Midland States Bancorp, Inc. · NASDAQ:MSBI
Midland States Bancorp — Investor Presentation (December 2022)
48 slides from Midland States Bancorp's investor presentation, December 2022
Slide 1: Midland States Bancorp, Inc. Investor Presentation
Midland States Bancorp, Inc. NASDAQ: MSBI Investor Presentation December 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 $7.8 billion asset community bank established in 1881 and headquartered in Effingham, Illinois Largest Illinois-based community bank1 $3.4 billion Wealth Management business Commercial bank focused on in-market relationships with national diversification in equipment finance
Slide 4: Recent Trends and Operational Highlights
Recent Trends and Operational Highlights Profitable growth and improved efficiencies resulting in higher EPS and increased returns Strengthened commercial banking team and increased presence in faster growing markets driving significant organic loan growth and consistent inflows of new commercia
Slide 5: Financial Services & Banking Center Footprint
Financial Services & Banking Center Footprint 5
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 for scalability Organization‐wide focu
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 service and accountability to our clients and of identifying and executing transactions that colleagues; seek to develop bankers
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 Douglas J. Tucker | SVP, Corporate Counsel
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: 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 11: 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 12: …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) $21.42 CAGR: 9.2% $1.16 CAGR: 4.8% $1.12 $1.07 $0.97 $18.80 $18.34 $0.88 $17.20 $17.22 $17.09 $0.80 $0.72 $21.66 $19.31 $18.64 $17.16 $17.3
Slide 13: …And Increased Profitability
…And Increased Profitability Adjusted Diluted EPS(1) Adjusted ROATCE(1) CAGR: 17.9% $3.65 19.18% 18.33% $2.54 15.00% $2.39 14.44% $1.89 $1.89 $1.70 11.68% 11.32% 9.24% 2016 2017 2018 2019 2020 2021 YTD 2016 2017 2018 2019 2020 2021 2022* Notes: 13 (1) Represents a non‐GAAP financial measure. See “No
Slide 14: Strategic Initiatives Strengthening Franchise
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 15: Strategic Initiatives Strengthening Franchise: Improved Growth and Profitability
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 $2,320 2016 2017 2018 2019 2020
Slide 16: Foundational Technology Roadmap
Technology Roadmap Midland’s technology investments are enhancing efficiencies, improving client experience, and positively impacting retail deposit gathering and commercial/consumer loan production Consumer Small Business Commercial Wealth Flexible Overdrafts (Q1 2022) Commercial Online Account Ope
Slide 17: Loan Portfolio and Asset Quality
Loan Portfolio and Asset Quality 17
Slide 18: Commercial Loans and Leases by Industry
Commercial Loans and Leases by Industry Industries as a percentage of Commercial, Retail Trade Wholesale Trade Other Services Health Care CRE and Equipment Finance Loans and Leases ($s in millions) $170 $100 $100 $77 with outstanding balances Ag., Forestry, & Fishing 3.6% 2.1% 2.1% 1.6% of $4.69 bil
Slide 19: Commercial Real Estate Portfolio by Collateral Type
Commercial Real Estate Portfolio by Collateral Type Collateral type as a percentage of the Assisted Living All Others Commercial Real Estate and Construction $185 $176 Hotel/Motel ($s in millions) Portfolio with outstanding balances of 6.9% 6.5% $160 $2.69 billion as of 9/30/22 5.9% Industrial / War
Slide 20: Accelerating Commercial Loan Growth
Accelerating Commercial Loan Growth 39% Commercial Loan Growth Over Trailing 12 Months(1) New hires and an increase in productivity of the Commercial and CRE Loan Production commercial banking group without increasing the size of the business development team ($ in millions) $858 $861 Addition o
Slide 21: Deposit Base Shifting More Toward Commercial Deposits
Deposit Base Shifting More Toward Commercial Deposits New Business Development Efforts Producing Consistent Inflows of Commercial Deposits New Commercial Deposit Accounts Commercial banking team more focused on ($ in millions) developing full banking relationships $107.3 Treasury Management succ
Slide 22: Midland Equipment Finance Portfolio Overview
Midland Equipment Finance Portfolio Overview Portfolio Characteristics (as of 9/30/22) Nationwide portfolio providing financing solutions to equipment vendors and end‐users Total Outstanding $1,034.9 million Loans and Leases (16.7% of total loans) Number of Loans and Leases 8,718 Average Loan/Lease
Slide 23: GreenSky Consumer Loan Portfolio Overview
GreenSky Consumer Loan Portfolio Overview Portfolio Characteristics Prime Credit (as of 9/30/22) Average FICO score of 774 $950.4 million Total Outstanding (15.3% of total loans) No losses to MSBI in 10 year history of portfolio Number of Loans 415,326 Average Loan Size $2,288 Credit Enhancement
Slide 24: Asset Quality
Asset Quality • Nonperforming loans decreased $10.0 million due to a combination of payoffs, note sale, and a charge-off on a previously reserved loan relationship • Generally positive trends in the loan portfolio with continued upgrades of watch list loans • Delinquencies in consumer portfolio rema
Slide 25: Changes in Allowance for Credit Losses
Changes in Allowance for Credit Losses ($ in thousands) Specific Portfolio Economic Reserves Changes Factors Changes to macro- economic variables and forecasts Changes to other economic qualitative factors Changes to specific New loans reserves Changes in credit quality including risk rati
Slide 26: ACL by Portfolio
ACL by Portfolio ($ in thousands) September 30, 2022 June 30, 2022 % of % of Portfolio Loans ACL Loans ACL Total Loans Total Loans Commercial $ 852,930 $ 5,745 0.67% $ 747,782 $ 5,412 0.72% Warehouse Lines 51,309 ‐ 0.00% 23,872 ‐ 0.00% Commercial Other 683,353 8,620 1.26% 643,477 7,336 1.14% Equipme
Slide 27: Recent Financial Trends
Recent Financial Trends 27 Midland [=] States Bancorp, Inc.
Slide 28: Overview of 3Q22
Overview of 3Q22 • Net income of $23.5 million, or $1.04 diluted EPS, up from $0.97 in prior quarter Higher Earnings and • Pre-tax, pre-provision earnings(1) of $36.4 million, up from $35.9 million in prior quarter Improved Returns • ROAA of 1.22% and ROATCE(1) of 20.20%, both increased from prior q
Slide 29: Loan Portfolio
Loan Portfolio • Total loans increased $402.9 million from prior quarter to $6.20 billion • Growth in all portfolios with the exception of SBA PPP loans • Largest increases came in commercial and CRE loans, which increased at 36% annualized and 22% annualized, respectively • Equipment finance balanc
Slide 30: Total Deposits
Total Deposits • Total deposits increased $210.8 million from prior quarter to $6.40 billion • Increase driven by higher balances of noninterest-bearing and lower-cost interest-bearing deposits • Continued improvement in deposit mix with noninterest-bearing deposits increasing to 31.7% of total depo
Slide 31: Net Interest Income/Margin
Net Interest Income/Margin • Net interest income increased 4.4% from the prior quarter due primarily to higher average loan balances • Net interest margin decreased 2 bps from prior quarter as increase in cost of deposits exceeded the increase in the average yield on earning assets • Planned redempt
Slide 32: Wealth Management
Wealth Management • During 3Q22, assets under administration decreased $152.7 million, primarily due to market performance • Wealth Management revenue relatively consistent with prior quarter Assets Under Administration Wealth Management Revenue (in millions) (in millions) $4,217 $7.18 $7.18 $7.14 $
Slide 33: Noninterest Income
Noninterest Income • Noninterest income increased 8.3% from prior quarter, primarily due to impairment on commercial MSRs that negatively impacted noninterest income in 2Q22 • Most fee generating areas were relatively consistent with prior quarter • Commercial MSR portfolio in the process of being s
Slide 34: Noninterest Expense and Operating Efficiency
Noninterest Expense and Operating Efficiency Noninterest Expense and Efficiency Ratio (1) • Efficiency Ratio (1) was 54.3% in 3Q22 vs. 53.1% in 2Q22 (Noninterest expense in millions) • Adjustments to non-interest expense: $50.0 70.0% $45.8 ($ in millions) 3Q22 2Q22 $45.0 $43.5 Integration and acquis
Slide 35: Outlook
Outlook 35 Midland [=] States Bancorp, Inc.
Slide 36: Outlook
Outlook • Strengthened capital ratios will support continued balance sheet growth • Loan pipeline remains strong, but loan growth expected to moderate as higher rates and uncertain economic conditions have a greater impact on loan demand • Continued loan growth, higher net interest margin, and impro
Slide 37: 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 37
Slide 38: Appendix
APPENDIX 38 Midland [=] States Bancorp, Inc.
Slide 39: 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 40: Capital Ratios and Strategy
Capital Ratios and Strategy Capital Strategy Capital Ratios (as of 9/30/22) 15.00% Strengthened capital ratios with issuance of 12.79% $115 million of non-cumulative preferred stock in August 2022 11.19% 10.43% 10.43% 10.05% Included as Tier 1 Regulatory Capital 10.00% 9.40%9.75% 7.75% with re
Slide 41: Liquidity Overview
Liquidity Overview Liquidity Sources (as of 9/30/22) ($ in millions) Cash and Cash Equivalents $ 313.2 Unpledged Securities 153.5 FHLB Committed Liquidity 1,148.9 FRB Discount Window Availability 13.5 Total Estimated Liquidity $ 1,629.1 Conditional Funding Based on Market Conditions Additional Credi
Slide 42: 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 43: 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 44: 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 45: Adjusted Return on Average Tangible Common Equity
MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued) Adjusted Return on Average Tangible Common Equity (ROATCE) For the Nine Months Ended For the Years Ended December 31, (dollars in thousands) September 30, 2022 2021 2020 2019 2018 2017 Adjusted earnin
Slide 46: Adjusted Earnings Reconciliation (Quarterly)
MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) Adjusted Earnings Reconciliation For the Quarter Ended September 30, June 30, March 31, December 31, September 30, (dollars in thousands, except per share data) 2022 2022 2022 2021 2021 Income before income taxes
Slide 47: Efficiency Ratio Reconciliation (Quarterly)
MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued) Efficiency Ratio Reconciliation For the Quarter Ended September 30, June 30, March 31, December 31, September 30, (dollars in thousands) 2022 2022 2022 2021 2021 Noninterest expense - GAAP $ 43,496 $
Slide 48: Tangible Common Equity to Tangible Assets and TBV 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 September 30, June 30, March 31, December 31, September 30, (dollars in thousands, except per share data) 2022 2
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