Midland States Bancorp, Inc.

Good day and thank you for standing by. Welcome to the Q4 2022 Midland States Bank Corp 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 the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. I would now like to turn the conference over to your host today, Tony Rafi of Financial Profiles. You may begin.

Thank you, Kevin. Good morning, everyone, and thank you for joining us today for the Midland States Bancorp fourth 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've 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 States 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. 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. Our fourth quarter performance capped a very successful year in which we generated a record level of earnings for the company. One of our goals over the past few years was to bring our level of returns more in line with our peer group, and we believe our performance this year reflects the strong progress we have made in this area. For the full year, we generated a return on average assets of 1.31%, up from 1.18% in 2021. and a return on average tangible equity of 20.8% up from 17.9% in 2021. Our improved profitability represents our strong execution on our strategies to generate profitable growth and realize more operating leverage, while at the same time prudently managing our growth as reflected in our continued strong credit quality. We have built a stronger, more diversified franchise with higher quality, more consistent sources of income, which has resulted in the steady improvement we have seen in our financial performance. Specific to the fourth quarter, we continue to generate strong financial performance despite moderating our level of loan growth given the likelihood of economic conditions weakening in 2023. We generated net income of $29.7 million or $1.30 per share, which included $17.5 million gain we realized on the termination of forward-starting FHLB interest rate swaps, and $6.7 million in charges we took on commercial mortgage servicing rights and impairment on other real estate owned. On a core earnings basis, we continued to generate a higher level of profitability with adjusted pre-tax, pre-provision earnings coming in at $33.2 million. We were able to continue generating solid loan growth, even while being more selective in our new loan production. Our total loans increased at a 7% annualized rate, with most of the growth coming in our commercial portfolio. Our equipment finance business had another strong quarter, which contributed to the growth in commercial loans, as this portfolio has now surpassed $1.1 billion. Our community bank group continues to be highly productive, and with the increased exposure to higher growth markets, we are seeing a larger volume of attractive lending opportunities, which has enabled us to continue generating solid loan growth while being conservative in our underwriting and pricing. We are seeing good contributions across our footprint, but in particular, we are seeing increased production out of our eastern Illinois markets, which includes the Chicago MSA. and the St. Louis market where we have made investments to increase our business development capabilities over the past couple of years. For the full year, our Eastern Illinois loan portfolio increased 22% while our St. Louis loan portfolio increased 40%. We also saw double digit deposit growth in these markets as our teams are doing an excellent job of developing full banking relationships. As I indicated earlier, We have generated a higher level of earnings and loan growth over the past few years while maintaining a conservative approach to risk management. As a result, we continue to see good asset quality trends. While we had a slight increase in non-performing loans in the fourth quarter, our net charge-offs were just three basis points of average loans. And importantly, at this point, we continue to see generally healthy trends across the portfolio with no meaningful change in delinquencies or watch list loans. Our strong financial performance continues to enhance the value of our franchise. During the fourth quarter, our book value per share increased 2.4%, while our tangible book value per share increased 4%. And with the exception of our total capital ratio, which decreased due to the payoff of $40 million in subordinated debt in the fourth quarter, all of our capital ratios increased from the end of the prior quarter as we continue to make progress on one of the most important financial goals. At this point, I'm going to turn the call over to Eric to provide some additional details around our fourth quarter performance. Eric.