Safe and Sound

Midland States Bank

Effingham, IL
3
Star Rating
Started in 1881, Midland States Bank is an FDIC-insured bank headquartered in Effingham, IL. As of December 31, 2017, the bank had equity of $559.2 million on $4.40 billion in assets.

With 834 full-time employees in 60 offices in multiple states, the bank holds loans and leases worth $3.26 billion, including real estate loans of $2.14 billion. U.S. bank customers currently have $3.19 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, Midland States Bank exhibited a generally satisfactory condition, earning 3 out of 5 stars for safety and soundness. Here's a look at how the bank did on the three key criteria Bankrate used to grade U.S. banks.

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THE INSTITUTION'S SCORE

Capital Score

Capital is an essential measurement of an institution's financial fortitude. It acts as a bulwark against losses and affords protection for accountholders when a bank is struggling financially. When it comes to safety and soundness, the higher the capital, the better.

Midland States Bank fell below the national average of 13.13 on our test to measure the adequacy of a bank's capital, achieving a score of 10 out of a possible 30 points.

One widely used measure of this buffer is a bank's Tier 1 capital ratio. Midland States Bank's Tier 1 capital ratio was 11.84 percent, exceeding the 6 percent level considered adequate by regulators, but below the national average of 25.65 percent. The higher the capital ratio, the better the bank will be able to stand up to economic downturns.

Overall, Midland States Bank held equity amounting to 12.71 percent of its assets, which exceeded the national average of 12.03 percent.

Asset Quality Score

In this test, Bankrate tries to determine the impact of problem assets, such as past-due mortgages, on the bank's reserves set aside to cover loan losses, as well as overall capitalization.

Having lots of these types of assets may eventually require a bank to use capital to absorb losses, reducing its cushion of equity. It also means that there are likely to be many assets that are in non-accrual status and thus aren't earning interest for the bank, decreasing earnings and increasing the risk of a future failure.

Midland States Bank finished below the national average of 37.49 on Bankrate's test of asset quality, racking up 36 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.86 percent of Midland States Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks keep a reserve to deal with problem assets known as an "allowance for loan and lease losses." That reserve's size can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Midland States Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, giving a boost to its capital cushion, or be used to deal with problematic loans, potentially making the bank better able to withstand financial shocks. Obviously, banks that are losing money are less able to do those things.

Midland States Bank scored 8 out of a possible 30 on Bankrate's earnings test, falling short of the national average of 15.12.

Return on equity, calculated by dividing net income (profit, essentially) by the total amount of equity, is one important measure of a bank's earnings. The most recent annualized quarterly return on equity for Midland States Bank was 3.32 percent, below the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank recorded net income of $18.0 million on total equity of $559.2 million. The bank experienced an annualized return on average assets, or ROA, of 0.41 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.