# EDGAR Filing Document

**Accession Number:** 0001466026
**File Stem:** 0001104659-23-036690
**Filing Date:** 2023-3
**Character Count:** 46270
**Document Hash:** 2e7be3f406c4ce3b8f5bf847358d6f07
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001104659-23-036690.hdr.sgml**: 20230324

**ACCESSION NUMBER**: 0001104659-23-036690

**CONFORMED SUBMISSION TYPE**: ARS

**PUBLIC DOCUMENT COUNT**: 1

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230324

**DATE AS OF CHANGE**: 20230324

**EFFECTIVENESS DATE**: 20230324

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Midland States Bancorp, Inc.
- **CENTRAL INDEX KEY:** 0001466026
- **STANDARD INDUSTRIAL CLASSIFICATION:** STATE COMMERCIAL BANKS [6022]
- **IRS NUMBER:** 371233196
- **STATE OF INCORPORATION:** IL
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** ARS
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-35272
- **FILM NUMBER:** 23760721

**BUSINESS ADDRESS:**
- **STREET 1:** 1201 NETWORK CENTRE DRIVE
- **CITY:** EFFINGHAM
- **STATE:** IL
- **ZIP:** 62401
- **BUSINESS PHONE:** (217) 342-2141

**MAIL ADDRESS:**
- **STREET 1:** 1201 NETWORK CENTRE DRIVE
- **CITY:** EFFINGHAM
- **STATE:** IL
- **ZIP:** 62401

### Attached PDF Documents

**Attachment 1:** `tm238555d2_ars.pdf`

# ANNUAL REPORT 2022

![img-0.jpeg](img-0.jpeg)

**Midland**  
States Bancorp, Inc.

In last year's Annual Report I reported that our efforts to focus on improving operating performance resulted in record revenue and profits in 2021, but more importantly that those improvements would continue to drive shareholder value for years to come. That has proven true for 2022, in which we again recorded record revenue and profits. Looking into 2023 and beyond, with interest rates likely to remain somewhat higher than in the recent past and posing challenges to retaining lower-cost deposits, operating efficiencies will be even more important to maintaining our strong profitability. I remain confident that the improvements we have made in our customer experience, streamlined operations and better use of data and analytics will continue to serve us well in this higher rate environment.

The Company's 2022 Annual Report to Shareholders is available on the Company's website, and printed copies are available by request. Please contact Ms. Dacia Albin, Assistant Secretary of the Company, at 217-342-7321 or dalbin@midlandsb.com for access/delivery information.

# Our Strategic Plan

We continue to focus on these five initiatives:

- Customer Centric Culture
- Operational Excellence
- Accretive Acquisitions
- Revenue Diversification
- Enterprise-Wide Risk Management

## Total Assets

($ in Billions)

![img-1.jpeg](img-1.jpeg)

Selected Acquisitions: Total Assets at Time of Acquisition (in millions)

2009: Strategic Capital Bank ($540)

2014: Love Savings/Heartland Bank ($889)

2018: Alpine Bancorp. ($1,243)

2010: AMCORE Bank ($500)

2017: Centrue Financial ($990)

2019: HomeStar Financial Group ($366)

## Table of Contents

| Our Strategic Plan | 1 |
| --- | --- |
| Letter to Shareholders | 2 |
| Financial Highlights | 6 |
| Summary Financial Information | 8 |
| Our Environmental, Social and Governance Program (ESG) | 15 |
| Board of Directors | 16 |
| Management Team | 17 |

1

# Letter to Shareholders

Dear Shareholders:

I am very pleased to report that 2022 was another terrific year for the Company. As with 2021, we saw record net revenue and record earnings per share for the year.

The primary drivers of this performance were:

- Our model of customer-centric service and relationship banking allowed us to grow loans and deposits, with loans growing by $1.08 billion, or 20.7%, and total deposits growing to $6.4 billion, an increase of 4.2% year-over-year;
- A continued focus on reducing costs and increasing operating efficiencies; and
- Increased use of technology across our business sectors.

The investments we made in prior years to improving customer experience while more effectively controlling expenses continue to pay off. I cannot emphasize enough the contribution our team has made in implementing these changes while maintaining our strong culture that focuses on technology, training, personal development and pride in serving our customers better than ever before.

We also took steps to position our balance sheet for further growth, principally through our issuance of $115 million of preferred stock but also by beginning to transition some of our consumer debt assets into U.S. treasury and agency securities. We also redeemed $40.0 million of our subordinated debt and injected $50 million of new capital into the Bank, all of which contributed to stronger capital ratios.

In June 2022 we completed the acquisition of two branches from FNBC Bank & Trust, expanding our presence in the greater Chicagoland market. The acquisition brought us $16.6 million in loans and $79.8 million in deposits. In 2022 we also planned for improving our presence in Sterling, Illinois by building a new branch facility. The new facility opened last month.

Our record results for the year came in the face of strong macro headwinds, including a 450-basis point increase in short-term interest rates prompted by the Federal Reserve Bank's efforts to stem inflation. This rapid rate increase had an adverse effect on revenue at our mortgage-banking and Wealth Management

![img-2.jpeg](img-2.jpeg)

**Jeffrey G. Ludwig**

President and
Chief Executive Officer
Midland States Bancorp, Inc.

Adjusted Diluted Earnings Per Share

![img-3.jpeg](img-3.jpeg)

Adjusted Diluted Earnings Per Share is a non-GAAP financial measure. See page 11 for a reconciliation of this measure to its most comparable GAAP measure.

2

businesses as a result of slower home sales and a material drop in stock and bond prices.

### Financial Results

Net income available to common shareholders was $95.9 million, or $4.23 per fully diluted share in 2022 compared to net income of $81.3 million, or $3.57 per fully diluted share in 2021. Net income benefitted from a $17.5 million gain on the termination of an interest rate swap, which was partially offset by $3.3 million of impairment of commercial servicing rights held for sale and a $4.3 million OREO impairment. Our adjusted pre-tax, pre-provision earnings increased by 14.2% on a year-over-year basis, to $137.5 million as compared to $120.4 million for 2021.

2022 also represented the 22nd consecutive year we increased our common dividend. When taking the share repurchases and common share dividends paid in 2022 together, we distributed $27.0 million to our common shareholders.

Tangible book value per share at December 31, 2022 was $20.94, a 3.3% decrease from $21.66 a share in 2021. Tangible book value per share was negatively impacted by a significant decrease in the fair value of our securities portfolio. This resulted principally from unrealized losses on investment securities, which losses we do not expect to actually realize.

Total loans increased by $1.08 billion or 20.7%, to $6.31 billion. Total deposits, which include servicing deposits and wholesale deposits, increased by $254.0 million, or 4.2%, to $6.36 billion.

### Operating Efficiency

Our focus on improving efficiency has yielded strong results. In 2022, our efficiency ratio declined to 55.4% from 57.1% in 2021, representing very strong year-over-year improvement. Given that our efficiency ratio was 66.1% in 2018, this represents a four-year improvement of 1,070 basis points.

### Our Business Units

**Community Banking.** Loans in our Community Banking business increased to approximately $4.0 billion, an increase of $747.3 million or 22.6% over 2021. Included in the loan activity during the year was the payoff of $50.6 million of PPP loans and a decrease in our commercial FHA warehouse lending activity of $66.9 million. Excluding these two products, loans increased $864.8 million or 26.1% during 2022. Core deposits grew to $4.8 billion, an increase of 5.5% year-over-year.

While our consumer program has largely been through our longstanding relationship with GreenSky, we are now seeking to diversify our consumer portfolio, partly as a result of GreenSky having been acquired by Goldman Sachs in the second quarter of 2022. In January 2023 we informed GreenSky that we do not intend to originate new loans through their program starting later this year. Our intention is to engage with other loan originating fintechs that have solidified their business models and compliance regimes over the past years and can meet our requirements in those areas. Also, while we will stop originating additional GreenSky loans later

### Tangible Book Value Per Share

![img-4.jpeg](img-4.jpeg)

Tangible Book Value Per Share is a non-GAAP financial measure. See page 12 for a reconciliation of this measure to its most comparable GAAP measure.

### Common Dividends Per Share

![img-5.jpeg](img-5.jpeg)

### Efficiency Ratio

![img-6.jpeg](img-6.jpeg)

Efficiency ratio is a non-GAAP financial measure. See page 13 for a reconciliation of this measure to its most comparable GAAP measure.

3

this year, we will still have a balance of their high credit metric loans on our balance sheet for several years during their payoff periods.

On a broader basis, we also expect to develop a robust “banking as a service” business, which is commonly referred to as “BaaS.” BaaS generally involves banks providing services they already perform for their own operations to one or more outside clients. This can range from funding consumer and/or commercial loan originations, as we have done with GreenSky for more than ten years; to servicing loans, as we have done for FHA lenders for several years; to holding deposits generated by non-bank financial service companies; to providing payment services and other financial services these clients need but for regulatory purposes cannot, or do not want to, do for themselves.

Over the past couple of years, we have begun fostering relationships across the BaaS ecosystem, added a BaaS technology platform through a leading provider, and held discussions with a number of potential partners. However, as a result of our determination to employ strong caution and compliance requirements with respect to any new partnerships, we have not yet signed any new BaaS agreements. Still, I believe BaaS offers new revenue opportunities for us and I look forward to sharing additional information about this in the future.

**Wealth Management.** Increasing interest rates as a result of the Federal Reserve Bank actions in 2022 had a negative impact on the stock markets and our assets under administration and revenues. Overall, Wealth Management’s assets under administration declined $594.1 million, or 14.5% to $3.51 billion by the end of 2022, from year-end 2021. Wealth Management revenue declined 4.1% to $25.7 million, compared to 2021. However, this is a case where numbers do not tell the whole story. We have made significant progress in building a more vibrant and customer-centric wealth group, including at the leadership level. In June of 2022 Jayne Hladio, a seasoned wealth business executive, joined us as President of our Wealth Group. Jayne is a proven leader who has built successful customer-centric wealth management businesses. Jayne and her team have made great progress in upgrading and revitalizing our team, technology and business processes for our Wealth clients.

**Equipment Finance.** Our equipment finance business continues to grow markedly, even as the pandemic caused great stress to many of its customers. Our equipment finance portfolio stood at $1.11 billion at the end of 2022, as compared to $945.3 million at year-end 2021, representing an increase of 17.3%. Our equipment finance business has benefitted greatly from the strength of its management and the very cohesive team that operates this business for us. This is evident not only in its growth but also in its charge-off rates, which are consistently well below peer, based on the data provided by the Equipment Leasing and Finance Association.

### Total Gross Loans

![img-7.jpeg](img-7.jpeg)

### Trust Assets Under Administration

![img-8.jpeg](img-8.jpeg)

![img-9.jpeg](img-9.jpeg)

Midland Wealth Management

4

## Outlook

I continue to believe we are well positioned for the future. Our customer-facing teams are doing great work and remain highly motivated to provide excellent customer service. The same is true for our operations people. Although I have concerns about the ability of community banks to attract deposits and maintain a healthy net interest margin if the velocity of interest rate increases does not abate, I view that more as a short-medium term headwind that we cannot control. As such, we will continue our focus on the things we can control, such as managing expenses, credit quality and providing an excellent customer experience. I remain confident that these will serve us well in 2023 and beyond.

As always, we thank you for your continued support.

Chief Executive Officer

March 20, 2023

## Additional Information

This document may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, plans, objectives, future performance and business of Midland. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of Midland's management and on information currently available to management, are generally identifiable by the use of words such as 'believe,' 'expect,' 'anticipate,' 'plan,' 'intend,' 'estimate,' 'may,' 'will,' 'would,' 'could,' 'should' or other similar expressions. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made. Midland undertakes no obligation to update any statement in light of new information or future events. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Additional information concerning Midland and its business, including additional factors that could materially affect Midland's financial results, are included in Midland's filings with the Securities and Exchange Commission.

5

# Financial Highlights

Adjusted Return on Average Assets(1)

![img-10.jpeg](img-10.jpeg)

Net Interest Margin

![img-11.jpeg](img-11.jpeg)

Revenue
($ in Millions)

![img-12.jpeg](img-12.jpeg)

Noninterest Income / Revenue

![img-13.jpeg](img-13.jpeg)

Adjusted Pre-Tax Pre-Provision Earnings(1)
($ in Millions)

![img-14.jpeg](img-14.jpeg)

(1) Adjusted return on average assets, adjusted pre-tax pre-provision earnings and return on average tangible common shareholders' equity are non-GAAP financial measures. See "Non-GAAP Financial Measures" on pages 11 through 13 for a reconciliation of these measures to their most comparable GAAP measures.

6

# **Total Deposits**  
(\$ in Millions)

![img-15.jpeg](img-15.jpeg)

# **Total Shareholders' Equity**  
(\$ in Millions)

![img-16.jpeg](img-16.jpeg)

# **Total Capital to Risk-Weighted Assets**

![img-17.jpeg](img-17.jpeg)

# **Return on Average Tangible  
Common Shareholders' Equity$^{(1)}$**

![img-18.jpeg](img-18.jpeg)

(1) Adjusted return on average assets, adjusted pre-tax pre-provision earnings and return on average tangible common shareholders' equity are non-GAAP financial measures. See 'Non-GAAP Financial Measures' on pages 11 through 13 for a reconciliation of these measures to their most comparable GAAP measures.

7

# Summary Financial Information

The following consolidated selected financial data is derived from the Company's audited consolidated financial statements as of and for the five years ended December 31, 2022. This information should be read in connection with our audited consolidated financial statements, related notes and 'Management's Discussion and Analysis of Financial Condition and Results of Operations' appearing in our Form 10-K for the fiscal year ended December 31, 2022.

| (dollars in thousands, except per share data) | As of and for the Years Ended December 31, |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 | 2019 | 2018 |
| Per Share Data (Common Stock) |  |  |  |  |  |
| Earnings |  |  |  |  |  |
| Basic | $4.24 | $3.58 | $0.95 | $2.28 | $1.69 |
| Diluted | 4.23 | 3.57 | 0.95 | 2.26 | 1.66 |
| Dividends declared | 1.16 | 1.12 | 1.07 | 0.97 | 0.88 |
| Book value | 29.17 | 30.11 | 27.83 | 27.10 | 25.50 |
| Tangible book value (1) | 20.94 | 21.66 | 19.31 | 18.64 | 17.00 |
| Market price | 26.62 | 24.79 | 17.87 | 28.96 | 22.34 |
| Weighted average shares outstanding |  |  |  |  |  |
| Basic | 22,341,498 | 22,481,389 | 23,336,881 | 24,288,793 | 23,130,475 |
| Diluted | 22,395,698 | 22,547,353 | 23,346,126 | 24,493,431 | 23,549,025 |
| Shares outstanding at period end | 22,214,913 | 22,050,537 | 22,325,471 | 24,420,345 | 23,751,798 |
| Performance Metrics |  |  |  |  |  |
| Return on average assets | 1.31% | 1.18% | 0.35% | 0.96% | 0.72% |
| Return on average shareholders' equity | 14.40% | 12.65% | 3.55% | 8.74% | 6.92% |
| Return on average common shareholders' equity | 14.83% | 12.65% | 3.55% | 8.76% | 6.93% |
| Return on average tangible common equity (1) | 20.76% | 17.91% | 5.18% | 12.82% | 10.40% |
| Yield on earning assets | 4.38% | 3.81% | 4.17% | 4.83% | 4.65% |
| Cost of average interest bearing liabilities | 1.16% | 0.66% | 1.00% | 1.43% | 1.11% |
| Net interest margin (2) | 3.57% | 3.33% | 3.40% | 3.69% | 3.76% |
| Efficiency ratio (3) | 55.35% | 57.05% | 59.42% | 61.53% | 66.08% |
| Common stock dividend payout ratio (3) | 27.36% | 31.28% | 112.63% | 42.54% | 52.07% |
| Loan to deposit ratio | 99.09% | 85.50% | 100.05% | 96.86% | 101.56% |
| Core deposits/total deposits (4) | 96.58% | 97.27% | 97.72% | 96.09% | 92.35% |
| Adjusted Earnings Metrics |  |  |  |  |  |
| Adjusted earnings (1) | $89,021 | $83,221 | $40,183 | $62,826 | $56,763 |
| Adjusted diluted earnings per share (1) | 3.79 | 3.65 | 1.70 | 2.54 | 2.39 |
| Adjusted return on average assets (1) | 1.18% | 1.21% | 0.62% | 1.08% | 1.04% |
| Adjusted return on average tangible common equity (1) | 18.59% | 18.33% | 9.24% | 14.44% | 15.00% |
| Regulatory Capital Ratios |  |  |  |  |  |
| Total risk-based capital ratio | 12.38% | 12.19% | 13.24% | 14.72% | 12.79% |
| Tier 1 risk-based capital ratio | 10.21% | 9.16% | 9.20% | 10.52% | 10.25% |
| Common equity tier 1 risk-based capital ratio | 7.77% | 8.08% | 7.99% | 9.20% | 8.76% |
| Tier 1 leverage ratio | 9.43% | 7.75% | 7.50% | 8.74% | 8.53% |
| Tangible common equity to tangible assets (1) | 6.06% | 6.58% | 6.46% | 7.74% | 7.43% |
| Credit Quality Data |  |  |  |  |  |
| Loans 30-89 days past due | $32,372 | $17,514 | $31,460 | $29,876 | $25,213 |
| Loans 30-89 days past due to total loans | 0.51% | 0.34% | 0.62% | 0.68% | 0.61% |
| Nonperforming loans | $49,423 | $42,580 | $54,070 | $42,082 | $42,899 |
| Nonperforming loans to total loans | 0.78% | 0.81% | 1.06% | 0.96% | 1.04% |
| Nonperforming assets | $57,824 | $57,069 | $75,432 | $50,027 | $45,899 |
| Nonperforming assets to total assets | 0.74% | 0.77% | 1.10% | 0.82% | 0.81% |
| Allowance for credit losses on loans to total loans | 0.97% | 0.98% | 1.18% | 0.64% | 0.51% |
| Allowance for credit losses on loans to nonperforming loans | 123.53% | 119.92% | 111.79% | 66.60% | 48.73% |
| Net charge-offs to average loans | 0.15% | 0.27% | 0.50% | 0.23% | 0.13% |

(1) Tangible book value per share, return on average tangible common shareholders' equity, efficiency ratio, adjusted earnings, adjusted diluted earnings per share, adjusted return on average assets, adjusted return on average tangible common equity and tangible common equity to tangible assets are non-GAAP financial measures. See 'Non-GAAP Financial Measures' on pages 11 through 13 for a reconciliation of these measures to their most comparable GAAP measures.

(2) Net interest margin is presented on a fully taxable equivalent basis.

(3) Common stock dividend payout ratio represents dividends per share divided by basic earnings per share.

(4) Core deposits are defined as total deposits less certificates of deposits greater than $250,000 and brokered certificates of deposits.

8

## Balance Sheet

|  | As of December 31, |  |
| --- | --- | --- |
| (dollars in thousands) | 2022 | 2021 |
| Assets |  |  |
| Cash and due from banks | $143,035 | $673,297 |
| Federal funds sold | 7,286 | 7,074 |
| Cash and cash equivalents | 150,321 | 680,371 |
| Investment securities available for sale | 768,234 | 906,603 |
| Equity securities | 8,626 | 9,529 |
| Loans | 6,306,467 | 5,224,801 |
| Allowance for credit losses on loans | (61,051) | (51,062) |
| Total loans | 6,245,416 | 5,173,739 |
| Loans held for sale | 1,286 | 32,045 |
| Premises and equipment | 78,293 | 79,220 |
| Other real estate owned | 6,729 | 12,059 |
| Nonmarketable equity securities | 46,201 | 36,341 |
| Accrued interest receivable | 20,313 | 19,470 |
| Loan servicing rights | 1,205 | 28,865 |
| Commercial FHA mortgage loan servicing rights held for sale | 20,745 | - |
| Goodwill | 161,904 | 161,904 |
| Other intangible assets | 20,866 | 24,374 |
| Company-owned life insurance | 150,443 | 148,378 |
| Other assets | 174,919 | 130,907 |
| Total assets | $7,855,501 | $7,443,805 |
| Liabilities and Shareholders' Equity |  |  |
| Liabilities: |  |  |
| Deposits: |  |  |
| Noninterest-bearing | $1,935,773 | $2,245,701 |
| Interest-bearing | 4,428,879 | 3,864,947 |
| Total deposits | 6,364,652 | 6,110,648 |
| Short-term borrowings | 42,311 | 76,803 |
| FHLB advances and other borrowings | 460,000 | 310,171 |
| Subordinated debt | 99,772 | 139,091 |
| Trust preferred debentures | 49,975 | 49,374 |
| Accrued interest payable and other liabilities | 80,217 | 93,881 |
| Total liabilities | 7,096,927 | 6,779,968 |
| Shareholders' Equity: |  |  |
| Preferred stock | 110,548 | - |
| Common stock | 222 | 221 |
| Capital surplus | 449,196 | 445,907 |
| Retained earnings | 282,405 | 212,472 |
| Accumulated other comprehensive (loss) income | (83,797) | 5,237 |
| Total shareholders' equity | 758,574 | 663,837 |
| Total liabilities and shareholders' equity | $7,855,501 | $7,443,805 |

9

## Income Statement

|  | For the Years Ended December 31, |  |  |
| --- | --- | --- | --- |
| (dollars in thousands) | 2022 | 2021 | 2020 |
| Interest income | $301,755 | $237,817 | $244,888 |
| Interest expense | 56,020 | 30,142 | 45,752 |
| Net interest income | 245,735 | 207,675 | 199,136 |
| Provision for credit losses | 20,126 | 3,393 | 44,361 |
| Net interest income after provision for credit losses | 225,609 | 204,282 | 154,775 |
| Noninterest income: |  |  |  |
| Wealth management revenue | 25,708 | 26,811 | 22,802 |
| Commercial FHA revenue | 1,663 | 1,414 | 6,007 |
| Residential mortgage banking revenue | 1,509 | 5,526 | 9,812 |
| Service charges on deposit accounts | 9,480 | 8,348 | 8,603 |
| Interchange revenue | 13,879 | 14,500 | 12,266 |
| (Loss) gain on sales of investment securities | (230) | 537 | 1,721 |
| Gain on termination of hedged interest rate swaps | 17,531 | 2,159 | - |
| Impairment on commercial mortgage servicing rights | (1,263) | (7,532) | (12,337) |
| Company-owned life insurance | 3,584 | 4,496 | 3,581 |
| Other income | 8,030 | 13,640 | 8,794 |
| Total noninterest income | 79,891 | 69,899 | 61,249 |
| Noninterest expense: |  |  |  |
| Salaries and employee benefits | 90,305 | 86,883 | 85,557 |
| Occupancy and equipment | 14,842 | 14,866 | 17,552 |
| Data processing | 24,350 | 24,595 | 22,643 |
| Professional | 6,907 | 10,971 | 7,234 |
| Marketing | 3,318 | 3,239 | 3,498 |
| Communications | 2,382 | 3,002 | 4,052 |
| Loan expense | 4,586 | 2,014 | 2,504 |
| Amortization of intangible assets | 5,410 | 5,855 | 6,504 |
| Other real estate owned | 5,188 | 1,277 | 2,155 |
| Loss on mortgage servicing rights held for sale | 3,250 | 222 | 1,692 |
| Impairment related to facilities optimization | - | - | 12,847 |
| FHLB advances prepayment fees | - | 8,536 | 4,872 |
| Other expense | 15,124 | 13,609 | 12,900 |
| Total noninterest expense | 175,662 | 175,069 | 184,010 |
| Income before income taxes | 129,838 | 99,112 | 32,014 |
| Income taxes | 30,813 | 17,795 | 9,477 |
| Net income | 99,025 | 81,317 | 22,537 |
| Preferred dividends | 3,169 | - | - |
| Net income available to common shareholders | $95,856 | $81,317 | $22,537 |

10

**Adjusted Earnings Metrics.** We use the measure adjusted earnings to assess the performance of our core business and the strength of our capital position. We believe that this non-GAAP financial measure provides meaningful additional information about us to assist investors in evaluating our operating results. This non-GAAP financial measure should not be considered a substitute for operating results determined in accordance with GAAP and may not be comparable to other similarly titled measures used by other companies. The following table reconciles adjusted earnings, adjusted diluted earnings per share, adjusted return on average assets and adjusted return on average tangible common equity to their most comparable GAAP measures:

| (dollars in thousands, except per share data) | For the years ended December 31, |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 | 2019 | 2018 |
| Adjusted Earnings: |  |  |  |  |  |
| Income before income taxes - GAAP | $129,838 | $99,112 | $32,014 | $72,471 | $50,805 |
| Adjustments to noninterest income: |  |  |  |  |  |
| (Loss) gain on sales of investment securities | (230) | 537 | 1,721 | 674 | 464 |
| Gain on termination of hedged interest rate swap | 17,531 | 2,159 | - | - | - |
| Other | - | 48 | (17) | (29) | 89 |
| Total adjustments to noninterest income | 17,301 | 2,744 | 1,704 | 645 | 553 |
| Adjustments to noninterest expense: |  |  |  |  |  |
| Impairment related to facilities optimization | - | - | 12,847 | 3,577 | - |
| Loss (gain) on mortgage servicing rights held for sale | 3,250 | 222 | 1,692 | (490) | 458 |
| FHLB advances prepayment fees | - | 8,536 | 4,872 | - | - |
| Loss on repurchase of subordinated debt | - | - | 193 | 1,778 | - |
| Integration and acquisition expenses | 347 | 4,356 | 2,309 | 5,493 | 24,015 |
| Total adjustments to noninterest expense | 3,597 | 13,114 | 21,913 | 10,358 | 24,473 |
| Adjusted earnings pre tax | 116,134 | 109,482 | 52,223 | 82,184 | 74,725 |
| Adjusted earnings tax | 27,113 | 26,261 | 12,040 | 19,358 | 17,962 |
| Adjusted earnings - non-GAAP | $89,021 | $83,221 | $40,183 | $62,826 | $56,763 |
| Preferred stock dividends and premium amortization | 3,169 | - | - | 46 | 141 |
| Adjusted earnings available to common shareholders - non-GAAP | $85,852 | $83,221 | $40,183 | $62,780 | $56,622 |
| Adjusted diluted earnings per common share | $3.79 | $3.65 | $1.70 | $2.54 | $2.39 |
| Weighted average shares outstanding - diluted | 22,395,698 | 22,547,353 | 23,346,126 | 24,493,431 | 23,549,025 |
| Average assets | $7,536,647 | $6,881,592 | $6,529,226 | $5,835,086 | $5,455,823 |
| Adjusted return on average assets | 1.18% | 1.21% | 0.62% | 1.08% | 1.04% |
| Average tangible common equity | $461,842 | $454,061 | $434,673 | $434,681 | $377,602 |
| Adjusted return on average tangible common equity | 18.59% | 18.33% | 9.24% | 14.44% | 15.00% |
| Adjusted Pre-Tax, Pre-Provision Earnings |  |  |  |  |  |
| Adjusted earnings pre-tax - non-GAAP | $116,134 | $109,482 | $52,223 | $82,184 | $74,725 |
| Provision for credit losses | 20,126 | 3,393 | 44,361 | 16,985 | 9,430 |
| Impairment on commercial mortgage servicing rights | 1,263 | 7,532 | 12,337 | 2,139 | (449) |
| Adjusted pre-tax, pre-provision earnings - non-GAAP | $137,523 | $120,407 | $108,921 | $101,308 | $83,706 |
| Adjusted pre-tax, pre-provision return on average assets | 1.82% | 1.75% | 1.67% | 1.74% | 1.53% |

11

**Tangible Common Equity, Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share.** Tangible common equity, tangible common equity to tangible assets ratio and tangible book value per share are non-GAAP measures generally used by financial analysts and investment bankers to evaluate capital adequacy. We calculate: (i) tangible common equity as total shareholders' equity less preferred equity, goodwill and other intangible assets (excluding mortgage servicing rights); (ii) tangible assets as total assets less goodwill and other intangible assets; and (iii) tangible book value per share as tangible common equity divided by shares of common stock outstanding.

Our management, banking regulators, many financial analysts and other investors use these measures in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of preferred equity and/or goodwill or other intangible assets, which typically stem from the use of the purchase accounting method of accounting for mergers and acquisitions. Tangible common equity, tangible assets, tangible book value per share and related measures should not be considered in isolation or as a substitute for total shareholders' equity, total assets, book value per share or any other measure calculated in accordance with GAAP. Moreover, the manner in which we calculate tangible common equity, tangible assets, tangible book value per share and any other related measures may differ from that of other companies reporting measures with similar names. The following table reconciles shareholders' equity (on a GAAP basis) to tangible common equity and total assets (on a GAAP basis) to tangible assets, and calculates our tangible common equity to tangible assets ratio and tangible book value per share:

| (dollars in thousands, except per share data) | For the years ended December 31, |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 | 2019 | 2018 |
| Shareholders' Equity to Tangible Common Equity: |  |  |  |  |  |
| Total shareholders' equity-GAAP | $758,574 | $663,837 | $621,391 | $661,911 | $608,525 |
| Adjustments: |  |  |  |  |  |
| Preferred stock | (110,548) | - | - | - | (2,781) |
| Goodwill | (161,904) | (161,904) | (161,904) | (171,758) | (164,673) |
| Other intangible assets, net | (20,866) | (24,374) | (28,382) | (34,886) | (37,376) |
| Tangible common equity | $465,256 | $477,559 | $431,105 | $455,267 | $403,695 |
| Total Assets to Tangible Assets: |  |  |  |  |  |
| Total assets-GAAP | $7,855,501 | $7,443,805 | $6,868,540 | $6,087,017 | $5,637,673 |
| Adjustments: |  |  |  |  |  |
| Goodwill | (161,904) | (161,904) | (161,904) | (171,758) | (164,673) |
| Other intangible assets, net | (20,866) | (24,374) | (28,382) | (34,886) | (37,376) |
| Tangible assets | $7,672,731 | $7,257,527 | $6,678,254 | $5,880,373 | $5,435,624 |
| Common shares outstanding | 22,214,913 | 22,050,537 | 22,325,471 | 24,420,345 | 23,751,798 |
| Tangible common equity to tangible assets ratio | 6.06% | 6.58% | 6.46% | 7.74% | 7.43% |
| Tangible book value per share | $20.94 | $21.66 | $19.31 | $18.64 | $17.00 |

**Return on Average Tangible Common Equity.** Management measures return on average tangible common equity to assess the Company's capital strength and business performance. Tangible equity excludes preferred equity, goodwill and other intangible assets (excluding mortgage servicing rights), and is reviewed by banking and financial institution regulators when assessing a financial institution's capital adequacy. This non-GAAP financial measure should not be considered a substitute for operating results determined in accordance with GAAP and may not be comparable to other similarly titled measures used by other companies. The following table reconciles return on average tangible common equity to its most comparable GAAP measure:

| (dollars in thousands) | For the years ended December 31, |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 | 2019 | 2018 |
| Net income available to common shareholders | $95,856 | $81,317 | $22,537 | $55,738 | $39,280 |
| Average Shareholders' Equity to Average Tangible Common Equity: |  |  |  |  |  |
| Average total shareholders' equity-GAAP | $687,876 | $642,698 | $634,995 | $638,307 | $569,537 |
| Adjustments: |  |  |  |  |  |
| Preferred stock | (41,493) | - | - | (1,561) | (2,882) |
| Goodwill | (161,904) | (161,904) | (168,821) | (166,721) | (151,546) |
| Other intangible assets, net | (22,637) | (26,733) | (31,501) | (35,344) | (37,507) |
| Average tangible common equity | $461,842 | $454,061 | $434,673 | $434,681 | $377,602 |
| Return on average tangible common equity | 20.76% | 17.91% | 5.18% | 12.82% | 10.40% |

12

**Efficiency Ratio.** Management uses the efficiency ratio to measure how effective the Bank is in using overhead expenses, including salaries and benefit costs and occupancy expenses as well as other operating expenses, in generating revenues. We believe that this non-GAAP financial measure provides meaningful information to further assist investors in evaluating our operating results. This non-GAAP financial measure should not be considered a substitute for operating results determined in accordance with GAAP and may not be comparable to other similarly titled measures used by other companies. The following table reconciles the efficiency ratio to its most comparable GAAP measure:

| (dollars in thousands) | For the years ended December 31, |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  | 2022 | 2021 | 2020 | 2019 | 2018 |
| Noninterest expense | $175,662 | $175,069 | $184,010 | $175,641 | $191,643 |
| Adjustments to noninterest expense: |  |  |  |  |  |
| Impairment related to facilities optimization | - | - | (12,847) | (3,577) | - |
| (Loss) gain on mortgage servicing rights held for sale | (3,250) | (222) | (1,692) | 490 | (458) |
| FHLB advances prepayment fees | - | (8,536) | (4,872) | - | - |
| Loss on repurchase of subordinated debt | - | - | (193) | (1,778) | - |
| Integration and acquisition expenses | (347) | (4,356) | (2,309) | (5,493) | (24,015) |
| Adjusted noninterest expense | $172,065 | $161,955 | $162,097 | $165,283 | $167,170 |
| Net interest income | 245,735 | 207,675 | 199,136 | 189,815 | 180,087 |
| Effect of tax-exempt income | 1,283 | 1,543 | 1,766 | 2,045 | 2,095 |
| Adjusted net interest income | $247,018 | $209,218 | $200,902 | $191,860 | $182,182 |
| Noninterest income | 79,891 | 69,899 | 61,249 | 75,282 | 71,791 |
| Adjustments to noninterest income: |  |  |  |  |  |
| Impairment (recapture) on commercial servicing rights | 1,263 | 7,532 | 12,337 | 2,139 | (449) |
| Loss (gain) on sales of investment securities | 230 | (537) | (1,721) | (674) | (464) |
| Gain on termination of hedged interest rate swap | (17,531) | (2,159) | - | - | - |
| Other income | - | (48) | 17 | 29 | (90) |
| Adjusted noninterest income | $63,853 | $74,687 | $71,882 | $76,776 | $70,788 |
| Adjusted total revenue | $310,871 | $283,905 | $272,784 | $268,636 | $252,970 |
| Efficiency ratio | 55.35% | 57.05% | 59.42% | 61.53% | 66.08% |

13

### 2022 Actual Cash Dividend Data

| Quarter | Record Date | Payment Date | Share Amount |
| --- | --- | --- | --- |
| 1 | February 11, 2022 | February 18, 2022 | $0.29 |
| 2 | May 13, 2022 | May 20, 2022 | $0.29 |
| 3 | August 19, 2022 | August 26, 2022 | $0.29 |
| 4 | November 14, 2022 | November 21, 2022 | $0.29 |

### Ten-year Dividend History and Book Value Per Share

| Year | Cash Dividends for the Year |  | Book Value Per Share - at End of Year |  |
| --- | --- | --- | --- | --- |
|  | Amount | % Increase | Amount (a) | % Increase |
| 2013 | $0.53 | 10.4% | $17.81 | 8.8% |
| 2014 | $0.59 | 11.3% | $18.72 | 5.1% |
| 2015 | $0.65 | 10.2% | $19.74 | 5.4% |
| 2016 | $0.72 | 10.8% | $20.78 | 5.3% |
| 2017 | $0.80 | 11.1% | $23.35 | 12.4% |
| 2018 | $0.88 | 10.0% | $25.50 | 9.2% |
| 2019 | $0.97 | 10.2% | $27.10 | 6.3% |
| 2020 | $1.07 | 10.3% | $27.83 | 2.7% |
| 2021 | $1.12 | 4.7% | $30.11 | 8.2% |
| 2022 | $1.16 | 3.6% | $29.17 | -3.1% |

(a) Book value per share gives effect to the conversion of all of the issued and outstanding shares of preferred stock into shares of the Company's common stock in 2013

### Two-year Stock Price

Our common stock trades on the NASDAQ Global Select Market ('NASDAQ') under the symbol 'MSBI.' The following table sets forth the high and low sales prices of our common stock for the years ended December 31, 2022 and 2021 as reported by NASDAQ.

|  | Price Per Share |  |
| --- | --- | --- |
|  | High | Low |
| 2022 |  |  |
| Fourth Quarter | $28.59 | $23.60 |
| Third Quarter | $28.88 | $23.48 |
| Second Quarter | $29.86 | $23.74 |
| First Quarter | $30.60 | $24.92 |
| 2021 |  |  |
| Fourth Quarter | $24.93 | $24.62 |
| Third Quarter | $26.68 | $22.50 |
| Second Quarter | $29.28 | $25.34 |
| First Quarter | $30.32 | $17.70 |

14

# Our Environmental, Social and Governance Program (ESG)

## Environmental

Our environmental initiatives pertain to our internal business operations and our Bank's lending activities.

### Facilities

- Our Corporate HQ, built in 2011, is LEED (Silver) Certified.
- We have installed Solar power in 10 Midland locations.
- We have made more than $50 million of credit available for residential solar projects since 2011.
- We have also provided $540 million of financing for 18 "green" (LEED, Energy Star, etc.) multi-family/health care facilities since 2017.

### Paper Reduction

- More than 50% of our customers use paperless statements and we have had a paper elimination program in place since 2010.

### Social

We strive to further the financial success of the families and small-medium sized/minority owned businesses in our markets by offering fair products and services supported by financial education and other measures.

Our Community Impact Investment goals (available at www.midlandsb.com/community) as well as our Community Development Plan (CDP) (available at www.midlandsb.com/community-development-plan) are designed to ensure we serve as a catalyst for community development in our neighborhoods.

We strive to safekeep our customer's information, and help them reduce the chance of identity theft and online fraud.

### Community Outreach

- We have been serving families and businesses since 1881, offering products and services based on the needs of our customers.
- We work with more than 150 low-to-moderate income (LMI) and minority focused community groups to insure we address the needs of each of our markets.
- The Midland Institute CEO program, a unique year-long program designed to teach entrepreneurship to high school students, was created in 2010. In 2022, more than 60 programs, serving 288 high schools in 10 states, now utilize this powerful program for energizing tomorrow's business leaders.

### Culture and People

- Since 2008 Midland has provided all employees with personal and professional development training.
- Midland's Advanced Study for Talent Enrichment and Resource Training (MASTERS) program serves to develop future leaders of the Company. To date 65% of participants have been women or minority employees.
- Midland launched its Diversity & Inclusion Council in April 2020 to focus on diversity in the workplace and workforce.
- Beginning in 2022, Midland offers employees paid time off to contribute their time and talents to recognized charities, causes, or not-for-profit community organizations.

### Philanthropy

- $132.5 million of loans extended towards community development goals during the 2019-2021 period.
- Since its creation in 2011, the Midland States Bank Foundation has contributed more than $1.6 million to non-profit organizations throughout Midland's footprint.

### Financial Education

- Since 2015 we have held more than 240 financial literacy seminars in LMI/minority neighborhoods in our footprint.

### Community Development and Financial Inclusion

- We have provided $877 million of financing for 148 affordable multi-family and health care projects since 2015.
- Through our Believable Banking® Residential Mortgage and Home Improvement programs we have made $97.3 million of loans to families underserved by traditional loan programs.

- Our banking products and services are offered through our personal bankers, online with materials clearly describing the features, costs and alternatives available, and by dual-language materials in our branches and our ADA compliant website.

### Governance

Midland has a long history of effective corporate governance, inclusiveness and providing opportunities for personal and professional development for all employees.

Our Enterprise-Wide Risk Management program has been one of the five initiatives under our Strategic Plan since its creation in 2008.

Our Executive Compensation program is designed to reward growth oriented results without exceeding proper credit and other risk tolerances for a community-focused banking organization. For example, under our executive compensation program we do not provide tax gross-ups, we do not include walk-away severance payments or single-trigger cash payments upon a change of control, we do not provide single-trigger vesting of equity awards in change of control transactions for awards granted during 2020 and thereafter under our 2019 Long-Term Incentive Plan, and we do not reprice equity awards without prior shareholder approval.

### Reputation and Ethics

- Midland States Bank was one of the first banks in the nation to have a woman on its board (1903).
- Our board composition includes 45% women and minorities, and our criteria for identifying directors includes seeking diverse individuals.
- Our Code of Business Conduct and Ethics is available at investors.midlandsb.com.

### Oversight of Strategy and Risk Management

- The Company's Chair and CEO roles have been separate since the Company's inception (1988).
- All directors, except our CEO, are "independent" pursuant to applicable SEC/NASDAQ rules.
- Our board of directors has established a Risk and Compliance Committee to oversee all aspects of risk and compliance management across our enterprise.
- Consistent with COSO's 2017 Enterprise-Wide Risk Management (ERM) Framework, our ERM program employs business process risk ownership and the "three lines of defense" model. The primary objectives of our ERM framework are to:
  - Maintain sufficient liquidity given our funding requirements;
  - Identify, measure, monitor and report market, credit and operational risks;
  - Promote awareness of emerging risks among all employees, managers, directors; and
  - Manage avoidable exposures through a robust framework of internal controls.

### Data Security & Privacy

- We utilize data security programs and a privacy policy under which we do not sell or share customer information with non-affiliated entities.

### Executive Compensation

- Our executive compensation, including all performance related compensation, is evaluated annually by Risk Management to ensure consistency with Federal Reserve Safety and Soundness requirements, and the Interagency Guidance on Sound Incentive Compensation Policies issued jointly by the federal regulatory agencies.
- All cash and equity incentive programs for executive officers include performance metrics and/or four-year vesting periods.

15

# Board of Directors

![img-0.jpeg](img-0.jpeg)

**Jeffrey C. Smith**
Midland States Bancorp, Inc.
Chairman

Midland States Bank
Chairman

Walters Golf Management
Principal and Managing
Partner

![img-1.jpeg](img-1.jpeg)

**Jeffrey G. Ludwig**
Midland States Bancorp, Inc.
Vice Chairman, President
and Chief Executive Officer

Midland States Bank
Chief Executive Officer

![img-2.jpeg](img-2.jpeg)

**R. Dean Bingham**
Agracel, Inc.
Chief Executive Officer

![img-3.jpeg](img-3.jpeg)

**Jennifer L. DiMotta**
DiMotta Consulting LLC
President

![img-4.jpeg](img-4.jpeg)

**Deborah A. Golden**
Former Executive Vice
President, General Counsel
and Secretary of GATX

![img-5.jpeg](img-5.jpeg)

**Jerry L. McDaniel**
Superior Fuels, Inc.
Dirtbuster Carwash, LLC
President

![img-6.jpeg](img-6.jpeg)

**Jeffrey M. McDonnell**
J&J Management
Services, Inc.
Chief Executive Officer

![img-7.jpeg](img-7.jpeg)

**Dwight A. Miller**
Dash Management, Inc.
Chief Executive Officer

![img-8.jpeg](img-8.jpeg)

**Richard T. Ramos**
Maritz Holdings, Inc.
Executive Vice President
Chief Financial Officer
and Board Member

![img-9.jpeg](img-9.jpeg)

**Robert F. Schultz**
JM Schultz Investment
Company
Managing Partner

![img-10.jpeg](img-10.jpeg)

**Sherina Maye Edwards**
Former Chief Strategy
Officer of MasTec, Inc.

16

# Management Team

## Executive Management

### Jeffrey G. Ludwig

Midland States Bancorp, Inc.
President and
Chief Executive Officer

Midland States Bank
Chief Executive Officer

### Jeffrey S. Mefford

Midland States Bancorp, Inc.
Executive Vice President

Midland States Bank
President

### Jeffrey A. Brunoehler

Midland States Bank
Senior Vice President,
Chief Credit Officer

### Douglas J. Tucker

Midland States Bancorp, Inc.
Senior Vice President,
Corporate Counsel and Secretary

Midland States Bank
Senior Vice President,
Corporate Counsel

### James R. Stewart

Midland States Bank
Senior Vice President,
Chief Risk Officer

### Eric T. Lemke

Midland States Bancorp, Inc.
Chief Financial Officer

Midland States Bank
Chief Financial Officer

## Senior Management

### Corporate

#### Donald Spring

Chief Accounting Officer and
Corporate Controller

#### Shonna Kracinski

Chief Human Resources Officer

#### Kyle Mooney

Chief Information Officer

#### William Wierman, Jr.

Director - Credit Underwriting

#### Dena Steele

Director - Marketing

#### Gerald Maloney

Chief Compliance Officer

### Banking

#### Timothy Spitz

Senior Vice President

#### Dan Stevenson

Senior Vice President

#### Frank Turza

Director - Retail Banking

#### Richard Kantor

Director - Commercial Banking

#### Elizabeth Schweger

Director - Commercial Services

#### Martesha Brown

Director - Community Economic
Development

### Wealth Management

#### Jayne Hladio

President

### Midland Equipment Finance

#### Frederick Van Etten

President

For press releases, financial information
and more, visit midlandsb.com/investors.

17

![img-11.jpeg](img-11.jpeg)

1201 Network Centre Drive, Effingham, IL 62401 • midlandsb.com • 1-855-696-4352