Midland States Bancorp : Q4 2020 Midland States Bancorp, Inc. Earnings Call Presentation

Midland States Bancorp, Inc.

NASDAQ: MSBI

Fourth Quarter 2020 Earnings Call

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Forward-LookingStatements. This presentation may contain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements expressing management's current expectations, forecasts of future events or long-term goals may be based upon beliefs, expectations and assumptions of Midland's management, and are generally identifiable by the use of words such as "believe," "expect," "anticipate," "plan," "intend," "estimate," "may," "will," "would," "could," "should" or other similar expressions. All statements in this presentation speak only as of the date they are made, and Midland undertakes no obligation to update any statement. A number of factors, many of which are beyond the ability of Midland to control or predict, could cause actual results to differ materially from those in its forward-looking statements including the effects of the Coronavirus Disease 2019 (COVID-19) pandemic, including its potential effects on the economic environment, our customers and our operations, as well as any changes to federal, state or local government laws, regulations or orders in connection with the pandemic. These risks and uncertainties should be considered in evaluating forward-looking statements, and undue reliance should not be placed on such statements. Additional information concerning Midland and its businesses, including additional factors that could materially affect Midland's financial results, are included in Midland's filings with the Securities and Exchange Commission.

Use of Non-GAAPFinancial Measures. This presentation may contain certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States ("GAAP"). These non-GAAP financial measures include "Adjusted Earnings," "Pre-Tax,Pre-Provision Income," "Adjusted Diluted Earnings Per Share," "Adjusted Return on Average Assets," "Adjusted Return on Average Shareholders' Equity," "Adjusted Return on Average Tangible Common Equity," "Adjusted Pre- Tax, Provision Return on Average Assets," "Efficiency Ratio," "Tangible Common Equity to Tangible Assets," "Tangible Book Value Per Share," and "Return on Average Tangible Common Equity." The Company believes that 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. Reconciliations of these non-GAAP measures are provided in the Appendix section of this presentation.

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Overview of 4Q20

4Q20 Earnings

Restructuring of FHLB Advances

• Net income of $8.3 million, or $0.36 diluted EPS, includes $4.9 million in charges related to prepayment of FHLB advances
• Adjusted earnings(1) of $12.5 million, or $0.54 diluted EPS, excluding charges primarily related to prepayments of FHLB advances
• Adjusted Pre-Tax,Pre-Provision (PTPP) Income(1) of $28.9 million; PTPP ROAA(1) of 1.69%, excluding impairment of commercial MSRs of $2.3 million
• Prepaid $114.2 million of FHLB advances with weighted average rate of 2.10%
• One-timeprepayment charge of $4.9 million with expected payback of ~3 years
• Expected to reduce interest expense by $2.3 million in 2021 and positively impact NIM by 2-3 bps
• Added $200 million in short-term FHLB advances to fund expansion of commercial FHA warehouse credit lines

Strong

Balance Sheet

Growth

• Annualized loan growth of 13.2%, driven by growth in equipment finance, commercial, commercial real estate, and warehouse lines to commercial FHA lenders
• Annualized deposit growth of 5.6%, driven by continued increases in core deposits

Stable	•	NIM, excluding PPP income, was unchanged from 3Q20
•	Excess liquidity redeployed into higher earning assets and continued decline in cost of deposits
Net Interest Margin
	supported the margin in 4Q20

	• NPLs declined 19.8% from 3Q20 due to resolution of longer-term problem loans and
Improved		minimal new inflow
•	More borrowers with deferred loans resuming full or partial scheduled payments
Asset Quality
	•	Allowance for credit losses strengthened to 1.18% of total loans and 112% of NPLs

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Notes:
	(1) Represents a non-GAAP financial measure. See "Non-GAAP Reconciliation" in the appendix.

Paycheck Protection Program Overview

Paycheck Protection Program

(as of 12/31/20)

Loans Outstanding	$184.4 million
Number of Loans	1,541
Average Loan Size	$119,663
Total Fees Earned	$9.8 million
Fees Recognized in 4Q20	$3.1 million
Remaining Fees to be Recognized	$4.3 million

Paycheck Protection Program

Loan Forgiveness

	As of 12/31/20	As of 1/25/21
Loans Submitted to SBA	$155.6 million	$171.2 million
Loans Forgiven by SBA	$93.2 million	$115.9 million
Percentage of Total PPP	33.6%	41.8%
Loans Forgiven

Impact on 4Q20 Financials

	At or for the	Metrics Excluding
	Three Months Ended 12/31/20	PPP Impact
Total Loans	$5.10 billion	$4.92 billion
Average Loans	$5.00 billion	$4.76 billion
Net Interest Income FTE(1)	$53.9 million	$50.2 million
Net Interest Margin(1)	3.47%	3.36%
ACL/Total Loans	1.18%	1.22%

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1. Loan fees and deferred loan origination costs being amortized over an estimated 24-month life of PPP loans