Table of Contents

Company Overview

Financial Highlights

Income Analysis

Loan Portfolio

Credit Quality

Investment Portfolio

Funding

Capital and Liquidity

Interest Rate Risk

Company Overview

Midland States Bancorp, Inc. is a financial holding company headquartered in Illinois. For the first quarter of 2024, the company generated net income of $13.9 million, down from $21.8 million in the first quarter of 2023. Diluted earnings per share decreased to $0.53 from $0.86 over the same period.

Financial Highlights

• Total assets were $7.83 billion at March 31, 2024, compared to $7.87 billion at December 31, 2023.
• Total loans decreased by $172.6 million in the first quarter to $5.96 billion at March 31, 2024.
• Total deposits increased slightly to $6.32 billion at March 31, 2024.
• The net interest margin decreased to 3.18% for the first quarter of 2024 from 3.39% for the first quarter of 2023.

Income Analysis

• Net interest income decreased by $4.6 million in the first quarter of 2024 compared to the first quarter of 2023, primarily due to lower yields on interest-earning assets.
• Provision for credit losses increased by $10.9 million in the first quarter of 2024 compared to the first quarter of 2023.
• Noninterest income increased by 34.3% in the first quarter of 2024 compared to the first quarter of 2023, partially offsetting the decreases in net interest income and higher provision.

Loan Portfolio

• Total loans decreased $172.6 million in the first quarter of 2024. Consumer loans drove the majority of the decline.
• Nonperforming loans increased to $105.0 million at March 31, 2024 from $56.4 million at December 31, 2023. The allowance for credit losses increased to 1.31% of total loans compared to 1.12% at December 31, 2023.

Credit Quality

• The provision for credit losses on loans increased to $14.0 million in the first quarter of 2024 from $3.1 million in the first quarter of 2023.
  
• Net charge-offs increased to 0.30% of average loans for the first quarter of 2024 compared to 0.14% for the first quarter of 2023.

Investment Portfolio

• Total investment securities increased to $1.04 billion at March 31, 2024 compared to $915.9 million at December 31, 2023.
• The investment portfolio had a weighted average yield of 3.98% at March 31, 2024. Over 65% of the portfolio is in agency mortgage-backed securities.

Funding

• Total deposits were up slightly in the first quarter. Noninterest bearing deposits increased to 19.2% of total deposits compared to 18.1% at December 31, 2023.
• Short-term borrowings increased significantly in the first quarter to provide additional liquidity as FHLB advances decreased.

Capital and Liquidity

• Shareholders’ equity decreased slightly to $791.0 million due to dividends and stock repurchases exceeding net income generation for the quarter.
• The bank remains well above regulatory minimums for capital ratios.
• Estimated liquidity was $2.45 billion at March 31, 2024, providing a sound liquidity position.

Interest Rate Risk

• Interest rate risk modeling shows the company is virtually neutral to interest rate changes compared to a liability sensitive position at December 31, 2023.
• Net interest income sensitivity improved compared to the previous quarter.

In summary, while earnings decreased from the prior year period, the company maintains a solid financial position in terms of capital, credit quality, liquidity and interest rate risk. The loan portfolio contracted but credit metrics remain at reasonable levels. The investment portfolio provides additional income and the funding base is stable. The company is well positioned to weather changes in the economic environment.