Midland States Bancorp, Inc. · NASDAQ:MSBI
Midland States Bancorp — Debt Investor Presentation (September 2019)
44 slides from Midland States Bancorp's debt investor presentation, Sep 20, 2019
Slide 1: Investor Presentation: Subordinated Debt Offering
Midland StatesBancorp, Inc. NASDAQ: MSBI Investor Presentation Subordinated Debt Offering September 2019 1 Confidential
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, including with respect to acquisitions, and may
Slide 3: Terms of Planned 10 Year Non-Call 5 Year Capital Raise
Terms of Planned 10 Year – Non Call 5 Year Capital Raise: Midland States Bancorp, Inc. Private Placement with Registration Rights [•] 2029 through the maturity date or early redemption date Redeemable at 100% of principal amount, plus accrued and unpaid interest beginning on [•] 2024 The Company int
Slide 4: Terms of Planned 15 Year Non-Call 10 Year Capital Raise
Terms of Planned 15 Year – Non Call 10 Year Capital Raise: Midland States Bancorp, Inc. Private Placement with Registration Rights [•] 2034 through the maturity date or early redemption date Redeemable at 100% of principal amount, plus accrued and unpaid interest beginning on [•] 2029 The Company in
Slide 5: Overview of Midland States Bancorp, Inc.
Overview of Midland States Bancorp, Inc. Dollars in millions, apart from per share data 2015 2Q19 YTD $5.55 billion asset community bank established in 1881 and headquartered in Effingham, Illinois (3rd largest Illinois-based community bank2) $3.13 billion AUA Wealth Management business Strong fee g
Slide 6: Financial Services and Banking Center Footprint
Financial Services and Banking Center Footprint Freeport GJ Northern Illinois 2) r:J [iJ Fari na GrPPnviiiPI!J Diamond Menteno (2) I:J Grant Por :o'dlley 12 Bort"'nats (2) treater .;. • • .,... HPr tt"hPr • r(eeburg r:J Smiihton I:J Arnold I5J • • • * • • • • A Midland Equipment Finance Midland Weal
Slide 7: Investment Summary
Investment Summary Experienced and deep management team Consistent track record of driving shareholder returns through disciplined strategic expansion and earnings growth Solid asset quality with low charge-off history driven by a diversified loan portfolio, conservative credit culture and disciplin
Slide 8: Business and Corporate Strategy
Business and Corporate Strategy Drive organic growth by focusing on customer service and accountability to Midland’s clients and colleagues; seek to develop bankers who create dynamic relationships; pursue continual investment in people; maintain a core set of institutional values A corporate-wide f
Slide 9: Experienced Leadership
Experienced Leadership Highly experienced senior management in place: Team John M. Schultz: Chairman of the Board Held the position since 2006 Chief Executive Officer of Agracel, Inc. Author of Boomtown USA: the 7 ½ Keys to Big Success in Small Towns Jeffrey G. Ludwig: President and CEO of Midland S
Slide 10: Midland States Board of Directors
Midland States Board of Directors Executive Officer of the Company. He serves on the Company’s Executive Committee and Capital 10 Name Background John M. Schultz Chairman of the Board •Mr. Schultz has served as the Chairman of the Company since 1986. Since 1986, Mr. Schultz has served as the Chief E
Slide 11: Midland States Board of Directors (Continued)
Midland States Board of Directors (Continued) served on the board of directors of Prime Banc Corp. and First National Bank of Dieterich. Mr. Schultz investment advisory committees Oakwood Medical and Rivervest. Mr. McDonnell holds a B.A. in 11 Name Background Deborah A. Golden Director •Ms. Golden j
Slide 12: 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 geograph
Slide 13: Successful Execution of Strategic Plan
Successful Execution of Strategic Plan… (at period-end in Billions) CAGR with Acquisitions: 19% CAGR Excluding Assets from Acquisitions: 10% $5.9¹ $5.6 $2.9 $2.7 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2Q19 Selected Acquisitions 13 Notes: (1) Represents 2Q19 pro forma with HomeStar Selecte
Slide 14: Leads to 10%+ Creation of Shareholder Value
…Leads to 10%+ Creation of Shareholder Value annual dividend growth over the past 15 years (at period-end) $18.36 $0.97 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (annualized) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2Q19 Notes: (1) Tangible book value per share is a non-GAAP financi
Slide 15: Overview of HomeStar Bank Acquisition
Overview of HomeStar Bank Acquisition Closed in July 2019 Complements Midland’s franchise in Kankakee Du buque Provides #1 deposit market share in Kankakee, IL MSA Cedar Rapiid s Ellgiin 94 Stable, low-cost deposit franchise 88 80 Iowa Ciitty 80 20 bps weighted average cost of deposits 1.3% deposit
Slide 16: Market Opportunities and Acquisition Strategy
Market Opportunities and Acquisition Strategy MSBI believes there will be numerous small to midsized banking organizations available for acquisition within Illinois and contiguous states Wisconsin There are more than 1,200 institutions in the six-state region with less than $1.0 billion in assets (1
Slide 17: Balance Sheet Growth Trends
Balance Sheet Growth Trends $5,638 $5,546 $4,138 $4,074 $1,996 2015 2016 2017 2018 2Q19 2015 2016 2017 2018 2Q19 $640 $4,074 $4,011 $609 2015 2016 2017 2018 2Q19 2015 2016 2017 2018 2Q19 17 Notes: Source: S&P Global Market Intelligence $450 $322 $233 $3,131 $2,368 $2,404 Total Equity ($mm) Total Dep
Slide 18: Loan Portfolio Overview
Loan Portfolio Overview Broadly diversified loan portfolio by type of customer and loan type Residential Real Estate $552M 14% 66% of portfolio is fixed; 34% is floating Non-Owner Occupied CRE $825M 20% Owner-Occupied CRE $699M Focus on growing Equipment Finance portfolio that provides superior risk
Slide 19: Largest Lending Relationships
Largest Lending Relationships Borrower (1) 28,911 28,861 0.71% 11 Municipal & Term financing Borrower (3) 25,854 25,846 0.63 10 Hotel Borrower (5) 30,823 20,823 0.76 6 Dixon hospital Borrower (7) 21,147 20,297 0.52 34 Gas station Borrower (9) 16,446 16,446 0.40 9 Building product supplier Borrower (
Slide 20: Commercial Loans: Collateral and Industry Concentrations
Commercial Loans: Collateral and Industry Concentrations Income P roducing Ow ner Occupied 20% 17.1% 16% 12% 10.3% 9.4% 9.1% 8.5% 8% 7.1% 5.6% 4% 0.7% 0.2% 0.0% 0% Loa ns Leases 30% 27.4% 24% 18% 12% 4.6% 3.6% 6% 3.6% 3.1% 3.2% 2.4% 0.4% 0% 20 7.4%7.0%6.8%6.6%6.6%6.0%5.8%5.3% % of Total Non PCI Comm
Slide 21: 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 0.92% 0.39% 0.64% 0.12% 2015 2016 2017 2018 2Q19 YTD 2015 2016 2017 2018 Q219 21 Notes: (1) Excludes performing restru
Slide 22: Credit Quality Review
Credit Quality Review 1.40% 600% 1.20% 500% 1.00% 400% 0.80% 300% 0.60% 200% 0.40% 100% 0.20% 0.00% 0% 2015 2016 2017 2018 2Q19 2015 2016 2017 2018 2Q19 0.50% MSBI 1.00% MSBI 0.92% Peers Peers 0.75% 0.40% 0.80% 0.64% 0.28% 0.30% 0.60% 0.20% 0.40% 0.45% 0.44% 0.10% 0.20% 0.10% 0.00% 0.00% 2015 2016 2
Slide 23: Acquired Loans – Adjusted Loan Loss Reserve
Acquired Loans – Adjusted Loan Loss Reverse (dollars in thousands) Loans Other Legacy Heartland Centrue Alpine 923 1,847 2,174 7,290 125 276 1,707 1,754 1,048 2,123 3,880 9,043 0.03% 0.05% 0.10% 0.22% 12,233 3,861 16,094 0.39% Allowance + Credit Mark to Total Loans: Allowance to Total Loans Credit M
Slide 24: Strong Core Deposit Base
Strong Core Deposit Base¹ 94% core deposits² Recent acquisitions have improved overall funding mix Interest-Bearing Checking $1,009M 25% Noninterest-Bearing $902M 22% 22% non-interest bearing deposits Retail deposits represent 54% of total deposits Brokered Time Dep $140M 4% MMDA $733M 18% Time Depo
Slide 25: Largest Deposit Relationships
Largest Deposit Relationships Customer (1) $35,709 27 Public Funds - County 0.89% Customer (3) 23,353 25 Public Funds - City 0.58 Customer (5) 19,194 4 Business 0.48 Customer (7) 14,305 1 Business 0.36 Customer (9) 12,517 7 Business 0.31 Customer (11) 10,377 3 Business 0.26 Customer (13) 9,021 9 Pub
Slide 26: Dominant MSA Deposit Market Share
Dominant MSA Deposit Market Share MSBI is #1 or #2 in Market Share in 42% of the MSAs the company has a deposit presence in 2 3 4 5 6 7 8 9 10 Heartland Financial USA Inc. JPMorgan Chase & Co. Associated Banc-Corp Bank of Montreal Blackhawk Bancorp Inc. Foresight Financial Group Inc. PNC Financial S
Slide 27: Demonstrated Historical Earnings Growth
Demonstrated Historical Earnings Growth $56.8 1.09% 1.05% 1.04% 2015 2016 2017 2018 Q219 YTD 2015 2016 2017 2018 Q219 YTD 16.97% 68.7% 2015 2016 2017 2018 Q219 YTD 2015 2016 2017 2018 Q219 YTD 27 Notes: (1) Non-GAAP financial measures. Refer to Appendix for a reconciliation to the comparable GAAP fi
Slide 28: Performance vs. Peers
Performance vs. Peers 1.31% 1.40% 16.0% MSBI Peers 1.20% 14.0% 1.00% 12.0% 0.80% 10.0% 0.60% 8.0% 0.40% 6.0% 0.20% 4.0% 0.00% 2015Y 2016Y 2017Y 2018Y 2Q19 YTD 2015Y 2016Y 2017Y 2018Y 2Q19 YTD 4.60% 4.40% 4.20% 4.00% 3.80% 3.60% 3.40% 3.20% 3.00% MSBI 70.0% 68.0% 66.0% 64.0% 62.0% 60.0% 58.0% 56.0% 5
Slide 29: Revenue Mix
Revenue Mix Diverse revenue mix with nearly 30% noninterest income Strong sources of recurring income led by Wealth Management business All Other Fee Income 15.7% Noninterest Income 29% Commercial FHA 22.3% Residential Mortgage Banking 3.9% Service Net Interest Income 71% Interchange 29.6% Wealth Ma
Slide 30: Net Interest Income and Net Interest Margin
Net Interest Income and Net Interest Margin $183 $180 Net Interest Margin Cost of Deposits Yiel d o n L oans & Le ase s 5.27% 5.21% 5.06% 4.85% 4.85% 4.38% 3.92% 3.77% 3.76% 3.75% 0.84% 0.55% 0.42% 0.38% 0.33% 2015 2016 2017 2018 Q219 YTD Annualized 2015 2016 2017 2018 Q219 YTD Annualized 30 Notes:
Slide 31: Interest Rate Sensitivity and Asset / Liability Management
Interest Rate Sensitivity and Asset / Liability Management Balanced positioning supports stable net interest margin Year 1 Year 2 Strong, low-cost deposit base 14% 11% $4.01B total deposits at 84 bps (weighted average) Cumulative interest-bearing deposit beta of 39% ~22% stable core deposit franchis
Slide 32: Investments
Investments Midland continues to adjust the portfolio to optimize the portfolio’s duration, mix, and to increase yield. As of June 2019, the portfolio had an effective duration of approximately 3.25 years Equity Securities, Corporate Securities, 15% 0% GSE Debt Securities, 12% The portfolio weighted
Slide 33: Current Borrowings and Available Sources of Liquidity
Current Borrowings and Available Sources of Liquidity In May 2017, the Company entered into a loan agreement with another bank for a $10.0 million revolving line of credit and a term loan in the original principal amount of $40.0 million. The term loan details are: Variable interest rate equal to LI
Slide 34: Holding Company Liquidity
Holding Company Liquidity MSBI has historically grown dividends at approximately 10% annually The company has recently announced a share buyback as an efficient means to return excess capital 2015 2016 2017 2018 2Q19 (dollars in thousands) Assets (dollars in thousands) 2Q19 Beginning Cash Sources Di
Slide 35: Capital Overview
Capital Overview ($’s in millions) 16.0% Common A 14.0% 12.0% 10.0% 8.0% 6.0% B 4.0% $2.7 Equity 2.0% C Preferred 0.0% D Tier 1 Common Tier 1 RBC Total RBC Tier 1 CommonTier 1Total RBC LeverageEquity Tier 1 LeverageEquity Tier 1 RBC C Total Capital: $620.5 Total Capital: $617.8 Notes: (1) Includes r
Slide 36: Consolidated Capital Ratios
Consolidated Capital Ratios 15.00% 15.00% 11.27% 12.00% 12.00% 10.85% 10.19% 10.25% 8.76% 8.45% 9.00% 9.00% 6.00% 6.00% 3.00% 3.00% 0.00% 0.00% 2015 2016 2017 2018 2Q19 + HS + Pref.¹ + June Call ² 2015 2016 2017 2018 2Q19 + HS + Pref.¹ + June Call ² 15.00% 20.00% 14.89% 16.00% 12.00% 14.05% 8.63% 8.
Slide 37: Bank-Level Capital Ratios
Bank-Level Capital Ratios 15.00% 15.00% 12.27% 11.84% 11.61% 12.00% 12.00% 9.00% 9.00% 6.00% 6.00% 3.00% 3.00% 0.00% 0.00% 2015 2016 2017 2018 2Q19 + HS + Pref.¹ + June Call ² 2015 2016 2017 2018 2Q19 + HS + Pref.¹ + June Call ² 15.00% 15.00% 12.76% 12.32% 12.17% 12.00% 12.00% 9.01% 9.00% 9.00% 6.00
Slide 38: Pro Forma Capitalization Table
Pro Forma Capitalization Table (dollars in millions) Tangible Common Equity Tangible Assets $438.6 5,347.5 $438.6 5,786.1 $587.2 5,344.3 $588.5 5,682.9 Notes: (1) Estimates for HomeStar acquisition and July 2019 redemption of preferred equity Assumes none of the issuance proceeds are down streamed t
Slide 39: Double Leverage and Interest Coverage
Double Leverage and Interest Coverage 2020 Call of Subdebt Investment In Subsidiaries Consolidated Equity $327,323 $382,241 $565,498 $766,449 $789,979 $800,319 $800,319 $232,880 $321,770 $449,545 $608,525 $639,888 $650,228 $650,228 Proposed Holding Company Subordinated Debt Offering Pro Forma Bank-l
Slide 40: Appendix
Appendix Midland [=]
Slide 41: Reconciliation of Adjusted Earnings/Profitability
Appendix: Reconciliation of Adjusted Earnings/Profitability (dollars in thousands, except per share data) Adjus te d Ear nings Income bef ore income taxes - GAAP Adjustments to noninterest income: Gain on sales of investment securities, net Other than-temporary-impairment on investment securities FD
Slide 42: Reconciliation of Efficiency Ratio
Appendix: Reconciliation of Efficiency Ratio (dollars in thousands) Noninterest expense Adjustments to noninterest expense: Expense f rom payof f of subordinated debt Net expense f rom FDIC loss share termination agreement Branch netw ork optimization plan charges Gain (loss) on mortgage servicing r
Slide 43: Reconciliation of TBV
Appendix: Reconciliation of TBV (dollars in thousands, except per share data) Share holde rs ' Equity to Tangible Com m on Equity: Total shareholders' equity—GAAP Adjustments: Pref erred equity Goodw ill Other intangibles Tangible com m on e quity $ 639,888 $ 608,525 $ 449,545 $ 321,770 $ 232,880 (2
Slide 44: Reconciliation of ROATCE
Appendix: Reconciliation of ROATCE (dollars in thousands) Ne t Incom e Less—pref erred stock dividends Ne t incom e available to com m on s hare holde rs $ 30,337 68 $ 39,421 141 $ 16,056 83 $ 31,542 - $ 24,324 - $ 30,269 $ 39,280 $ 15,973 $ 31,542 $ 24,324 Ave rage Share holde rs ' Equity to Ave ra
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