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MS

Midland States Bancorp, Inc. (MSBI)·Q1 2025 Earnings Summary

Executive Summary

  • Preliminary Q1 2025 EPS was $0.57 and net income available to common was $12.6M; pre-tax, pre-provision earnings were $27.0M, reflecting stronger NIM and disciplined expense despite ongoing credit clean-up .
  • Net interest margin expanded to 3.48% with cost of deposits down to 2.29%, aided by late-2024 Fed rate cuts; wealth management revenue contributed $7.4M .
  • The company closed the sale of ~$330M (89%) of GreenSky consumer loans in April and tightened standards in equipment finance to reduce higher-risk exposure; no significant new substandard or nonperforming loans were identified in the quarter .
  • Versus S&P Global consensus, Q1 EPS slightly beat (Actual $0.57 vs $0.554*) while revenue missed (Actual $65.203M* vs $72.636M*); we attribute the revenue shortfall to lower total revenue in the quarter as MSBI reshapes balance sheet mix and reduces brokered/sweep deposits .
  • Key catalysts into 2025: completion of delayed 10-K and audit (including any goodwill impairment), Nasdaq compliance plan submission, continued credit clean-up and NIM resilience from lower funding costs .

What Went Well and What Went Wrong

What Went Well

  • Strong NIM expansion and lower funding costs: Net interest margin reached 3.48% and cost of deposits declined to 2.29% as Fed cuts flowed through funding .
  • Community bank loan growth and wealth management momentum: Community Bank loans +$56.8M QoQ (1.8%); Wealth Management revenue $7.4M with AUA $4.10B and new sales hires .
  • Strategic risk reduction: Completed sale of ~$330M GreenSky loans (89% of portfolio); tightened equipment finance underwriting; “we do not expect a material impact to first quarter tangible equity or regulatory capital levels” (CEO) .

What Went Wrong

  • Deposits declined by $260.8M QoQ with notable reductions in brokered deposits (-$115.4M) and sweep balances (-$115.4M) despite growth in noninterest-bearing and retail .
  • Elevated net charge-offs ($16.9M) including ~$4.5M in equipment finance; provision for credit losses $8.3M reflecting continued trends in equipment finance and trucking .
  • Reporting/audit overhang and Nasdaq deficiency notices: Preliminary results pending completion of the 2024 audit and potential goodwill impairment evaluation; deficiency notices received in April and May regarding late 10-K/10-Q filings .

Financial Results

Income and Profitability (GAAP unless noted)

MetricQ3 2024Q4 2024Q1 2025
Net Interest Income ($USD Millions)$54.950 $56.035 $58.186
Noninterest Income ($USD Millions)$19.339 $19.561 $17.763
Provision for Credit Losses on Loans ($USD Millions)$5.000 $92.270 $8.250
Noninterest Expense ($USD Millions)$46.733 $54.183 $48.925
Net Income Available to Common ($USD Millions)$16.247 $(54.769) $12.571
Diluted EPS ($USD)$0.74 $(2.52) $0.57
Net Interest Margin (%)3.10% 3.19% 3.48%
Efficiency Ratio (Non-GAAP) (%)62.76% 71.42% 64.24%
Adjusted Total Revenue (Non-GAAP, $USD Millions)$74.461 $75.864 $76.157

Balance Sheet and Capital

MetricQ3 2024Q4 2024Q1 2025
Total Loans ($USD Billions)$5.749 $5.168 $5.018
Total Deposits ($USD Billions)$6.257 $6.197 $5.936
CET1 Ratio (%)9.00% 8.37% 8.60%
Total RBC Ratio (%)13.98% 13.38% 13.77%
Tier 1 Leverage (%)10.10% 9.36% 9.55%
TBV/Share ($)$24.90 $21.01 $21.43

Asset Quality KPIs

MetricQ3 2024Q4 2024Q1 2025
Nonperforming Loans ($USD Millions)$114.6 $140.1 $140.0
NPLs / Total Loans (%)1.99% 2.71% 2.79%
Net Charge-Offs ($USD Millions)$11.379 $102.660 $16.878
NCOs / Avg Loans (%)0.78% 7.23% 1.35%
ACL / Total Loans (%)1.49% 1.46% 1.80%

Segment Breakdown (Loans and Deposits at 3/31/2025)

SegmentAmount ($USD Thousands)
Community Bank Loans (Regional)$3,259,350
Specialty Finance$865,401
Equipment Finance$763,444
Non-core Consumer & Other$129,858
Total Loans$5,018,053
Deposits by Channel – Retail$2,846,494
Deposits – Commercial$1,074,837
Deposits – Public Funds$490,374
Deposits – Wealth & Trust$301,251
Deposits – Servicing$842,567
Deposits – Brokered$358,063
Deposits – Other$22,848
Total Deposits$5,936,434

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Noninterest Income (near-term)Q2–Q3 2025~$18.0–$18.5M (near-term) ~$17.0–$17.5M (near-term, post credit enhancement items) Lowered
Operating Expense Run-RateQ2–Q3 2025~$45.5–$46.5M (near-term) ~$48.0–$49.0M (near-term) Raised
Common DividendQ2 2025N/A$0.31 per share, payable May 23, 2025 N/A
Preferred Dividend (Series A)Q2 2025N/A$0.4844 per depository share, payable June 30, 2025 N/A

Earnings Call Themes & Trends

Note: No Q1 2025 earnings call transcript was found; themes reflect disclosed press releases/8-Ks.

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
Credit clean-upElevated provision tied to LendingPoint conversion; substandard loans up Major portfolio actions: sold LendingPoint; plan to sell GreenSky; heavy charge-offs; downgrades and updated appraisals No significant new substandard/NPLs; sale of ~$330M GreenSky; tightened standards Improving
Equipment finance (Trucking)Continued reduction of balances; NCOs rising Significant impairments on operating lease collateral; NCOs elevated ~$4.5M NCOs; underwriting tightened; balances down $44.9M Gradual de-risking
Deposit mix & funding costsBrokered time increased; cost of interest-bearing deposits rose Noninterest-bearing deposits up slightly; brokered time 4.2% of deposits Deposits -$260.8M QoQ; retail +$96.8M; cost of deposits down to 2.29% Mixed (cost tailwind, mix shifting)
Wealth managementRevenue $7.1M; AUA $4.27B; advisor hires Revenue $7.7M; AUA $4.15B Revenue $7.4M; AUA $4.10B; six new sales positions Stable growth
Regulatory/listing——Nasdaq deficiency notices re late 10-K/10-Q; compliance plan timeline Risk to be resolved
Audit/restatement & goodwill——Ongoing audit of third-party arrangements; evaluating goodwill impairment Pending resolution
Macro & NIMMargin steady 3.10% despite competition NIM improved to 3.19% with rate cuts NIM 3.48%; deposit costs lower post cuts Improving

Management Commentary

  • “We do not expect a material impact to first quarter tangible equity or regulatory capital levels… our unaudited preliminary first quarter results already reflect the previously disclosed accounting methodology changes.” – Jeffrey G. Ludwig, President & CEO .
  • “Improving credit quality remains a strategic priority… two-thirds of net charge-offs in the quarter taking place within third party programs that were fully reimbursed.” .
  • “Our underlying profitability trends were favorable… strong net interest margin of 3.48%… We continue to expect stronger profitability over the balance of 2025 with growing capital ratios.” .
  • Prior quarter context: “We took significant steps to reduce credit risk and address underlying credit issues… exit non-core consumer portfolio and charge-off deteriorating credits… well positioned to deliver solid financial performance in 2025.” – Ludwig (Q4 2024) .

Q&A Highlights

  • No Q1 2025 earnings call transcript was available in our document catalog; MSBI provided preliminary results due to ongoing audit and evaluation processes .
  • Management clarified near-term noninterest income ($17.0–$17.5M) and expense run-rate ($48.0–$49.0M), and highlighted NIM strength and capital ratios as profit drivers .

Estimates Context

MetricQ1 2025 ConsensusQ1 2025 ActualSurprise
Primary EPS ($)0.554*0.57 Bold beat: +$0.016
Revenue ($USD Millions)72.636*65.203*Bold miss: -$7.433

Values retrieved from S&P Global.
Bold beat/miss reflects magnitude versus consensus.

Key Takeaways for Investors

  • EPS beat with NIM expansion: 3.48% NIM and lower deposit costs drove profitability; total adjusted revenue was stable QoQ despite balance sheet repositioning .
  • Credit risk is being actively reduced: GreenSky sale (~$330M) completed; equipment finance balances and underwriting tightened; NCOs elevated but partly reimbursed via third-party programs .
  • Deposit mix transition underway: Retail growth (+$96.8M) offset by brokered/sweep declines; watch for sustained reductions in funding costs as a margin tailwind .
  • Capital remains sound: CET1 8.60%, Total RBC 13.77%, TCE/TA 6.32%; tangible book $21.43/share .
  • Near-term guidance cautious: Noninterest income guided lower ($17.0–$17.5M) and operating expense run-rate guided higher ($48.0–$49.0M), reflecting credit enhancement variability and legal/collection costs .
  • Event path matters: Resolution of audit/10-K delay, Nasdaq compliance, and any goodwill impairment determination are key stock catalysts near-term .
  • Medium-term thesis: Community bank growth and wealth management pipeline, combined with lower funding costs, support margin durability and earnings normalization through 2025 .