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Midland States Bancorp, Inc. Announces 2023 First Quarter Results
Источник: Nasdaq GlobeNewswire / 27 апр 2023 16:30:01 America/New_York
First Quarter 2023 Highlights:
- Net income available to common shareholders of $19.5 million, or $0.86 per diluted share
- Total loan growth of $47.8 million, or 3.0% annualized from prior quarter
- Total deposits increased $60.5 million, or 3.8% annualized from prior quarter, with uninsured deposits of 21%
- Tangible book value per share of $21.87, an increase of 4.4% from prior quarter
EFFINGHAM, Ill., April 27, 2023 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (Nasdaq: MSBI) (the “Company”) today reported net income available to common shareholders of $19.5 million, or $0.86 per diluted share, for the first quarter of 2023 compared to $29.7 million, or $1.30 per diluted share, for the fourth quarter of 2022. This also compares to net income available to common shareholders of $20.7 million, or $0.92 per diluted share, for the first quarter of 2022.
Jeffrey G. Ludwig, President and Chief Executive Officer of the Company, said, “The strength of the franchise we have built has enabled us to effectively manage through the recent troubles in the banking industry and continue delivering strong financial performance. Due to the strong relationships we have with our clients, our deposit base has been exceptionally stable, and we have not needed to take any extraordinary measures to prevent deposit outflows or increase our level of liquidity beyond the usual prudent level that we maintain.
“While becoming more selective in our new loan production given the uncertain economic conditions, we still grew our total loans at a 3% annualized rate in the first quarter, largely driven by growth in our commercial loan portfolio, which offset a decline in consumer loans as we see the planned reduction in loan balances in our GreenSky portfolio. We delivered another quarter of strong financial performance that further increased our capital ratios and tangible book value per share.
“We will continue to prioritize prudent risk management and be conservative in our new loan production to build capital and liquidity. We expect to see continued reductions in our consumer portfolio that will be used to add to our security portfolio and pay off higher cost funding sources, with the net impact likely being earnings neutral, but capital accretive. We have a strong balance sheet with healthy asset quality, and we believe we can capitalize on the current environment to add new commercial and retail deposit relationships. Our focus on continuing to grow and strengthen our core deposit base will help us to generate long-term profitable growth and continue enhancing the value of our franchise,” said Mr. Ludwig.
Balance Sheet Highlights
Total assets were $7.93 billion at March 31, 2023, compared to $7.86 billion at December 31, 2022, and $7.34 billion at March 31, 2022. At March 31, 2023, portfolio loans were $6.35 billion, compared to $6.31 billion as of December 31, 2022, and $5.54 billion as of March 31, 2022. During the first quarter of 2023, the Company experienced another quarter of growth of $47.8 million, consisting of growth in commercial loan and lease balances of $84.1 million and commercial real estate loans of $15.0 million. The Company’s consumer loan balances declined $61.1 million, primarily due to a decrease in loans originated through the program with GreenSky.
Loans
As of March 31, December 31, March 31, (in thousands) 2023 2022 2022 Loan Portfolio Commercial loans $ 937,920 $ 872,794 $ 825,554 Equipment finance loans 632,205 616,751 528,572 Equipment finance leases 510,029 491,744 429,000 Commercial FHA warehouse lines 10,275 25,029 83,999 Total commercial loans and leases 2,090,429 2,006,318 1,867,125 Commercial real estate 2,448,158 2,433,159 2,114,041 Construction and land development 326,836 320,882 188,668 Residential real estate 369,910 366,094 329,331 Consumer 1,118,938 1,180,014 1,040,796 Total loans $ 6,354,271 $ 6,306,467 $ 5,539,961 Loan Quality
Credit quality remained steady during the first quarter of 2023. Loans 30-89 days past due totaled $30.9 million as of March 31, 2023, compared to $32.4 million as of December 31, 2022, and $29.0 million as of March 31, 2022. Non-performing loans were $50.7 million at March 31, 2023, compared to $49.4 million as of December 31, 2022, and $52.9 million as of March 31, 2022. Non-performing loans as a percentage of portfolio loans was 0.80% at March 31, 2023 compared with 0.78% at December 31, 2022, and 0.95% at March 31, 2022. Non-performing assets were 0.74% of total assets at the end of the first quarter of 2023, compared to 0.74% at December 31, 2022 and 0.90% at March 31, 2022.
As of and for the Quarter Ended March 31, December 31, March 31, (dollars in thousands, except per share data) 2023 2022 2022 Asset Quality Loans 30-89 days past due $ 30,895 $ 32,372 $ 29,044 Nonperforming loans 50,713 49,423 52,900 Nonperforming assets 58,806 57,824 66,164 Substandard loans 99,819 101,044 120,837 Net charge-offs 2,119 538 2,256 Loans 30-89 days past due to total loans 0.49 % 0.51 % 0.52 % Nonperforming loans to total loans 0.80 % 0.78 % 0.95 % Nonperforming assets to total assets 0.74 % 0.74 % 0.90 % Allowance for credit losses to total loans 0.98 % 0.97 % 0.96 % Allowance for credit losses to nonperforming loans 122.39 % 123.53 % 100.07 % Net charge-offs to average loans 0.14 % 0.03 % 0.17 % The Company’s allowance for credit losses totaled $62.1 million at March 31, 2023, compared to $61.1 million at December 31, 2022, and $52.9 million at March 31, 2022. The allowance as a percentage of portfolio loans was 0.98% at March 31, 2023, compared to 0.97% at December 31, 2022, and 0.96% at March 31, 2022.
Deposits
Total deposits were $6.43 billion at March 31, 2023, compared with $6.36 billion at December 31, 2022, and $6.06 billion at March 31, 2022. Interest rate promotions offered during the first quarter of 2023 on money market and time deposit products resulted in increases in balances of $79.7 million and $117.3 million, respectively, at March 31, 2023, compared to December 31, 2022.
As of March 31, December 31, March 31, (in thousands) 2023 2022 2022 Deposit Portfolio Noninterest-bearing demand $ 1,215,758 $ 1,362,158 $ 1,393,825 Interest-bearing: Checking 2,502,827 2,494,073 2,350,225 Money market 1,263,813 1,184,101 964,352 Savings 636,832 661,932 710,955 Time 766,884 649,552 619,386 Brokered time 39,087 12,836 18,796 Total deposits $ 6,425,201 $ 6,364,652 $ 6,057,539 The Company estimates that uninsured deposits(1) totaled $1.32 billion, or 21% of total deposits, at March 31, 2023 compared to $1.55 billion, or 24%, at December 31, 2022.
(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
During the first quarter of 2023, net interest income, on a tax-equivalent basis, totaled $60.7 million, a decrease of $3.1 million, or 4.8%, compared to $63.8 million for the fourth quarter of 2022, and an increase of $3.6 million, or 6.2%, compared to the first quarter of 2022 net interest income of $57.2 million.
Net Interest Income and Margin
The tax equivalent net interest margin for the first quarter of 2023 was 3.39%, compared with 3.50% in both the fourth and first quarters of 2022. The decline in the net interest margin during the first quarter of 2023 was largely attributable to increased market interest rates resulting in the cost of funding liabilities increasing at a faster rate than the yields on earning assets.
For the Quarter Ended March 31, December 31, March 31, (dollars in thousands) 2023 2022 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 $ 85,123 $ 980 4.67 % $ 220,938 $ 2,143 3.85 % $ 384,231 $ 171 0.18 % Investment securities 809,848 5,995 3.00 % 736,579 4,824 2.62 % 894,634 4,962 2.22 % Loans 6,320,402 87,997 5.65 % 6,240,277 82,810 5.26 % 5,274,051 57,280 4.40 % Loans held for sale 1,506 16 4.41 % 3,883 47 4.86 % 31,256 220 2.86 % Nonmarketable equity securities 47,819 795 6.75 % 43,618 677 6.16 % 36,378 484 5.40 % Total interest-earning assets $ 7,264,698 $ 95,783 5.35 % $ 7,245,295 $ 90,501 4.96 % $ 6,620,550 $ 63,117 3.87 % Interest-Bearing Liabilities Interest-bearing deposits $ 5,053,941 $ 26,405 2.12 % $ 5,053,158 $ 19,841 1.56 % $ 4,507,642 $ 2,161 0.19 % Short-term borrowings 38,655 25 0.26 % 47,391 31 0.26 % 70,043 23 0.14 % FHLB advances & other borrowings 540,278 6,006 4.51 % 460,598 4,264 3.67 % 311,282 1,212 1.58 % Subordinated debt 99,812 1,370 5.57 % 107,374 1,463 5.45 % 139,139 2,011 5.78 % Trust preferred debentures 50,047 1,229 9.96 % 49,902 1,066 8.47 % 49,451 514 4.21 % Total interest-bearing liabilities $ 5,782,733 $ 35,035 2.46 % $ 5,718,423 $ 26,665 1.85 % $ 5,077,557 $ 5,921 0.47 % Net Interest Margin $ 60,748 3.39 % $ 63,836 3.50 % $ 57,196 3.50 % Cost of Deposits 1.70 % 1.23 % 0.15 % Average interest-earning assets for the first quarter of 2023 were $7.26 billion, compared to $7.25 billion for the fourth quarter of 2022, and $6.62 billion for the first quarter of 2022. Average loans were $6.32 billion for the first quarter of 2023, compared to $6.24 billion for the fourth quarter of 2022 and $5.27 billion for the first quarter of 2022. The average balance of PPP loans for the first quarter of 2022 was $36.2 million.
Average investment securities for the first quarter of 2023 were $809.8 million, compared to $736.6 million for the fourth quarter of 2022, and $894.6 million for the first quarter of 2022. The Company took advantage of certain market conditions during the quarter to reposition out of lower yielding tax-exempt securities in favor of other structures and to purchase additional investments, increasing average investment securities by $73.3 million. These changes should result in improved overall margin, liquidity, and capital allocations. These transactions resulted in losses of $0.6 million in the current quarter, with expected paybacks to occur within the calendar year.
Average interest-bearing deposits were $5.05 billion for the first quarter of 2023, compared to $5.05 billion for the fourth quarter of 2022, and $4.51 billion for the first quarter of 2022. Cost of interest-bearing deposits was 2.12% in the first quarter of 2023, which represents a 56 basis point increase from the fourth quarter of 2022. A competitive market driven by rising interest rates was a contributing factor to the increase in deposit costs.
Noninterest Income
Noninterest income was $15.8 million for the first quarter of 2023, compared to $33.8 million for the fourth quarter of 2022, and $15.6 million for the first quarter of 2022. Noninterest income for the first quarter of 2023 was negatively impacted by $0.6 million of losses on the sales of investment securities, while the fourth quarter of 2022 was positively impacted by a $17.5 million gain on the termination of forward starting interest rate swaps, and the first quarter of 2022 was negatively impacted by $0.4 million of impairment on commercial servicing rights. Excluding these transactions, noninterest income for the first quarter of 2023, the fourth quarter of 2022 and the first quarter of 2022 was $16.4 million, $16.3 million, and $16.0 million, respectively.
For the Quarter Ended March 31, December 31, March 31, (in thousands) 2023 2022 2022 Noninterest income Wealth management revenue $ 6,411 $ 6,227 $ 7,139 Residential mortgage banking revenue 405 316 599 Service charges on deposit accounts 2,568 2,511 2,068 Interchange revenue 3,412 3,478 3,280 Loss on sales of investment securities, net (648 ) — — Gain on termination of hedged interest rate swaps — 17,531 — Impairment on commercial mortgage servicing rights — — (394 ) Company-owned life insurance 876 796 1,019 Other income 2,755 2,980 1,902 Total noninterest income $ 15,779 $ 33,839 $ 15,613 Noninterest Expense
Noninterest expense was $44.5 million in the first quarter of 2023, compared to $49.9 million in the fourth quarter of 2022, and $40.9 million in the first quarter of 2022. Noninterest expense for the fourth quarter of 2022 included a $3.3 million charge on commercial FHA loan servicing rights held for sale and $3.3 million of impairment charges on two OREO properties. Noninterest expense, excluding these adjustments, was $44.5 million in the first quarter of 2023, compared to $43.2 million in the fourth quarter of 2022, and $40.9 million in the first quarter of 2022. As a result, the efficiency ratio was 57.64% for the quarter ended March 31, 2023, compared to 58.26% for the quarter ended December 31, 2022, and 55.73% for the quarter ended March 31, 2022.
For the Quarter Ended March 31, December 31, March 31, (in thousands) 2023 2022 2022 Noninterest expense Salaries and employee benefits $ 24,243 $ 22,901 $ 21,870 Occupancy and equipment 4,443 3,748 3,755 Data processing 6,311 6,302 5,873 Professional 1,760 1,726 1,972 Amortization of intangible assets 1,291 1,333 1,398 Other real estate owned — 3,779 — Loss on mortgage servicing rights held for sale — 3,250 — FDIC insurance 1,329 703 830 Other expense 5,105 6,201 5,186 Total noninterest expense $ 44,482 $ 49,943 $ 40,884 Noteworthy components of noninterest expense are as follows:
- Salaries and employee benefits expenses were $24.2 million in the first quarter of 2023, compared to $22.9 million in the fourth quarter of 2022, and $21.9 million in the first quarter of 2022. Employees numbered 931 at March 31, 2023, compared to 935 at December 31, 2022, and 920 at March 31, 2022. Increased payroll taxes and medical insurance of $0.6 million and $0.5 million, respectively, contributed to increased expense in the first quarter of 2023 compared to the fourth quarter of 2022. Annual salary increases and the modest increase in staffing levels contributed to increased salaries and benefits expenses from the first quarter of 2022, along with a $0.7 million increase in medical insurance.
- Occupancy and equipment increased $0.7 million in the first quarter of 2023 compared to the fourth quarter of 2022, primarily due to seasonal related expenses, including snow removal and utilities expenses.
- FDIC insurance expense was $1.3 million in the first quarter of 2023, compared to $0.7 million in the fourth quarter of 2022, and $0.8 million in the first quarter of 2022. The increase is primarily related to the FDIC’s 2 basis point increase to the initial base deposit insurance assessment rate schedules effective January 1, 2023.
Income Tax Expense
Income tax expense was $6.9 million for the first quarter of 2023, as compared to $11.0 million for the fourth quarter of 2022 and $6.6 million for the first quarter of 2022. The resulting effective tax rates were 24.0%, 25.1% and 24.2% respectively.
Capital
At March 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 March 31, 2023 Midland States Bank Midland States Bancorp, Inc. Minimum Regulatory Requirements (2) Total capital to risk-weighted assets 11.59% 12.46% 10.50% Tier 1 capital to risk-weighted assets 10.76% 10.25% 8.50% Tier 1 leverage ratio 10.02% 9.54% 4.00% Common equity Tier 1 capital 10.76% 7.84% 7.00% Tangible common equity to tangible assets (1) N/A 6.24% N/A (1) A non-GAAP financial measure. Refer to page 13 for a reconciliation to the comparable GAAP financial measure.
(2) Includes the capital conservation buffer of 2.5%.Since the beginning of 2022, the impact of rising interest rates on the Company’s investment portfolio has resulted in an $83.0 million decline in accumulated other comprehensive income, which has negatively impacted tangible book value per share by $3.76, and the tangible common equity to tangible assets ratio by 108 basis points.
Stock Repurchase Program
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. The previous repurchase plan terminated on December 31, 2022. During the first quarter of 2023, the Company repurchased 124,266 shares of its common stock at a weighted average price of $22.54 under its stock repurchase program. As of March 31, 2023, the Company had $22.2 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 March 31, 2023, the Company had total assets of approximately $7.93 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, 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, the impact of inflation, continuing effects of the recent failures of Silicon Valley Bank and Signature Bank, including anticipated effects on FDIC premiums, increased deposit volatility and potential regulatory developments; 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; 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) 342-7321MIDLAND STATES BANCORP, INC. CONSOLIDATED FINANCIAL SUMMARY (unaudited) As of and for the Quarter Ended March 31, December 31, March 31, (dollars in thousands, except per share data) 2023 2022 2022 Earnings Summary Net interest income $ 60,504 $ 63,550 $ 56,827 Provision for credit losses 3,135 3,544 4,167 Noninterest income 15,779 33,839 15,613 Noninterest expense 44,482 49,943 40,884 Income before income taxes 28,666 43,902 27,389 Income taxes 6,894 11,030 6,640 Net income 21,772 32,872 20,749 Preferred dividends 2,228 3,169 — Net income available to common shareholders $ 19,544 $ 29,703 $ 20,749 Diluted earnings per common share $ 0.86 $ 1.30 $ 0.92 Weighted average common shares outstanding - diluted 22,501,970 22,503,611 22,350,307 Return on average assets 1.12 % 1.66 % 1.16 % Return on average shareholders' equity 11.51 % 17.41 % 12.80 % Return on average tangible common equity (1) 16.70 % 25.89 % 17.84 % Net interest margin 3.39 % 3.50 % 3.50 % Efficiency ratio (1) 57.64 % 58.26 % 55.73 % Adjusted Earnings Performance Summary (1) Adjusted earnings available to common shareholders $ 20,017 $ 19,278 $ 20,815 Adjusted diluted earnings per common share $ 0.88 $ 0.85 $ 0.92 Adjusted return on average assets 1.15 % 1.13 % 1.16 % Adjusted return on average shareholders' equity 11.76 % 11.89 % 12.84 % Adjusted return on average tangible common equity 17.11 % 16.80 % 17.89 % Adjusted pre-tax, pre-provision earnings $ 32,449 $ 33,165 $ 32,041 Adjusted pre-tax, pre-provision return on average assets 1.67 % 1.68 % 1.79 % Wealth Management Trust assets under administration $ 3,502,635 $ 3,505,372 $ 3,934,140 Market Data Book value per share at period end $ 30.08 $ 29.17 $ 29.26 Tangible book value per share at period end (1) $ 21.87 $ 20.94 $ 20.87 Tangible book value per share excluding accumulated other comprehensive income at period end (1) $ 25.39 $ 24.72 $ 22.14 Market price at period end $ 21.42 $ 26.62 $ 28.86 Common shares outstanding at period end 22,111,454 22,214,913 22,044,626 Capital Total capital to risk-weighted assets 12.46 % 12.38 % 11.74 % Tier 1 capital to risk-weighted assets 10.25 % 10.21 % 8.82 % Tier 1 common capital to risk-weighted assets 7.84 % 7.77 % 7.80 % Tier 1 leverage ratio 9.54 % 9.43 % 7.96 % Tangible common equity to tangible assets (1) 6.24 % 6.06 % 6.43 % (1) Non-GAAP financial measures. Refer to pages 11 - 13 for a reconciliation to the comparable GAAP financial measures.
MIDLAND STATES BANCORP, INC. CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) As of March 31, December 31, March 31, (in thousands) 2023 2022 2022 Assets Cash and cash equivalents $ 138,310 $ 160,631 $ 332,264 Investment securities 821,005 776,860 858,246 Loans 6,354,271 6,306,467 5,539,961 Allowance for credit losses on loans (62,067 ) (61,051 ) (52,938 ) Total loans, net 6,292,204 6,245,416 5,487,023 Loans held for sale 2,747 1,286 8,931 Premises and equipment, net 80,582 78,293 77,857 Other real estate owned 6,729 6,729 11,537 Loan servicing rights, at lower of cost or fair value 1,117 1,205 27,484 Commercial FHA mortgage loan servicing rights held for sale 20,745 20,745 — Goodwill 161,904 161,904 161,904 Other intangible assets, net 19,575 20,866 22,976 Company-owned life insurance 151,319 150,443 148,060 Other assets 233,937 231,123 202,433 Total assets $ 7,930,174 $ 7,855,501 $ 7,338,715 Liabilities and Shareholders' Equity Noninterest-bearing demand deposits $ 1,215,758 $ 1,362,158 $ 1,393,825 Interest-bearing deposits 5,209,443 5,002,494 4,663,714 Total deposits 6,425,201 6,364,652 6,057,539 Short-term borrowings 31,173 42,311 60,352 FHLB advances and other borrowings 482,000 460,000 310,171 Subordinated debt 99,849 99,772 139,184 Trust preferred debentures 50,135 49,975 49,524 Other liabilities 66,173 80,217 76,959 Total liabilities 7,154,531 7,096,927 6,693,729 Total shareholders’ equity 775,643 758,574 644,986 Total liabilities and shareholders’ equity $ 7,930,174 $ 7,855,501 $ 7,338,715 MIDLAND STATES BANCORP, INC. CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued) For the Quarter Ended March 31, December 31, March 31, (in thousands, except per share data) 2023 2022 2022 Net interest income: Interest income $ 95,539 $ 90,215 $ 62,748 Interest expense 35,035 26,665 5,921 Net interest income 60,504 63,550 56,827 Provision for credit losses: Provision for credit losses on loans 3,135 2,950 4,132 Provision for credit losses on unfunded commitments — 594 256 Provision for other credit losses — — (221 ) Total provision for credit losses 3,135 3,544 4,167 Net interest income after provision for credit losses 57,369 60,006 52,660 Noninterest income: Wealth management revenue 6,411 6,227 7,139 Residential mortgage banking revenue 405 316 599 Service charges on deposit accounts 2,568 2,511 2,068 Interchange revenue 3,412 3,478 3,280 Loss on sales of investment securities, net (648 ) — — Gain on termination of hedged interest rate swaps — 17,531 — Impairment on commercial mortgage servicing rights — — (394 ) Company-owned life insurance 876 796 1,019 Other income 2,755 2,980 1,902 Total noninterest income 15,779 33,839 15,613 Noninterest expense: Salaries and employee benefits 24,243 22,901 21,870 Occupancy and equipment 4,443 3,748 3,755 Data processing 6,311 6,302 5,873 Professional 1,760 1,726 1,972 Amortization of intangible assets 1,291 1,333 1,398 Other real estate owned — 3,779 — Loss on mortgage servicing rights held for sale — 3,250 — FDIC insurance 1,329 703 830 Other expense 5,105 6,201 5,186 Total noninterest expense 44,482 49,943 40,884 Income before income taxes 28,666 43,902 27,389 Income taxes 6,894 11,030 6,640 Net income 21,772 32,872 20,749 Preferred stock dividends 2,228 3,169 — Net income available to common shareholders $ 19,544 $ 29,703 $ 20,749 Basic earnings per common share $ 0.86 $ 1.31 $ 0.92 Diluted earnings per common share $ 0.86 $ 1.30 $ 0.92 MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) Adjusted Earnings Reconciliation For the Quarter Ended March 31, December 31, March 31, (dollars in thousands, except per share data) 2023 2022 2022 Income before income taxes - GAAP $ 28,666 $ 43,902 $ 27,389 Adjustments to noninterest income: Loss on sales of investment securities, net 648 — — (Gain) on termination of hedged interest rate swaps — (17,531 ) — Total adjustments to noninterest income 648 (17,531 ) — Adjustments to noninterest expense: (Loss) on mortgage servicing rights held for sale — (3,250 ) — Integration and acquisition expenses — — (91 ) Total adjustments to noninterest expense — (3,250 ) (91 ) Adjusted earnings pre tax 29,314 29,621 27,480 Adjusted earnings tax 7,069 7,174 6,665 Adjusted earnings - non-GAAP 22,245 22,447 20,815 Preferred stock dividends 2,228 3,169 — Adjusted earnings available to common shareholders $ 20,017 $ 19,278 $ 20,815 Adjusted diluted earnings per common share $ 0.88 $ 0.85 $ 0.92 Adjusted return on average assets 1.15 % 1.13 % 1.16 % Adjusted return on average shareholders' equity 11.76 % 11.89 % 12.84 % Adjusted return on average tangible common equity 17.11 % 16.80 % 17.89 % Adjusted Pre-Tax, Pre-Provision Earnings Reconciliation For the Quarter Ended March 31, December 31, March 31, (dollars in thousands) 2023 2022 2022 Adjusted earnings pre tax - non-GAAP $ 29,314 $ 29,621 $ 27,480 Provision for credit losses 3,135 3,544 4,167 Impairment on commercial mortgage servicing rights — — 394 Adjusted pre-tax, pre-provision earnings - non-GAAP $ 32,449 $ 33,165 $ 32,041 Adjusted pre-tax, pre-provision return on average assets 1.67 % 1.68 % 1.79 % MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued) Efficiency Ratio Reconciliation For the Quarter Ended March 31, December 31, March 31, (dollars in thousands) 2023 2022 2022 Noninterest expense - GAAP $ 44,482 $ 49,943 $ 40,884 Loss on mortgage servicing rights held for sale — (3,250 ) — Integration and acquisition expenses — — (91 ) Adjusted noninterest expense $ 44,482 $ 46,693 $ 40,793 Net interest income - GAAP $ 60,504 $ 63,550 $ 56,827 Effect of tax-exempt income 244 286 369 Adjusted net interest income 60,748 63,836 57,196 Noninterest income - GAAP 15,779 33,839 15,613 Impairment on commercial mortgage servicing rights — — 394 Loss on sales of investment securities, net 648 — — (Gain) on termination of hedged interest rate swaps — (17,531 ) — Adjusted noninterest income 16,427 16,308 16,007 Adjusted total revenue $ 77,175 $ 80,144 $ 73,203 Efficiency ratio 57.64 % 58.26 % 55.73 % Return on Average Tangible Common Equity (ROATCE) For the Quarter Ended March 31, December 31, March 31, (dollars in thousands) 2023 2022 2022 Net income $ 21,772 $ 32,872 $ 20,749 Average total shareholders' equity—GAAP $ 767,186 $ 749,183 $ 657,327 Adjustments: Preferred Stock (110,548 ) (110,548 ) — Goodwill (161,904 ) (161,904 ) (161,904 ) Other intangible assets, net (20,184 ) (22,859 ) (23,638 ) Average tangible common equity $ 474,550 $ 453,872 $ 471,785 ROATCE 16.70 % 25.89 % 17.84 % MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued) Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share As of March 31, December 31, March 31, (dollars in thousands, except per share data) 2023 2022 2022 Shareholders' Equity to Tangible Common Equity Total shareholders' equity—GAAP $ 775,643 $ 758,574 $ 644,986 Adjustments: Preferred Stock (110,548 ) (110,548 ) — Goodwill (161,904 ) (161,904 ) (161,904 ) Other intangible assets, net (19,575 ) (20,866 ) (22,976 ) Tangible common equity $ 483,616 $ 465,256 $ 460,106 Less: Accumulated other comprehensive income (AOCI) (77,797 ) (83,797 ) (28,035 ) Tangible common equity excluding AOCI 561,413 549,053 488,141 Total Assets to Tangible Assets: Total assets—GAAP $ 7,930,174 $ 7,855,501 $ 7,338,715 Adjustments: Goodwill (161,904 ) (161,904 ) (161,904 ) Other intangible assets, net (19,575 ) (20,866 ) (22,976 ) Tangible assets $ 7,748,695 $ 7,672,731 $ 7,153,835 Common Shares Outstanding 22,111,454 22,214,913 22,044,626 Tangible Common Equity to Tangible Assets 6.24 % 6.06 % 6.43 % Tangible Book Value Per Share $ 21.87 $ 20.94 $ 20.87 Tangible Book Value Per Share excluding AOCI $ 25.39 $ 24.72 $ 22.14