Updated 3/11/25
Midland States Bancorp, Inc. (MSBI) is a regional bank based in Effingham, Illinois, serving customers through a mix of commercial and consumer banking services. The company has been navigating a tough economic landscape, as regional banks face rising interest rates, regulatory pressures, and shifting deposit trends. Despite these challenges, MSBI has remained committed to returning value to shareholders, particularly through its dividend. With a dividend yield of 6.68%, it has drawn attention from income-focused investors looking for a reliable payout.
That said, while the dividend may look appealing at first glance, a deeper dive into the company’s financial health and stock performance helps paint a more complete picture.
Key Dividend Metrics
📈 Dividend Yield: 6.68%
💰 Annual Dividend: $1.24 per share
📊 Payout Ratio: 53.48%
📆 Ex-Dividend Date: February 14, 2025
📅 Dividend Payment Date: February 21, 2025
📈 5-Year Average Dividend Yield: 5.16%
Dividend Overview
For investors focused on income, MSBI’s dividend yield of 6.68% stands out, especially when compared to its 5-year average of 5.16%. This suggests that the stock may be undervalued, offering a higher yield than in previous years.
The company has continued to pay dividends consistently, which is a reassuring sign for shareholders who prioritize stable income. With a payout ratio of 53.48%, there’s still some breathing room before the dividend becomes unsustainable. A payout ratio in this range is typically considered healthy, as it indicates that the company isn’t stretching its earnings too thin to keep paying dividends.
However, the bigger concern lies in profitability. The most recent financials show a net income loss of -$22.34 million and negative earnings per share of -$1.05 over the past twelve months. While the company is still generating revenue, negative earnings could become a red flag for dividend stability if losses continue.
Dividend Growth and Safety
MSBI has a solid history of paying dividends, but its future growth potential is less certain given the current financial picture.
A payout ratio of just over 50% suggests the company isn’t overcommitting to its dividend, but the fact that it reported a net loss in recent quarters raises questions. If earnings don’t recover, the bank could be forced to cut its dividend at some point to preserve capital.
Historically, the company has maintained a steady dividend policy, which speaks to management’s commitment to returning value to shareholders. However, given the pressures facing the regional banking sector, MSBI may not be in a strong position to increase its dividend meaningfully in the near future.
Chart Analysis
Stock Trend and Moving Averages
Midland States Bancorp (MSBI) has been in a clear downtrend for several months, with the stock now trading near its lowest levels in a year. The 50-day moving average (orange line) crossed below the 200-day moving average (blue line) a few months ago, confirming a bearish trend. This type of crossover, often called a death cross, typically signals that downside momentum is building, and that has certainly been the case here.
Looking at price action, there was a strong rally toward the end of last year, where the stock spiked above 27.50. However, that momentum faded quickly, and shares have steadily declined since, breaking below key support levels. The moving averages are now both sloping downward, reinforcing the ongoing weakness in the stock.
Recent Price Action and Support Levels
Over the last few weeks, MSBI has been hovering near 18.50, struggling to find a solid footing. The price is now sitting below both the 50-day and 200-day moving averages, which means there is no technical support from these levels. The stock attempted to stabilize after the steep drop in early February, but buying interest has been weak, and there’s no clear sign of a reversal yet.
If MSBI continues to decline, the next support zone could be around the 17.50 to 18.00 range, an area where buyers may step in. If that level doesn’t hold, further downside could be in play. On the flip side, any attempt to move higher would likely face resistance near 20, which aligns with previous support that has now turned into resistance.
Volume and Market Sentiment
Trading volume has remained low recently, suggesting that there’s a lack of strong buying interest at current levels. However, there were a few notable spikes in volume in late January and early February, likely indicating a combination of institutional selling and panic selling from retail investors.
A key takeaway here is that volume has not been picking up on the downside, which could mean that selling pressure is easing. However, for the stock to turn around, there needs to be a strong surge in buying volume, which hasn’t happened yet.
Relative Strength Index and Momentum
The RSI, which measures the strength of price movements, is sitting in the lower range, but it’s not yet at extreme oversold levels. Typically, a reading below 30 is considered oversold, signaling that a bounce might be due. Right now, RSI is low but still hovering above 30, which suggests that while the stock is weak, it may not be deeply oversold just yet.
Momentum remains sluggish, and without a sharp reversal in RSI, the stock could continue drifting lower in the short term. If RSI starts to turn up and breaks through key resistance levels, that would be an early sign of potential stabilization.
Recent Candlestick Patterns and Price Behavior
The last five trading days have shown small-bodied candlesticks with relatively short wicks, indicating that there hasn’t been much aggressive buying or selling pressure. There was a slight push downward, but no clear signals of a strong reversal or capitulation selling.
If buyers step in, a bullish engulfing pattern or a large green candle with strong volume would be an early indication of a potential turnaround. For now, the choppy and weak price action suggests that investors remain hesitant to step in at current levels.
Analyst Ratings
📉 Downgrades:
🔻 October 2021 – Stephens & Co. adjusted its rating from overweight to equal-weight, lowering the price target from 30 to 28. The downgrade was primarily due to concerns about increasing delinquencies and nonperformance in the bank’s unsecured and specialty finance portfolios. Rising charge-offs and impairments created uncertainty about future earnings stability, prompting analysts to take a more cautious stance.
📈 Upgrades:
🔺 February 2021 – Stephens & Co. upgraded MSBI from equal-weight to overweight, raising the price target to 28. The upgrade was driven by an improvement in net interest income, largely due to lower borrowing costs. Analysts also noted positive trends in client additions, particularly in the community banking and wealth management divisions, suggesting stronger long-term growth potential.
📊 Consensus Price Target:
The latest analyst consensus places MSBI’s average price target at 23.50, which reflects a potential upside of approximately 24.87% from its current trading price.
🔄 Overall Sentiment:
The consensus rating remains hold, indicating that most analysts believe the stock is fairly valued at its current levels. While some upgrades highlight improving fundamentals, recent downgrades reflect concerns over asset quality and future loan performance. Investors should keep an eye on financial reports and macroeconomic trends that could impact MSBI’s outlook.
Earnings Report Summary
Midland States Bancorp had a rough fourth quarter in 2024, reporting a net loss of $54.8 million, or $2.52 per share. That’s a sharp contrast to the previous quarter when the company brought in $16.2 million in net income. A year ago, earnings were even stronger at $18.5 million, so this was a significant drop.
The main reason behind the loss was the decision to offload some of its loan portfolios. The company sold its LendingPoint consumer loan portfolio, which resulted in a hit of $17.3 million from charge-offs and credit loss provisions. On top of that, it committed to selling its Greensky portfolio, leading to another $33.4 million in losses. These moves were part of a strategy to clean up the balance sheet and shift focus toward core banking operations.
Despite the losses, MSBI remains financially solid. The company’s capital position stayed strong, with a common equity tier 1 capital ratio that remained in good shape. The tangible book value per share ended the quarter at $23.35, and cash reserves were healthy enough to meet operational needs.
Net interest income came in at $55.2 million, slightly lower than the $56.0 million recorded in the previous quarter. The net interest margin dipped to 3.32% from 3.38%, mainly due to a shift in the mix of earning assets and rising funding costs.
On the fee income side, non-interest income dropped to $15.8 million, down from $17.2 million last quarter. This was largely because of weaker performance in wealth management and mortgage banking. Meanwhile, expenses were on the rise, climbing to $56.5 million from $54.0 million in the prior quarter, driven by higher salaries and professional fees tied to the company’s strategic shifts.
Loan balances, excluding the sold-off portfolios, remained stable as MSBI took a cautious approach to lending in a challenging economic environment. Deposits saw modest growth, with both interest-bearing and non-interest-bearing deposits ticking higher, signaling that customers still have confidence in the bank.
Asset quality took a slight hit, with non-performing loans rising to 1.20% of total loans, up from 1.10% in the previous quarter. The bank also increased its allowance for credit losses to $58.7 million, or 1.35% of total loans, in preparation for potential future losses.
Overall, it was a tough quarter for MSBI, but the company is taking steps to position itself for a stronger future. By cleaning up its loan portfolio and focusing on core banking operations, it hopes to regain stability and return to profitability.
Financial Health and Stability
Dividend sustainability isn’t just about payout ratios—it’s also about overall financial strength. MSBI’s book value per share of $29.10 suggests that the stock is trading at a discount compared to its assets, which could be a positive for value investors.
But looking beyond asset value, there are some financial red flags:
- Net income losses of -$22.34 million suggest ongoing struggles with profitability.
- Return on Equity (ROE) of -1.76% indicates that the bank is failing to generate profits on shareholder capital.
- Return on Assets (ROA) of -0.17% reflects weak efficiency in utilizing assets to generate earnings.
On the balance sheet side, the company holds $114.77 million in cash, which provides some liquidity cushion. However, with total debt of $474.45 million, the company remains highly leveraged. If interest rates continue to rise or if deposit outflows accelerate, MSBI’s financial position could become more strained.
Valuation and Stock Performance
Valuation is another factor that plays into the dividend equation. With a price-to-earnings (P/E) ratio of 11.68, MSBI trades at a discount compared to the broader market. Meanwhile, its price-to-book (P/B) ratio of 0.54 suggests that the stock is priced well below the value of its assets.
Looking at recent performance:
- 52-week high: $28.08
- 52-week low: $18.23 (which is also the current price)
- 50-day moving average: $21.18
- 200-day moving average: $22.95
Trading near the lower end of its range indicates that investor sentiment is weak. The fact that both the 50-day and 200-day moving averages are well above the stock price suggests that the stock has been in a sustained downtrend. While this could present a buying opportunity for value investors, it also reflects broader concerns about earnings stability and long-term growth prospects.
Risks and Considerations
Dividend investors should always consider the risks that could impact a company’s ability to continue paying and growing its dividend.
- Profitability Struggles: The company’s recent net loss raises concerns about how sustainable the dividend will be if earnings don’t recover soon.
- Banking Sector Challenges: Regional banks face ongoing pressures from rising funding costs, regulatory scrutiny, and economic uncertainty, all of which can weigh on earnings.
- High Debt Load: With $474.45 million in debt, MSBI is heavily leveraged. If interest expenses rise or credit losses increase, the company may need to preserve cash.
- Stock Price Weakness: The fact that the stock is sitting at its 52-week low suggests that the market sees risks ahead. Investors should be cautious about catching a falling knife.
Final Thoughts
Midland States Bancorp offers an attractive 6.68% dividend yield, and its valuation metrics indicate that the stock may be undervalued. However, financial concerns—particularly around profitability and debt—suggest that caution is warranted.
The dividend appears sustainable for now, but its long-term safety will depend on whether the company can return to profitability and improve its financial strength. Investors who are comfortable with risk may find value in the stock, but those looking for stability may want to keep a close eye on upcoming earnings reports before making any decisions.
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