Midland States Bancorp, Inc. · NASDAQ:MSBI
Midland States Bancorp — Sandler O'Neill Investor Conference 2016
32 slides from Midland States Bancorp's conference presentation, November 2016
Slide 1: Midland States Bancorp, Inc.
Midland States Bancorp, Inc. NASDAQ: MSBI Sandler O’Neill Investor Conference November 2016
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 Overview Financial Highlights (1) • $3.2 billion asset community bank Total Assets $3,248 headquartered in Effingham, Illinois and Total Deposits $2,420 established in 1881 Tangible Common Equity $270 NPAs / Assets 1.06% • Five principal business lines: – Traditional community banki
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 Structure
Management Structure 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 posit
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) $3.2 $17.52 $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 $8.28 $1.1 $0.4 2008 2009 2010 2011 2012 2013 2014 2015 3Q 2008 2009
Slide 9: Successful Acquisition History
Successful Acquisition History • Midland States has announced ten 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 r
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 (2) midsized banking organizations available for acquisition within Illinois and contiguous states – ~50% of nationwide community bank M&A in 20
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 • Low cost deposits (0.38% cost of deposits) and robust loan yields (4.90%) drive net interest margin of 4.00% • 10
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% 22.4% 0.90% 0.94% 19.7% 17.0% 12.8% 11.6% 0.44% 7.0% 0.40% 5.3% 0.22% (0.7%) 2008 2009 2010 2011 2012 2013 2014 2015 YTD(3) 2008 2009 2010 2011 2012 2013 2014 20
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 14 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 Loans Sold Purchase / Refinance Mix (in mill
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 on lease finance portfolio was 5.62% in the quarte
Slide 17: Business Unit Review – Wealth Management
Business Unit Review – Wealth Management • Offers comprehensive suite of Trust and Wealth Management products • Named one of the fastest growing Trust departments in 2014 (Bank Director Magazine) • Sterling Trust company acquisition closed in November; increases Assets Under Administration to $1.6 b
Slide 18: Delivering Organic Loan Growth
Delivering Organic Loan Growth Total Loans and Deposits 11% average annual $2,420 $2,368 $2,297 core loan growth (1) $2,151 $1,996 $1,798 $1,365 $1,382 $1,268 $1,222 $1,206 $1,047 $958 $979 $918 $624 $352 $337 (2) 2008 2009 2010 2011 2012 2013 2014 2015 3Q 2016 Deposits ($mm) Loans ($mm) Note: (1) A
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 $182M Residential Real 8% Estate • Current loan origination efforts focus on high $217M quality commercial loan segments 9% Non-Owner Occupied CRE $553M Consumer 24%
Slide 20: Strong Credit Quality
Strong Credit Quality • Managed by experienced personnel, MSBI maintains a disciplined approval process and conservative credit culture • Demonstrated reduction in nonperforming assets resulting in improved credit quality metrics Nonperforming Assets ($mm) (1) NCOs / Average Loans NPAs / Assets 1.58
Slide 21: Attractive and Growing Core Deposit Base
(1) Attractive and Growing Core Deposit Base • 86% core deposits Deposit Mix • 26% non-interest bearing deposits • Low cost of deposits at 38 basis points Noninterest- NOW Bearing $658M $629M 26% • Recent acquisitions have improved overall 27% 86% Core (3) funding mix Brokered Tim e Dep $183M 8% • N
Slide 22: Capital Position
Strong Pro Forma Capital Position (1) Capital Position 20.00% 16.00% 13.53% 12.00% 10.94% 9.82% 9.03% 8.44% 8.00% 4.00% 0.00% TCE/TA Tier 1 Common Tier 1 Leverage Tier 1 RBC Total RBC As Reported (9/30/16) 21
Slide 23: Third Quarter 2016 Summary
Third Quarter 2016 Summary Strong Earnings Net income of $8.1 million or $0.51 per diluted share Strong Loan Growth Annualized average loan growth of 17.7% in the quarter Strong Growth in Double digit annualized increases in commercial real estate, residential real estate, Multiple Portfolios consum
Slide 24: Outlook
Outlook • Economic conditions in our markets remain healthy • Expecting low- to mid-teen loan growth for the full year • New loan products are contributing to strong pipeline • Operational Excellence initiative adopted to place enterprise-wide focus on efficiency improvements • Early termination of
Slide 25: Summary
Summary • Diversified financial holding company • Multiple complementary business lines, diversified revenue streams • Experienced management team, considerable inside ownership • Long term strategic and earnings growth • Solid asset quality, conservative credit culture and disciplined underwriting
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: Appendix: Solid Reserve Coverage
Appendix: Solid Reserve Coverage As of Decem ber 31, 2014 As of Decem ber 31, 2015 As of Septem ber 30, 2016 % of the % of the % of the Allow ance Allow ance Allow ance Non- to Total Non- to Total Non- to Total Purchased Purchased Loans in Purchased Purchased Loans in Purchased Purchased Loans in Cr
Slide 29: Appendix: Investment Portfolio Overview
(1) Appendix: Investment Portfolio Overview % of Total Weighted Average (dollars in thousands) Book Value Investment Securities Yield Investment Securities Available for Sale: US Treasury securities $ 35,506 10.6% 0.61% Government sponsored entity debt securities 8,990 2.7% 2.18% Agency mortgage-bac
Slide 30: Appendix: Well-positioned for Rising Interest Rates
Appendix: Well-positioned for Rising Interest Rates (1) % Change in Net Interest Income -50bps Shock +100bps Shock +200bps Shock 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% (2.0%) (4.0%) Dollars in thousands September 30, 2016 December 31, 2015 December 31, 2014 December 31, 2013 NII $ NII % NII $ NII % NII $ NI
Slide 31: Appendix: Reconciliation of Net Interest Margin Excluding Accretion Income
Appendix: Reconciliation of Net Interest Margin Excluding Accretion Income Nine Months Year Ended December 31, Ended 2008 2009 2010 2011 2012 2013 2014 2015 September 30, 2016 Reported yield on loans 6.56% 6.58% 6.48% 6.17% 5.73% 5.33% 4.65% 5.21% 4.90% Effect of accretion income on acquired loans 0
Slide 32: Appendix: Reconciliation of Adjusted Earnings/Profitability
Appendix: Reconciliation of Adjusted (1) Earnings/Profitability Nine Months Year Ended Decem ber 31, Ended Septem ber 30, (dollars in thousands, except per share data) 2008 2009 2010 2011 2012 2013 2014 2015 2016 Adjusted Earnings Income before income taxes - GAAP $ 2,742 $ 23,662 $ 17,924 $ 15,347
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