Midland States Bancorp(MSBI) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for the period ended March 31, 2023 Consolidated Balance Sheets 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] - Total liabilities increased by $57.604 million (0.81%) over the same period[12] - Total shareholders' equity increased by $17.069 million (2.25%), primarily due to net income and a decrease in accumulated other comprehensive loss[12] Consolidated Statements of Income 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 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 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 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] - 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] Notes to Consolidated Financial Statements These notes provide detailed disclosures on business operations, accounting policies, and financial instruments Note 1: Business Description 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] - 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] - Principal expenses include interest on deposits/borrowings, operating expenses (salaries, occupancy, data processing, professional fees), provisions for credit losses, and income tax expense[26] Note 2: Basis of Presentation and Summary of Significant Accounting Policies 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] - 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][33] Note 3: Investment Securities 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][36][37] 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 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][183] - 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][51][53][55][57][184][189][190] 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] Note 5: Premises, Equipment and Leases 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] Note 6: Loan Servicing Rights 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][144] Note 7: Derivative Instruments 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] - Cash flow hedges had a fair value loss of $7.793 million at March 31, 2023, included in other liabilities[94] Note 8: Deposits 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 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] Note 10: FHLB Advances and Other Borrowings 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] Note 11: Subordinated Debt 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] Note 12: Earnings Per Common Share 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] Note 13: Fair Value of Financial Instruments 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] - 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] 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 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] 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 The Company operates through three segments: Banking, Wealth Management, and Other - The Company's business segments are Banking, Wealth Management, and Other[129] 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 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][135] - Interchange revenue, from debit/credit card income and ATM user fees, is recognized daily as transaction processing services are completed[136] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the Company's financial performance, condition, market risks, and significant developments 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] - Forward-looking statements are subject to risks and uncertainties, including changes in interest rates, economic conditions, financial markets, and regulatory developments[140] - There have been no significant changes in critical accounting policies or the assumptions and judgments used since December 31, 2022[141] Significant Developments and Transactions 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] - 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] - On October 15, 2022, the Company redeemed $40.0 million of 6.25% Fixed-to-Floating Rate Subordinated Notes due October 15, 2027[145] - 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] Results of Operations 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][156] - 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][157] - 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][161] - Provision for credit losses decreased to $3.1 million in Q1 2023 from $4.2 million in Q1 2022[164] - Noninterest income increased by 1.06% to $15.779 million in Q1 2023[167][169] - Noninterest expense increased by $3.6 million to $44.482 million in Q1 2023, mainly due to higher salaries and employee benefits[170][171][172] Financial Condition 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] - 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][175][176] - 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] - Nonperforming loans increased to $50.7 million at March 31, 2023, from $49.4 million at December 31, 2022[194] - Total deposits increased by $60.5 million to $6.43 billion at March 31, 2023[208] - 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] - Shareholders' equity increased by $17.1 million to $775.6 million at March 31, 2023, driven by net income and a decrease in accumulated other comprehensive loss[212] Estimated Liquidity Sources | Liquidity Source | March 31, 2023 ($ 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 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] - At March 31, 2023, both the Company and the Bank exceeded regulatory minimums and met the regulatory definition of well-capitalized[220] Item 3. Quantitative and Qualitative Disclosures about Market Risk Market Risk 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] - Interest rate risk is actively managed to achieve consistent net interest income growth while controlling volatility[224][226] - The Company uses Net Interest Income at Risk (NII at Risk) to model interest rate risk, forecasting net interest earnings under various scenarios[229] 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][231] Item 4. Controls and Procedures Evaluation of disclosure controls and procedures 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] - 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] Changes in internal control over financial reporting 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] PART II. OTHER INFORMATION Item 1. Legal Proceedings 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] - The banking industry is subject to heightened legal and regulatory compliance and litigation risk due to extensive laws and regulations[239] Item 1A. Risk Factors 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] 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][245] Item 6. Exhibits 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] - Financial information from the Quarterly Report on Form 10-Q is provided in iXBRL format, including consolidated financial statements and notes[247] 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]