Midland States Bancorp(US:MSBI)2021-11-04 20:53PART I. FINANCIAL INFORMATION Financial Statements Presents Midland States Bancorp's unaudited consolidated financial statements for Q3 and YTD 2021, covering balance sheets, income, equity, and cash flows Consolidated Balance Sheets Total assets increased to $7.09 billion, driven by cash and investments, while liabilities and equity also grew due to higher deposits Consolidated Balance Sheet Highlights (Unaudited) | (dollars in thousands) | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $662,643 | $341,640 | | Investment securities available for sale | $890,777 | $676,711 | | Total loans, net | $4,859,879 | $5,042,888 | | Total assets | $7,093,959 | $6,868,540 | | Liabilities & Equity | | | | Total deposits | $5,601,376 | $5,101,016 | | FHLB advances and other borrowings | $440,171 | $779,171 | | Total liabilities | $6,436,115 | $6,247,149 | | Total shareholders' equity | $657,844 | $621,391 | Consolidated Statements of Income Net income surged in Q3 2021 and YTD 2021, driven by lower credit provisions and reduced noninterest expense Consolidated Income Statement Highlights (Unaudited) | (dollars in thousands) | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $51,396 | $49,980 | $153,374 | $145,620 | | Provision for credit losses | $(184) | $11,728 | $2,926 | $34,303 | | Noninterest income | $15,143 | $18,919 | $47,376 | $46,913 | | Noninterest expense | $41,292 | $53,901 | $129,312 | $136,962 | | Net income | $19,548 | $86 | $58,210 | $14,204 | | Diluted EPS | $0.86 | $0.00 | $2.55 | $0.59 | Consolidated Statements of Cash Flows Net cash increased by $321.0 million YTD 2021, driven by operating cash flow, offsetting investing and financing activities Cash Flow Summary for Nine Months Ended Sep 30 (Unaudited) | (dollars in thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $301,093 | $405,860 | | Net cash used in investing activities | $(85,189) | $(942,729) | | Net cash provided by financing activities | $105,099 | $603,560 | | Net increase in cash and cash equivalents | $321,003 | $66,691 | Notes to Consolidated Financial Statements Details accounting policies and methodologies for financial statements, covering acquisitions, loan portfolio, and borrowings - On June 1, 2021, the Company acquired substantially all trust assets of ATG Trust Company for $2.7 million in cash, adding approximately $399.7 million in assets under management and recording $2.1 million in customer relationship intangibles3193 - The outstanding balance of loan modifications made as a result of COVID-19 decreased significantly from $209.1 million at year-end 2020 to $34.3 million at September 30, 202170 - Subsequent to the reporting period, on October 22, 2021, the Company prepaid FHLB advances totaling $130.0 million, incurring prepayment fees of $4.9 million, and terminated a $50.0 million interest rate swap, recognizing a gain of $1.8 million141 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and results, highlighting key developments, performance drivers, and balance sheet changes Significant Developments and Transactions Outlines key events affecting comparability, including COVID-19 impact, tax benefit, and the ATG Trust acquisition - COVID-19 related loan deferrals decreased from $107.3 million (2.2% of total loans) at June 30, 2021, to $34.3 million (0.7% of total loans) at September 30, 2021150 - A tax settlement in Q2 2021 resulted in a $6.8 million tax benefit, partially offset by $3.6 million in related expenses, for a net after-tax gain of approximately $2.9 million150 - The company redeemed $31.1 million of subordinated notes in June 2021, which had an interest rate of 4.54%152 Results of Operations Net income surged in Q3 2021 due to higher net interest income, lower credit provisions, and reduced noninterest expenses Net Interest Margin Analysis (Tax-Equivalent) | | Q3 2021 | Q3 2020 | | :--- | :--- | :--- | | Net Interest Income (in thousands) | $51,798 | $50,410 | | Average Earning Assets (in thousands) | $6,158,360 | $6,020,018 | | Net Interest Margin | 3.34% | 3.33% | - The provision for credit losses was a benefit of $0.2 million in Q3 2021, compared to an expense of $11.7 million in Q3 2020, primarily due to favorable changes in the loan portfolio mix and improved economic forecasts182183 - Noninterest expense decreased by $12.6 million YoY for Q3 2021, largely because the prior-year quarter included a $12.7 million impairment charge related to facilities optimization190 Financial Condition Total assets grew to $7.09 billion, deposits increased to $5.60 billion, while total loans decreased to $4.92 billion Loan Portfolio Composition | (dollars in thousands) | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total commercial loans | $3,230,140 | $3,384,285 | | Residential real estate | $344,414 | $442,880 | | Consumer | $928,570 | $866,102 | | Lease financing | $412,430 | $410,064 | | Total loans, gross | $4,915,554 | $5,103,331 | - The allowance for credit losses on loans decreased to $55.7 million (1.13% of total loans) at September 30, 2021, from $60.4 million (1.18% of total loans) at December 31, 2020209 - Total deposits increased by $500.4 million since year-end 2020, driven by a $225.6 million increase in commercial deposits and a $62.1 million increase in retail deposits237 Capital Resources and Liquidity Management Shareholders' equity increased to $657.8 million, supported by net income and an extended stock repurchase program - The Board of Directors increased the stock repurchase program authority to $75.0 million and extended it to December 31, 2022, with approximately $24.9 million of authority remaining as of September 30, 2021245246 Regulatory Capital Ratios as of September 30, 2021 | Ratio | Actual (Company) | Minimum Requirement | | :--- | :--- | :--- | | Total risk-based capital | 13.10% | 10.50% | | Tier 1 risk-based capital | 9.73% | 8.50% | | Common equity tier 1 | 8.55% | 7.00% | | Tier 1 leverage | 8.16% | 4.00% | Quantitative and Qualitative Disclosures about Market Risk Discusses market risk, primarily interest rate risk, using NII at Risk and EVE models, showing asset sensitivity Net Interest Income (NII) at Risk Sensitivity (as of Sep 30, 2021) | Immediate Rate Change | Dollar Change (in thousands) | Percent Change | | :--- | :--- | :--- | | -100 bps | $(6,747) | (3.4)% | | +100 bps | $5,078 | 2.6% | | +200 bps | $9,000 | 4.5% | Economic Value of Equity (EVE) Sensitivity (as of Sep 30, 2021) | Immediate Rate Change | Dollar Change (in thousands) | Percent Change | | :--- | :--- | :--- | | -100 bps | $(93,797) | (14.6)% | | +100 bps | $39,917 | 6.2% | | +200 bps | $69,670 | 10.8% | Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes to internal controls - The President and Chief Executive Officer and the Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of the end of the reporting period278 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal controls279 PART II. OTHER INFORMATION Legal Proceedings The company is involved in routine legal actions, with no material pending proceedings expected to impact operations - There are no material pending legal proceedings to which the Company or any of its subsidiaries is a party281 Risk Factors No material changes have occurred in the risk factors since the last Annual Report on Form 10-K - No material changes have occurred in the risk factors since the last Annual Report on Form 10-K283 Unregistered Sales of Equity Securities and Use of Proceeds Details Q3 2021 common stock repurchases and the modified repurchase program, with 210,407 shares bought Issuer Purchases of Equity Securities (Q3 2021) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 1 - 31, 2021 | 53,917 | $24.88 | | August 1 - 31, 2021 | 102,730 | $24.95 | | September 1 - 30, 2021 | 53,760 | $24.94 | | Total | 210,407 | $24.93 | - On September 7, 2021, the Board increased the stock repurchase authority to $75.0 million and extended the program to December 31, 2022, with approximately $24.9 million of repurchase authority remaining as of September 30, 2021288 Exhibits Lists exhibits filed with Form 10-Q, including CEO/CFO certifications and iXBRL formatted financial statements