MIDLAND STS(US:MSBIP)2024-05-09 20:33Financial Performance - For the three months ended March 31, 2024, the company reported net income of $13.9 million, a decrease of 36.4% from $21.8 million in the same period of 2023[130]. - Net interest income decreased to $56.1 million for Q1 2024, down from $60.7 million in Q1 2023, reflecting a decrease in net interest margin from 3.39% to 3.18%[133]. - Noninterest income rose to $21.2 million in Q1 2024, up from $15.8 million in Q1 2023, marking a 34.4% increase[130]. - Interest income increased by $6.1 million to $101.9 million for the three months ended March 31, 2024, primarily due to improved yields on earning assets, with the yield increasing 41 basis points to 5.76%[138]. - Noninterest expense increased by $0.4 million, or 0.9%, to $44.9 million for Q1 2024 compared to the same period in 2023[152]. - The effective tax rate for Q1 2024 was 23.9%, slightly down from 24.0% in Q1 2023, with income tax expense at $4.4 million[153]. - Shareholders' equity decreased by $0.8 million to $791.0 million at March 31, 2024, influenced by net income of $13.9 million and dividends totaling $9.0 million[195]. Credit Losses and Provisions - The provision for credit losses increased significantly to $14 million in Q1 2024, compared to $3.1 million in Q1 2023, indicating a rise in expected credit losses[130]. - The provision for credit losses on loans was $14.0 million for Q1 2024, compared to $3.1 million in Q1 2023, reflecting a specific reserve of $8.0 million on one large construction loan[146]. - Net charge-offs for the three months ended March 31, 2024, totaled $4.4 million, compared to $2.1 million for the same period in 2023[174]. - The total charge-offs for the three months ended March 31, 2024, were $5,036,000, significantly higher than $2,399,000 in the same period of 2023[173]. - The allowance for credit losses on loans increased to $78.1 million, or 1.31% of total loans, from $68.5 million, or 1.12% of total loans, at December 31, 2023[164]. - Nonperforming loans increased by $48.6 million to $105.0 million as of March 31, 2024, compared to $56.4 million at December 31, 2023, with four loans totaling $47.4 million accounting for the increase[177]. - The allowance allocated to construction and land development loans rose to $12.6 million, or 2.66% of total construction loans, from $4.2 million, or 0.92% at December 31, 2023[170]. - The commercial real estate loan portfolio's allowance increased to $21.4 million, or 0.89% of total commercial real estate loans, from $20.2 million, or 0.84% at December 31, 2023[169]. Asset and Liability Management - Total assets were $7.83 billion at March 31, 2024, compared to $7.87 billion at December 31, 2023[154]. - The average balance of interest-earning assets decreased to $7.1 billion in Q1 2024 from $7.3 billion in Q1 2023[135]. - Average earning assets decreased to $7.11 billion in Q1 2024 from $7.26 billion in Q1 2023, with average loans decreasing by $308.4 million[139]. - Total loans decreased by $172.6 million to $5.96 billion at March 31, 2024, as the company adopted a more selective approach to loan origination[155]. - Consumer loans decreased by $98.1 million to $837.1 million at March 31, 2024, due to loan payoffs and a cessation in loans originated through GreenSky[156]. - Short-term borrowings increased to $214.4 million at March 31, 2024, from $34.9 million at December 31, 2023[192]. - Total deposits rose by $14.5 million to $6.32 billion at March 31, 2024, driven by increases in noninterest-bearing demand accounts and time deposits of $67.0 million and $76.0 million, respectively[189]. - Noninterest-bearing deposits increased to 19.2% of total deposits at March 31, 2024, up from 18.1% at December 31, 2023[189]. - Brokered time deposits increased to $188.2 million at March 31, 2024, from $94.5 million at December 31, 2023[190]. - The carrying amount of investment securities pledged for repurchase agreements was $15.8 million as of March 31, 2024, compared to $20.9 million at December 31, 2023[199]. - Total investment securities available for sale increased to $1,040.4 million at March 31, 2024, from $915.9 million at December 31, 2023[182]. Capital and Liquidity - The Company and the Bank exceeded the regulatory minimums and met the definition of well-capitalized as of March 31, 2024[204]. - The total risk-based capital ratio for Midland States Bancorp, Inc. was 13.68%, exceeding the minimum requirement of 10.50%[205]. - The Company reported a Tier 1 leverage ratio of 9.92% for Midland States Bancorp, Inc., well above the minimum requirement of 4.00%[205]. - The FHLB committed liquidity increased to $1,167.4 million as of March 31, 2024, from $997.4 million at the end of 2023, indicating enhanced access to funding[200]. - As of March 31, 2024, total estimated liquidity increased to $2,454.1 million from $1,379.4 million on December 31, 2023, reflecting a significant improvement in liquidity management[200]. - The additional credit facility available increased to $431.0 million as of March 31, 2024, compared to $250.0 million at December 31, 2023[200]. Interest Rate Risk Management - The Federal Reserve maintained its key interest rate in the range of 5.25%-5.50%, the highest level since August 2007, impacting the company's interest income and expense dynamics[132]. - Interest expense increased to $45.8 million in Q1 2024, compared to $35.0 million in Q1 2023, reflecting higher funding costs[130]. - Interest expense increased by $10.7 million to $45.8 million for Q1 2024, with the cost of interest-bearing liabilities rising to 3.22% from 2.46% in the prior year[142]. - The net interest income sensitivity (NII at Risk) for a +200 basis point shock as of March 31, 2024, projected a dollar change of -$2,519 thousand, indicating potential earnings volatility[214]. - NII at Risk for March 31, 2024 shows a dollar change of $497,000 for a -200 basis point shift, and a dollar change of $(2,519,000) for a +200 basis point shift, indicating a sensitivity to interest rate changes[214]. - Percent change in NII at Risk for March 31, 2024 is 0.2% for -200 basis points and -1.1% for +200 basis points, reflecting the potential impact of interest rate fluctuations on earnings[214]. - The bank is adjusting its investment strategy to protect against lower rates in the future, responding to market shifts towards slowing rate increases or potential rate cuts into 2024[215]. - The bank's NII at Risk analysis is conducted quarterly and models shifts in market interest rates based on the forward yield curve over the next twelve months[214]. - The bank is moving towards a virtually neutral position in response to +/- 100 basis point rate shocks[215]. - Interest rate risk management is actively monitored, with the Board of Directors' Risk Policy and Compliance Committee overseeing risk measures and limits[209]. - Price risk is present from mortgage-backed securities, derivative instruments, and equity investments, which are subject to fair value accounting[216]. - The bank's risk management requires ongoing development of remedial plans to maintain residual risk within approved levels as the balance sheet is adjusted[215]. - The bank's beta assumptions related to its non-maturity deposit portfolio align with industry trends throughout 2023[215]. - The NII at Risk results are within board policy limits for all scenarios as of March 31, 2024[214].