PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for Midland States Bancorp, Inc. as of June 30, 2024, and for the three and six-month periods then ended Consolidated Balance Sheets Total assets decreased to $7.76 billion at June 30, 2024, primarily due to reduced loans, with corresponding decreases in liabilities and equity Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 (Unaudited) | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Total loans, net | $5,759,811 | $6,062,577 | | Investment securities available for sale | $1,095,091 | $915,895 | | Total assets | $7,757,274 | $7,866,868 | | Liabilities & Equity | | | | Total deposits | $6,118,023 | $6,309,529 | | FHLB advances and other borrowings | $600,000 | $476,000 | | Total liabilities | $6,971,502 | $7,075,015 | | Total shareholders' equity | $785,772 | $791,853 | Consolidated Statements of Income Net income for Q2 2024 significantly decreased to $6.8 million from $21.6 million in Q2 2023, mainly due to a higher provision for credit losses and lower net interest income Key Income Statement Data (in thousands, except per share data) | Metric | Q2 2024 | Q2 2023 | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $55,052 | $58,840 | $110,972 | $119,344 | | Provision for credit losses | $16,800 | $5,879 | $30,800 | $9,014 | | Noninterest income | $17,656 | $18,753 | $38,843 | $34,532 | | Noninterest expense | $47,479 | $42,894 | $92,346 | $87,376 | | Net income | $6,750 | $21,575 | $20,635 | $43,347 | | Diluted EPS | $0.20 | $0.86 | $0.73 | $1.72 | Consolidated Statements of Cash Flows Net cash from operating activities decreased to $45.0 million in H1 2024, while investing activities shifted to a $63.9 million inflow, and financing activities resulted in a $119.3 million outflow, leading to a net decrease in cash Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $44,983 | $60,803 | | Net cash provided by (used in) investing activities | $63,892 | $(185,892) | | Net cash (used in) provided by financing activities | $(119,290) | $125,153 | | Net (decrease) increase in cash and cash equivalents | $(10,415) | $64 | Notes to Consolidated Financial Statements The notes provide detailed explanations of the company's accounting policies and financial data, covering loan portfolio, investment securities, derivatives, deposits, borrowings, fair value, and segment performance Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial condition and results of operations, highlighting decreased net income due to higher credit loss provisions from FinTech and construction projects, alongside reduced net interest income - Q2 2024 net income fell to $6.8 million from $21.6 million in Q2 2023, primarily due to a $10.9 million increase in provision for credit losses, a $3.8 million decrease in net interest income, and a $4.6 million increase in noninterest expense136 - The elevated loan provision in Q2 2024 was mainly due to credit deterioration and servicing issues with FinTech partner LendingPoint, resulting in a $14.0 million provision for that portfolio, while the Q1 2024 provision included an $8.0 million specific reserve on a multi-family construction project161 - Total loans decreased by $279.1 million since year-end 2023, driven by intentional reductions in equipment finance and consumer portfolios, including a $145.3 million decrease in GreenSky-originated loans in H1 2024168169 Results of Operations Net interest income (tax-equivalent) for Q2 2024 was $55.2 million with a 3.12% margin, down from Q2 2023, as increased funding costs outpaced asset yields, while credit loss provision surged and noninterest expense rose Net Interest Margin Analysis | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net Interest Income (Tax-equivalent, in thousands) | $55,222 | $59,035 | | Net Interest Margin (Tax-equivalent) | 3.12% | 3.23% | | Yield on Earning Assets | 5.84% | 5.51% | | Cost of Interest-Bearing Liabilities | 3.36% | 2.83% | - The provision for credit losses was $16.8 million for Q2 2024, a significant increase from $5.9 million in Q2 2023, with the first six months seeing a provision of $30.8 million in 2024 versus $9.0 million in 2023160 - Other noninterest expense for Q2 2024 included $4.1 million related to OREO impairment, OREO property taxes, and expenses related to various legal actions, contributing to a $4.6 million increase in total noninterest expense compared to Q2 2023166 Financial Condition Total assets stood at $7.76 billion as of June 30, 2024, with total loans decreasing to $5.85 billion, while the allowance for credit losses and nonperforming loans significantly increased, and total deposits decreased Loan Portfolio Composition (in thousands) | Loan Category | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Commercial loans and leases | $1,829,526 | $1,955,880 | | Commercial real estate | $2,421,505 | $2,406,845 | | Construction and land development | $476,528 | $452,593 | | Residential real estate | $378,393 | $380,583 | | Consumer | $746,042 | $935,178 | | Total loans, gross | $5,851,994 | $6,131,079 | Asset Quality Metrics | Metric | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Nonperforming loans to total loans | 1.92% | 0.92% | | Allowance for credit losses to total loans | 1.58% | 1.12% | | Allowance for credit losses to nonperforming loans | 82.22% | 121.56% | - Non-performing loans increased by $55.7 million to $112.1 million at June 30, 2024, primarily attributed to four loans totaling $47.2 million, three of which are related to multi-family construction or projects191 Capital Resources and Liquidity Management Shareholders' equity decreased to $785.8 million in H1 2024 due to dividends, repurchases, and comprehensive losses, while the company repurchased 205,153 shares, and total estimated liquidity stood at $2.04 billion - Shareholders' equity decreased by $6.1 million to $785.8 million at June 30, 2024, from December 31, 2023205 - During H1 2024, the Company repurchased 205,153 shares at a weighted average price of $24.09, with approximately $20.1 million remaining under its authorized repurchase program206 Sources of Liquidity (in thousands) | Source | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $124,646 | $135,061 | | Unpledged securities | $505,478 | $346,843 | | FHLB committed liquidity | $797,092 | $935,977 | | FRB discount window availability | $610,294 | $699,896 | | Total Estimated Liquidity | $2,037,510 | $2,117,777 | Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate risk, managed via NII at Risk modeling, with the balance sheet positioned to benefit from a declining interest rate environment Net Interest Income Sensitivity (NII at Risk) | Immediate Change in Rates | +200 bps | +100 bps | -100 bps | -200 bps | | :--- | :--- | :--- | :--- | :--- | | % Change (June 30, 2024) | (3.4)% | (1.5)% | 0.9% | 2.1% | | % Change (Dec 31, 2023) | (1.3)% | (0.6)% | (0.1)% | 0.2% | - The company's NII at Risk profile at June 30, 2024, shows increased profitability in a declining rate environment, a shift from the end of 2023, driven by investment strategies to protect against lower rates and deposit beta assumptions223 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting - The President and CEO, and the CFO concluded that the Company's disclosure controls and procedures were effective as of June 30, 2024227 - No material changes to the Company's internal control over financial reporting occurred during the second quarter of 2024228 PART II. OTHER INFORMATION Legal Proceedings The company is not a party to any material pending legal proceedings beyond routine litigation, with an accrual for various legal actions recorded in Q2 2024 - There are no material pending legal proceedings outside of ordinary routine litigation, and an accrual for various legal actions was recorded in Q2 2024111230 Risk Factors 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, 2023 - No material changes from the risk factors disclosed in the 2023 Form 10-K have occurred232 Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 132,260 shares at an average price of $22.84 in Q2 2024, with approximately $20.1 million remaining under the current repurchase program Issuer Purchases of Equity Securities (Q2 2024) | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Dollar Value Remaining in Program | | :--- | :--- | :--- | :--- | | April 2024 | 21,066 | $24.58 | $22,541,307 | | May 2024 | 52,602 | $22.68 | $21,368,769 | | June 2024 | 58,592 | $22.35 | $20,059,072 | | Total Q2 | 132,260 | $22.84 | $20,059,072 | - The board approved a stock repurchase program on December 5, 2023, authorizing up to $25.0 million of common stock repurchases through December 31, 2024236 Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the second quarter of 2024 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement in Q2 2024238 Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and the iXBRL formatted financial data
MIDLAND STS(MSBIP) - 2024 Q2 - Quarterly Report