tm231864-1_nonfiling - none - 11.875099s
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under §240.14a-12
MIDLAND STATES BANCORP, INC.
(Name of Registrant as Specified In Its Charter)
   
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check all boxes that apply):

No fee required

Fee paid previously with preliminary materials

Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11

 
[MISSING IMAGE: lg_midland-4c.jpg]
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 1, 2023
To the shareholders of Midland States Bancorp, Inc.:
The annual meeting of the shareholders of Midland States Bancorp, Inc., an Illinois corporation, will be held at the Holiday Inn that is located at 1301 Avenue of Mid-America, Effingham, Illinois 62401, on Monday, May 1, 2023, at 5:30 p.m., local time, for the following purposes:
1.
To elect the four nominees named in the accompanying proxy statement to serve as Class I directors, each for a term expiring at the 2026 annual meeting of shareholders.
2.
To approve, on a non-binding, advisory basis, the compensation of certain executive officers, which we refer to as the “say-on-pay proposal.”
3.
To approve an amendment and restatement of the Midland States Bancorp, Inc. 2019 Long-Term Incentive Plan to increase the number of shares that may be issued under the plan by 550,000, which we refer to as the “2019 LTIP amendment proposal.”
4.
To approve an amendment and restatement of the Amended and Restated Midland States Bancorp, Inc. Employee Stock Purchase Plan to increase the number of shares that may be issued under the plan by 100,000, which we refer to as the “ESPP amendment proposal.”
5.
To ratify the appointment of Crowe LLP as our independent registered public accounting firm for the year ending December 31, 2023.
The board of directors has fixed the close of business on March 2, 2023, as the record date for the determination of shareholders entitled to notice of, and to vote at, the meeting. If there is an insufficient number of votes for a quorum or to approve or ratify any of the foregoing proposals at the time of the meeting, the meeting may be adjourned or postponed to permit our further solicitation of proxies.
By order of the Board of Directors,
[MISSING IMAGE: sg_jeffreysmith-bw.jpg]
Jeffrey C. Smith
Chairman
Effingham, Illinois
March 20, 2023
YOUR VOTE IS IMPORTANT. PLEASE EXERCISE YOUR SHAREHOLDER RIGHT TO VOTE, REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE ANNUAL MEETING.
 

 
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MIDLAND STATES BANCORP, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 1, 2023
These proxy materials are furnished in connection with the solicitation by the Board of Directors of Midland States Bancorp, Inc., an Illinois corporation (the “Company”) and the holding company of Midland States Bank (the “Bank”), of proxies to be used at the 2023 annual meeting of shareholders of the Company, to be held at the Holiday Inn that is located at 1301 Avenue of Mid-America, Effingham, Illinois 62401, on Monday, May 1, 2023, at 5:30 p.m., local time, and at any adjournments or postponements of such meeting. A complete list of the shareholders entitled to vote at the 2023 annual meeting of shareholders is kept on file at the Company’s principal executive offices, located at 1201 Network Centre Drive, Effingham, Illinois 62401.
In accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”), instead of mailing a printed copy of our proxy materials to each shareholder of record, we furnish proxy materials, which include the Notice of Annual Meeting, this proxy statement and our Annual Report on Form 10-K for the year ended December 31, 2022, over the Internet unless otherwise instructed by the shareholder. If you received a Notice of Internet Availability of Proxy Materials by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice of Internet Availability of Proxy Materials. The Notice of Internet Availability of Proxy Materials is being mailed on or about March 20, 2023.
GENERAL INFORMATION ABOUT THE ANNUAL MEETING
The following is information regarding the meeting and the voting process, presented in a question and answer format.
Why did I receive access to the proxy materials?
According to our records, on March 2, 2023, the record date for the annual meeting, you owned shares of our common stock. This proxy statement describes the matters that will be presented for consideration by the shareholders at the meeting. It also gives you information concerning those matters to assist you in making an informed decision.
What matters will be voted on at the meeting?
You are being asked to vote on: (i) the election of the four nominees named in this proxy statement to serve as Class I directors, each for a term expiring at the 2026 annual meeting of shareholders; (ii) the approval, on a non-binding, advisory basis, of the say-on-pay proposal; (iii) the approval of the 2019 LTIP amendment proposal; (iv) the approval of the ESPP amendment proposal; and (v) the ratification of the appointment of Crowe LLP as our independent registered public accounting firm for the year ending December 31, 2023. These matters are more fully described in this proxy statement.
What are the board’s voting recommendations?
The board recommends that you vote your shares:

“FOR” the election of each of the director nominees named in this proxy statement;

“FOR” the say-on-pay proposal;

“FOR” the LTIP amendment proposal;

“FOR” the ESPP amendment proposal; and

“FOR” the ratification of the appointment of our independent registered public accounting firm for the year ending December 31, 2023.
 
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If I am the record holder of my shares, how do I vote?
If your shares are registered directly in your name with the Company’s transfer agent, Computershare, Inc., there are four ways to vote:

Via the Internet.   You may vote by proxy via the Internet by following the instructions provided in the Notice of Internet Availability of Proxy Materials. If you request printed copies of the proxy materials by mail, you will receive a proxy card and these instructions can be found on your proxy card.

By Telephone.   If you request printed copies of the proxy materials by mail, you will receive a proxy card and you may vote by proxy by calling the toll free number found on the proxy card.

By Mail.   If you request printed copies of the proxy materials by mail, you will receive a proxy card and you may vote by proxy by filling out the proxy card and returning it in the envelope provided.

In Person.   You may vote in person at the meeting by requesting a ballot when you arrive. You must bring valid picture identification, such as a driver’s license or passport, and may be requested to provide proof of stock ownership as of the record date.
If I am a beneficial owner of the Company’s shares held in street name, how do I vote?
If you are a beneficial owner of shares held in street name (such as if you hold your shares through a broker, trustee or other fiduciary), then that organization will instruct you as to how your shares may be voted by proxy, including whether telephone or Internet voting options are available. If you are a beneficial owner of shares held in street name and wish to vote in person at the meeting, you must obtain a “legal proxy” from the organization that holds your shares. A legal proxy is a written document that will authorize you to vote your shares held in street name at the meeting. Please contact the organization that holds your shares for instructions regarding obtaining a legal proxy. You must bring a copy of the legal proxy to the meeting and ask for a ballot from an usher when you arrive. You must also bring valid picture identification, such as a driver’s license or a passport. For your vote to be counted, you must hand both the copy of the legal proxy and your completed ballot to an usher to be provided to the inspector of election.
What happens if I do not give specific voting instructions?
Shareholders of Record.   If you are a shareholder of record and you: (i) indicate when voting on the Internet or by telephone that you wish to vote as recommended by the board; or (ii) sign, date and return a proxy card without giving specific voting instructions; then the persons named as proxy holders will vote your shares in the manner recommended by the board on all matters presented in this proxy statement and as the proxy holders may determine in their judgment with respect to any other matters properly presented for a vote at the meeting.
Beneficial Owners of Shares Held in Street Name.   If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific voting instructions, then, under applicable rules, the organization that holds your shares may generally vote on “routine” matters but cannot vote on “non-routine” matters. If the organization that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, that organization will inform the inspector of election that it does not have the authority to vote on this matter with respect to your shares. This is generally referred to as a “broker non-vote.”
At the meeting, the election of directors, the say-on-pay proposal, the 2019 LTIP amendment proposal and the ESPP amendment proposal are considered non-routine matters, but the ratification of the appointment of our independent registered public accounting firm is considered a routine matter.
If I hold shares in the Amended and Restated Midland States Bancorp, Inc. Employee Stock Purchase Plan, who votes my shares?
If you are a holder of stock in the Amended and Restated Midland States Bancorp, Inc. Employee Stock Purchase Plan (the “ESPP”), you can direct the service provider of the ESPP (the “Service Provider”) how to vote the number of shares you hold in the ESPP for each proposal included in this proxy statement.
 
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If you do not provide timely voting directions to the Service Provider, then the shares held for your benefit in the ESPP shall be voted in accordance with the recommendations of the board.
What options do I have in voting on each of the proposals?
You may vote “FOR,” “AGAINST” or “ABSTAIN” with respect to the election of each director nominee, with respect to each other proposal described in this proxy statement, and with respect to any other proposal that may properly be brought before the meeting.
How many votes may I cast?
You are entitled to cast one vote for each share of common stock you owned on the record date.
What is the quorum required for each matter?
The holders of a majority of the outstanding shares of the Company entitled to vote on each matter represented in person or by proxy will constitute a quorum for purposes of such matter at the meeting. If less than a majority of the outstanding shares are represented at the meeting, a majority of the shares represented may adjourn the meeting at any time. On March 2, 2023, the record date, there were 22,496,135 shares of common stock issued and outstanding and entitled to vote.
A list of shareholders entitled to vote at the meeting will be available for inspection by shareholders within 20 days after the record date at the Company’s office located at 1201 Network Centre Drive, Effingham, Illinois 62401.
Broker non-votes will count for purposes of determining whether or not a quorum is present since a routine matter (the ratification of the appointment of our independent registered public accounting firm) is on the proxy ballot. Similarly, abstentions will also count in determining the presence of a quorum.
How many votes are needed for approval of each proposal?
With respect to the election of directors, if a majority of the shares represented at the meeting and entitled to vote on such proposal are voted “FOR” any nominee, he or she will be elected as a director to serve until the Company’s 2026 annual meeting of shareholders, or until his or her earlier resignation or removal.
With respect to the say-on-pay proposal, if a majority of the shares represented at the meeting and entitled to vote on such proposal are voted “FOR” the proposal, such proposal will be approved. Please note, however, that because the say-on-pay proposal is advisory, the outcome of such vote will not be binding on the board of directors or the Compensation Committee.
With respect to the 2019 LTIP amendment proposal, if a majority of the shares represented at the meeting and entitled to vote on such proposal are voted “FOR” the proposal, such proposal will be approved.
With respect to the ESPP amendment proposal, if a majority of the shares represented at the meeting and entitled to vote on such proposal are voted “FOR” the proposal, such proposal will be approved.
With respect to the proposal to ratify of the appointment of our independent registered public accounting firm, if a majority of the shares represented at the meeting and entitled to vote on such proposal are voted “FOR” the proposal, such proposal will be approved.
How are abstentions and broker non-votes treated?
With respect to the election of directors, a vote to “ABSTAIN” will have the effect of a vote “AGAINST” the applicable nominee. A broker non-vote will not be treated as entitled to vote on the proposal, and therefore will not have an effect on the election of a nominee.
With respect to the say-on-pay proposal, a vote to “ABSTAIN” will have the effect of a vote “AGAINST” the proposal. A broker non-vote will not be treated as entitled to vote on the proposal, and therefore will not have an effect on the proposal.
 
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With respect to each of the 2019 LTIP amendment proposal and the ESPP amendment proposal, a vote to “ABSTAIN” will have the effect of a vote “AGAINST” such proposal. A broker non-vote will not be treated as entitled to vote on the proposal, and therefore will not have an effect on the proposal.
With respect to the ratification of the appointment of our independent registered public accounting firm, a vote to “ABSTAIN” will have the effect of a vote “AGAINST” the proposal.
To minimize the number of broker non-votes, the Company encourages you to vote or to provide voting instructions with respect to each proposal to the organization that holds your shares by carefully following the instructions provided.
What if I change my mind after I return my proxy?
You may revoke your proxy and change your vote at any time prior to the taking of the vote at the meeting. Prior to the applicable cutoff time, you may change your vote using the Internet or telephone methods described above, in which case only your latest Internet or telephone proxy submitted prior to the meeting will be counted. You may also revoke your proxy and change your vote by signing and returning a new proxy card or voting instruction form dated as of a later date, or by attending the meeting and voting in person. However, your attendance at the meeting will not automatically revoke your proxy unless you properly vote at the meeting or specifically request that your prior proxy be revoked by delivering a written notice of revocation to the Company’s Secretary at 1201 Network Centre Drive, Effingham, Illinois 62401, prior to the meeting.
What happens if a nominee is unable to stand for election?
The board may, by resolution, provide for a lesser number of directors or designate a substitute nominee. In the latter case, shares represented by proxies may be voted for a substitute nominee. Proxies cannot be voted for more than four nominees. The board has no reason to believe any nominee will be unable to stand for election.
Who will serve as the inspector of election?
A representative of the Company is expected to serve as the inspector of election.
Where do I find the voting results of the meeting?
If available, we will announce voting results at the meeting. The voting results will also be disclosed in a Current Report on Form 8-K that we will file with the SEC within four business days after the annual meeting.
Who bears the cost of soliciting proxies?
We will bear the cost of soliciting proxies. In addition to solicitations by mail, officers, directors or employees of the Company or its subsidiaries may solicit proxies in person or by telephone. These persons will not receive any special or additional compensation for soliciting proxies. In addition, we have engaged Georgeson to solicit proxies of institutional investors, for an anticipated cost of $13,500. We may reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation material to shareholders.
 
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CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS
We currently have eleven directors serving as our board, a majority of whom we have determined to be “independent,” as that term is defined by the rules of the Nasdaq Stock Market. One of our directors, Dwight Miller, is expected to retire from our board following the annual meeting, at which point we will have ten directors, until a replacement director is appointed.
Our board of directors has evaluated the independence of its members based upon the rules of the Nasdaq Stock Market and the SEC. Applying these standards, our board of directors has affirmatively determined that, with the exception of Mr. Ludwig, each of our current directors is an independent director, as defined under the applicable rules. The board determined that Mr. Ludwig does not qualify as an independent director because he is an executive officer of the Company.
Generally, the board oversees our business and monitors the performance of our management. In accordance with our corporate governance procedures, the board does not involve itself in the day-to-day operations of the Company, which are monitored by our executive officers and management. Our directors fulfill their duties and responsibilities by attending regular meetings of the full board, with additional special meetings held from time to time. Our directors also discuss business and other matters with Mr. Ludwig, other key executives and our principal external advisers (legal counsel, auditors and other consultants) at times other than regularly scheduled meetings when appropriate.
The board held eight regularly scheduled and special meetings during 2022. In 2023, the full board intends to hold eight regularly scheduled meetings with special meetings held from time to time when necessary and through committee membership, which is discussed below. During 2022, all directors attended at least 75 percent of the meetings of the board and the committees on which they served. Although we do not have a formal policy regarding director attendance at the annual meeting of shareholders, we encourage and expect all of our directors to attend. Last year, each of our directors serving at that time was present at the annual meeting of shareholders.
Committees of the Board of Directors
Our board of directors has established standing committees in connection with the discharge of its responsibilities. These committees include the Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee, Risk Policy & Compliance Committee and Executive Committee. Our board of directors also may establish such other committees as it deems appropriate, in accordance with applicable law and regulations and our articles and bylaws.
The current charters of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee are available on the Company’s website at www.midlandsb.com under “Investors — Corporate Governance — Governance Highlights.” The table below shows the current membership of each of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee:
Directors
Audit Committee
Compensation
Committee
Nominating and
Corporate Governance
Committee
Jeffrey C. Smith
X
X
Jeffrey G. Ludwig
R. Dean Bingham
Jennifer L. DiMotta
X
Sherina M. Edwards
Deborah A. Golden
Chair
X
Jerry L. McDaniel
X
Chair
Jeffrey M. McDonnell
X
Dwight A. Miller
Richard T. Ramos
Chair
X
Robert F. Schultz
        
        
        
Meetings Held in 2022
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Audit Committee.   Our Audit Committee currently consists of Richard T. Ramos (Chair), Jerry L. McDaniel, and Jeffrey M. McDonnell. Our board of directors has evaluated the independence of the members of our Audit Committee and has affirmatively determined that: (i) each of the members of our Audit Committee meets the definition of “independent director” under Nasdaq Stock Market rules; (ii) each of the members satisfies the additional independence standards under Nasdaq Stock Market rules and applicable SEC rules for audit committee service; and (iii) each of the members has the ability to read and understand fundamental financial statements. In addition, our board of directors has determined that Mr. Ramos has the required financial sophistication due to his experience and background, which Nasdaq Stock Market rules require at least one such Audit Committee member have. Our board has determined that Mr. Ramos also qualifies as an “audit committee financial expert,” as that term is defined under applicable SEC rules.
Our Audit Committee has adopted a written charter, which sets forth the committee’s duties and responsibilities. The current charter of the Audit Committee is available on our website at www.midlandsb.com under “Investors — Corporate Governance — Governance Highlights.” As described in its charter, our Audit Committee has responsibility for, among other things:

selecting and reviewing the independence, qualifications and performance of our independent auditors and approving, in advance, all engagements and fee arrangements;

reviewing on a quarterly basis a summary of findings from completed internal audits, and a progress report on the proposed internal audit plans, with explanations for any deviations from the original plan as well as disposition of audit recommendations;

reviewing and discussing with management, the internal auditors and the independent auditors the effectiveness of our system of internal control and internal audit procedures;

reviewing and discussing with management and the independent auditor the annual audited and quarterly unaudited financial statements, including disclosures made in management’s discussion and analysis, earnings press releases and any earnings guidance provided to analysts and rating agencies, prior to the release of quarterly and annual earnings results;

discussing with management and the independent auditor any correspondence with regulators or governmental agencies and any published reports that raise material issues regarding the Company’s financial statements or accounting policies;

reviewing and approving all material related party transactions; and

handling such other matters that are specifically delegated to the Audit Committee by our board of directors from time to time.
Compensation Committee.   Our Compensation Committee currently consists of Deborah A. Golden (Chair), Richard T. Ramos, and Jeffrey C. Smith. Our board of directors has evaluated the independence of the members of our Compensation Committee and has affirmatively determined that each of the members of our Compensation Committee is “independent” under Nasdaq Stock Market rules and also satisfies the additional independence standards under Nasdaq Stock Market rules for compensation committee service.
Our Compensation Committee has adopted a written charter, which sets forth the committee’s duties and responsibilities. The current charter of the Compensation Committee is available on our website at www.midlandsb.com under “Investors — Corporate Governance — Governance Highlights.” As described in its charter, our Compensation Committee has responsibility for, among other things:

reviewing, monitoring and approving our overall compensation structure, policies and programs (including benefit plans) and assessing whether the compensation structure establishes appropriate incentives for our executive officers and other employees and meets our corporate objectives;

determining the annual compensation of our Chief Executive Officer;

reviewing the compensation decisions made by our Chief Executive Officer with respect to our other named executive officers;
 
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overseeing the administration of our equity plans and other incentive compensation plans and programs and preparing recommendations and periodic reports to our board of directors relating to these matters;

reviewing the management succession plans of the Company;

determining whether to retain or obtain the advice of a compensation consultant, legal counsel or other adviser and to oversee the appointment, compensation and work of any such adviser; and

handling such other matters that are specifically delegated to the Compensation Committee by our board of directors from time to time.
Nominating and Corporate Governance Committee.   Our Nominating and Corporate Governance Committee currently consists of Jerry L. McDaniel (Chair), Jeffrey C. Smith, Jennifer L. DiMotta and Deborah A. Golden. Our board of directors has evaluated the independence of the members of our Nominating and Corporate Governance Committee and has affirmatively determined that each of the members of our Nominating and Corporate Governance Committee is “independent” under Nasdaq Stock Market rules.
Our Nominating and Corporate Governance Committee has adopted a written charter, which sets forth the committee’s duties and responsibilities. The current charter of the Nominating and Corporate Governance Committee is available on our website at www.midlandsb.com under “Investors — Corporate Governance — Governance Highlights.” As described in its charter, our Nominating and Corporate Governance Committee has responsibility for, among other things:

identifying qualified individuals to serve as directors of the Company and recommending to the Company’s board of directors the nomination or appointment of such individuals;

monitoring the functioning of our standing committees and recommending any changes with respect to the assignment of individual directors to such committees;

developing, reviewing and monitoring compliance with our corporate governance guidelines;

reviewing annually the composition of our board of directors as a whole and making recommendations; and

handling such other matters that are specifically delegated to the Nominating and Corporate Governance Committee by our board of directors from time to time.
Our Nominating and Corporate Governance Committee strives to recommend candidates for director positions who will create a collective membership on the board of directors with varied experience and perspective and who maintain a board that reflects diversity, including but not limited to gender, ethnicity, background, country of citizenship and experience.
In carrying out its nominating functions, the Nominating and Corporate Governance Committee has developed qualification criteria for all potential director nominees, including incumbent directors, board nominees and shareholder nominees included in the proxy statement. These criteria include the following attributes:

the highest personal and professional ethics, integrity and values;

sufficient educational and professional experience, business experience or comparable service on other boards of directors to qualify the nominee for service to the board;

exemplary management and communication skills;

contribution to the board’s goals of having a diverse range of backgrounds, views, experiences, talents and skills in the boardroom;

evidence of effective leadership and sound judgment in the nominee’s professional life;

a willingness to meet the standards and duties set forth in the Company’s Code of Business Conduct and Ethics; and
 
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a willingness and ability to devote sufficient time to carrying out the duties and responsibilities required of a board member, and a commitment to serving on the board for an extended period of time.
The committee also evaluates potential nominees to determine if they have any conflicts of interest that may interfere with their ability to serve as effective board members and to determine whether they are “independent” in accordance with Nasdaq Stock Market rules to ensure that, at all times, at least a majority of our directors are independent. Our Nominating and Corporate Governance Committee evaluates all candidates in the same way, reviewing the aforementioned factors, among others, regardless of the source of such candidates, including shareholder recommendations. Because of this, there is no separate policy with regard to the consideration of candidates recommended by shareholders.
Prior to nominating an existing director for re-election to the board, the committee will consider and review the following attributes with respect to each existing director:

board and committee attendance and performance;

length of board service;

experience, skills and contributions that the existing director brings to the board;

independence and any conflicts of interest; and

any significant change in the director’s professional status or work experience, including the attributes considered for initial board membership.
Shareholder Communication with the Board, Nomination and Proposal Procedures
General Communications with the Board.   Shareholders may contact our board of directors by contacting Douglas J. Tucker, Secretary, Midland States Bancorp, Inc. at 1201 Network Centre Drive, Effingham, Illinois 62401 or (217) 342-7321.
Nominations of Directors.   In accordance with our bylaws, a shareholder may nominate a director for election at an annual meeting of shareholders by delivering written notice of the nomination to our Secretary, at the above address, not less than 90 days nor more than 120 days prior to the annual meeting. However, if less than 100 days’ notice or prior public disclosure of the date of the annual meeting is given to shareholders, then written notice of the nomination must be delivered to our Secretary no later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made.
We anticipate holding our 2024 annual meeting of shareholders on May 6, 2024. As a result, notice of nominations for directors to be elected at the 2024 annual meeting of shareholders must be delivered to our Secretary no earlier than January 7, 2024, and no later than February 6, 2024. The shareholder’s notice to the Secretary must include: (a) the name and address of record of the nominating shareholder; (b) a representation that the nominating shareholder is a holder of record of shares of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the persons specified in the notice; (c) the name, age, business and residence addresses, and principal occupation or employment of each nominee; (d) a description of all arrangements or understandings between the nominating shareholder and each nominee and any other person (naming such person) pursuant to which the nominations are to be made by the nominating shareholder; (e) such other information regarding each nominee proposed by such nominating shareholder as is required to be included in a proxy statement filed pursuant to the proxy rules of the SEC, as in effect; and (f) the consent of each nominee to serve as a director of the Company if so elected. Persons nominated for election to the board pursuant to this paragraph will not be included in our proxy statement, unless they are also submitted in accordance with the requirements described under “Other Shareholder Proposals,” below.
Other Shareholder Proposals.   To be considered for inclusion in our proxy statement and form of proxy for our 2024 annual meeting of shareholders, shareholder proposals must be received by our Secretary, at the above address, no later than November 21, 2023, and must otherwise comply with the notice and other provisions of our bylaws, as well as SEC rules and regulations.
 
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For proposals to be otherwise brought by a shareholder and voted upon at an annual meeting, the shareholder must file written notice of the proposal to our Secretary not less than 90 days nor more than 120 days prior to the annual meeting. However, that if less than 100 days’ notice of the date of the annual meeting is given to shareholders, then written notice of the proposal must be delivered to our Secretary no later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed to shareholders.
We anticipate holding our 2024 annual meeting of shareholders on May 6, 2024. As a result, notice of shareholder proposals to be brought at the 2024 annual meeting of shareholders must be delivered to our Secretary no earlier than January 1, 2024, and no later than January 31, 2024. The shareholder’s notice to the Secretary must include: (a) a brief description of the proposal desired to be brought before the meeting and the reasons for conducting such business at the meeting; (b) the name and address, as they appear on the Company’s books, of the shareholder proposing such business; (c) the number of shares of the Company’s common stock beneficially owned by such shareholder on the date of such shareholder’s notice; and (d) any financial or other interest of such shareholder in the proposal.
Board Leadership Structure
We currently have separate individuals serving as Chairman of our board of directors and as our Chief Executive Officer. Mr. Jeffrey C. Smith serves as Chairman, and Mr. Jeffrey G. Ludwig holds the position of Chief Executive Officer.
Although our bylaws do not require our Chairman and Chief Executive Officer positions to be separate, our board believes that having separate positions and having a non-executive director serve as Chairman is the appropriate leadership structure for the Company at this time and demonstrates our commitment to good corporate governance. Separating these positions allows our Chief Executive Officer to focus on our day-to-day business, while allowing the Chairman to lead the board in its fundamental role of providing advice to and independent oversight of management. In addition, we believe this leadership structure allows our board to more effectively monitor and evaluate the performance of our Chief Executive Officer.
Independent Director Sessions
Consistent with Nasdaq Stock Market listing requirements, the independent directors regularly meet without the non-independent directors present. In 2022, four independent sessions were held.
Board’s Role in Risk Oversight
Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including general economic risks, credit risks, regulatory risks, audit risks, reputational risks and others, such as the impact of competition. Management is responsible for the day-to-day management of risks the Company faces, while the board, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the board of directors has the responsibility that the risk management processes designed and implemented by management are adequate and functioning as designed.
While the full board of directors is charged with ultimate oversight responsibility for risk management, various committees of the board and members of management also have responsibilities with respect to our risk oversight. In particular, the Risk Policy & Compliance Committee plays a large role in monitoring and assessing our financial, legal, and organizational risks and receives regular reports from the management team regarding comprehensive organizational risk as well as particular areas of concern. The board’s Compensation Committee monitors and assesses the various risks associated with compensation policies and oversees incentives that encourage a level of risk-taking consistent with our overall strategy. Additionally, our Chief Credit Officer and loan review staff are directly responsible for overseeing our credit risk, and the Director Credit Risk Committee of the Bank’s board of directors oversees the credit risk for large loans, monitors portfolio credit metrics and approves credit risk policy changes.
We believe that establishing the right “tone at the top” and providing for full and open communication between management and our board of directors are essential for effective risk management and oversight.
 
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Our executive management meets regularly with our other senior officers to discuss strategy and risks facing the company, including through meetings of its Senior Risk Committee. Executive officers attend many of the board meetings or, if not in attendance, are available to address any questions or concerns raised by the board on risk-management-related and any other matters. Additionally, each of our board-level committees provides regular reports to the full board and apprises of any areas of concern.
Compensation Committee Interlocks and Insider Participation
During 2022, Deborah A. Golden, Richard T. Ramos and Jeffrey C. Smith served on our Compensation Committee. None of the members of our Compensation Committee will be or has been an officer or employee of the Company. None of our executive officers serves or has served as a member of the board of directors, compensation committee or other board committee performing equivalent functions of any entity that has one or more executive officers serving as one of our directors or on our Compensation Committee.
Code of Business Conduct and Ethics
We have a Code of Business Conduct and Ethics in place that applies to all of our directors and employees. The code sets forth the standard of ethics that we expect all of our directors and employees to follow. Our code of business conduct and ethics is available on our website at www.midlandsb.com under “Investors — Corporate Governance — Governance Highlights.” In accordance with SEC rules, we intend to disclose on the “Investors” section of our website any amendments to the code, or any waivers of its requirements, that apply to our executive officers to the extent such disclosure is required.
Anti-Hedging Policy
Our insider trading policy prohibits our directors, executive officers and employees from entering into any hedging transaction with respect to any of the Company’s securities. This prohibition includes the purchase or use of stock options, prepaid variable forward contracts, equity swaps, collars, exchange funds or any other instruments to directly offset any decrease in the market value of the Company’s securities. However, this prohibition does not apply to positions in broad-based exchange-traded mutual funds or exchange-traded funds containing stocks in the financial or banking sector.
Board Diversity
The following table summarizes each director’s voluntary self-identified diversity characteristics.
Board Diversity Matrix (As of March 2, 2023)
Total Number of Directors
11
Female
Male
Part I: Gender Identity
Directors
3 8
Part II: Demographic Background
African American or Black
1 1
Hispanic or Latino
1
White
2 6
 
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Director Compensation
The following table sets forth information regarding 2022 compensation for each of our nonemployee directors. None of the directors receive any compensation or other payment in connection with his or her service as a director other than compensation received by the Company as set forth below.
Name
(a)
Fees Earned or
Paid in Cash
($)
(b)
Stock
Awards
(1)
($)
(c)
Total
($)
(h)
R. Dean Bingham
44,269 40,000 84,269
Jennifer L. DiMotta
36,769 40,000 76,769
Sherina M. Edwards(2)
25,250 40,000 65,250
Deborah A. Golden
39,263 40,000 79,263
Jerry L. McDaniel
42,769 40,000 82,769
Jeffrey M. McDonnell
32,513 40,000 72,513
Dwight A. Miller
36,769 40,000 76,769
Richard T. Ramos
50,269 40,000 90,269
Robert F. Schultz
54,599 40,000 94,599
Jeffrey C. Smith
80,679 40,000 120,679
(1)
The amounts set forth in the “Stock Awards” column reflect the aggregate grant date fair value of restricted stock units granted in 2022 in accordance with FASB ASC Topic 718. The amounts shown are based on fair market values of $24.04 for awards granted on June 30, 2022. Each of our directors, aside from Mr. Ludwig, received a grant of restricted stock units on June 30, 2022, which will vest on March 30, 2023 subject to continued service on the board. The aggregate number of restricted stock units held by each nonemployee director as of December 31, 2022 was as follows:
R. Dean Bingham — 1,664 restricted stock units
Jennifer L. DiMotta — 1,664 restricted stock units
Sherina M. Edwards — 1,664 restricted stock units
Deborah A. Golden — 1,664 restricted stock units
Jerry L. McDaniel — 1,664 restricted stock units
Jeffrey M. McDonnell — 1,664 restricted stock units
Dwight A. Miller — 1,664 restricted stock units
Richard T. Ramos — 1,664 restricted stock units
Robert F. Schultz — 1,664 restricted stock units
Jeffrey C. Smith — 1,664 restricted stock units
(2)
Ms. Edwards was appointed to the Company board in June 2022.
Effective as of April 1, 2022, the Company revamped its director compensation policy. Under our new director compensation policy, nonemployee directors are provided with cash compensation and an annual equity award.
Cash Compensation.   Each nonemployee director receives a $30,000 annual retainer, except that the Chairman of the board is entitled to an annual retainer of $60,000. Company board committee chairs and members are also entitled to a fee for such service as follows (respectively):

Audit Committee: $15,000/$6,000

Risk Policy & Compliance Committee: $10,000/$5,000

Nominating and Governance Committee: $10,000/$5,000

Compensation Committee: $10,000/$6,000
 
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In addition to the foregoing, any nonemployee director serving on the Director Credit Risk Committee is entitled to an additional annual fee of $18,000, and any such director serving on the trust committee of the Bank board is entitled to an additional annual fee of $3,000.
Equity Compensation.   Each nonemployee director is also entitled to an annual equity award with a grant date value of $40,000. The equity award is granted on June 30 of each year and is scheduled to vest the following March 30.
Policy Prior to April 2022.   Prior to the Company’s implementation of its new director compensation policy on April 1, 2022, the amounts paid to our nonemployee directors were as described herein. The annual retainer fee for service on the Company board and Bank board was $22,050 and $11,025, respectively. The Chairman of the Company board and the Bank board were entitled to an annual fee of $44,691 and $22,345, respectively. The Chair of the Audit Committee and members thereof were entitled to an additional annual fee of $10,688 and $4,500, respectively. The Chair of the Compensation Committee and members thereof were entitled to an additional annual fee of $10,688 and $4,313, respectively. The Chair of the Nominating and Corporate Governance Committee and members thereof were entitled to an additional annual fee of $4,313 and $2,813, respectively. The Chair of the Risk Policy & Compliance Committee and members thereof were entitled to an additional annual fee of $10,688 and $4,500, respectively. Members of the Director Credit Risk Committee were entitled to an additional annual fee of $10,875. Directors who were members of the trust committee of the Bank board were entitled to an additional annual fee of $2,813.
 
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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 headquarters, 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.
 
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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;
 
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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.
The information contained or referenced in this section of this proxy statement shall not be considered “filed” with the SEC, and such information shall not be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates this section of this proxy statement by reference in such filing.
 
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PROPOSAL 1 — ELECTION OF DIRECTORS
At the annual meeting, our shareholders will elect four Class I directors for a term expiring at the 2026 annual meeting of shareholders. The Company’s directors are divided into three classes having staggered terms of three years. As described further below, each of the four nominees for election as Class I directors is an incumbent director. Each nominee has consented to being a nominee and serving on the board, if elected, but if any of the nominees becomes unavailable for election, the holders of the proxies may vote for another nominee when voting at the meeting. Shareholders of the Company have no cumulative voting rights with respect to the election of directors.
Set forth below is information concerning the nominees for election and for the other directors whose terms of office will continue after the meeting.
The board of directors unanimously recommends that you vote “FOR” each of the nominees for director.
Nominees for Election
Name
Age
Position with the Company
Director Since
Class I
Term expires 2026
Jennifer L. DiMotta
49
Director
2018
Jeffrey G. Ludwig
51
President, Chief Executive Officer and Director
2019
Richard T. Ramos
60
Director
2012
Jeffrey C. Smith
61
Chairman of the Board
2005
Continuing Directors
Name
Age
Position with the Company
Director Since
Class II
Term expires 2024
Sherina M. Edwards
39
Director
2022
Deborah A. Golden
68
Director
2015
Robert F. Schultz
58
Director
2002
Class III
Term expires 2025
R. Dean Bingham
58
Director
2020
Jerry L. McDaniel
58
Director
2012
Jeffrey M. McDonnell
59
Director
2015
Each of our continuing directors listed above and, if elected, each of the nominees listed above, will hold office until the annual meeting of shareholders in the year indicated, or until their earlier resignation or removal. There are no arrangements or understandings with any of the nominees pursuant to which they have been selected as nominees or directors.
The business experience of each nominee and continuing director, as well as their qualifications to serve on the board, is set forth below. Unless otherwise noted, nominees for director have been employed in their principal occupation with the same organization for at least the last five years. Other than as described below, no nominee, continuing director or executive officer has any family relationship, as defined in Item 401 of Regulation S-K, with any other director or with any of our executive officers.
 
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Jeffrey C. Smith
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Background.   Mr. Smith serves as the Chairman of the Company, a position he has held since 2020, and as Chair of our Nominating and Corporate Governance Committee. He is a Principal and Managing Partner of Walters Golf Management, a golf club management company headquartered in St. Louis, Missouri, which manages a number of properties and offers turnkey management, construction management, acquisition, consulting, agronomics and remodeling/redecorating services. The company also has a revenue management business assisting facilities to improve annual green fee income through innovative software systems and methodologies. He has been with Walters Golf Management Group since 1996 and also serves on two not-for-profit philanthropic boards, The Greater St. Louis Golf Charities, and the Metropolitan Gold Foundation. Mr. Smith received his B.S. in Education from the University of Missouri.
Skills and Qualifications.   Our board considered Mr. Smith’s business experience, his management experience as the managing partner of a business and his knowledge of the business community in our St. Louis market area in determining that he should be a member of our board.
Jeffrey G. Ludwig
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Background.   Mr. Ludwig serves as President and Chief Executive Officer of the Company, positions he has held since March 2018 and January 2019, respectively, and as Chief Executive Officer of the Bank since March 2018. Prior to those appointments, Mr. Ludwig served as Executive Vice President of the Company and the Bank since 2010, and also as Chief Financial Officer of the Company and the Bank from November 2006, when he joined the Company and the Bank, through November 2016 and from October 2017 until March 2018. Mr. Ludwig also previously served as President of the Bank from November 2016 until he was promoted to Chief Executive Officer of the Bank in March 2018. He serves on the Company’s Executive Committee. Prior to joining the Company, Mr. Ludwig held the positions of Associate Director, Corporate Reporting, for Zimmer Holdings, Inc., an NYSE-listed company in Warsaw, Indiana, from 2005 to 2006; Director of Corporate Accounting for Novellus Systems, Inc., a Nasdaq-listed company in San Jose, California, from 2002 to 2005; and various positions, including Senior Manager — Audit & Advisory Services, for KPMG LLP in its banking practice in St. Louis, Missouri, from 1993 to 2000 and in its technology practice in Mountain View, California, from 2000 to 2002. Mr. Ludwig received his B.S. in Accounting from Eastern Illinois University.
Skills and Qualifications.   Our board considered Mr. Ludwig’s positions as President and Chief Executive Officer of the Company, his experience in executive officer roles within the Bank, and his long-standing relationships within the business community in determining that he should be a member of our board.
 
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R. Dean Bingham
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Background.   Mr. Bingham has served on the board of directors of the Bank since 2018 and joined the board of directors of the Company in 2020. Since 1994, Mr. Bingham has served as President, and then Chief Executive Officer of Agracel, Inc., an industrial developer of facilities for manufacturing and high-tech entities in small to midsized communities. Throughout his career, Mr. Bingham has been directly involved with the development of over 17 million square feet of industrial projects on long term leases, focused primarily in tertiary markets with an emphasis on manufacturing. Mr. Bingham received his B.S. in Industrial Engineering from the University of Illinois.
Skills and Qualifications.   Our board considered Mr. Bingham’s business experience, his management experience as the President of a business and his knowledge of the business communities in determining that he should be a member of our board.
Jennifer L. DiMotta
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Background.   Mrs. DiMotta is President of DiMotta International LLC (DI), an international consulting firm focusing on digital transformation, leadership training and building aggressive sales growth, a position she has held since 2020. Prior to DI, she served as Executive Vice President and Chief Marketing Digital Officer of MediaMarktSaturn, Europe’s largest consumer electronics retailer, from 2019 to 2020. Prior to joining MediaMarkt in 2019, she was President of DiMotta Consulting LLC, a strategic eCommerce and digital marketing consulting firm, which she founded in 2017. Prior to launching her consulting business, Mrs. DiMotta served as Vice President Digital and Omnichannel of Bluemercury Inc., a cosmetics retailer, beginning in 2015, as Vice President eCommerce of Sports Authority, Inc., a sporting goods retailer, beginning in 2013, and as Senior Director of eCommerce of Office Depot, beginning in 2012, where she was responsible for developing those companies’ eCommerce and digital marketing efforts. Mrs. DiMotta holds a B.A. in Criminal Justice from the University of Nebraska, and a Master’s Degree in Leadership from Bellevue University.
Skills and Qualifications.   Our board considered Mrs. DiMotta’s more than 20 years’ experience in leadership and management, business development, and information technology, including omnichannel strategies, in determining that she should be a member of our board.
Sherina M. Edwards
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Background.   Ms. Edwards served as the Chief Strategy Officer of MasTec, Inc., a NYSE-listed infrastructure construction company. Previously, Ms. Edwards served as Chief Executive Officer of INTREN, LLC, a subsidiary of MasTec, from 2020 to 2022, and as a partner at the law firm of Quarles & Brady LLP, from 2018 to 2020. Ms. Edwards is a director of the South West Water Company and served as a director of INTREN from 2017 to 2020. She served as a Commissioner of the Illinois Commerce Commission from 2013 to 2017, and as Co-Chair of the U.S. Department of Transportation’s Voluntary Information-sharing System Working Group from 2016 to 2017. Ms. Edwards received a B.A. in Psychology from Spelman College and a J.D. from Howard University School of Law.
Skills and Qualifications.   Our board considered Ms. Edwards’s business and leadership experience as an executive of a publicly-traded company, her experience with both public and private sectors, and her knowledge of operational strategy in determining that she should be a member of our board.
 
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Deborah A. Golden
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Background.   Ms. Golden, who serves as Chair of our Compensation Committee, joined the Company’s board in November 2015. Ms. Golden served as Executive Vice President, General Counsel and Secretary of GATX Corporation, a NYSE-listed railcar leasing company, where she was employed from 2006 through 2022. She previously served as General Counsel of Midwest Generation, LLC, a power generation company, from 2004 to 2006; Assistant General Counsel, Office of the Governor, State of Illinois, from 2003 to 2004; in various executive legal positions at Ameritech Corporation from 1995 to 2001; and as a partner at Schiff, Hardin & Waite, where she began her legal career in 1984. Ms. Golden holds a B.A. from Boston College, a J.D. from Loyola University School of Law and an M.B.A. from Loyola University. She is a member of the Illinois Bar.
Skills and Qualifications.   Our board considered Ms. Golden’s experience as an executive of a publicly-traded company, her experience with commercial leasing, and her knowledge of corporate governance of publicly-traded companies in determining that she should be a member of our board.
Jerry L. McDaniel
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Background.   Mr. McDaniel is President of Superior Fuels, Inc., whose principal business was the wholesale supply of propane and petroleum products prior to the sale of these business lines and which now holds various real estate investments, a position he has held since 2007, and President of Dirtbuster Carwash LLC, which operates carwashes in Southern Illinois and Indiana. In addition to his ownership of these businesses, Mr. McDaniel is a principal in other businesses, including real estate development. Mr. McDaniel is a licensed pilot and previously served on the board of the Southeastern Illinois Community Foundation from 2013 to 2020. Prior to joining our board, Mr. McDaniel served as a director of another local community bank.
Skills and Qualifications.   Our board considered Mr. McDaniel’s experience in starting and running several local businesses, his broad investment experience and his prior service as a director of a community bank in determining that he should be a member of our board.
Jeffrey M. McDonnell
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Background.   Mr. McDonnell is Chief Executive Officer of J&J Management Services, Inc., a private management company, a position he has held since 2012, and prior to that as President and Chief Compliance Officer since 1997. He also serves on the board of The Center for Emerging Technologies, a non-profit technology incubator. Prior to Midland’s acquisition of Heartland Bank in December 2014, Mr. McDonnell was a director of Heartland Bank and its parent company, Love Savings Holding Company. Mr. McDonnell holds a B.A. in Economics from Princeton University, an M.B.A. from the University of Michigan and a certification as a Chartered Financial Analyst.
Skills and Qualifications.   Our board considered Mr. McDonnell’s service on the boards of Love Savings Holding Company and Heartland Bank and his other business experience in determining that he should be a member of our board.
 
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Richard T. Ramos
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Background.   Mr. Ramos, who serves as Chair of our Audit Committee, is Executive Vice President, Chief Financial Officer and board member for Maritz Holdings, Inc., headquartered in St. Louis, Missouri. Maritz specializes in the design and development of incentive, reward and loyalty programs focused on improving workforce quality and customer satisfaction. He has been with Maritz since 2000. Prior to joining Maritz, Mr. Ramos served as Chief Financial Officer for Purcell Tire and Rubber Company, practiced corporate law at the firm of Blumenfeld, Kaplan and Sandweiss in St. Louis, and was a senior manager at KPMG LLP. He received his B.S. in Business Administration from the University of Missouri in St. Louis and his J.D. from St. Louis University School of Law. Mr. Ramos is a Certified Public Accountant and a member of the Missouri Bar.
Skills and Qualifications.   Our board considered Mr. Ramos’s experience as a chief financial officer and board member and his accounting acumen in determining that he should be a member of our board.
Robert F. Schultz
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Background.   Mr. Schultz serves as Managing Partner of the J.M. Schultz Investment, L.L.C., a private family office. He has been with this organization since 1989. Since 1996, he also has served as Chairman of the Board of Directors of AKRA Builders Inc., a multi-state construction, design-build and project management firm headquartered in Teutopolis, Illinois. Prior to joining the Company’s board of directors, he served on the board of directors of Prime Banc Corp. and First National Bank of Dieterich. He also serves as a founding board member of national, state and regional non-profit organizations focused on social services and student education. Mr. Schultz received his B.S. in Finance from the University of Illinois and a J.D. from the University of Notre Dame Law School.
Skills and Qualifications.   Our board considered Mr. Schultz’s business and investment experience, his experience as a director of other community banks, and his knowledge of the business community in our central Illinois market area in determining that he should be a member of our board.
 
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The business experience for each of our executive officers not discussed above is as follows:
Jeffrey S. Mefford.   Mr. Mefford, age 57, serves as Executive Vice President of the Company and President of the Bank, positions he has held since March 2018. He has been with the Bank since 2003, and prior to his appointment as Executive Vice President of the Company and President of the Bank, he served as the Bank’s Executive Vice President — Banking since October 2010. Prior to serving as Executive Vice President — Banking, Mr. Mefford served as the Bank’s Illinois Region Market President, responsible for the banking offices in our central Illinois market. Prior to joining the Bank, Mr. Mefford held the position of President and Chief Executive Officer of Farmers State Bank of Camp Point in Camp Point, Illinois, from 2000 to 2003. Mr. Mefford received his B.S. in Business Administration from Illinois College and his M.B.A. from William Woods University.
Eric T. Lemke.   Mr. Lemke, age 54, CPA (inactive), serves as Chief Financial Officer of the Company and the Bank, having been promoted to those positions in November 2019. Prior to his appointment as Chief Financial Officer, Mr. Lemke, who has been with the Company since 2018, served as Director of Assurance and Audit. Immediately prior to joining the Company, he was the Chief Financial Officer of Metropolitan Capital Bancorp, Inc. and Metropolitan Capital Bank & Trust, its banking subsidiary, since July 2017. Prior to that he was a partner in the Financial Services Practice of RSM US LLP, having first joined RSM in 1993. Mr. Lemke holds a B.S. in Accounting from Olivet Nazarene University in Bourbonnais, Illinois, and is a member of the American Institute of Certified Public Accountants.
Douglas J. Tucker.   Mr. Tucker, age 64, serves as Senior Vice President and Corporate Counsel of the Company and the Bank, positions to which he was appointed in October 2010. Mr. Tucker also serves on the Company’s Executive Committee. Prior to joining the Company, Mr. Tucker was a Partner in the Corporate Services Group of Quarles & Brady LLP, having joined that firm in 2004. Mr. Tucker also served as Chair of Quarles & Brady’s Chicago Securities Practice, as one of the firm’s National Growth Partners, as Chair of the China Law Group and as Managing Partner of the firm’s office in Shanghai, China. Mr. Tucker, who has worked with financial institutions for more than 25 years, has been a licensed attorney since 1993 and an Adjunct Professor at the Chicago-Kent Law School from 2002 to 2016. He holds a B.A. in International Relations from Michigan State University and a J.D. from Northwestern University School of Law.
Jeffrey A. Brunoehler.   Mr. Brunoehler, age 62, serves as the Bank’s Senior Vice President — Chief Credit Officer, a position he has held since July 2010. Prior to joining the Bank, Mr. Brunoehler held positions at AMCORE Bank, N.A., as Senior Vice President and Regional Credit Officer from 2005 to 2010 and Senior Vice President and Market President from 1999 to 2004. Mr. Brunoehler received his B.S. in Agricultural Economics from the University of Illinois.
James R. Stewart.   Mr. Stewart, age 67, serves as the Bank’s Chief Risk Officer. He joined as Director of Risk Management in 2012, was appointed Senior Director of Risk Management in 2013, and assumed his current role in June 2015. Prior to joining the Bank, Mr. Stewart was a principal with JHC Risk Strategies, a risk management consulting firm in Williston, Vermont, and from 2003 to 2010, served as Executive Vice President and Chief Risk Officer at Bank of N. T. Butterfield & Son Limited, Hamilton, Bermuda. Prior to that position, he was Senior Vice President and Head of Risk Management at Riyad Bank, Riyadh, Saudi Arabia, and for seventeen years prior consulted to Lloyd’s of London and other key insurers on financial services risks. Mr. Stewart holds a B.S. in Business Administration from the University of Alabama. He is a CPA and a Chartered Global Management Accountant.
 
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COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion & Analysis (“CD&A”) explains our executive compensation program for our named executive officers (“NEOs”) listed below. This CD&A also describes the Compensation Committee’s process for making pay decisions, as well as its rationale for specific decisions related to the fiscal year ended December 31, 2022.
Name
Position
Jeffrey G. Ludwig President and Chief Executive Officer
Jeffrey S. Mefford Executive Vice President and President of the Bank
Eric T. Lemke Chief Financial Officer
Douglas J. Tucker Senior Vice President and Corporate Counsel
James R. Stewart
Senior Vice President and Chief Risk Officer of the Bank
EXECUTIVE SUMMARY
2022 Compensation Highlights
We compensate our NEOs with a combination of base salary, annual incentive bonuses in cash, annual grants of equity, and other benefits including perquisites. Each element is designed to achieve a specific purpose and to contribute to a total package that is competitive with similar packages provided by other institutions that compete for the services of individuals like our NEOs. Base salary is an essential component to any market-competitive compensation program. Annual incentives reward the achievement of short-term goals, while long-term incentives having four-year vesting schedules serve as important retention incentives and drive our NEOs to focus on long-term sustainable shareholder value creation.
Based on our performance and consistent with the design of our program, the Compensation Committee made the following executive compensation decisions for fiscal year 2022:

Base salaries:   The Compensation Committee approved base salary increases for 2022 ranging between 6.64% and 22.38%. These increases were based upon strong corporate performance in 2021, several years without executive salary increases (other than Mr. Lemke’s increase in connection with his promotion) and Aon’s assessment of our peer compensation in 2021, as was previously disclosed in the 2021 proxy. See “2022 Executive Compensation Program in Detail” within this CD&A section for more information.

Annual Incentive Bonus.   Based on 2022 performance, our NEOs’ annual incentives were earned at 120% of target under the Company’s Corporate Bonus Plan. See “2022 Executive Compensation Program in Detail” within this CD&A section for more information.

Long-Term Incentives:   To continue to strengthen alignment with the market and provide a balance between performance and retention, the Compensation Committee decided it would use a mix of equity vehicles as part of granting long-term incentives to the NEOs for 2022. Specifically, the Compensation Committee granted awards using stock options (50%) and restricted stock (50%).
Compensation Best Practices
Our Compensation Committee considers it important to design our compensation program in accordance with best practices for public companies, while continuing to be able to recruit and retain superior executive talent.
 
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What We Do
What We Do Not Do

Use performance-based incentives as a significant portion of our NEOs’ total compensation

Use peer group benchmarking to inform compensation decisions

Condition short-term incentive-based compensation on key performance objectives (revenue, income and earnings per share)

Condition annual long-term incentives on four-year equal tranche vesting

Provide for severance payments only upon an involuntary termination of employment where the termination was without cause or for “good reason” ​(whether or not such termination is in connection with a change in control)

Conduct an annual risk-based assessment of our compensation program

Provide tax gross-ups

Include walk-away severance payments or single-trigger cash payments upon a change in control

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

Reprice equity awards without prior shareholder approval
Prior Year’s Say-on-Pay Vote
At the Company’s 2022 annual meeting of shareholders, the nonbinding, advisory proposal to approve the compensation of certain executive officers received the approval of more than 93% of the shares having voting power and present at the meeting. The Company, the board of directors and the Compensation Committee pay careful attention to communications received from shareholders regarding executive compensation, including the nonbinding, advisory vote and believe that the vote reflects our shareholders’ support of our compensation philosophy and the manner in which we compensate our NEOs. The Compensation Committee generally considered the strong support for the advisory vote on executive compensation as part of its evaluation of the 2022 compensation program.
We will continue to review, evaluate and modify the structure and design of our program to meet its objectives, promote strategic growth, increase value for our shareholders, and maintain a competitive executive compensation package in relation to our peers. Our future compensation plan may depart from historical practices.
WHAT GUIDES OUR PROGRAM
Compensation Philosophy and Objectives
We strive to be among the top performing community banks in the nation. While our operations are primarily located in Illinois and the St. Louis metropolitan area in Missouri, we measure our performance on both a local and national level. Our compensation philosophy reflects this vision and strategy.
We structure our executive compensation program to align compensation with business objectives, to motivate our NEOs to enhance long-term business results (although certain shorter-term results, such as revenue, net income and earnings per share are also targeted), and to enable us to attract talent and retain and reward executive officers who contribute to our financial performance and success. In particular, we do the following:

use performance-based incentives as a meaningful portion of our NEOs’ total compensation while ensuring a sufficient base level salary in both strong and weak economic markets necessary to retain national-level executive talent;

condition incentive-based compensation on key performance objectives, including annual financial targets, which focus our executive team on sustaining top-level performance of the Company and the Bank and creating long-term value for our shareholders; and
 
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conduct through our Risk Management Department an annual risk-based assessment of our compensation program to help ensure our overall compensation program is designed to incentivize long-term shareholder growth without incentivizing short-term risk taking.
In addition to being motivational tools for our existing executive team, we also structure our compensation packages in view of our recruitment and retention objectives. The Compensation Committee is mindful of the need to compete for national-level executive talent and attract talent to Effingham, Illinois, the location of our corporate headquarters. In this endeavor, one of our challenges has been persuading top-level talent to relocate, often from major metropolitan areas, to Effingham, which is a town of slightly more than 12,000 people situated approximately two hours from St. Louis, Missouri and Indianapolis, Indiana. Therefore, in establishing our compensation program, the Compensation Committee considers the pay practices of our peers as one of many factors in establishing our executive compensation programs, but does not set compensation at a specific percentile of our peers. As discussed in more detail below, the Compensation Committee has established a selective group of peers with the assistance of our independent compensation consultant.
Elements of Compensation
Our compensation philosophy is supported by the following principal elements of compensation:
Pay Element
How It’s Paid
Purpose
Base Salary Cash
(Fixed)
Provide a competitive base salary rate relative to similar positions in the market and enable the Company to attract and retain critical executive talent.
Annual Incentives Cash
(Variable)
Reward executive officers for delivering on annual strategic objectives that contribute to the creation of shareholder value.
Long-Term Incentives
Equity
(Variable)
Provide incentives for executive officers to execute on longer-term financial goals that drive the creation of shareholder value and support the Company’s retention strategy.
Pay Mix
The charts below show the target annual total direct compensation of our CEO and our other NEOs for fiscal 2022. These charts illustrate that a meaningful portion of executive compensation is variable (60% for our CEO and an average of 52% for our other NEOs).
[MISSING IMAGE: pc_paymix-4c.jpg]
The Decision-Making Process
The Role of the Compensation Committee.   The Compensation Committee oversees the executive compensation program for our NEOs. The Compensation Committee is comprised of independent, non-employee members of the Board. The Compensation Committee works very closely with its independent
 
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consultant and management to examine the effectiveness of the Company’s executive compensation program throughout the year. Details of the Compensation Committee’s authority and responsibilities are specified in its charter, which may be accessed at www.midlandsb.com under “Investors — Corporate Governance — Governance Highlights.”
Role of Executive Officers.   None of our NEOs participates in or makes recommendations with respect to the determination of their own compensation. The Compensation Committee is responsible for all compensation decisions affecting our Chief Executive Officer, and for performance-driven and other determinations of incentive bonuses and equity awards for all our NEOs. Our Chief Executive Officer recommends salary adjustments for the other NEOs, which the Compensation Committee reviews prior to adjustments becoming effective.
Use of Independent Consultants.   The Compensation Committee has authority to retain, at the Company’s expense, outside counsel, experts, compensation consultants and other advisors, as needed. Beginning in May 2022, the Compensation Committee retained Pearl Meyer & Partners, LLC as an independent compensation consultant. Prior to retaining Pearl Meyer, the Compensation Committee had worked with Aon’s Human Capital Solutions practice, a division of Aon plc.
The Company paid Aon’s Human Capital Solutions practice $21,118 for compensation consulting services in 2022. In addition, Aon Risk Services, another division of Aon plc, is the Company’s current insurance brokerage provider. The Company paid fees of approximately $1,274,654 to Aon Risk Services in 2022 for insurance brokerage services. The insurance brokerage services provided to the Company by Aon Risk Services were approved by Company management in the ordinary course of business. Aon has established and followed various policy and practice safeguards between the compensation consultants engaged by the Compensation Committee and the other Aon service providers to the Company, which are designed to help ensure that the Compensation Committee’s compensation consultants continue to fulfill their role in providing objective, unbiased advice.
In its engagement of Pearl Meyer and Aon, the Compensation Committee considered the independence of its compensation advisors under applicable SEC and Nasdaq listing rules and concluded there was no conflict of interest with respect to their engagement.
Pearl Meyer’s and Aon’s specific services to the Compensation Committee have included support in the Compensation Committee’s effort to develop an appropriate peer group; review and update, as appropriate, our compensation philosophy; review potential risks associated with our compensation programs; analyze our NEO and director compensation levels, including based on our peer group; and analyze our equity utilization. Pearl Meyer and Aon also provide reports to the Compensation Committee on market compensation trends and developments.
The Role of Peer Group Companies.   The Compensation Committee strives to set a competitive level of total compensation for each NEO as compared with executive officers in similar positions at peer companies. For purposes of setting compensation levels for 2022, in conjunction with the recommendation of Pearl Meyer, the Compensation Committee took into account publicly-available data from industry compensation surveys from the group of peer companies listed below.:
Origin Bancorp NBT Bancorp, Inc. Independent Bank Corp.
Enterprise Financial Services First Financial Bankshares Park National Corp.
First Busey Corp. First Commonwealth Financial Tompkins Financial Corp.
National Bank Holdings Corp. First Bancorp Univest Financial Corp.
Community Trust Bancorp Inc. City Holding Co. QCR Holdings Inc.
Westamerica Bancorp. Washington Trust Bancorp Inc. Lakeland Financial Corp.
Peoples Bancorp Inc. Horizon Bancorp Inc. Sandy Spring Bancorp Inc.
German American Bancorp Inc.
It is important to note that this market data is not the sole determinant in setting pay levels for the NEOs. The Compensation Committee also considers Company and individual performance and the nature
 
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of an individual’s role within the Company, as well as his or her experience and contributions to his or her current role when making its compensation-related decisions.
2022 EXECUTIVE COMPENSATION PROGRAM IN DETAIL
Base Salary
Base salary represents annual fixed compensation and is a standard element of compensation necessary to attract and retain executive leadership talent. The Compensation Committee reviews and approves base salaries of our NEOs and sets the compensation of our Chief Executive Officer. In setting the base salary of each NEO, the Compensation Committee relies on market data provided annually by our independent compensation consultant and survey data from industry resources. Salary levels are typically considered annually as part of our executive compensation review process or upon a promotion or other change in job responsibility.
The table below states the base salaries for our NEOs in 2021 and 2022.
Name
2021
Base
Salary
2022
Base
Salary
% Increase
Jeffrey G. Ludwig
$ 572,000 $ 700,000 22.38%
Jeffrey S. Mefford
400,000 450,000 12.50%
Douglas J. Tucker
354,320 380,000 7.25%
Eric T. Lemke
350,000 385,000 10.00%
James R. Stewart
324,450 346,000 6.64%
Annual Incentive Bonus — Corporate Bonus Plan
The Compensation Committee believes that performance-based compensation can and should incentivize our NEOs to drive the Company’s growth, balanced with the assumption of reasonable risk. Accordingly, we account for several performance and risk-based metrics in their annual incentive bonuses.
Annual cash incentive bonuses may be earned in accordance with the terms of the Company’s Corporate Bonus Plan (the “Bonus Plan”), which is also available to employees of the Company and its subsidiaries other than those individuals with production-related commission structures and our retail team. To emphasize corporate performance, 100% of the bonus opportunities available to our NEOs are conditioned on Company performance. Each NEO employment agreement specifies a target annual incentive bonus, stated as a percentage of annual base salary, and any such bonus is earned, if at all, in accordance with the requirements of the Bonus Plan.
On a year-by-year basis, the Compensation Committee structures the Bonus Plan by selecting and weighting annual financial goals under which bonuses may be earned. In accordance with the weighting assigned by the Committee, our NEOs are eligible to earn a portion of their target bonuses if the Company attains a sufficient level of performance for a particular metric. If we fail to attain more than 90% of the target performance goal, our NEOs earn no amount of their target bonuses subject to the metric. If we achieve greater than 90% but less than 100% of the target performance goal, our NEOs earn between 50% and 100% of the amount of their target bonuses subject to the metric, with actual payouts determined based on a sliding scale. If we achieve above 100% of a performance goal, the NEOs will earn an increased percentage of the amount of their target bonuses.
The Compensation Committee may adjust performance goals mid-year, at its discretion, to account for extra-ordinary, one-time events deemed to be in the long-term interests of our shareholders, such as integration expenses incurred in connection with acquisitions. The Committee exercised its discretion this year because of certain events, including gain on the termination of forward starting swaps and valuation adjustments of mortgage servicing rights (MSRs). In addition, annual bonuses are subject to partial reduction or forfeiture if certain risk-based capital and asset quality metrics are not maintained, including specified levels for the Bank’s Tier 1 leverage ratio and the Company’s ratio of nonperforming assets to total assets. The NEOs may
 
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later earn restoration bonuses following a reduction or forfeiture if the Committee determines that the deficiencies in the risk-based metrics have been timely cured.
Annual incentive bonuses are based on the level of achievement of financial metrics selected by the Committee for the respective year. In the recent years the Committee has selected earnings per share and revenue as the two metrics, assigning 70% and 30% weighting, respectively, to the two metrics under the Bonus Plan. Starting in 2020, the Committee determined it was appropriate to split the earnings per share metric into two metrics, each having equal weight, to better measure the Company’s core performance and the Company’s transition to the Current Expected Credit Loss (“CECL”) model for determining loan loss provision. Accordingly, the annual incentive bonuses for our NEOs in 2022 were based upon the following aspects of Company performance:

Earnings Per Share — 35% of the annual incentive bonus was based upon achieving a specified earnings per share goal for the year, as adjusted for certain events, including gain on the termination of forward starting swaps and valuation adjustments of MSRs. If the Company’s earnings per share for the fiscal year was at or below 90% of the specified target, no annual incentive bonus would be earned for this metric. If more than 90%, but less than 100% of the target was achieved, only a portion of the annual incentive bonus would be earned. If more than 100% of the target was achieved, each NEO may earn more than 100% of the target bonus amount with respect to this metric.

Pre-Tax, Pre-Provision Income — 35% of the annual incentive bonus was based upon achieving a specified pre-tax, pre-provision income goal for the year, as adjusted for certain events, including gain on the termination of forward starting swaps and valuation adjustments of MSRs. If the Company’s income for the fiscal year was at or below 90% of the specified target, no annual incentive bonus would be earned for this metric. If more than 90%, but less than 100% of the target was achieved, only a portion of the annual incentive bonus would be earned. If more than 100% of the target was achieved, each NEO would earn more than 100% of the target bonus amount with respect to this metric.

Revenue — 30% of the annual incentive bonus was based upon achieving a specified revenue goal for the year, as adjusted for certain events, including gain on the termination of forward starting swaps and valuation adjustments of MSRs. If the Company’s revenue was at or below 90% of the specified target, no annual incentive bonus would be earned for this metric. If more than 90%, but less than 100% of the target was achieved, only a portion of the annual incentive bonus would be earned. If more than 100% of the target was achieved, each NEO would earn 100% of the target bonus amount with respect to this metric.
The table below summarizes the components and results of the Bonus Plan for our NEOs in 2022.
2022 Metric
Metric
Weight
Threshold
Goal
Target
Goal
Actual
Result
Percent
Attained
Payout
Percentage
Earnings Per Share
35% $ 3.34 $ 3.71 $ 3.96 107% 132%
PTPP Income
35% $ 116,558 $ 129,509 $ 137,153 106% 126%
Revenue
30% $ 264,995 $ 294,439 $ 309,218 105% 100%
Total Payout
120%
The table below summarizes the annual incentive bonus targets and actual payouts for each NEO in 2022.
Name
2022
Target % of Salary
Actual Bonus
(% of Salary)
Actual Bonus
($)
Jeffrey G. Ludwig
65% 77% 535,816
Jeffrey S. Mefford
60% 71% 318,147
Douglas J. Tucker
40% 48% 181,430
Eric T. Lemke
40% 48% 183,319
James R. Stewart
40% 48% 165,299
 
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Long-Term Equity Incentive Awards
The Compensation Committee believes that equity awards serve to align each officer’s interests with those of our shareholders. The equity awards held by our NEOs and reflected in the compensation tables below all relate to awards made under our 2019 Long-Term Incentive Plan (the “2019 LTIP”) or its predecessor plans.
The Compensation Committee typically grants equity awards to each NEO at the time the individual is hired and, thereafter, on an annual basis as part of our overall executive compensation program. The Compensation Committee grants equity awards to encourage our NEOs to stay with, and maximize the performance of, the Company over the long term and to discourage excessive focus on short term metrics at the expense of the long-term health of the organization.
To continue to strengthen alignment with the market and provide a balance between performance and retention, the Compensation Committee decided it would use a mix of equity vehicles as part of granting long-term incentives to the NEOs for 2022. Specifically, the Compensation Committee granted awards using stock options (50%) and restricted stock (50%) as follows:
Name
Stock Options
Restricted Stock
Actual
Grant Date
Fair Value
Options
Per Option
Fair Value
Total Fair
Value of
Options
Shares
Per Share
Fair Value
Total Fair
Value of
Shares
Jeffrey G. Ludwig
52,291 $ 4.92 $ 257,050 9,233 $ 28.43 $ 262,494 $ 519,545
Jeffrey S. Mefford
29,133 4.92 143,211 5,144 28.43 146,244 289,455
Douglas J. Tucker
18,924 4.92 93,026 3,342 28.43 95,013 188,039
Eric T. Lemke
19,173 4.92 94,250 3,386 28.43 96,264 190,514
James R. Stewart
17,231 4.92 84,704 3,043 28.43 86,512 171,216
Generally, each grant of restricted stock awards vests annually in equal portions on the first four anniversaries of the grant date, assuming the executive’s employment has not previously terminated. Each grant also vests in full upon an involuntary termination in connection with a change in control of the Company or the NEO’s termination of employment due to death or disability. The grant date fair value of the restricted stock awards in 2022 was determined based on a share price of $28.43, the closing share price of the Company’s common stock on the date of grant.
Generally, each option grant vests annually in equal portions on the first four anniversaries of the grant date, assuming the executive’s employment has not previously terminated. Each grant also vests in full upon an involuntary termination in connection with a change in control of the Company or the named executive officer’s termination of employment due to death or disability. Each stock option grant date fair value was determined in accordance with FASB ASC Topic 718.
OTHER PRACTICES, POLICIES & GUDIELINES
Anti-Hedging Policy
Our insider trading policy prohibits our directors, executive officers and employees from entering into any hedging transaction with respect to any of the Company’s securities. See “Corporate Governance and the Board of Directors — Anti-Hedging Policy” for more details.
Clawback Policy
As required pursuant to the Sarbanes-Oxley Act, certain of our NEOs, including Messrs. Ludwig and Lemke, are subject to the clawback rules set forth therein. Further, any participant, including any NEO, receiving an award pursuant to the Company’s 2019 LTIP is subject to the clawback provision included therein. Pursuant to the terms of the 2019 LTIP, any award, amount, or benefit received under the plan is subject to potential cancellation, recoupment, rescission, payback or other similar action in accordance with any clawback policy or any applicable law that is in effect at the time such award is granted. Further, it is
 
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anticipated that all of the NEOs will be made subject to the incentive compensation clawback provisions contained in the Dodd-Frank Act when the relevant rules thereunder are finalized which is expected to occur later in 2023.
Benefits and Other Perquisites
The NEOs are eligible to participate in the same benefit plans designed for all of our full-time employees, including health, dental, vision, disability and basic group life insurance coverage. We also provide our employees, including our NEOs, with various retirement benefits. Our retirement plans are designed to assist our employees in planning for retirement and securing appropriate levels of income during retirement. The purpose of our retirement plans is to attract and retain quality employees, including executives, by offering benefit plans similar to those typically offered by our competitors. These plans are described in the “Executive Compensation — Other Compensation Programs” section below.
Regulatory Impact on Compensation
As a publicly traded financial institution, Midland is subject to additional requirements, most notably, the Interagency Guidelines Establishing Standards for Safety and Soundness (the “Safety and Soundness Standards”). The Federal Deposit Insurance Corporation (the “FDIC”) has long held that excessive compensation is prohibited as an unsafe and unsound practice. In describing a framework to determine whether compensation is excessive, the FDIC has indicated that financial institutions should consider whether aggregate cash amounts paid, or noncash benefits provided, to employees are unreasonable or disproportionate to the services performed by an employee. The FDIC encourages financial institutions to review an employee’s compensation history and to consider internal pay equity, and, as appropriate, to consider benchmarking compensation to peer groups. Finally, the FDIC provides that, in order to give proper context, such an assessment must be made in light of the institution’s overall financial condition.
Additionally, the Compensation Committee must also take into account the joint agency Guidance on Sound Incentive Compensation Policies (the “Guidance”), which is intended to complement the Safety and Soundness Standards. The Guidance sets forth a framework for assessing and mitigating risk associated with incentive compensation plans, programs and arrangements maintained by financial institutions.
Other matters, such as accounting, tax and SEC requirements regarding risk assessment are also considered by the Compensation Committee as part of its compensation design and annual decisions.
 
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COMPENSATION COMMITTEE REPORT
We have reviewed and discussed the Compensation Discussion and Analysis section of this proxy statement with management. Based on our review and discussion with management, we have recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Submitted by:
Deborah A. Golden (Chair)
Richard T. Ramos
Jeffrey C. Smith
Members of the Compensation Committee
 
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EXECUTIVE COMPENSATION
The compensation reported in the Summary Compensation Table below is not necessarily indicative of how we will compensate our NEOs in the future. We will continue to review, evaluate and modify our compensation program to maintain a competitive total compensation package. As such, the compensation program in the future could vary from our historical practices.
Summary Compensation Table
The following table sets forth information regarding the compensation paid, awarded to, or earned for our fiscal years ended December 31, 2022, 2021 and 2020 by each of our NEOs.
Summary Compensation Table
Name and principal position
(a)
Year
(b)
Salary(1)
($)
(c)
Stock
Awards
(2)
($)
(e)
Option
Awards
(3)
($)
(f)
Non-equity
Incentive Plan
Compensation
(4)
($)
(g)
All Other
Compensation
(5)
($)
(i)
Total
($)
(j)
Jeffrey G. Ludwig
President and Chief Executive Officer
2022 700,000 262,494 257,050 535,816 22,373 1,777,733
2021 572,000 372,512 615,143 21,519 1,581,174
2020 572,000 194,419 241,670 19,239 1,027,328
Jeffrey S. Mefford
President of the Bank
2022 450,000 146,244 143,211 318,147 20,687 1,078,289
2021 400,000 220,438 397,080 19,430 1,036,948
2020 400,000 115,040 154,200 19,843 689,083
Douglas J. Tucker
Senior Vice President and Corporate Counsel
2022 380,000 95,013 93,026 181,430 9,150 758,619
2021 354,320 159,762 234,489 8,700 757,271
2020 354,320 83,371 92,123 8,550 538,634
Eric T. Lemke
Chief Financial Officer
2022 385,000 96,264 94,250 183,319 13,582 772,415
2021 350,000 140,274 223,613 21,635 735,522
2020 305,000 63,797 79,300 19,050 467,147
James R. Stewart
Senior Vice President and Chief
Risk Officer
2022 346,000 86,512 84,704 165,299 9,150 691,665
2021 324,450 146,290 214,721 8,700 694,161
2020 324,450 76,352 84,357 8,550 493,709
(1)
The amounts set forth in the “Salary” column reflects base salary earned in each fiscal year, including amounts deferred at the election of the NEO under the Deferred Compensation Plan.
(2)
The amounts set forth in the “Stock Awards” column reflect the aggregate grant date fair value of stock awards for the years ended December 31, 2022, 2021 and 2020 in accordance with FASB ASC Topic 718. The restricted stock award amounts are based on fair market values of $28.43, which is the fair market value as of the trading day immediately prior to the grant date, for awards granted on October 31, 2022 and $25.71 and $14.84 for awards granted on November 1, 2021 and November 5, 2020, respectively.
(3)
The amounts set forth in the “Options Awards” column reflect aggregate grant date fair value of option awards in accordance with FASB ASC Topic 718. The assumptions used in calculating the option award amounts are set forth in Note 16 to our consolidated financial statements as of December 31, 2022.
(4)
The amounts set forth in the “Non-equity Incentive Plan Compensation” column reflect annual cash incentive awards earned pursuant to the Bonus Plan, including amounts deferred at the election of the NEO under the Deferred Compensation Plan.
 
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(5)
The amounts set forth in the “All Other Compensation” column for the NEOs during the 2022 fiscal year is summarized below.
Name
Year
Perquisites(i)
($)
Company 401(k)
Match
(ii)
($)
Total “All Other
Compensation”
($)
Jeffrey G. Ludwig
2022 13,223 9,150 22,373
Jeffrey S. Mefford
2022 11,537 9,150 20,687
Douglas J. Tucker
2022 9,150 9,150
Eric T. Lemke
2022 4,432 9,150 13,582
James R. Stewart
2022 9,150 9,150
(i)
The amounts set forth in the “Perquisites” column for Messrs. Ludwig and Mefford reflect club dues and the use of a Company-owned vehicle. Such amount for Mr. Lemke reflects club dues.
(ii)
The amounts set forth in the “Company 401(k) Match” column reflect Company matching contributions under the 401(k) Plan.
Grants of Plan-Based Awards
The following table provides information on incentive compensation and equity grants awarded to our NEOs during 2022. All such grants were made under our 2019 LTIP, which is described in more detail below.
Grants of Plan-Based Awards Table
Name
(a)
Grant Date
(b)
Estimated Future Payouts Under
Non-Equity Incentive Plan
Awards
(1)
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(2)
(#)
(i)
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(3)
(j)
Exercise
or Base
Price of
Option
Award
($/Sh)
(k)
Grant
Date Fair
Value of
Stock and
Option
Awards
(4)
($)
(l)
Threshold
($)
(c)
Target
($)
(d)
Maximum
($)
(e)
Jeffrey G. Ludwig
227,500 455,000
10/31/2022 9,233 262,494
10/31/2022 52,291 28.43 257,050
Jeffrey S. Mefford
135,000 270,000
10/31/2022 5,144 146,244
10/31/2022 29,133 28.43 143,211
Douglas J. Tucker
76,000 152,000
10/31/2022 3,342 95,013
10/31/2022 18,924 28.43 93,026
Eric T. Lemke
77,000 154,000
10/31/2022 3,386 96,264
10/31/2022 19,173 28.43 94,250
James R. Stewart
69,200 138,400
10/31/2022 3,043 86,512
10/31/2022 17,231 28.43 84,704
(1)
The amounts set forth in the “Estimated Future Payouts Under Non-Equity Incentive Plan Awards” columns reflect the threshold, target, and maximum payouts for performance under the Bonus Plan, assuming that the respective level of performance is attained for all applicable metrics, as described in the section titled “Compensation Components — Corporate Bonus Plan” in the Compensation Discussion
 
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and Analysis above. The amounts earned by each NEO for 2022 performance is included in the Summary Compensation Table in the column titled “Non-Equity Incentive Plan Compensation”.
(2)
The amounts set forth in the “All Other Stock Awards: Number of Shares of Stock or Units” column reflect restricted stock awards which, except as noted, vest in 25% increments on the first, second, third and fourth anniversary of the date of grant. These restricted stock awards are accelerated and vest in full upon an involuntary termination or cancellation of the awards in connection with a change in control of the Company or upon the participant’s death or disability.
(3)
The amounts set forth in the “All Other Option Awards: Number of Securities Underlying Options” column reflect options which vest in 25% increments on the first, second, third and fourth anniversary of the date of grant. These option awards are accelerated and vest in full upon an involuntary termination or cancellation of the awards in connection with a change in control of the Company or upon the participant’s death or disability.
(4)
The amounts set forth in the “Grant Date Fair Value of Stock and Option Awards” column reflect the aggregate grant date fair value of restricted stock and option awards in accordance with FASB ASC Topic 718.
Outstanding Equity Awards
The following table provides information for each of our NEOs regarding outstanding stock options and unvested stock awards held by the officers as of December 31, 2022. Market values are presented as of the end of 2022 (based on the market value of our common stock of $26.62 on December 30, 2022 (the last trading day of the year)) for outstanding stock awards, which include 2022 grants and prior-year grants.
Outstanding Equity Awards at Fiscal Year-End
Name
Option Awards
Stock Awards
Number of
Securities Underlying
Unexercised Options
Option
Exercise Price
($)
Option
Expiration
Date
Number of
Shares or
Units of
Stock That
Have Not
Vested
(1)
(#)
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)
Exercisable
(#)
Unexercisable
(#)
Jeffrey G. Ludwig
9,482 16.59 12/10/23
12,753 21.00 12/02/24
16,800 23.00 11/03/25
8,383 28.59 11/16/26
52,291 28.43 10/31/32
30,001 798,627
Jeffrey S. Mefford
961 16.59 12/10/23
10,000 18.00 08/05/24
7,885 21.00 12/02/24
10,702 23.00 11/03/25
5,341 28.59 11/16/26
29,133 28.43 10/31/32
17,433 464,066
Douglas J. Tucker
3,577 21.00 12/02/24
11,566 23.00 11/03/25
5,405 28.59 11/16/26
18,924 28.43 10/31/32
12,248 326,042
 
33

 
Name
Option Awards
Stock Awards
Number of
Securities Underlying
Unexercised Options
Option
Exercise Price
($)
Option
Expiration
Date
Number of
Shares or
Units of
Stock That
Have Not
Vested
(1)
(#)
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)
Exercisable
(#)
Unexercisable
(#)
James R. Stewart
1,031 16.59 12/10/23
2,697 21.00 12/02/24
6,759 23.00 11/03/25
4,532 28.59 11/16/26
17,231 28.43 10/31/32
11,198 298,091
Eric T. Lemke
19,173 28.43 10/31/32
10,726 285,526
(1)
All awards in this column that remain subject to vesting vest in 25% increments on the first, second, third and fourth anniversary of the date of grant. Stock options and restricted stock awards granted under our 2019 LTIP are accelerated and vest in full upon an involuntary termination or cancellation of the awards in connection with a change in control of the Company or upon the participant’s death or disability. All of the outstanding stock options and restricted stock awards shown above granted before May 3, 2019 were granted under our 2010 Long-Term Incentive Plan (the “2010 LTIP”). All of the outstanding stock options and restricted stock awards above granted on or after May 3, 2019 were granted under our 2019 LTIP.
Option Exercises and Stock Vested in 2022
The following table sets forth information concerning the exercise of options and vesting of stock awards with respect to each NEO in 2022.
Option Exercises and Stock Vested Table
Name
(a)
Option Awards
Stock Awards
Number of
Shares Acquired
on Exercise (#)
(b)
Value
Realized
on Exercise
(1) ($)
(c)
Number of
Shares Acquired
on Vesting (#)
(d)
Value
Realized on
Vesting ($)
(e)
Jeffrey G. Ludwig
68,075 530,116 13,115 364,487
Jeffrey S. Mefford
11,200 106,533 7,832 217,644
Douglas J. Tucker
5,842 162,300
Eric T. Lemke
3,804 105,855
James R. Stewart
5,350 148,631
(1)
Computed by determining the difference between the market value per share of our common stock on the date of exercise and the exercise price.
Nonqualified Deferred Compensation
The following table sets forth information concerning the benefits under the Company’s Executive Deferred Compensation Plan as of December 31, 2022.
 
34

 
Nonqualified Deferred Compensation Table
Name
(a)
Executive
Contributions
in Last FY
(1)
($)
(b)
Registrant
Contributions
in Last FY
($)
(c)
Aggregate
Earnings
in Last FY
(2)
($)
(d)
Aggregate
Withdrawals/

Distributions
($)
(e)
Aggregate
Balance at
Last FYE
(3)
($)
(f)
Jeffrey G. Ludwig
Jeffrey S. Mefford
Douglas J. Tucker
187,591 (50,349) 754,203
Eric T. Lemke
James R. Stewart
(1)
The “Executive Contributions in Last FY” column includes contribution amounts also reported in the Summary Compensation Table. The contribution amount reflected for Mr. Tucker represents elective deferrals of $187,591 of his long-term incentive paid in 2022.
(2)
The “Aggregate Earnings in Last FY” column does not include any amounts that are also reported in the Summary Compensation Table as the Executive Deferred Compensation Plan does not provide for above-market interest.
(3)
The “Aggregate Balance at Last FYE” column includes contribution amounts previously reported as compensation for Mr. Tucker in the Summary Compensation Table for the 2020, 2021, and 2022 fiscal years. The aggregate amounts reported in the Summary Compensation Table in prior years for Mr. Tucker as of December 31, 2022 was $616,961.
Potential Payments Upon Termination or Change in Control
The following table sets forth information concerning potential payments and benefits under our compensation programs and benefit plans, including the individual employment agreements, to which the NEOs would be entitled upon various terminations of employment or a change in control as of December 31, 2022. Except for payments and benefits provided by the employment agreements, all payments and benefits provided to any NEO upon termination of employment are the same as the payments and benefits provided to other eligible employees of the Company. For purposes of estimating the value of accelerated vesting of equity awards we have assumed a price per share of our common stock of $26.62 based on the market value of our common stock on December 30, 2022 (the last trading day of the year).
Potential Payments Upon Termination or Change in Control Table
Name
Cash
Severance
Payments
(1)
($)
COBRA
Continuation
(2)
($)
Accelerated
Vesting of
Equity
Awards
(3)
($)
Total
Payments
($)
Jeffrey G. Ludwig
Involuntary Termination (not in connection with a change in control)(4)
1,164,210 25,814 1,190,024
Involuntary Termination (in connection with a change in control)(5)
3,492,629 77,441 798,627 4,368,697
Death or Disability
798,627 798,627
Jeffrey S. Mefford
Involuntary Termination (not in connection with a change in control)(4)
225,000 225,000
Involuntary Termination (in connection with a change in control)(5)
1,479,618 464,066 1,943,684
Death or Disability
464,066 464,066
 
35

 
Name
Cash
Severance
Payments
(1)
($)
COBRA
Continuation
(2)
($)
Accelerated
Vesting of
Equity
Awards
(3)
($)
Total
Payments
($)
Douglas J. Tucker
Involuntary Termination (not in connection with a change in control)(4)
274,674 15,719 290,393
Involuntary Termination (in connection with a change in control)(5)
1,098,695 31,438 326,042 1,456,174
Death or Disability
326,042 326,042
Eric T. Lemke
Involuntary Termination (not in connection with a change in control)(4)
118,462 25,772 144,234
Involuntary Termination (in connection with a change in control)(5)
1,094,155 51,544 285,526 1,431,225
Death or Disability
285,526 285,526
James R. Stewart
Involuntary Termination (not in connection with a change in control)(4)
173,000 18,162 191,162
Involuntary Termination (in connection with a change in control)(5)
1,001,585 36,324 298,091 1,336,000
Death or Disability
298,091 298,091
(1)
The amounts set forth in the “Cash Severance Payments” column reflect the sum of cash severance payments to be made pursuant to each NEO’s employment agreement exclusive of any pro rata bonus payable on a termination of employment as annual incentive bonuses are earned as of December 31 and no additional amount would be payable to a NEO for a termination occurring on the last day of the year. Please see the “Non-equity Incentive Plan Compensation” column of the Summary Compensation Table for 2022 annual incentive compensation amounts.
(2)
The amounts set forth in the “COBRA Continuation” column reflect the employer-paid portion of COBRA premiums to be made pursuant to each NEO’s employment agreement, assuming each NEO was eligible for, and elected, COBRA coverage for the maximum period allowed by law. No value is reflected for Mr. Mefford as he did not participate in our medical and dental plans as of December 31, 2022.
(3)
The amounts set forth in the “Accelerated Vesting of Equity Awards” column reflect the value of accelerated vesting of unvested restricted stock awards pursuant to our 2019 LTIP based on the market value of our common stock of $26.62 on December 30, 2022 (the last trading day of the year). In certain instances, the NEOs will also be entitled to accelerated vesting of the NEOs’ unvested options. As of December 30, 2022 (the last trading day of the year), the value of the Company’s stock was below the NEOs’ option exercise price and therefore no value is reflected on this table with respect to the acceleration of the NEOs’ options.
(4)
Involuntary Termination (not in connection with a change in control) means a termination by (i) the employer other than for cause, death or disability, or (ii) the NEO for good reason, in either case that does not occur within six months prior to, or 24 months following, a change in control. For executives receiving benefits under our general severance plan, the severance payment generally is equal to four weeks of salary for each year of service with a maximum of 26 weeks of salary.
(5)
Involuntary Termination (in connection with a change in control) means a termination by (i) the employer other than for cause, death or disability, or (ii) the NEO for good reason, in either case that occurs within six months prior to, or 24 months following, a change in control.
Employment Agreements
We have entered into employment agreements with each of our NEOs. Each agreement generally describes the position and duties of each NEO, provides for a specified term of employment, describes base
 
36

 
salary, bonus opportunity and other benefits and perquisites to which the executive officer is entitled, if any, sets forth the duties and obligations of each party in the event of a termination of employment prior to expiration of the employment term, and provides us with a measure of protection by obligating the NEO to abide by the terms of restrictive covenants during the terms of his employment and thereafter for a specified period of time. We entered into amended and restated agreements with each of the NEOs in November 2020.
Mr. Ludwig.   Our employment agreement with Mr. Ludwig, effective November 5, 2020, provides for an initial term of three years, with an automatic extension for an additional one-year period commencing on the first anniversary of the effective date and each anniversary thereafter, unless either party provides written notice of non-extension ninety days prior to the extension date. If a change in control of the Company occurs during the term of the agreement, the agreement will remain in effect for the two-year period following the change in control. Mr. Ludwig’s base salary is subject to annual review and increase at the discretion of our Compensation Committee, and his target bonus is required to be at least 65% of his base salary. The agreement also provides for Mr. Ludwig’s participation in the Company’s compensation and benefits plans, including the 2019 LTIP, in the same manner as other senior executives of the Company. Following Mr. Ludwig’s termination of employment, he will be subject to non-competition and non-solicitation restrictions for a period of 12 months. In the event Mr. Ludwig’s employment is terminated by the Company other than for cause, death, or disability, or he resigns for good reason, he will be entitled to a payment equal to 100% (300% if in connection with a change in control) of the sum of his salary plus the average of his bonus payments for the prior three years. He will also be entitled to COBRA coverage at employee rates for up to 12 months (36 months if in connection with a change in control) and a pro rata bonus for the year of termination.
Mr. Mefford.   Our employment agreement with Mr. Mefford, effective November 5, 2020, provides for an initial term of two years, with an automatic extension for an additional one-year period commencing on the first anniversary of the effective date and each anniversary thereafter, unless either party provides written notice of non-extension ninety days prior to the extension date. If a change in control of the Company occurs during the term of the agreement, the agreement will remain in effect for the two-year period following the change in control. Mr. Mefford’s base salary is subject to annual review and increase at the discretion of our Chief Executive Officer, and his target bonus is required to be at least 60% of his base salary. The agreement also provides for Mr. Mefford’s participation in the Company’s compensation and benefits plans, including the 2019 LTIP, in the same manner as other senior executives of the Company. Following Mr. Mefford’s termination of employment, he will be subject to non-competition and non-solicitation restrictions for a period of 12 months. In the event Mr. Mefford’s employment is terminated by the Company other than for cause, death, or disability, or he resigns for good reason, he will be entitled to receive severance pursuant to the Company’s general severance plan, or if such termination is in connection with a change in control, he will be entitled to a payment equal to 200% of the sum of his salary plus the average of his bonus payments for the prior three years. He will also be entitled to COBRA coverage at employee rates for up to 12 months (24 months if in connection with a change in control) and, if such termination is in connection with a change in control, a pro rata bonus for the year of termination.
Mr. Tucker.   Our employment agreement with Mr. Tucker, effective November 5, 2020, provides for an initial term of two years, with an automatic extension for an additional one-year period commencing on the first anniversary of the effective date and each anniversary thereafter, unless either party provides written notice of non-extension ninety days prior to the extension date. If a change in control of the Company occurs during the term of the agreement, the agreement will remain in effect for the two-year period following the change in control. Mr. Tucker’s base salary is subject to annual review and increase at the discretion of our Chief Executive Officer and his target bonus is required to be at least 40% of his base salary. The agreement also provides for Mr. Tucker’s participation in the Company’s compensation and benefits plans, including the 2019 LTIP, in the same manner as other senior executives of the Company. Following Mr. Tucker’s termination of employment, he will be subject to non-competition and non-solicitation restrictions for a period of 12 months. In the event Mr. Tucker’s employment is terminated by the Company other than for cause, death, or disability, or he resigns for good reason, he will be entitled to a payment equal to 50% (200% if in connection with a change in control) of the sum of his salary plus the average of his bonus payments for the prior three years. He will also be entitled to COBRA coverage at employee rates
 
37

 
for up to 12 months (24 months if in connection with a change in control) and, if such termination is in connection with a change in control, a pro rata bonus for the year of termination.
Mr. Lemke.   Our employment agreement with Mr. Lemke, effective November 5, 2020, provides for an initial term of two years, with an automatic renewal for additional one-year periods commencing on each anniversary thereafter, unless either party provides written notice of nonrenewal ninety days prior to the extension date. If a change in control of the Company occurs during the term of the agreement, the agreement will remain in effect for the two-year period following the change in control. Mr. Lemke’s base salary is subject to annual review and increase at the discretion of our Chief Executive Officer and his target bonus is required to be at least 40% of his base salary. The agreement also provides for Mr. Lemke’s participation in the Company’s compensation and benefits plans, including the 2019 LTIP, in the same manner as other senior executives of the Company. Following Mr. Lemke’s termination of employment, he will generally be subject to non-solicitation (and non-competition unless such termination is due to good reason) restrictions for a period of 12 months. In the event Mr. Lemke’s employment is terminated by the Company other than for cause, death, or disability, or he resigns for good reason, he will be entitled to receive severance pursuant to the Company’s general severance plan, or if such termination is in connection with a change in control, he will be entitled to a payment equal to 200% of the sum of his salary plus the average of his bonus payments for the prior three years. He will also be entitled to COBRA coverage at employee rates for up to 12 months (24 months if in connection with a change in control) and, if such termination is in connection with a change in control, a pro rata bonus for the year of termination.
Mr. Stewart.   Our employment agreement with Mr. Stewart, effective November 5, 2020, provides for an initial term of two years, with an automatic renewal for additional one-year periods commencing on each anniversary thereafter, unless either party provides written notice of nonrenewal ninety days prior to the extension date. If a change in control of the Company occurs during the term of the agreement, the agreement will remain in effect for the two-year period following the change in control. Mr. Stewart’s base salary is subject to annual review and increase at the discretion of our Chief Executive Officer and his target bonus is required to be at least 40% of his base salary. The agreement also provides for Mr. Stewart’s participation in the Company’s compensation and benefits plans, including the 2019 LTIP, in the same manner as other senior executives of the Company. Following Mr. Stewart’s termination of employment, he will be subject to non-competition and non-solicitation restrictions for a period of 12 months. In the event Mr. Stewart’s employment is terminated by the Company other than for cause, death, or disability, or he resigns for good reason, he will be entitled to receive severance pursuant to the Company’s general severance plan, or if such termination is in connection with a change in control, he will be entitled to a payment equal to 200% of the sum of his salary plus the average of his bonus payments for the prior three years. He will also be entitled to COBRA coverage at employee rates for up to 12 months (24 months if in connection with a change in control) and, if such termination is in connection with a change in control, a pro rata bonus for the year of termination.
Our obligation to pay any severance under each of the amended and restated employment agreements is conditioned on the execution by the NEO of a general release and waiver of any and all claims with respect to their employment with the Company.
Long Term Incentive Plans
Equity based incentive awards are currently made though the Company’s 2019 LTIP. The Company also maintains the 2010 LTIP, and previously maintained the Midland States Bancorp, Inc. Omnibus Stock Ownership and Long Term Incentive Plan, and the Third Amendment and Restatement Midland States Bancorp, Inc. 1999 Stock Option Plan (collectively, with the 2010 LTIP, the “Prior Incentive Plans”). As of the effective date of the 2019 LTIP, no further awards may be granted under the Prior Incentive Plans. However, any previously outstanding incentive award granted under the Prior Incentive Plans remains subject to the terms of such plans until the time it is no longer outstanding.
Midland States Bancorp, Inc. 2019 Long-Term Incentive Plan.   The 2019 LTIP was adopted by our board on February 5, 2019 and became effective upon approval by our shareholders on May 3, 2019. The 2019 LTIP was designed to ensure continued availability of equity awards that will assist the Company in attracting, retaining and rewarding key employees, directors and other service providers. Pursuant to the 2019 LTIP, the Compensation Committee is allowed to grant awards to eligible persons in the form of qualified
 
38

 
and non-qualified stock options, restricted stock, restricted stock units, stock appreciation rights and other incentive awards. Awards vest, become exercisable and contain such other terms and conditions as determined by the Compensation Committee and set forth in individual agreements with the employees receiving the awards. The plan enables the Compensation Committee to set specific performance criteria that must be met before an award vests under the plan. The 2019 LTIP allows for acceleration of vesting and exercise privileges of grants if a participant’s termination of employment is due to a change in control, death or total disability. If a participant’s job is terminated for cause, then all unvested awards expire at the date of termination. Up to 1,000,000 shares of common stock may be issued under the plan (all of which may be granted as qualified stock options). As of December 31, 2022, there were 210,107 shares available for issuance under the plan. If, at the annual meeting, shareholders approve the 2019 LTIP amendment proposal, the maximum number of shares that may be issued under the 2019 LTIP will be increased from 1,000,000 to 1,550,000. See “Proposal 3 — Approval of Amendment and Restatement of the Midland States Bancorp, Inc. 2019 Long-Term Incentive Plan” for more information.
Midland States Bancorp, Inc. Second Amended and Restated 2010 Long-Term Incentive Plan.   The 2010 LTIP was adopted by our board on October 18, 2010 and approved by our shareholders on November 23, 2010. The 2010 LTIP was amended and restated December 31, 2010 and further amended and restated February 2, 2016. The 2016 restatement, which was not submitted to shareholders for approval, increased the number of shares available for issuance under the plan by 1,000,000. The 2010 LTIP was designed to ensure continued availability of equity awards to assist the Company in attracting, retaining and rewarding key employees, directors and other service providers. Pursuant to the 2010 LTIP, the Compensation Committee was allowed to grant awards to eligible persons in the form of qualified and non-qualified stock options, restricted stock, restricted stock units, stock appreciation rights and other incentive awards. Up to 2,000,000 shares of common stock were available for issuance under the plan (the initial 1,000,000 of which were eligible to be granted as qualified stock options). After approval of our 2019 LTIP, no additional grants were to be made under the 2010 LTIP. Awards vest, become exercisable and contain such other terms and conditions as determined by the Compensation Committee and set forth in individual agreements with the employees receiving the awards. The plan enabled the Compensation Committee to set specific performance criteria that must be met before an award vests under the plan. The 2010 LTIP allowed for acceleration of vesting and exercise privileges of grants upon a change in control or if a participant’s termination of employment is due to death or total disability. If a participant’s job is terminated for cause, then all unvested awards expire at the date of termination.
Midland States Bancorp, Inc. Omnibus Stock Ownership and Long Term Incentive Plan.   The Company adopted this plan in 2008 to replace our 1999 Stock Option Plan. Under the plan, we were permitted to grant awards to eligible persons in the form of qualified and non-qualified stock options, restricted stock, restricted stock units, and long-term incentive compensation units and stock appreciation rights. We had reserved up to 100,000 shares of common stock for issuance under the plan. After approval of our 2010 LTIP, no additional grants were to be made under this plan. Awards that were granted under this plan will vest, become exercisable and contain such other terms and conditions as determined by the Compensation Committee and set forth in individual agreements with the employees receiving the awards. The plan allows for acceleration of vesting and exercise privileges of grants prior to the consummation of a change in control transaction, or the death or total disability of the participant. If a participant’s job is terminated for cause, then all unvested awards expire at the date of termination.
Other Compensation Programs
Midland States Bank 401(k) Profit Sharing Plan.   The Midland States Bank 401(k) Profit Sharing Plan, or the 401(k) Plan, is designed to provide retirement benefits to all eligible full-time and part-time employees of the Bank and its subsidiaries. The 401(k) Plan provides employees with the opportunity to save for retirement on a tax-favored basis. Named executive officers, all of whom were eligible during 2020, may elect to participate in the 401(k) Plan on the same basis as all other employees. Employees may defer 1% to 100% of their compensation to the 401(k) Plan up to the applicable statutory limit. We currently match employee contributions on the first 6% of employee compensation (50 cents for each $1). The Company match is contributed in the form of cash and is invested according to the employee’s current investment allocation. The Company has the authority to make an annual discretionary profit sharing contribution to the 401(k) Plan, but does not currently do so.
 
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Amended and Restated Midland States Bancorp, Inc. Employee Stock Purchase Plan.   We maintain the Amended and Restated Midland States Bancorp, Inc. Employee Stock Purchase Plan (Amended and Restated May 3, 2019) (the “ESPP”) for the benefit of our eligible employees. The plan is not intended to constitute an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”). Any employee who has been employed by us or any subsidiary is eligible to participate in the plan upon completion of the service requirements determined by the Compensation Committee. Pursuant to the plan, participating employees are permitted to use after-tax dollars, up to a maximum of $25,000 per calendar year of their compensation, to purchase shares of our common stock at the end of each calendar quarter. The purchase price for the stock is currently 90% of the stock’s fair market value as of the first day of each quarterly offering period. While the Compensation Committee could elect a different discount percentage, it does not expect to do so in the foreseeable future. At any time our common stock is listed for trading on a principal national securities exchange, including the Nasdaq Global Select Market, the fair market value under this plan is deemed to be the officially quoted closing selling price of the shares on the applicable day. The maximum number of shares that may be issued under the ESPP is 500,000, which includes the 300,000 previously subject to the ESPP and an additional 200,000 shares approved by shareholders as of May 3, 2019. If, at the annual meeting, shareholders approve the ESPP amendment proposal, the maximum number of shares that may be issued under the ESPP will be increased to 600,000. See “Proposal 4 — Approval of Amendment and Restatement of the Amended and Restated Midland States Bancorp, Inc. Employee Stock Purchase Plan” for more information.
Deferred Compensation Plan for Directors and Executives.   Effective as of November 8, 2018, we maintain two separate deferred compensation plans for the benefit of our directors and executives which are the Deferred Compensation Plan for Directors of Midland States Bancorp, Inc. (the “Director Deferred Compensation Plan”) and the Deferred Compensation Plan for Executives of Midland States Bancorp, Inc. (the “Executive Deferred Compensation Plan”). The plans provide directors and executives an opportunity to better plan for their financial futures by providing a vehicle for the deferral of current income taxation. Under the plans, directors and eligible senior executives are permitted to elect to defer all or a portion of their annual director fees (in whatever form), salary and/or bonus, as the case may be. Any deferrals are credited to a plan account and earn interest based on the notional investment elections of the executives from a selection of measurement funds generally available to participants under the 401(k) Plan. One available notional investment alternative for directors is Company stock units, which track the value of our common stock. Participants can elect to receive their distributions in a lump sum or in installments spread over a period of up to 5 years.
Health and Welfare Benefits.   Our named executive officers are eligible to participate in our standard health and welfare benefits program, which offers medical, dental, vision, life, accident, and disability coverage to all of our eligible employees. We do not provide the named executive officers with any health and welfare benefits that are not generally available to our other employees.
Perquisites.   We provide our named executive officers with certain perquisites that we believe are reasonable and consistent with our overall compensation program to better enable us to attract and retain superior employees for key positions. The Compensation Committee periodically reviews the levels of perquisites and other personal benefits provided to named executive officers. Based on this periodic review, perquisites are awarded or adjusted on an individual basis. The perquisites received by our named executive officers in 2020 included allowances for annual country club/social club dues and use of a Company-owned automobile. With respect to our named executive officers, country club allowances and the use of a Company car are provided only to Messrs. Ludwig, Mefford and Lemke.
CEO Pay Ratio
Pursuant to the SEC’s pay ratio disclosure rule, we are providing information about the relationship of the annual total compensation of Mr. Jeffrey G. Ludwig, our Chief Executive Officer, to the total compensation of our median employee.
To determine the median employee, a list of all active full- and part-time employees as of December 31, 2022, excluding Mr. Ludwig, was prepared with the corresponding annual total W-2 compensation as reflected in our payroll records. A total of 929 employees were included. Compensation was annualized for
 
40

 
any individual not employed for the full calendar year of 2022. Annual total W-2 compensation was ranked from lowest to highest, and the median employee was selected from the list.
Mr. Ludwig had 2022 total compensation of $1,777,733, as reflected in the Summary Compensation Table included in this Proxy Statement. The median employee annual total compensation for 2022, using the methodology that was used to calculate Mr. Ludwig’s compensation in the Summary Compensation Table, was $59,443. As a result, the CEO pay ratio is 29.9:1.
This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described above. Because the SEC rules for identifying the median employee and calculating the pay ratio allow companies to adopt a variety of methodologies, apply certain exclusions, and make reasonable estimates and assumptions that reflect their compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio reported above.
 
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PAY VERSUS PERFORMANCE DISCLOSURE
In accordance with rules adopted by the SEC pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we provide the following disclosure regarding executive “compensation actually paid” ​(“CAP”) and its relationship to certain Company performance for the fiscal years listed below.
The Pay versus Performance table below summarizes the compensation values both previously reported in our Summary Compensation Table, as well as the adjusted values required in this section for the 2020, 2021 and 2022 calendar years.
Year
Summary
Compensation
Table Total
for CEO
(1)
Compensation
Actually Paid
to CEO
(2)
Average
Summary
Compensation
Table Total
for Non-CEO
NEOs
(1)
Average
Compensation
Actually Paid
to Non-CEO
NEOs
(2)
Value of Initial Fixed $100
Invested on 12/31/19:
Midland
Net Income
(in millions)
Midland
Adjusted
Earnings
Per
Share (EPS)
(5)
Total
Shareholder
Return
(3)
Peer Group Total
Shareholder
Return
(4)
2022
$ 1,777,733 $ 1,851,719 $ 825,247 $ 857,590 $ 106.74 $ 107.95 $ 99.03 $ 3.79
2021
$ 1,581,174 $ 1,806,916 $ 805,976 $ 903,099 $ 95.30 $ 119.79 $ 81.32 $ 3.65
2020
$ 1,027,328 $ 756,598 $ 547,076 $ 431,468 $ 65.66 $ 89.23 $ 22.54 $ 1.70
(1)
Mr. Ludwig has served as the Company’s CEO, and Messrs. Mefford, Tucker, Lemke and Stewart were the Non-CEO NEOs, for all three years covered in the table. The dollar amounts reported are total compensation in the Summary Compensation Table for the CEO and the average for Non-CEO NEOs for each reported fiscal year.
(2)
The dollar amounts reported represent “compensation actually paid,” as calculated in accordance with SEC rules.
(3)
The Company’s 2022 total shareholder return as of December 31, 2022, as provided by S&P Cap IQ.
(4)
Reflects the cumulative total shareholder return of the S&P Small Cap 600 Banks Index. This is the peer group used by the Company as reflected in its Annual Report on Form 10-K for the year ended December 31, 2022.
(5)
Adjusted earnings per share (or “EPS”) is the Company-Selected Measure. For further detail, see the “Compensation Discussion and Analysis” section in this proxy statement.
 
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Calculation of Compensation Actually Paid (CAP)
To calculate the amounts of “compensation actually paid” ​(or “CAP”) to our CEO and Non-CEO NEOs, as reflected in the table above, the following adjustments were made to total compensation as reported in the Summary Compensation Table for each covered year.
2022
2021
2020
CEO
Average Non-
CEO NEOs
CEO
Average Non-
CEO NEOs
CEO
Average Non-
CEO NEOs
Total Compensation from Summary Compensation Table
$ 1,777,733 825,247 1,581,174 805,976 1,027,328 547,076
Adjustments for Pension
Adjustment Summary Compensation Table Pension
$ $ $ $ $ $
Amount added for current year service cost
$ $ $ $ $ $
Amount added for prior service cost impacting current year
$ $ $ $ $ $
Total Adjustments for Pension
$ $