Midland States Bancorp, Inc. · NASDAQ:MSBI
Midland States Bancorp — Q3 2021 Earnings Presentation
25 slides from Midland States Bancorp's earnings presentation, Oct 28, 2021
Slide 1: Midland States Bancorp, Inc. Third Quarter 2021 Earnings Call
1 Midland States Bancorp, Inc. NASDAQ: MSBI Third Quarter 2021 Earnings Call
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: Overview of 3Q21
3 Overview of 3Q21 3 Improving Operating Leverage 3Q21 Earnings Positive Trends in Asset Quality • Net interest income and recurring fee income increasing while operating expenses remain relatively stable • Efficiency ratio (1) improved to 58.78% from 60.19% in prior quarter • Nonperforming loans de
Slide 4: Paycheck Protection Program Overview
4 Paycheck Protection Program Overview Paycheck Protection Program (as of 9/30/21) Loans Outstanding $82.4 million Round 1 $12.4 million Round 2 $70.0 million Total Fees Earned $15.3 million Fees Recognized in 3Q21 $2.2 million Remaining Fees to be Recognized $3.5 million Impact on 3Q21 Financials A
Slide 5: Loan Deferral Overview
5 Loan Deferral Overview Total Loan Deferrals As of Mar. 31, 2021 As of Jun. 30, 2021 As of Sep. 30, 2021 Total Loans Deferred $219.1 million $107.3 million $34.3 million % of Total Loans 4.5% 2.2% 0.7% Deferrals by Industry (as of September 30, 2021) Hotels/Motels $7.1 21% Transit & Ground Passenge
Slide 6: Loan Portfolio
6 Loan Portfolio Total Loans and Average Loan Yield • Total loans increased $79.7 million from prior quarter to $4.92 billion • Increased commercial and CRE loan production, higher end of period balances on commercial FHA warehouse credit lines, and growth in consumer portfolio offset lower PPP loan
Slide 7: Midland Equipment Finance Portfolio Overview
7 Midland Equipment Finance Portfolio Overview ($ in millions) Portfolio Characteristics (as of 9/30/21) Nationwide portfolio providing financing solutions to equipment vendors and end - users Total Outstanding Loans and Leases $899.1 million (18.3% of total loans) Number of Loans and Leases 7,471 A
Slide 8: Hotel/Motel Portfolio Overview
8 Hotel/Motel Portfolio Overview ($ in millions) Portfolio Characteristics (CRE & C&I) (as of 9/30/21) Total Outstanding $177.1 million (3.6% of total loans) Number of Loans 69 Average Loan Size $2.6 million Largest Loan $11.2 million Average LTV 56% Total Deferred Loans as of 6/30/21 $39.4 million
Slide 9: GreenSky Consumer Loan Portfolio Overview
9 GreenSky Consumer Loan Portfolio Overview Delinquency Rate (greater than 60 days) Portfolio Characteristics (as of 9/30/21) Total Outstanding $834.3 million (17.0% of total loans) Number of Loans 389,705 Average Loan Size $2,141 Average FICO Score 772 Total Deferred Loans (as of June 30, 2021) $0.
Slide 10: Total Deposits
10 Total Deposits Total Deposits and Cost of Deposits • Total deposits increased $405.0 million, or 7.8% from prior quarter, to $5.60 billion • Increase in deposits largely attributable to increase in commercial FHA servicing deposits and other commercial deposits • $184 million of CDs maturing in 4
Slide 11: Net Interest Income and Margin
11 • Net interest income increased 2.6% from the prior quarter due primarily to an increase in net interest margin • Net interest margin, excluding accretion income, increased 7 bps from prior quarter due primarily to a reduction in the cost of funds • Excess liquidity expected to result in a lower
Slide 12: Wealth Management Revenue and Assets Under Administration
12 • During 3Q21, assets under administration decreased $19.4 million, primarily due to market performance • Wealth Management revenue increased 9.9% from prior quarter, primarily due to full quarter contribution of ATG Trust Company Wealth Management Wealth Management Revenue Assets Under Administr
Slide 13: Noninterest Income
13 Noninterest Income • Noninterest income decreased 13.1% from prior quarter • Impairment on commercial MSRs impacted noninterest income by $3.0 million and $1.1 million in 3Q21 and 2Q21, respectively • Excluding the impact of the impairment of commercial MSRs, noninterest income decreased 2.1% pri
Slide 14: Noninterest Expense and Operating Efficiency
14 Noninterest Expense and Operating Efficiency • Efficiency Ratio (1) was 58.8% in 3Q21 vs. 60.2% in 2Q21 • Adjustments to non - interest expense: • Excluding these adjustments, noninterest expense decreased $0.2 million • Operating expense run - rate expected to be $40.0 - $42.0 million in 4Q21 No
Slide 15: Asset Quality
15 Asset Quality NCO / Average Loans • Nonperforming loans decreased $6.7 million due to upgrades, disposition of certain loans, and minimal new inflow into nonperforming category • Net charge - offs of $3.0 million, or 0.25% of average loans • $1.5 million specific reserve charged - off on one of t
Slide 16: Changes in Allowance for Credit Losses
16 Changes in Allowance for Credit Losses ACL 6/30/21 ACL 9/30/21 ($ 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 17: ACL by Portfolio
17 ACL by Portfolio Portfolio Total Loans at 9/30/21 ACL % of Total Loans Total Loans at 6/30/21 ACL % of Total Loans Commercial $ 799,189 $ 6,360 0.80% $ 719,642 $ 5,825 0.81% Warehouse Lines 180,248 - 0.00% 129,607 - 0.00% Commercial Other 668,146 8,231 1.23% 704,438 9,024 1.28% Equipment Finance
Slide 18: Outlook
18 Outlook • GreenSky relationship to gradually wind down over next two years » Loan originations expected to continue through mid - 2022 and keep balances relatively stable » After loan originations end, GreenSky portfolio expected to decline by $400 - $450 million over the following year » Runoff
Slide 19: Appendix
APPENDIX Midland [=]
Slide 20: Commercial Loans and Leases by Industry
20 Commercial Loans and Leases by Industry RE / Rental & Leasing 20.5% All Others 10.7% Assisted Living 9.6% Finance and Insurance 9.5% Construction - General 7.8% Manufacturing 7.0% Accommodation & Food Svcs 6.9% Retail Trade 6.0% Ag., Forestry, & Fishing 4.9% Trans. / Ground Passenger 4.7% General
Slide 21: Commercial Real Estate Portfolio by Collateral Type
21 Commercial Real Estate Portfolio by Collateral Type Assisted Living 18.3% Retail 14.8% Multi - Family 10.6% Hotel/Motel 9.4% Industrial / Warehouse 8.9% All Others 8.5% Office 6.3% Residential 1 - 4 Family 4.3% Farmland 3.9% C - Store / Gas Station 3.9% Mixed Use / Other 3.1% Medical Building 2.3
Slide 22: Capital and Liquidity Overview
22 Capital and Liquidity Overview Capital Ratios (as of 9/30/21) Liquidity Sources (as of 9/30/21) 6.80% 8.55% 8.16% 9.73% 13.10% 11.17% 9.38% 11.17% 12.03% 0.00% 5.00% 10.00% 15.00% TCE/TA Tier 1 Common Tier 1 Leverage Tier 1 RBC Total RBC Consolidated Bank Level ($ in millions) Cash and Cash Equiv
Slide 23: Adjusted Earnings Reconciliation
23 (dollars in thousands, except per share data) Income before income taxes - GAAP $ 25,431 $ 19,041 $ 24,040 $ 10,746 $ 3,270 Adjustments to noninterest income: Gain on sales of investment securities, net 160 377 - - 1,721 Other income - (27) 75 3 (17) Total adjustments to noninterest income 160 35
Slide 24: Adjusted Noninterest Expense and Income Reconciliation
24 (dollars in thousands) Noninterest expense - GAAP $ 41,292 $ 48,941 $ 39,079 $ 47,048 $ 53,901 Loss on mortgage servicing rights held for sale (79) (143) - (617) (188) Impairment related to facilities optimization - - - 10 (12,651) FHLB advances prepayment fees - (3,669) (8) (4,872) - Integration
Slide 25: Tangible Common Equity Reconciliation
25 (dollars in thousands, except per share data) Shareholders' Equity to Tangible Common Equity Total shareholders' equity—GAAP $ 657,844 $ 648,186 $ 635,467 $ 621,391 $ 621,880 Adjustments: Goodwill (161,904) (161,904) (161,904) (161,904) (161,904) Other intangible assets, net (26,065) (27,900) (26
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