Midland States Bancorp, Inc. · NASDAQ:MSBI
Midland States Bancorp — Investor Presentation (May 2017)
42 slides from Midland States Bancorp's investor presentation, May 2017
Slide 1: Midland States Bancorp Investor Presentation May 2017
Midland States Bancorp, Inc. NASDAQ: MSBI Investor Presentation May 2017
Slide 2: Forward-Looking Statements
Forward-Looking Statements. This presentation contains 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, by their nature, are subject to assumptions, r
Slide 3: Company Snapshot
Company Snapshot • $3.4 billion asset community bank established in 1881 and headquartered in Effingham, Illinois • Five principal business lines – Traditional community banking – Residential mortgage origination – Wealth management – Commercial FHA origination & servicing – Commercial equipment lea
Slide 4: Financial Services & Banking Center Footprint
Financial Services & Banking Center Footprint 3
Slide 5: Investment Summary
Investment Summary • Diversified financial holding company with community banking presence across Illinois, and in Missouri and Colorado • Multiple complementary business lines provide continued organic growth opportunities and diversified revenue streams, with non-interest income accounting for 37.
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: Revenue Generate a diversif
Slide 7: Management Team
Management Team Highly experienced senior management in place: John M. Schultz: Chairman of the Board Kevin L. Thompson: Chief Financial Officer Held the position since 2006 Joined Midland States in November 2016 Chief Executive Officer of Agracel, Inc. Held various senior finance positions
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) $3.4 $3.2 $17.16 $17.42 $2.9 $15.91 $2.7 $15.20 $14.34 $13.82 $13.68 $12.52 $11.10 $1.6 $1.7 $1.5 $1.6 $1.1 2009 2010 2011 2012 2013 2014 2015 2016 1Q 2009 2010
Slide 9: Successful Acquisition History
Successful Acquisition History • Midland States has announced 12 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: 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 1,341 institutions in the six-sta
Slide 11: Compelling Earnings and Dividend History
Compelling Earnings and Dividend History • Profitability and earnings per share are driven by MSBI’s attractive asset base, core funding structure and growing fee generating businesses • 10%+ annual dividend growth over the past 15 years Adjusted Diluted Earnings Per Share (1) Dividends Declared Per
Slide 12: Performance Metrics
Performance Metrics Adjusted Return on Average Assets (1) Adjusted Return on Avg. Tangible Common Equity (1) 30.0% 1.17% 1.13% 1.17% 1.08% 1.05% 22.4% 0.90% 0.89% 19.7% 17.0% 14.2% 11.6% 11.7% 0.44% 7.0% 0.22% (0.7%) 2009 2010 2011 2012 2013 2014 2015 2016 1Q 2017 2009 2010 2011 2012 2013 2014 2015
Slide 13: Diversified Revenue Streams
Diversified Revenue Streams • Significant base of four non-interest income sources diversify earnings across various operating environments while reducing sensitivity to changes in the yield curve – Love Savings/Heartland Bank acquisition augmented mortgage banking revenue and provided further nonin
Slide 14: Business Unit Review - Love Funding
Business Unit Review - Love Funding • Commercial FHA origination and servicing business focused on multifamily and healthcare facilities • One of the top originators of government sponsored mortgages for multifamily and healthcare facilities in the U.S. • CEO with 17 years tenure and previously with
Slide 15: Business Unit Review - Residential Mortgage
Business Unit Review - Residential Mortgage • Residential mortgage loan origination and servicing • Cornerstone product – contributes substantial fee income for the Bank • 15 fold increase in mortgage originations from eight years ago Net Gain on Sale and Mortgage Locks Purchase / Refinance Mix (in
Slide 16: Business Unit Review - Heartland Business Credit
Business Unit Review - Heartland Business Credit • Equipment leasing sourced from a network of equipment manufacturers and brokers • Target industries include: Healthcare, Petroleum, Telecommunications and Lighting • Attractive yields – average rate (ex. accretion) on lease finance portfolio was 5.4
Slide 17: Business Unit Review – Wealth Management
Business Unit Review – Wealth Management • Offers comprehensive suite of Trust and Wealth Management products • Acquisition of Sterling Trust (Nov. 2016) added $400 million in Assets Under Administration • Acquisition of CedarPoint Investment Advisors (Mar. 2017) added RIA platform • Year-over-year
Slide 18: Delivering Organic Loan Growth
Delivering Organic Loan Growth Total Loans and Deposits 11.5% average annual $2,527 core loan growth (1) $2,455 $2,368 $2,404 $2,320 $2,151 $1,996 $1,798 $1,365 $1,382 $1,268 $1,222 $1,206 $1,047 $958 $979 $918 $624 2009 2010 2011 2012 2013 2014 2015 2016 1Q 2017 Deposits ($mm) Loans ($mm) Note: (1)
Slide 19: Loan Portfolio Overview
(1) Loan Portfolio Overview • Broadly diversified loan portfolio by type of Loan Portfolio Mix customer and loan type Lease Financing $197M 8% Residential Real • Current loan origination efforts focus on high Estate $277M quality commercial loan segments 11% Non-Owner Occupied CRE $572M 23% • 62% of
Slide 20: Strong Credit Quality
Strong Credit Quality • Managed by experienced personnel, MSBI maintains a disciplined approval process and conservative credit culture • Credit losses have steadily declined since 2015 Nonperforming Assets ($mm) (1) NCOs / Average Loans NPAs / Assets 1.64% 1.64% 1.48% 1.01% 1.07% 0.94% 0.94% $39.5
Slide 21: Attractive and Growing Core Deposit Base
(1) Attractive and Growing Core Deposit Base • 87% core deposits Deposit Mix • 21% non-interest bearing deposits • Low cost of deposits at 40 basis points Checking Noninterest- $751M Bearing 30% $528M • Recent acquisitions have improved overall 21% 87% Core (3) funding mix Brokered Time Dep MMDA $26
Slide 22: Well Positioned for Higher Interest Rates
Well Positioned for Higher Interest Rates • Midland’s modeled base case earnings Loan Maturities outlook for the years 2017 and 2018 in an +100 bps scenario would boost net interest income by $1.7 million in 2017 and $3.5 10+ yr. Fixed Variable Rate 13% 23% million in 2018 7-10 yr. Fixed 5% 0-1 yr.
Slide 23: Acquisition of Centrue Financial Corporation
Midland States Bancorp Acquisition of Centrue Financial Corporation
Slide 24: Transaction Highlights
Transaction Highlights • Centrue is a 140+ year old $1 billion bank with deep ties to the communities it serves offering robust commercial, retail and mortgage banking services Scalable $1 Billion • Midland further solidifies its position in its north/central Illinois and St. Louis markets and the F
Slide 25: Centrue Financial Corporation Overview
Centrue Financial Corporation Overview Overview Branch Map(3) • Established in 1874, Centrue is a regional, full- service community bank – Headquartered in Ottawa, Illinois – Offers commercial, retail and mortgage banking services • Branch network with solid market share in its core markets and foot
Slide 26: Centrue Financial Corporation's Recent Improvements
Centrue Financial Corporation’s Recent Improvements • Over the last several years, Centrue has committed significant resources to repositioning itself • Centrue was recapitalized via a private placement of common stock on 3/31/2015 • NPLs / Loans have declined from 5.08% at 12/31/13 to 0.24% at 4Q’1
Slide 27: Pro Forma Franchise
Pro Forma Franchise Overview Branch Map • 52 branches throughout Illinois, as well as 13 branches in Missouri and 1 in Colorado • Transaction creates the 6th largest Illinois-based bank by total assets(1) • $4.2 billion in assets(2) • $3.0 billion in gross loans(2) • $3.1 billion in deposits(2) Pro
Slide 28: Diversified, Low Risk Loan Portfolio
Diversified, Low Risk Loan Portfolio Centrue Financial Loan Portfolio Centrue Loan Growth $700.0 $685.8 • Well diversified loan portfolio: $661.1 $657.9 $666.8 $645.8 – Commercial loans represent more than 11% of loans $650.0 $612.1 $587.0 $600.0 Loans ($M) – More than 20% growth in total loans sinc
Slide 29: Attractive Core Deposit Base
Attractive Core Deposit Base Centrue Financial Deposit Overview LTM Cost of Deposits • 140+ year presence in its core markets has provided 0.38% 0.40% Centrue with an attractive, stable core deposit base 0.33% 0.30% – 18 bps LTM cost of total deposits(1) 0.18% – 7.3 years weighted average life(1) 0.
Slide 30: Summary of Deal Terms
Summary of Deal Terms • $175.1 million or $26.75 per share (total deal value includes cash consideration for outstanding Aggregate Deal Value equity awards) • Midland will also assume Centrue’s outstanding preferred stock Consideration Mix • 65% Stock, 35% cash • Centrue shareholders may elect to re
Slide 31: Key Transaction Assumptions
Key Transaction Assumptions Cost Saves & One Time • 40% of Centrue’s non-interest expense base (fully realized in 2018 and beyond) Charges • $18.2 million of one time deal charges, or 10.4% of total deal value • 1.5% gross credit mark on outstanding loan balances • $775 thousand write-down on OREO F
Slide 32: Recent Financial Performance and Outlook
Recent Financial Performance and Outlook
Slide 33: First Quarter 2017 Summary
First Quarter 2017 Summary Strong Earnings Net income of $8.5 million or $0.52 per diluted share Positive Trends in Strong loan growth, expanding NIM, higher non-interest income, greater efficiencies and Key Metrics improvement in credit quality Robust Loan Growth Total loans increased 23% on an ann
Slide 34: Catalysts for Continued Profitable Growth
Catalysts for Continued Profitable Growth • Healthy economic conditions in our markets • Multiple lending areas and specialty businesses experiencing strong organic growth • New RIA platform enhances ability to recruit new talent to Wealth Management business • Operational Excellence initiative driv
Slide 35: Appendix
APPENDIX
Slide 36: Appendix: Board of Director Profiles
Appendix: Board of Director Profiles Name: Background: John M. Schultz • Mr. Schultz serves as CEO of Agracel Inc, an industrial developer of facilities for manufacturing and high tech entities in small to midsized communities, Chairman of the Board and is the author of BoomtownUSA: The Keys to Big
Slide 37: Capital Position
Strong Pro Forma Capital Position (1) Capital Position 20.00% 16.00% 13.48% 12.00% 10.97% 9.61% 9.10% 8.29% 8.00% 4.00% 0.00% TCE/TA Tier 1 Common Tier 1 Leverage Tier 1 RBC Total RBC As Reported (3/31/17) 36
Slide 38: Appendix: Solid Reserve Coverage
Appendix: Solid Reserve Coverage As of Decem ber 31, 2015 As of Decem ber 31, 2016 As of March 31, 2017 % of the % of the % of the Allow ance Allow ance Allow ance Non- to Total Non- to Total Non- to Total Purchased Purchased Loans in Purchased Purchased Loans in Purchased Purchased Loans in Credit
Slide 39: Appendix: Investment Portfolio Overview
(1) Appendix: Investment Portfolio Overview • Midland has optimized the investment Investment Portfolio portfolio to enhance portfolio quality, flexibility and yield while maintaining an effective duration of approximately 3.0 years Municipal HTM US Treasury 23% GSE Debt 14% Securities 2% • Portfoli
Slide 40: Appendix: Reconciliation of Net Interest Margin Excluding Accretion Income
Appendix: Reconciliation of Net Interest Margin Excluding Accretion Income Three Months Year Ended December 31, Ended 2009 2010 2011 2012 2013 2014 2015 2016 March 31, 2017 Reported yield on loans 6.58% 6.48% 6.17% 5.73% 5.33% 4.65% 5.21% 4.83% 4.91% Effect of accretion income on acquired loans (0.5
Slide 41: Appendix: Reconciliation of Adjusted Earnings/Profitability
Appendix: Reconciliation of Adjusted (1) Earnings/Profitability Three Months Year Ended Decem ber 31, Ended (dollars in thousands, except per share data) 2009 2010 2011 2012 2013 2014 2015 2016 March 31, 2017 Adjusted Earnings Income before income taxes - GAAP $ 23,662 $ 17,924 $ 15,347 $ 18,499 $ 2
Slide 42: Additional Information
Additional Information. Midland has filed a registration statement on Form S-4 with the Securities and Exchange Commission (SEC) in connection with its proposed acquisition of Centrue. The registration statement includes a proxy statement of Midland and Centrue that also constitutes a prospectus of
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