Midland States Bancorp, Inc. · NASDAQ:MSBI
Midland States Bancorp — Investor Presentation (August 2021)
45 slides from Midland States Bancorp's investor presentation, Aug 2, 2021
Slide 1: Midland States Bancorp, Inc. Investor Presentation August 2021
1 Midland States Bancorp, Inc. NASDAQ: MSBI Investor Presentation August 2021
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 ▪ $6.63 billion asset community bank established in 1881 and headquartered in Effingham, Illinois » 2nd largest Illinois - based community bank 1 ▪ $4.1 billion Wealth Management business ▪ Commercial bank focused on in - market relationships with national diversification in equip
Slide 4: Financial Services & Banking Center Footprint
4 Financial Services & Banking Center Footprint
Slide 5: Investment Summary
5 Notes: 1. As of June 30, 2021 Investment Summary Consistent track record of driving compelling shareholder returns through disciplined strategic expansion and earnings growth Well diversified loan portfolio across asset classes, industries and property types Organization - wide focus on expense ma
Slide 6: Business and Corporate Strategy
6 Business and Corporate Strategy Customer - Centric Culture Drive organic growth by focusing on customer service and accountability to our clients and colleagues; seek to develop bankers who create dynamic relationships; pursue continual investment in people; maintain a core set of institutional va
Slide 7: Management Team
7 Jeffrey G. Ludwig | President and CEO of Midland States Bancorp ▪ Assumed Company CEO role in Jan. 2019 after serving as Bank CEO ▪ More than 10 years serving as CFO ▪ Joined Midland in 2006; 16+ years in banking industry Jeffrey S. Mefford | President of Midland States Bank and EVP of Midland Sta
Slide 8: Successful Acquisition History
8 Strategic Capital Bank AMCORE Bank, N.A. Love Savings / Heartland Bank Sterling Bancorp Centrue Financial Alpine Bancorp. HomeStar Financial Acquisition Type FDIC - Assisted 12 Branches Whole Bank Trust Administration Whole Bank Whole Bank and Wealth Mgmt Whole Bank Assets Acquired ($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: 17% 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 $13.82 $15.20 $17.16 $17.31 $17.00 $18.64 $19.31 $20.48 2014 2015 2016 2017 2018 2019 2020 2Q21 …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 defined as tangible common equit y divided by shares
Slide 11: Strategic Initiatives Strengthening Franchise
11 Strategic Initiatives Strengthening Franchise Action Strategic Rationale Financial Impact Three whole bank acquisitions • Low - cost deposits 2016 2Q21 Total Assets $3.2B $6.6B Four Wealth Management acquisitions • Recurring revenue AUA $1.7B $4.1B Expanded equipment finance group • Diversify rev
Slide 12: Improved Growth and Profitability
12 Strategic Initiatives Strengthening Franchise …Have Produced Improved Growth and Profitability Total Loans $2,320 $3,227 $4,138 $4,401 $5,103 2016 2017 2018 2019 2020 (in millions, as of year - end) Wealth Management Revenue $8.09 $13.34 $20.51 $21.83 $22.80 2016 2017 2018 2019 2020 (in millions)
Slide 13: 2020 Optimization and Efficiency Initiatives
13 2020 Optimization and Efficiency Initiatives 13 Sale of Commercial FHA Loan Origination Platform • Sale of origination platform to Dwight Capital • No significant gain on sale (reduced goodwill by $10.9 million) • $3.0 million tax charge on sale • Retain servicing and low - cost deposits • Ongoin
Slide 14: Digital Talent and Technology Initiatives
14 Foundational Consumer Small Business Commercial Customer Facing Digital Talent (39 FTE) Chief Digital Officer , Director – Digital Customer Experience, Director – Enterprise Data Services, Director – Digital Solution Delivery, Lead Engineer API Development, Senior Manager – Digital Marketing, Man
Slide 15: Recent Financial Trends
Recent Financial Trends Midland
Slide 16: Overview of 2Q21
16 Overview of 2Q21 16 Increasing Loan Production 2Q21 Earnings Strong Increase in Non - Interest Income • Increased production in equipment finance, CRE and construction offset by declines in commercial FHA warehouse lines, PPP loans, and residential real estate loans • Growth in consumer portfolio
Slide 17: Loan Portfolio
17 2Q 2021 1Q 2021 2Q 2020 Commercial loans and leases $ 1,831 $ 1,977 $ 1,856 Commercial real estate 1,540 1,494 1,495 Construction and land development 213 192 208 Residential real estate 367 399 509 Consumer 885 849 771 Total Loans $4,836 $4,911 $4,839 Total Loans ex. Commercial FHA Lines and PPP
Slide 18: Total Deposits
18 2Q 2021 1Q 2021 2Q 2020 Noninterest - bearing demand $ 1,366 $ 1,522 $ 1,273 Interest - bearing: Checking 1,619 1,601 1,485 Money market 788 819 878 Savings 669 653 595 Time 722 719 690 Brokered time 32 25 23 Total Deposits $5,196 $5,341 $4,943 Total Deposits Total Deposits and Cost of Deposits •
Slide 19: Net Interest Income/Margin
19 • Net interest income decreased 3.4% from the prior quarter due to lower prepayment fees, an unfavorable shift in the mix of earning assets, and the recovery of interest on a previously charged - off loan in 1Q21 • Net interest margin, excluding accretion income, declined 17 bps from prior quarte
Slide 20: Wealth Management
20 • During 2Q21, assets under administration increased $517.2 million, primarily due to acquisition of ATG Trust Company in June • Wealth Management revenue increased 10.1% from prior quarter, primarily due to one month contribution of ATG Trust Company Wealth Management Wealth Management Revenue A
Slide 21: Noninterest Income
21 Noninterest Income • Noninterest income increased 17.6% from prior quarter • Impairment on commercial MSRs impacted noninterest income by $1.1 million and $1.3 million in 2Q21 and 1Q21, respectively • Excluding the impact of the impairment of commercial MSRs, noninterest income increased primaril
Slide 22: Noninterest Expense and Operating Efficiency
22 Noninterest Expense and Operating Efficiency • Efficiency Ratio (1) was 60.2% in 2Q21 vs. 56.9% in 1Q21 • Adjustments to non - interest expense: • Excluding these adjustments, noninterest expense increased primarily due to: » Higher salaries and benefits expense resulting from increased incentive
Slide 23: COVID-Response and Impact
23 COVID - 19 Response and Impact
Slide 24: Paycheck Protection Program Overview
24 Paycheck Protection Program Overview Paycheck Protection Program (as of 6/30/21) Loans Outstanding $146.7 million Round 1 $50.1 million Round 2 $96.6 million Total Fees Earned $15.2 million Fees Recognized in 2Q21 $2.0 million Remaining Fees to be Recognized $5.6 million Impact on 2Q21 Financials
Slide 25: Commercial Loans and Leases by Industry
25 Commercial Loans and Leases by Industry RE / Rental & Leasing 20.5% All Others 11.8% Assisted Living 9.5% Finance and Insurance 7.6% Manufacturing 7.4% Construction - General 7.4% Accommodation & Food Svcs 7.1% Retail Trade 6.5% Ag., Forestry, & Fishing 4.9% General Freight Trucking 4.4% Trans. /
Slide 26: Commercial Real Estate Portfolio by Collateral Type
26 Commercial Real Estate Portfolio by Collateral Type Assisted Living 18.0% Retail 15.4% Multi - Family 9.7% Hotel/Motel 9.6% All Others 9.0% Industrial / Warehouse 8.7% Office 6.0% Residential 1 - 4 Family 4.9% Farmland 4.0% C - Store / Gas Station 3.9% Mixed Use / Other 2.7% Medical Building 2.4%
Slide 27: Loan Deferral Overview
27 Loan Deferral Overview Total Loan Deferrals As of Dec. 31, 2020 As of Mar. 31, 2021 As of Jun. 30, 2021 Total Loans Deferred $209.1 million $219.1 million $107.3 million % of Total Loans 4.1% 4.5% 2.2% Deferrals by Industry (as of June 30, 2021) Hotels/Motels $39.4 37% Transit & Ground Passenger
Slide 28: Midland Equipment Finance Portfolio Overview
28 Midland Equipment Finance Portfolio Overview ($ in millions) Portfolio Characteristics (as of 6/30/21) Nationwide portfolio providing financing solutions to equipment vendors and end - users Total Outstanding Loans and Leases $871.5 million (18.0% of total loans) Number of Loans and Leases 7,121
Slide 29: Hotel/Motel Portfolio Overview
29 Hotel/Motel Portfolio Overview ($ in millions) Portfolio Characteristics (CRE & C&I) (as of 6/30/21) Total Outstanding $180.4 million (3.7% of total loans) Number of Loans 64 Average Loan Size $2.8 million Largest Loan $11.3 million Average LTV 52% Total Deferred Loans as of 3/31/21 $117.4 millio
Slide 30: GreenSky Consumer Loan Portfolio Overview
30 GreenSky Consumer Loan Portfolio Overview Delinquency Rate (greater than 60 days) Portfolio Characteristics (as of 6/30/21) Total Outstanding $796.5 million (16.5% of total loans) Number of Loans 371,110 Average Loan Size $2,146 Average FICO Score 772 Total Deferred Loans (as of March 31, 2021) $
Slide 31: Asset Quality
31 Asset Quality NCO / Average Loans • Nonperforming loans increased $8.5 million due primarily to addition of three loans in the hotel/motel portfolio • Sale of properties for slight gain resulted in a $7.5 million decline in OREO from 1Q21 • Net charge - offs of $4.0 million, or 0.33% of average l
Slide 32: Changes in Allowance for Credit Losses
32 Changes in Allowance for Credit Losses ACL 3/31/21 ACL 6/30/21 ($ in thousands) Specific Reserves Portfolio Changes Economic Factors ▪ Changes to specific reserves ▪ New loans ▪ Changes in credit quality including risk downgrades and deferrals ▪ Changes in allocations to COVID - 19 impacted segme
Slide 33: ACL by Portfolio
33 ACL by Portfolio Portfolio Total Loans at 6/30/21 ACL % of Total Loans Total Loans at 3/31/21 ACL % of Total Loans Commercial $ 719,642 $ 5,825 0.81% $ 808,262 $ 8,214 1.02% Warehouse Lines 129,607 - 0.00% 205,115 - 0.00% Commercial Other 704,438 9,024 1.28% 766,632 9,125 1.19% Equipment Finance
Slide 34: Capital and Liquidity Overview
34 Capital and Liquidity Overview Capital Ratios (as of 6/30/21) Liquidity Sources (as of 6/30/21) 7.12% 8.44% 8.00% 9.64% 13.11% 11.06% 9.19% 11.06% 11.98% 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 35: Outlook
35 Outlook
Slide 36: Outlook
36 Outlook • Continued improvement in economic conditions should lead to reductions in problem loans and increased loan demand • Loan pipeline in Community Banking group approximately 14% higher than end of 1Q21, which should lead to higher level of loan growth in second half of 2021, favorable shif
Slide 37: Long-Term Formula for Enhancing Shareholder Value
37 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 Stable Sources of Recurring Income
Slide 38: Appendix
APPENDIX Midland
Slide 39: ESG: A Framework for Sustainability
39 ESG: A Framework for Sustainability Environmental Facilities • Our Corporate HQ, built in 2011, is LEED (Silver) Certified. • 10 of our other locations use solar panels. • We have made more than $50+ million of credit available for residential solar projects since 2011. • We have also completed m
Slide 40: Reconciliation of TBV Per Share
40 Appendix: Reconciliation of TBV Per Share 40 As of June 30, (dollars in thousands, except per share data) 2014 2015 2016 2017 2018 2019 2020 2021 Shareholders' Equity to Tangible Common Equity: Total shareholders' equity—GAAP 219,456$ 232,880$ 321,770$ 449,545$ 608,525$ 661,911$ 621,391$ 648,186$
Slide 41: Adjusted Earnings Reconciliation
41 Adjusted Earnings Reconciliation (dollars in thousands) Income before income taxes - GAAP $ 32,014 72,471 50,805 26,471 50,431 Adjustments to noninterest income: Gain on sales of investment securities, net 1,721 674 464 222 14,702 Other (17) (29) 89 (67) (608) Other income Total adjustments to no
Slide 42: Efficiency Ratio Reconciliation
42 Efficiency Ratio Reconcilation (dollars in thousands) Noninterest expense $ 184,010 $ 175,641 $ 191,643 $ 152,997 $ 121,289 Adjustments to noninterest expense: Net expense from FDIC loss share termination agreement - - - - (351) Impairment related to facilities optimization (12,847) (3,577) - (1,
Slide 43: Adjusted Earnings Reconciliation (Quarterly)
43 (dollars in thousands, except per share data) Income before income taxes - GAAP $ 19,041 $ 24,040 $ 10,746 $ 3,270 $ 15,993 Adjustments to noninterest income: Gain on sales of investment securities, net 377 - - 1,721 - Other income (27) 75 3 (17) 11 Total adjustments to noninterest income 350 75
Slide 44: Adjusted Noninterest Expense Reconciliation
44 (dollars in thousands) Noninterest expense - GAAP $ 48,941 $ 39,079 $ 47,048 $ 53,901 $ 41,395 Loss on mortgage servicing rights held for sale (143) - (617) (188) (391) Impairment related to facilities optimization - - 10 (12,651) (60) FHLB advances prepayment fees (3,669) (8) (4,872) - - Integra
Slide 45: Tangible Common Equity Reconciliation
45 (dollars in thousands, except per share data) Shareholders' Equity to Tangible Common Equity Total shareholders' equity—GAAP $ 648,186 $ 635,467 $ 621,391 $ 621,880 $ 633,589 Adjustments: Goodwill (161,904) (161,904) (161,904) (161,904) (172,796) Other intangible assets, net (27,900) (26,867) (28
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