Midland States Bancorp(US:MSBI)2021-05-06 20:45PART I. FINANCIAL INFORMATION Financial Statements The company presents its unaudited consolidated financial statements for the first quarter of 2021 Consolidated Balance Sheets Total assets remained stable at $6.88 billion, with increased cash offsetting a decrease in total loans Consolidated Balance Sheet Highlights (Unaudited) | (In thousands) | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $631,219 | $341,640 | | Total loans, net | $4,848,119 | $5,042,888 | | Total assets | $6,884,786 | $6,868,540 | | Liabilities & Equity | | | | Total deposits | $5,340,513 | $5,101,016 | | FHLB advances and other borrowings | $529,171 | $779,171 | | Total liabilities | $6,249,319 | $6,247,149 | | Total shareholders' equity | $635,467 | $621,391 | Consolidated Statements of Income Net income significantly increased to $18.5 million, driven by higher interest income and lower credit loss provisions Consolidated Income Statement Highlights (Unaudited) | (In thousands, except per share data) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net interest income | $51,868 | $46,651 | | Total provision for credit losses | $3,565 | $11,578 | | Total noninterest income | $14,816 | $8,598 | | Total noninterest expense | $39,079 | $41,666 | | Net income | $18,538 | $1,549 | | Diluted earnings per common share | $0.81 | $0.06 | Notes to Consolidated Financial Statements Notes detail accounting policies, a pending acquisition, and the financial impact of the COVID-19 pandemic - The company operates as a diversified financial holding company focused on lending, deposits, and wealth management2022 - A definitive agreement was announced to acquire ATG Trust Company, with $387 million in assets under management30 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2021 financial results, including impacts from COVID-19 and strategic initiatives Significant Developments and Transactions Key developments include ongoing COVID-19 impacts, PPP loan activity, and a branch optimization plan - Loans on deferral due to COVID-19 totaled $219.1 million, with 70% from the hotel and transportation industries147 - The company held $211.6 million in outstanding PPP loans, which generated $2.6 million in income during Q1 2021147 - A branch network optimization plan is expected to generate annual cost savings of approximately $5.0 million148 Results of Operations Net income rose to $18.5 million, reflecting higher revenues, lower expenses, and reduced credit loss provisions Quarterly Results of Operations | (In thousands) | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net interest income | $51,868 | $46,651 | | Provision for credit losses | $3,565 | $11,578 | | Noninterest income | $14,816 | $8,598 | | Noninterest expense | $39,079 | $41,666 | | Net income | $18,538 | $1,549 | - Net interest margin (tax-equivalent) decreased slightly to 3.45% from 3.48% in the prior-year quarter154 - The provision for credit losses decreased significantly to $4.0 million from $10.6 million due to an improved economic outlook165 - Noninterest income increased by $6.2 million, mainly from a $7.2 million reduction in impairment charges on mortgage servicing rights168 - Noninterest expense decreased by $2.6 million, driven by cost savings from branch closures and the sale of the FHA origination platform173174 Financial Condition Total assets were $6.88 billion, with loan portfolio contraction offset by strong growth in total deposits Loan Portfolio Composition | (In thousands) | March 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Commercial | $1,574,894 | $1,685,575 | | Commercial real estate | $1,494,031 | $1,525,973 | | Construction and land development | $191,870 | $172,737 | | Residential real estate | $398,501 | $442,880 | | Consumer | $848,964 | $866,102 | | Lease financing | $402,546 | $410,064 | | Total loans, gross | $4,910,806 | $5,103,331 | - Nonperforming loans as a percentage of total loans remained stable at 1.08%203 - The allowance for credit losses on loans increased to 1.28% of total loans, up from 1.18% at year-end 2020190 - Total deposits increased by $239.5 million, driven by government stimulus payments and PPP loan funds219 Capital Resources and Liquidity Management The company maintained a strong capital and liquidity position while executing a stock repurchase program - The company repurchased 74,507 shares for $1.2 million in Q1 2021, with $5.2 million remaining under its repurchase authorization223224264 Regulatory Capital Ratios (Company) as of March 31, 2021 | Ratio | Actual | Minimum Requirement | | :--- | :--- | :--- | | Total risk-based capital | 13.73% | 10.50% | | Tier 1 risk-based capital | 9.62% | 8.50% | | Common equity tier 1 | 8.39% | 7.00% | | Tier 1 leverage | 7.79% | 4.00% | - The company's primary liquidity sources are core deposits, supplemented by wholesale funding and credit facilities226228229230 Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate risk, with analysis showing reduced sensitivity to rising rates Net Interest Income (NII) Sensitivity Analysis (12-Month) | Rate Shock | March 31, 2021 (% Change) | December 31, 2020 (% Change) | | :--- | :--- | :--- | | -100 bps | (3.3)% | (3.1)% | | +100 bps | 1.6% | 2.7% | | +200 bps | 3.0% | 4.9% | Economic Value of Equity (EVE) Sensitivity Analysis | Rate Shock | March 31, 2021 (% Change) | December 31, 2020 (% Change) | | :--- | :--- | :--- | | -100 bps | (16.4)% | (13.9)% | | +100 bps | 8.6% | 11.5% | | +200 bps | 15.3% | 20.2% | - The company was out of compliance with its internal policy limit for the -100 basis point EVE scenario250 Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes in internal controls - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of March 31, 2021254 - No material changes to the Company's internal control over financial reporting occurred during the first quarter of 2021255 PART II. OTHER INFORMATION Legal Proceedings The company is involved in routine legal actions, none of which are expected to have a material effect - In the normal course of business, the company is involved in various lawsuits, none of which are expected to be material257 Risk Factors There have been no material changes from the risk factors previously disclosed in the 2020 Annual Report - There have been no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K259 Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 65,840 shares under its stock repurchase program during the first quarter Issuer Purchases of Equity Securities (Q1 2021) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Publicly Announced Program | | :--- | :--- | :--- | :--- | | Jan 2021 | 51,263 | $18.24 | 49,660 | | Feb 2021 | 18,638 | $18.99 | 16,180 | | Mar 2021 | 4,606 | $28.10 | — | | Total | 74,507 | $19.04 | 65,840 | - As of March 31, 2021, the company had approximately $5.2 million of remaining repurchase authority under its program264 Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and iXBRL data