Midland States Bancorp, Inc. · NASDAQ:MSBI
Midland States Bancorp — Investor Presentation (August 2023)
49 slides from Midland States Bancorp's investor presentation, August 2023
Slide 1: Midland States Bancorp, Inc. Investor Presentation August 2023
Midland States Bancorp, Inc. NASDAQ: MSBI Investor Presentation August 2023 1
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 expressing management’s current expectations, forecasts of future events or long-term goals may be based upon beliefs, expectations and a
Slide 3: Company Snapshot
Company Snapshot • Illinois state-chartered community bank founded in 1881 • $8.0 billion in assets • $3.6 Wealth Management business • Commercial bank focused on in-market relationships with national diversification in equipment finance • 53 branches in Illinois and Missouri • 16 successful acquisi
Slide 4: Recent Trends and Operational Highlights
Recent Trends and Operational Highlights • Profitable growth and improved efficiencies resulting in higher EPS and increased returns over the past few years • Strengthened commercial banking team and increased presence in faster growing markets driving significant organic loan growth and consistent
Slide 5: Financial Services & Banking Center Footprint
Financial Services & Banking Center Footprint 55
Slide 6: Investment Summary
Investment Summary Consistent track record of driving Proven track record of successful compelling shareholder returns acquisitions with a focus on enhancing through disciplined strategic shareholder value while building a expansion and earnings growth platform of scalability Organization-wide focus
Slide 7: Business and Corporate Strategy
Business and Corporate Strategy Customer-Centric Culture Accretive Acquisitions Drive organic growth by focusing on customer Maintain experienced acquisition team capable of service and accountability to our clients and identifying and executing transactions that build colleagues; seek to develop ba
Slide 8: Experienced Senior Management Team
Experienced Senior Management Team 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 S
Slide 9: Successful Acquisition History
Successful Acquisition History ▪ Midland States has completed 16 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 ge
Slide 10: Strategic Initiatives Strengthening Franchise
Strategic Initiatives Strengthening Franchise Significant Corporate Actions Since Coming Public in 2016... Action Strategic Rationale Financial Impact 2016 2022 Three whole bank acquisitions ▪ Low-cost deposits Total Assets $3.2B $7.9B Scale Four Wealth Management acquisitions ▪ Recurring revenue AU
Slide 11: Strategic Initiatives Strengthening Franchise
Strategic Initiatives Strengthening Franchise ...Have Produced Improved Growth and Profitability Adjusted Pre-Tax Pre-Provision Earnings(1) Total Loans (in millions) (in millions, as of year-end) Adjusted PTPP Adjusted PTPP / Avg Assets CAGR: 18.1% $6,306 Adjusted PTPP CAGR: 18.4% $137.5 $120.4 $5,2
Slide 12: Successful Execution of Strategic Plan...
Successful Execution of Strategic Plan... Total Assets (at period-end in billions) CAGR: 16% : 15% IPO $8.0 016 $7.9 e2 inc $7.4 G Rs $6.9 CA $6.1 $5.6 $4.4 $3.2 $2.9 $2.7 $1.6 $1.6 $1.7 $1.5 $1.1 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Q2 2023 Selected Acquisitions Sel
Slide 13: ...Leads to Creation of Shareholder Value
...Leads to Creation of Shareholder Value 22 Consecutive Years of Dividend Increases Tangible Book Value Per Share(1) Dividends Declared Per Share TBV/Share ex. AOCI CAGR: 7.9% CAGR: 7.0% $26.11 $24.72 $1.20 $1.16 $21.42 $1.12 $1.07 $0.97 $18.80 $18.34 $0.88 $17.22 $17.09 $0.80 $21.66 $22.24 $20.94
Slide 14: ...And Increased Profitability
...And Increased Profitability Adjusted Diluted EPS(1) Adjusted ROATCE(1) CAGR: 14.9% $3.79 18.59% $3.65 18.33% 16.60% 15.00% 14.44% $2.54 $2.39 11.32% $1.89 9.24% $1.70 2017 2018 2019 2020 2021 2022 YTD 2017 2018 2019 2020 2021 2022 2023 Adjusted Diluted EPS data through 2022 14 14 Notes: (1) Repre
Slide 15: Foundational Technology Roadmap
Technology Roadmap Midland’s technology investments are enhancing efficiencies, improving client experience, and positively impacting retail deposit gathering and commercial/consumer loan production Consumer Small Business Commercial Wealth Flexible Overdrafts (Q1 2022) Commercial Online Account Ope
Slide 16: Loan Portfolio and Asset Quality
Loan Portfolio 2009 and Asset Quality 16 16
Slide 17: Commercial Loans and Leases by Industry
Commercial Loans and Leases by Industry Other Services Health Care Retail Trade Wholesale Trade $100.3 $74.0 Industries as a percentage of Commercial, ($s in millions) $172.6 $98.3 2.0% 1.5% CRE and Equipment Finance Loans and Leases 3.5% 2.0% with outstanding balances of $4.92 billion as of 6/30/20
Slide 18: Commercial Real Estate Portfolio by Collateral Type
Commercial Real Estate Portfolio by Collateral Type ($s in millions) Mixed Use/Other Restaurant Medical Building Raw Land $71 $39 Collateral type as a percentage of the $110 $17 C-Store/Gas Station 2.5% 1.4% Commercial Real Estate and Construction 3.9% 0.6% $69 Portfolio with outstanding balances of
Slide 19: Strong Commercial Loan Growth
Strong Commercial Loan Growth 9.9% LTM Commercial Loan Growth(1) • New hires and an increase in productivity of the Commercial and CRE Loan Production commercial banking group without increasing (in millions) the size of the business development team $857 $861 • Addition of expertise in specialty fi
Slide 20: Midland Equipment Finance Portfolio Overview
Midland Equipment Finance Portfolio Overview Portfolio Characteristics (as of June 30, 2023) Nationwide portfolio providing financing solutions to equipment vendors and end-users Total Outstanding $1,115.1 million Loans and Leases (17.5% of total loans) Number of Loans and Leases 9,303 Average Loan/
Slide 21: GreenSky Consumer Loan Portfolio Overview
GreenSky Consumer Loan Portfolio Overview Portfolio Characteristics Plan with GreenSky to Wind Down Portfolio (as of June 30, 2023) ▪ Notice provided to officially terminate the $817.6 million Total Outstanding GreenSky program in October 2023 (12.8% of total loans) Weighted Average Rate 5.51% ▪ Red
Slide 22: Asset Quality
Asset Quality • Nonperforming loans increased $4.1 million primarily due to one commercial loan as well as increases in the equipment finance portfolio • Delinquencies in consumer portfolio remain low • Net charge-offs to average loans was 0.19% • Provision for credit losses on loans of $5.9 million
Slide 23: Changes in Allowance for Credit Losses
Changes in Allowance for Credit Losses ($ in thousands) $353 $810 $1,720 ▪ Changes to ▪ New Loans ▪ Change to macro- specific reserves economic variables ▪ Changes in Credit quality including risk and forecasts rating ▪ Changes to other ▪ Changes in portfolio economic qualitative $64,950 mix factors
Slide 24: ACL by Portfolio
ACL by Portfolio ($ in thousands) June 30, 2023 March 31, 2023 % of Total % of Total Portfolio Loans ACL Loans ACL Loans Loans Commercial $ 875,295 $ 5,180 0.59 % $ 823,847 $ 5,365 0.65 % Warehouse Lines 30,522 — —% 10,275 — —% Commercial Other 732,616 10,110 1.38 % 756,553 10,397 1.37 % Equipment F
Slide 25: Recent Financial Trends
Recent Financial Trends 2009 25 25
Slide 26: Overview of 2Q23
Overview of 2Q23 • Net income available to common shareholders of $19.3 million, or $0.86 diluted EPS Strong Financial • Pre-tax, pre-provision earnings(1) increased 8% from prior quarter to $34.9 million Performance • ROAA of 1.09% and ROTCE of 15.99% Stable • Total deposits up slightly from end of
Slide 27: Loan Portfolio
Loan Portfolio • Total loans increased $13.1 million from prior quarter to $6.37 billion • Growth primarily driven by increases in commercial loans and leases and construction and land development loans, partially offset by decline in consumer loans resulting from planned reduction of loans originat
Slide 28: Total Deposits
Total Deposits • Total deposits increased $1.3 million from end of prior quarter • Noninterest-bearing deposits decline primarily attributable to commercial depositors moving excess liquidity into interest-bearing accounts and other seasonal outflows • Managing rates on deposits in order to continue
Slide 29: Deposit Type Trend
Deposit Type Trend Deposits by Type Trend (in millions) GR 11% CA $6,365 $6,427 $6,111 $5,101 $4,544 $4,074 2018 2019 2020 2021 2022 2Q 2023 Non Int Bearing Demand Interest Bearing Checking Money Market Savings Time Brokered Time 29 29
Slide 30: Deposit Summary as of June 30, 2023
Deposit Summary as of June 30, 2023 Deposits by Channel Commercial Deposits by NAICS Code (in millions) (in millions) Finance & Insurance RE, Rental & Leasing $481 2.9% 8.1% Manufacturing 7.5% 9.4% Other Services $600 9.3% Skilled/Memory Care 14.0% Construction $270 Retail Deposits Admin, Support, 4
Slide 31: Uninsured Deposits
Uninsured Deposits Uninsured Deposits (in millions) June 30, 2023 March 31, 2023 Call Report Uninsured Estimate $ 1,654 $ 1,793 Call Report Estimated Uninsured Deposits to Total Deposits 26 % 28 % Less: Affiliate Deposits (MSB owned funds) (30) (32) Less: Additional structured FDIC coverage (50) (56
Slide 32: Investment Portfolio
Investment Portfolio Fair Value of Investments by Type As of June 30, 2023 9.3% 4.8% 8.3% 2.6% 6.5% • All Investments are classified as Treasuries Available for Sale US GSE & US Agency 7.5% MBS - agency • Average T/E Yield is 3.39% $883 million MBS - non agency State & Muni • Average Duration is 5.4
Slide 33: Liquidity Overview
Liquidity Overview Liquidity Sources (in millions) June 30, 2023 March 31, 2023 Cash and Cash Equivalents $ 160.7 $ 138.3 Unpledged Securities 343.5 310.3 FHLB Committed Liquidity 857.2 932.8 FRB Discount Window Availability 184.1 207.7 Total Estimated Liquidity $ 1,545.5 $ 1,589.1 Conditional Fundi
Slide 34: Net Interest Income/Margin
Net Interest Income/Margin • Net interest income down slightly from prior quarter as higher average balance of interest-earning assets was offset by an increase in cost of interest-bearing liabilities • Net interest margin decreased 16 bps from prior quarter as the increase in cost of deposits excee
Slide 35: Wealth Management
Wealth Management • Assets under administration up slightly in 2Q23 • 1Q23 increase in Wealth Management fees included seasonal tax preparation fees • Increase in AUA resulted in slight increase in Wealth Management revenue compared to the prior quarter excluding the seasonal tax preparation fees As
Slide 36: Noninterest Income
Noninterest Income • Noninterest income increased $3.0 million from prior quarter primarily due to gains on the redemption of subordinated debt and sales of other real estate owned • 2Q23 noninterest income included $0.9 million loss on sale of investment securities as part of repositioning of portf
Slide 37: Noninterest Expense and Operating Efficiency
Noninterest Expense and Operating Efficiency Noninterest Expense and Efficiency Ratio (1) (Noninterest expense in millions) • Efficiency Ratio (1) was 55.0% in 2Q 2023 vs. 57.6% in 1Q 2023 • Noninterest expense decreased primarily $49.9 due to: $3.3 ◦ Decreased commissions and incentive $44.5 compen
Slide 38: Capital Ratios and Strategy
Capital Ratios and Strategy Capital Ratios Capital Strategy (as of June 30, 2023) • Capital initiatives increased CET1 to 8.03% from 7.77% at 12/31/22 with limited 12.65% buybacks below TBV 11.89% 11.01% 11.01% 10.47% • Internal capital generated from strong 10.07% 9.57% profitability and slower bal
Slide 39: Outlook
Outlook 2009 39 39
Slide 40: Outlook
Outlook • Prudent risk management will remain top priority while economic uncertainty remains • Continue generating strong financial performance while maintaining conservative approach to new loan production to build capital and liquidity • Planned reduction in the consumer portfolio will continue t
Slide 41: Long-Term Formula for Enhancing Shareholder Value
Long-Term Formula for Enhancing Shareholder Value Disciplined Balance Sheet Growth + Improving Operating Efficiencies + Stable Sources of Recurring Income + Accretive M&A Transactions = Earnings Growth, Improving Returns and Enhanced Franchise Value 41 41
Slide 42: Appendix
APPENDIX Midland [=] States Bancorp, Inc.
Slide 43: ESG: A Framework for Sustainability
ESG: A Framework for Sustainability Financial Education ▪ Since 2015 we have held more than 240 financial literacy seminars in LMI/minority neighborhoods in our footprint. Environmental Facilities CRA, Community Development and Financial Inclusion ▪ Our Corporate HQ, built in 2011, is LEED (Silver)
Slide 44: Reconciliations of Non-GAAP Financial Measures: Tangible Book Value Per Share
MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) Tangible Book Value Per Share For the Year Ended (dollars in thousands, except per share data) 2017 2018 2019 2020 2021 2022 Shareholders' Equity to Tangible Common Equity Total shareholders' equity—GAAP $ 449,54
Slide 45: Reconciliations of Non-GAAP Financial Measures: Adjusted Earnings
MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) Adjusted Earnings Reconciliation For The Year Ended (dollars in thousands, except per share data) 2017 2018 2019 2020 2021 2022 Income before income taxes - GAAP $ 26,471 $ 50,805 $ 72,471 $ 32,014 $ 99,112 $ 129
Slide 46: Reconciliations of Non-GAAP Financial Measures: Efficiency Ratio
MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) Efficiency Ratio Reconciliation For the Year Ended 2016 2017 2018 2019 2020 2021 2022 (dollars in thousands) Noninterest expense - GAAP $ 121,289 $ 152,997 $ 191,643 $ 175,641 $ 184,010 $ 175,069 $ 175,662 Adjust
Slide 47: Reconciliations of Non-GAAP Financial Measures: Adjusted Earnings (Quarterly)
MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) Adjusted Earnings Reconciliation For The Quarter Ended June 30, March 31, December 31, September 30, June 30, (dollars in thousands, except per share data) 2023 2023 2022 2022 2022 Income before income taxes - GA
Slide 48: Reconciliations of Non-GAAP Financial Measures: Efficiency Ratio (Quarterly)
MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued) Efficiency Ratio Reconciliation For the Quarter Ended June 30, March 31, December 31, September 30, June 30, 2023 2023 2022 2022 2022 (dollars in thousands) Noninterest expense - GAAP $ 42,894 $ 44,48
Slide 49: Reconciliations of Non-GAAP Financial Measures: Tangible Common Equity Ratio
MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued) Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share As of June 30, March 31, December 31, September 30, June 30, (dollars in thousands, except per share data) 2023 2023 2
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