Midland States Bancorp, Inc. (MSBI) Bundle
Understanding Midland States Bancorp, Inc. (MSBI) Revenue Streams
Understanding Midland States Bancorp, Inc.’s Revenue Streams
Midland States Bancorp, Inc. generates revenue primarily from two sources: net interest income and noninterest income. The breakdown of these revenue streams is essential for understanding the company's financial health.
Revenue Streams Breakdown
- Net Interest Income: For the third quarter of 2024, net interest income was $54.95 million, compared to $58.60 million in the same period of 2023.
- Noninterest Income: Noninterest income for the third quarter of 2024 was $19.34 million, an increase from $11.55 million in the third quarter of 2023.
Year-over-Year Revenue Growth Rate
Looking at historical trends, the total revenue for the third quarter of 2024 reached $74.29 million, compared to $70.15 million in the third quarter of 2023, marking a year-over-year increase of 5.4%.
Contribution of Different Business Segments
The contribution of various business segments to overall revenue for the third quarter of 2024 is detailed in the following table:
| Segment | Revenue (in millions) | Percentage of Total Revenue |
|---|---|---|
| Net Interest Income | $54.95 | 73.9% |
| Noninterest Income | $19.34 | 26.1% |
| Total Revenue | $74.29 | 100% |
Analysis of Significant Changes in Revenue Streams
In the third quarter of 2024, the company experienced a 3.0% decrease in net interest income compared to the previous quarter, attributed to rising interest rates affecting loan yields. Conversely, noninterest income saw an increase of 67.3% year-over-year, primarily driven by growth in wealth management services, which generated $7.10 million in revenue for the third quarter of 2024, up from $6.29 million in the same quarter of 2023.
The following table summarizes the key components of revenue over the past three quarters:
| Quarter | Net Interest Income (in millions) | Noninterest Income (in millions) | Total Revenue (in millions) |
|---|---|---|---|
| Q3 2024 | $54.95 | $19.34 | $74.29 |
| Q2 2024 | $55.05 | $17.66 | $72.86 |
| Q3 2023 | $58.60 | $11.55 | $70.15 |
A Deep Dive into Midland States Bancorp, Inc. (MSBI) Profitability
A Deep Dive into Midland States Bancorp, Inc.'s Profitability
Gross Profit Margin: For the third quarter of 2024, the net interest income was $55.2 million, resulting in a net interest margin of 3.10%. This compares to $58.8 million and a margin of 3.20% for the same quarter in 2023.
Operating Profit Margin: The operating income before taxes for the third quarter of 2024 was $22.6 million, leading to an operating profit margin of approximately 40.8%.
Net Profit Margin: The net income available to common shareholders for the third quarter of 2024 was $16.2 million, which translates to a net profit margin of 29.4%.
Trends in Profitability Over Time
Over the past year, profitability has shown varied trends:
- Net interest income decreased from $58.8 million in Q3 2023 to $55.2 million in Q3 2024.
- Net income increased from $9.2 million in Q3 2023 to $16.2 million in Q3 2024, reflecting a significant recovery.
Comparison of Profitability Ratios with Industry Averages
| Metric | Company Value | Industry Average |
|---|---|---|
| Gross Profit Margin | 3.10% | 3.25% |
| Operating Profit Margin | 40.8% | 38.5% |
| Net Profit Margin | 29.4% | 25.0% |
Analysis of Operational Efficiency
The efficiency ratio improved to 62.76% in Q3 2024 from 65.16% in Q2 2024, indicating better cost management.
Noninterest Expense: Noninterest expenses amounted to $46.7 million for Q3 2024, up from $42.0 million in Q3 2023.
Cost Management: The cost of funds increased to 3.45% in Q3 2024, indicating higher competition for deposits.
Gross Margin Trends: The gross margin has remained relatively stable, with the net interest margin fluctuating slightly due to changes in interest rates and the competitive landscape.
Overall, the financial health indicators suggest a solid performance despite some challenges, with trends indicating a recovery trajectory in profitability metrics.
Debt vs. Equity: How Midland States Bancorp, Inc. (MSBI) Finances Its Growth
Debt vs. Equity: How Midland States Bancorp, Inc. Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, Midland States Bancorp, Inc. reported total interest-bearing liabilities of $5.75 billion. This includes:
- Interest-bearing deposits: $5.14 billion
- Short-term borrowings: $53.58 million
- FHLB advances & other borrowings: $428.74 million
- Subordinated debt: $89.12 million
- Trust preferred debentures: $50.99 million
Debt-to-Equity Ratio and Comparison to Industry Standards
The company's debt-to-equity ratio as of September 30, 2024, was calculated at 7.28. This ratio is notably higher than the industry average of approximately 1.35, indicating a higher reliance on debt financing compared to peers.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
In the third quarter of 2024, the company repurchased $0.2 million of subordinated debt, reflecting a proactive approach to managing its capital structure. The credit ratings for Midland States Bancorp remain strong, with a focus on maintaining financial stability amidst rising interest rates.
How the Company Balances Between Debt Financing and Equity Funding
As of September 30, 2024, the total shareholders' equity stood at $789.71 million, showcasing a solid equity base. The company has strategically utilized debt to fund growth while maintaining a robust equity position, which is critical for sustaining operations during economic fluctuations.
| Category | Amount (in millions) |
|---|---|
| Total Interest-Bearing Liabilities | 5,750 |
| Interest-Bearing Deposits | 5,143 |
| Short-term Borrowings | 54 |
| FHLB Advances & Other Borrowings | 429 |
| Subordinated Debt | 89 |
| Trust Preferred Debentures | 51 |
| Total Shareholders' Equity | 790 |
| Debt-to-Equity Ratio | 7.28 |
Overall, Midland States Bancorp, Inc.'s financial strategy emphasizes a balanced approach to debt and equity financing, ensuring it can capitalize on growth opportunities while maintaining a solid capital foundation.
Assessing Midland States Bancorp, Inc. (MSBI) Liquidity
Assessing Midland States Bancorp, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio was 1.45, calculated from current assets of $1.71 billion and current liabilities of $1.18 billion.
Quick Ratio: The quick ratio stood at 0.67, derived from liquid assets of $1.11 billion and current liabilities of $1.18 billion.
Analysis of Working Capital Trends
Total working capital was calculated as current assets minus current liabilities, resulting in a working capital of $532 million as of September 30, 2024. This reflects a trend of increasing working capital compared to $489 million in the previous quarter.
Cash Flow Statements Overview
| Cash Flow Type | Q3 2024 (in thousands) | Q2 2024 (in thousands) | Q3 2023 (in thousands) |
|---|---|---|---|
| Operating Cash Flow | $20,500 | $18,300 | $15,700 |
| Investing Cash Flow | ($15,200) | ($12,400) | ($18,600) |
| Financing Cash Flow | $10,300 | $9,800 | $8,500 |
Potential Liquidity Concerns or Strengths
Liquidity strengths include a strong cash position of $75.3 million and stable deposits totaling $6.26 billion as of September 30, 2024. However, potential concerns arise from an increasing loan-to-deposit ratio of 91.9%, indicating a tighter liquidity environment.
Additionally, the allowance for credit losses was $85.8 million, equating to 1.49% of total loans, which may impact future liquidity if credit quality deteriorates.
Is Midland States Bancorp, Inc. (MSBI) Overvalued or Undervalued?
Valuation Analysis
In evaluating whether the company is overvalued or undervalued, we will analyze key financial ratios such as price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA).
Price-to-Earnings (P/E) Ratio
The current stock price is $22.38 as of September 30, 2024. The diluted earnings per share (EPS) for the third quarter of 2024 is $0.74. Therefore, the P/E ratio is calculated as follows:
P/E Ratio = Stock Price / EPS = $22.38 / $0.74 = 30.19
Price-to-Book (P/B) Ratio
The book value per share is $33.08. Therefore, the P/B ratio is calculated as follows:
P/B Ratio = Stock Price / Book Value per Share = $22.38 / $33.08 = 0.67
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) can be calculated as follows:
EV = Market Capitalization + Total Debt - Cash
Assuming total debt is $414.259 million and cash is $75.255 million, and using the number of shares outstanding at period end 21,393,905:
Market Capitalization = Stock Price Shares Outstanding = $22.38 21,393,905 = $478.10 million
EV = $478.10 million + $414.259 million - $75.255 million = $817.10 million
EBITDA for the last twelve months is $70 million, therefore:
EV/EBITDA = EV / EBITDA = $817.10 million / $70 million = 11.7
Stock Price Trends
Over the last 12 months, the stock price has shown the following trends:
- September 2023: $20.54
- December 2023: $22.65
- June 2024: $22.65
- September 2024: $22.38
Dividend Yield and Payout Ratios
The annual dividend per share is $0.84, resulting in a dividend yield of:
Dividend Yield = Annual Dividend / Stock Price = $0.84 / $22.38 = 3.75%
The payout ratio is calculated as:
Payout Ratio = Annual Dividend / EPS = $0.84 / $2.96 = 28.38%
Analyst Consensus on Stock Valuation
Analyst consensus shows the following ratings:
- Buy: 5 analysts
- Hold: 3 analysts
- Sell: 1 analyst
| Ratio | Value |
|---|---|
| P/E Ratio | 30.19 |
| P/B Ratio | 0.67 |
| EV/EBITDA | 11.7 |
| Dividend Yield | 3.75% |
| Payout Ratio | 28.38% |
Key Risks Facing Midland States Bancorp, Inc. (MSBI)
Key Risks Facing Midland States Bancorp, Inc.
Midland States Bancorp, Inc. operates within a complex financial landscape that exposes it to various internal and external risks. Understanding these risks is crucial for investors.
Industry Competition
The banking sector has seen intensified competition, particularly from fintech companies and traditional banks. This competitive pressure can impact pricing strategies and profitability. As of September 30, 2024, the cost of interest-bearing deposits was 3.25%, up 14 basis points from the previous quarter, highlighting the increasing competition for deposits.
Regulatory Changes
Changes in federal and state regulations can significantly affect operations. For instance, compliance costs are rising, and the company must navigate regulations under the Dodd-Frank Act and Basel III. As of September 30, 2024, the Common Equity Tier 1 capital ratio was 9.00%, exceeding the minimum regulatory requirement of 7.00%.
Market Conditions
Market fluctuations, including interest rate changes, can adversely affect the company’s financial health. The net interest margin for the third quarter of 2024 was 3.10%, a slight decline from 3.12% in the previous quarter. Additionally, the company reported an accumulated other comprehensive loss of $60.6 million due to rising interest rates.
Operational Risks
Operational risks have emerged, particularly related to technology failures and the integration of new systems. The company experienced a $14.0 million provision expense due to credit deterioration linked to its fintech partner, LendingPoint. This reflects the challenges posed by operational risks and the need for robust risk management practices.
Financial Risks
Financial risks include credit risks and liquidity risks. As of September 30, 2024, nonperforming loans were 1.99% of total loans, an increase from 1.92% in the previous quarter. The company had $85.8 million in allowance for credit losses, showing a proactive approach to managing potential loan defaults.
Strategic Risks
Strategic risks arise from the company’s business decisions. The focus on reducing the equipment finance and consumer loan portfolios could impact short-term revenue but aims to enhance long-term stability. Total loans decreased by $103.2 million, or 1.8%, from the previous quarter.
Mitigation Strategies
To address these risks, Midland States Bancorp has implemented various mitigation strategies. The company is focused on improving credit quality and has added a new Chief Credit Officer to oversee risk management efforts. Furthermore, efforts to enhance technology and streamline operations are ongoing, aimed at reducing operational risks and improving efficiency.
| Risk Type | Description | Impact | Mitigation Strategies |
|---|---|---|---|
| Industry Competition | Intensified competition from fintech and banks | Increased cost of deposits to 3.25% | Focus on competitive pricing and service quality |
| Regulatory Changes | Compliance with evolving regulations | Increased compliance costs | Maintaining capital ratios above regulatory requirements |
| Market Conditions | Fluctuations in interest rates | Net interest margin at 3.10% | Active asset-liability management |
| Operational Risks | Technology failures and integration issues | Provision expense of $14.0 million due to credit deterioration | Investment in technology and risk management frameworks |
| Financial Risks | Credit and liquidity risks | Nonperforming loans at 1.99% | Robust credit assessment and monitoring |
| Strategic Risks | Business decision impacts | Total loans decreased by $103.2 million | Focus on high-quality loan origination |
These risk factors illustrate the challenges Midland States Bancorp faces as it navigates a complex financial landscape. Investors should consider these factors when assessing the company’s future prospects.
Future Growth Prospects for Midland States Bancorp, Inc. (MSBI)
Future Growth Prospects for Midland States Bancorp, Inc.
Analysis of Key Growth Drivers
Midland States Bancorp, Inc. is poised for growth through several key drivers:
- Product Innovations: The company has enhanced its wealth management services, resulting in revenue growth from $6.3 million in Q3 2023 to $7.1 million in Q3 2024, a 12.9% increase year-over-year.
- Market Expansions: The St. Louis market has shown promising growth, with loan balances increasing at an annualized rate of 12% during Q3 2024.
- Acquisitions: Ongoing strategic acquisitions in the financial services sector are expected to bolster service offerings and market share.
Future Revenue Growth Projections and Earnings Estimates
Projected revenue growth for Midland States Bancorp shows a positive trend:
- Expected net interest income for the full year 2024 is projected at approximately $220 million, up from $200 million in 2023.
- Adjusted diluted earnings per share are estimated to increase from $2.53 in 2023 to $2.75 in 2024.
Strategic Initiatives or Partnerships That May Drive Future Growth
Strategic partnerships and initiatives include:
- Collaboration with fintech partners to enhance digital banking services.
- Investment in technology to improve operational efficiency, which is reflected in an improved efficiency ratio of 62.76% in Q3 2024 compared to 65.16% in Q2 2024.
Competitive Advantages That Position the Company for Growth
Midland States Bancorp benefits from several competitive advantages:
- Strong Capital Position: As of September 30, 2024, the common equity tier 1 capital ratio was 9.00%, demonstrating strong financial health.
- Robust Loan Portfolio: Total loans amounted to $5.75 billion at Q3 2024, with a focus on higher quality commercial loans.
- Increased Assets Under Administration: Wealth management assets under administration rose to $4.27 billion, up from $3.50 billion in Q3 2023.
| Key Financial Metrics | Q3 2023 | Q2 2024 | Q3 2024 |
|---|---|---|---|
| Net Income Available to Common Shareholders ($ million) | 9.2 | 4.5 | 16.2 |
| Adjusted Diluted Earnings per Share | 0.41 | 0.20 | 0.74 |
| Wealth Management Revenue ($ million) | 6.3 | 6.8 | 7.1 |
| Assets Under Administration ($ billion) | 3.50 | 4.00 | 4.27 |
| Total Loans ($ billion) | 6.28 | 5.85 | 5.75 |
With these growth opportunities and strategic initiatives, Midland States Bancorp is well-positioned to capitalize on future market conditions and enhance shareholder value.
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Article updated on 8 Nov 2024
Resources:
- Midland States Bancorp, Inc. (MSBI) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Midland States Bancorp, Inc. (MSBI)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Midland States Bancorp, Inc. (MSBI)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.