Midland States Bancorp, Inc. · NASDAQ:MSBI
Midland States Bancorp — Investor Presentation (November 2023)
51 slides from Midland States Bancorp's investor presentation, November 2023
Slide 1: Midland States Bancorp, Inc. Investor Presentation
Midland States Bancorp, Inc. NASDAQ: MSBI Investor Presentation November 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 • $3.5 billion Wealth Management business • Commercial bank focused on in-market relationships with national diversification in equipment finance • 53 branches in Illinois and Missouri • 16 successful
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: 15% : 14% 6 IPO $8.0 201 $7.9 c e $7.4 R sin CAG $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 2022 3Q 2023 Selected Acquisitions Se
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% $26.66 $24.72 $1.20 $1.16 $1.12 $21.42 $1.07 $0.97 $18.80 $0.88 $18.34 $0.80 $17.22 $17.09 $21.66 $21.98 $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% 15.80% 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 and CAGR through 2022 14 14 Notes:
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 $100.2 $72.7 Industries as a percentage of Commercial, ($s in millions) $175.3 $75.2 2.1% 1.5% CRE and Equipment Finance Loans and Leases 3.6% 1.5% with outstanding balances of $4.89 billion as of Septemb
Slide 18: Commercial Real Estate Portfolio by Collateral Type
Commercial Real Estate Portfolio by Collateral Type ($s in millions) Mixed Use/Other Restaurant Medical Building Raw Land $85.6 $35.8 Collateral type as a percentage of the $106.7 $13.8 C-Store/Gas Station 3.0% 1.3% Commercial Real Estate and Construction 3.8% 0.5% $74.4 Portfolio with outstanding b
Slide 19: Commercial Loan Growth
Commercial Loan Growth More conservative approach to new loan production in light of economic uncertainty has impacted production levels since mid-2022 • New hires and an increase in productivity of the Commercial and CRE Loan Production commercial banking group without increasing (in millions) the
Slide 20: Midland Equipment Finance Portfolio Overview
Midland Equipment Finance Portfolio Overview Portfolio Characteristics (as of September 30, 2023) Nationwide portfolio providing financing solutions to equipment vendors and end-users Total Outstanding $1,064.4 million Loans and Leases (16.9% of total loans) Number of Loans and Leases 9,099 Average
Slide 21: GreenSky Consumer Loan Portfolio Overview
GreenSky Consumer Loan Portfolio Overview Portfolio Characteristics Plan with GreenSky to Wind Down Portfolio (as of September 30, 2023) ▪ Notice provided to officially terminate the $754.7 million Total Outstanding GreenSky program in October 2023 (12.0% of total loans) Weighted Average Rate 5.58%
Slide 22: Asset Quality
Asset Quality • Nonperforming loans increased $1.1 million primarily due to one commercial loan as well as increases in the equipment finance portfolio • Net charge-offs to average loans was 0.22% • Provision for credit losses on loans of $5.2 million, primarily related to increases in past dues for
Slide 23: Changes in Allowance for Credit Losses
Changes in Allowance for Credit Losses ($ in thousands) $53 $3,207 $(1,541) ▪ 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 mix factors $66,
Slide 24: ACL by Portfolio
ACL by Portfolio ($ in thousands) September 30, 2023 June 30, 2023 % of Total % of Total Portfolio Loans ACL Loans ACL Loans Loans Commercial $ 874,004 $ 7,563 0.87 % $ 875,295 $ 5,180 0.59 % Warehouse Lines 48,547 — —% 30,522 — —% Commercial Other 697,235 11,847 1.70 % 732,616 10,110 1.38 % Equipme
Slide 25: Recent Financial Trends
Recent Financial Trends 2009 25 25
Slide 26: Overview of 3Q23
Overview of 3Q23 • Net income available to common shareholders of $15.8 million, or $0.71 diluted EPS • 3Q23 results include net loss of $0.07 per share related to balance sheet repositioning Strong Financial that should increase EPS going forward Performance • Pre-tax, pre-provision earnings(1) of
Slide 27: Loan Portfolio
Loan Portfolio • Total loans decreased $86.5 million from prior quarter to $6.28 billion • Decrease primarily driven by decline in equipment finance portfolio of $50.7 million and continued runoff of GreenSky portfolio of $62.8 million • Growth in construction portfolio driven by fundings on existin
Slide 28: Total Deposits
Total Deposits • Total deposits decreased $21.5 million from end of prior quarter • Noninterest-bearing deposits relatively stable as continued movement of funds into interest-bearing accounts was offset by new commercial and small business relationships • Managing rates on deposits in order to cont
Slide 29: Deposit Type Trend
Deposit Type Trend Deposits by Type Trend (in millions) GR 10% CA $6,365 $6,405 $6,111 $5,101 $4,544 $4,074 2018 2019 2020 2021 2022 3Q 2023 Non Int Bearing Demand Interest Bearing Checking Money Market Savings Time Brokered Time 29 29
Slide 30: Deposit Summary as of September 30, 2023
Deposit Summary as of September 30, 2023 Deposits by Channel Commercial Deposits by NAICS Code (in millions) (in millions) Finance & Insurance RE, Rental & Leasing $425 2.7% Manufacturing 6.6% 11.9% $711 22.9% Other Services 11.1% Skilled/Memory Care 4.6% Construction $228 Retail Deposits Admin, Sup
Slide 31: Uninsured Deposits
Uninsured Deposits Uninsured Deposits (in millions) September 30, 2023 June 30, 2023 Call Report Uninsured Estimate $ 1,737 $ 1,654 Call Report Estimated Uninsured Deposits to Total Deposits 27 % 26 % Less: Affiliate Deposits (MSB owned funds) (44) (30) Less: Additional structured FDIC coverage (49)
Slide 32: Investment Portfolio
Investment Portfolio Fair Value of Investments by Type As of September 30, 2023 0.2% 9.8% 10.7% • All Investments are classified as 2.7% Available for Sale 5.9% Treasuries • Average T/E Yield is 3.60% US GSE & US Agency 8.7% MBS - agency • Average Duration is 5.19 years $835 million MBS - non agency
Slide 33: Balance Sheet Repositioning 3Q23
Balance Sheet Repositioning 3Q23 Financial Impact (after tax) On-going (in millions) 3Q2023 Annualized Company-Owned Life Insurance Optimization Surrendered policies - $51 million at 2.19%; tax penalty of $4.5 million $ (4.5) $ (1.1) Purchased policies - $100 million at 4.56%; enhancement fee of $6.
Slide 34: Liquidity Overview
Liquidity Overview Liquidity Sources (in millions) September 30, 2023 June 30, 2023 Cash and Cash Equivalents $ 132.1 $ 160.7 Unpledged Securities 258.1 343.5 FHLB Committed Liquidity 883.9 857.2 FRB Discount Window Availability 759.8 184.1 Total Estimated Liquidity $ 2,033.9 $ 1,545.5 Conditional F
Slide 35: 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 • As expected, net interest margin stabilized with just a 3 bp decrease from prior quarter as the i
Slide 36: Loans & Securities - Repricing and Maturity
Loans & Securities - Repricing and Maturity Total Loans and Leases (net of unearned income)(1) (in millions) As of September 30, 2023 Repricing Term Rate Structure 3 mos or 3-12 1-3 3-5 5-10 10-15 Over 15 Adjustable less mos years years years years years Total Rate Fixed Rate Commercial loans and le
Slide 37: Wealth Management
Wealth Management • Assets under administration and Wealth Management fees remained relatively stable from 2Q23 to 3Q23, as declines in market values were partially offset by addition of new client assets from new business development efforts • Formed Midland Wealth Advisors, a registered investment
Slide 38: Noninterest Income
Noninterest Income • Noninterest income decreased 3% from prior quarter • 3Q23 noninterest income included $5.0 million loss on sale of investment securities and $6.6 million enhancement fee on company-owned life insurance resulting from balance sheet repositioning • Excluding impact of balance shee
Slide 39: Noninterest Expense and Operating Efficiency
Noninterest Expense and Operating Efficiency Noninterest Expense and Efficiency Ratio (1) (Noninterest expense in millions) • Efficiency Ratio (1) was 55.8% in 3Q 2023 vs. 55.0% in 2Q 2023 $49.9 • Disciplined expense control resulted in $3.3 slight declines in most line items compared to the prior q
Slide 40: Capital Ratios and Strategy
Capital Ratios and Strategy Capital Ratios Capital Strategy (as of September 30, 2023) • Capital initiatives increased CET1 to 8.16% from 7.77% at 12/31/22 with limited 12.84% 12.13% buybacks below TBV 11.21% 11.21% 10.62% 10.21% • Internal capital generated from strong 9.67% profitability and slowe
Slide 41: Outlook
Outlook 2009 41 41
Slide 42: Outlook
Outlook • Prudent risk management will remain top priority while economic uncertainty remains with business development efforts focused on adding new commercial and retail deposit relationships • Continue generating strong financial performance while maintaining conservative approach to new loan pro
Slide 43: 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 43 43
Slide 44: Appendix
APPENDIX Midland [=] States Bancorp, Inc.
Slide 45: 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 46: 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 47: 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 48: 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 49: 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 September 30, June 30, March 31, December 31, September 30, (dollars in thousands, except per share data) 2023 2023 2023 2022 2022 Income before income taxes
Slide 50: 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 September 30, June 30, March 31, December 31, September 30, 2023 2023 2023 2022 2022 (dollars in thousands) Noninterest expense - GAAP $ 42,038 $
Slide 51: Reconciliations: Tangible Common Equity Ratio and Tangible Book Value
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) 2023 2
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