Midland States Bancorp, Inc. · NASDAQ:MSBI
Midland States Bancorp — Investor Presentation (September 2022)
47 slides from Midland States Bancorp's investor presentation, September 2022
Slide 1: Midland States Bancorp, Inc. Investor Presentation
Midland States Bancorp, Inc. NASDAQ: MSBI Investor Presentation September 2022 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 $7.4 billion asset community bank established in 1881 and headquartered in Effingham, Illinois Largest Illinois-based community bank1 $3.6 billion Wealth Management business Commercial bank focused on in-market relationships with national diversification in equipment finance
Slide 4: Financial Services & Banking Center Footprint
Financial Services & Banking Center Footprint 4
Slide 5: 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 for scalability Organization‐wide focu
Slide 6: 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 service and accountability to our clients and of identifying and executing transactions that colleagues; seek to develop bankers
Slide 7: 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 Douglas J. Tucker | SVP, Corporate Counsel
Slide 8: 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 9: Overview of FNBC Branch Acquisition
Overview of FNBC Branch Acquisition Key Highlights Extends Footprint Closer to Chicago Completed in Q2 2022 Acquired one branch and the deposits and certain loans from two FNBC Bank & Trust locations Added branch in Mokena, IL Increases Midland’s exposure to faster growing markets in Norther
Slide 10: Successful Execution of Strategic Plan…
Successful Execution of Strategic Plan… Total Assets (at period‐end in Billions) CAGR: 17% $7.4 $6.9 $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 Selected Acquisitions Selected Acquisitions: Total Assets at Time of Acquisitio
Slide 11: …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 (at period‐end) $21.66 $1.16 CAGR: 5.8% CAGR: 7.7% $1.12 $1.07 $19.31 $0.97 $18.64 $0.88 $17.31 $0.80 $17.00 2017 2018 2019 2020 2021 2017 2018 2019 2020 2
Slide 12: …And Increased Profitability
…And Increased Profitability Adjusted Diluted EPS(1) Adjusted ROATCE(1) CAGR: 17.9% $3.65 18.65% 18.33% $2.54 15.00% $2.39 14.44% $1.89 $1.70 11.32% 9.24% 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 1H 2022 12 Notes: (1) Represents a non‐GAAP financial measure. See “Non‐GAAP Reconciliation” in
Slide 13: Significant Corporate Actions Since Coming Public in 2016
Strategic Initiatives Strengthening Franchise Significant Corporate Actions Since Coming Public in 2016… Action Strategic Rationale Financial Impact 2016 2021 Three whole bank acquisitions • Low‐cost deposits Total Assets $3.2B $7.4B Scale Four Wealth Management acquisitions • Recurring revenue AUA
Slide 14: 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) $120.4 $5,103 $5,225 $108.9 $101.3 $4,401 $83.7 $4,138 $61.9 $50.0 $3,227 $2,320 2016 2017 2018 2019 2020
Slide 15: Foundational Technology Roadmap
Technology Roadmap Midland’s technology investments are enhancing efficiencies, improving client experience, and positively impacting retail deposit gathering and commercial/consumer loan production Consumer Small Business Commercial Wealth Flexible Overdrafts (Q1 2022) Commercial Online Account Ope
Slide 16: Loan Portfolio and Asset Quality
Loan Portfolio and Asset Quality 16
Slide 17: Commercial Loans and Leases by Industry
Commercial Loans and Leases by Industry Industries as a percentage of Commercial, ($s in millions) Retail Trade Wholesale Trade Other Services Health Care CRE and Equipment Finance Loans and Leases $159 $115 $103 $100 with outstanding balances 3.6% 2.6% 2.4% 2.3% of $4.37 billion as of 6/30/22 Gener
Slide 18: Commercial Real Estate Portfolio by Collateral Type
Commercial Real Estate Portfolio by Collateral Type Collateral type as a percentage of the Hotel/Motel All Others Commercial Real Estate and Construction Assisted Living $167 $160 ($s in millions) Portfolio with outstanding balances of $180 6.6% 6.3% $2.54 billion as of 6/30/22 7.1% Office $149 5.9%
Slide 19: Accelerating Commercial Loan Growth
Accelerating Commercial Loan Growth 26% Annualized Loan Growth Over Trailing 12 Months(1) New hires and an increase in productivity of the Commercial and CRE Loan Production commercial banking group without increasing the size of the business development team ($ in millions) $858 $861 Addition o
Slide 20: Deposit Base Shifting More Toward Commercial Deposits
Deposit Base Shifting More Toward Commercial Deposits New Business Development Efforts Producing Consistent Inflows of Low‐Cost Commercial Deposits New Commercial Deposit Accounts Commercial banking team more focused on ($ in millions) developing full banking relationships Treasury Management su
Slide 21: Midland Equipment Finance Portfolio Overview
Midland Equipment Finance Portfolio Overview Portfolio Characteristics (as of 6/30/22) Nationwide portfolio providing financing solutions to equipment vendors and end‐users Total Outstanding $985.5 million Loans and Leases (17.0% of total loans) Number of Loans and Leases 8,378 Average Loan/Lease Si
Slide 22: GreenSky Consumer Loan Portfolio Overview
GreenSky Consumer Loan Portfolio Overview Portfolio Characteristics Prime Credit (as of 6/30/22) Average FICO score of 772 $916.8 million Total Outstanding (15.8% of total loans) No losses to MSBI in 10 year history of portfolio Number of Loans 404,301 Average Loan Size $2,268 Credit Enhancement
Slide 23: Asset Quality
Asset Quality • Nonperforming loans increased $4.0 million due to one CRE loan where no loss is expected • Generally positive trends in the loan portfolio with continued upgrades of watch list loans • Delinquencies in consumer portfolio remain exceptionally low • Net charge-offs of $2.8 million, or
Slide 24: Changes in Allowance for Credit Losses
Changes in Allowance for Credit Losses ($ in thousands) Specific Portfolio Economic Reserves Changes Factors Changes to specific New loans Changes to macro- reserves Changes in credit economic variables and forecasts quality including risk ratings Changes to other economic Changes in qua
Slide 25: ACL by Portfolio
ACL by Portfolio ($ in thousands) June 30, 2022 March 31, 2022 % of % of Portfolio Loans ACL Loans ACL Total Loans Total Loans Commercial $ 747,782 $ 5,412 0.72% $ 796,498 $ 5,078 0.64% Warehouse Lines 23,872 ‐ 0.00% 83,999 ‐ 0.00% Commercial Other 643,477 7,336 1.14% 641,628 7,543 1.18% Equipment F
Slide 26: Recent Financial Trends
Recent Financial Trends 26 Midland [=] States Bancorp, Inc.
Slide 27: Overview of 2Q22
Overview of 2Q22 • Net income of $21.9 million, or $0.97 diluted EPS, up from $0.92 in prior quarter Higher Earnings and • Pre-tax, pre-provision earnings(1) of $35.9 million, up from $32.0 million in prior quarter Improved Returns • ROAA of 1.19%, ROATCE(1) of 19.14%, and Adjusted PTPP ROAA(1) of 1
Slide 28: Loan Portfolio
Loan Portfolio • Total loans increased $255.6 million from prior quarter to $5.80 billion • Growth in CRE loans, equipment finance, conventional commercial loans, and consumer loans offset lower end-of-period balances on commercial FHA warehouse credit lines and lower PPP loans • Equipment finance b
Slide 29: Total Deposits
Total Deposits • Total deposits increased $126.9 million from prior quarter to $6.18 billion • Increase driven by higher balances of noninterest-bearing and lower-cost interest-bearing deposits • Strengthened commercial banking and treasury management teams consistently generating new relationships
Slide 30: Net Interest Income/Margin
Net Interest Income/Margin • Net interest income increased 7.9% from the prior quarter due primarily to higher average loan balances and an increase in net interest margin • Net interest margin increased 15 bps from prior quarter due to the redeployment of excess liquidity into the loan portfolio an
Slide 31: Wealth Management
Wealth Management • During 2Q22, assets under administration decreased $446.2 million, primarily due to market performance • Wealth Management revenue declined due to lower AUA Assets Under Administration Wealth Management Revenue (in millions) (in millions) $4,217 $7.18 $7.18 $4,078 $7.14 $4,058 $4
Slide 32: Noninterest Income
Noninterest Income • Noninterest income decreased 6.4% from prior quarter, primarily due to lower wealth management revenue • Impairment on commercial MSRs impacted noninterest income by $0.9 million and $0.4 million in 2Q22 and 1Q22, respectively • Decline in wealth management and larger commercial
Slide 33: Noninterest Expense and Operating Efficiency
Noninterest Expense and Operating Efficiency Noninterest Expense and Efficiency Ratio (1) • Efficiency Ratio (1) was 53.1% in 2Q22 vs. 55.7% in 1Q22 (Noninterest expense in millions) • Adjustments to non-interest expense: $55.0 70.0% ($ in millions) 2Q22 1Q22 $50.0 $48.9 Integration and $45.8 acquis
Slide 34: Outlook
Outlook 34 Midland [=] States Bancorp, Inc.
Slide 35: Outlook
Outlook • Loan pipeline remains strong, but loan growth expected to moderate in second half of 2022 as higher rates and uncertain economic conditions are likely to have a greater impact on loan demand • Continued loan growth, NIM expansion, and expense control should drive further increases in earni
Slide 36: 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 36
Slide 37: Appendix
APPENDIX 37 Midland [=] States Bancorp, Inc.
Slide 38: ESG: A Framework for Sustainability
Financial Education ESG: A Framework for Sustainability • 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 39: Paycheck Protection Program Overview
Paycheck Protection Program Overview Paycheck Protection Program Paycheck Protection Program (as of 6/30/22) Loan Forgiveness Loans Outstanding $6.4 million As of 3/31/22 As of 6/30/22 Total Fees Earned $15.1 million Loans Submitted to SBA $362.7 million $378.2 million Fees Recognized in 2Q22 $0.7 m
Slide 40: Capital Ratios and Strategy
Capital Ratios and Strategy Capital Strategy Capital Ratios (as of 6/30/22) 15.00% Strengthened capital ratios with issuance of $115 million of non-cumulative preferred stock in 12.49% August 2022 11.44% 10.27% Included as Tier 1 Regulatory Capital 10.00% 9.41% 7.75% with reset at 5 years 7.66
Slide 41: Appendix: Reconciliation of TBV Per Share
Appendix: Reconciliation of TBV Per Share As of Decem ber 31, ( do lla rs in t ho us a nds , e xc e pt pe r s ha re da t a ) 2021 2020 2019 2018 2017 Shareholders' Equity to Tangible Common Equity: Total shareholders' equity—GAAP $ 663,837 $ 621,391 $ 661,911 $ 608,525 $ 449,545 Adjustments: Preferr
Slide 42: Adjusted Earnings Reconciliation
MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) Adjusted Earnings Reconciliation For the Years Ended December 31, (dollars in thousands, except per share data) 2021 2020 2019 2018 2017 2016 Income before income taxes - GAAP $ 99,112 $ 32,014 $ 72,471 $ 50,805
Slide 43: Efficiency Ratio Reconciliation
MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) Update Efficiency Ratio Reconciliation For the Years Ended December 31, (dollars in thousands) 2021 2020 2019 2018 2017 2016 Noninterest expense - GAAP $ 175,069 $ 184,010 $ 175,641 $ 191,643 $ 152,997 $ 121,289
Slide 44: Adjusted Return on Average Tangible Common Equity (ROATCE)
MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued) Adjusted Return on Average Tangible Common Equity (ROATCE) For the Six Months Ended For the Years Ended December 31, (dollars in thousands) June 30, 2022 2021 2020 2019 2018 2017 Adjusted earnings $ 4
Slide 45: Adjusted Earnings Reconciliation (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) 2022 2022 2021 2021 2021 Income before income taxes - GA
Slide 46: Efficiency Ratio Reconciliation (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, (dollars in thousands) 2022 2022 2021 2021 2021 Noninterest expense - GAAP $ 41,339 $ 40,88
Slide 47: Tangible Common Equity Ratio and Tangible Book Value Per Share
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) 2022 2022 2
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