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| Item 7.01. | Regulation FD Disclosure. |
Midland States Bancorp, Inc. (the “Company”) is filing an investor presentation (the “Presentation”) that will be used by the Company in meetings with investors and analysts. A copy of the Presentation is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
The information in this Item 7.01 and the attached exhibits shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in any such filing.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
| Exhibit No. | Description |
| 99.1 | Midland States Bancorp, Inc. Investor Presentation |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SignatureS
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: May 3, 2021 | Midland States Bancorp, Inc. | |
| By: | /s/ Douglas J. Tucker | |
| Name: | Douglas J. Tucker |
| Title: | Senior Vice President and Corporate Counsel |
Exhibit 99.1
1 Midland States Bancorp, Inc. NASDAQ: MSBI Investor Presentation May 2021
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, expectations and assumptions of Midland’s management, and are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “intend,” “estimate,” “may,” “will,” “would,” “could,” “should” o r o ther similar expressions. All statements in this presentation speak only as of the date they are made, and Midland undertakes no obligation to update any statement. A number of factors, many of which are beyond the ability of Midland to control or predic t, could cause actual results to differ materially from those in its forward - looking statements including the effects of the Corona virus Disease 2019 (“COVID - 19”) pandemic, including its potential effects on the economic environment, our customers and our operations, as well as any changes to federal, state or local government laws, regulations or orders in connection with the pandemic. These risks and uncertainties should be considered in evaluating forward - looking statements, and undue reliance shoul d not be placed on such statements. Additional information concerning Midland and its businesses, including additional factors tha t could materially affect Midland’s financial results, are included in Midland’s filings with the Securities and Exchange Commi ssi on. Use of Non - GAAP Financial Measures. This presentation may contain certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States (“GAAP”). These non - GAAP financial measure s include “Adjusted Earnings,” “Adjusted Pre - Tax, Pre - Provision Income,” “Adjusted Diluted Earnings Per Share,” “Adjusted Return o n Average Assets,” “Adjusted Return on Average Shareholders’ Equity,” “Adjusted Return on Average Tangible Common Equity,” “Adjusted Pre - Tax, Provision Return on Average Assets,” “Efficiency Ratio,” “Tangible Common Equity to Tangible Assets,” “Tangib le Book Value Per Share,” and “Return on Average Tangible Common Equity.” The Company believes that these non - GAAP financial measures provide both management and investors a more complete understanding of the Company’s funding profile and profitability. These non - GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP financ ial measures. Not all companies use the same calculation of these measures; therefore this presentation may not be comparable to other similarly titled measures as presented by other companies. Reconciliations of these non - GAAP measures are provided in the Appendix section of this presentation.
3 Company Snapshot ▪ $6.88 billion asset community bank established in 1881 and headquartered in Effingham, Illinois » 2nd largest Illinois - based community bank 1 ▪ $3.56 billion Wealth Management business ▪ Diversified lender with national equipment financing and consumer loan origination platforms complementing in - market commercial relationship banking ▪ 52 branches in Illinois and Missouri ▪ 14 successful acquisitions since 2008 Notes: 1) Community bank defined as banks with less than $10 billion in assets; Source: S&P Global Market Intelligence 2) All financial data as of March 31, 2021
4 Financial Services & Banking Center Footprint
5 Notes: 1. As of March 31, 2021 Investment Summary Consistent track record of driving compelling shareholder returns through disciplined strategic expansion and earnings growth Well diversified loan portfolio across asset classes, industries and property types Organization - wide focus on expense management driving improvement in operating efficiencies Attractive , stable core deposit franchise with 29% non - interest bearing accounts 1 Illinois and contiguous states provide ample opportunities for future acquisitions Proven track record of successful acquisitions with a focus on enhancing shareholder value while building a platform for scalability Leveraging technology to drive revenue growth, increase market share, and enhance the customer experience
6 Business and Corporate Strategy Customer - Centric Culture Drive organic growth by focusing on customer service and accountability to our clients and colleagues; seek to develop bankers who create dynamic relationships; pursue continual investment in people; maintain a core set of institutional values, and build a robust technology platform that provides customers with a superior banking experience Operational Excellence A corporate - wide focus on driving improvements in people, processes and technology in order to generate further improvement in Midland’s operating efficiency and financial performance Enterprise - Wide Risk Management Maintain a program designed to integrate controls, monitoring and risk - assessment at all key levels and stages of our operations and growth; ensure that all employees are fully engaged Accretive Acquisitions Maintain experienced acquisition team capable of identifying and executing transactions that build shareholder value through a disciplined approach to pricing; take advantage of relative strength in periods of market disruption Revenue Diversification Generate a diversified revenue mix and focus on growing businesses that generate strong recurring revenues such as wealth management
7 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 States Bank and EVP of Midland States Bancorp ▪ Joined Midland in 2003 ▪ Appointed Bank President in March 2018 ▪ Oversees all sales activities for commercial, retail, mortgage, wealth management, equipment finance, and treasury management Douglas J. Tucker | SVP, Corporate Counsel and Director of IR ▪ 20 + years experience advising banks and bank holding companies ▪ Significant IPO, SEC reporting and M&A experience ▪ Joined Midland in 2010 Eric T. Lemke | Chief Financial Officer ▪ Promoted to Chief Financial Officer in November 2019 ▪ Joined Midland in 2018 as Director of Assurance and Audit ▪ 25+ years of financial accounting and reporting experience in financial services Jeffrey A. Brunoehler | Chief Credit Officer ▪ 30+ years in banking, lending and credit ▪ Leads the credit underwriting, approval and loan portfolio management functions ▪ Joined Midland in 2010 Experienced Senior Management Team
8 Strategic Capital Bank AMCORE Bank, N.A. Love Savings / Heartland Bank Sterling Bancorp Centrue Financial Alpine Bancorp. HomeStar Financial Acquisition Type FDIC - Assisted 12 Branches Whole Bank Trust Administration Whole Bank Whole Bank and Wealth Mgmt Whole Bank Assets Acquired ($mm) $540.4 $499.5 $889.0 - $990.2 $1,243.3 $366.0 Location Champaign, IL Northern Illinois St. Louis, MO Yonkers, NY Northern Illinois Rockford, IL Kankakee, IL Successful Acquisition History Financially Transformative Operationally Transformative Revenue Diversification 2010 2009 2016 2014 2017 Enhanced Scale and Market Presence Selected Acquisitions 2018 Expanded Core Bank and Wealth Management 2019 Low - cost Deposit Franchise and Market Presence Expansion of Trust Business ▪ Midland States has completed 14 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 geographies and revenue channels ▪ Successful post - closing integration of systems and businesses
9 Successful Execution of Strategic Plan… Total Assets (at period - end in Billions) CAGR: 18% Selected Acquisitions: Total Assets at Time of Acquisition (in millions) 2009: Strategic Capital Bank ($540) 2010: AMCORE Bank ($500) 2014: Love Savings/Heartland Bank ($889) 2017: Centrue Financial ($990) 2018: Alpine Bancorp. ($1,243) 2019: HomeStar Financial Group ($366) $1.1 $1.6 $1.5 $1.6 $1.7 $2.7 $2.9 $3.2 $4.4 $5.6 $6.1 $6.9 $6.9 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 1Q21 Selected Acquisitions
10 $11.10 $12.52 $13.68 $14.34 $15.91 $13.82 $15.20 $17.16 $17.31 $17.00 $18.64 $19.31 $19.98 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 1Q21 …Leads to Creation of Shareholder Value Note: (1) Tangible book value per share is a non - GAAP financial measure; tangible book value per share is defined as tangible common equit y divided by shares of common stock outstanding (in the case of the ‘‘as converted’’ measure, assuming the conversion of all preferred shares that were out sta nding prior to December 31, 2014); please refer to the reconciliation in the Appendix Tangible Book Value Per Share (1) (at period - end) Dividends Declared Per Share 21 Consecutive Years of Dividend Increases (annualized) $0.39 $0.43 $0.48 $0.53 $0.59 $0.65 $0.72 $0.80 $0.88 $0.97 $1.07 $1.12 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 (annualized)
11 Strategic Initiatives Strengthening Franchise Action Strategic Rationale Financial Impact Three whole bank acquisitions • Low - cost deposits 2016 1Q21 Total Assets $3.2B $6.9B Four Wealth Management acquisitions (1) • Recurring revenue AUA $1.7B $3.9B Expanded equipment finance group • Diversify revenue with attractive risk - adjusted yields Equipment Finance $191M $859M Significant Corporate Actions Since Coming Public in 2016… Notes: (1) Includes the pending acquisition of ATG Trust Company, which is expected to close during the second quarter of 2021 (2) Represents a non - GAAP financial measure. See “Non - GAAP Reconciliation” in the appendix. Action Strategic Rationale Financial Impact Branch network and facility reductions • Increasing adoption of digital 2016 YTD 2021 Efficiency Ratio (2) 68.66% 56.88% Sale of Commercial FHA Loan Origination platform • Remove inconsistent revenue and profit contributor • Retain low - cost servicing deposits Accelerate technology investments • Digital adoption is increasing Scale Efficiency
12 Strategic Initiatives Strengthening Franchise …Have Produced Improved Growth and Profitability Total Loans $2,320 $3,227 $4,138 $4,401 $5,103 2016 2017 2018 2019 2020 (in millions, as of year - end) Wealth Management Revenue $8.09 $13.34 $20.51 $21.83 $22.80 2016 2017 2018 2019 2020 (in millions) Adjusted Pre - Tax Pre - Provision Earnings (1) Efficiency Ratio (1) $50.1 $61.9 $83.7 $101.3 $108.9 2016 2017 2018 2019 2020 68.66% 66.66% 66.08% 61.53% 59.42% 2016 2017 2018 2019 2020 Notes: (1) Represents a non - GAAP financial measure. See “Non - GAAP Reconciliation” in the appendix.
13 2020 Optimization and Efficiency Initiatives 13 Sale of Commercial FHA Loan Origination Platform • Sale of origination platform to Dwight Capital • No significant gain on sale (reduced goodwill by $10.9 million) • $3.0 million tax charge on sale • Retain servicing and low - cost deposits • Ongoing warehouse and servicing deposit relationship with Dwight Capital • Ongoing commercial FHA revenue of $1.2 million for servicing • $8 - $9 million expense reduction Branch Network and Facilities Optimization • Consolidation of 13 branches (20% of network and ~30 FTEs) • Most affected branches located within 3 miles of another Midland branch • 4 of the branches had been closed since March due to pandemic • Expected to retain 70% to 80% of deposits from consolidated branches • Exited three corporate locations including St. Louis and Denver • Restructuring charge in 3Q20 of $13.6 million • Other branch renovation and upgrading projects beginning in 4Q20 and continuing in 2021 at a cost of $4 million • $6 million expense reduction in 2021 Initiative Details FY 2021 Expected Financial Impact
14 Foundational Consumer Small Business Commercial Customer Facing Digital Talent (39 FTE) Chief Digital Officer , Director – Digital Customer Experience, Director – Enterprise Data Services, Director – Digital Solution Delivery, Lead Engineer API Development, Senior Manager – Digital Marketing, Manager – Customer Experience, Board Member – Digital Expertise Wealth Centralized Data Analytics - PowerBI , SAS Viya (2018, 2019, 2020) Oracle data warehouse with 98% of data accessible for analytics across all products, services and channels Artificial Intelligence (2020, 2021) 200+ RPA “bots” deployed in the last 18 months, AI based solutions applied in Risk Management, Mortgage Operations (Q2 2021), and Cyber Security (UEBA) CX Platform Customer Feedback (2020, 2021) Fintech Partnerships Established Canapi Fund, Alloy, Blend, Plaid, GreenSky Silo - elimination and 360 view of customer (2020) All sales teams on single sales platform using same 360 view of customer Near real time payments (Q1 2021) Consumer online loan Origination (Q1 2021) Consumer online account opening (2020) Automated analytics - based marketing platform deployed with access to all datasets and all businesses (2020 and on - going) CRM deployed to 600+ front office employees with rich view of the customer, automated leads, and single view of pipelines for executive team (2020) Digital mortgage application (2020) Self service loan portal and treasury on - boarding ( 2021) Loan pricing optimization engine (2021) Digital Paycheck Protection Program Portal (2020) Technology Roadmap Midland’s technology investments are enhancing efficiencies, improving client experience, and positively impacting retail deposit gathering and commercial/consumer loan production
15 Recent Financial Trends
16 Overview of 1Q21 16 Loan and Deposit Trends 1Q21 Earnings Announced Acquisition of ATG Trust Company • Total loan balances declined $192.5 million due to elevated payoffs/paydowns • Stable asset quality resulted in decline in provision for credit losses • Total deposits increased $239.5 million driven by growth in demand deposits • Further scales Wealth Management business • Adds specialized expertise expected to positively impact new business development • Continues to grow recurring fee income Increases in Capital Ratios and Book Value • All capital ratios increased between 21 and 49 basis points from prior quarter • Book value and tangible book value per share (1) increased 2.2% and 3.5%, respectively • Net income of $18.5 million, or $0.81 diluted EPS • Adjusted Pre - Tax, Pre - Provision (PTPP) Income (1) of $29.1 million Notes: (1) Represents a non - GAAP financial measure. See “Non - GAAP Reconciliation” in the appendix. Improving Performance Metrics • Efficiency ratio improves to 56.9% from 58.6% in 4Q20 • Return on average shareholders’ equity of 12.04% • Return on average tangible common equity (1) of 17.28% • Adjusted PTPP ROAA (1) of 1.75%
17 1Q 2021 4Q 2020 1Q 2020 Commercial loans and leases $ 1,977 $ 2,096 $ 1,439 Commercial real estate 1,494 1,526 1,507 Construction and land development 192 173 208 Residential real estate 399 443 548 Consumer 849 866 673 Total Loans $4,911 $5,103 $4,376 Loan Portfolio Total Loans and Average Loan Yield • Total loans decreased $192.5 million from prior quarter to $4.91 billion • Decline due to elevated payoffs/paydowns including lower line utilization by ag borrowers and continued runoff in residential real estate portfolio driven by refinancing activity • Average balances on commercial FHA warehouse credit lines increased in 1Q21, but end of period balances were $68.2 million lower than 4Q20 • PPP loans were $211.6 million at March 31, 2021, an increase of $27.2 million from December 31, 2020 Loan Portfolio Mix (in millions, as of quarter - end) (in millions, as of quarter - end) $4,376 $4,839 $4,941 $5,103 $4,911 5.01% 4.64% 4.57% 4.58% 4.50% 1Q 2020 2Q 2020 3Q 2020 4Q 2020 1Q 2021 Total Loans Average Loan Yield
18 1Q 2021 4Q 2020 1Q 2020 Noninterest - bearing demand $ 1,522 $ 1,470 $ 1,053 Interest - bearing: Checking 1,601 1,569 1,425 Money market 819 786 850 Savings 653 598 534 Time 719 656 766 Brokered time 25 23 23 Total Deposits $5,341 $5,101 $4,651 Total Deposits Total Deposits and Cost of Deposits • Total deposits increased $239.5 million, or 4.7% from prior quarter, to $5.34 billion • Growth in deposits largely attributable to increase in demand deposits from commercial clients and retail deposits resulting from stimulus payments • $159 million of CDs maturing in 2Q21 with a weighted average rate of 1.06% Deposit Mix (in millions, as of quarter - end) (in millions, as of quarter - end) $4,651 $4,943 $5,029 $5,101 $5,341 0.74% 0.45% 0.34% 0.26% 0.25% 1Q 2020 2Q 2020 3Q 2020 4Q 2020 1Q 2021 Total Deposits Cost of Deposits
19 $2.2 $1.8 $2.1 $1.6 $1.2 $46.7 $49.0 $50.0 $53.5 $51.9 1Q 2020 2Q 2020 3Q 2020 4Q 2020 1Q 2021 NII Accretion Income 0.16% 0.12% 0.14% 0.10% 0.08% 3.48% 3.32% 3.33% 3.47% 3.45% 1Q 2020 2Q 2020 3Q 2020 4Q 2020 1Q 2021 NIM Accretion Income • Net interest income decreased 3.1% from the prior quarter due to lower accretion income and lower PPP income • Net interest margin, excluding accretion income, was unchanged from prior quarter as a favorable shift in the mix of earning assets and a reduction in the average cost of funds were offset by a decline in the average yield on loans and securities • Redeployment of excess liquidity and higher rates on new securities purchases expected to keep NIM relatively stable, excluding impact of accretion and PPP income Net Interest Income/Margin Net Interest Margin Net Interest Income (in millions)
20 $5.68 $5.70 $5.56 $5.87 $5.93 1Q 2020 2Q 2020 3Q 2020 4Q 2020 1Q 2021 $2,968 $3,254 $3,261 $3,481 $3,560 1Q 2020 2Q 2020 3Q 2020 4Q 2020 1Q 2021 • During 1Q21, assets under administration increased $79.7 million, primarily due to market performance • Wealth Management revenue increased 1.1% from prior quarter, primarily due to higher assets under administration and seasonal impact of fees related to tax preparation Wealth Management Wealth Management Revenue Assets Under Administration (in millions) (in millions )
21 Noninterest Income • Noninterest income increased 3.3% from prior quarter • Impairment on commercial MSRs impacted noninterest income by $1.3 million and $2.3 million in 1Q21 and 4Q20, respectively • Excluding the impact of the impairment of commercial MSRs, noninterest income decreased primarily due to lower levels of residential mortgage banking revenue and service charges on deposit accounts Noninterest Income (in millions) Notes: (1) Excludes $8.5 million impairment of commercial mortgage servicing rights $17.1 $19.4 $18.9 $14.3 $14.8 1Q 2020 2Q 2020 3Q 2020 4Q 2020 1Q 2021 All Other Residential Mortgage Wealth Management (1)
22 Noninterest Expense and Operating Efficiency • Efficiency Ratio (1) was 56.9% in 1Q21 vs. 58.6% in 4Q20 • Adjustments to non - interest expense: • Excluding these adjustments, noninterest expense decreased primarily due to: » Lower salaries and benefits expense resulting from branch network and facilities consolidation » Accrual in 4Q20 for one - time rollover of vacation time due to COVID - 19 Noninterest Expense and Efficiency Ratio (1) (Noninterest expense in millions) $1.7 $0.4 $14.0 $5.7 $0.2 $41.7 $41.4 $53.9 $47.0 $39.1 62.2% 59.4% 57.7% 58.6% 56.9% 56.0% 1Q 2020 2Q 2020 3Q 2020 4Q 2020 1Q 2021 Total Noninterest Expense Adjustments to Noninterest Expense Efficiency Ratio Notes: (1) Represents a non - GAAP financial measure. See “Non - GAAP Reconciliation” in the appendix. ($ in millions) 1Q21 4Q20 Integration and acquisition related expenses ($0.2) ($0.2) Loss on MSRs held for sale -- ($0.6) FHLB advances prepayment fees -- ($4.9)
23 COVID - 19 Response and Impact
24 Paycheck Protection Program Overview Paycheck Protection Program (as of 3/31/21) Loans Outstanding $211.6 million Round 1 $132.2 million Round 2 $79.3 million Total Fees Earned $13.7 million Fees Recognized in 1Q21 $2.1 million Remaining Fees to be Recognized $6.0 million Impact on 1Q21 Financials At or for the Three Months Ended 3/31/21 Metrics Excluding PPP Impact Total Loans $4.91 billion $4.70 billion Average Loans $4.99 billion $4.80 billion Net Interest Income FTE (1) $52.3 million $49.6 million Net Interest Margin (1) 3.45% 3.38% ACL/Total Loans 1.28% 1.33% 1. Loan fees and deferred loan origination costs being amortized over an estimated 24 to 60 month life of PPP loans Paycheck Protection Program Loan Forgiveness As of 12/31/20 As of 3/31/21 Loans Submitted to SBA $155.6 million $196.5 million Loans Forgiven by SBA $93.2 million $146.0 million Percentage of Total Round 1 PPP Loans Forgiven 33.6% 52.6%
25 Commercial Loans and Leases by Industry 25 RE / Rental & Leasing 19.5% All Others 12.3% Finance and Insurance 8.9% Assisted Living 8.1% Manufacturing 7.7% Construction - General 7.4% Accommodation & Food Svcs 6.9% Retail Trade 6.1% Ag., Forestry, & Fishing 5.0% General Freight Trucking 4.6% Trans. / Ground Passenger 4.0% Health Care 3.7% Other Services 3.3% Wholesale Trade 2.5% Industries as a percentage of Commercial, CRE and Equipment Finance Loans and Leases as of 3/31/21
26 Commercial Real Estate Portfolio by Collateral Type 26 Assisted Living 15.3% Retail 15.1% All Others 9.7% Multi - Family 9.4% Hotel/Motel 9.3% Industrial / Warehouse 9.1% Office 7.1% Residential 1 - 4 Family 5.1% Farmland 4.2% C - Store / Gas Station 3.7% Mixed Use / Other 2.9% Medical Building 2.7% Car Dealerships 2.3% Developed Land 2.1% Restaurant 2.0% Collateral type as a percentage of the Commercial Real Estate and Construction Portfolio as of 3/31/21 CRE Concentration (as of 3/31/21) CRE as a % of Total Loans 30.4% CRE as a % of Total Risk - Based Capital (1) 178.7% Notes: (1) Represents non - owner occupied CRE loans only
27 Loan Deferral Overview Total Loan Deferrals As of Sept. 30, 2020 As of Dec. 31, 2020 As of Mar. 31, 2021 Total Loans Deferred $279.3 million $209.1 million $219.1 million % of Total Loans 5.7% 4.1% 4.5% Deferrals by Industry (as of March 31, 2021) Hotels/Motels $117.4 54% Transit & Ground Passenger $36.2 16% Assisted Living $21.8 10% RE Rental & Leasing $8.3 4% All Others <4% $35.4 16% ($ in millions) Deferral Type (as of March 31, 2021) Full Payment Deferral $131.9 million Deferred Loans Making I/O or Other Payments $87.2 million
28 Midland Equipment Finance Portfolio Overview ($ in millions) Portfolio Characteristics (as of 3/31/21) Nationwide portfolio providing financing solutions to equipment vendors and end - users Total Outstanding Loans and Leases $858.6 million (17.5% of total loans) Number of Loans and Leases 6,904 Average Loan/Lease Size $122,291 Largest Loan/Lease $1.5 million Weighted Average Rate 4.89% Avg. FICO Score 604 Transit and Ground Passenger $36.2 78.5% All Others <4% of Total $9.9 21.5% Total Deferred Loans and Leases As of 9/30/20 As of 12/31/20 As of 3/31/21 Total Deferrals $75.2 million $50.1 million $46.1 million Percentage of Portfolio 9.2% 5.8% 5.4% Deferred Loans Making I/O or Other Payments - $28.2 million $35.8 million Equipment Finance Deferrals by Industry (as of March 31, 2021)
29 Hotel/Motel Portfolio Overview Deferrals by Chain Scale ($ in millions) Upper Midscale Chain $96.0 82% Upscale Chain $11.7 10% Midscale Chain $8.7 7% Other $1.0 1% Portfolio Characteristics (CRE & C&I) (as of 3/31/21) Total Outstanding $167.0 million (3.4% of total loans) Number of Loans 46 Average Loan Size $3.6 million Largest Loan $11.3 million Average LTV 57% Total Deferred Loans as of 12/31/20 $82.6 million (45.8% of portfolio) Total Deferred Loans as of 3/31/21 $117.4 million (70.3% of portfolio) Average LTV of Deferred Loans as of 3/31/21 59% Deferred Loans Making I/O or Other Payments $24.8 million (21.1% of deferrals) Portfolio by State IL $90.0 54% MO $33.5 20% MI $13.9 8% CO $11.3 7% WI $9.2 6% Other $9.1 5%
30 GreenSky Consumer Loan Portfolio Overview Delinquency Rate (greater than 60 days) Portfolio Characteristics (as of 3/31/21) Total Outstanding $754.6 million (15.4% of total loans) Number of Loans 351,417 Average Loan Size $2,147 Average FICO Score 771 Total Deferred Loans (as of December 31, 2020) $3.1 million (0.4% of portfolio) Total Deferred Loans (as of March 31, 2021) $3.8 million (0.5% of portfolio) ▪ Average FICO score of 771 ▪ No losses to MSBI in 10 year history of portfolio ▪ Portfolio can be sold to provide liquidity; Loan sales were executed at par in Mar 2021 Prime Credit 0.34% 0.42% 0.36% 0.35% Jun 2020 Sep 2020 Dec 2020 Mar 2021 ▪ Cash flow waterfall structure » Cash flow from portfolio covers servicing fee, credit losses and our target margin » Excess cash flow is an incentive fee to GreenSky that is available to cover additional losses » GreenSky received incentive fees in 26 of past 27 months including every month in 2020 and 2021 ▪ Escrow deposits » Escrow deposits absorb losses in excess of cash flow waterfall » Escrow account totaled $30.1 million at 3/31/21 or 4.0% of the portfolio Credit Enhancement
31 Asset Quality NCO / Average Loans • Nonperforming loans declined $1.2 million due to resolution of long - term problem loans • NPLs/total loans increased to 1.08% from 1.06% at the end of the prior quarter due to the decline in total loan balances • Net charge - offs of $1.7 million, or 0.14% of average loans • Provision for credit losses of $3.6 million in 1Q21 primarily driven by additions to specific reserves • At 3/31/21, approximately 90% of ACL was allocated to general reserves Nonperforming Loans / Total Loans (Total Loans as of quarter - end) 1.33% 1.25% 1.36% 1.06% 1.08% 1Q 2020 2Q 2020 3Q 2020 4Q 2020 1Q 2021 1.18% 0.26% 0.44% 0.19% 0.14% 1Q 2020 2Q 2020 3Q 2020 4Q 2020 1Q 2021
32 Changes in Allowance for Credit Losses ACL 12/31/20 ACL 3/31/21 ($ 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 segments ▪ Aging of existing portfolio ▪ Other charge - offs and recoveries ▪ Changes to macro - economic variables and forecasts ▪ Changes to other economic qualitative factors
33 ACL by Portfolio Portfolio Total Loans at 3/31/21 ACL % of Total Loans Total Loans at 12/31/20 ACL % of Total Loans Commercial $ 808,262 $ 8,214 1.02% $ 937,382 $ 8,537 0.90% Warehouse Lines 205,115 - 0.00% 273,298 - 0.00% Commercial Other 766,632 9,125 1.19% 748,193 11,314 1.51% Equipment Finance 456,059 8,575 1.88% 451,437 10,727 2.38% Paycheck Protection Program 211,564 317 0.15% 184,401 277 0.15% Lease Financing 402,546 6,036 1.50% 410,064 7,427 1.81% CRE non - owner occupied 853,110 20,890 2.45% 871,451 16,604 1.91% CRE owner occupied 443,403 7,411 1.67% 423,257 4,936 1.17% Multi - family 120,784 2,776 2.30% 151,534 3,413 2.25% Farmland 76,734 744 0.97% 79,731 512 0.64% Construction and Land Development 191,870 1,239 0.65% 172,737 1,433 0.83% Residential RE First Lien 321,857 3,275 1.02% 358,329 3,212 0.90% Other Residential 76,644 706 0.92% 84,551 717 0.85% Consumer 76,943 341 0.44% 80,642 374 0.46% Consumer Other (1) 772,021 1,930 0.25% 785,460 1,964 0.25% Total Loans 4,910,806 62,687 1.28% 5,103,331 60,443 1.18% Loans (excluding GreenSky, PPP and warehouse lines) 3,667,924 60,292 1.64% 3,811,624 58,060 1.52% ($ in thousands) Notes: (1) Primarily consists of loans originated through GreenSky relationship
34 Capital and Liquidity Overview Capital Ratios (as of 3/31/21) Liquidity Sources (as of 3/31/21) 6.67% 8.39% 7.79% 9.62% 13.73% 11.15% 9.03% 11.15% 12.18% 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 Equivalents $ 631.2 Unpledged Securities 252.6 FHLB Committed Liquidity 645.2 FRB Discount Window Availability 57.3 Primary Liquidity 1,586.3 FRB – PPP Liquidity Facility (1) 211.6 Secondary Liquidity 211.6 Total Estimated Liquidity $ 1,797.9 Conditional Funding Based on Market Conditions Additional Credit Facility $ 250.0 Brokered CDs (additional capacity) $ 500.0 (1) Enrolled in PPP facility – loans available to submit Other Liquidity Holding Company Cash Position of $65.1 Million
35 Outlook
36 2021 Outlook and Priorities • Maintain strong capital and liquidity positions to continue supporting clients and communities through the duration of the COVID - 19 pandemic • Targeting low - to mid - single - digit loan growth (excluding PPP loans) resulting from continued growth in equipment finance, commercial FHA warehouse and commercial real estate portfolios • Expand commercial banking team with expertise in SBA, agribusiness lending, and specialty finance • Maintain lower cost structure following actions taken in 2020 to increase operating leverage as balance sheet grows • Focus technology investments on opportunities to capture wallet share from existing clients and enhance revenue generation • M&A focused primarily on expanding Wealth Management business • Employ balanced approach to capital deployment that increases return of capital to shareholders while also building capital ratios 36
37 Long - Term Formula for Enhancing Shareholder Value Accretive M&A Transactions Earnings Growth, Improving Returns and Enhanced Franchise Value Disciplined Balance Sheet Growth Improving Operating Efficiencies Stable Sources of Recurring Income
38 APPENDIX
39 ESG: A Framework for Sustainability Environmental Facilities • Our Corporate HQ, built in 2011, is LEED (Silver) Certified. • 10 of our other locations use solar panels. • We have made more than $50+ million of credit available for residential solar projects since 2011. • We have also completed more than $540 million of financing for 18 “green” (LEED, Energy Star, etc.) multi - family/health care facilities through our Love Funding subsidiary since 2017. Paper Reduction • More than 40% of our customers use paperless statements and • Midland has had a digitization/paper elimination program in place since 2010. Social Community Outreach • Midland States Bank has been serving families and businesses in our communities for more than 140 years, offering products and services based on the needs of our customers. • We work with more than 150 low - to - moderate income (“LMI”) and minority focused community development groups in our banking markets to help insure our community development programs address the needs of each of our markets. • The Midland Institute CEO Program, a unique program designed to teach and create entrepreneurial opportunities to teens, was first created by our Bank in 2008 for the local Effingham, Illinois high schools and has now grown to be offered by 56 high schools in six states. Culture and People • Since 2008 Midland has provided all employees personal and professional development through an acclaimed third - party training company. • Midland’s Advanced Study for Talent Enrichment and Resource Training (“MASTERS”) program serves to develop future leaders of the Company. To date 59% of participants have been women or minority employees. Philanthropy • $30 million of investment towards community development goals targeted for the 2019 - 2021 period. Financial Education • Since 2015 we have held more than 240 financial literacy seminars in LMI/minority neighborhoods in our footprint. CRA, Community Development and Financial Inclusion • Through our Believable Banking® Residential Mortgage and Home Improvement Loan Programs we have made more than $20 million of loans to consumers underserved by traditional loan programs. • Our banking products and services are offered through our personal bankers and online with materials designed to clearly describe the features, costs and alternatives available to our customers, including through dual - language materials and our ADA compliant website. • Love Funding has provided $877 million of financing for 148 affordable multi - family and health care projects during 2015 - 2019 through Love Funding. Governance Reputation • Midland States Bank was one of the first in the nation to have a woman on its board (1903). • Our board composition includes 36% women and minorities, and our criteria for identifying directors includes seeking diverse individuals. Oversight of Strategy and Risk • The Company’s Chair and CEO roles been separate since the Company’s inception (1988). • Our Board of Directors has established a Risk and Compliance Committee to oversee all aspects of risk and compliance management. • Our ERM program evaluates risk in each of our businesses and operational departments, including asset and liability management, and our Chief Risk Officer reports directly to the Audit and Risk and Compliance Committees of the Company’s Board of Directors. Data Security • Robust data security programs and a Privacy Policy under which we do not sell or share customer information with non - affiliated entities. Management of Legal and Regulatory Environment • All continuing directors except our CEO are “independent” pursuant to applicable SEC/NASDAQ rules. • Our Executive Compensation, including all performance related compensation, is also evaluated under our ERM to insure compliance with the FDIC’s Interagency Guidelines Establishing Standards for Safety and Soundness and the Sound Incentive Compensation Policies issued jointly by the federal financial institutions regulatory agencies. • All cash and equity incentive programs for executive officers include operating metrics and/or four - year vesting periods .
40 Appendix: Reconciliation of TBV Per Share 40 As of March 31, (dollars in thousands, except per share data) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Shareholders' Equity to Tangible Common Equity—as converted: Total shareholders' equity—GAAP 109,208$ 126,953$ 130,918$ 149,440$ 219,456$ 232,880$ 321,770$ 449,545$ 608,525$ 661,911$ 621,391$ 635,467$ Adjustments: Preferred stock (47,370) (57,370) (57,370) (57,370) - - - (2,970) (2,781) - - - Goodwill (7,582) (7,582) (7,732) (7,732) (47,946) (46,519) (48,836) (98,624) (164,673) (171,758) (161,904) (161,904) Other intangibles (13,234) (10,740) (8,485) (8,189) (9,464) (7,004) (7,187) (16,932) (37,376) (34,886) (28,382) (26,867) Tangible Common Equity 41,022$ 51,261$ 57,331$ 76,149$ 162,046$ 179,357$ 265,747$ 331,019$ 403,695$ 455,267$ 431,105$ 446,696$ Adjustments: Preferred stock 47,370 57,370 57,370 57,370 - - - - - - - - Warrants 11,300 - - - - - - - - - - - Tangible Common Equity—as converted (1) 99,692$ 108,631$ 114,701$ 133,519$ 162,046$ 179,357$ 265,747$ 331,019$ 403,695$ 455,267$ 431,105$ 446,696$ Total Assets to Tangible Assets: Total assets—GAAP 1,642,376$ 1,520,762$ 1,572,064$ 1,739,548$ 2,676,614$ 2,884,824$ 3,233,723$ 4,412,701$ 5,637,673$ 6,087,017$ 6,868,540$ 6,884,786$ Adjustments: Goodwill (7,582) (7,582) (7,732) (7,732) (47,946) (46,519) (48,836) (98,624) (164,673) (171,758) (161,904) (161,904) Other intangibles (13,234) (10,740) (8,485) (8,189) (9,464) (7,004) (7,187) (16,932) (37,376) (34,886) (28,382) (26,867) Tangible Assets 1,621,560$ 1,502,440$ 1,555,847$ 1,723,627$ 2,619,204$ 2,831,301$ 3,177,700$ 4,297,145$ 5,435,624$ 5,880,373$ 6,678,254$ 6,696,015$ Common Shares Outstanding—as converted: Common shares outstanding 4,164,030 4,198,947 4,257,319 4,620,026 11,725,158 11,797,404 15,483,499 19,122,049 23,751,798 24,420,345 22,325,471 22,351,740 Adjustments: Upon conversion of preferred stock 3,795,549 3,739,028 3,739,028 3,772,664 - - - - - - - - Common Shares Outstanding—as converted (1) 7,959,579 7,937,975 7,996,347 8,392,690 11,725,158 11,797,404 15,483,499 19,122,049 23,751,798 24,420,345 22,325,471 22,351,740 Tangible Common Equity to Tangible Assets 2.53 % 3.41 % 3.68 % 4.42 % 6.19 % 6.33 % 8.36 % 7.70 % 7.43 % 7.74 % 6.46 % 6.67 Tangible Book Value Per Share—as converted (1) 12.52$ 13.68$ 14.34$ 15.91$ 13.82$ 15.20$ 17.16$ 17.31$ 17.00$ 18.64$ 19.31$ 19.98$ Notes: (1) As converted represents amount per common share with all preferred shares that were outstanding prior to December 31, 2014 converted into common shares. As of December 31,
41 Adjusted Earnings Reconciliation (dollars in thousands) Income before income taxes - GAAP $ 32,014 72,471 50,805 26,471 50,431 Adjustments to noninterest income: Gain on sales of investment securities, net 1,721 674 464 222 14,702 Other (17) (29) 89 (67) (608) Other income Total adjustments to noninterest income 1,704 645 553 155 14,094 Adjustments to noninterest expense: Loss on mortgage servicing rights held for sale 1,692 (490) 458 4,059 - Loss on repurchase of subordinated debt 193 1,778 - - 511 Impairment related to facilities optimization 12,847 3,577 - 1,952 2,099 FHLB advances prepayment fees 4,872 - - - - Integration and acquisition expenses 2,309 5,493 24,015 17,738 2,343 Total adjustments to noninterest expense 21,913 10,358 24,473 23,749 4,953 Adjusted earnings pre tax 52,223 82,184 74,725 50,065 41,290 Adjusted earnings tax 12,040 19,358 17,962 15,170 14,064 Adjusted earnings - non-GAAP $ 40,183 $ 62,826 $ 56,763 $ 34,895 $ 27,226 Preferred stock dividends, net - 46 141 83 - Adjusted earnings available to common shareholders - non-GAAP $ 40,183 $ 62,780 $ 56,622 $ 34,812 $ 27,226 Adjusted Pre-Tax, Pre-Provision Earnings Reconciliation (dollars in thousands) Adjusted earnings pre tax - non- GAAP $ 52,223 $ 82,184 $ 74,725 $ 50,065 $ 41,290 Provision for credit losses 44,361 - 16,985 - 9,430 - 9,556 - 5,591 Impairment on commercial mortgage servicing rights 12,337 2,139 (449) 2,324 3,135 Adjusted pre-tax, pre-provision earnings - non-GAAP $ 108,921 $ 101,308 $ 83,706 $ 61,945 $ 50,016 Adjusted pre-tax, pre-provision return on average assets 1.67% % 1.74% % 1.53% % 1.57% % 1.63% % MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) For the Years Ended December 31, For the Years Ended December 31, 2020 2019 2018 2017 2016 2020 2019 2018 2017 2016
42 Efficiency Ratio Reconcilation (dollars in thousands) Noninterest expense $ 184,010 $ 175,641 $ 191,643 $ 152,997 $ 121,289 Adjustments to noninterest expense: Net expense from FDIC loss share termination agreement - - - - (351) Impairment related to facilities optimization (12,847) (3,577) - (1,952) (2,099) (Loss) gain on mortgage servicing rights held for sale (1,692) 490 (458) (4,059) - FHLB advances prepayments fees (4,872) - - - - Loss on repurchase of subordinated debt (193) (1,778) - - (511) Integration and acquisition expenses (2,309) (5,493) (24,015) (17,738) (2,343) Adjusted noninterest expense $ 162,097 $ 165,283 $ 167,170 $ 129,248 $ 115,985 Net interest income $ 199,136 $ 189,815 $ 180,087 $ 129,662 $ 105,254 Effect of tax-exempt income 1,766 2,045 2,095 2,691 2,579 Adjusted net interest income 200,902 191,860 182,182 132,353 107,833 Noninterest income 61,249 75,282 71,791 59,362 72,057 Adjustments to noninterest income: Impairment (recapture) on commercial servicing rights 12,337 2,139 (450) 2,324 3,135 Gain on sales of investment securities, net (1,721) (674) (464) (222) (14,702) Other income 17 29 (89) 67 608 Adjusted noninterest income 71,882 76,776 70,788 61,531 61,098 Adjusted total revenue $ 272,784 $ 268,636 $ 252,970 $ 193,884 $ 168,931 Efficiency Ratio 59.42 % 61.53 % 66.08 % 66.66 % 68.66 % MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) For the Years Ended December 31, 2020 2019 2018 2017 2016
43 Adjusted Earnings Reconciliation (dollars in thousands, except per share data) Income before income taxes - GAAP $ 24,040 $ 10,746 $ 3,270 $ 15,993 $ 2,005 Adjustments to noninterest income: Gain on sales of investment securities, net - - 1,721 - - Other 75 3 (17) 11 (13) Total adjustments to noninterest income 75 3 1,704 11 (13) Adjustments to noninterest expense: Loss on mortgage servicing rights held for sale - 617 188 391 496 Loss on repurchase of subordinated debt - - - - 193 Impairment related to facilities optimization - (10) 12,651 60 146 FHLB advances prepayment fees 8 4,872 - - - Integration and acquisition expenses 238 231 1,200 (6) 886 Total adjustments to noninterest expense 246 5,710 14,039 445 1,721 Adjusted earnings pre tax 24,211 16,453 15,605 16,427 3,739 Adjusted earnings tax 5,549 3,982 3,582 3,543 933 Adjusted earnings - non-GAAP $ 18,662 $ 12,471 $ 12,023 $ 12,884 $ 2,806 Adjusted diluted earnings per common share $ 0.82 $ 0.54 $ 0.52 $ 0.55 $ 0.11 Adjusted return on average assets 1.12 % 0.73 % 0.72 % 0.78 % 0.19 % Adjusted return on average shareholders' equity 12.12 % 7.97 % 7.56 % 8.20 % 1.73 % Adjusted return on average tangible common equity 17.39 % 11.50 % 11.04 % 12.14 % 2.53 % Adjusted Pre-Tax, Pre-Provision Earnings Reconciliation (dollars in thousands) Adjusted earnings pre tax - non- GAAP $ 24,211 $ 16,453 $ 15,605 $ 16,427 $ 3,739 Provision for credit losses 3,565 10,058 11,728 10,997 11,578 Impairment on commercial mortgage servicing rights 1,275 2,344 1,418 107 8,468 Adjusted pre-tax, pre-provision earnings - non-GAAP $ 29,051 $ 28,855 $ 28,751 $ 27,531 $ 23,785 Adjusted pre-tax, pre-provision return on average assets 1.75 % 1.69 % 1.72 % 1.68 % 1.58 % For the Quarter Ended 2021 2020 2020 2020 2020 March 31, December 31, September 30, June 30, March 31, MIDLAND STATES BANCORP, INC.RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) For the Quarter Ended June 30, 2020 March 31, 2020 March 31, 2021 December 31, 2020 September 30, 2020
44 Efficiency Ratio Reconciliation (dollars in thousands) Noninterest expense - GAAP $ 39,079 $ 47,048 $ 53,901 $ 41,395 $ 41,666 Loss on mortgage servicing rights held for sale - (617) (188) (391) (496) Loss on repurchase of subordinated debt - - - - (193) Impairment related to facilities optimization - 10 (12,651) (60) (146) FHLB advances prepayment fees (8) (4,872) - - - Integration and acquisition expenses (238) (231) (1,200) 6 (885) Adjusted noninterest expense $ 38,833 $ 41,338 $ 39,862 $ 40,950 $ 39,946 Net interest income - GAAP $ 51,868 $ 53,516 $ 49,980 $ 48,989 $ 46,651 Effect of tax-exempt income 386 413 430 438 485 Adjusted net interest income 52,254 53,929 50,410 49,427 47,136 Noninterest income - GAAP 14,816 14,336 18,919 19,396 8,598 Impairment on commercial mortgage servicing rights 1,275 2,344 1,418 107 8,468 Gain on sales of investment securities, net - - (1,721) - - Other (75) (3) 17 (11) 13 Adjusted noninterest income 16,016 16,677 18,633 19,492 17,079 Adjusted total revenue $ 68,270 $ 70,606 $ 69,043 $ 68,919 $ 64,215 Efficiency ratio 56.88 % 58.55 % 57.74 % 59.42 % 62.21 % MIDLAND STATES BANCORP, INC.RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued) For the Quarter Ended 2021 2020 2020 2020 2020 March 31, December 31, September 30, June 30, March 31,
45 Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Share (dollars in thousands, except per share data) Shareholders' Equity to Tangible Common Equity Total shareholders' equity
—GAAP $ 635,467 $ 621,391 $ 621,880 $ 633,589 $ 631,160 Adjustments: Goodwill (161,904) (161,904) (161,904) (172,796) (172,796) Other intangible assets, net (26,867) (28,382) (29,938) (31,495) (33,124) Tangible common equity $ 446,696 $ 431,105 $ 430,038 $ 429,298 $ 425,240 Total Assets to Tangible Assets: Total assets—GAAP $ 6,884,786 $ 6,868,540 $ 6,700,045 $ 6,644,498 $ 6,208,230 Adjustments: Goodwill (161,904) (161,904) (161,904) (172,796) (172,796) Other intangible assets, net (26,867) (28,382) (29,938) (31,495) (33,124) Tangible assets $ 6,696,015 $ 6,678,254 $ 6,508,203 $ 6,440,207 $ 6,002,310 Common Shares Outstanding 22,351,740 22,325,471 22,602,844 22,937,296 23,381,496 Tangible Common Equity to Tangible Assets 6.67 % 6.46 % 6.61 % 6.67 % 7.08 % Tangible Book Value Per Share $ 19.98 $ 19.31 $ 19.03 $ 18.72 $ 18.19 Return on Average Tangible Common Equity (ROATCE) (dollars in thousands) Net income available to common shareholders $ 18,538 $ 8,333 $ 86 $ 12,569 $ 1,549 Average total shareholders' equity—GAAP $ 624,661 $ 622,594 $ 632,879 $ 631,964 $ 652,701 Adjustments: Goodwill (161,904) (161,904) (168,771) (172,796) (171,890) Other intangible assets, net (27,578) (29,123) (30,690) (32,275) (33,951) Average tangible common equity $ 435,179 $ 431,567 $ 433,418 $ 426,893 $ 446,860 ROATCE 17.28 % 7.68 % 0.08 % 11.84 % 1.39 % MIDLAND STATES BANCORP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (unaudited) (continued) As of March 31, December 31, September 30, June 30, March 31, 2021 2020 2020 2020 2020 For the Quarter Ended 2021 2020 2020 2020 2020 March 31, December 31, September 30, June 30, March 31,