Midland States Bancorp(US:MSBI)2022-10-21 18:45Financial Data and Key Metrics Changes - The company generated net income of $23.5 million, or $1.04 per share, up from $0.97 in the prior quarter [7] - Pretax, pre-provision earnings increased to $36.4 million [7] - Return on assets and return on average tangible common equity both increased from the prior quarter [8] Business Line Data and Key Metrics Changes - Total loans increased by $403 million from the end of the prior quarter, with commercial loans growing at a 36% annualized rate and commercial real estate loans at 22% [17] - The consumer portfolio increased by approximately $71 million, largely due to fintech partnerships [19] - Equipment finance surpassed $1 billion in total outstandings, reflecting significant growth [12] Market Data and Key Metrics Changes - Nonperforming assets declined by 14% from the end of the prior quarter, indicating positive trends in asset quality [15] - Noninterest-bearing deposits accounted for 31.7% of total deposits, up from 29.9% at the same point last year [22] Company Strategy and Development Direction - The company is focused on long-term growth, adding high-quality relationships even if it impacts net interest margin in the short term [11] - Continued investment in the equipment finance business is expected to drive future growth [37] - The company is exploring Banking-as-a-Service initiatives to enhance franchise value [40][42] Management's Comments on Operating Environment and Future Outlook - Management expects loan growth to moderate in the fourth quarter due to higher interest rates and economic uncertainty [39] - The company is cautious about the economic outlook, anticipating potential recession impacts in 2023 or 2024 [74] - Management believes they are well-positioned to create shareholder value despite a challenging near-term operating environment [41] Other Important Information - The company raised $115 million through a preferred stock offering to strengthen capital ratios [16] - Noninterest income increased by 8.3% from the prior quarter, attributed to the sale of commercial mortgage servicing rights [28] Q&A Session Summary Question: Clarification on servicing sale and deposit retention - Management is uncertain if the $200 million in deposits will remain with the company after the servicing rights sale, as new owners may move them [47] Question: Margin outlook and loan growth funding - Management indicated that loan growth may require higher-cost funding, which could impact margins [48] Question: Expense management with new hires - Management aims to absorb new hires' costs while seeking 2% cost savings to offset increases [50] Question: Consumer portfolio expectations with fintech partnerships - A modest decline in the consumer portfolio is expected, with LendingPoint partially offsetting GreenSky's runoff [72] Question: Provision expectations in light of economic conditions - Management hopes the $7 million provision is a peak, but economic uncertainty remains a concern [74] Question: Areas of caution in lending - Management is cautious about lending in office and residential development sectors [76] Question: Tax rate changes - A lower tax rate this quarter was due to benefits from state tax adjustments [78]