarter of 2021 were $4.0 million, or 0.33% of average loans on an annualized basis, compared to net charge-offs of $1.7 million, or 0.14% of average loans on an annualized basis, for the first quarter of 2021 and $3.1 million, or 0.26% of average loans on an annualized basis, for the second quarter of 2020.  

The Company recorded a negative provision for credit losses of $0.5 million for the second quarter of 2021. No provision for credit losses on loans was recorded due to general improvement in portfolio mix and economic forecasts, while a negative provision of $0.5 million was recorded for credit losses on unfunded commitments and available-for-sale securities.

The Company’s allowance for credit losses on loans was 1.21% of total loans and 95.6% of nonperforming loans at June 30, 2021, compared with 1.28% of total loans and 118.7% of nonperforming loans at March 31, 2021. Approximately 91.6% of the allowance for credit losses on loans at June 30, 2021 was allocated to general reserves.

Capital

At June 30, 2021, Midland States Bank and the Company exceeded all regulatory capital requirements under Basel III, and Midland States Bank met the qualifications to be a ‘‘well-capitalized’’ financial institution, as summarized in the following table:

	Bank Level Ratios as of June 30, 2021	Consolidated Ratios as of June 30, 2021	Minimum Regulatory Requirements (2)
Total capital to risk-weighted assets	11.98%	13.11%	10.50%
Tier 1 capital to risk-weighted assets	11.06%	9.64%	8.50%
Tier 1 leverage ratio	9.19%	8.00%	4.00%
Common equity Tier 1 capital	11.06%	8.44%	7.00%
Tangible common equity to tangible assets (1)	NA	7.12%	NA

 

(1)	A non-GAAP financial measure. Refer to page 15 for a reconciliation to the comparable GAAP financial measure.
(2)	Includes the capital conservation buffer of 2.5%.

Stock Repurchase Program

During the second quarter of 2021, the Company did not repurchase any shares of its common stock. As of June 30, 2021, the Company had $5.2 million remaining under the current stock repurchase authorization.

Conference Call, Webcast and Slide Presentation

The Company will host a conference call and webcast at 7:30 a.m. Central Time on Friday, July 23, 2021, to discuss its financial results. The call can be accessed via telephone at (877) 516-3531; conference ID: 6112677. A recorded replay can be accessed through July 30, 2021, by dialing (855) 859-2056; conference ID: 6112677.

A slide presentation relating to the second quarter 2021 financial results will be accessible prior to the scheduled conference call. This earnings release should be read together with the slide presentation, which contains important information related to the impact of COVID-19. The slide presentation and webcast of the conference call can be accessed on the Webcasts and Presentations page of the Company’s investor relations website at investors.midlandsb.com under the “News and Events” tab.

About Midland States Bancorp, Inc.

Midland States Bancorp, Inc. is a community-based financial holding company headquartered in Effingham, Illinois, and is the sole shareholder of Midland States Bank. As of June 30, 2021, the Company had total assets of approximately $6.63 billion, and its Wealth Management Group had assets under administration of approximately $4.08 billion. Midland provides a full range of commercial and consumer banking products and services and business equipment financing, merchant credit card services, trust and investment management, insurance and financial planning services. For additional information, visit https://www.midlandsb.com/ or https://www.linkedin.com/company/midland-states-bank.

Non-GAAP Financial Measures

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

Forward-Looking Statements

Readers should note that in addition to the historical information contained herein, this press release includes "forward-looking statements" within the meanings of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including but not limited to statements about the Company’s plans, objectives, future performance, goals and future earnings levels. These statements are subject to many risks and uncertainties, including changes in interest rates and other general economic, business and political conditions, including the effects of the COVID-19 pandemic and its potential effects on the economic environment, our customers and our operations, as well as any changes to federal, state and local government laws, regulations and orders in connection with the pandemic; changes in the financial markets; changes in business plans as circumstances warrant; risks relating to acquisitions; developments and uncertainty related to the future use and availability of some reference rates, such as the London Inter-Bank Offered Rate, as well as other alternative reference rates, and the adoption of a substitute; and other risks detailed from time to time in filings made by the Company with the Securities and Exchange Commission. Readers should note that the forward-looking statements included in this press release are not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "will," "propose," "may," "plan," "seek," "expect," "intend," "estimate," "anticipate," "believe," "continue," or similar terminology. Any forward-looking statements presented herein are made only as of the date of this press release, and the Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

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

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited)
		For the Quarter Ended
		June 30,				March 31,				December 31,				September 30,				June 30,
(dollars in thousands, except per share data)		2021				2021				2020				2020				2020
Earnings Summary
Net interest income		$	50,110			$	51,868			$	53,516			$	49,980			$	48,989
Provision for credit losses			(455	)			3,565				10,058				11,728				10,997
Noninterest income			17,417				14,816				14,336				18,919				19,396
Noninterest expense			48,941				39,079				47,048				53,901				41,395
Income before income taxes			19,041				24,040				10,746				3,270				15,993
Income taxes			(1,083	)			5,502				2,413				3,184				3,424
Net income		$	20,124			$	18,538			$	8,333			$	86			$	12,569
Diluted earnings per common share		$	0.88			$	0.81			$	0.36			$	-			$	0.53
Weighted average shares outstanding - diluted			22,677,515				22,578,553				22,656,343				22,937,837				23,339,964
Return on average assets			1.20	%			1.11	%			0.49	%			0.01	%			0.77	%
Return on average shareholders' equity			12.59	%			12.04	%			5.32	%			0.05	%			8.00	%
Return on average tangible common equity (1)			17.85	%			17.28	%			7.68	%			0.08	%			11.84	%
Net interest margin			3.29	%			3.45	%			3.47	%			3.33	%			3.32	%
Efficiency ratio (1)			60.19	%			56.88	%			58.55	%			57.74	%			59.42	%
Adjusted Earnings Performance Summary (1)
Adjusted earnings		$	19,755			$	18,662			$	12,471			$	12,023			$	12,884
Adjusted diluted earnings per common share		$	0.86			$	0.82			$	0.54			$	0.52			$	0.55
Adjusted return on average assets			1.17	%			1.12	%			0.73	%			0.72	%			0.78	%
Adjusted return on average shareholders' equity			12.36	%			12.12	%			7.97	%			7.56	%			8.20	%
Adjusted return on average tangible common equity			17.52	%			17.39	%			11.50	%			11.04	%			12.14	%
Adjusted pre-tax, pre-provision earnings		$	26,967			$	29,051			$	28,855			$	28,751			$	27,531
Adjusted pre-tax, pre-provision return on average assets			1.60	%			1.75	%			1.69	%			1.72	%			1.68	%
(1) Non-GAAP financial measures. Refer to pages 13 - 15 for a reconciliation to the comparable GAAP financial measures.

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
		For the Quarter Ended
		June 30,				March 31,				December 31,				September 30,				June 30,
(in thousands, except per share data)		2021				2021				2020				2020				2020
Net interest income:
Interest income		$	58,397			$	60,503			$	62,712			$	60,314			$	60,548
Interest expense			8,287				8,635				9,196				10,334				11,559
Net interest income			50,110				51,868				53,516				49,980				48,989
Provision for credit losses:
Provision for credit losses on loans			-				3,950				10,000				10,970				11,610
Provision for credit losses on unfunded commitments			(265	)			(535	)			-				577				(665	)
Provision for other credit losses			(190	)			150				58				181				52
Total provision for credit losses			(455	)			3,565				10,058				11,728				10,997
Net interest income after provision for credit losses			50,565				48,303				43,458				38,252				37,992
Noninterest income:
Wealth management revenue			6,529				5,931				5,868				5,559				5,698
Commercial FHA revenue			342				292				400				926				3,414
Residential mortgage banking revenue			1,562				1,574				2,285				3,049				2,723
Service charges on deposit accounts			1,916				1,826				2,149				2,092				1,706
Interchange revenue			3,797				3,375				3,137				3,283				3,013
Gain on sales of investment securities, net			377				-				-				1,721				-
Impairment on commercial mortgage servicing rights			(1,148	)			(1,275	)			(2,344	)			(1,418	)			(107	)
Company-owned life insurance			863				860				893				897				892
Other income			3,179				2,233				1,948				2,810				2,057
Total noninterest income			17,417				14,816				14,336				18,919				19,396
Noninterest expense:
Salaries and employee benefits			22,071				20,528				22,636				21,118				20,740
Occupancy and equipment			3,796				3,940				3,531				4,866				4,286
Data processing			6,288				5,993				5,987				5,721				5,458
Professional			5,549				2,185				1,912				1,861				1,606
Amortization of intangible assets			1,470				1,515				1,556				1,557				1,629
Loss on mortgage servicing rights held for sale			143				-				617				188				391
Impairment related to facilities optimization			-				-				(10	)			12,651				60
FHLB advances prepayment fees			3,669				8				4,872				-				-
Other expense			5,955				4,910				5,947				5,939				7,225
Total noninterest expense			48,941				39,079				47,048				53,901				41,395
Income before income taxes			19,041				24,040				10,746				3,270				15,993
Income taxes			(1,083	)			5,502				2,413				3,184				3,424
Net income		$	20,124			$	18,538			$	8,333			$	86			$	12,569
Basic earnings per common share		$	0.88			$	0.81			$	0.36			$	0.00			$	0.53
Diluted earnings per common share		$	0.88			$	0.81			$	0.36			$	0.00			$	0.53

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
		As of
		June 30,				March 31,				December 31,				September 30,				June 30,
(in thousands)		2021				2021				2020				2020				2020
Assets
Cash and cash equivalents		$	425,100			$	631,219			$	341,640			$	461,196			$	519,868
Investment securities			756,831				690,390				686,135				618,974				639,693
Loans			4,835,866				4,910,806				5,103,331				4,941,466				4,839,423
Allowance for credit losses on loans			(58,664	)			(62,687	)			(60,443	)			(52,771	)			(47,093	)
Total loans, net			4,777,202				4,848,119				5,042,888				4,888,695				4,792,330
Loans held for sale			12,187				55,174				138,090				62,500				32,403
Premises and equipment, net			71,803				73,255				74,124				74,967				89,046
Other real estate owned			12,768				20,304				20,247				15,961				12,728
Loan servicing rights, at lower of cost or fair value			34,577				36,876				39,276				42,465				44,239
Goodwill			161,904				161,904				161,904				161,904				172,796
Other intangible assets, net			27,900				26,867				28,382				29,938				31,495
Cash surrender value of life insurance policies			148,277				146,864				146,004				145,112				144,215
Other assets			201,461				193,814				189,850				198,333				165,685
Total assets		$	6,630,010			$	6,884,786			$	6,868,540			$	6,700,045			$	6,644,498
Liabilities and Shareholders' Equity
Noninterest-bearing deposits		$	1,366,453			$	1,522,433			$	1,469,579			$	1,355,188			$	1,273,267
Interest-bearing deposits			3,829,898				3,818,080				3,631,437				3,673,548				3,669,840
Total deposits			5,196,351				5,340,513				5,101,016				5,028,736				4,943,107
Short-term borrowings			75,985				71,728				68,957				58,625				77,136
FHLB advances and other borrowings			440,171				529,171				779,171				693,640				693,865
Subordinated debt			138,906				169,888				169,795				169,702				169,610
Trust preferred debentures			49,094				48,954				48,814				48,682				48,551
Other liabilities			81,317				89,065				79,396				78,780				78,640
Total liabilities			5,981,824				6,249,319				6,247,149				6,078,165				6,010,909
Total shareholders’ equity			648,186				635,467				621,391				621,880				633,589
Total liabilities and shareholders’ equity		$	6,630,010			$	6,884,786			$	6,868,540			$	6,700,045			$	6,644,498

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
		As of
		June 30,				March 31,				December 31,				September 30,				June 30,
(in thousands)		2021				2021				2020				2020				2020
Loan Portfolio
Commercial loans and leases		$	1,831,241			$	1,977,440			$	2,095,639			$	1,938,691			$	1,856,435
Commercial real estate			1,540,489				1,494,031				1,525,973				1,496,758				1,495,183
Construction and land development			212,508				191,870				172,737				177,894				207,593
Residential real estate			366,612				398,501				442,880				470,829				509,453
Consumer			885,016				848,964				866,102				857,294				770,759
Total loans		$	4,835,866			$	4,910,806			$	5,103,331			$	4,941,466			$	4,839,423
Deposit Portfolio
Noninterest-bearing demand		$	1,366,453			$	1,522,433			$	1,469,579			$	1,355,188			$	1,273,267
Interest-bearing:
Checking			1,619,436				1,601,449				1,568,888				1,581,216				1,484,728
Money market			787,688				819,455				785,871				826,454				877,675
Savings			669,277				653,256				597,966				580,748				594,685
Time			721,502				718,788				655,620				661,872				689,841
Brokered time			31,995				25,132				23,092				23,258				22,911
Total deposits		$	5,196,351			$	5,340,513			$	5,101,016			$	5,028,736			$	4,943,107

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
		For the Quarter Ended
		June 30,				March 31,				December 31,				September 30,				June 30,
(dollars in thousands)		2021				2021				2020				2020				2020
Average Balance Sheets
Cash and cash equivalents		$	509,886			$	350,061			$	415,686			$	491,728			$	489,941
Investment securities			734,462				680,202				672,937				628,705				650,356
Loans			4,826,234				4,992,802				4,998,912				4,803,940				4,696,288
Loans held for sale			36,299				65,365				45,196				44,880				99,169
Nonmarketable equity securities			49,388				55,935				51,906				50,765				50,661
Total interest-earning assets			6,156,269				6,144,365				6,184,637				6,020,018				5,986,415
Non-earning assets			589,336				602,017				602,716				625,522				619,411
Total assets		$	6,745,605			$	6,746,382			$	6,787,353			$	6,645,540			$	6,605,826
Interest-bearing deposits		$	3,815,179			$	3,757,108			$	3,680,645			$	3,656,833			$	3,651,406
Short-term borrowings			65,727				75,544				62,432				64,010				59,103
FHLB advances and other borrowings			519,490				617,504				682,981				693,721				692,470
Subordinated debt			165,155				169,844				169,751				169,657				169,560
Trust preferred debentures			49,026				48,887				48,751				48,618				48,487
Total interest-bearing liabilities			4,614,577				4,668,887				4,644,560				4,632,839				4,621,026
Noninterest-bearing deposits			1,411,428				1,370,604				1,446,359				1,303,963				1,280,983
Other noninterest-bearing liabilities			78,521				82,230				73,840				75,859				71,853
Shareholders' equity			641,079				624,661				622,594				632,879				631,964
Total liabilities and shareholders' equity		$	6,745,605			$	6,746,382			$	6,787,353			$	6,645,540			$	6,605,826
Yields
Earning Assets
Cash and cash equivalents			0.11	%			0.11	%			0.12	%			0.10	%			0.14	%
Investment securities			2.43	%			2.51	%			2.65	%			2.86	%			3.05	%
Loans			4.43	%			4.50	%			4.58	%			4.57	%			4.64	%
Loans held for sale			2.88	%			2.74	%			3.14	%			2.92	%			4.07	%
Nonmarketable equity securities			4.94	%			4.93	%			5.22	%			5.26	%			5.40	%
Total interest-earning assets			3.83	%			4.02	%			4.06	%			4.01	%			4.10	%
Interest-Bearing Liabilities
Interest-bearing deposits			0.31	%			0.34	%			0.36	%			0.46	%			0.61	%
Short-term borrowings			0.12	%			0.13	%			0.14	%			0.17	%			0.19	%
FHLB advances and other borrowings			1.91	%			1.69	%			1.71	%			1.85	%			1.69	%
Subordinated debt			5.61	%			5.57	%			5.60	%			5.58	%			5.85	%
Trust preferred debentures			4.00	%			4.08	%			4.03	%			4.16	%			4.86	%
Total interest-bearing liabilities			0.72	%			0.75	%			0.79	%			0.89	%			1.01	%
Cost of Deposits			0.23	%			0.25	%			0.26	%			0.34	%			0.45	%
Net Interest Margin			3.29	%			3.45	%			3.47	%			3.33	%			3.32	%

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
		As of and for the Quarter Ended
		June 30,				March 31,				December 31,				September 30,				June 30,
(dollars in thousands, except per share data)		2021				2021				2020				2020				2020
Asset Quality
Loans 30-89 days past due		$	20,224			$	24,819			$	31,460			$	28,188			$	36,551
Nonperforming loans			61,363				52,826				54,070				67,443				60,513
Nonperforming assets			76,926				75,004				75,432				84,795				74,707
Net charge-offs			4,023				1,706				2,328				5,292				3,062
Loans 30-89 days past due to total loans			0.42	%			0.51	%			0.62	%			0.57	%			0.76	%
Nonperforming loans to total loans			1.27	%			1.08	%			1.06	%			1.36	%			1.25	%
Nonperforming assets to total assets			1.16	%			1.09	%			1.10	%			1.27	%			1.12	%
Allowance for credit losses to total loans			1.21	%			1.28	%			1.18	%			1.07	%			0.97	%
Allowance for credit losses to nonperforming loans			95.60	%			118.67	%			111.79	%			78.25	%			77.82	%
Net charge-offs to average loans			0.33	%			0.14	%			0.19	%			0.44	%			0.26	%
Wealth Management
Trust assets under administration		$	4,077,581			$	3,560,427			$	3,480,759			$	3,260,893			$	3,253,784
Market Data
Book value per share at period end		$	28.96			$	28.43			$	27.83			$	27.51			$	27.62
Tangible book value per share at period end (1)		$	20.48			$	19.98			$	19.31			$	19.03			$	18.72
Market price at period end		$	26.27			$	27.74			$	17.87			$	12.85			$	14.95
Shares outstanding at period end			22,380,492				22,351,740				22,325,471				22,602,844				22,937,296
Capital
Total capital to risk-weighted assets			13.11	%			13.73	%			13.24	%			13.34	%			13.67	%
Tier 1 capital to risk-weighted assets			9.64	%			9.62	%			9.20	%			9.40	%			9.71	%
Tier 1 common capital to risk-weighted assets			8.44	%			8.39	%			7.99	%			8.18	%			8.44	%
Tier 1 leverage ratio			8.00	%			7.79	%			7.50	%			7.72	%			7.75	%
Tangible common equity to tangible assets (1)			7.12	%			6.67	%			6.46	%			6.61	%			6.67	%
(1) Non-GAAP financial measures. Refer to pages 13 - 15 for a reconciliation to the comparable GAAP financial measures.

MIDLAND STATES BANCORP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited)
Adjusted Earnings Reconciliation
		For the Quarter Ended
		June 30,				March 31,				December 31,				September 30,				June 30,
(dollars in thousands, except per share data)		2021				2021				2020				2020				2020
Income before income taxes - GAAP		$	19,041			$	24,040			$	10,746			$	3,270			$	15,993
Adjustments to noninterest income:
Gain on sales of investment securities, net			377				-				-				1,721				-
Other income			(27	)			75				3				(17	)			11
Total adjustments to noninterest income			350				75				3				1,704				11
Adjustments to noninterest expense:
Loss on mortgage servicing rights held for sale			143				-				617				188				391
Impairment related to facilities optimization			-				-				(10	)			12,651				60
FHLB advances prepayment fees			3,669				8				4,872				-				-
Integration and acquisition expenses			3,771				238				231				1,200				(6	)
Total adjustments to noninterest expense			7,583				246				5,710				14,039				445
Adjusted earnings pre tax			26,274				24,211				16,453				15,605				16,427
Adjusted earnings tax			6,519				5,549				3,982				3,582				3,543
Adjusted earnings - non-GAAP		$	19,755			$	18,662			$	12,471			$	12,023			$	12,884
Adjusted diluted earnings per common share		$	0.86			$	0.82			$	0.54			$	0.52			$	0.55
Adjusted return on average assets			1.17	%			1.12	%			0.73	%			0.72	%			0.78	%
Adjusted return on average shareholders' equity			12.36	%			12.12	%			7.97	%			7.56	%			8.20	%
Adjusted return on average tangible common equity			17.52	%			17.39	%			11.50	%			11.04	%			12.14	%
Adjusted Pre-Tax, Pre-Provision Earnings Reconciliation
		For the Quarter Ended
		June 30,				March 31,				December 31,				September 30,				June 30,
(dollars in thousands)		2021				2021				2020				2020				2020
Adjusted earnings pre tax - non- GAAP		$	26,274			$	24,211			$	16,453			$	15,605			$	16,427
Provision for credit losses			(455	)			3,565				10,058				11,728				10,997
Impairment on commercial mortgage servicing rights			1,148				1,275				2,344				1,418				107
Adjusted pre-tax, pre-provision earnings - non-GAAP		$	26,967			$	29,051			$	28,855			$	28,751			$	27,531
Adjusted pre-tax, pre-provision return on average assets			1.60	%			1.75	%			1.69	%			1.72	%			1.68	%

MIDLAND STATES BANCORP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued)
Efficiency Ratio Reconciliation
		For the Quarter Ended
		June 30,				March 31,				December 31,				September 30,				June 30,
(dollars in thousands)		2021				2021				2020				2020				2020
Noninterest expense - GAAP		$	48,941			$	39,079			$	47,048			$	53,901			$	41,395
Loss on mortgage servicing rights held for sale			(143	)			-				(617	)			(188	)			(391	)
Impairment related to facilities optimization			-				-				10				(12,651	)			(60	)
FHLB advances prepayment fees			(3,669	)			(8	)			(4,872	)			-				-
Integration and acquisition expenses			(3,771	)			(238	)			(231	)			(1,200	)			6
Adjusted noninterest expense		$	41,358			$	38,833			$	41,338			$	39,862			$	40,950
Net interest income - GAAP		$	50,110			$	51,868			$	53,516			$	49,980			$	48,989
Effect of tax-exempt income			383				386				413				430				438
Adjusted net interest income			50,493				52,254				53,929				50,410				49,427
Noninterest income - GAAP			17,417				14,816				14,336				18,919				19,396
Impairment on commercial mortgage servicing rights			1,148				1,275				2,344				1,418				107
Gain on sales of investment securities, net			(377	)			-				-				(1,721	)			-
Other			27				(75	)			(3	)			17				(11	)
Adjusted noninterest income			18,215				16,016				16,677				18,633				19,492
Adjusted total revenue		$	68,709			$	68,270			$	70,607			$	69,043			$	68,919
Efficiency ratio			60.19	%			56.88	%			58.55	%			57.74	%			59.42	%

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
		June 30,				March 31,				December 31,				September 30,				June 30,
(dollars in thousands, except per share data)		2021				2021				2020				2020				2020
Shareholders' Equity to Tangible Common Equity
Total shareholders' equity—GAAP		$	648,186			$	635,467			$	621,391			$	621,880			$	633,589
Adjustments:
Goodwill			(161,904	)			(161,904	)			(161,904	)			(161,904	)			(172,796	)
Other intangible assets, net			(27,900	)			(26,867	)			(28,382	)			(29,938	)			(31,495	)
Tangible common equity		$	458,382			$	446,696			$	431,105			$	430,038			$	429,298
Total Assets to Tangible Assets:
Total assets—GAAP		$	6,630,010			$	6,884,786			$	6,868,540			$	6,700,045			$	6,644,498
Adjustments:
Goodwill			(161,904	)			(161,904	)			(161,904	)			(161,904	)			(172,796	)
Other intangible assets, net			(27,900	)			(26,867	)			(28,382	)			(29,938	)			(31,495	)
Tangible assets		$	6,440,206			$	6,696,015			$	6,678,254			$	6,508,203			$	6,440,207
Common Shares Outstanding			22,380,492				22,351,740				22,325,471				22,602,844				22,937,296
Tangible Common Equity to Tangible Assets			7.12	%			6.67	%			6.46	%			6.61	%			6.67	%
Tangible Book Value Per Share		$	20.48			$	19.98			$	19.31			$	19.03			$	18.72
Return on Average Tangible Common Equity (ROATCE)
		For the Quarter Ended
		June 30,				March 31,				December 31,				September 30,				June 30,
(dollars in thousands)		2021				2021				2020				2020				2020
Net income available to common shareholders		$	20,124			$	18,538			$	8,333			$	86			$	12,569
Average total shareholders' equity—GAAP		$	641,079			$	624,661			$	622,594			$	632,879			$	631,964
Adjustments:
Goodwill			(161,904	)			(161,904	)			(161,904	)			(168,771	)			(172,796	)
Other intangible assets, net			(26,931	)			(27,578	)			(29,123	)			(30,690	)			(32,275	)
Average tangible common equity		$	452,244			$	435,179			$	431,567			$	433,418			$	426,893
ROATCE			17.85	%			17.28	%			7.68	%			0.08	%			11.84	%