Midland States Bancorp, Inc. Announces 2020 Second Quarter Results

Summary

• Net income of $12.6 million, or $0.53 diluted earnings per share
• Total loans increased $463.2 million, or 10.6%, from the end of the prior quarter
• Total deposits increased $292.5 million, or 6.3%, from the end of the prior quarter
• Efficiency ratio of 58.5%
• Allowance for credit losses strengthened to 0.97% of total loans
• $276.0 million in Paycheck Protection Program loans as of June 30, 2020

EFFINGHAM, Ill., July 23, 2020 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (Nasdaq: MSBI) (the “Company”) today reported net income of $12.6 million, or $0.53 diluted earnings per share, for the second quarter of 2020.  This compares to net income of $1.5 million, or $0.06 diluted earnings per share, for the first quarter of 2020, which was impacted by an $8.5 million impairment on commercial mortgage servicing rights (“MSR”) and $1.0 million in integration and acquisition expenses, and net income of $16.4 million, or $0.67 diluted earnings per share, for the second quarter of 2019.

Jeffrey G. Ludwig, President and Chief Executive Officer of the Company, said, “Despite the ongoing impact of the COVID-19 pandemic, we saw a number of positive trends in the quarter including significant balance sheet growth, higher revenue, and lower expense levels, which combined to produce a strong quarter of earnings and an increase in our tangible book value per share.

“While a great deal of uncertainty remains regarding the duration of the pandemic, we are seeing some encouraging signs across our markets and customers.  Overall asset quality remained relatively stable during the second quarter while requests for loan deferrals have slowed considerably in June and July.  Approximately 60% to 65% of the loans we granted deferrals to in April and May are expected to resume making their scheduled payments once their deferral period ends. 

“Our participation in the Small Business Administration’s Paycheck Protection Program (“PPP”) has continued to be a valuable source of support to our communities.  Through the end of June, we had more than 2,300 applications approved by the SBA totaling $276.0 million in loans for our customers, which will help support more than 28,000 employees in our markets.

“We continue to increase our allowance for credit losses and maintain strong capital and liquidity positions.  We believe our strong balance sheet will enable us to continue supporting our clients through the duration of this crisis, while we focus on building upon the positive trends we are seeing in revenue generation and operating efficiencies,” said Mr. Ludwig.

Factors Affecting Comparability

The Company acquired HomeStar Financial Group, Inc. (“HomeStar”) in July 2019, with the core system conversion completed in October 2019. The financial position and results of operations of HomeStar prior to its acquisition date are not included in the Company’s financial results.   

In addition, effective January 1, 2020, the Company adopted the new current expected credit loss (“CECL”) accounting standard, which replaces the incurred loss methodology with an estimated life of loan credit loss methodology.

Adjusted Earnings

Financial results for the second quarter of 2020 were impacted by a $0.4 million loss on residential mortgage servicing rights 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. 

Financial results for the first quarter of 2020 were impacted by $1.0 million in integration and acquisition expenses, a $0.5 million loss on residential mortgage servicing rights held-for-sale, and a $0.2 million loss on the repurchase of subordinated debt.  Excluding these amounts and certain income, adjusted earnings were $2.8 million, or $0.11 diluted earnings per share, for the first 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 2020 was 3.32%, compared to 3.48% for the first quarter of 2020.  The Company’s net interest margin benefits from accretion income on purchased loan portfolios, which contributed 12 and 16 basis points to net interest margin in the second quarter of 2020 and first quarter of 2020, respectively.  Excluding the impact of accretion income, net interest margin decreased 12 basis points from the first quarter of 2020, which was primarily attributable to excess liquidity invested in lower-yielding earning assets and the addition of low-yielding loans originated through the PPP program.

Relative to the second quarter of 2019, net interest margin decreased from 3.76%.  Accretion income on purchased loan portfolios contributed 25 basis points to net interest margin in the second quarter of 2019.  Excluding the impact of accretion income, net interest margin decreased 31 basis points compared to the second quarter of 2019, primarily due to the impact of new subordinated debt issued in September 2019 and a decline in the yield on earning assets. 

Net Interest Income

Net interest income for the second quarter of 2020 was $49.0 million, an increase of 5.0% from $46.7 million for the first quarter of 2020.  Excluding accretion income, net interest income increased $2.8 million from the prior quarter.  Accretion income associated with purchased loan portfolios totaled $1.8 million for the second quarter of 2020, compared with $2.2 million for the first quarter of 2020. 

Relative to the second quarter of 2019, net interest income increased $2.9 million, or 6.3%.  Accretion income for the second quarter of 2019 was $3.4 million.  Excluding the impact of accretion income, net interest income increased primarily due to the acquisition of HomeStar’s loans and securities and organic loan growth.

Noninterest Income

Noninterest income for the second quarter of 2020 was $19.4 million, an increase of 125.6% from $8.6 million for the first quarter of 2020, which included an $8.5 million impairment on commercial MSRs.  Excluding the impairment, the increase was primarily attributable to higher commercial FHA and residential mortgage banking revenue.

Relative to the second quarter of 2019, noninterest income decreased 1.0% from $19.6 million.  The decrease was primarily attributable to lower commercial FHA revenue and service charges on deposit accounts, partially offset by higher residential mortgage banking revenue.

Wealth management revenue for the second quarter of 2020 was $5.7 million, unchanged from the first quarter of 2020.  Compared to the second quarter of 2019, wealth management revenue increased 3.5%.

Commercial FHA revenue for the second quarter of 2020 was $3.4 million, compared to $1.3 million in the first quarter of 2020.  During the second quarter of 2020, the Company recorded a $0.1 million commercial MSR impairment, compared to a $8.5 million impairment recorded in the first quarter of 2020.  The Company originated $134.8 million in rate lock commitments during the second quarter of 2020, compared to $13.3 million in the prior quarter.  Compared to the second quarter of 2019, commercial FHA revenue decreased $0.9 million.

Noninterest Expense

Noninterest expense for the second quarter of 2020 was $40.8 million, which included a $0.4 million loss on residential MSRs held for sale and $0.1 million in integration and acquisition expenses, compared with $42.7 million for the first quarter of 2020, which included $1.0 million in integration and acquisition expenses, a $0.5 million loss on residential MSRs held for sale, and a $0.2 million loss on the repurchase of subordinated debt.  Excluding losses on residential MSRs held for sale, integration and acquisition expenses, and the loss on the repurchase of subordinated debt, the $0.6 million decrease in noninterest expense primarily reflects lower salaries and employee benefits expense resulting from the staffing level adjustments made during the first quarter of 2020.

Relative to the second quarter of 2019, noninterest expense increased 1.5% from $40.2 million, which included $0.3 million in integration and acquisition expenses and a $0.5 million gain on residential MSRs held for sale.  Excluding integration and acquisition expenses and gains/losses on MSRs held for sale, noninterest expense was essentially unchanged from the prior year period.

Loan Portfolio

Total loans outstanding were $4.84 billion at June 30, 2020, compared with $4.38 billion at March 31, 2020 and $4.07 billion at June 30, 2019.  The increase in total loans from March 31, 2020 was primarily attributable to loans originated under the PPP program and an increase in consumer loans and equipment finance loans and leases.

Equipment finance balances increased $78.2 million from March 31, 2020, which are booked within the commercial loans and leases portfolio, reflecting management’s efforts to grow the equipment finance business. 

The increase in total loans from June 30, 2019 was primarily attributable to the addition of HomeStar’s loan portfolio, the growth in equipment finance balances, and loans originated under the PPP program.

Deposits

Total deposits were $4.94 billion at June 30, 2020, compared with $4.65 billion at March 31, 2020, and $4.01 billion at June 30, 2019.  The increase in total deposits from both prior periods was attributable to an increase in core deposits, primarily from commercial customers, partially driven by inflows of PPP-related funds, while the addition of HomeStar’s deposits also contributed to the increase from June 30, 2019. 

Asset Quality

Nonperforming loans totaled $60.5 million, or 1.25% of total loans, at June 30, 2020, compared with $58.2 million, or 1.33% of total loans, at March 31, 2020. The increase in non-performing loans was primarily attributable to the addition of one large relationship partially reduced by charge-offs and transfers to other real estate owned. At June 30, 2019, nonperforming loans totaled $50.7 million, or 1.24% of total loans.  

Net charge-offs for the second quarter of 2020 were $3.1 million, or 0.26% of average loans on an annualized basis. 

The Company recorded a provision for credit losses on loans of $11.6 million for the second quarter of 2020, which reflects the weakened economic outlook due to the impact of the COVID-19 pandemic. 

The Company’s allowance for credit losses on loans was 0.97% of total loans and 77.8% of nonperforming loans at June 30, 2020, compared with 0.88% of total loans and 66.3% of nonperforming loans at March 31, 2020.  Approximately 96% of the allowance for credit losses on loans at June 30, 2020 was allocated to general reserves.

Capital

At June 30, 2020, 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, 2020		Consolidated Ratios as of June 30, 2020		Minimum Regulatory Requirements (2)
Total capital to risk-weighted assets	12.05%		13.67%		10.50%
Tier 1 capital to risk-weighted assets	11.28%		9.71%		8.50%
Tier 1 leverage ratio	9.01%		7.75%		4.00%
Common equity Tier 1 capital	11.28%		8.44%		7.00%
Tangible common equity to tangible assets (1)	NA		6.67%		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 2020, the Company repurchased 470,278 shares of its common stock at a weighted average price of $15.22 under its stock repurchase program, which authorized the repurchase of up to $50 million of its common stock.  As of June 30, 2020, the Company had $18.3 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 24, 2020, to discuss its financial results.  The call can be accessed via telephone at [phone]; conference ID: 1477734.  A recorded replay can be accessed through July 31, 2020, by dialing [phone]; conference ID: 1477734.

A slide presentation relating to the second quarter 2020 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, 2020, the Company had total assets of approximately $6.64 billion, and its Wealth Management Group had assets under administration of approximately $3.25 billion. Midland provides a full range of commercial and consumer banking products and services, business equipment financing, merchant credit card services, trust and investment management, and insurance and financial planning services. In addition, multi-family and healthcare facility FHA financing is provided through Love Funding, Midland’s non-bank subsidiary. For additional information, visit https://www.midlandsb.com/ or follow Midland on LinkedIn at 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 Return on Average Assets,” “Adjusted Return on Average Shareholders’ Equity,” “Adjusted Return on Average Tangible Common Equity,” “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 including 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; 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 [e-mail] or [phone]
Eric T. Lemke, Chief Financial Officer, at [e-mail] or [phone]
Douglas J. Tucker, SVP and Corporate Counsel, at [e-mail] or [phone]

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)	2020				2020				2019				2019					2019
Earnings Summary
Net interest income	$	48,989			$	46,651			$	48,687			$	49,450				$	46,077
Provision for credit losses on loans		11,610				10,569				5,305				4,361					4,076
Noninterest income		19,396				8,598				19,014				19,606					19,587
Noninterest expense		40,782				42,675				46,325				48,025					40,194
Income before income taxes		15,993				2,005				16,071				16,670					21,394
Income taxes		3,424				456				3,279				4,015					5,039
Net income		12,569				1,549				12,792				12,655					16,355
Preferred stock dividends, net		-				-				-				(22	)				34
Net income available to common shareholders	$	12,569			$	1,549			$	12,792			$	12,677				$	16,321
Diluted earnings per common share	$	0.53			$	0.06			$	0.51			$	0.51				$	0.67
Weighted average shares outstanding - diluted		23,339,964				24,538,002				24,761,960				24,684,529					24,303,211
Return on average assets		0.77	%			0.10	%			0.83	%			0.84		%			1.17	%
Return on average shareholders' equity		8.00	%			0.96	%			7.71	%			7.71		%			10.43	%
Return on average tangible common equity (1)		11.84	%			1.39	%			11.24	%			11.19		%			15.34	%
Net interest margin		3.32	%			3.48	%			3.56	%			3.70		%			3.76	%
Efficiency ratio (1)		58.53	%			63.78	%			59.46	%			60.63		%			61.58	%
Adjusted Earnings Performance Summary
Adjusted earnings (1)	$	12,884			$	2,806			$	16,110			$	16,422				$	16,196
Adjusted diluted earnings per common share (1)	$	0.55			$	0.11			$	0.64			$	0.66				$	0.66
Adjusted return on average assets (1)		0.78	%			0.19	%			1.04	%			1.09		%			1.16	%
Adjusted return on average shareholders' equity (1)		8.20	%			1.73	%			9.71	%			10.01		%			10.33	%
Adjusted return on average tangible common equity (1)		12.14	%			2.53	%			14.15	%			14.52		%			15.19	%
(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)	2020					2020					2019					2019					2019
Net interest income:
Interest income	$	60,548				$	61,314				$	64,444				$	65,006				$	60,636
Interest expense		11,559					14,663					15,757					15,556					14,559
Net interest income		48,989					46,651					48,687					49,450					46,077
Provision for credit losses on loans		11,610					10,569					5,305					4,361					4,076
Net interest income after provision for credit losses on loans		37,379					36,082					43,382					45,089					42,001
Noninterest income:
Wealth management revenue		5,698					5,677					5,377					5,998					5,504
Commercial FHA revenue		3,414					1,267					3,702					3,954					4,358
Residential mortgage banking revenue		2,723					1,755					763					720					611
Service charges on deposit accounts		1,706					2,656					2,860					3,008					2,639
Interchange revenue		3,013					2,833					3,053					3,249					3,010
Gain on sales of investment securities, net		-					-					635					25					14
(Impairment) recapture on commercial mortgage servicing rights		(107	)				(8,468	)				(1,613	)				(1,060	)				559
Other income		2,949					2,878					4,237					3,712					2,892
Total noninterest income		19,396					8,598					19,014					19,606					19,587
Noninterest expense:
Salaries and employee benefits		20,740					21,063					23,650					25,083					21,134
Occupancy and equipment		4,286					4,869					4,654					4,793					4,511
Data processing		5,300					5,334					6,074					5,271					4,821
Professional		1,606					1,855					1,952					2,348					2,410
Amortization of intangible assets		1,629					1,762					1,804					1,803					1,673
Loss (gain) on mortgage servicing rights held for sale		391					496					95					(70	)				(515	)
Other expense		6,830					7,296					8,096					8,797					6,160
Total noninterest expense		40,782					42,675					46,325					48,025					40,194
Income before income taxes		15,993					2,005					16,071					16,670					21,394
Income taxes		3,424					456					3,279					4,015					5,039
Net income		12,569					1,549					12,792					12,655					16,355
Preferred stock dividends, net		-					-					-					(22	)				34
Net income available to common shareholders	$	12,569				$	1,549				$	12,792				$	12,677				$	16,321
Basic earnings per common share	$	0.53				$	0.06				$	0.52				$	0.51				$	0.67
Diluted earnings per common share	$	0.53				$	0.06				$	0.51				$	0.51				$	0.67

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
	As of
	June 30,					March 31,					December 31,					September 30,					June 30,
(in thousands)	2020					2020					2019					2019					2019
Assets
Cash and cash equivalents	$	519,868				$	449,396				$	394,505				$	409,346				$	245,415
Investment securities		639,693					661,894					655,054					668,630					613,026
Loans		4,839,423					4,376,204					4,401,410					4,328,835					4,073,527
Allowance for credit losses on loans		(47,093	)				(38,545	)				(28,028	)				(24,917	)				(25,925	)
Total loans, net		4,792,330					4,337,659					4,373,382					4,303,918					4,047,602
Loans held for sale		32,403					113,852					16,431					88,322					22,143
Premises and equipment, net		89,046					90,118					91,055					93,896					94,824
Other real estate owned		12,728					7,892					6,745					4,890					3,797
Loan servicing rights, at lower of cost or fair value		44,239					44,566					53,824					54,124					54,191
Mortgage servicing rights held for sale		1,244					1,460					1,972					1,860					159
Goodwill		172,796					172,796					171,758					171,074					164,673
Other intangible assets, net		31,495					33,124					34,886					36,690					33,893
Cash surrender value of life insurance policies		144,215					143,323					142,423					141,510					140,593
Other assets		164,441					152,150					144,982					139,644					125,739
Total assets	$	6,644,498				$	6,208,230				$	6,087,017				$	6,113,904				$	5,546,055
Liabilities and Shareholders' Equity
Noninterest-bearing deposits	$	1,273,267				$	1,052,726				$	1,019,472				$	1,015,081				$	902,286
Interest-bearing deposits		3,669,840					3,597,914					3,524,782					3,430,090					3,108,921
Total deposits		4,943,107					4,650,640					4,544,254					4,445,171					4,011,207
Short-term borrowings		77,136					43,578					82,029					122,294					113,844
FHLB advances and other borrowings		693,865					593,089					493,311					559,932					582,387
Subordinated debt		169,610					169,505					176,653					192,689					94,215
Trust preferred debentures		48,551					48,420					48,288					48,165					48,041
Other liabilities		78,640					71,838					80,571					90,131					56,473
Total liabilities		6,010,909					5,577,070					5,425,106					5,458,382					4,906,167
Total shareholders’ equity		633,589					631,160					661,911					655,522					639,888
Total liabilities and shareholders’ equity	$	6,644,498				$	6,208,230				$	6,087,017				$	6,113,904				$	5,546,055

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited) (continued)
	As of
	June 30,				March 31,				December 31,				September 30,				June 30,
(in thousands)	2020				2020				2019				2019				2019
Loan Portfolio
Commercial loans and leases	$	1,856,435			$	1,439,145			$	1,387,766			$	1,292,511			$	1,149,370
Commercial real estate		1,495,183				1,507,280				1,526,504				1,622,363				1,524,369
Construction and land development		207,593				208,361				208,733				215,978				250,414
Residential real estate		509,453				548,014				568,291				587,984				552,406
Consumer		770,759				673,404				710,116				609,999				596,968
Total loans	$	4,839,423			$	4,376,204			$	4,401,410			$	4,328,835			$	4,073,527
Deposit Portfolio
Noninterest-bearing demand	$	1,273,267			$	1,052,726			$	1,019,472			$	1,015,081			$	902,286
Interest-bearing:
Checking		1,484,728				1,425,022				1,342,788				1,222,599				1,009,023
Money market		877,675				849,642				787,662				753,869				732,573
Savings		594,685				534,457				522,456				526,938				442,017
Time		689,841				765,870				822,160				833,038				785,337
Brokered time		22,911				22,923				49,716				93,646				139,971
Total deposits	$	4,943,107			$	4,650,640			$	4,544,254			$	4,445,171			$	4,011,207

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)	2020				2020				2019				2019				2019
Average Balance Sheets
Cash and cash equivalents	$	489,941			$	337,851			$	406,526			$	259,427			$	162,110
Investment securities		650,356				662,450				631,294				666,157				636,946
Loans		4,696,288				4,384,206				4,359,144				4,352,635				4,086,720
Loans held for sale		99,169				19,844				36,974				31,664				40,177
Nonmarketable equity securities		50,661				45,124				43,745				44,010				44,217
Total interest-earning assets		5,986,415				5,449,475				5,477,683				5,353,893				4,970,170
Non-earning assets		619,411				624,594				649,169				636,028				618,023
Total assets	$	6,605,826			$	6,074,069			$	6,126,852			$	5,989,921			$	5,588,193
Interest-bearing deposits	$	3,651,406			$	3,549,515			$	3,490,165			$	3,429,063			$	3,107,660
Short-term borrowings		59,103				55,616				104,598				124,183				120,859
FHLB advances and other borrowings		692,470				532,733				531,419				591,516				607,288
Subordinated debt		169,560				170,026				182,149				106,090				94,196
Trust preferred debentures		48,487				48,357				48,229				48,105				47,982
Total interest-bearing liabilities		4,621,026				4,356,247				4,356,560				4,298,957				3,977,985
Noninterest-bearing deposits		1,280,983				986,178				1,028,670				967,192				921,115
Other noninterest-bearing liabilities		71,853				78,943				83,125				72,610				60,363
Shareholders' equity		631,964				652,701				658,497				651,162				628,730
Total liabilities and shareholders' equity	$	6,605,826			$	6,074,069			$	6,126,852			$	5,989,921			$	5,588,193
Yields
Earning Assets
Cash and cash equivalents		0.14	%			1.26	%			1.62	%			2.14	%			2.43	%
Investment securities		3.05	%			3.23	%			3.10	%			3.00	%			3.11	%
Loans		4.64	%			5.01	%			5.22	%			5.31	%			5.32	%
Loans held for sale		4.07	%			3.87	%			4.12	%			3.02	%			4.50	%
Nonmarketable equity securities		5.40	%			5.39	%			5.31	%			5.33	%			5.42	%
Total interest-earning assets		4.10	%			4.56	%			4.70	%			4.85	%			4.94	%
Interest-Bearing Liabilities
Interest-bearing deposits		0.61	%			0.95	%			1.03	%			1.08	%			1.09	%
Short-term borrowings		0.19	%			0.73	%			0.67	%			0.68	%			0.70	%
FHLB advances and other borrowings		1.69	%			2.24	%			2.26	%			2.36	%			2.34	%
Subordinated debt		5.85	%			5.90	%			5.94	%			6.30	%			6.43	%
Trust preferred debentures		4.86	%			6.02	%			6.41	%			6.83	%			7.17	%
Total interest-bearing liabilities		1.01	%			1.35	%			1.43	%			1.44	%			1.47	%
Cost of Deposits		0.45	%			0.74	%			0.80	%			0.84	%			0.84	%
Net Interest Margin		3.32	%			3.48	%			3.56	%			3.70	%			3.76	%

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)	2020				2020				2019				2019				2019
Asset Quality
Loans 30-89 days past due	$	36,551			$	40,392			$	29,876			$	23,118			$	21,554
Nonperforming loans		60,513				58,166				42,082				45,168				50,676
Nonperforming assets		74,707				67,158				50,027				50,058				54,473
Net charge-offs		3,062				12,835				2,194				5,369				1,242
Loans 30-89 days past due to total loans		0.76	%			0.92	%			0.68	%			0.53	%			0.53	%
Nonperforming loans to total loans		1.25	%			1.33	%			0.96	%			1.04	%			1.24	%
Nonperforming assets to total assets		1.12	%			1.08	%			0.82	%			0.82	%			0.98	%
Allowance for credit losses to total loans		0.97	%			0.88	%			0.64	%			0.58	%			0.64	%
Allowance for credit losses to nonperforming loans		77.82	%			66.27	%			66.60	%			55.29	%			51.16	%
Net charge-offs to average loans		0.26	%			1.18	%			0.20	%			0.49	%			0.12	%
Wealth Management
Trust assets under administration	$	3,253,784			$	2,967,536			$	3,409,959			$	3,281,260			$	3,125,869
Market Data
Book value per share at period end	$	27.62			$	26.99			$	27.10			$	26.93			$	26.66
Tangible book value per share at period end (1)	$	18.72			$	18.19			$	18.64			$	18.40			$	18.36
Market price at period end	$	14.95			$	17.49			$	28.96			$	26.05			$	26.72
Shares outstanding at period end		22,937,296				23,381,496				24,420,345				24,338,748				23,897,038
Capital
Total capital to risk-weighted assets		13.67	%			13.73	%			14.72	%			14.82	%			13.49	%
Tier 1 capital to risk-weighted assets		9.71	%			9.76	%			10.52	%			10.35	%			10.85	%
Tier 1 leverage ratio		7.75	%			8.39	%			8.74	%			8.77	%			9.27	%
Tier 1 common capital to risk-weighted assets		8.44	%			8.47	%			9.20	%			9.02	%			9.38	%
Tangible common equity to tangible assets (1)		6.67	%			7.08	%			7.74	%			7.58	%			8.20	%
(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
Adjusted Earnings Reconciliation
	For the Quarter Ended
	June 30,				March 31,					December 31,					September 30,					June 30,
(dollars in thousands, except per share data)	2020				2020					2019					2019					2019
Income before income taxes - GAAP	$	15,993			$	2,005				$	16,071				$	16,670				$	21,394
Adjustments to noninterest income:
Gain on sales of investment securities, net		-				-					635					25					14
Other		11				(13	)				(6	)				-					(23	)
Total adjustments to noninterest income		11				(13	)				629					25					(9	)
Adjustments to noninterest expense:
Loss (gain) on mortgage servicing rights held for sale		391				496					95					(70	)				(515	)
Loss on repurchase of subordinated debt		-				193					1,778					-					-
Integration and acquisition expenses		54				1,031					3,332					5,292					286
Total adjustments to noninterest expense		445				1,720					5,205					5,222					(229	)
Adjusted earnings pre tax		16,427				3,738					20,647					21,867					21,174
Adjusted earnings tax		3,543				932					4,537					5,445					4,978
Adjusted earnings - non-GAAP		12,884				2,806					16,110					16,422					16,196
Preferred stock dividends, net		-				-					-					(22	)				34
Adjusted earnings available to common shareholders - non-GAAP	$	12,884			$	2,806				$	16,110				$	16,444				$	16,162
Adjusted diluted earnings per common share	$	0.55			$	0.11				$	0.64				$	0.66				$	0.66
Adjusted return on average assets		0.78	%			0.19		%			1.04		%			1.09		%			1.16		%
Adjusted return on average shareholders' equity		8.20	%			1.73		%			9.71		%			10.01		%			10.33		%
Adjusted return on average tangible common equity		12.14	%			2.53		%			14.15		%			14.52		%			15.19		%

MIDLAND STATES BANCORP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (continued)
Efficiency Ratio Reconciliation
	For the Quarter Ended
	June 30,					March 31,					December 31,					September 30,					June 30,
(dollars in thousands)	2020					2020					2019					2019					2019
Noninterest expense - GAAP	$	40,782				$	42,675				$	46,325				$	48,025				$	40,194
(Loss) gain on mortgage servicing rights held for sale		(391	)				(496	)				(95	)				70					515
Loss on repurchase of subordinated debt		-					(193	)				(1,778	)				-					-
Integration and acquisition expenses		(54	)				(1,031	)				(3,332	)				(5,292	)				(286	)
Adjusted noninterest expense	$	40,337				$	40,955				$	41,120				$	42,803				$	40,423
Net interest income - GAAP	$	48,989				$	46,651				$	48,687				$	49,450				$	46,077
Effect of tax-exempt income		438					485					474					502					526
Adjusted net interest income		49,427					47,136					49,161					49,952					46,603
Noninterest income - GAAP	$	19,396				$	8,598				$	19,014				$	19,606				$	19,587
Loan servicing rights impairment (recapture)		107					8,468					1,613					1,060					(559	)
Gain on sales of investment securities, net		-					-					(635	)				(25	)				(14	)
Other		(11	)				13					6					-					23
Adjusted noninterest income		19,492					17,079					19,998					20,641					19,037
Adjusted total revenue	$	68,919				$	64,215				$	69,159				$	70,593				$	65,640
Efficiency ratio		58.53		%			63.78		%			59.46		%			60.63		%			61.58		%

MIDLAND STATES BANCORP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (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)	2020					2020					2019					2019					2019
Shareholders' Equity to Tangible Common Equity
Total shareholders' equity—GAAP	$	633,589				$	631,160				$	661,911				$	655,522				$	639,888
Adjustments:
Preferred stock		-					-					-					-					(2,684	)
Goodwill		(172,796	)				(172,796	)				(171,758	)				(171,074	)				(164,673	)
Other intangibles, net		(31,495	)				(33,124	)				(34,886	)				(36,690	)				(33,893	)
Tangible common equity	$	429,298				$	425,240				$	455,267				$	447,758				$	438,638
Total Assets to Tangible Assets:
Total assets—GAAP	$	6,644,498				$	6,208,230				$	6,087,017				$	6,113,904				$	5,546,055
Adjustments:
Goodwill		(172,796	)				(172,796	)				(171,758	)				(171,074	)				(164,673	)
Other intangibles, net		(31,495	)				(33,124	)				(34,886	)				(36,690	)				(33,893	)
Tangible assets	$	6,440,207				$	6,002,310				$	5,880,373				$	5,906,140				$	5,347,489
Common Shares Outstanding		22,937,296					23,381,496					24,420,345					24,338,748					23,897,038
Tangible Common Equity to Tangible Assets		6.67		%			7.08		%			7.74		%			7.58		%			8.20		%
Tangible Book Value Per Share	$	18.72				$	18.19				$	18.64				$	18.40				$	18.36
Return on Average Tangible Common Equity (ROATCE)
	For the Quarter Ended
	June 30,					March 31,					December 31,					September 30,					June 30,
(dollars in thousands)	2020					2020					2019					2019					2019
Net income available to common shareholders	$	12,569				$	1,549				$	12,792				$	12,677				$	16,321
Average total shareholders' equity—GAAP	$	631,964				$	652,701				$	658,497				$	651,162				$	628,730
Adjustments:
Preferred stock		-					-					-					(814	)				(2,708	)
Goodwill		(172,796	)				(171,890	)				(171,082	)				(166,389	)				(164,673	)
Other intangibles, net		(32,275	)				(33,951	)				(35,745	)				(34,519	)				(34,689	)
Average tangible common equity	$	426,893				$	446,860				$	451,670				$	449,440				$	426,660
ROATCE		11.84		%			1.39		%			11.24		%			11.19		%			15.34		%