Midland States Bancorp, Inc. · NASDAQ:MSBI
Midland States Bancorp — Piper Sandler East Coast Financial Services Conference 2020
40 slides from Midland States Bancorp's conference presentation, Nov 10, 2020
Slide 1: Midland States Bancorp Investor Presentation
Midland States Bancorp, Inc. NASDAQ: MSBI Investor Presentation Piper Sandler East Coast Financial Services Conference November 10, 2020 1
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 expressing management’s current expectations, forecasts of future events or long‐term goals may be based upon beliefs, expectations and a
Slide 3: Company Snapshot
Company Snapshot $6.70 billion asset community bank established in 1881 and headquartered in Effingham, Illinois 3rd largest Illinois-based community bank1 $3.26 billion Wealth Management business Diversified lender with national equipment financing and consumer loan origination platforms co
Slide 4: Financial Services & Banking Center Footprint
Financial Services & Banking Center Footprint* 4 *Pro forma to represent branch closures scheduled by the end of 2020
Slide 5: Investment Summary
Investment Summary Experienced and deep Proven track record of successful management team acquisitions with a focus on enhancing shareholder value while building a platform for scalability Consistent track record of driving compelling shareholder returns through disciplined strategic Illinois and co
Slide 6: Business and Corporate Strategy
Business and Corporate Strategy Customer‐Centric Culture Accretive Acquisitions Drive organic growth by focusing on customer Maintain experienced acquisition team capable service and accountability to our clients and of identifying and executing transactions that colleagues; seek to develop bankers
Slide 7: Experienced Senior Leadership Team
Experienced Senior Leadership Team John M. Schultz | Chairman of the Board Jeffrey G. Ludwig | President and CEO of Midland Held the position since 2006 States Bancorp Chief Executive Officer of Agracel, Inc. Assumed Company CEO role in Jan. 2019 after serving as Bank CEO Author of Boomtown
Slide 8: Successful Acquisition History
Successful Acquisition History Midland States has completed 14 transactions since 2008, including FDIC-assisted, branch, whole bank, asset purchase and business line acquisitions, and a New York trust asset acquisition Demonstrated history of earnings expansion Deliberate diversification of ge
Slide 9: Successful Execution of Strategic Plan
Successful Execution of Strategic Plan… Total Assets (at period‐end in Billions) CAGR: 18% $6.7 $6.1 $5.6 $4.4 $3.2 $2.9 $2.7 $1.6 $1.6 $1.7 $1.5 $1.1 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 3Q20 Selected Acquisitions Selected Acquisitions: Total Assets at Time of Acquisition (in mill
Slide 10: Leads to Creation of Shareholder Value
…Leads to Creation of Shareholder Value 10%+ annual dividend growth over the past 15 years Tangible Book Value Per Share(1) Dividends Declared Per Share (at period‐end) $1.07 $19.03 $18.64 $0.97 $0.88 $17.31 $17.16 $17.00 $0.80 $15.91 $0.72 $15.20 $0.65 $0.59 $14.34 $13.82 $0.53 $13.68 $0.48 $0.43 $
Slide 11: Strategic Initiatives Strengthening Franchise
Strategic Initiatives Strengthening Franchise Significant Corporate Actions Since Coming Public in 2016 Action Strategic Rationale Financial Impact • Added scale Realized synergies from M&A have Three whole bank acquisitions • Added low‐cost deposits positively impacted earnings power and • Deepened
Slide 12: 2020 Optimization and Efficiency Initiatives
2020 Optimization and Efficiency Initiatives FY 2021 Initiative Details Expected Financial Impact • Sale of origination platform to • Ongoing commercial FHA revenue of Dwight Capital $1.2 million for servicing • No significant gain on sale (reduced • $8-$9 million expense reduction goodwill by $10.9
Slide 13: Recent Financial Trends
13 Recent Financial Trends Midland [=] States Bancorp, Inc.
Slide 14: Overview of 3Q20
Overview of 3Q20 • Net income of $86 thousand, or $0.00 diluted EPS, reflect $13.9 million in one-time charges 3Q20 Earnings primarily related to branch and facilities optimization plan • Adjusted earnings(1) of $12.0 million, or $0.52 diluted EPS, excluding charges primarily related to branch and f
Slide 15: Loan Portfolio
Loan Portfolio • Total loans increased $102.0 million, or 2.1% from prior quarter, to $4.94 billion • Increase primarily attributable to growth in commercial and consumer portfolios, partially offset by decrease in residential real estate loans • PPP loans totaled $277.6 million at September 30, 202
Slide 16: Total Deposits
Total Deposits • Total deposits increased $85.6 million, or 1.7% from prior quarter, to $5.03 billion • Growth in deposits attributable to increase in commercial FHA servicing deposits • Continued intentional run-off of higher-cost time deposits, replaced with lower-cost core deposits Deposit Mix To
Slide 17: Net Interest Income/Margin
Net Interest Income/Margin • Net interest income increased 2.0% from the prior quarter due to higher average loan balances • Net interest margin remained stable as decline in average yield on earning assets was largely offset by decline in cost of deposits • 11 basis point decline in cost of deposit
Slide 18: Wealth Management
Wealth Management • During 3Q20, assets under administration increased $7.1 million, primarily due to market performance • Wealth Management revenue remains a consistent source of noninterest income • Slight variation in quarter-to-quarter revenue primarily relates to seasonal fees related to tax pr
Slide 19: Noninterest Income
Noninterest Income • Noninterest income reduced 2.5% from prior quarter, due to lower Commercial FHA revenue resulting from the sale of the origination platform at the end of August and a $1.4 million impairment of commercial mortgage servicing rights (“MSRs”) • Excluding the impact of the impairmen
Slide 20: Noninterest Expense and Operating Efficiency
Noninterest Expense and Operating Efficiency Noninterest Expense and Efficiency Ratio (1) • Efficiency Ratio (1) was 58.8% in 3Q20 vs. 58.5% in 2Q20 (Noninterest expense in millions) • Adjustments to non-interest expense: ($ in millions) 3Q20 2Q20 Integration and $54.7 acquisition related ($13.9) ($
Slide 21: COVID-19 Response and Impact
COVID‐19 Response and Impact 21
Slide 22: Paycheck Protection Program Overview
Paycheck Protection Program Overview Paycheck Protection Program Paycheck Protection Program Loan Forgiveness (as of 9/30/20) (as of 11/3/20) Loans Outstanding $277.6 million Loans Submitted to SBA $94.3 million Number of Loans 2,295 Loans Forgiven by SBA $27.4 million Average Loan Size $120,938 Est
Slide 23: Commercial Loans and Leases by Industry
Commercial Loans and Leases by Industry Industries as a percentage of Commercial, Other Services Wholesale Trade CRE and Equipment Finance Loans and Leases Trans. / Ground Passenger 3.5% 2.4% as of 9/30/20 3.6% Health Care RE / Rental & Leasing 4.8% 21.3% General Freight Trucking 5.0% Ag., Forestry,
Slide 24: Commercial Real Estate Portfolio by Collateral Type
Commercial Real Estate Portfolio by Collateral Type Collateral type as a percentage of the Office Commercial Real Estate and Construction All Others 6.8% Portfolio as of 9/30/20 9.0% Residential 1‐4 Family 6.2% Hotel/Motel C‐Store / Gas Station 9.4% 4.1% Farmland 4.0% Medical Building Multi‐Family 3
Slide 25: Loan Deferral Overview
Loan Deferral Overview Total Loan Deferrals Deferral Type (as of October 31, 2020) As of As of As of June 30, 2020 September 30, 2020 October 31, 2020 Full Payment Deferral $158.6 million Total Loans Deferred $898.4 million $279.3 million $209.6 million Interest Only Deferral $50.9 million % of Tota
Slide 26: Midland Equipment Finance Portfolio Overview
Midland Equipment Finance Portfolio Overview Portfolio Characteristics Total Deferred (as of 9/30/20) Loans and Leases Nationwide portfolio providing financing solutions As of As of As of to equipment vendors and end‐users June 30, 2020 September 30, 2020 October 31, 2020 Total Outstanding $815.5 mi
Slide 27: Hotel/Motel Portfolio Overview
Hotel/Motel Portfolio Overview Portfolio Characteristics (CRE & C&I) (as of 9/30/20) Total Outstanding $187.6 million (3.8% of total loans) Number of Loans 61 Average Loan Size $2.2 million Largest Loan $11.1 million Average LTV 58% Total Deferred Loans as of 6/30/20 $146.2 million (84.8% of portfol
Slide 28: GreenSky Consumer Loan Portfolio Overview
GreenSky Consumer Loan Portfolio Overview Portfolio Characteristics Prime Credit (as of 9/30/20) Average FICO score of 763 $768.6 million Total Outstanding (15.6% of total loans) No losses to MSBI in 9 year history of the portfolio Number of Loans 330,751 Portfolio can be sold to provide liqui
Slide 29: Asset Quality
Asset Quality • Nonperforming loans/total loans increased to 1.36% from 1.25% at the end of the prior quarter, primarily due to the addition of three CRE loans • Net charge-offs of $5.3 million, or 0.44% of average loans, reflects charge-offs taken against the three CRE loans moved into NPL in 3Q20
Slide 30: Changes in Allowance for Credit Losses
Changes in Allowance for Credit Losses ($ in thousands) Specific Portfolio Economic Reserves Changes Factors Changes to macro- economic variables and forecasts Changes to other economic qualitative factors Changes to specific New loans reserves Changes in credit quality including risk down
Slide 31: ACL by Portfolio
ACL by Portfolio ($ in thousands) Total Loans at % of Total Loans at % of Portfolio ACL ACL 9/30/20 Total Loans 6/30/20 Total Loans Commercial $ 729,745 $ 7,846 1.08% $ 715,206 $ 4,916 0.69% Warehouse Lines 136,761 ‐ 0.00% 127,568 ‐ 0.00% Commercial Other 813,412 10,014 1.23% 767,175 7,297 0.95% Equ
Slide 32: Capital and Liquidity Overview
Capital and Liquidity Overview Capital Ratios Liquidity Sources (as of 9/30/20) (as of 9/30/20) 15.00% ($ in millions) 13.34% Cash and Cash Equivalents $ 416.2 Unpledged Securities 188.7 11.82% FHLB Committed Liquidity 451.2 10.96% 10.96% FRB Discount Window Availability 52.7 Primary Liquidity 1,153
Slide 33: Outlook
33 Outlook Midland [=] States Bancorp, Inc.
Slide 34: Outlook and Near-Term Priorities
Outlook and Near‐Term Priorities • Maintain strong capital and liquidity positions to continue supporting clients and communities through the duration of the COVID-19 pandemic • Continue capitalizing on areas of near-term demand to drive additional loan growth • Implement branch network and corporat
Slide 35: Long-Term Formula for Enhancing Shareholder Value
Long‐Term Formula for Enhancing Shareholder Value Disciplined Balance Sheet Growth Improving Operating Efficiencies Stable Sources of Recurring Income Accretive M&A Transactions Earnings Growth, Improving Returns and Enhanced Franchise Value 35
Slide 36: Appendix
36 APPENDIX Midland [=] States Bancorp, Inc.
Slide 37: Appendix: Reconciliation of TBV Per Share
Appendix: Reconciliation of TBV Per Share As of December 31, As of September 30, 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (do llars in tho usands, except per share data) 2020 Shareholders' Equity to Tangible Common Equity—as converted: Total shareholders' equity—GAAP $ 109,208 $ 126,953 $ 1
Slide 38: Adjusted Earnings Reconciliation
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) 2020 2020 2020 2019 2019 Income before income taxes
Slide 39: Efficiency Ratio Reconciliation
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, (dollars in thousands) 2020 2020 2020 2019 2019 Noninterest expense - GAAP $ 54,659 $
Slide 40: Tangible Common Equity to Tangible Assets and TBV Per Share
MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (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) 2020 2020 2020 201
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