Midland States Bancorp, Inc.

Good day, and thank you for standing by. Welcome to the Q1 2022 Midland States Bancorp, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during that session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded, and if you require any assistance during the call, please press star 0. I would now like to hand the conference over to your speaker today, Mr. Tony Rossi of Financial Profiles. Mr. Rossi, the floor is yours.

Thank you, Chris. Good morning, everyone, and thank you for joining us today for the Midland States Bancorp First Quarter 2022 Earnings Call. Joining us from Midland's management team are Jeff Ludwig, President and Chief Executive Officer, and Eric Lemke, Chief Financial Officer. We will be using a slide presentation as part of our discussion this morning. If you have not done so already, please visit the webcast and presentations page of Midland's Investor Relations website to download a copy of the presentation. Before we begin, I'd like to remind you that this conference call contains forward-looking statements with respect to the future performance and financial condition of Midland Saints Bancorp that involve risks and uncertainties. Various factors could cause actual results to be materially different from any future results expressed or implied by such forward-looking statements. These factors are discussed in the company's SEC filings, which are available on the company's website. The company disclaims any obligation to update any forward-looking statements made during the call. Additionally, management may refer to non-GAAP measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures. The press release available on the website contains the financial and other quantitative information to be discussed today, as well as the reconciliation of the GAAP to non-GAAP measures. And with that, I'd like to turn the call over to Jeff. Jeff?

Good morning, everyone. Welcome to the Midland States Earnings Call. I'm going to start on slide three with the highlights of the first quarter. As we expected, we saw a continuation of many of the positive trends we experienced in the second half of last year. Most notably, we had very strong loan growth, an expanding net interest margin, and disciplined expense control. This resulted in a strong quarter with net income of $20.7 million, or $0.92 per share. and pre-tax pre-provision earnings of $32 million. Relative to the first quarter of 2021, our return on average assets, return on average tangible common equity, and adjusted pre-tax pre-provision return on average assets have all increased, which reflects the consistent improvement we are seeing in the level of profitability as we generate strong organic growth and realize more operating leverage. Despite the first quarters typically being a seasonally slower period for loan production, we had another strong quarter of loan originations. We had $673 million in new commercial and commercial real estate originations, which is 115% higher than in the first quarter of last year. The higher level of loan originations reflects the more productive commercial banking teams we have built. and the increased presence we now have in higher growth markets. Our loan production was more heavily weighted towards commercial real estate this quarter as we continue to see good results from our specialty finance group that primarily originates loans for multifamily and senior care properties and provides bridge to HUD financing. Within commercial lending, our Midland Equipment finance team had a strong quarter of originations with production being about 60% higher than the first quarter of 2021, although a higher level of payoffs impacted the growth we had in this portfolio. From a geographic perspective, we had a strong quarter in loan production in the St. Louis market, which reflects the improved business development capabilities we have following changes in leadership and additional resources we have added to the teams. The record level of loan production resulted in 24% annualized growth in total loans. This strong growth in loans enabled us to redeploy a lot of our excess liquidity into the loan portfolio, which resulted in a favorable shift in our mix of earning assets and significant expansion in our net interest margin. We are seeing higher rates on new loan originations, which is also contributing to the increase in our net interest margins. Notably, we are generating the strong loan growth and increase in net interest income while maintaining relatively flat expense levels. As we have mentioned in the past, we've kept the size of our overall banking teams relatively consistent, but we have made many changes in personnel over the past couple of years that have upgraded the quality and productivity of the teams. And we are also continuing to realize more efficiencies from the investments we have made in our technology platform. As a result, while we are seeing some degree of inflationary pressure, particularly in labor costs, we have been able to largely offset this pressure by increasing efficiencies and productivity, which allows more of the strong organic growth we are generating to fall to the bottom line and improve our earnings and returns. At this point, I'm going to turn the call over to Eric to provide some additional details around our first quarter performance.