On Tuesday, Keefe, Bruyette & Woods adjusted its outlook on Midland States Bancorp (NASDAQ:MSBI), reducing the price target to $26 from $28, while keeping a Market Perform rating on the stock. The adjustment follows Midland States Bancorp's recent earnings report, which revealed operating earnings of $0.53 per share, missing the firm's expectations by $0.21.
The financial institution's performance was impacted by a combination of factors. Despite better pre-provision net revenue (PPNR), the earnings were negatively affected by a higher provision for loan losses. Credit quality showed signs of decline, with an increase in non-performing loans (NPLs) driven by four specific loans, necessitating an elevated provision.
The company also experienced an 11% quarter-over-quarter decrease in loan balances. This decline was attributed to the runoff in consumer and equipment finance loans. Additionally, Midland States Bancorp's net interest margin decreased slightly by 3 basis points as funding costs continued to pose challenges.
Looking forward, Keefe, Bruyette & Woods anticipates slower net loan growth for Midland States Bancorp. The firm predicts that the runoff of non-core loans will be partially balanced by community banking loans and investments in securities. However, the expected slower growth, coupled with the need for provisioning, has led to the revised lower estimates for the bank's financial outlook. The price target adjustment reflects these updated projections.
InvestingPro Insights
Midland States Bancorp (NASDAQ:MSBI) has shown resilience in its dividend distribution, having raised its dividend for 8 consecutive years and maintaining payments for 9 consecutive years, signaling a commitment to shareholder returns. This is reflected in a high shareholder yield, which is a key metric for income-focused investors. Despite recent market pressures that have seen the stock take a significant hit over the last week, the company's profitability remains intact with analysts predicting that MSBI will remain profitable this year, a sentiment backed by its performance over the last twelve months.
The InvestingPro data points to a modest market capitalization of approximately $484.49 million, with a P/E Ratio on a trailing twelve-month basis as of Q1 2024 standing at 8.39. This indicates that the stock could be undervalued relative to earnings, especially when considering the company's solid dividend yield of 5.51% as of the latest data. However, investors should note the revenue decline of 11.87% over the same period, which may have contributed to the recent price declines.
For investors seeking a deeper dive into MSBI's financial health and future prospects, InvestingPro offers additional insights and metrics. Utilize coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and gain access to even more InvestingPro Tips for a comprehensive investment strategy. There are 7 additional InvestingPro Tips available for MSBI at: https://www.investing.com/pro/MSBI.
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