Midland States Bancorp, Inc. · NASDAQ:MSBI
Midland States Bancorp — Q3 2023 Earnings Presentation
33 slides from Midland States Bancorp's earnings presentation, Oct 26, 2023
Slide 1: Midland States Bancorp, Inc. Third Quarter 2023 Earnings Presentation
1 Midland States Bancorp, Inc. NASDAQ: MSBI Third Quarter 2023 Earnings Presentation
Slide 2: Forward-Looking Statements
22 Forward-Looking Statements. This presentation may contain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements expressing management’s current expectations, forecasts of future events or long-term goals may be based upon beliefs, expectations an
Slide 3: Company Snapshot
33 Company Snapshot • Illinois state-chartered community bank founded in 1881 • $8.0 billion in assets • $3.5 billion Wealth Management business • Commercial bank focused on in-market relationships with national diversification in equipment finance • 53 branches in Illinois and Missouri • 16 success
Slide 4: Business and Corporate Strategy
4 Business and Corporate Strategy 4 Customer-Centric Culture Drive organic growth by focusing on customer service and accountability to our clients and colleagues; seek to develop bankers who create dynamic relationships; pursue continual investment in people; maintain a core set of institutional va
Slide 5: Successful Execution of Strategic Plan
5 Successful Execution of Strategic Plan... 5 Total Assets (at period-end in billions) $1.1 $1.6 $1.5 $1.6 $1.7 $2.7 $2.9 $3.2 $4.4 $5.6 $6.1 $6.9 $7.4 $7.9 $8.0 Selected Acquisitions 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 3Q 2023 CAG R si nce 201 6 IP O: 1 4% CAGR: 15
Slide 6: Leads to Creation of Shareholder Value
6 ...Leads to Creation of Shareholder Value 6 Tangible Book Value Per Share(1) 22 Consecutive Years of Dividend Increases $17.31 $17.00 $18.64 $19.31 $21.66 $20.94 $21.98 $17.22 $17.09 $18.34 $18.80 $21.42 $24.72 $26.66 Tangible Book Value Per Share TBV/Share ex. AOCI 2017 2018 2019 2020 2021 2022 3
Slide 7: And Increased Profitability
7 ...And Increased Profitability 7 Adjusted Diluted EPS(1) CAGR: 14.9% Adjusted ROATCE(1) 11.32% 15.00% 14.44% 9.24% 18.33% 18.59% 15.80% 2017 2018 2019 2020 2021 2022 YTD 2023 Notes: (1) Represents a non-GAAP financial measure. See “Non-GAAP Reconciliation” in the appendix. $1.89 $2.39 $2.54 $1.70
Slide 8: Overview of 3Q23
8 Overview of 3Q23 Strong Financial Performance Stable Deposit Base Conservative Underwriting and Pricing Criteria Results in Small Decline in Total Loans Stable Asset Quality and Increase in Capital Ratios 8 • Net income available to common shareholders of $15.8 million, or $0.71 diluted EPS • 3Q23
Slide 9: Loan Portfolio
9 Loan Portfolio 9 • Total loans decreased $86.5 million from prior quarter to $6.28 billion • Decrease primarily driven by decline in equipment finance portfolio of $50.7 million and continued runoff of GreenSky portfolio of $62.8 million • Growth in construction portfolio driven by fundings on exi
Slide 10: Total Deposits
10 Total Deposits 10 • Total deposits decreased $21.5 million from end of prior quarter • Noninterest-bearing deposits relatively stable as continued movement of funds into interest-bearing accounts was offset by new commercial and small business relationships • Managing rates on deposits in order t
Slide 11: Deposit Summary as of September 30, 2023
11 Deposit Summary as of September 30, 2023 11 Deposits by Channel (in millions) Commercial Deposits by NAICS Code (in millions) 22.9% 13.3% 5.8% 9.3%1.4% 7.9% 1.5% 4.1% 4.1% 2.2% 3.7% 1.2% 3.4% 4.6% 11.9% 2.7% Finance & Insurance RE, Rental & Leasing Manufacturing Other Services Skilled/Memory Care
Slide 12: Uninsured Deposits
12 Uninsured Deposits 12 Average Deposit Balance per Account = $34,000 Uninsured Deposits (in millions) September 30, 2023 June 30, 2023 Call Report Uninsured Estimate $ 1,737 $ 1,654 Call Report Estimated Uninsured Deposits to Total Deposits 27 % 26 % Less: Affiliate Deposits (MSB owned funds) (44)
Slide 13: Investment Portfolio
13 Investment Portfolio As of September 30, 2023 13 Fair Value of Investments by Type 0.2% 10.7% 62.0% 8.7% 5.9% 2.7% 9.8% Treasuries US GSE & US Agency MBS - agency MBS - non agency State & Muni CLOs Corporate • All Investments are classified as Available for Sale • Average T/E Yield is 3.60% for 3
Slide 14: Balance Sheet Repositioning
14 Balance Sheet Repositioning 3Q23 14 Financial Impact (after tax) (in millions) 3Q2023 Ongoing Annualized Company-Owned Life Insurance Optimization Surrendered policies - $51 million at 2.19%; tax penalty of $4.5 million $ (4.5) $ (1.1) Purchased policies - $100 million at 4.56%; enhancement fee o
Slide 15: Liquidity Overview
15 Liquidity Overview 15 Liquidity Sources (in millions) September 30, 2023 June 30, 2023 Cash and Cash Equivalents $ 132.1 $ 160.7 Unpledged Securities 258.1 343.5 FHLB Committed Liquidity 883.9 857.2 FRB Discount Window Availability* 759.8 184.1 Total Estimated Liquidity $ 2,033.9 $ 1,545.5 Condit
Slide 16: Net Interest Income/Margin
16 Net Interest Income/Margin 16 • Net interest income down slightly from prior quarter as higher average balance of interest-earning assets was offset by an increase in cost of interest-bearing liabilities • As expected, net interest margin stabilized with just a 3 bp decrease from prior quarter as
Slide 17: Loans & Securities - Repricing and Maturity
17 Loans & Securities - Repricing and Maturity 17 Total Loans and Leases (net of unearned income)(1) (in millions) As of September 30, 2023 Repricing Term Rate Structure 3 mos or less 3-12 mos 1-3 years 3-5 years 5-10 years 10-15 years Over 15 years Total Adjustable Rate Fixed Rate Commercial loans
Slide 18: Wealth Management
18 Wealth Management 18 • Assets under administration and Wealth Management fees remained relatively stable from 2Q23 to 3Q23, as declines in market values were partially offset by addition of new client assets from new business development efforts • Formed Midland Wealth Advisors, a registered inve
Slide 19: Noninterest Income
19 Noninterest Income 19 • Noninterest income decreased 3% from prior quarter • 3Q23 noninterest income included $5.0 million loss on sale of investment securities and $6.6 million enhancement fee on company-owned life insurance resulting from balance sheet repositioning • Excluding impact of balanc
Slide 20: Noninterest Expense and Operating Efficiency
20 Noninterest Expense and Operating Efficiency 20 Noninterest Expense and Efficiency Ratio (1) (Noninterest expense in millions) $43.5 $44.5 $42.9 $42.0 $49.9 $3.3 54.3% 58.3% 57.6% 55.0% 55.8% Total Noninterest Expense Adjustments to Noninterest Expense Efficiency Ratio 3Q 2022 4Q 2022 1Q 2023 2Q
Slide 21: Asset Quality
21 Asset Quality 21 • Nonperforming loans increased $1.1 million primarily due to one commercial loan as well as increases in the equipment finance portfolio • Net charge-offs to average loans was 0.22% • Provision for credit losses on loans of $5.2 million, primarily related to increases in past du
Slide 22: Changes in Allowance for Credit Losses
22 Changes in Allowance for Credit Losses 22 ($ in thousands) ▪ Changes to specific reserves ▪ New Loans ▪ Changes in Credit quality including risk rating ▪ Changes in portfolio mix ▪ Aging of existing portfolio ▪ Other charge-offs and recoveries ▪ Change to macro- economic variables and forecasts ▪
Slide 23: ACL by Portfolio
23 ACL by Portfolio 23 ($ in thousands) September 30, 2023 June 30, 2023 Portfolio Loans ACL % of Total Loans Loans ACL % of Total Loans Commercial $ 874,004 $ 7,563 0.87 % $ 875,295 $ 5,180 0.59 % Warehouse Lines 48,547 — — % 30,522 — — % Commercial Other 697,235 11,847 1.70 % 732,616 10,110 1.38 %
Slide 24: Outlook
24 Outlook 24 • Prudent risk management will remain top priority while economic uncertainty remains with business development efforts focused on adding new commercial and retail deposit relationships • Continue generating strong financial performance while maintaining conservative approach to new lo
Slide 25: Appendix
APPENDIX Midland [=] States Bancorp, ne.
Slide 26: Commercial Loans and Leases by Industry
2626 Industries as a percentage of Commercial, CRE and Equipment Finance Loans and Leases with outstanding balances of $4.89 billion as of 9/30/2023 ($s in millions) RE/Rental & Leasing $1,533.9 31.4% All Others $622.8 12.7% Skilled Nursing $468.8 9.6% Construction - General $336.7 6.9% Manufacturin
Slide 27: Commercial Real Estate Portfolio by Collateral Type
27 Commercial Real Estate Portfolio by Collateral Type 27 CRE Concentration (as of September 30, 2023) CRE as a % of Total Loans 38.4% CRE as a % of Total Risk-Based Capital (1) 262.0% Notes: (1) Represents non-owner occupied CRE loans only Collateral type as a percentage of the Commercial Real Esta
Slide 28: Capital Ratios and Strategy
28 Capital Ratios and Strategy 28 • Capital initiatives increased CET1 to 8.16% from 7.77% at 12/31/22 with limited buybacks below TBV • Internal capital generated from strong profitability and slower balance sheet growth expected to raise TCE ratio to 7.00%-7.75% by the end of 2024 • Capital action
Slide 29: Reconciliations of Non-GAAP Financial Measures
2929 MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) Tangible Book Value Per Share For the Year Ended (dollars in thousands, except per share data) 2017 2018 2019 2020 2021 2022 Shareholders' Equity to Tangible Common Equity Total shareholders' equity—GAAP $ 4
Slide 30: Reconciliations of Non-GAAP Financial Measures: Adjusted Earnings
3030 MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) Adjusted Earnings Reconciliation For The Year Ended (dollars in thousands, except per share data) 2017 2018 2019 2020 2021 2022 Income before income taxes - GAAP $ 26,471 $ 50,805 $ 72,471 $ 32,014 $ 99,112
Slide 31: Reconciliations of Non-GAAP Financial Measures: Adjusted Earnings (Quarterly)
3131 MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) Adjusted Earnings Reconciliation For The Quarter Ended September 30, June 30, March 31, December 31, September 30, (dollars in thousands, except per share data) 2023 2023 2023 2022 2022 Income before income
Slide 32: Reconciliations of Non-GAAP Financial Measures: Efficiency Ratio
3232 MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued) Efficiency Ratio Reconciliation For the Quarter Ended September 30, June 30, March 31, December 31, September 30, 2023 2023 2023 2022 2022 (dollars in thousands) Noninterest expense - GAAP $ 42,0
Slide 33: Reconciliations of Non-GAAP Financial Measures: Tangible Common Equity
3333 MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued) Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share As of September 30, June 30, March 31, December 31, September 30, (dollars in thousands, except per share data) 2
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