Midland States Bancorp, Inc. · NASDAQ:MSBI
Midland States Bancorp — Investor Presentation (August 2022)
47 slides from Midland States Bancorp's investor presentation, Aug 1, 2022
Slide 1: Midland States Bancorp, Inc. Investor Presentation August 2022
1 Midland States Bancorp, Inc. NASDAQ: MSBI Investor Presentation August 2022
Slide 2: Forward-Looking Statements
2 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 - te rm goals may be based upon beliefs, expecta
Slide 3: Company Snapshot
3 Company Snapshot ▪ $7.4 billion asset community bank established in 1881 and headquartered in Effingham, Illinois » Largest Illinois - based community bank 1 ▪ $3.6 billion Wealth Management business ▪ Commercial bank focused on in - market relationships with national diversification in equipment
Slide 4: Financial Services & Banking Center Footprint
4 Financial Services & Banking Center Footprint
Slide 5: Investment Summary
5 Notes: 1. As of June 30, 2022 Investment Summary Consistent track record of driving compelling shareholder returns through disciplined strategic expansion and earnings growth Well diversified loan portfolio across asset classes, industries and property types Organization - wide focus on expense ma
Slide 6: Business and Corporate Strategy
6 Business and Corporate Strategy Customer - Centric Culture Drive organic growth by focusing on customer service and accountability to our clients and colleagues; seek to develop bankers who create dynamic relationships; pursue continual investment in people; maintain a core set of institutional va
Slide 7: Management Team
7 Jeffrey G. Ludwig | President and CEO of Midland States Bancorp ▪ Assumed Company CEO role in Jan. 2019 after serving as Bank CEO ▪ More than 10 years serving as CFO ▪ Joined Midland in 2006; 16+ years in banking industry Jeffrey S. Mefford | President of Midland States Bank and EVP of Midland Sta
Slide 8: Successful Acquisition History
8 Strategic Capital Bank AMCORE Bank, N.A. Love Savings / Heartland Bank Sterling Bancorp Centrue Financial Alpine Bancorp. HomeStar Financial Acquisition Type FDIC - Assisted 12 Branches Whole Bank Trust Administration Whole Bank Whole Bank and Wealth Mgmt Whole Bank Assets Acquired ($mm) $540.4 $4
Slide 9: Overview of FNBC Branch Acquisition
9 Overview of FNBC Branch Acquisition Key Highlights ▪ Completed in Q2 2022 ▪ Acquired one branch and the deposits and certain loans from two FNBC Bank & Trust locations ▪ Added branch in Mokena, IL ▪ Increases Midland’s exposure to faster growing markets in Northern Illinois ▪ Improves ability to c
Slide 10: Successful Execution of Strategic Plan
10 Successful Execution of Strategic Plan… Total Assets (at period - end in Billions) CAGR: 17% Selected Acquisitions: Total Assets at Time of Acquisition (in millions) 2009: Strategic Capital Bank ($540) 2010: AMCORE Bank ($500) 2014: Love Savings/Heartland Bank ($889) 2017: Centrue Financial ($990
Slide 11: Leads to Creation of Shareholder Value
11 $17.31 $17.00 $18.64 $19.31 $21.66 2017 2018 2019 2020 2021 …Leads to Creation of Shareholder Value Note: (1) Tangible book value per share is a non - GAAP financial measure; tangible book value per share is defined as tangible common equit y divided by shares of common stock outstanding; please
Slide 12: And Increased Profitability
12 …And Increased Profitability Adjusted Diluted EPS (1) Adjusted ROATCE (1) $1.89 $2.39 $2.54 $1.70 $3.65 2017 2018 2019 2020 2021 11.32% 15.00% 14.44% 9.24% 18.33% 18.65% 2017 2018 2019 2020 2021 1H 2022 Notes: (1) Represents a non - GAAP financial measure. See “Non - GAAP Reconciliation” in the a
Slide 13: Strategic Initiatives Strengthening Franchise
13 Strategic Initiatives Strengthening Franchise Action Strategic Rationale Financial Impact Three whole bank acquisitions • Low - cost deposits 2016 2021 Total Assets $3.2B $7.4B Four Wealth Management acquisitions • Recurring revenue AUA $1.7B $4.2B Expanded equipment finance group • Diversify rev
Slide 14: Strategic Initiatives Have Produced Improved Growth and Profitability
14 Strategic Initiatives Strengthening Franchise …Have Produced Improved Growth and Profitability Total Loans $2,320 $3,227 $4,138 $4,401 $5,103 $5,225 2016 2017 2018 2019 2020 2021 (in millions, as of year - end) Wealth Management Revenue $8.09 $13.34 $20.51 $21.83 $22.80 $26.81 2016 2017 2018 2019
Slide 15: Digital Talent and Technology Initiatives
15 Foundational Consumer Small Business Commercial Customer Facing Digital Talent (39 FTE) Chief Digital Officer , Director – Digital Customer Experience, Director – Enterprise Data Services, Director – Digital Solution Delivery, Lead Engineer API Development, Senior Manager – Digital Marketing, Man
Slide 16: Loan Portfolio and Asset Quality
16 Loan Portfolio and Asset Quality
Slide 17: Commercial Loans and Leases by Industry
17 Commercial Loans and Leases by Industry RE / Rental & Leasing $1,178 27.0% All Others $508 11.6% Skilled Nursing $414 9.5% Construction - General $321 7.3% Manufacturing $273 6.2% Finance and Insurance $232 5.3% Accommodation & Food Svcs $224 5.1% Trans. / Ground Passenger $204 4.7% Assisted Livi
Slide 18: Commercial Real Estate Portfolio by Collateral Type
18 Commercial Real Estate Portfolio by Collateral Type Skilled Nursing $441 17.4% Retail $414 16.3% Multi - Family $306 12.0% Industrial / Warehouse $212 8.3% Assisted Living $180 7.1% Hotel/Motel $167 6.6% All Others $160 6.3% Office $149 5.9% Farmland $84 3.3% Residential 1 - 4 Family $74 2.9% C -
Slide 19: Accelerating Commercial Loan Growth
19 Accelerating Commercial Loan Growth » New hires and an increase in productivity of the commercial banking group without increasing the size of the business development team » Addition of expertise in specialty finance and SBA lending » Increased exposure to higher growth markets in Northern Illin
Slide 20: Deposit Base Shifting More Toward Commercial Deposits
20 Deposit Base Shifting More Toward Commercial Deposits » Commercial banking team more focused on developing full banking relationships » Treasury Management successfully targeting larger commercial clients » Larger banking team in St. Louis effectively taking market share » Effectively leveraging
Slide 21: Midland Equipment Finance Portfolio Overview
21 Midland Equipment Finance Portfolio Overview ($ in millions) Portfolio Characteristics (as of 6/30/22) Nationwide portfolio providing financing solutions to equipment vendors and end - users Total Outstanding Loans and Leases $985.5 million (17.0% of total loans) Number of Loans and Leases 8,378
Slide 22: GreenSky Consumer Loan Portfolio Overview
22 GreenSky Consumer Loan Portfolio Overview Delinquency Rate (greater than 60 days) Portfolio Characteristics (as of 6/30/22) Total Outstanding $916.8 million (15.8% of total loans) Number of Loans 404,301 Average Loan Size $2,268 Average FICO Score 772 ▪ Average FICO score of 772 ▪ No losses to MS
Slide 23: Asset Quality
23 Asset Quality NCO / Average Loans • Nonperforming loans increased $4.0 million due to one CRE loan where no loss is expected • Generally positive trends in the loan portfolio with continued upgrades of watch list loans • Delinquencies in consumer portfolio remain exceptionally low • Net charge -
Slide 24: Changes in Allowance for Credit Losses
24 Changes in Allowance for Credit Losses ACL 3/31/22 ACL 6/30/22 ($ in thousands) Specific Reserves Portfolio Changes Economic Factors ▪ Changes to specific reserves ▪ New loans ▪ Changes in credit quality including risk ratings ▪ Changes in portfolio mix ▪ Aging of existing portfolio ▪ Other charg
Slide 25: ACL by Portfolio
25 ACL by Portfolio Portfolio Loans ACL % of Total Loans Loans ACL % of Total Loans Commercial $ 747,782 $ 5,412 0.72% $ 796,498 $ 5,078 0.64% Warehouse Lines 23,872 - 0.00% 83,999 - 0.00% Commercial Other 643,477 7,336 1.14% 641,628 7,543 1.18% Equipment Finance 546,267 7,068 1.29% 528,572 7,288 1.
Slide 26: Recent Financial Trends
26 Recent Financial Trends
Slide 27: Overview of 2Q22
27 Overview of 2Q22 27 Completion of FNBC Branch Purchase Higher Earnings and Improved Returns • Low - risk, easily digestible, immediately earnings accretive transaction • Added $80 million of low - cost deposits • New Mokena branch will support increased business development efforts in greater Chi
Slide 28: Loan Portfolio
28 Loan Portfolio Total Loans and Average Loan Yield • Total loans increased $255.6 million from prior quarter to $5.80 billion • Growth in CRE loans, equipment finance, conventional commercial loans, and consumer loans offset lower end - of - period balances on commercial FHA warehouse credit lines
Slide 29: Total Deposits
29 Total Deposits Total Deposits and Cost of Deposits • Total deposits increased $126.9 million from prior quarter to $6.18 billion • Increase driven by higher balances of noninterest - bearing and lower - cost interest - bearing deposits • Strengthened commercial banking and treasury management tea
Slide 30: Net Interest Income/Margin
30 • Net interest income increased 7.9% from the prior quarter due primarily to higher average loan balances and an increase in net interest margin • Net interest margin increased 15 bps from prior quarter due to the redeployment of excess liquidity into the loan portfolio and higher average yield o
Slide 31: Wealth Management
31 • During 2Q22, assets under administration decreased $446.2 million, primarily due to market performance • Wealth Management revenue declined due to lower AUA Wealth Management Wealth Management Revenue Assets Under Administration (in millions) (in millions ) $4,078 $4,058 $4,217 $4,044 $3,598 2Q
Slide 32: Noninterest Income
32 Noninterest Income • Noninterest income decreased 6.4% from prior quarter, primarily due to lower wealth management revenue • Impairment on commercial MSRs impacted noninterest income by $0.9 million and $0.4 million in 2Q22 and 1Q22, respectively • Decline in wealth management and larger commerc
Slide 33: Noninterest Expense and Operating Efficiency
33 Noninterest Expense and Operating Efficiency • Efficiency Ratio (1) was 53.1% in 2Q22 vs. 55.7% in 1Q22 • Adjustments to non - interest expense: • Excluding these adjustments, noninterest expense was up slightly from the prior quarter primarily due to a modest increase in staffing levels and high
Slide 34: Outlook
34 Outlook
Slide 35: Outlook
35 Outlook • Loan pipeline remains strong, but loan growth expected to moderate in second half of 2022 as higher rates and uncertain economic conditions are likely to have a greater impact on loan demand • Continued loan growth, NIM expansion, and expense control should drive further increases in ea
Slide 36: Long-Term Formula for Enhancing Shareholder Value
36 Long - Term Formula for Enhancing Shareholder Value Accretive M&A Transactions Earnings Growth, Improving Returns and Enhanced Franchise Value Disciplined Balance Sheet Growth Improving Operating Efficiencies Stable Sources of Recurring Income
Slide 37: Appendix
37 APPENDIX
Slide 38: ESG: A Framework for Sustainability
38 ESG: A Framework for Sustainability Environmental Facilities • Our Corporate HQ, built in 2011, is LEED (Silver) Certified. • We have installed solar power in 10 Midland locations. • We have made more than $50+ million of credit available for residential solar projects since 2011. • We have also
Slide 39: Paycheck Protection Program Overview
39 Paycheck Protection Program Overview Paycheck Protection Program (as of 6/30/22) Loans Outstanding $6.4 million Total Fees Earned $15.1 million Fees Recognized in 2Q22 $0.7 million Remaining Fees to be Recognized $0.2 million Impact on 2Q22 Financials At or for the Three Months Ended 6/30/22 Metr
Slide 40: Capital and Liquidity Overview
40 Capital and Liquidity Overview Capital Ratios (as of 6/30/22) Liquidity Sources (as of 6/30/22) 6.22% 7.66% 7.98% 8.63% 11.44% 9.85% 9.12% 9.85% 10.60% 0.00% 5.00% 10.00% 15.00% TCE/TA Tier 1 Common Tier 1 Leverage Tier 1 RBC Total RBC Consolidated Bank Level ($ in millions) Cash and Cash Equival
Slide 41: Reconciliation of TBV Per Share
41 Appendix: Reconciliation of TBV Per Share 41 (dollars in thousands, except per share data) 2021 2020 2019 2018 2017 Shareholders' Equity to Tangible Common Equity: Total shareholders' equity—GAAP 663,837$ 621,391$ 661,911$ 608,525$ 449,545$ Adjustments: Preferred stock - - - (2,781) (2,970) Goodw
Slide 42: (dollars in thousands, except per share data) Income before income taxes - GAAP $
42 (dollars in thousands, except per share data) Income before income taxes - GAAP $ 99,112 $ 32,014 $ 72,471 $ 50,805 $ 26,471 $ 50,431 Adjustments to noninterest income: Gain on sales of investment securities, net 537 1,721 674 464 222 14,702 Gain on termination of hedged interest rate swap 2,159
Slide 43: Update (dollars in thousands) Noninterest expense - GAAP $ 175,069 $ 184,010 $ 175,641
43 Update (dollars in thousands) Noninterest expense - GAAP $ 175,069 $ 184,010 $ 175,641 $ 191,643 $ 152,997 $ 121,289 Adjustments to noninterest expense: Net expense from FDIC loss share termination agreement - - - - - (351) Impairment related to facilities optimization - (12,847) (3,577) - (1,952
Slide 44: (dollars in thousands) Adjusted earnings $ 43,006 $ 83,221 $ 40,183 $ 62,780 $
44 (dollars in thousands) Adjusted earnings $ 43,006 $ 83,221 $ 40,183 $ 62,780 $ 56,622 $ 34,812 Average total shareholders' equity—GAAP $ 650,126 $ 642,698 $ 634,995 $ 638,307 $ 569,537 $ 399,061 Adjustments: Preferred stock - - - (1,561) (2,882) (1,707) Goodwill (161,904) (161,904) (168,821) (166
Slide 45: (dollars in thousands, except per share data) Income before income taxes - GAAP $
45 (dollars in thousands, except per share data) Income before income taxes - GAAP $ 29,167 $ 27,389 $ 30,600 $ 25,431 $ 19,041 Adjustments to noninterest income: Loss (gain) on sales of investment securities, net 101 - - (160) (377) (Gain) on termination of hedged interest rate swap - - (1,845) - -
Slide 46: (dollars in thousands) Noninterest expense - GAAP $ 41,339 $ 40,884 $ 45,757 $
46 (dollars in thousands) Noninterest expense - GAAP $ 41,339 $ 40,884 $ 45,757 $ 41,292 $ 48,941 (Loss) on mortgage servicing rights held for sale - - - (79) (143) FHLB advances prepayment fees - - (4,859) - (3,669) Integration and acquisition expenses (324) (91) (171) (176) (3,771) Adjusted nonint
Slide 47: (dollars in thousands, except per share data) Shareholders' Equity to Tangible Common Equity Total
47 (dollars in thousands, except per share data) Shareholders' Equity to Tangible Common Equity Total shareholders' equity—GAAP $ 636,188 $ 644,986 $ 663,837 $ 657,844 $ 648,186 Adjustments: Goodwill (161,904) (161,904) (161,904) (161,904) (161,904) Other intangible assets, net (23,559) (22,976) (24
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