Midland States Bancorp, Inc. · NASDAQ:MSBI
Midland States Bancorp — Stephens Bank CEO Forum 2020
41 slides from Midland States Bancorp's conference presentation, Sep 22, 2020
Slide 1: Midland States Bancorp Investor Presentation
1 Midland States Bancorp, Inc. NASDAQ: MSBI Investor Presentation Stephens Bank CEO Forum September 23, 2020
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 ▪ $6.64 billion asset community bank established in 1881 and headquartered in Effingham, Illinois » 3rd largest Illinois - based community bank 1 ▪ $3.25 billion Wealth Management business ▪ Diversified lender with national equipment financing and consumer loan origination platfor
Slide 4: Financial Services & Banking Center Footprint
4 Financial Services & Banking Center Footprint* *Pro forma to represent branch closures scheduled by the end of 2020
Slide 5: Investment Summary
5 Notes: 1. As of June 30, 2020 Investment Summary Consistent track record of driving compelling shareholder returns through disciplined strategic expansion and earnings growth Comprehensive risk management standards applied throughout the entire business Experienced and deep management team Organiz
Slide 6: Business and Corporate Strategy
6 Business and Corporate Strategy Customer - Centric Culture Drive organic growth by focusing on customer service and accountability to our clients and colleagues; seek to develop bankers who create dynamic relationships; pursue continual investment in people; maintain a core set of institutional va
Slide 7: Leadership team
7 John M. Schultz | Chairman of the Board ▪ Held the position since 2006 ▪ Chief Executive Officer of Agracel, Inc. ▪ Author of Boomtown USA: the 7 ½ Keys to ▪ Big Success in Small Towns Jeffrey G. Ludwig | President and CEO of Midland States Bancorp ▪ Assumed Company CEO role in Jan. 2019 after ser
Slide 8: Successful Acquisition History
8 Strategic Capital Bank AMCORE Bank, N.A. Love Savings / Heartland Bank Sterling Bancorp Centrue Financial Alpine Bancorp. HomeStar Financial Acquisition Type FDIC - Assisted 12 Branches Whole Bank Trust Administration Whole Bank Whole Bank and Wealth Mgmt Whole Bank Assets Acquired ($mm) $540.4 $4
Slide 9: Successful Execution of Strategic Plan
9 Successful Execution of Strategic Plan… Total Assets (at period - end in Billions) CAGR: 19% 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 10: Leads to Creation of Shareholder Value
10 $11.10 $12.52 $13.68 $14.34 $15.91 $13.82 $15.20 $17.16 $17.31 $17.00 $18.64 $18.72 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2Q20 …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 defin
Slide 11: Strategic Initiatives Strengthening Franchise
11 Strategic Initiatives Strengthening Franchise Action Strategic Rationale Financial Impact Three whole bank acquisitions • Added scale • Added low - cost deposits • Deepened presence in Illinois Realized synergies from M&A have positively impacted earnings power and efficiency ratio Three Wealth M
Slide 12: 2020 Optimization and Efficiency Initiatives
12 2020 Optimization and Efficiency Initiatives 12 Sale of Commercial FHA Loan Origination Platform • Sale of origination platform to Dwight Capital • No significant gain on sale (reduced goodwill by $10.8 million) • Retain servicing and low - cost deposits • Ongoing warehouse and servicing deposit
Slide 13: Recent Financial Trends
Recent Financial Trends Midland [=]
Slide 14: Overview of 2Q20
14 Overview of 2Q20 14 Positive Trends Across Multiple Business Lines 2Q20 Earnings Continued Progress on Strategic Initiatives • Wealth management AUA increased due to improved market performance • Equipment financing group had record quarter of loan closings • Strong quarter of residential mortgag
Slide 15: Loan Portfolio
15 2Q 2020 1Q 2020 2Q 2019 Commercial loans and leases $ 1,856 $ 1,439 $ 1,149 Commercial real estate 1,495 1,508 1,524 Construction and land development 208 208 250 Residential real estate 509 548 552 Consumer 771 673 597 Total Loans $ 4,839 $ 4,376 $ 4,074 Loan Portfolio Total Loans and Average Lo
Slide 16: Total Deposits
16 2Q 2020 1Q 2020 2Q 2019 Noninterest - bearing demand $ 1,273 $ 1,053 $ 902 Interest - bearing: Checking 1,485 1,425 1,009 Money market 877 850 733 Savings 595 534 442 Time 690 766 785 Brokered time 23 23 140 Total Deposits $4,943 $4,651 $4,011 Total Deposits Total Deposits and Cost of Deposits •
Slide 17: Net Interest Income/Margin
17 $3.4 $3.1 $3.6 $2.2 $1.8 $46.1 $49.5 $48.7 $46.7 $49.0 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 NII Accretion Income 0.25% 0.20% 0.23% 0.16% 0.12% 3.76% 3.70% 3.56% 3.48% 3.32% 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 NIM Accretion Income • Net interest income increased 5.0% from the prior quarter
Slide 18: Factors Impacting Net Interest Margin in 3Q20
18 Factors Impacting Net Interest Margin in 3Q20 • $107.1 million in time deposits scheduled to mature in 3Q20 with weighted average rate of 1.36% • $183.3 million in money market accounts at teaser rates of 1.60% scheduled to reprice in 3Q20 • $31.1 million in subordinated debt moved to floating ra
Slide 19: Wealth Management
19 $5.50 $6.00 $5.38 $5.68 $5.70 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 $3,126 $3,281 $3,410 $2,968 $3,254 2Q 2019 3Q 2019 4Q 2019 1Q 2020 2Q 2020 • During 2Q20, assets under administration increased $286.2 million, primarily due to market performance • Total Wealth Management revenue was up slight
Slide 20: Noninterest Income
20 Noninterest Income • Noninterest income increased 125.6% from prior quarter, which included an $8.5 million impairment of commercial mortgage servicing rights (“MSRs”) • Excluding the impact of the impairment of commercial MSRs, noninterest income increased 13.5% primarily due to higher commercia
Slide 21: Noninterest Expense and Operating Efficiency
21 Noninterest Expense and Operating Efficiency • Efficiency Ratio (1) was 58.5% in 2Q20 vs. 63.8% in 1Q20 • Adjustments to non - interest expense: • Excluding these adjustments, noninterest expense declined $0.6 million on a linked - quarter basis • Decrease in noninterest expense was primarily att
Slide 22: COVID-Response and Impact
22 COVID - 19 Response and Impact
Slide 23: Paycheck Protection Program Overview
23 Paycheck Protection Program Overview Paycheck Protection Program (as of 6/30/20) Total Loans Funded $313.1 million Number of Loans 2,311 Average Loan Size $135,482 Loans Outstanding $276.0 million Average Fee 3.5% Total Fees $9.7 million Impact on 2Q20 Financials At or for the Three Months Ended
Slide 24: Commercial Loans and Leases by Industry
24 Commercial Loans and Leases by Industry 24 RE / Rental & Leasing 22.2% All Others 10.8% Manufacturing 8.1% Accommodation & Food Svcs 7.5% Retail Trade 7.3% Construction - General 7.0% Assisted Living 6.9% Finance and Insurance 6.1% Health Care 5.1% General Freight Trucking 5.1% Ag., Forestry, & F
Slide 25: Commercial Real Estate Portfolio by Collateral Type
25 Commercial Real Estate Portfolio by Collateral Type 25 Retail 15.1% All Others 12.3% Assisted Living 10.9% Multi - Family 9.6% Hotel/Motel 9.3% Industrial / Warehouse 9.0% Office 6.5% Residential 1 - 4 Family 6.2% Farmland 3.9% Medical Building 3.7% C - Store / Gas Station 3.4% Developed Land 2.8
Slide 26: Loan Deferral Overview
26 Loan Deferral Overview Total Loan Deferrals As of June 30, 2020 As of August 31, 2020 Percentage Change 2 nd Deferrals In Process Total Loans Deferred $898.4 million $267.8 million (70.2%) $58.7 million % of Total Loans 18.8% 5.6% (70.2%) 1.3% C&I and CRE Deferrals by Industry* (as of August 31,
Slide 27: Midland Equipment Finance Portfolio Overview
27 Midland Equipment Finance Portfolio Overview ($ in millions) Portfolio Characteristics (as of 6/30/20) Nationwide portfolio providing financing solutions to equipment vendors and end - users Total Outstanding Loans and Leases $750.6 million (15.5% of total loans) Number of Loans and Leases 5,694
Slide 28: Hotel/Motel Portfolio Overview
28 Hotel/Motel Portfolio Overview Deferrals by Chain Scale ($ in millions) Upper Midscale Chain $87.9 85% Midscale Chain $9.1 9% Upscale Chain $5.8 5% Other $1.0 1% Portfolio Characteristics (CRE & C&I) (as of 6/30/20) Total Outstanding $172.5 million (3.6% of total loans) Number of Loans 57 Average
Slide 29: GreenSky Consumer Loan Portfolio Overview
29 GreenSky Consumer Loan Portfolio Overview Delinquency Rate (greater than 60 days) Portfolio Characteristics (as of 6/30/20) Total Outstanding $680.5 million (14.1% of total loans) Number of Loans 297,241 Average Loan Size $2,289 Average FICO Score 746 Total Deferred Loans (as of June 30, 2020) $3
Slide 30: Asset Quality
30 Asset Quality NCO / Average Loans • Nonperforming loans/total loans declined to 1.25% from 1.33% at the end of the prior quarter • Net charge - offs of $3.1 million, or 0.26% of average loans • Provision for loan losses of $11.6 million in 2Q20 primarily reflects changes in portfolio and a contin
Slide 31: Changes in Allowance for Credit Losses
31 Changes in Allowance for Credit Losses ACL 3/31/20 ACL 6/30/20 Specific Reserves Portfolio Changes Economic Factors ▪ Changes to specific reserves ▪ New loans ▪ Changes in credit quality including risk downgrades and deferrals ▪ Aging of existing portfolio ▪ Other charge - offs and recoveries ▪ C
Slide 32: ACL by Portfolio
32 ACL by Portfolio Portfolio Total Loans at 6/30/20 ACL % of Total Loans Total Loans at 3/31/20 ACL % of Total Loans Commercial $ 715,206 $ 4,916 0.69% $ 649,403 $ 4,900 0.75% Warehouse Lines 127,568 - 0.00% 22,772 - 0.00% Commercial Other 767,175 7,297 0.95% 443,376 6,840 1.54% Equipment Finance 3
Slide 33: Capital and Liquidity Overview
33 Capital and Liquidity Overview Capital Ratios (as of 6/30/20) Liquidity Sources (as of 6/30/20) 6.67% 8.44% 7.75% 9.71% 13.67% 11.28% 9.01% 11.28% 12.05% 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 Equiv
Slide 34: Outlook
Outlook Midland [=]
Slide 35: Outlook and Near-Term Priorities
35 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 executing on technology initiatives to improve customer experience, reduce expenses and increase operation
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 Growing Sources of Recurring Income
Slide 37: Appendix
APPENDIX Midland [=]
Slide 38: Reconciliation of TBV Per Share
38 Appendix: Reconciliation of TBV Per Share 38 As of (dollars in thousands, except per share data) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 June 30, 2020 Shareholders' Equity to Tangible Common Equity—as converted: Total shareholders' equity—GAAP 109,208$ 126,953$ 130,918$ 149,440$ 219,456
Slide 39: Adjusted Earnings Reconciliation
39 Adjusted Earnings Reconciliation (dollars in thousands, except per share data) Income before income taxes - GAAP $ 15,993 $ 2,005 $ 16,071 $ 16,670 $ 21,394 Adjustments to noninterest income: Gain on sales of investment securities, net - - 635 25 14 Other 11 (13) (6) - (23) Total adjustments to n
Slide 40: Efficiency Ratio Reconciliation
40 Efficiency Ratio Reconciliation (dollars in thousands) Noninterest expense - GAAP $ 40,782 $ 42,675 $ 46,325 $ 48,025 $ 40,194 (Loss) gain on mortgage servicing rights held for sale (391) (496) (95) 70 515 Loss on repurchase of subordinated debt - (193) (1,778) - - Integration and acquisition exp
Slide 41: Tangible Common Equity to Tangible Assets Ratio and TBV Per Share
41 Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share (dollars in thousands, except per share data) Shareholders' Equity to Tangible Common Equity Total shareholders' equity—GAAP $ 633,589 $ 631,160 $ 661,911 $ 655,522 $ 639,888 Adjustments: Preferred stock - - - - (2,
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