PART I. FINANCIAL INFORMATION This section presents the company's unaudited consolidated financial statements and management's analysis for Q2 and H1 2023 [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements%3A) This section presents the unaudited consolidated financial statements for Midland States Bancorp, Inc. as of June 30, 2023, and for the three and six-month periods then ended, compared with prior periods. It includes the Consolidated Balance Sheets, Statements of Income, Comprehensive Income, Shareholders' Equity, Cash Flows, and the accompanying Notes to Consolidated Financial Statements [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This section presents the company's consolidated balance sheets as of June 30, 2023, and December 31, 2022 Consolidated Balance Sheet Highlights (Unaudited) (In thousands) | (In thousands) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$8,034,721** | **$7,855,501** | | Total loans, net | $6,302,394 | $6,245,416 | | Investment securities available for sale | $882,715 | $768,234 | | Goodwill | $161,904 | $161,904 | | **Total Liabilities** | **$7,257,900** | **$7,096,927** | | Total deposits | $6,426,548 | $6,364,652 | | FHLB advances and other borrowings | $575,000 | $460,000 | | **Total Shareholders' Equity** | **$776,821** | **$758,574** | [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) This section presents consolidated income statements for the three and six months ended June 30, 2023 and 2022 Consolidated Income Statement Highlights (Unaudited) (In thousands, except per share data) | (In thousands, except per share data) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $58,840 | $61,334 | $119,344 | $118,161 | | Provision for credit losses | $5,879 | $5,441 | $9,014 | $9,608 | | Noninterest income | $18,753 | $14,613 | $34,532 | $30,226 | | Noninterest expense | $42,894 | $41,339 | $87,376 | $82,223 | | **Net income** | **$21,575** | **$21,883** | **$43,347** | **$42,632** | | Net income available to common shareholders | $19,347 | $21,883 | $38,891 | $42,632 | | **Diluted earnings per common share** | **$0.86** | **$0.97** | **$1.72** | **$1.89** | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed disclosures supporting the consolidated financial statements. Key areas include descriptions of the business, accounting policies, and detailed breakdowns of financial statement line items such as investment securities, loans, deposits, derivatives, and segment information - The company adopted ASU No. 2022-02 on January 1, 2023, which eliminates the accounting guidance for troubled debt restructurings (TDRs) and enhances disclosure requirements for loan modifications to borrowers experiencing financial difficulty. The adoption was applied prospectively and did not have a material impact aside from new disclosures[26](index=26&type=chunk) - The company is managing the transition from LIBOR to alternative reference rates like SOFR, having ceased booking new LIBOR-based commitments after 2021. Management does not expect the adoption of reference rate reform guidance to have a material impact[29](index=29&type=chunk)[30](index=30&type=chunk) Loan Portfolio Composition (In thousands) | Loan Category (in thousands) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Commercial | $4,418,537 | $4,268,615 | | Residential real estate | $371,486 | $366,094 | | Consumer | $1,076,836 | $1,180,014 | | Lease financing | $500,485 | $491,744 | | **Total loans** | **$6,367,344** | **$6,306,467** | Segment Financial Highlights (Six Months Ended June 30, 2023) (In thousands) | (In thousands) | Banking | Wealth Management | Other | Total | | :--- | :--- | :--- | :--- | :--- | | Net interest income (expense) | $123,643 | $— | $(4,299) | $119,344 | | Noninterest income | $21,495 | $12,680 | $357 | $34,532 | | Income (loss) before taxes | $57,727 | $3,164 | $(3,405) | $57,486 | | **Net income (loss)** | **$43,195** | **$2,280** | **$(2,128)** | **$43,347** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and results of operations, comparing the second quarter and first half of 2023 to the same periods in 2022. Key themes include a slight decrease in net income for Q2 2023 due to lower net interest income and higher expenses, offset by increased noninterest income. The analysis covers the impact of rising interest rates on net interest margin, loan and deposit growth, credit quality trends, and capital and liquidity management. Total assets grew to $8.03 billion, driven by loan growth, while deposits also increased [Results of Operations](index=42&type=section&id=Results%20of%20Operations) For Q2 2023, net income was $21.6 million ($0.86 per diluted share), a slight decrease from $21.9 million ($0.97 per diluted share) in Q2 2022. The decline was driven by a $2.5 million decrease in net interest income and a $1.6 million increase in noninterest expense, partially offset by a $4.1 million rise in noninterest income. For the six months ended June 30, 2023, net income increased to $43.3 million from $42.6 million year-over-year, supported by higher net interest income and noninterest income, which outweighed increased noninterest expenses Performance Metrics | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Return on average assets | 1.09% | 1.19% | 1.10% | 1.17% | | Return on average shareholders' equity | 11.14% | 13.65% | 11.32% | 13.22% | - The Federal Reserve's interest rate hikes, reaching a target range of **5.00%-5.25%** by May 2023, significantly influenced the company's performance, particularly impacting net interest margin and deposit costs[146](index=146&type=chunk)[147](index=147&type=chunk) [Net Interest Income and Margin](index=42&type=section&id=Net%20Interest%20Income%20and%20Margin) Tax-equivalent net interest income for Q2 2023 decreased to $59.0 million from $61.7 million in Q2 2022, with the net interest margin compressing to 3.23% from 3.65%. This was primarily due to a significant increase in the cost of interest-bearing liabilities (to 2.83% from 0.60%) outpacing the rise in yields on earning assets. For the first six months of 2023, net interest income slightly increased to $119.8 million from $118.9 million year-over-year, while the margin decreased to 3.31% from 3.58%. The increase in interest expense was driven by higher deposit costs and increased FHLB borrowings in the rising rate environment Net Interest Margin Analysis (Tax-Equivalent) (In thousands) | Period | Net Interest Income (in thousands) | Net Interest Margin | | :--- | :--- | :--- | | **Q2 2023** | **$59,035** | **3.23%** | | Q2 2022 | $61,655 | 3.65% | | **H1 2023** | **$119,783** | **3.31%** | | H1 2022 | $118,851 | 3.58% | - Interest expense on deposits surged to **$33.6 million** in Q2 2023 from **$3.8 million** in Q2 2022, reflecting the rapid rise in interest rates paid to retain and attract deposits[168](index=168&type=chunk) - Interest income growth was driven by a **139 basis point increase** in the yield on earning assets in Q2 2023 compared to Q2 2022, reflecting the repricing of loans and investments in a higher rate environment[159](index=159&type=chunk) [Financial Condition](index=49&type=section&id=Financial%20Condition) Total assets grew to $8.03 billion at June 30, 2023, from $7.86 billion at year-end 2022. This was driven by a $60.9 million increase in total loans to $6.37 billion, primarily in commercial and construction portfolios. Total deposits increased by $61.9 million to $6.43 billion, with growth in interest-bearing accounts offsetting a decline in noninterest-bearing demand deposits. Nonperforming assets remained stable at $57.7 million. Shareholders' equity increased by $18.2 million to $776.8 million, reflecting net income partially offset by dividends and share repurchases - Total loans increased by **$60.9 million** since year-end 2022, with growth concentrated in commercial loans and leases (**+$102.1 million**) and construction/land development (**+$45.7 million**). This was partially offset by a **$103.2 million decrease** in consumer loans, mainly due to the planned termination of the GreenSky loan origination program[188](index=188&type=chunk)[190](index=190&type=chunk) - The allowance for credit losses on loans increased to **$65.0 million** (**1.02% of total loans**) from **$61.1 million** (**0.97% of total loans**) at year-end 2022. The increase reflects management's outlook of a slowing economy, with forecasted GDP growth of **1.3% for 2023** and **0.4% for 2024**[197](index=197&type=chunk)[203](index=203&type=chunk) - Nonperforming loans increased to **$54.8 million** (**0.86% of total loans**) at June 30, 2023, from **$49.4 million** (**0.78% of total loans**) at December 31, 2022[209](index=209&type=chunk) - Estimated uninsured deposits decreased to **$1.21 billion** (**19% of total deposits**) at June 30, 2023, from **$1.55 billion** (**24% of total deposits**) at December 31, 2022[225](index=225&type=chunk) [Capital Resources and Liquidity Management](index=58&type=section&id=Capital%20Resources%20and%20Liquidity%20Management) Shareholders' equity rose to $776.8 million at June 30, 2023, an increase of $18.2 million from year-end 2022, driven by $43.3 million in net income, which was partially offset by $17.9 million in dividends and $9.0 million in common stock repurchases. The company remains well-capitalized, with all regulatory capital ratios exceeding minimum requirements. Total estimated liquidity increased to $1.55 billion from $1.38 billion at year-end 2022, supported by cash, unpledged securities, and borrowing capacity from the FHLB and Federal Reserve Regulatory Capital Ratios (Company Level) - June 30, 2023 | Ratio | Actual | Minimum Requirement (incl. buffer) | | :--- | :--- | :--- | | Total risk-based capital | 12.65% | 10.50% | | Tier 1 risk-based capital | 10.47% | 8.50% | | Common equity tier 1 | 8.03% | 7.00% | | Tier 1 leverage | 9.57% | 4.00% | - The company repurchased **$8.9 million** (**432,809 shares**) of its common stock under its **$25.0 million** repurchase program as of June 30, 2023, with approximately **$16.1 million** remaining in authority[228](index=228&type=chunk) - Total estimated liquidity stood at **$1.55 billion** as of June 30, 2023, an increase from **$1.38 billion** at the end of 2022, enhancing the company's ability to meet cash flow requirements[232](index=232&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=60&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is interest rate risk, which it actively manages to mitigate its impact on net interest income (NII). The company uses NII at Risk simulation analysis to measure sensitivity to interest rate changes. As of June 30, 2023, the company's balance sheet was asset-sensitive, meaning net interest income is projected to increase in a rising rate environment. The analysis shows that a +100 basis point immediate rate shock would increase NII by 3.9%, while a -100 basis point shock would decrease it by 3.4%, both within board-approved policy limits Net Interest Income (NII) Sensitivity Analysis (June 30, 2023) (In thousands) | Immediate Change in Rates | Dollar Change (in thousands) | Percent Change | | :--- | :--- | :--- | | -100 bps | $(9,439) | (3.4)% | | +100 bps | $10,748 | 3.9% | | +200 bps | $20,948 | 7.5% | - The company's earnings exhibit increasing sensitivity to changes in interest rates for rising rate scenarios compared to December 31, 2022[245](index=245&type=chunk) [Controls and Procedures](index=62&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2023. There were no material changes in the company's internal control over financial reporting during the quarter - The President and Chief Executive Officer and the Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2023[250](index=250&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[251](index=251&type=chunk) PART II. OTHER INFORMATION This section provides additional information on legal proceedings, risk factors, and equity security sales [Legal Proceedings](index=62&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various lawsuits in the normal course of business, but none are expected to have a material effect. There are no material pending legal proceedings against the company or its subsidiaries - The Company states that there are no material pending legal proceedings to which it or its subsidiaries are a party[253](index=253&type=chunk) [Risk Factors](index=62&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022 - There have been no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[255](index=255&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=63&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities. During the second quarter of 2023, the company repurchased 310,327 shares of its common stock at an average price of $19.78 per share. As of June 30, 2023, approximately $16.1 million remained available for repurchase under the current program, which expires on December 31, 2023 Issuer Purchases of Equity Securities (Q2 2023) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 1 - 30, 2023 | 97,089 | $20.60 | | May 1 - 31, 2023 | 208,150 | $19.39 | | June 1 - 30, 2023 | 5,088 | $19.76 | | **Total** | **310,327** | **$19.78** | - As of June 30, 2023, approximately **$16.1 million** remained available for repurchase under the company's stock repurchase program, which is authorized to repurchase up to **$25.0 million** of common stock through December 31, 2023[260](index=260&type=chunk) [Other Information](index=63&type=section&id=Item%205.%20Other%20Information) During the second quarter of 2023, no director or officer of the company adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the three months ended June 30, 2023[262](index=262&type=chunk) [Exhibits](index=64&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and iXBRL formatted financial data (101, 104)

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for the period ended March 31, 2023 [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets and liabilities increased slightly, with a notable shift in deposit composition Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Total assets | $7,930,174 | $7,855,501 | | Total liabilities | $7,154,531 | $7,096,927 | | Total shareholders' equity | $775,643 | $758,574 | | Noninterest-bearing demand deposits | $1,215,758 | $1,362,158 | | Interest-bearing deposits | $5,209,443 | $5,002,494 | - Total assets increased by **$74.673 million (0.95%)** from December 31, 2022, to March 31, 2023[12](index=12&type=chunk) - Total liabilities increased by **$57.604 million (0.81%)** over the same period[12](index=12&type=chunk) - Total shareholders' equity increased by **$17.069 million (2.25%)**, primarily due to net income and a decrease in accumulated other comprehensive loss[12](index=12&type=chunk) [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) Net income decreased year-over-year as a sharp rise in interest expense outpaced interest income growth Consolidated Income Statement Highlights (in thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change (YoY) | | :--- | :--- | :--- | :--- | | Total interest income | $95,539 | $62,748 | +$32,791 | | Total interest expense | $35,035 | $5,921 | +$29,114 | | Net interest income | $60,504 | $56,827 | +$3,677 | | Provision for credit losses | $3,135 | $4,167 | -$1,032 | | Total noninterest income | $15,779 | $15,613 | +$166 | | Total noninterest expense | $44,482 | $40,884 | +$3,598 | | Net income | $21,772 | $20,749 | +$1,023 | | Preferred dividends | $2,228 | $0 | +$2,228 | | Net income available to common shareholders | $19,544 | $20,749 | -$1,205 | | Basic earnings per common share | $0.86 | $0.92 | -$0.06 | | Diluted earnings per common share | $0.86 | $0.92 | -$0.06 | [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Total comprehensive income improved significantly due to a positive shift in unrealized gains on securities Consolidated Comprehensive Income Highlights (in thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change (YoY) | | :--- | :--- | :--- | :--- | | Net income | $21,772 | $20,749 | +$1,023 | | Unrealized gains (losses) on AFS securities (during period) | $5,364 | $(50,776) | +$56,140 | | Change in investment securities available for sale, net of tax | $4,390 | $(36,973) | +$41,363 | | Change in cash flow hedges, net of tax | $1,610 | $3,701 | -$2,091 | | Other comprehensive income (loss), net of tax | $6,000 | $(33,272) | +$39,272 | | Total comprehensive income | $27,772 | $(12,523) | +$40,295 | [Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity) Shareholders' equity increased due to net income, partially offset by dividends and stock repurchases Changes in Shareholders' Equity (in thousands) | Metric | December 31, 2022 | March 31, 2023 | Change | | :--- | :--- | :--- | :--- | | Total shareholders' equity | $758,574 | $775,643 | +$17,069 | | Net income | - | $21,772 | +$21,772 | | Other comprehensive income | - | $6,000 | +$6,000 | | Common dividends declared | - | $(6,749) | -$6,749 | | Preferred dividends declared | - | $(2,228) | -$2,228 | | Common stock repurchased | - | $(2,801) | -$2,801 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash and cash equivalents decreased due to significant net cash outflows from investing activities Consolidated Cash Flow Highlights (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $16,008 | $39,077 | | Net cash used in investing activities | $(98,412) | $(310,769) | | Net cash provided by (used in) financing activities | $60,083 | $(76,415) | | Net decrease in cash and cash equivalents | $(22,321) | $(348,107) | | Cash and cash equivalents, end of period | $138,310 | $332,264 | - Investing activities saw a net increase in loans of **$49.923 million** and purchases of investment securities available for sale of **$136.881 million** in Q1 2023[23](index=23&type=chunk) - Financing activities included a net increase in deposits of **$60.549 million** and proceeds from FHLB borrowings of **$4.108 billion**, largely offset by payments of **$4.086 billion**[23](index=23&type=chunk) [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures on business operations, accounting policies, and financial instruments [Note 1: Business Description](index=9&type=section&id=Note%201:%20Business%20Description) Midland States Bancorp, Inc is a diversified financial holding company with multiple income streams - The Company's principal business activity involves lending to and accepting deposits from individuals, businesses, municipalities, and other entities[26](index=26&type=chunk) - Income is primarily derived from interest on loans and investment securities, and noninterest sources such as fees from lending/deposit services, wealth management, mortgage loan servicing, and asset sales[26](index=26&type=chunk) - Principal expenses include interest on deposits/borrowings, operating expenses (salaries, occupancy, data processing, professional fees), provisions for credit losses, and income tax expense[26](index=26&type=chunk) [Note 2: Basis of Presentation and Summary of Significant Accounting Policies](index=9&type=section&id=Note%202:%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) The financial statements are prepared under GAAP, with recent accounting standard updates adopted - The Company adopted FASB ASU No. 2022-02 on January 1, 2023, eliminating TDR accounting guidance and enhancing disclosures for loan refinancings/restructurings when a borrower faces financial difficulty[29](index=29&type=chunk) - FASB ASU No. 2022-06 deferred the sunset date of Topic 848 (Reference Rate Reform) from December 31, 2022, to December 31, 2024, to cover the transition period for LIBOR cessation[31](index=31&type=chunk)[33](index=33&type=chunk) [Note 3: Investment Securities](index=10&type=section&id=Note%203:%20Investment%20Securities) The available-for-sale securities portfolio increased, with temporary unrealized losses due to interest rates Investment Securities Portfolio (Fair Value, in thousands) | Investment Category | March 31, 2023 Fair Value | December 31, 2022 Fair Value | | :--- | :--- | :--- | | U.S. Treasury securities | $52,798 | $81,230 | | U.S. government sponsored entities and U.S. agency securities | $54,136 | $37,509 | | Mortgage-backed securities - agency | $489,491 | $448,150 | | Mortgage-backed securities - non-agency | $42,514 | $20,754 | | State and municipal securities | $66,256 | $94,636 | | Collateralized loan obligations | $22,695 | $0 | | Corporate securities | $84,395 | $85,955 | | **Total available for sale securities** | **$812,285** | **$768,234** | - At March 31, 2023, 329 investment securities available for sale had unrealized losses totaling **$99.305 million**, representing **12.42% depreciation** from their amortized cost basis[34](index=34&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk) Sales of Available-for-Sale Securities (in thousands) | Sales Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Proceeds from sales | $84,493 | $0 | | Gross realized gains | $338 | $0 | | Gross realized losses | $(986) | $0 | [Note 4: Loans](index=12&type=section&id=Note%204:%20Loans) Total loans increased to $6.35 billion, driven by growth in commercial and lease financing portfolios Loan Portfolio Composition (in thousands) | Loan Portfolio Class | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Commercial | $823,847 | $786,877 | | Commercial other | $756,553 | $727,697 | | Commercial real estate (non-owner occupied) | $1,636,316 | $1,591,399 | | Commercial real estate (owner occupied) | $460,133 | $496,786 | | Multi-family | $281,559 | $277,889 | | Farmland | $70,150 | $67,085 | | Construction and land development | $326,836 | $320,882 | | Residential first lien | $309,637 | $304,243 | | Other residential | $60,273 | $61,851 | | Consumer | $112,882 | $105,880 | | Consumer other | $1,006,056 | $1,074,134 | | Lease financing | $510,029 | $491,744 | | **Total loans** | **$6,354,271** | **$6,306,467** | | Allowance for credit losses on loans | $(62,067) | $(61,051) | - The allowance for credit losses on loans increased to **$62.067 million (0.98% of total loans)** at March 31, 2023, from **$61.051 million (0.97% of total loans)** at December 31, 2022[50](index=50&type=chunk)[183](index=183&type=chunk) - Qualitative adjustments were made upwards by approximately **52 basis points** of total loans at March 31, 2023, reflecting declining economic conditions, rising inflation fears, and increasing recession risk[50](index=50&type=chunk)[51](index=51&type=chunk)[53](index=53&type=chunk)[55](index=55&type=chunk)[57](index=57&type=chunk)[184](index=184&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk) Nonaccrual Loans (in thousands) | Nonaccrual Loans (Individually Evaluated) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total nonaccrual loans | $49,069 | $41,976 | | Commercial loans | $42,299 | $35,882 | | Residential real estate | $4,496 | $4,368 | | Consumer | $119 | $120 | | Lease financing | $2,155 | $1,606 | - During the three months ended March 31, 2023, the Company restructured two loans for borrowers experiencing financial difficulties, with principal balances totaling **$0.1 million**[70](index=70&type=chunk) [Note 5: Premises, Equipment and Leases](index=24&type=section&id=Note%205:%20Premises,%20Equipment%20and%20Leases) Net premises and equipment increased, along with operating lease right-of-use assets and liabilities Premises, Equipment, and Leases (in thousands) | Metric | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Premises and equipment, net | $80,582 | $78,293 | | Lease right-of-use assets | $7,710 | $7,001 | | Operating lease liabilities | $9,556 | $8,900 | | Depreciation expense (Q1) | $1,200 | $1,300 | - The weighted average remaining lease term for operating leases was **8.10 years** at March 31, 2023, with a weighted average discount rate of **3.26%**[86](index=86&type=chunk) [Note 6: Loan Servicing Rights](index=25&type=section&id=Note%206:%20Loan%20Servicing%20Rights) Total loan servicing rights decreased slightly, with the commercial FHA portfolio held for sale Loan Servicing Rights (Carrying Value, in thousands) | Servicing Right Type | March 31, 2023 Carrying Value | December 31, 2022 Carrying Value | | :--- | :--- | :--- | | SBA | $599 | $656 | | Residential | $518 | $549 | | Commercial FHA held for sale | $20,745 | $20,745 | | **Total** | **$21,862** | **$21,950** | - The Company committed to sell its commercial FHA servicing portfolio in Q3 2022, transferring **$24.0 million** to held for sale[88](index=88&type=chunk)[144](index=144&type=chunk) [Note 7: Derivative Instruments](index=25&type=section&id=Note%207:%20Derivative%20Instruments) The Company uses various derivative instruments to manage interest rate and mortgage banking risks Derivative Notional Amounts (in thousands) | Derivative Type | March 31, 2023 Notional Amount | December 31, 2022 Notional Amount | | :--- | :--- | :--- | | Interest rate lock commitments (assets) | $4,601 | $2,078 | | Interest rate lock commitments (liabilities) | $4,419 | $4,419 | | Forward commitments to sell MBS | $9,357 | $6,669 | | Cash flow hedges (interest rate swaps) | $200,000 | $200,000 | | Customer/Offsetting interest rate swap contracts | $7,300 | $7,400 | - The Company recognized net gains of **$0.1 million** on derivative instruments in residential mortgage banking revenue for both Q1 2023 and Q1 2022[93](index=93&type=chunk) - Cash flow hedges had a fair value loss of **$7.793 million** at March 31, 2023, included in other liabilities[94](index=94&type=chunk) [Note 8: Deposits](index=27&type=section&id=Note%208:%20Deposits) Total deposits increased, driven by growth in interest-bearing accounts offsetting a decline in noninterest-bearing deposits Deposit Composition (in thousands) | Deposit Type | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Noninterest-bearing demand | $1,215,758 | $1,362,158 | | Interest-bearing checking | $2,502,827 | $2,494,073 | | Money market | $1,263,813 | $1,184,101 | | Savings | $636,832 | $661,932 | | Time | $805,971 | $662,388 | | **Total deposits** | **$6,425,201** | **$6,364,652** | [Note 9: Short-Term Borrowings](index=27&type=section&id=Note%209:%20Short-Term%20Borrowings) Short-term borrowings decreased, while the Company maintained significant unused credit lines Short-Term Borrowings and Liquidity (in thousands) | Metric | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Repurchase agreements outstanding | $31,173 | $42,311 | | Repurchase agreements average outstanding (Q1) | $38,655 | $58,688 | | Repurchase agreements weighted average interest rate (Q1) | 0.26% | 0.18% | | Available Federal Reserve Discount Window lines | $207,700 | $12,200 | | Available federal funds lines of credit | $394,000 | $394,000 | - Investment securities with a carrying amount of **$33.9 million** were pledged for securities sold under agreements to repurchase at March 31, 2023[99](index=99&type=chunk) [Note 10: FHLB Advances and Other Borrowings](index=28&type=section&id=Note%2010:%20FHLB%20Advances%20and%20Other%20Borrowings) FHLB advances and other borrowings increased, collateralized by qualifying real estate loans FHLB Advances (in thousands) | FHLB Advance Type | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Fixed rate, fixed term | $55,000 | $0 | | Putable fixed rate | $160,000 | $110,000 | | SOFR floater | $100,000 | $100,000 | | Short term fixed rate | $167,000 | $250,000 | | **Total FHLB advances and other borrowings** | **$482,000** | **$460,000** | - FHLB advances are collateralized by approximately **$2.88 billion** in qualifying mortgage, home equity, and commercial real estate loans at March 31, 2023[102](index=102&type=chunk) [Note 11: Subordinated Debt](index=28&type=section&id=Note%2011:%20Subordinated%20Debt) The Company's subordinated debt, eligible for Tier 2 capital, remained stable Subordinated Debt (Carrying Amount, in thousands) | Subordinated Debt Type | March 31, 2023 Carrying Amount | December 31, 2022 Carrying Amount | | :--- | :--- | :--- | | Fixed to Float (Issued Sep 2019, due 2029) | $72,364 | $72,300 | | Fixed to Float (Issued Sep 2019, due 2034) | $26,937 | $26,925 | | Fixed (Issued June 2015, due 2025) | $548 | $547 | | **Total Subordinated Debt (Carrying Amount)** | **$99,849** | **$99,772** | - All subordinated debentures may be included in **Tier 2 capital** under current regulatory guidelines[103](index=103&type=chunk) [Note 12: Earnings Per Common Share](index=28&type=section&id=Note%2012:%20Earnings%20Per%20Common%20Share) Basic and diluted earnings per common share decreased from the prior year to $0.86 Earnings Per Common Share Calculation (in thousands, except per share data) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net income available to common shareholders | $19,544 | $20,749 | | Weighted average common shares outstanding, basic | 22,478,808 | 22,274,884 | | Weighted average common shares outstanding, diluted | 22,501,970 | 22,350,307 | | Basic earnings per common share | $0.86 | $0.92 | | Diluted earnings per common share | $0.86 | $0.92 | - The diluted EPS computation for Q1 2023 excluded **265,831 antidilutive stock options** because their exercise prices exceeded the average market prices of the Company's common shares[104](index=104&type=chunk) [Note 13: Fair Value of Financial Instruments](index=29&type=section&id=Note%2013:%20Fair%20Value%20of%20Financial%20Instruments) The Company measures financial instruments at fair value using a three-level hierarchy - Fair value is defined as the exchange price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, reflecting market participant assumptions[107](index=107&type=chunk) - The fair value hierarchy categorizes inputs into **Level 1** (quoted prices in active markets for identical assets), **Level 2** (significant other observable inputs), and **Level 3** (significant unobservable inputs)[108](index=108&type=chunk) Assets and Liabilities Measured at Fair Value on a Recurring Basis (in thousands) | Asset Type (Recurring Fair Value) | March 31, 2023 (Level 1) | March 31, 2023 (Level 2) | March 31, 2023 (Level 3) | | :--- | :--- | :--- | :--- | | Investment securities available for sale | $61,518 | $762,685 | $0 | | Equity securities | $8,720 | $0 | $0 | | Loans held for sale | $0 | $2,747 | $0 | | Derivative assets | $0 | $451 | $0 | | **Total Assets (Recurring)** | **$61,518** | **$762,685** | **$0** | | **Total Liabilities (Recurring)** | **$0** | **$8,159** | **$0** | Assets Measured at Fair Value on a Non-Recurring Basis (in thousands) | Asset Type (Non-Recurring Fair Value) | March 31, 2023 (Level 1) | March 31, 2023 (Level 2) | March 31, 2023 (Level 3) | | :--- | :--- | :--- | :--- | | Loan servicing rights | $0 | $0 | $1,117 | | Commercial FHA loan servicing rights held for sale | $0 | $20,745 | $0 | | Nonperforming loans | $10,159 | $31,979 | $8,575 | | Other real estate owned | $0 | $6,729 | $0 | | Assets held for sale | $0 | $178 | $0 | Losses on Nonrecurring Assets (in thousands) | Losses on Nonrecurring Assets | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Commercial mortgage servicing rights | $0 | $394 | | Nonperforming loans | $1,103 | $1,930 | | Other real estate owned | $0 | $337 | | **Total losses** | **$1,103** | **$2,661** | [Note 14: Commitments, Contingencies and Credit Risk](index=35&type=section&id=Note%2014:%20Commitments,%20Contingencies%20and%20Credit%20Risk) The Company faces contingent liabilities from legal actions and off-balance-sheet credit risks - The Company is a party to financial instruments with off-balance-sheet risk, including commitments to extend credit and standby letters of credit, which involve credit risk in excess of recognized balance sheet amounts[127](index=127&type=chunk) Off-Balance-Sheet Commitments (in thousands) | Commitment Type | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Commitments to extend credit | $1,264,040 | $1,276,263 | | Financial guarantees – standby letters of credit | $17,762 | $23,748 | | Mortgage repurchase liability | $200 | $200 | [Note 15: Segment Information](index=35&type=section&id=Note%2015:%20Segment%20Information) The Company operates through three segments: Banking, Wealth Management, and Other - The Company's business segments are **Banking**, **Wealth Management**, and **Other**[129](index=129&type=chunk) Segment Financial Information (Q1 2023, in thousands) | Segment (Q1 2023) | Net Interest Income (expense) | Noninterest Income | Noninterest Expense | Net Income (loss) | Total Assets | | :--- | :--- | :--- | :--- | :--- | :--- | | Banking | $62,608 | $9,621 | $39,847 | $22,041 | $7,918,339 | | Wealth Management | $0 | $6,411 | $4,841 | $1,131 | $29,828 | | Other | $(2,104) | $(253) | $(206) | $(1,400) | $(17,993) | | **Total** | **$60,504** | **$15,779** | **$44,482** | **$21,772** | **$7,930,174** | [Note 16: Revenue From Contracts with Customers](index=37&type=section&id=Note%2016:%20Revenue%20From%20Contracts%20with%20Customers) Noninterest income from contracts with customers is recognized under Topic 606 Noninterest Income by Revenue Recognition Standard (in thousands) | Noninterest Income (In-Scope Topic 606) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Wealth management revenue | $6,411 | $7,139 | | Service charges on deposit accounts | $2,568 | $2,068 | | Interchange revenues | $3,412 | $3,280 | | Other income (in-scope) | $988 | $1,124 | | **Total in-scope Topic 606** | **$13,379** | **$13,611** | | Noninterest income (Out-of-scope Topic 606) | $2,400 | $2,002 | | **Total noninterest income** | **$15,779** | **$15,613** | - Wealth management revenue is primarily from trust management/administration fees, recognized monthly based on assets under management[134](index=134&type=chunk)[135](index=135&type=chunk) - Interchange revenue, from debit/credit card income and ATM user fees, is recognized daily as transaction processing services are completed[136](index=136&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the Company's financial performance, condition, market risks, and significant developments [Introduction](index=39&type=section&id=Introduction) This section outlines the scope of the MD&A, including forward-looking statements and accounting policies - The discussion should be read in conjunction with the unaudited consolidated financial statements and the Annual Report on Form 10-K for the year ended December 31, 2022[139](index=139&type=chunk) - Forward-looking statements are subject to risks and uncertainties, including changes in interest rates, economic conditions, financial markets, and regulatory developments[140](index=140&type=chunk) - There have been no significant changes in critical accounting policies or the assumptions and judgments used since December 31, 2022[141](index=141&type=chunk) [Significant Developments and Transactions](index=39&type=section&id=Significant%20Developments%20and%20Transactions) Key developments include a preferred stock issuance, asset sales, debt redemption, and a branch acquisition - On August 24, 2022, the Company issued 4,600,000 depositary shares of **7.75% fixed rate reset non-cumulative perpetual preferred stock, Series A**, generating net proceeds of **$110.5 million**[143](index=143&type=chunk) - In Q3 2022, the Company committed to sell its commercial FHA servicing portfolio, transferring **$24.0 million** of servicing rights to held for sale, with no impairment recognized in Q1 2023[144](index=144&type=chunk) - On October 15, 2022, the Company redeemed **$40.0 million** of 6.25% Fixed-to-Floating Rate Subordinated Notes due October 15, 2027[145](index=145&type=chunk) - On June 17, 2022, the Company acquired **$79.8 million** in assets and assumed **$79.8 million** in deposits from FNBC's Mokena and Yorkville, Illinois branches[146](index=146&type=chunk) [Results of Operations](index=40&type=section&id=Results%20of%20Operations) Net income available to common shareholders decreased due to higher expenses and preferred dividends Key Performance Metrics | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net income available to common shareholders | $19,544 | $20,749 | | Basic earnings per common share | $0.86 | $0.92 | | Diluted earnings per common share | $0.86 | $0.92 | | Return on average assets | 1.12% | 1.16% | | Return on average shareholders' equity | 11.51% | 12.80% | - Net interest income, on a tax-equivalent basis, increased by **$3.552 million** to **$60.7 million** in Q1 2023, compared to **$57.2 million** in Q1 2022[150](index=150&type=chunk)[156](index=156&type=chunk) - Interest income increased by **$32.7 million** to **$95.8 million** in Q1 2023, driven by rising interest rates and a **$1.05 billion** increase in average loan balances[156](index=156&type=chunk)[157](index=157&type=chunk) - Interest expense surged by **$29.1 million** to **$35.0 million** in Q1 2023, with the cost of interest-bearing liabilities increasing to **2.46%** from **0.47%**[160](index=160&type=chunk)[161](index=161&type=chunk) - Provision for credit losses decreased to **$3.1 million** in Q1 2023 from **$4.2 million** in Q1 2022[164](index=164&type=chunk) - Noninterest income increased by **1.06%** to **$15.779 million** in Q1 2023[167](index=167&type=chunk)[169](index=169&type=chunk) - Noninterest expense increased by **$3.6 million** to **$44.482 million** in Q1 2023, mainly due to higher salaries and employee benefits[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk) [Financial Condition](index=45&type=section&id=Financial%20Condition) Total assets increased to $7.93 billion, driven by loan growth and supported by increased deposits - Total assets increased to **$7.93 billion** at March 31, 2023, from **$7.86 billion** at December 31, 2022[174](index=174&type=chunk) - Total loans increased by **$47.8 million** to **$6.35 billion** at March 31, 2023, primarily due to growth in commercial loans and leases[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) - The allowance for credit losses on loans was **$62.1 million (0.98% of total loans)** at March 31, 2023, up from **$61.1 million (0.97%)** at December 31, 2022[183](index=183&type=chunk) - Nonperforming loans increased to **$50.7 million** at March 31, 2023, from **$49.4 million** at December 31, 2022[194](index=194&type=chunk) - Total deposits increased by **$60.5 million** to **$6.43 billion** at March 31, 2023[208](index=208&type=chunk) - Uninsured deposits were estimated at **$1.32 billion (21% of total deposits)** at March 31, 2023, down from **$1.55 billion (24%)** at December 31, 2022[210](index=210&type=chunk) - Shareholders' equity increased by **$17.1 million** to **$775.6 million** at March 31, 2023, driven by net income and a decrease in accumulated other comprehensive loss[212](index=212&type=chunk) Estimated Liquidity Sources | Liquidity Source | March 31, 2023 ($ millions) | December 31, 2022 ($ millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $138.3 | $160.6 | | Unpledged securities | $310.3 | $209.2 | | FHLB committed liquidity | $932.8 | $997.4 | | FRB discount window availability | $207.7 | $12.2 | | **Total Estimated Liquidity** | **$1,589.1** | **$1,379.4** | [Regulatory Capital Requirements](index=54&type=section&id=Regulatory%20Capital%20Requirements) The Company and its bank subsidiary exceeded all regulatory minimum capital requirements Regulatory Capital Ratios (as of March 31, 2023) | Capital Ratio | Midland States Bancorp, Inc. (Actual) | Midland States Bank (Actual) | Minimum Regulatory Requirements (1) | | :--- | :--- | :--- | :--- | | Total risk-based capital ratio | 12.46% | 11.59% | 10.50% | | Tier 1 risk-based capital ratio | 10.25% | 10.76% | 8.50% | | Common equity tier 1 risk-based capital ratio | 7.84% | 10.76% | 7.00% | | Tier 1 leverage ratio | 9.54% | 10.02% | 4.00% | - The Company is adopting the **CECL capital transition relief** over the permissible five-year period[219](index=219&type=chunk) - At March 31, 2023, both the Company and the Bank exceeded regulatory minimums and met the regulatory definition of **well-capitalized**[220](index=220&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=55&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) [Market Risk](index=55&type=section&id=Market%20Risk) The Company's primary market risk is interest rate risk, managed via NII at Risk modeling - The Company's primary market risk exposure is to **interest rates**, with secondary exposure to price risk from mortgage-backed securities[223](index=223&type=chunk) - Interest rate risk is actively managed to achieve consistent net interest income growth while controlling volatility[224](index=224&type=chunk)[226](index=226&type=chunk) - The Company uses **Net Interest Income at Risk (NII at Risk)** to model interest rate risk, forecasting net interest earnings under various scenarios[229](index=229&type=chunk) Net Interest Income at Risk (NII at Risk) Analysis (in thousands) | NII at Risk Scenario | March 31, 2023 Dollar Change | March 31, 2023 Percent Change | December 31, 2022 Dollar Change | December 31, 2022 Percent Change | | :--- | :--- | :--- | :--- | :--- | | -100 bps shift | $(10,614) | (3.8)% | $(12,560) | (4.2)% | | +100 bps shift | $9,258 | 3.3% | $10,814 | 3.6% | | +200 bps shift | $18,380 | 6.5% | $21,357 | 7.2% | - At March 31, 2023, the Company was within board policy limits for all NII at Risk scenarios, projecting **reduced sensitivity** to interest rate changes compared to December 31, 2022[230](index=230&type=chunk)[231](index=231&type=chunk) [Item 4. Controls and Procedures](index=57&type=section&id=Item%204.%20Controls%20and%20Procedures) [Evaluation of disclosure controls and procedures](index=57&type=section&id=Evaluation%20of%20disclosure%20controls%20and%20procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2023 - The Company's disclosure controls and procedures were evaluated as **effective** as of March 31, 2023[236](index=236&type=chunk) - The evaluation concluded that controls provide **reasonable assurance** that information required to be disclosed is recorded, processed, summarized, and reported within SEC time periods[236](index=236&type=chunk) [Changes in internal control over financial reporting](index=57&type=section&id=Changes%20in%20internal%20control%20over%20financial%20reporting) No material changes in internal control over financial reporting occurred during the fiscal quarter - No material changes in the Company's internal control over financial reporting occurred during the fiscal quarter[237](index=237&type=chunk) [PART II. OTHER INFORMATION](index=57&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=57&type=section&id=Item%201.%20Legal%20Proceedings) The Company is involved in various lawsuits in the normal course of business, none material - The Company is named or threatened in various lawsuits in the normal course of business, but **no material losses are anticipated**[239](index=239&type=chunk) - The banking industry is subject to heightened legal and regulatory compliance and litigation risk due to extensive laws and regulations[239](index=239&type=chunk) [Item 1A. Risk Factors](index=57&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to previously disclosed risk factors - No material changes from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[241](index=241&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=58&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company repurchased 124,266 shares for $2.8 million under its repurchase program in Q1 2023 - No unregistered sales of equity securities occurred during the period[243](index=243&type=chunk) Share Repurchase Activity (Q1 2023) | Period | Total Shares Purchased | Average Price Paid Per Share | Shares Purchased Under Publicly Announced Plans | Approximate Dollar Value Remaining | | :--- | :--- | :--- | :--- | :--- | | January 1 - 31, 2023 | 264 | $25.48 | — | $25,000,000 | | February 1 - 28, 2023 | 120 | $25.97 | — | $25,000,000 | | March 1 - 31, 2023 | 124,266 | $22.54 | 124,266 | $22,198,588 | | **Total** | **124,650** | **$22.55** | **124,266** | **$22,198,588** | - The Board authorized a **$25.0 million** common stock repurchase program through December 31, 2023[213](index=213&type=chunk)[245](index=245&type=chunk) [Item 6. Exhibits](index=59&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications - Exhibits include CEO and CFO certifications required by Rule 13a-14(a) and 18 U.S.C. Section 1350[247](index=247&type=chunk) - Financial information from the Quarterly Report on Form 10-Q is provided in **iXBRL format**, including consolidated financial statements and notes[247](index=247&type=chunk) [SIGNATURES](index=60&type=section&id=SIGNATURES) The report was duly signed by the President and CEO and the Chief Financial Officer - The report was signed by Jeffrey G. Ludwig, President and Chief Executive Officer, and Eric T. Lemke, Chief Financial Officer, on **May 4, 2023**[253](index=253&type=chunk)

All Other category made up of over 155 NAICS with Executive Offices being the largest at $10 million 12 12 Uninsured Deposits Uninsured Deposits (in millions) • All Investments are classified as Available for Sale • Average T/E Yield is 3.00% 10 10 l Deposit Type Trend Deposits by Type Trend (in millions) $4,074 $4,544 $5,101 11% CAGR $6,111 $6,365 $6,425 2018 2019 2020 2021 2022 1Q 2023 Non Int Bearing Demand Interest Bearing Checking Money Market Savings Time Brokered Time 11 11 1 Company Snapshot • 53 br ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark one) ☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2022 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number 001-35272 MIDLAND STATES BANCORP, INC. (Exact name of registrant as specified in its charter) Illinois 37-1233196 (State of other jurisdiction of incorpo ...

Midland States Bancorp, Inc. NASDAQ: MSBI 1 Fourth Quarter 2022 Earnings Call Overview of 4Q22 • Net income available to common shareholders of $29.7 million, or $1.30 diluted EPS • Results include $17.5 million gain on the termination of forward starting swaps, $3.3 million loss on commercial mortgage servicing rights held for sale and $3.5 million impairment on other real estate owned • Pre-tax, pre-provision earnings(1) of $33.2 million • GAAP ROAA of 1.66% and Adjusted ROAA(1) of 1.13% • Total loans inc ...

Midland States Bancorp, Inc. (NASDAQ:MSBI) Q4 2022 Earnings Conference Call January 27, 2022 8:30 AM ET Company Participants Tony Rossi - IR, Financial Profiles, Inc. Jeffrey Ludwig - President & CEO Eric Lemke - CFO Conference Call Participants Jeff Rulis - D.A. Davidson & Co. Damon DelMonte - Keefe, Bruyette & Woods North America Nathan Race - Piper Sandler Operator Good day, and thank you for standing by. Welcome to the Q4 2022 Midland States Bancorp Earnings Conference Call. At this time, all participan ...

Financial Data and Key Metrics Changes - The company generated net income of $23.5 million, or $1.04 per share, up from $0.97 in the prior quarter [7] - Pretax, pre-provision earnings increased to $36.4 million [7] - Return on assets and return on average tangible common equity both increased from the prior quarter [8] Business Line Data and Key Metrics Changes - Total loans increased by $403 million from the end of the prior quarter, with commercial loans growing at a 36% annualized rate and commercial real estate loans at 22% [17] - The consumer portfolio increased by approximately $71 million, largely due to fintech partnerships [19] - Equipment finance surpassed $1 billion in total outstandings, reflecting significant growth [12] Market Data and Key Metrics Changes - Nonperforming assets declined by 14% from the end of the prior quarter, indicating positive trends in asset quality [15] - Noninterest-bearing deposits accounted for 31.7% of total deposits, up from 29.9% at the same point last year [22] Company Strategy and Development Direction - The company is focused on long-term growth, adding high-quality relationships even if it impacts net interest margin in the short term [11] - Continued investment in the equipment finance business is expected to drive future growth [37] - The company is exploring Banking-as-a-Service initiatives to enhance franchise value [40][42] Management's Comments on Operating Environment and Future Outlook - Management expects loan growth to moderate in the fourth quarter due to higher interest rates and economic uncertainty [39] - The company is cautious about the economic outlook, anticipating potential recession impacts in 2023 or 2024 [74] - Management believes they are well-positioned to create shareholder value despite a challenging near-term operating environment [41] Other Important Information - The company raised $115 million through a preferred stock offering to strengthen capital ratios [16] - Noninterest income increased by 8.3% from the prior quarter, attributed to the sale of commercial mortgage servicing rights [28] Q&A Session Summary Question: Clarification on servicing sale and deposit retention - Management is uncertain if the $200 million in deposits will remain with the company after the servicing rights sale, as new owners may move them [47] Question: Margin outlook and loan growth funding - Management indicated that loan growth may require higher-cost funding, which could impact margins [48] Question: Expense management with new hires - Management aims to absorb new hires' costs while seeking 2% cost savings to offset increases [50] Question: Consumer portfolio expectations with fintech partnerships - A modest decline in the consumer portfolio is expected, with LendingPoint partially offsetting GreenSky's runoff [72] Question: Provision expectations in light of economic conditions - Management hopes the $7 million provision is a peak, but economic uncertainty remains a concern [74] Question: Areas of caution in lending - Management is cautious about lending in office and residential development sectors [76] Question: Tax rate changes - A lower tax rate this quarter was due to benefits from state tax adjustments [78]

Midland States Bancorp, Inc. NASDAQ: MSBI 1 Third Quarter 2022 Earnings Call Forward-Looking Statements. 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 ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 MIDLAND STATES BANCORP, INC. (Exact name of registrant as specified in its charter) (State of other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 1201 Network Centre Dr ...

Midland States Bancorp, Inc. (NASDAQ:MSBI) Q2 2022 Earnings Conference Call July 29, 2022 8:30 AM ET Company Participants Tony Rossi - Financial Profiles, IR Jeff Ludwig - President and CEO Eric Lemke ??? CFO Conference Call Participants Clark Wright - D.A. Davidson Damon DelMonte - KBW Terry McEvoy - Stephens Inc. Nathan Race - Piper Sandler Manuel Navas - D.A. Davidson Operator Good day, and thank you for standing by. Welcome to the Q2 2022 Midland States Bancorp, Inc. Earnings Conference Call. [Operator ...