Midland States Bancorp, Inc. Q4 FY2021 earnings call

• Strong fourth quarter performance with net income of $23.1 million or $1.02 per diluted share, adjusted pre-tax pre-provision income $36.3 million (up 27.8% QoQ).
• Record loan production driven by business development efforts, including higher loan demand, new bankers, higher growth areas, technology investments improving win rate.
• Equipment finance portfolio recovering, consumer loan portfolio with GreenSky performing exceptionally well.
• Deposits increased with non-interest-bearing deposits driving runoff of higher cost deposits.
• Net interest income up but margin affected by excess liquidity, partially offset by paying off higher rate FHLB advances and improved deposit mix.
• Wealth management assets under administration up, revenue flat QoQ but up YoY.
• Non-interest income increased 48.7% QoQ, with gains on equity investments and bank-owned life insurance.
• Non-interest expense adjusted down, efficiency ratio improved to 52.6%.
• Asset quality improved with non-performing loans down, deferred loans declining, provision for credit losses low.

Loan Portfolio: Total loans increased $309 million from the prior quarter. Strong growth in commercial real estate portfolio, commercial loan portfolio flat with equipment finance and conventional commercial loans offsetting PPP and commercial FHA warehouse credit line declines, consumer loan portfolio up $74 million. Deposits: Total deposits increased $509 million or 9.1% from prior quarter, driven by non-interest-bearing deposits, with CD balances declining. Net Interest Income: Increased 5.7% from prior quarter, but net interest margin affected by excess liquidity. Wealth Management: Assets under administration increased, revenue flat QoQ but up YoY. Equipment Finance: Deferrals remaining low, portfolio performing well. Consumer Loan Portfolio (GreenSky): Extremely low delinquency, escrow account increased to $34.8 million at end of fourth quarter.

• Expect high single digit loan growth in 2022 driven by commercial loans, equipment finance, commercial real estate, and new Fintech partnerships.
• Focus on increasing asset-sensitivity, shifting technology investment to revenue generation, maintaining stable expenses, and M&A activity.
• Expect earnings in 2022 to be similar to 2021 with organic growth, wealth management revenue, and operating leverage, and higher core performance in 2023.

• Impact of COVID-19 pandemic on financial performance.
• Interest rate changes affecting net interest margin.
• Uncertainty in deposit beta and charge-off levels.
• Potential disruptions in markets like Chicago and St. Louis affecting growth.

Q: Loan growth seasonality and deposit base reaction to higher rates?

A: Loan growth expected to be more balanced in 2022, deposit base likely to have lower beta than previous tightening cycles