Midland States Bancorp, Inc. · NASDAQ:MSBI
Midland States Bancorp — Sandler O'Neill East Coast Financial Services Conference 2018
29 slides from Midland States Bancorp's conference presentation, Nov 6, 2018
Slide 1: Midland States Bancorp, Inc.
Midland States Bancorp, Inc. NASDAQ: MSBI Sandler O’Neill East Coast Financial Services Conference November 6-7, 2018
Slide 2: Forward-Looking Statements
Forward-Looking Statements. This presentation may contain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements express management’s current expectations, forecasts of future events or long-term goals, and may be based upon beliefs, expectations and
Slide 3: Company Snapshot
Company Snapshot • $5.7 billion asset community bank established in 1881 and headquartered in Effingham, Illinois (4th largest Illinois-based community bank) • $3.2 billion Wealth Management business • Strong fee generators consistently account for more than 30% of total revenue • 95+ offices throug
Slide 4: Financial Services & Banking Center Footprint
Financial Services & Banking Center Footprint 3
Slide 5: Investment Summary
Investment Summary • Experienced and deep management team led by Board of Directors with considerable ownership • Following management transition completed in 2007, consistent track record of driving compelling shareholder returns through disciplined strategic expansion and earnings growth • Solid a
Slide 6: Business and Corporate Strategy
Business and Corporate Strategy • In conjunction with a new leadership team, MSBI’s corporate initiative-driven strategic plan was adopted in late 2007 to build a diversified financial services company anchored by a strong community bank • Five core strategic initiatives: Customer-Centric Drive our
Slide 7: Management Team
Management Team Highly experienced senior management in place: John M. Schultz: Chairman of the Board Leon J. Holschbach: CEO of Midland States Bancorp Held the position since 2006 Joined Midland States in August 2007 Chief Executive Officer of Agracel, Inc. 35+ years in community banking; 2
Slide 8: Strategic Growth History
Strategic Growth History Successful Execution of Strategic Plan… …Driving Consistent TBV Growth (at period-end in Billions) (at period-end) CAGR: 21% $5.7 CAGR: 5% $17.16 $17.31 $16.38 $4.4 $15.91 $15.20 $3.2 $14.34 $2.9 $13.82 $2.7 $13.68 $1.7 $12.52 $1.6 $1.5 $1.6 $1.1 $11.10 2009 2010 2011 2012 2
Slide 9: Successful Acquisition History
Successful Acquisition History • Midland States has completed 13 transactions since 2008, including FDIC-assisted, branch, whole bank, asset purchase, business line, and a New York trust asset acquisition • Demonstrated history of earnings expansion • Deliberate diversification of geographies and re
Slide 10: Overview of Alpine Bancorp. Acquisition
Overview of Alpine Bancorp. Acquisition Key Highlights Alpine Branch Map • Closed February 28, 2018 South South Beloit Beloit • Expands Midland’s franchise in Northern Illinois 90 Rockton Rockton – Provides #1 deposit market share in Rockford, IL MSA Harvard Harvard • Low-cost, relationship driv
Slide 11: Market Opportunities & Acquisition Strategy
Market Opportunities & Acquisition Strategy Number of Banks & Thrifts • MSBI believes there will be numerous small to With less than $1.0 Billion in Assets (1) midsized banking organizations available for acquisition within Illinois and contiguous states • There are nearly 1,300 institutions in the
Slide 12: Long Track Record of Strong Returns and Increasing Dividends
Long Track Record of Strong Returns and Increasing Dividends • Profitability driven by MSBI’s attractive asset base, core funding structure and fee generating businesses • 10%+ annual dividend growth over the past 15 years Adjusted Return on Average Assets(1) Dividends Declared Per Share 1.08% 1.05%
Slide 13: Performance Metrics
Performance Metrics Adjusted Diluted Earnings Per Share (1) Adjusted Return on Avg. Tangible Common Equity (1) $2.39 19.7% $2.08 17.0% $1.89 $1.89 $1.74 $1.72 14.5% 11.6% 11.7% 11.3% 2013 2014 2015 2016 2017 YTD 2018 2013 2014 2015 2016 2017 YTD 2018 Net Interest Margin (2) Noninterest Income / Tota
Slide 14: Consistent Balance Sheet Growth
Consistent Balance Sheet Growth Total Loans and Deposits $4,143 $4,156 12.4% average annual core loan growth (1) $3,227 $3,131 $2,368 $2,404 $2,320 $2,151 $1,996 $1,798 $1,382 $1,206 2013 2014 2015 2016 2017 3Q 2018 Depos its ($m m) Loa ns ($m m) Note: (1) Average annual core loan growth represents
Slide 15: Loan Portfolio Overview
Loan Portfolio Overview • Broadly diversified loan portfolio by type of Loan Portfolio Mix customer and loan type Residential Real Estate $586M • Current loan origination efforts focus on high 14% quality commercial loan segments Non-Owner Occupied CRE $916M Consumer 22% • 62% of portfolio is fixed;
Slide 16: Strong Credit Quality
Strong Credit Quality • Managed by experienced personnel, MSBI maintains a disciplined approval process and conservative credit culture • Credit losses have steadily declined since 2015 Nonperforming Assets / Total Assets (1) NCOs / Average Loans 0.94% 1.64% 1.48% 1.07% 1.01% (2) 0.80% 0.70% 0.73% 0
Slide 17: Attractive and Growing Core Deposit Base
(1) Attractive and Growing Core Deposit Base • 93% core deposits (2) Deposit Mix • Recent acquisitions have improved overall funding mix Interest- Bearing Noninterest- Bearing • 24% non-interest bearing deposits Checking $991M $1,048M 93% Core (2) 25% 24% Brokered • Retail deposits represent 51% of
Slide 18: Positioned for Increasing Interest Rates
Positioned for Increasing Interest Rates • Midland’s modeled base case earnings Earnings Sensitivity(1) projections as of September 30, 2018 for $25.0 $ 20.8 a +100 bps Ramp scenario would $20.0 increase net interest income by $1.5mm in Year 1 and $7.3mm in Year Two. $ 14.0 $15.0 • Midland’s cumulat
Slide 19: Wealth Management
Wealth Management • Wealth Management group offers Trust and Estate services, Investment Management, Financial Planning and Employer Sponsored Retirement Plans • Acquisition of Sterling Trust (Nov. 2016) added $400 million in Assets Under Administration • Acquisition of CedarPoint Investment Advisor
Slide 20: Outlook
Outlook Midland [=] States Bancorp, Inc.
Slide 21: Improving Quality of Earnings
Improving Quality of Earnings • With recent acquisitions of Alpine and Centrue, a greater percentage of revenue is being derived from core community banking and wealth management businesses • Private label CMO income(1) and gain on sale income from commercial FHA and residential mortgage banking dec
Slide 22: Fee Income Shifting to More Consistent Sources
Fee Income Shifting to More Consistent Sources • Wealth Management and core banking fees increasing as percentage of fee income • Gain on sale income from commercial FHA and residential mortgage banking declining as a percentage of fee income FY 2016 Fee Income Mix Projected FY 2019 Fee Income Mix(1
Slide 23: Outlook
Outlook • Realization of additional operating leverage expected to drive higher level of profitability in 2019 • Continued discipline in balance sheet growth to manage liquidity and protect net interest margin • Loan production will remain focused on areas with most attractive risk- adjusted yields
Slide 24: Appendix
APPENDIX
Slide 25: Appendix: Capital Position
Strong Pro Forma Appendix: Position (1) CapitalPosition Capital 12.35% 12.00% 9.85% 8.37% 8.24% 8.00% 7.03% 4.00% 0.00% TCE/TA Tier 1 Common Tier 1 Leverage Tier 1 RBC Total RBC As Reported (9/30/18) 24
Slide 26: Appendix: Solid Reserve Coverage
Appendix: Solid Reserve Coverage As of December 31, 2015 As of December 31, 2016 As of December 31, 2017 As of S eptember 30, 2018 % of the % of the % of the % of the Allowance Allowance Allowance Allowance Non- to Total Non- to Total Non- to Total Non- to Total Purchased Purchased Loans in Purchase
Slide 27: Appendix: Investments
Appendix: Investments • Midland continues to adjust the portfolio Investment Portfolio to optimize the portfolio’s duration, mix, Equity Securities, 0% US Treasury, 3% and to increase yield. Currently, the Corporate Securities, 9% portfolio has an effective duration of GSE Debt Securities, 11% appro
Slide 28: Appendix: Reconciliation of Net Interest Margin Excluding Accretion Income
Appendix: Reconciliation of Net Interest Margin Excluding Accretion Income Nine Months Year Ended December 31, Ended September 30, 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Reported yield on loans 6.58% 6.48% 6.17% 5.73% 5.33% 4.65% 5.21% 4.85% 4.85% 4.98% Effect of accretion income on acqui
Slide 29: Appendix: Reconciliation of Adjusted Earnings/Profitability
Appendix: Reconciliation of Adjusted (1) Earnings/Profitability Nine Months Ende d (dollars in thousands, e xce pt pe r share data) 2013 2014 2015 2016 2017 Se pte mbe r 30, 2018 Adjuste d Earnings Income before income taxes - GAAP $ 20,528 $ 15,467 $ 35,498 $ 50,431 $ 26,471 $ 29,942 Adjustments to
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