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Midland States Bancorp, Inc. (MSBI)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 EPS of $0.44 missed Wall Street consensus of $0.63; revenue (SPGI basis) of $64.86M missed $76.20M, driven by elevated provisions ($17.4M) and net charge-offs ($29.9M), particularly in equipment and specialty finance portfolios; NIM expanded 7 bps to 3.56% on lower deposit costs, supporting PPNR growth to $32.2M . EPS consensus and revenue consensus from S&P Global; values retrieved from S&P Global.*
  • Credit clean-up progressed: NPAs fell to $111.2M (1.56% of assets), with two larger relationships exited in July (additional $29M) that would reduce the NPA ratio by ~41 bps pro forma; CET1 rose to 9.02% with a stated target of 10% .
  • Community Bank loans grew $58.9M QoQ while specialty finance and equipment finance balances declined by $173.3M and $51.8M, respectively, as Midland tightened underwriting standards and continued to exit higher-risk non-core portfolios .
  • Dividend maintained: Board declared a $0.32 per share common dividend (payable Aug 22, 2025), signaling confidence in capital and liquidity despite credit normalization headwinds .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin expanded to 3.56% (+7 bps QoQ) as cost of deposits fell to 2.19%, supporting PPNR growth to $32.2M and improving efficiency ratio to 60.60% from 64.29% QoQ .
  • CEO highlighted normalization progress: “Second quarter marked a notable step in returning Midland to a more normalized operating environment… we expect further improvement in profitability over the balance of 2025” .
  • Asset quality improved: NPAs dropped to $111.2M (1.56% of assets) with limited new substandard/nonperforming loans; post-quarter exits of $29M of NPAs further reduce pro forma ratios; allowance coverage of NPLs increased to 84.6% .

What Went Wrong

  • Provision and charge-offs remained elevated: $17.4M provision and $29.9M net charge-offs, including $3.9M in equipment finance (trucking exposure) and $13.9M in specialty finance; headwinds drove misses vs consensus EPS and revenue . EPS and revenue consensus from S&P Global; values retrieved from S&P Global.*
  • Noninterest expenses, though down from the goodwill impairment-affected Q1, remained pressured by legal/professional fees tied to collections and restatement work; operating efficiency remains above pre-issue levels .
  • Non-core movements complicate comparability: financing of the GreenSky sale raised non-core balances by $212.8M, while intentional portfolio runoff in specialty and equipment finance muted overall loan growth, pressuring revenue vs expectations .

Financial Results

Core Financials (actuals across periods)

MetricQ2 2024Q1 2025Q2 2025
Adjusted Total Revenue ($USD Thousands)$91,034 $76,261 $82,496
Revenue (SPGI basis, NII after provision + Noninterest) ($USD Thousands)*$82,597$65,203$64,860
Net Interest Income ($USD Thousands)$58,895 $58,290 $58,695
Diluted EPS ($USD)$1.06 $(6.58) $0.44
Adjusted Diluted EPS ($USD)$1.06 $0.49 $0.44
Net Interest Margin %3.33% 3.49% 3.56%
Efficiency Ratio %55.79% 64.29% 60.60%

Footnote: *Values retrieved from S&P Global. SPGI “Revenue” reflects net interest income after provision plus noninterest income (e.g., Q2 2025: $41.326M + $23.534M = $64.860M) .

Q2 2025 Actual vs Wall Street Consensus

MetricConsensusActual# of EstimatesResult
EPS ($USD)*$0.63$0.44 4Miss
Revenue ($USD Thousands)*$76,196$64,8604Miss

Footnote: *Values retrieved from S&P Global.

Segment Breakdown – Loan Portfolio Mix ($USD Thousands)

SegmentQ2 2024Q1 2025Q2 2025
Total Commercial Loans & Leases$1,829,526 $1,632,453 $1,891,541
Commercial Real Estate$2,421,505 $2,592,325 $2,412,761
Construction & Land Dev.$476,528 $264,966 $258,729
Residential Real Estate$378,393 $373,095 $361,261
Consumer$746,042 $155,214 $140,403
Total Loans$5,851,994 $5,018,053 $5,064,695

Deposit Portfolio Mix ($USD Thousands)

CategoryQ2 2024Q1 2025Q2 2025
Noninterest-bearing Demand$1,108,521 $1,090,707 $1,074,212
Checking (Interest-bearing)$2,343,533 $2,161,282 $2,180,717
Money Market$1,143,668 $1,154,403 $1,216,357
Savings$538,462 $522,663 $511,470
Time$852,415 $818,732 $818,813
Brokered Time$131,424 $188,647 $145,350
Total Deposits$6,118,023 $5,936,434 $5,946,919

KPIs and Asset Quality

MetricQ2 2024Q1 2025Q2 2025
Return on Average Assets %1.33% (7.66)% 0.67%
PPNR to Avg Assets %2.07% 1.47% 1.81%
Cost of Deposits %2.55% 2.29% 2.19%
NPLs / Total Loans %1.92% 2.90% 2.16%
NPAs / Total Assets %1.61% 2.08% 1.56%
Net Charge-offs / Avg Loans %0.94% 1.35% 2.34%
Allowance for Credit Losses / Total Loans %2.67% 2.10% 1.83%
CET1 Capital Ratio % (Consolidated)8.40% 8.60% 9.02%
Total Capital Ratio % (Consolidated)13.20% 13.77% 14.50%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Common Equity Tier 1 (CET1) Target2025~9.25–9.50% by YE 2025 (from Q4 deck commentary) Target 10.0% (management reiteration) Raised ambition (qualitative)
Net Interest MarginNear-termNIM expansion as rates lower (Q4/Q2 decks) NIM expected to further improve in 2025 Maintained/affirmed
Operating Expense Run-rateNear-term~$48.0–$49.0M (Q1 press) Higher professional/legal expenses continue (no explicit range in Q2) Maintained prior range; caution on pressure
Noninterest Income Run-rateNear-term~$17.0–$17.5M (Q1 press) Q2 at $23.5M including $3.8M credit enhancement; run-rate depends on credit enhancement variability Potentially higher with credit enhancement variable
Servicing DepositsJul 2025—$284.4M outflow in July; expected positive margin impact New item; supportive of NIM
DividendQ3 2025 Payable—$0.32 common dividend declared, payable Aug 22, 2025 Maintained dividend policy

Earnings Call Themes & Trends

Note: No Q2 2025 earnings call transcript was available in the document set; themes below derived from press release and investor presentation –.

TopicPrevious Mentions (Q4 2024 & Q1 2025)Current Period (Q2 2025)Trend
Credit remediation (Specialty/Equipment/Consumer)Major charge-offs; exit non-core consumer (LendingPoint, GreenSky); tighten underwriting – NCOs $29.9M; NPAs down to 1.56%; additional $29M NPAs exited post-quarter; underwriting tightened –Improving; remediation nearing completion
Margin and funding costsNIM expanded in Q4 on lower deposit costs; cost of deposits declining –NIM 3.56%; cost of deposits 2.19%; expect further profitability improvement Positive
Capital ratiosCET1 ~8.37–8.60%; plan to rebuild during 2025 CET1 9.02%; target 10% reiterated Strengthening
Community Bank growthStable to growing loans; add bankers; focus St. Louis/Chicago Loans +$58.9M QoQ; added advisors/sales; pipelines strong Accelerating
Tech-forward & BaaSTech investments; BaaS with indemnified credit; AI/RPA in ops Continuing BaaS partner pursuit; AI/RPA automation noted Ongoing execution
Equipment finance (trucking)Elevated charge-offs; impairment on leases Continued credit issues; $3.9M charge-offs; tight underwriting; reduce balances –Stabilizing with runoff
Restatement/legal/professional feesHigher expenses tied to collections/restatement Persisting pressure in noninterest expense Headwind near term

Management Commentary

  • “Second quarter marked a notable step in returning Midland to a more normalized operating environment… Capital levels increased quarter-over-quarter, and we continue to target growing our common equity tier 1 capital ratio to our target of 10.0%… We expect further improvement in profitability over the balance of 2025.” – Jeffrey G. Ludwig, President & CEO .
  • “During the quarter, we had limited new substandard or nonperforming loans identified… non-performing assets decreased to $111 million… After quarter-end, the bank successfully exited two larger non-performing relationships in July totaling $29 million…” .
  • “Tighter underwriting standards in our equipment finance and specialty finance portfolios have already begun to meaningfully reduce our exposure to these higher-risk portfolios.” .

Q&A Highlights

  • No Q2 2025 earnings call transcript was available; management’s prepared remarks and slides emphasize credit clean-up progress, margin expansion, and capital ratio trajectory, with qualitative guidance on profitability improvement and CET1 targeting 10% –.

Estimates Context

  • Q2 2025: EPS $0.44 vs $0.63 consensus; revenue $64.86M vs $76.20M consensus – both misses, primarily on higher provisions/charge-offs despite NIM tailwinds and community bank growth . EPS/revenue consensus from S&P Global; values retrieved from S&P Global.*
  • Q1 2025: EPS $0.57 vs $0.55 consensus (beat); revenue $65.20M vs $72.64M consensus (miss), reflecting provision dynamics and portfolio repositioning; note Q1 GAAP EPS was diluted loss of $(6.58) due to $154.0M goodwill impairment . EPS/revenue consensus from S&P Global; values retrieved from S&P Global.*
  • Q2 2024: EPS $1.06 vs $0.70 consensus (beat); revenue $82.60M vs $74.82M consensus (beat), pre-credit normalization . EPS/revenue consensus from S&P Global; values retrieved from S&P Global.*
MetricQ2 2024Q1 2025Q2 2025
EPS Consensus ($)*$0.70$0.55$0.63
EPS Actual ($)$1.06 $0.57 $0.44
Revenue Consensus ($USD Thousands)*$74,820$72,636$76,196
Revenue Actual ($USD Thousands)*$82,597$65,203$64,860

Footnote: *Values retrieved from S&P Global.

Implication: Near-term estimate revisions likely lower on revenue/EPS to incorporate ongoing credit costs and portfolio runoff, while margin outlook and capital build provide a medium-term offset .

Key Takeaways for Investors

  • Credit normalization is progressing: NPAs down to 1.56% with additional $29M post-quarter exits; expect continued reduction in high-risk exposures via tightened underwriting and portfolio runoff .
  • Margin tailwinds: NIM expanded to 3.56% as deposit costs fell to 2.19%; servicing deposit outflow in July is expected to further support margin dynamics .
  • Capital trajectory: CET1 at 9.02% with a stated 10% target; dividend maintained at $0.32 suggests confidence in capital generation while credit costs subside over time .
  • Community Bank growth offsetting non-core runoff: +$58.9M QoQ in core loans; continued talent adds and strong pipelines in St. Louis/Chicago .
  • Near-term headwinds remain: Elevated provisions and charge-offs (equipment finance/trucking; specialty finance CRE) likely keep EPS below prior expectations until credit metrics normalize; efficiency improvements partially offset .
  • Trading lens: Post-print misses on EPS/revenue could weigh near term; watch updates on NPA resolution, provision trajectory, and margin progress as key stock catalysts .
  • Medium-term thesis: Focused core growth, improved funding costs, and capital build position Midland to expand profitability as credit costs normalize into 2026; monitor execution on BaaS and tech-enabled efficiency (AI/RPA) .

Additional documents read:

  • Q2 2025 8-K press release and slides –.
  • Q1 2025 preliminary results 8-K –.
  • Q4 2024 results 8-K and slides –.
  • Q2 2025 dividend 8-K press release .