DEF: Midland States Bancorp to Hold 2025 Annual Meeting Amidst Financial Restatement and Executive Compensation Review

Sentiment:

Proxy Statement 1 July 2025 4:41 PM

📋All filings for Midland States Bancorp, INC

Midland States Bancorp, Inc. announced its 2025 annual shareholder meeting agenda, including director elections and executive compensation votes, while disclosing a financial statement restatement for prior years impacting executive bonuses.

Worse than expectedExecutive cash incentive bonuses for 2024 were approved at only 27% of target, significantly lower than previous years, indicating underperformance against internal financial goals.Adjusted Earnings Per Share (EPS) for 2024 was $(1.05), falling far short of the target goal of $3.15 and resulting in a 0% payout for this metric.Adjusted Pre-Tax, Pre-Provision Income for 2024 was $106,306, which was below the threshold goal of $111,761, also resulting in a 0% payout for this metric.The company restated its consolidated financial statements for 2023 and 2022 to correct errors, which led to a required clawback analysis of executive incentive compensation, signaling significant financial reporting issues.

Summary

The annual meeting of shareholders will be held on Monday, August 4, 2025, at 5:30 p.m. local time, to elect three Class III directors, approve executive compensation on an advisory basis, vote on the frequency of future say-on-pay proposals, and ratify the appointment of Crowe LLP as the independent registered public accounting firm for 2025.
The company restated its consolidated financial statements for the years ended December 31, 2023, and December 31, 2022, to correct certain errors, as reflected in the Annual Report on Form 10-K filed on July 1, 2025.
Executive cash incentive bonuses for 2024 were approved at 27% of target under the Corporate Bonus Plan, primarily due to Adjusted EPS of $(1.05) (target $3.15) and Adjusted Pre-Tax, Pre-Provision Income of $106,306 (target $124,179), both falling below threshold goals.
A clawback analysis of incentive-based compensation received by executive officers during the relevant recovery period will be conducted by the Audit Committee due to the financial restatement.
The board of directors recommends voting FOR the election of all director nominees, FOR the say-on-pay proposal, EVERY YEAR for the say-on-frequency proposal, and FOR the auditor ratification proposal.
As of December 31, 2024, the CEO's total compensation was $1,466,243, with a CEO pay ratio of 22.6 to the median employee's total compensation of $64,853.

Sentiment

Score: 3

Explanation: The document highlights significant corporate governance and responsibility efforts, but the financial restatement for prior years and the very low executive bonus payouts for 2024 due to missed financial targets indicate substantial operational and financial challenges. The negative Adjusted EPS and missed PTPP income targets are concerning, despite management's explanation of strategic restructuring.

Positives

Maintains strong corporate governance practices, including separate Chairman and CEO roles since 1988, and a board with a majority of independent directors.
Committed to board diversity, with female, Hispanic, or African American representation since before its 2016 public listing, and a historical record of a woman on the board since 1903.
Executive compensation program incorporates best practices such as performance-based incentives, stock ownership guidelines for executives and directors, and a clawback policy compliant with SEC and Nasdaq rules.
Received strong shareholder support for executive compensation in the prior year, with approximately 97% approval at the 2024 annual meeting.
Implements a robust risk oversight framework, including a dedicated Risk Policy & Compliance Committee and an Enterprise Risk Management program that follows the COSO 2017 framework.
Demonstrates significant corporate responsibility through initiatives like solar power installations in 22 locations, LEED (Silver) Certification for its corporate headquarters, and extensive financial literacy and community development programs, including over $1.8 million donated by the Midland States Bank Foundation since 2011.

Negatives

The company restated its consolidated financial statements for the years ended December 31, 2023, and December 31, 2022, to correct errors, indicating issues with financial reporting accuracy.
Executive cash incentive bonuses for 2024 were significantly below target, with an overall payout of only 27% of target, reflecting underperformance against internal financial goals.
Adjusted Earnings Per Share (EPS) for 2024 was $(1.05), falling substantially short of the target goal of $3.15 and resulting in a 0% payout for this metric in the annual incentive plan.
Adjusted Pre-Tax, Pre-Provision Income for 2024 was $106,306, which was below the threshold goal of $111,761, also resulting in a 0% payout for this metric.
The financial restatement triggers a required clawback analysis of incentive-based compensation for executive officers, suggesting potential recovery of previously awarded compensation due to misstated results.

Risks

General economic risks affecting business operations.
Credit risks, highlighted by challenging credit issues in 2024 that necessitated strategic restructuring efforts, including sales of non-core consumer loan portfolios and adjustments in Specialty Finance and Midland Equipment Finance portfolios.
Regulatory risks, as a publicly traded financial institution subject to stringent requirements such as FDIC Safety and Soundness Standards and interagency guidance on incentive compensation.
Audit risks, evidenced by the restatement of consolidated financial statements for prior years due to identified errors, which could indicate weaknesses in internal controls over financial reporting.
Reputational risks associated with financial restatements and underperformance.
Impact of competition within the banking sector.
Risk of incentive compensation clawbacks due to accounting restatements, as mandated by the company's policy and SEC rules.

Future Outlook

The company anticipates that strategic restructuring efforts undertaken in 2024, including sales of non-core consumer loan portfolios and adjustments in Specialty Finance and Midland Equipment Finance portfolios, will reduce credit risk over the long term, despite temporarily impacting earnings, PTPP income, and revenue. The board recommends an annual advisory vote on executive compensation to ensure alignment with shareholder interests.

Management Comments

"We strive to be among the top performing community banks in the nation."
"Our executive compensation program enables us to attract, retain, and motivate executive officers who contribute to our financial performance and success."
"In light of challenging credit issues, the Company undertook strategic restructuring efforts in 2024. This included the one-time sales of certain non-core consumer loan portfolios as well as certain downgrades, charge-offs, and reserves in the Specialty Finance and Midland Equipment Finance portfolios. While these actions temporarily impacted earnings per share, PTPP income, and revenue, they are anticipated to reduce credit risk over the long term."

Industry Context

The company operates within the U.S. banking sector, specifically as a community bank, and measures its performance against both local and national benchmarks. It is subject to significant regulatory oversight, including FDIC Safety and Soundness Standards and interagency guidance on incentive compensation, which influences its compensation policies and risk management framework. The strategic restructuring efforts in 2024, driven by challenging credit issues, reflect broader economic pressures that can impact financial institutions.

Comparison to Industry Standards

The company uses a peer group of 20 financial institutions, including City Holding Company, First Merchants Corporation, and Park National Corporation, to inform executive compensation decisions, though it does not set compensation at a specific percentile.
The company's cumulative Total Shareholder Return (TSR) is compared against the S&P Small Cap 600 Banks Index, which serves as a relevant industry benchmark.
The company's Enterprise Risk Management program follows the COSO 2017 framework, a widely recognized standard for internal control and risk management.
The company's executive compensation practices are designed to align with 'best practices for public companies,' including the use of performance-based incentives and a clawback policy compliant with SEC and Nasdaq rules.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Senior Vice President and Corporate Counsel	Douglas J. Tucker	NA	January 3, 2025	Retirement
Director	Deborah A. Golden	NA	May 6, 2024	Retirement
Director	Sherina M. Edwards	NA	May 12, 2025	Resignation
Director	NA	Gerald J. Carlson	February 6, 2024	Appointment
Director	NA	Travis J. Franklin	May 7, 2024	Appointment

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Policy Adoption	Adopted a clawback policy on November 6, 2023, in accordance with SEC and Nasdaq rules, requiring recoupment of incentive compensation in case of accounting restatement due to material noncompliance.	November 6, 2023	Enhances accountability and aligns executive incentives with accurate financial reporting, but its activation due to recent restatements indicates prior control deficiencies.
Policy Update	Implemented new stock ownership guidelines effective January 1, 2024, requiring CEO to hold 3x base salary, other Section 16 Officers 2x base salary, and Directors 5x cash retainer, with a five-year period to meet the guidelines.	January 1, 2024	Strengthens alignment of executive and director interests with long-term shareholder value and promotes sound corporate governance.
Board Structure	Maintains separate roles for Chairman of the Board (Jeffrey C. Smith) and Chief Executive Officer (Jeffrey G. Ludwig) since 1988, demonstrating a commitment to independent oversight of management.	NA	Promotes stronger corporate governance by separating leadership roles, allowing the CEO to focus on operations and the Chairman to lead board oversight.
Board Composition	Board consists of ten directors, with a majority determined to be independent under Nasdaq rules, and a stated commitment to diversity in director selection.	NA	Ensures independent oversight and brings diverse perspectives to board decision-making, enhancing governance quality.

Related Party Transactions

Directors, officers, beneficial owners of more than 5% of voting securities, and their associates have engaged in ordinary course banking relationships (loans, certificates of deposit, depository relationships).
All such transactions were made on substantially the same terms as comparable loans/relationships with unrelated persons and did not involve more than normal risk of collectability or unfavorable features.
All loans to related parties are approved by the Bank's board of directors in accordance with bank regulatory requirements.
The Audit Committee reviews and approves all material related party transactions, considering fairness, potential conflicts of interest, director independence, regulatory acceptability, and compliance with corporate policies.

Stakeholder Impact

Shareholders are directly impacted by the financial restatement, which could affect confidence and share price. The low executive bonus payouts reflect poor financial performance, impacting shareholder value. The advisory votes on executive compensation and frequency provide a direct channel for shareholder input on governance.
Executive Officers' compensation is directly tied to company performance, with 2024 bonuses significantly reduced due to missed targets. They are subject to the clawback policy due to the financial restatement, potentially requiring repayment of incentive compensation.
Employees participate in the 401(k) plan and Employee Stock Purchase Plan (ESPP). The MASTERS program aims to develop future leaders, with a focus on women and minority employees.
Customers are served by the Bank's operations, with initiatives like paperless statements and financial literacy seminars.
Communities benefit from the Bank's corporate responsibility initiatives, including solar power, foundation donations ($1.8M since 2011), and volunteer hours for financial empowerment.
Creditors are impacted by the company's financial health and risk management, especially given the strategic restructuring due to credit issues.

Next Steps

Shareholders will vote on director elections, executive compensation, and auditor ratification at the annual meeting on August 4, 2025.
The Audit Committee will conduct a recovery analysis of incentive-based compensation received by executive officers during the relevant recovery period, in accordance with the Clawback Policy, due to the financial restatement.
The board will take into account the outcome of the advisory vote on frequency of say-on-pay when determining the frequency of future votes.
The company will disclose voting results in an SEC filing within four business days after the annual meeting.

Key Dates

Date	Description
1903	Midland States Bank had a woman on its board.
1988	Company's Chair and CEO roles have been separate since this year.
1989	Robert F. Schultz joined J.M. Schultz Investment, L.L.C.
1993	Jeffrey G. Ludwig started at KPMG LLP.
1994	R. Dean Bingham became President of Agracel, Inc.
1996	Jeffrey C. Smith joined Walters Golf Management Group.
1996	Robert F. Schultz became Chairman of the Board of Directors of AKRA Builders Inc.
1997	Jeffrey M. McDonnell became President and Chief Compliance Officer of J&J Management Services, Inc.
2000	Jeffrey S. Mefford became President and CEO of Farmers State Bank of Camp Point.
2000	Richard T. Ramos joined Maritz.
2002	Robert F. Schultz became a director of the Company.
2002	Daniel E. Casey became Director, Credit Portfolio Group at Bank One, N.A.
2003	Jeffrey S. Mefford joined Midland States Bank.
2004	Daniel E. Casey became Managing Director, Portfolio Strategist and Global Head of Markets (Group Treasury) at ABN AMRO Bank N.V./ LaSalle Bank, N.A.
2005	Jeffrey C. Smith became Chairman of the Board.
2005	Jeffrey G. Ludwig became Associate Director, Corporate Reporting, for Zimmer Holdings, Inc.
November 2006	Jeffrey G. Ludwig joined the Company and Bank as Chief Financial Officer.
2007	Jerry L. McDaniel became President of Superior Fuels, Inc.
October 18, 2010	2010 LTIP adopted by the board.
November 23, 2010	2010 LTIP approved by shareholders.
2011	Midland States Bank Foundation began donating to nonprofit organizations.
2012	Jerry L. McDaniel became a director of the Company.
2012	Jeffrey M. McDonnell became Chief Executive Officer of J&J Management Services, Inc.
2012	Jennifer L. DiMotta became Senior Director of eCommerce of Office Depot.
2012	Richard T. Ramos became a director of the Company.
2013	Jennifer L. DiMotta became Vice President eCommerce of Sports Authority, Inc.
2013	Gerald J. Carlson became Managing Partner of KPMG for Washington, D.C. metropolitan and Chesapeake regions.
December 2014	Midland's acquisition of Heartland Bank.
2015	Jeffrey M. McDonnell became a director of the Company.
2015	Jennifer L. DiMotta became Vice President Digital and Omnichannel of Bluemercury Inc.
2015	Company began holding financial literacy seminars for lowto moderate-income and minority neighborhoods.
February 2, 2016	2010 LTIP further amended and restated.
2016	Company became a publicly traded company.
2016	Travis J. Franklin became Executive Vice President and Chief Financial Officer of Heartland Dental, LLC.
November 2016	Jeffrey G. Ludwig served as President of the Bank.
2017	Jennifer L. DiMotta founded DiMotta Consulting LLC.
July 2017	Eric T. Lemke became Chief Financial Officer of Metropolitan Capital Bancorp, Inc.
October 2017	Jeffrey G. Ludwig served as Chief Financial Officer of the Company and the Bank.
March 2018	Jeffrey G. Ludwig became President and Chief Executive Officer of the Company and Chief Executive Officer of the Bank.
March 2018	Jeffrey S. Mefford became Executive Vice President of the Company and President of the Bank.
2018	Jennifer L. DiMotta became a director of the Company.
2018	Eric T. Lemke joined the Company as Director of Assurance and Audit.
2018	R. Dean Bingham joined the board of directors of the Bank.
November 8, 2018	Deferred Compensation Plan for Directors and Executives became effective.
February 5, 2019	2019 LTIP adopted by the board.
May 3, 2019	2019 LTIP became effective upon shareholder approval.
May 3, 2019	Amended and Restated Midland States Bancorp, Inc. Employee Stock Purchase Plan amended and restated.
2019	Jennifer L. DiMotta became Executive Vice President and Chief Marketing Digital Officer of MediaMarktSaturn.
January 2019	Jeffrey G. Ludwig became Chief Executive Officer of the Company.
November 2019	Eric T. Lemke promoted to Chief Financial Officer of the Company and the Bank.
2020	R. Dean Bingham joined the board of directors of the Company.
2020	Jennifer L. DiMotta became President of DiMotta International LLC.
November 5, 2020	Amended and restated employment agreements with Messrs. Ludwig, Mefford, Tucker, and Lemke became effective.
November 5, 2020	Deferred Compensation Plan for Directors of Midland States Bancorp, Inc. amended.
November 5, 2020	Deferred Compensation Plan for Executives of Midland States Bancorp, Inc. amended.
January 1, 2021	New distribution election period for Deferred Compensation Plans began.
February 1, 2021	Deferred Compensation Plan for Directors of Midland States Bancorp, Inc. amended.
May 1, 2023	2019 LTIP amended and restated, and additional shares approved by shareholders.
May 1, 2023	Amended and Restated Midland States Bancorp, Inc. Employee Stock Purchase Plan amended and restated.
May 3, 2023	Daniel E. Casey's change of control agreement became effective.
May 2023	Daniel E. Casey became the Bank's Senior Vice President and Chief Risk Officer.
November 6, 2023	Clawback policy adopted by the Board.
December 31, 2023	Date used to identify median employee for CEO pay ratio.
January 1, 2024	Stock ownership guidelines became effective.
February 6, 2024	Gerald J. Carlson appointed to the Company's board of directors.
May 6, 2024	Ms. Golden retired from the Company's board of directors.
May 7, 2024	Travis J. Franklin appointed to the Company's board of directors.
June 30, 2024	Date of restricted stock unit grants to nonemployee directors.
2024	Company undertook strategic restructuring efforts due to challenging credit issues.
December 31, 2024	Fiscal year end for financial reporting and compensation analysis.
December 31, 2024	Date for market value of common stock ($24.40) used in equity award calculations.
January 3, 2025	Douglas J. Tucker retired from his position.
April 15, 2025	Schedule 13G filed by BlackRock, Inc.
May 12, 2025	Ms. Edwards resigned from the Company's board of directors.
June 6, 2025	Record date for shareholders entitled to notice and vote at the annual meeting.
July 1, 2025	Proxy materials mailed to shareholders of record.
July 1, 2025	Company's Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC, reflecting corrected audited financial statements.
July 11, 2025	Deadline for shareholder nominations for 2025 annual meeting.
August 1, 2025	Deadline for electronic proxy votes for the annual meeting.
August 4, 2025	Date of the annual meeting of shareholders.
November 23, 2025	Deadline for shareholder proposals for inclusion in 2026 proxy statement.
January 4, 2026	Earliest notice date for shareholder nominations/proposals for 2026 annual meeting.
February 3, 2026	Latest notice date for shareholder nominations/proposals for 2026 annual meeting.
May 4, 2026	Anticipated date of 2026 annual meeting of shareholders.

Recommendation

sell

Keywords

Midland States Bancorp, SEC filing, proxy statement, annual meeting, corporate governance, executive compensation, financial restatement, clawback policy, director election, auditor ratification, risk management, shareholder vote, banking, financial services, Illinois, Missouri, Nasdaq

Disclaimer:The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.