Midland States Bancorp, Inc. · NASDAQ:MSBI
Midland States Bancorp — Q4 2016 Earnings Presentation
29 slides from Midland States Bancorp's earnings presentation, Jan 26, 2017
Slide 1: Fourth Quarter 2016 Earnings Call and Acquisition of Centrue Financial Corporation
Slide 2: Forward-Looking Statements and Non-GAAP Measures
Looking 5. This may contain forward-looking statements within the meaning of the federal securities laws. Forward-looking express management's current : of future events or long-term goals, and may be based upon beliefs, expectations and assumptions of Midland’s and Centrue’s management, are general
Slide 3: Fourth Quarter 2016 Summary
Fourth Quarter 2016 Summary Strong Earnings Non-Core Items Loan Growth Wealth Management Operational Excellence Net income of $11.6 million or $0.72 per diluted share $14.3 million gain from sale of CMO portfolio; $2.1 million charge related to branch network optimization; and $1.6 million in other
Slide 4: Business Unit Review - Love Funding
Business Unit Review - Love Funding Commercial FHA origination and servicing business focused on multifamily and healthcare facilities Long-term replacement reserve deposits for maintenance/capex of properties and escrow deposits are low-cost sources of funds Originated $159 million in rate lock com
Slide 5: Business Unit Review - Residential Mortgage
Business Unit Review - Residential Mortgage + Residential mortgage loan origination and servicing + $149 million in originations in 4Q16 + Residential mortgage banking revenue of $6.2 million in 4Q16 included the recapture of mortgage servicing rights totaling $3.6 million * Q416 net gain on sale re
Slide 6: Business Unit Review - Heartland Business Credit
Business Unit Review - Heartland Business Credit Equipment leasing sourced from a network of equipment manufacturers and brokers Strong production with $29 million in originations Attractive yields - average rate (ex. accretion) on lease finance portfolio was 5.15% in the quarter 33% portfolio growt
Slide 7: Business Unit Review — Wealth Management
Business Unit Review — Wealth Management + Wealth Management group offers Trust and Estate services, Investment Management, Financial Planning and Employer Sponsored Retirement Plans + Assets under administration increased by $423 million or 34% from the end of 3Q16 + Excluding the Sterling Trust co
Slide 8: Net Interest Income/Margin
Net Interest Income/Margin Net interest income declined 4.8% from 3Q16 primarily due to a $1.7 n decrease in interest income on investment securities as a result of the sale of the CMO portfolio Interest income on loans (excluding accretion income) increased $1.0 million from 3Q16 Net interest margi
Slide 9: Non-Interest Income
Non-Interest Income * $14.3 million gain on sale of investment securities resulting from sale of CMO portfolio Excluding gain on sale of investment securities, non-interest income was 8.4% higher than 3Q16 + All major fee generating business were up compared to 3Q16 Non-Interest Income (omtions) $30
Slide 10: Non-Interest Expense and Operating Efficiency
Non-Interest Expense and Operating Efficiency Non-Interest Expense and Efficiency Ratio* + Efficiency Ratio‘ increased to (Wonsnteret expense nitions) 77% in 4Q16 vs. 65% in 3Q16 + 4Q16 adjusted expenses > $2.1 million of charges related to branch network optimization > $1.6 million in other integra
Slide 11: Loan Portfolio
Loan Portfolio * Total loans at quarter end increased by $7 million in 4Q16 vs. 3Q16 Commercial loans impacted by unusually high level of advances at end of 3Q16 on a government guaranteed warehouse line of credit to a customer that originates commercial FHA loans + Excluding advances on tl 4Q16 ine
Slide 12: Total Deposits
Total Deposits + 4Q16 EOP total deposits impacted by fluctuations in deposit balances of commercial FHA warehouse line customer * Outside of the deposits related to commercial FHA warehouse line customer, non-interest bearing, money market and savings deposits from other customers increased Deposit
Slide 13: Asset Quality
Asset Quality + Non-performing loans increased by $1.7 million from 3Q16 + Net charge-offs totaled $3.1 million in 4Q16 + Recorded a provision for loan losses of $2.4 million in 4Q16 Non-performing Loans / Total Loans (Total Leaneas of qterand) NCO / Average Loans 1.36% see 1.29% 0.93% 0.85% 051% On
Slide 14: Midland States Bancorp Acquisition of Centrue Financial Corporation
Midland States Bancorp Acquisition of Centrue Financial Corporation Midland [=] States Bancorp, Inc.
Slide 15: Transaction Highlights
Transaction Highlights Scalable $1 Billion Franchise that Strengthens Existing Footprint Strong Transaction Economics Deal Execution Centrue is a 140+ year old $1 billion bank with deep ties to the communities it serves offering robust commercial, retail and mortgage banking services Midland further
Slide 16: Centrue Financial Corporation Overview
Centrue Financial Corporation Overview Overview Branch Map!) Established in 1874, Centrue is a regional, full- service community bank — Headquartered in Ottawa, Illinois - Offers commercial, retail and mortgage banking services + Branch network with solid market share in its core markets and foothol
Slide 17: Centrue Financial Corporation's Recent Improvements
Centrue Financial Corporation’s Recent Improvements + Over the last several years, Centrue has committed significant resources to repositioning itself Centrue was recapitalized via a private placement of common stock on 3/31/2015 NPLs / Loans have declined from 5.08% at 12/31/13 to 0.24% at 4Q’16"")
Slide 18: Pro Forma Franchise
Pro Forma Franchise Overview Branch Map + 52 branches throughout Illinois, as well as 13 branches Tego Rockford ‘Waukegan Missouri and 1 in Colorado “edar Rapids aie, ¥ + Transaction creates the 6" largest Illinois-based bank Gietn | NSiGhigae) by total assets”) | Henan + $4.2 billion in assets® + $
Slide 19: Diversified, Low Risk Loan Portfolio
Diversified, Low Risk Loan Portfolio Centrue Financial Loan Portfolio Centrue Loan Growth + Well diversified loan portfolio: 5700.8 eaten sors — Commercial loans represent more than 11% of loans $650.0 ma — More than 20% growth in total loans since 1Q’15 © 9600.0 sens Te — Non-performing loans as of
Slide 20: Attractive Core Deposit Base
Attractive Core Deposit Base Centrue Financial Deposit Overview + 140+ year presence in its core markets has provided Centrue with an attractive, stable core deposit base = 18 bps LTM cost of total deposits”) - 7.3 years weighted average life”) — Non-time deposits of 73%”) + The combined entity woul
Slide 21: Summary of Deal Terms
Summary of Deal Terms Aggregate Deal Value Consideration Mix Consideration Structure Termination Fee Pricing Ratios Required Approvals imum Equity Anticipated Closing $175.1 million or $26.75 per share (total deal value includes cash consideration for outstanding ‘equity awards) Midland will also as
Slide 22: Key Transaction Assumptions
Key Transaction Assumptions Cost Saves & One Time Charges Fair Market Value Adjustments & Purchase Accounting Core Deposit Intangibles Revenue Enhancements Pro Forma Capital Ratios 40% of Centrue’s non-interest expense base (fully realized in 2018 and beyond) $18.2 million of one time deal charges,
Slide 23: Transaction Background
Transaction Background Experienced Acquirer Extensive Due Diligence Process Midland States is an experienced and disciplined buyer Including Centrue, Midland States has announced and/or completed 11 acquisitions, including: — Whole bank acquisitions — FDIC-assisted acquisitions — Out of market acqui
Slide 24: Outlook
Outlook + Economic conditions in our markets remain healthy + Expect to deliver 8-12% loan growth in 2017 + Expect solid loan and/or revenue growth in all key business areas + Centrue Financial Corporation acquisition expected to further increase earnings power + Incremental earnings growth to be ge
Slide 25: Appendix
APPENDIX
Slide 26: Reconciliations of Non-GAAP Financial Measures
MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON.GAAP FINANCIAL MEASURES, For the Quarter Ended December 31, September30, June 30, March 31, December 31, (in thousands, excep per share data) 2016 2016 2016 2016 2015 Adjusted Earnings Reconciliation Income before income taxes - GAAP S07 STS tas 79
Slide 27: Reconciliations of Non-GAAP Financial Measures
MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share As of December 31, September 30, “June 30, March, December i, (in thousonds xcept per share data) 2016 "ne 016 26 2018 ‘Shareholders Equlty to
Slide 28: Successful Acquisition History
Successful Acquisition History Including Centrue, Midland States has announced 11 transactions since 2008, including FDIC-assisted, branch, whole bank, asset purchase, business line, and a New York trust asset acquisition + Track record of successful post-closing integration of systems and businesse
Slide 29: Centrue Financial Highlights
Centrue Financial Highlights YTD Ended December 31 2016 2015 2016 ai a2 a3 Qa Balance Sheet ($000) Total Assets $ 961,218 $ 977,779 $ 969,017 $ 952,657 $ 1,000,083 $ 977,779 Total Loans") 645,806 685,775, 661,082 657,941 666,795 685,775 Total Deposits 718,504 740,046 729,269 716,424 760,951. 740,046
Midland States Bancorp — Q4 2016 Earnings Presentation on 6ix