MSBI - Earnings call transcript Q1 2019 | Midland States Bancorp, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Q1 2019 Midland States Bancorp, Inc. Earnings Conference Call. [Operator Instructions].

As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Profiles. Financial from Rossi, Tony Mr. Rossi, you begin. may

Tony Rossi

Thank joining us Josh. Quarter Earnings Good States morning, for you XXXX thank and Call. today First everyone, Bancorp you, for Midland the

Midland's Erickson, Chief Officer. President from Joining Jeff Financial team Officer; Steve Executive Ludwig, us and and management Chief are

this We be discussion slide part of presentation will as a our using morning.

discuss If Presentations a Investor will Midland's to download first page copy management done the the Relations up already, The for questions. visit please and will so not results of you've the and presentation. of then Webcasts quarter open call website team we the

different Before risks with forward-looking you that future respect and made obligation company's could cause on uncertainties. begin, States call. such to disclaims financial this statements The future or statements. in during like implied filings, the company Midland These the forward-looking and which from by Various the materially results performance factors forward-looking statements discussed available contains update any we are website. SEC to results to condition are actual I'd involve any conference the be that expressed company's remind of to call factors Bancorp any

the I'd And Jeff. that, as today to reconciliation and with GAAP to but which press call most discussed non-GAAP information well non-GAAP refer intended as to the on other are the supplement, available release measures. Additionally, may be to quantitative of comparable GAAP management the financial turn the not to Jeff? the for to The substitute, measures, directly measures. over website like contains the

Jeffrey Ludwig

Slide first earnings to share, We I'm highlights earnings the generated $X.XX going the to compared welcome and X Good quarter. morning, everyone, States Midland which in quarter. of call. to the on prior with $X.XX in per start the

quarter again, generation on recapture resulted our performance in capital rebuilding and the mortgage Alpine once attractive capital Management a in made internal of in items servicing and of the ratios. our consistent commercial excellent higher a loan including ratios, bottom we which in had on progress our was I touch acquisition line, When will in included favorably We've of strong adjusting our strategy moments. of following higher-accretion enabled prior another our business quarter our fees solid financial our on that a items, relatively year, prior all that Wealth these And last acquisition to us few impacted FHA purchase business. results income quarter. portfolios, Our number the transaction that announced estate rights for increases on execute capital with

value us as strong per share Our earn from the the our performance first increased also in acquisitions, quarter. is tangible back tangible book book dilution quickly X% helping value to by prior

the for execution performance reflects Our we company. have the on solid outlined first quarter priorities near-term

We balance in are normalized a to basis, our managing increased points prudently margin, protect on basis quarter. our sheet the which, net X interest

is first loans, attractive which on which our normalized We than see portfolio, Most are the to in the impact the rate basis loans most in and continue average production costs. in portfolio. X.X% areas to yields. XX our and seen was seeing of focus can the the than yield offsetting quarter on an in more yield are we loan our our deposit be the attractive more points increase our risk-adjusted higher drive increase is or The on growth yields overall our helping equipment in our notably, in new on leases average with overall strong focusing that new we finance risk-adjusted renewed

controlling are focused efficiencies enhancing operating expenses. on and the On we side, expense

was quarter. prior million the over Our $X total than noninterest expense lower

attractive, under with shareholders, increase to this operations, expect considerable the the challenging our to able are effectively fund on years. to synergies of that approximately deposits. the out Because utilize per call, the priorities, strong its earnings quarter earnings a this laid of furthers result growth. XX% make the deliver we we in respect last combination our cost acquisitions, HomeStar the franchise. XXXX, of during beta these strategic were has tangible leading our for XX% rising agreement to Group, we the With costs branches announced customers, just deposits, Financial XXXX, With digestible definitive from has deal classic standpoint. generating indicated position X%. a in relationships, and this of are considerable we five very base rate with excellent fourth low-cost require the there efforts ratio, to its has market HomeStar strong balance in profile. Earlier of a fits just we of over total in attractive. type Kankakee, easily employees liquidity conditions to we just HomeStar when for in very interest about small franchise customer the organic a enhance loan priorities presence, of saves a of to share the this cycle despite loan-to-deposit of earnings our our size already acquisition we resources and of On build a of is a the opportunities earned book where is approximately be growth. which the and we had focused overlap back accretive for can a very with commitment that value deposit sheet XXXX. utilized dilution exactly month, of Through that been communities a in execution cost value strong our manage won't able signing its be as addition integration our two that XX to has that stable and projected accretive of HomeStar deposit $XXX has to X% HomeStar our though, the HomeStar's As solid bank points this The assets core a a noninterest to basis on Illinois. can acquire filling transaction community is that significant the have Despite total market a share of million we expense. deposits transaction, of economics to profitably just The are an

transaction the shareholders we decade, over be value earnings have enhances our we As done the of will have activities, for deposit and our our past base, further HomeStar we acquisition consistently while another M&A our created increasing that through power. believe

Steve? in walk to Now I'm the to Steve through our the details more going quarter. to over on call some financial turn performance

Stephen Erickson

I'm portfolio Slide on with loan start Thanks, our X. going to Jeff.

declined due from loans of in due offset to estate. leases. outstanding partially This by yields total their commercial attractive current risk-adjusted that the loan growth commercial portfolios in most Our are is deemphasizing our primarily This real the is $XX.X we environment, notably and less to in million and the end prior residential quarter. declines

Our this positive we XX.X% million expansion equipment finance the impact group on has the quarter. balances our anticipated bring that the from end new team continues or business outstanding by to of equipment was prior million and perform or total XX%, Year-over-year, board. investment the of when increased $XX.X to $XXX.X up had finance made the and the we portfolio well, this

the time Slide adding from of The the approximately a and the attributable by $XX.X on in balances deposits deposits of first outflows offset quarter. a decline commercial quarter, deposits Total decline prior to decline million billion deposits end primarily were We broker our funds. to deposits. Turning of end of partially X. of the to $X.XX decline was and at public the

quarter, the quarter. market of Turning Management primarily - The end were increase prior assets on to of administration to an from end the Wealth increase was At Slide attributable of billion, million our the prior the $X.X $XXX the improved performance. under X. from

Wealth fees increased primarily items quarter the from revenue revenue a Management XX.X% Our we our was to year-over-year recorded quarter. and revenue in onetime which XX.X%. lower million, the attributable that basis, $X Management other estate prior On Wealth to declined to prior

net interest and Turning income margin Page on net to interest X. our slide

by fourth Our net from the X% income interest quarter. decreased

earning from income our decrease interest accretion income. margin, by accretion interest Excluding the a decline due The prior in offset X interest million primarily net point which partially to $X.X quarter. average decreased excluding assets, basis net a in increase our income, was was

and average interest our of cost impact of first offset our rates repricing the the in loans, than the our asset more in portfolio, higher on the yields new loan With earning increase and funds the the quarter. in increase during renewed

accretion last we relatively continue the the a from flat earnings impact to call, standpoint. to sensitivity has changed While income. interest going margin bit balance Accordingly, expect from relatively our sheet our we of are a net neutral be excluding interest for outlook forward, rates quite

prepayments This of not accounting accretion In quantify which is million XXXX terms second Group, our in and we million on loans, expecting of will once pending HomeStar scheduled does include accretion impact $X.X and are the our income, the transaction completed. the purchase for not acquired does that full acquisition which from year. Financial closes of income quarter the $X.X include of

our to on on Slide Moving noninterest income X.

income decreased noninterest the our income. major to from prior Our spread contributors The was decrease XX.X% total noninterest across of quarter. all

out recapture revenue low $X.X income commercial the rights this of noninterest million lengthened early this range of of in earlier, which revenue some had for end year expect business. the The that our quarter, which of we pointed possibly a pipeline. sales servicing our on at We last $X.X items - part the shutdown a the mortgage number cycle is onetime of million for had business. of in our commercial positively opportunities As was government impacted we in Jeff the FHA one quarter, the impairment that FHA

through business HUD more overall now as rate-like the remain nearly shutdown. the see our However, caught accumulated the is for up pipeline activity should and loans this that on same, in backlog we the we that work during expectations the

ratio X. acquisition in million to our quarter. first in integration on efficiency expenses and We expense $X.X and incurred the Turning Slide

expense noninterest expenses are in all success noninterest driving improved the Excluding expense line basis. integration managing by The our linked organization. of in the major items, expense, declines our throughout from and quarter resulted and efficiencies which on X.X% decreased decrease acquisition a we having reflects

With the our ratio first improved efficiency the from lower expense levels quarter, in XX.X% XX.X%. to

range. Although that we quarterly to expenses $XX run our quarter, expect range in million we below $XX million came the for rate first will in be still expected in the operating our

XX, Slide we'll our at asset look quality. to Moving

increased to one loan by Our the quarter. residential loans loan attributable real commercial $X.X estate the during which real was one million, downgrade nonperforming of estate and primarily

just call the loan. recorded losses one $X.X which reserve specific charge-offs loan million, for XX against points the nonperforming our credit was XX Jeff. XX, turn March for basis set a net increased of to back loans for loans as were With Jeff? to of our by provision a total Our primarily driven points over provision another and of average of accounted basis allowance quarter. that, We This points. XX basis marks I'll

Jeffrey Ludwig

our margin Steve. up strong focused XX remain to going We'll protecting earnings. on expenses, to controlling wrap Thanks, and and comments Slide we outlook. deliver some on expect on We're our with

balances that we comfortable Although year we the saw quarter, we will generate growth seeing on organic decline our a first demand loan based feel are loan this during we in level single-digit still of in the markets. low

our loan needs discussed, production ability million As lower it assist has transaction $XXX in to with to throughout HomeStar acquisition small focus ongoing match than our size growth organization. with continue highly our we HomeStar enough The is acquisition fund in The enhancing new us to accretive this cost our effort will to on more deposits. have allow is efficiencies in deposits. excess that

Given markets, have. any footprint. we answer With that, value questions strategy our believe of call. that acquisition we happy banks we'll may drive Operator, our within continue can be to in our please the open to existing you number the through

Operator

[Operator Instructions].

from comes question first of Our Stephens. Terry McEvoy

Terence McEvoy

average equipment talked much X.XX%. I equipment them the in a How finance new the renewal on quite being Just you loans? above that the loan finance bit are about question a X.XX% rate. know I that remember loans. above

Stephen Erickson

Yes.

the basis given down did quarter. in X%. X% think yield points XX probably seen we, It in in a in to little little above and the number in was it quarter. that the bit, touching curve current I come current have the finance business equipment on XX a quarter, the flatter prior the in the quarters, rates And the above probably -

Terence McEvoy

the you balance I And in the seasonal just talked funds public moving - And over you just to sheet in down do typically to second And about Do deposits. you see and the QX. flat, outflows in know of thank then brokered decline quarter? a rebound bring funding? just you some some there. keep

Stephen Erickson

deposits that come the deposits strategy do have some Yes. we excess can let have for have demand. If if we we That's don't in, a sure. brokered we loan go

of still see now in has now, we've still couple given the for last I on growth maybe we Alpine been think years, had view, year. years - about point we're Centrue two the from here a seasonality a seasonality. just for can't

So seasonality pinpointing we're not right necessarily now.

as customers, better a these move sheet I forward move I as we of feel continue with seasonality think and to we'll larger balance get this we think forward.

Terence McEvoy

one was order with And those outstanding still deal? that And unique last there the to completely some On been Or then trumps? some HomeStar, in - move with there? are just has of forward the closing eventual there the uncertainty is what question. are still finalized -

Stephen Erickson

the the be but that and of legal pretty that will I a confident will little wouldn't uncertainly. final through. we're back needs forth trustee legal communications between there's I work say bit - there's debt on work mean the to any based holders work happen, paperwork still and

So no. an we don't see obstacle, that as

Operator

question from Perito And Michael of KBW. comes next our

Michael Perito

a had to want hit I of things I handful on.

opportunities loan of the the portfolio tilt mean to segments share? there few here, growth the that like side, the there the loan does willing forward? I on you're production. driver to going kind be kind quarters to net the it been mean Or that on moving of has for are growth seems is seem of that really within it case finance other First, I team be last equipment

Jeffrey Ludwig

Yes.

seeing what an quarters that we're good for seeing actually. of other So been now. pretty seeing in What's we're level several the I think attrition in is portfolios, there's we've payoffs happening probably elevated pipeline,

And these not seeing probably that's raised lack - than we're we're commercial on real some going more estate runoff chase balances seeing the side. terms production. seeing impacting where of in we're that a to And are probably of we're the

is growth, In I now business. terms mean, equipment right finance - terms our of so shining in star yes, other the

some on business. portfolios, focus the other are - lift other right deemphasizing see if we although estate to if think And of the we'll we some of attrition continue on down, We see areas I slow real residential these now.

we would... So

Michael Perito

be of to activity just next mean going my versus of and I attrition that's elevated that the of intentional Yes, nature? payoff question. how is kind much stuff

Jeffrey Ludwig

Yes.

books. over - to estate The real portfolio it of were some to a so quarters, had was expect we lending, We Alpine it we stopped We've doctor some running, intentional. doing real some program, those our program - continue that So a prior that so do on is residential - that are would which were put portfolios indirect doing in we residential we an to and kind decrease stopped ago. of time. we quarter or estate

So you well. some yielding, lower there book but natural that pay that line those in is item, see And as profitable consumer on don't downs both are less the loans. necessarily a

Michael Perito

Okay.

maybe pipeline outlook to production about next commentary piece fee the that so? a unit? the mortgage little this point kind just little the the think - Love And you around continues at the for jump bit. side, On of quarter income then What's Funding give also the can as about we or a us residential where is

Jeffrey Ludwig

get side, the the quarter on We'll of the probably loan the X/X feel funding the of low government pipeline is stable. had so it we in we was two. of shut the most production in good about - The It's about down, not for not of so three of the So pipeline. kind fairly - begin had most quarter, a quarter, - as year, production. the the to it's same months quarter,

have a quarter Love quarter. second the quarter it So we this optimistic are I first that we're - better did than than Funding think - quarter can the

changes about quarters working think million with pretty continuing. So things the Those of last I our we're are guidance I revenue, And well. business. working feel in several are We've we And next million $X made good year. good management that the on front. that $X to well pretty think Love that of guidance

- that item the We're the where generate to have some were We going seasonally quarter. producers end second on build focus some the would be they bring On back up that better, quarter ramp a from are second material I up to in resi revenue I materially think look it's at It's to going the in going to year. two. time, I quarter. wouldn't it's in revenue. line of up pipelines but not to a over continue it be business some say the be period to to expect change in next the side, of and do or

Michael Perito

on Okay. pretty that - $XX we where were talk guess, million And is into I increase, first from in $XX what you I going the quarter the drive good. on quarter? back range mean, to about expenses, then the Can the million, obviously, looked

Stephen Erickson

this all Yes, at at look where said, decline. with saw as it we're is we across Steve. million, we where the we categories was, sitting When the $XX.X

Going to forward, of X will pulled that our annual in in kick the $XX expectations million. we million $XX haven't and salary our down And of that's April starting increases why quarter. take second place so all

we that, $XX correct the of that's the now. million So primary believe for $XX million still driver why to is guidance that

Michael Perito

a Is it of processing low? an like noticing. Okay. mean with around it's a room elevated little outlook lot jumped operating there? What's there activity down we're at still that figure, I to for data the bit know some I come but of seems it's a line the deal

Jeffrey Ludwig

involves of not materially X that something So an at managing we as doing longer we internally, data how do involves different bit at that's a over look and that process also as expense looking month impacted look a like can we're contracts. processing at but be period. That's we internally, X the vendor kind something it work to things

brought but exercise an doing it be focused going we that others that that so, are along with a is to in while down, so it's may something be be item, can And on. longer-term

Michael Perito

then one, one And can. if Okay. just I last

rate. on seems Just high tax year's relative total last to the rate, year a full little a

Just rest trend of that the year? any thoughts for the will on where

Jeffrey Ludwig

is and that year for all rolling Last little probably bit onetime through. Alpine impacted expenses are the kind a of

think Yes, is in year. expect to for will, So if we the rate. some the correct if I our XX% you range that me it noise, tax be Steve, there wrong, rate, in I'm tax

Michael Perito

Okay.

So in first was the consistent it with quarter. where

Jeffrey Ludwig

Yes.

level that's little increase going We have rate to bit. a of higher that profitability tax

Operator

Instructions]. [Operator

question comes of Our next Andrew Sandler from Liesch O'Neill.

Andrew Liesch

maybe of your like right what's - runoff there? from talk It wanted with what's the quarter? some what to - indirect were the about but outlook And take to be used that that growth Just doing, the for GreenSky sounds portfolio. consumer And there now relationship? any the Alpine and growth there last some was the

Jeffrey Ludwig

Yes.

quarter-over-quarter, flat what last been of was and kind GreenSky we've So that's to of quarters. the managing couple

- we assess something And may periodically. in that no point, this some as appropriate. it's increase we volumes to the concrete at feel there. But relationship we our might So continue we plans at a helpful. and do that's future, and volumes Hopefully, it's that. look increase we'll it And - to

Andrew Liesch

just looks was on Alpine quarter - Management done. The this Wealth the the deal Yes. like line. was And lowest the since then

and rate from other what third get of second of run trying a onetime what to The quarter is just there. going a like good forward have items the quarter, last - I'm in here. year, also some sense

Jeffrey Ludwig

Yes.

had a we in It nature, had do. just some quarter, manage be type those fees, happened more we have we generally an So than And we of quite do. consistent. the a fourth bit thing. when onetime generally stream Those or of while those It's quarter. first items. really we group of that than not business that every normally estate, quite we that some do they quarter that in normally have less is have to the are And as quarter, a each in - part we predictable we bit

So we will just and they be. items, those where predict it's have still hard will to

Operator

our question And comes of Davidson. from next Kevin D.A. Reevey

Kevin Reevey

the that quarter. to related estate loan down the question during a have I was real commercial

a legacy us on loan some and the color was was And the type of First, credit? that Midland of this can a type part acquisition? a Or was prior this give of you credit States collateral?

Jeffrey Ludwig

living center in credit. municipality-based was Midland credit. that's Illinois legacy This an Northern a It's a assisted

okay we today, needed and about a with some loss. we the to issues we into about move So nonperforming. take feel rates loss the there credit, - that won't But are

Operator

any now And further any I'm back time. not the would to like for at this I to call questions remarks. further Jeff showing over turn Ludwig

Jeffrey Ludwig

for Thanks. we'll today, I'd and our quarter. you. Thank everybody joining talk to thank like call next

Operator

thank and all Ladies gentlemen, conference. does conclude today's disconnect. day. This may for you a have Everyone, program, today's in you wonderful participating and

Jeffrey Ludwig

you. Thank

Midland States Bancorp (MSBI) 26 Apr 192019 Q1 Earnings call transcript