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Midland States Bancorp, Inc. (MSBI)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 EPS was $0.24, a significant miss versus Wall Street consensus of $0.64; revenue also missed consensus, driven by higher provision expense from equipment finance and lower noninterest income as credit enhancement swung to a loss . EPS consensus and revenue consensus values retrieved from S&P Global.*
  • Total revenue was $81.1M, down 1.4% sequentially and down 12.4% year over year; net interest margin expanded 23 bps QoQ to 3.79% (3.69% ex-$1.6M interest recovery) on a 7 bps decline in deposit costs to 2.12% .
  • Credit clean-up continued: NPAs fell to 1.02% of assets; provision for credit losses rose to $20.0M, including ~$15M tied to higher loss-given-default assumptions in equipment finance; net charge-offs were $12.3M (equipment finance, specialty finance, and reimbursed third-party programs) .
  • Strategic actions and capital: equipment finance originations ceased (Sept 30), $50.75M sub notes redeemed, CET1 improved to 9.37% (target >10%); Board authorized $25M share repurchase and declared a $0.32 quarterly dividend post-quarter .
  • Stock reaction catalysts: significant EPS miss vs consensus; visible NIM expansion from lower deposit costs; de-risking via equipment finance exit; buyback/dividend support; continued trajectory of NPAs declining may be key to multiple re-rating .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin expanded to 3.79% (3.69% ex-interest recovery), aided by deposit cost reductions (2.12%), with management noting further funding cost relief from recent Fed cuts .
  • Credit clean-up continued: NPAs/Assets declined to 1.02% (from 1.15% in Q2 and 2.10% at YE 2024), supported by dispositions and charge-offs; CEO emphasized “meaningful progress on several strategic initiatives” despite disappointment in quarterly financial results .
  • Wealth Management posted record revenue of $8.0M; AUA rose to $4.36B; commercial deposit growth within the community bank contributed to a healthier funding mix .

Quote: “Although we are disappointed in our financial results this quarter, we have made meaningful progress on several strategic initiatives… Revenue trends were positive, bolstered by the expansion of the net interest margin and continued strong contribution from our wealth management platform…” — Jeffrey G. Ludwig, President & CEO .

What Went Wrong

  • EPS and revenue missed consensus; EPS declined sequentially to $0.24; noninterest income dropped to $20.0M (from $23.5M) as credit enhancement moved from income to a small loss . EPS and revenue comparisons to consensus values retrieved from S&P Global.*
  • Provision for credit losses elevated to $20.0M, with ~$15M tied to higher LGD assumptions in equipment finance amid trucking sector stress; net charge-offs were $12.3M, including $5.0M in equipment finance and $3.5M in specialty finance .
  • Total deposits fell by $342.1M QoQ, driven by intentional reductions of high-cost servicing ($286.8M) and brokered time deposits ($81.5M), pressuring revenue scale; noninterest expense included $1.0M severance from ceasing equipment finance originations .

Financial Results

Headline P&L and Key Ratios (periods: oldest → newest)

MetricQ3 2024Q2 2025Q3 2025
Total Revenue ($USD Millions)$92.6 $82.2 $81.1
Net Interest Income ($USD Millions)$59.1 $58.7 $61.1
Noninterest Income ($USD Millions)$33.5 $23.5 $20.0
Provision for Credit Losses ($USD Millions)$17.9 $17.4 $20.0
Diluted EPS ($USD)$0.83 $0.44 $0.24
Net Interest Margin (%)3.34% 3.56% 3.79%
Efficiency Ratio (%)53.61% 60.60% 61.25%
NPA / Total Assets (%)1.65% 1.15% 1.02%
Total Deposits ($USD Millions)$6,256.8 $5,946.9 $5,604.8

Performance vs Wall Street Consensus (S&P Global)

MetricConsensusActualSurprise# of Estimates
Primary EPS ($)0.64*0.24*-0.40*5*
Revenue ($USD)$79.08M*$61.13M*-$17.95M*5*

Values retrieved from S&P Global.*

Segment/Portfolio Mix

Loan Portfolio ($USD Millions)Q3 2024Q2 2025Q3 2025
Commercial loans and leases$1,790 $1,891 $1,789
Commercial real estate$2,510 $2,383 $2,337
Construction & land development$422 $259 $260
Residential real estate$379 $361 $353
Consumer$627 $140 $130
Total Loans$5,728 $5,035 $4,868
Deposit Mix ($USD Millions)Q3 2024Q2 2025Q3 2025
Noninterest-bearing demand$1,051 $1,074 $1,016
Checking (interest-bearing)$2,390 $2,181 $1,997
Money Market$1,187 $1,216 $1,241
Savings$510 $511 $487
Time$849 $819 $805
Brokered Time$269 $145 $60
Total Deposits$6,257 $5,947 $5,605

KPIs

KPIQ3 2024Q2 2025Q3 2025
Pre-provision net revenue ($USD Millions)$42.9 $32.2 $31.3
Net charge-offs to average loans (%)1.53% 2.34% 0.99%
CET1 ratio (Consolidated) (%)7.00% minimum reference; company 9.37% in Q3 20259.02% 9.37%
TCE / TA (%)6.45% 6.27% 6.61%
Cost of Deposits (%)2.69% 2.19% 2.12%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Noninterest income (near-term run-rate)Near-term quarters~$17.0–$17.5M (Q1 disclosure) No explicit update provided in Q2/Q3; actual Q3 $20.0M Maintained (no formal update)
Noninterest expense (near-term run-rate)Near-term quarters~$48.0–$49.0M (Q1 disclosure) No explicit update; actual Q3 $49.8M incl. ~$1.0M severance Maintained (no formal update)
Equipment finance originationsOngoingTightening standards; portfolio reduction (Q1/Q2) Ceased originations effective Sept 30, 2025 Lowered/Exited
CET1 target2025+Targeting ~10% CET1 (Q2) Near-term focus on CET1 over 10% Maintained (reaffirmed)
Subordinated notesSept 30, 2025N/ARedeemed $50.75M using liquidity Executed action
Common dividendQ4 2025N/ADeclared $0.32 per share (payable Nov 21) Maintained/Declared
Share repurchase11/3/25–11/2/26N/AAuthorized up to $25M buyback New

Earnings Call Themes & Trends

Note: No Q3 2025 earnings call transcript found in filings or document catalog; themes below reflect press-release narratives.

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Credit remediationQ1: Sold ~$330M GreenSky; lowered substandard and NPLs; reimbursed third-party charge-offs . Q2: NPAs to 1.56%; exited two NPLs in July totaling $29M .NPAs down to 1.02%; NPLs to 1.41%; ongoing dispositions; elevated provision due to equipment finance LGD assumptions .Improving NPAs; provisioning elevated near term
Equipment finance strategyQ1/Q2: Tightened underwriting; reducing balances; sector stress (trucking); NCOs in EF .Ceased originations effective Sept 30, 2025; $5.0M NCOs; ~$15M provision impact .De-risking accelerated
Deposit strategy & funding costsQ1/Q2: Lower cost of deposits (2.29%→2.19%); reduction in brokered; servicing deposits lowering .Cost of deposits fell to 2.12%; intentional reduction in high-cost servicing and brokered .Continued improvement
Capital & balance sheet actionsQ2: CET1 9.02%; target ~10% .CET1 9.37%; redeemed $50.75M sub notes; TCE/TA 6.61% .Building capital
Wealth managementQ1/Q2: ~$7.4M revenue; AUA ~4.10–4.18B; hiring advisors .Record $8.0M revenue; AUA $4.36B; continued hiring .Strengthening contribution

Management Commentary

  • Strategic focus and credit clean-up: “Reducing problem loans has been a priority this year and importantly, our nonperforming assets decreased to $70 million, or 1.02% of total assets… we have made the decision to cease originations in equipment finance to further reduce our exposure to higher-risk asset classes.” — Jeffrey G. Ludwig, President & CEO .
  • Profitability drivers: “Revenue trends were positive, bolstered by the expansion of the net interest margin… We also saw solid deposit growth in our Community Bank.” — Jeffrey G. Ludwig .
  • Capital trajectory: “Our capital position also improved, with the common equity tier 1 capital ratio rising to 9.4% and remaining on track to reach our 10.0% target.” — Jeffrey G. Ludwig .

Q&A Highlights

  • No Q3 2025 earnings call transcript available in the document catalog; no Q&A content accessible to extract [ListDocuments returned no transcripts for Q3 2025].

Estimates Context

  • EPS: Actual $0.24 versus consensus $0.64; significant miss likely to prompt near-term estimate revisions focused on credit costs and expense trajectory.*
  • Revenue: Actual $61.13M versus consensus $79.08M; we anchor comparisons on S&P Global’s “Revenue” definition, noting the company reports “Total Revenue” of $81.1M in its 8-K. The definitional gap suggests analysts may adjust model line-items to align with reporting conventions.*
  • Number of estimates: 5 for both EPS and Revenue, indicating moderate coverage breadth.*

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • EPS and revenue both missed consensus; the miss was primarily due to elevated provision in equipment finance and lower noninterest income as credit enhancement flipped to a minor loss .
  • Core NIM expansion and deposit cost relief are tangible positives; further benefit expected as lower-rate environment flows through deposit repricing, while intentional reductions of high-cost deposits support margins .
  • Credit clean-up is progressing—NPAs and NPLs down materially—but near-term provisioning remains elevated due to revised LGD in equipment finance; decisive action to cease originations reduces future risk .
  • Capital build continues: CET1 at 9.37% with a stated path to >10%; redemption of $50.75M sub notes simplifies liabilities; TCE/TA improved to 6.61% .
  • Shareholder returns are active: $25M repurchase authorized and $0.32 dividend declared post-quarter, providing support amid credit transition .
  • Wealth Management shows structural strength (record $8.0M revenues; AUA $4.36B), diversifying fee income as lending portfolios derisk .
  • Near-term trading: Watch additional credit disclosures (10-Q), NIM trajectory, and deposit mix shifts; medium-term thesis hinges on credit normalization, capital attainment over 10% CET1, and disciplined expense control .