Analyzing Independent Bank (INDB) & Midland States Bancorp (MSBI)

Independent Bank (NASDAQ: INDB) and Midland States Bancorp (NASDAQ:MSBI) are both small-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, risk, valuation, institutional ownership, profitability, dividends and analyst recommendations.

Dividends

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Independent Bank pays an annual dividend of $1.52 per share and has a dividend yield of 2.1%. Midland States Bancorp pays an annual dividend of $0.88 per share and has a dividend yield of 2.8%. Independent Bank pays out 45.4% of its earnings in the form of a dividend. Midland States Bancorp pays out 44.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Midland States Bancorp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional & Insider Ownership

79.8% of Independent Bank shares are held by institutional investors. Comparatively, 38.4% of Midland States Bancorp shares are held by institutional investors. 2.7% of Independent Bank shares are held by company insiders. Comparatively, 9.2% of Midland States Bancorp shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Independent Bank and Midland States Bancorp’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Independent Bank 24.21% 10.00% 1.15%
Midland States Bancorp 7.56% 8.71% 0.88%

Analyst Ratings

This is a breakdown of recent recommendations for Independent Bank and Midland States Bancorp, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Independent Bank 0 3 1 0 2.25
Midland States Bancorp 0 0 1 0 3.00

Independent Bank currently has a consensus target price of $70.67, indicating a potential downside of 1.85%. Midland States Bancorp has a consensus target price of $42.00, indicating a potential upside of 31.70%. Given Midland States Bancorp’s stronger consensus rating and higher probable upside, analysts plainly believe Midland States Bancorp is more favorable than Independent Bank.

Risk and Volatility

Independent Bank has a beta of 0.87, suggesting that its share price is 13% less volatile than the S&P 500. Comparatively, Midland States Bancorp has a beta of 0.99, suggesting that its share price is 1% less volatile than the S&P 500.

Valuation and Earnings

This table compares Independent Bank and Midland States Bancorp’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Independent Bank $360.19 million 5.50 $87.20 million $3.35 21.49
Midland States Bancorp $212.48 million 3.54 $16.05 million $1.99 16.03

Independent Bank has higher revenue and earnings than Midland States Bancorp. Midland States Bancorp is trading at a lower price-to-earnings ratio than Independent Bank, indicating that it is currently the more affordable of the two stocks.

Summary

Independent Bank beats Midland States Bancorp on 9 of the 15 factors compared between the two stocks.

About Independent Bank

Independent Bank Corp. is a bank holding company. The Company operates through its subsidiary, Rockland Trust Company (the Bank). The Bank is a community-oriented commercial bank. Its community banking business provides a range of banking services, including lending activities, acceptance of demand, savings, and time deposits, and investment management. As of December 31, 2016, the bank had operated 80 full service and three limited service retail branches, 11 commercial banking centers, five investment management offices and one mortgage lending center, all of which located in Eastern Massachusetts. The Bank classifies loans as commercial loans, consumer real estate loans, or other consumer loans. Commercial loans consist of commercial and industrial loans, commercial real estate loans, commercial construction loans, and small business loans. The Bank offers a range of demand deposits, interest checking, money market accounts, savings accounts and time certificates of deposit.

About Midland States Bancorp

Midland States Bancorp, Inc. is a diversified financial holding company. The Company’s banking subsidiary is Midland States Bank (the Bank). The Company’s principal business activity has been lending to and accepting deposits from individuals, businesses, municipalities and other entities. The Company’s segments include Banking, which provides a range of financial products and services to consumers and businesses, including loan products; commercial equipment leasing; mortgage loan sales and servicing; letters of credit; various types of deposit products, including checking, savings and time deposit accounts; merchant services, and corporate treasury management services; Commercial Federal Housing Administration (FHA) Origination and Servicing, which provides for the origination and servicing of government sponsored mortgages for multifamily and healthcare facilities, and Other, which includes the operating results of the Company and its wealth management business unit.

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