Midland States Bancorp, Inc. · NASDAQ:MSBI
Midland States Bancorp — 7th Annual Stephens Bank CEO Forum (September 2017)
32 slides from Midland States Bancorp's conference presentation, Sep 20, 2017
Slide 1: Midland States Bancorp, Inc.
Midland States Bancorp, Inc. NASDAQ: MSBI 7th Annual Stephens Bank CEO Forum September 20, 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 • $4.5 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 34.
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) $4.5 $3.2 $17.16 $17.47 $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 2Q 2009 2010
Slide 9: Successful Acquisition History
Successful Acquisition History • Midland States has completed 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 more than 1,300 institutions in t
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% 1.08% 1.05% 1.07% 22.4% 0.90% 0.89% 19.7% 17.0% 13.2% 11.6% 11.7% 0.44% 7.0% 0.22% (0.7%) 2009 2010 2011 2012 2013 2014 2015 2016 YTD 2009 2010 2011 2012 2013 2014 2015 2016
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 5.3
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 - $180 million in AUA) added RIA plat
Slide 18: Delivering Organic Loan Growth
Delivering Organic Loan Growth Total Loans and Deposits $3,333 $3,184 11.1% average annual core loan growth (1) $2,368 $2,404 $2,320 $2,151 $1,996 $1,798 $1,365 $1,382 $1,222 $1,268 $1,206 $1,047 $958 $979 $918 $624 2009 2010 2011 2012 2013 2014 2015 2016 2Q 2017 Deposits ($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 $202M Residential Real 6% Estate • Current loan origination efforts focus on high $428M quality commercial loan segments 13% Non-Owner Occupied CRE $770M 24% • 57% of
Slide 20: Strong Credit Quality
Strong Credit Quality • Managed by experienced personnel, MSBI maintains a disciplined approval process and conservative credit culture • Credit losses have steadily declined since 2015 Nonperforming Assets ($mm) (1) NCOs / Average Loans NPAs / Assets 1.64% 1.64% 1.48% 1.01% 1.07% 0.74% 0.94% $39.5
Slide 21: Attractive and Growing Core Deposit Base
(1) Attractive and Growing Core Deposit Base • 88% core deposits (2) Deposit Mix • 24% non-interest bearing deposits • Low cost of deposits at 41 basis points Checking Noninterest- $842M Bearing 25% $781 24% • Recent acquisitions have improved overall 88% Core (2) funding mix Brokered Time Dep MMDA
Slide 22: Well Positioned for Higher Interest Rates
Well Positioned for Higher Interest Rates • Midland’s modeled base case earnings $14.0 $11.8 projections as of June 30, 2017 and 2018 in $12.0 an +100 bps Ramp scenario would boost $10.0 $8.1 net interest income by $1.9mm in Year 1 $8.0 and $4.3mm in Year Two. $5.3 $6.0 $4.3 $3.6 • Conservative asse
Slide 23: Recent Financial Performance and Outlook
Recent Financial Performance and Outlook
Slide 24: Second Quarter 2017 Summary
Second Quarter 2017 Summary Centrue Acquisition Closed on June 9, 2017 Strong EPS Accretion Centrue expected to be 8-9% accretive to EPS Net income of $3.5 million, or $0.20 diluted EPS 2Q17 Earnings • Integration and acquisition expenses of $7.5 million, or $0.31 per diluted share • MSR impairment
Slide 25: Catalysts for Continued Profitable Growth
Catalysts for Continued Profitable Growth • Healthy economic conditions in our markets • New RIA platform enhances ability to recruit new talent to Wealth Management business • Operational Excellence initiative driving improvement in efficiencies • Asset-sensitive balance sheet will benefit from ris
Slide 26: Appendix
APPENDIX
Slide 27: 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 28: Capital Position
Strong Pro Forma Capital Position (1) Capital Position 20.00% 16.00% 12.34% 12.00% 11.04% 10.45% 8.68% 7.62% 8.00% 4.00% 0.00% TCE/TA Tier 1 Common Tier 1 Leverage Tier 1 RBC Total RBC As Reported (6/30/17) 27
Slide 29: Appendix: Solid Reserve Coverage
Appendix: Solid Reserve Coverage As of December 31, 2015 As of December 31, 2016 As of June 30, 2017 % of the % of the % of the Allowance Allowance Allowance Non- to Total Non- to Total Non- to Total Purchased Purchased Loans in Purchased Purchased Loans in Purchased Purchased Loans in Credit- Credi
Slide 30: Appendix: Investments
Appendix: Investments(1) • Midland has optimized the investment US Treasury, portfolio to enhance portfolio quality, 6% GSE Debt Securities, 4% flexibility, and yield while maintaining an Equity Securities, effective duration of approximately 2.5 1% Municipal HTM, years. The addition of Centrue’s AR
Slide 31: Appendix: Reconciliation of Net Interest Margin Excluding Accretion Income
Appendix: Reconciliation of Net Interest Margin Excluding Accretion Income Six Months Year Ended December 31, Ended 2009 2010 2011 2012 2013 2014 2015 2016 June 30, 2017 Reported yield on loans 6.58% 6.48% 6.17% 5.73% 5.33% 4.65% 5.21% 4.83% 4.80% Effect of accretion income on acquired loans (0.56%)
Slide 32: Appendix: Reconciliation of Adjusted Earnings/Profitability
Appendix: Reconciliation of Adjusted (1) Earnings/Profitability Six Months Year Ended December 31, Ended (dollars in thousands, except per share data) 2009 2010 2011 2012 2013 2014 2015 2016 June 30, 2017 Adjusted Earnings Income before income taxes - GAAP $ 23,662 $ 17,924 $ 15,347 $ 18,499 $ 20,52
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