MSBI - Midland States Bancorp Inc. Announces 2022 First Quarter Results

Summary

• Net income of $20.7 million, or $0.92 diluted earnings per share
• Total loans increased 24.1% annualized
• Net interest income increased 4.7% from prior quarter to $56.8 million
• Net interest margin increased 25 basis points from prior quarter to 3.50%
• Efficiency ratio improved to 55.73% from 57.14% in the first quarter of 2021
  

EFFINGHAM, Ill., April 28, 2022 (GLOBE NEWSWIRE) -- Midland States Bancorp, Inc. (Nasdaq: MSBI) (the “Company”) today reported net income of $20.7 million, or $0.92 diluted earnings per share, for the first quarter of 2022. This compares to net income of $23.1 million, or $1.02 diluted earnings per share, for the fourth quarter of 2021, which included a $4.9 million FHLB advance prepayment fee and a $1.8 million gain on the termination of an interest rate swap. This also compares to net income of $18.5 million, or $0.81 diluted earnings per share, for the first quarter of 2021.

Jeffrey G. Ludwig, President and Chief Executive Officer of the Company, said, “We executed very well in the first quarter, continuing to generate strong loan production while effectively managing expenses. Our banking teams are generating high quality lending opportunities across all asset classes, which resulted in 24% annualized growth in total loans. The strong loan production enabled us to redeploy our excess liquidity into the loan portfolio, drive a favorable shift in our mix of earning assets, and generate significant expansion in our net interest margin.

“Our loan pipeline remains very strong, which should enable us to continue to generate a high level of loan growth, drive additional expansion in our net interest margin, and further improve our earnings and level of profitability as we move through the year. While we continue to see good results from the efforts we have made to enhance our new business development capabilities, we are also making steady progress on our long-term initiatives to further enhance the value of the Midland franchise. Through consistent investment in our technology platform and the development of additional fintech partnerships, we are steadily expanding our Banking-as-a-Service capabilities, which we believe will become a meaningful contributor to further balance sheet and earnings growth in the years to come,” said Mr. Ludwig.

Adjusted Earnings

Financial results for the fourth quarter of 2021 were impacted by $4.9 million in FHLB advance prepayment fees and a $1.8 million gain on the termination of an interest rate swap. Excluding these amounts and certain other income and expenses, adjusted earnings were $25.4 million, or $1.12 per diluted share, for the fourth quarter of 2021.

A reconciliation of adjusted earnings to net income according to accounting principles generally accepted in the United States (“GAAP”) is provided in the financial tables at the end of this press release.

Net Interest Margin

Net interest margin for the first quarter of 2022 was 3.50%, compared to 3.25% for the fourth quarter of 2021. The Company’s net interest margin benefits from accretion income on purchased loan portfolios, which contributed 3 and 4 basis points to net interest margin in the first quarter of 2022 and fourth quarter of 2021, respectively. Excluding the impact of accretion income, net interest margin increased 26 basis points from the fourth quarter of 2021, due primarily to a favorable shift in the mix of earning assets.

Relative to the first quarter of 2021, net interest margin increased from 3.45%. Accretion income on purchased loan portfolios contributed 8 basis points to net interest margin in the first quarter of 2021. Excluding the impact of accretion income, net interest margin increased 10 basis points from the first quarter of 2021, primarily due to a decrease in the cost of deposits.

Net Interest Income

Net interest income for the first quarter of 2022 was $56.8 million, an increase of 4.7% from $54.3 million for the fourth quarter of 2021. Accretion income associated with purchased loan portfolios totaled $0.6 million for the first quarter of 2022, compared to $0.8 million for the fourth quarter of 2021. Excluding accretion income, net interest income increased $2.7 million from the prior quarter, which was primarily due to higher average loan balances and an increase in net interest margin. PPP loan income totaled $1.2 million, including net loan origination fees of $1.1 million, in the first quarter of 2022, compared to $1.6 million, including net loan origination fees of $1.4 million, in the fourth quarter of 2021.

Relative to the first quarter of 2021, net interest income increased $5.0 million, or 9.6%. Accretion income for the first quarter of 2021 was $1.2 million. Excluding the impact of accretion income, net interest income increased due to higher average earning assets and a decrease in the cost of deposits. PPP loan income totaled $2.6 million, including net loan origination fees of $2.1 million, in the first quarter of 2021.

Noninterest Income

Noninterest income for the first quarter of 2022 was $15.6 million, a decrease of 30.7% from $22.5 million for the fourth quarter of 2021. Noninterest income for the fourth quarter of 2021 was positively impacted by $3.9 million in unrealized income on equity investments, a $1.8 million gain on the termination of an FHLB interest rate swap, and a $1.0 million gain on company-owned life insurance. Impairment on commercial MSRs negatively impacted noninterest income by $0.4 million and $2.1 million in the first quarter of 2022 and fourth quarter of 2021, respectively.

Relative to the first quarter of 2021, noninterest income increased 5.4% from $14.8 million. The increase was primarily attributable to higher levels of wealth management revenue, partially offset by a decline in residential mortgage banking revenue.

Wealth management revenue for the first quarter of 2022 was $7.1 million, which was consistent with the fourth quarter of 2021. Compared to the first quarter of 2021, wealth management revenue increased 20.4%, primarily due to the increase in assets under administration over the past year, including the acquisition of ATG Trust Company.

Noninterest Expense

Noninterest expense for the first quarter of 2022 was $40.9 million, compared with $45.8 million in the fourth quarter of 2021. Noninterest expense for the fourth quarter of 2021 included $4.9 million in FHLB advance prepayment fees and $0.2 million in integration and acquisition expenses. Excluding the FHLB advance prepayment fees and integration and acquisition expenses, noninterest expense was consistent with the fourth quarter of 2021.

Relative to the first quarter of 2021, noninterest expense increased 4.6% from $39.1 million, primarily due to higher salaries and employee benefits expense consistent with the overall growth of the Company.

Loan Portfolio

Total loans outstanding were $5.54 billion at March 31, 2022, compared with $5.22 billion at December 31, 2021, and $4.91 billion at March 31, 2021. The increase in total loans from December 31, 2021 was primarily attributable to higher balances of commercial real estate loans, partially offset by continued forgiveness of PPP loans.

Equipment finance balances increased $12.3 million from December 31, 2021 to $957.6 million at March 31, 2022.

Compared to loan balances at March 31, 2021, growth in equipment finance balances, other commercial loans, commercial real estate loans, and consumer loans was partially offset by declines in commercial FHA warehouse lines, PPP loans and residential real estate loans.

Deposits

Total deposits were $6.06 billion at March 31, 2022, compared with $6.11 billion at December 31, 2021, and $5.34 billion at March 31, 2021. The decrease in total deposits from the end of the prior quarter was primarily attributable to period-end fluctuations in commercial FHA servicing deposits.

Asset Quality

Nonperforming loans totaled $52.9 million, or 0.95% of total loans, at March 31, 2022, compared with $42.6 million, or 0.81% of total loans, at December 31, 2021. The increase in nonperforming loans was attributable to one commercial real estate loan where no loss is currently expected. At March 31, 2021, nonperforming loans totaled $52.8 million, or 1.08% of total loans.

Net charge-offs for the first quarter of 2022 were $2.3 million, or 0.17% of average loans on an annualized basis, compared to net charge-offs of $4.6 million, or 0.37% of average loans on an annualized basis, for the fourth quarter of 2021, and $1.7 million, or 0.14% of average loans on an annualized basis, for the first quarter of 2021.

The Company recorded a provision for credit losses on loans of $4.1 million for the first quarter of 2022, which was primarily related to the growth in total loans.

The Company’s allowance for credit losses on loans was 0.96% of total loans and 100.0% of nonperforming loans at March 31, 2022, compared with 0.98% of total loans and 119.9% of nonperforming loans at December 31, 2021.

Capital

At March 31, 2022, Midland States Bank and the Company exceeded all regulatory capital requirements under Basel III, and Midland States Bank met the qualifications to be a ‘‘well-capitalized’’ financial institution, as summarized in the following table:

(1)   A non-GAAP financial measure. Refer to page 15 for a reconciliation to the comparable GAAP financial measure.
(2)   Includes the capital conservation buffer of 2.5%.

Stock Repurchase Program

During the first quarter of 2022, the Company repurchased 43,010 shares of its common stock at a weighted average price of $25.77 under its stock repurchase program. As of March 31, 2022, the Company had $18.6 million remaining under the current stock repurchase authorization.

Conference Call, Webcast and Slide Presentation

The Company will host a conference call and webcast at 7:30 a.m. Central Time on Friday, April 29, 2022, to discuss its financial results. The call can be accessed via telephone at (877) 516-3531; conference ID: 1638388. A recorded replay can be accessed through May 6, 2022, by dialing (855) 859-2056; conference ID: 1638388.

A slide presentation relating to the first quarter 2022 financial results will be accessible prior to the scheduled conference call. This earnings release should be read together with the slide presentation. The slide presentation and webcast of the conference call can be accessed on the Webcasts and Presentations page of the Company’s investor relations website at investors.midlandsb.com under the “News and Events” tab.

About Midland States Bancorp, Inc.

Midland States Bancorp, Inc. is a community-based financial holding company headquartered in Effingham, Illinois, and is the sole shareholder of Midland States Bank. As of March 31, 2022, the Company had total assets of approximately $7.34 billion, and its Wealth Management Group had assets under administration of approximately $4.04 billion. Midland provides a full range of commercial and consumer banking products and services and business equipment financing, merchant credit card services, trust and investment management, insurance and financial planning services. For additional information, visit https://www.midlandsb.com/ or https://www.linkedin.com/company/midland-states-bank.

Non-GAAP Financial Measures

Some of the financial measures included in this press release are not measures of financial performance recognized in accordance with GAAP. These non-GAAP financial measures include “Adjusted Earnings,” “Adjusted Diluted Earnings Per Common Share,” “Adjusted Pre-Tax, Pre-Provision Earnings,” “Adjusted Return on Average Assets,” “Adjusted Return on Average Shareholders’ Equity,” “Adjusted Return on Average Tangible Common Equity,” “Adjusted Pre-Tax, Pre-Provision Return on Average Assets,” “Efficiency Ratio,” “Tangible Common Equity to Tangible Assets,” “Tangible Book Value Per Share” and “Return on Average Tangible Common Equity.” The Company believes these non-GAAP financial measures provide both management and investors a more complete understanding of the Company’s funding profile and profitability. These non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP financial measures. Not all companies use the same calculation of these measures; therefore, this presentation may not be comparable to other similarly titled measures as presented by other companies.

Forward-Looking Statements

Readers should note that in addition to the historical information contained herein, this press release includes "forward-looking statements" within the meanings of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including but not limited to statements about the Company’s plans, objectives, future performance, goals and future earnings levels. These statements are subject to many risks and uncertainties, including changes in interest rates and other general economic, business and political conditions, including the effects of the COVID-19 pandemic and its potential effects on the economic environment, our customers and our operations, as well as any changes to federal, state and local government laws, regulations and orders in connection with the pandemic; changes in the financial markets; changes in business plans as circumstances warrant; risks relating to acquisitions; developments and uncertainty related to the future use and availability of some reference rates, such as the London Inter-Bank Offered Rate, as well as other alternative reference rates, and the adoption of a substitute; changes to U.S. tax laws, regulations and guidance; and other risks detailed from time to time in filings made by the Company with the Securities and Exchange Commission. Readers should note that the forward-looking statements included in this press release are not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "will," "propose," "may," "plan," "seek," "expect," "intend," "estimate," "anticipate," "believe," "continue," or similar terminology. Any forward-looking statements presented herein are made only as of the date of this press release, and the Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

CONTACTS:
Jeffrey G. Ludwig, President and CEO, at jludwig@midlandsb.com or (217) 342-7321
Eric T. Lemke, Chief Financial Officer, at elemke@midlandsb.com or (217) 342-7321
Douglas J. Tucker, SVP and Corporate Counsel, at dtucker@midlandsb.com or (217) 342-7321