MSBI Midland States Bancorp Inc

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) 342-7321Eric T. Lemke, Chief Financial Officer, at elemke@midlandsb.com or (217) 342-7321Douglas J. Tucker, SVP and Corporate Counsel, at dtucker@midlandsb.com or (217) 342-7321

MIDLAND STATES BANCORP, INC.
CONSOLIDATED FINANCIAL SUMMARY (unaudited)
		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