Midland States Bancorp Inc (MSBI)

A. Company Overview

Midland States Bancorp, Inc. is a diversified financial holding company established in 1988 and headquartered in Effingham, Illinois. With a robust heritage, the company operates through its banking subsidiary, Midland States Bank, which has its roots dating back to 1881. As of December 31, 2023, Midland States Bancorp reported total assets amounting to $7.87 billion. The company's wealth management division administers assets totaling approximately $3.73 billion, reflecting its capabilities in financial management and advisory services. Midland States Bancorp's strategic focus includes cultivating a performance-driven, customer-centered culture while diversifying revenue streams, pursuing accretive acquisitions, achieving operational excellence, and maintaining a strong risk management framework.

The company has expanded its footprint through a combination of organic growth and acquisitions over recent years. Notable transactions include the acquisition of branches from FNBC in June 2022, which brought in $79.8 million in deposits and $16.6 million in loans, and the acquisition of trust assets from ATG Trust in June 2021, enhancing its wealth management service offerings.

B. Principal Businesses

Traditional Community Banking

Midland States Bank offers a comprehensive suite of commercial and retail banking services aimed at individuals, businesses, municipalities, and various organizations in its operating regions—primarily Illinois and the St. Louis metropolitan area. As of the end of 2023, the bank maintains 53 full-service banking offices.

Lending Services

The bank’s lending strategy emphasizes a diverse portfolio divided among different customer types, loan products, geographical areas, and sectors:

• Commercial Loans: This segment primarily includes term loans for capital equipment purchasing and lines of credit serving small and midsized businesses. Loans are mostly secured, though unsecured lending occurs depending on the borrower's financial position.
• Commercial Real Estate Loans: Financing options are available for both owner-occupied and non-owner-occupied properties across various sectors such as retail, multifamily residences, hotels, and agricultural land.
• Construction and Land Development Loans: These loans are geared towards businesses constructing owner-user properties or developing commercial real estate, alongside loans for residential projects.
• Residential Real Estate Loans: The bank provides first and second mortgage loans as well as home equity lines of credit tailored to individuals' needs for purchasing primary residences.
• Consumer Installment Loans: Midland offers loans for automobiles, boats, and home improvements, which were historically originated through partnerships with vendors but were ceased in late 2023.
• Commercial Equipment Leasing: The bank provides leasing and financing solutions primarily for industries including manufacturing, construction, and healthcare, generally targeting equipment leases between $50,000 and $500,000.

Deposit Services

Midland States Bank offers traditional deposit services such as checking accounts, savings accounts, money market accounts, and certificates of deposit. The bank's capability to gather core deposits is crucial to its business model, underlined by FDIC insurance coverage for deposits.

Wealth Management

Midland Wealth Management, a division of Midland States Bancorp, extends a comprehensive range of wealth management services that encompass financial and estate planning, trustee and custodial services, investment management, and retirement plan consulting. This division aims to provide tailored financial solutions to meet the diverse needs of its clients.

FHA Servicing

Midland States Bancorp previously operated a non-bank subsidiary, Love Funding Corporation, which specialized in FHA financing for multifamily and healthcare facilities. Following the sale of this commercial FHA origination platform in August 2020, the company continues to service approximately $2.08 billion of originated commercial FHA loans.

C. Competition

Midland States Bancorp operates in a highly competitive landscape characterized by a wide array of financial institutions, including community banks, credit unions, large national banks, and emerging financial technology firms. The competition covers many areas, such as retail banking, mortgage lending, wealth management, and equipment leasing.

The bank differentiates itself through a commitment to personalized customer service and fostering long-term relationships with its clients. Its ability to tailor offerings to middle-market enterprises is a cornerstone of its business development and marketing strategy.

D. Human Capital Resources

As of December 31, 2023, Midland States Bancorp employed 914 individuals, including part-time staff. The company emphasizes the importance of human capital and aims to attract and retain skilled professionals through competitive salary structures and ongoing educational opportunities. Employee development programs, such as Midland University, focus on training and continuous improvement in various banking and financial service areas.

E. Corporate Information

Midland States Bancorp operates under rigorous regulatory frameworks applicable to both financial holding companies and its banking subsidiary. The holding company must comply with regulations imposed by the Federal Reserve and other regulatory agencies, overseeing its operational practices, disclosures, and financial health.

The company has elected to operate as a financial holding company, allowing it to engage in a diversified range of financial activities beyond conventional banking, including securities and insurance services. This election enables the bank to maximize its operational capabilities while adhering to the regulatory requirements established under the Bank Holding Company Act (BHCA).

F. Supervision and Regulation

Midland States Bancorp and its banking subsidiary are subject to extensive regulatory oversight intended to ensure the safety and soundness of their operations. This regulation is primarily designed to protect depositors rather than shareholders. Regulatory agencies, including the Federal Reserve and the FDIC, periodically assess the bank’s compliance with capital requirements, asset quality, management practices, and operational soundness.

The Basel III framework significantly influences the capital requirements that govern Midland States Bancorp and its subsidiary, necessitating rigorous capital management and comprehensive risk assessments to maintain regulatory compliance. The company maintains its standing as "well-capitalized," aligning its operations with the stipulated prudential standards while fostering avenues for growth within regulatory boundaries.