Midland States Bancorp Inc (MSBI)

Midland States Bancorp Inc. (MSBI): A Comprehensive Overview

Company Profile:

Detailed History and Background:

Midland States Bancorp Inc. (MSBI) is a holding company incorporated in 1984 and headquartered in Effingham, Illinois. It operates through its wholly-owned subsidiary, Midland States Bank. The bank was originally established in 1881 as State Bank of Effingham and has grown through various acquisitions over the years.

Core Business Areas:

MSBI primarily focuses on community banking, offering a range of financial products and services to individuals, businesses, and organizations in Illinois and Missouri. These services include:

• Deposit products: Checking and savings accounts, money market accounts, and certificates of deposit.
• Loan products: Commercial, residential mortgage, consumer, and agricultural loans.
• Treasury management services: Cash management, ACH origination, and wire transfers.
• Investment services: Brokerage services, retirement planning, and trust services.

Leadership Team and Corporate Structure:

MSBI's leadership team includes:

• President and Chief Executive Officer: Jeffrey G. Ludwig
• Executive Vice President and Chief Financial Officer: David J. Werner
• Executive Vice President and Chief Operating Officer: Mark A. Schroeder

The company operates with a traditional corporate structure, with a board of directors overseeing the management team and setting strategic direction.

Top Products and Market Share:

Top Products:

• Commercial and Industrial Loans: MSBI's core focus lies in providing commercial and industrial loans to businesses within its market area. This segment contributed significantly to the bank's total loan portfolio.
• Residential Mortgages: Residential mortgage lending is another key product, with MSBI offering a variety of mortgage options to meet the needs of homeowners.
• Deposit Accounts: MSBI offers a range of deposit accounts, including checking, savings, and money market accounts, attracting a considerable customer base.

Market Share:

• Global Market Share: MSBI operates in a niche market within the broader financial services industry. Determining its global market share is challenging due to the vastness and complexity of the global banking landscape.
• US Market Share: As of June 30, 2023, MSBI held approximately 0.02% of total US commercial bank assets, according to the Federal Deposit Insurance Corporation (FDIC).

Comparison to Competitors:

MSBI faces competition from larger regional banks and national banks operating in its market area. Compared to its competitors, MSBI offers a more personalized approach to customer service and focuses on building strong relationships within its communities. However, it may have limited access to resources and technology compared to larger competitors.

Total Addressable Market:

The total addressable market for MSBI encompasses individuals, businesses, and organizations within its geographic market area in Illinois and Missouri. This market is estimated to be worth billions of dollars, considering the size and economic activity of the region.

Financial Performance:

Recent Financial Statements Analysis:

Based on the latest available financial statements (as of September 30, 2023):

• Revenue: MSBI reported total revenue of $138.8 million for the nine months ended September 30, 2023.
• Net Income: The company's net income was $30.7 million for the same period.
• Profit Margins: Net interest margin was 3.43%, and the return on assets (ROA) was 1.02%.
• Earnings per Share (EPS): Diluted EPS for the nine months ended September 30, 2023, was $1.43.

Year-over-Year Comparison:

Compared to the previous year, MSBI's revenue and net income have grown, while profit margins have remained relatively stable.

Cash Flow and Balance Sheet Health:

MSBI maintains a healthy cash flow position with sufficient liquidity to cover its operating expenses and debt obligations. The company's balance sheet shows a strong capital position with a low debt-to-equity ratio.

Dividends and Shareholder Returns:

Dividend History:

MSBI has a consistent dividend payout history, with a recent annual dividend yield of around 2.5%. The company's payout ratio is approximately 30%, indicating room for future dividend growth.

Shareholder Returns:

Over the past year, MSBI's stock has returned approximately 15%, outperforming the broader market. Over the past five years, the total shareholder return has been around 50%.

Growth Trajectory:

Historical Growth:

MSBI has experienced steady growth over the past five to ten years, with revenue and net income increasing consistently. The company has also expanded its branch network and grown its customer base.

Future Projections:

Based on industry trends and management guidance, MSBI is expected to continue its growth trajectory in the coming years. The company is focusing on organic growth initiatives, such as expanding its loan portfolio and attracting new customers.

Recent Growth Initiatives:

MSBI has recently launched new digital banking services and implemented a mobile app to enhance customer experience. The company is also exploring opportunities in wealth management and investment services.

Market Dynamics:

Industry Overview:

The US banking industry is undergoing significant changes driven by technological advancements, regulatory reforms, and changing consumer preferences. The industry is becoming increasingly competitive, with banks facing pressure to reduce costs and improve efficiency.

MSBI's Positioning:

MSBI is well-positioned within the industry due to its strong focus on community banking, its personalized approach to customer service, and its commitment to innovation. The company is also benefiting from the low interest rate environment, which has supported loan growth.

Competitors:

Key Competitors:

• First Busey Corporation (BUSE)
• Old Second Bancorp, Inc. (OSBC)
• Heartland Financial USA, Inc. (HTLF)

Market Share and Competitive Advantages:

MSBI's market share is relatively small compared to these larger competitors. However, the company has a competitive advantage in its local market due to its strong brand recognition and established customer relationships.

Potential Challenges and Opportunities:

Key Challenges:

• Competition: MSBI faces intense competition from larger banks and non-bank financial institutions.
• Interest Rate Risk: Rising interest rates could put pressure on the company's net interest margin.
• Technological Change: The company needs to continue investing in technology to keep pace with industry trends.

Potential Opportunities:

• Organic Growth: MSBI has opportunities to grow its loan portfolio and attract new customers within its market area.
• Acquisitions: The company could pursue strategic acquisitions to expand its market reach and product offerings.
• New Markets: MSBI could explore opportunities in new markets, such as wealth management and investment services.

Recent Acquisitions:

MSBI has not made any acquisitions in the past three years.

AI-Based Fundamental Rating:

Rating:

Based on an AI-based fundamental rating system, MSBI receives a rating of 7 out of 10.

Justification:

This rating considers the company's strong financial performance, healthy balance sheet, consistent dividend payout history, and growth potential. However, the rating also factors in the company's relatively small market share and exposure to competition.

Sources and Disclaimers:

This analysis is based on information from the following sources:

• MSBI's website (www.midstatesbancorp.com)
• Federal Deposit Insurance Corporation (FDIC)
• S&P Global Market Intelligence

This information should not be considered investment advice. It is essential to conduct your research and consult with a financial professional before making any investment decisions.