Breaking Down Midland States Bancorp, Inc. (MSBI) Financial Health: Key Insights for Investors

You are defintely looking at Midland States Bancorp, Inc. (MSBI) and seeing a mixed picture, and honestly, you should be. The latest Q3 2025 earnings show a sharp drop in profitability-net income available to common shareholders fell to just $5.3 million, or $0.24 per diluted share, down from $9.8 million in the prior quarter-but that number hides a strategic clean-up. Here's the quick math: the company took a hefty $20.5 million provision for credit losses, mostly to ring-fence the troubled equipment finance portfolio, a segment they've now ceased originating. Still, the core business is showing resilience, with the Net Interest Margin (NIM) expanding to 3.79% as funding costs drop, and the Common Equity Tier 1 (CET1) capital ratio is up to 9.37%, moving toward their 10.0% target. So, is this a bank with fundamental problems, or a bank making the tough, necessary moves to protect its approximate $7.46 billion in total assets? We need to map the credit risk against the capital strength to see if the current $4.87 billion loan book is a liability or a launchpad.

Revenue Analysis

You need to know where Midland States Bancorp, Inc. (MSBI)'s money is coming from to gauge the quality of its earnings, and the story here is a mix of core strength and strategic pullback. The direct takeaway is that MSBI's revenue is heavily reliant on Net Interest Income (NII) at roughly 75% of the total, but the company is actively cutting higher-risk, non-core segments, which is causing a near-term drop in overall revenue.

For the third quarter of 2025 (Q3 2025), Midland States Bancorp, Inc. reported total revenue (NII plus noninterest income) of $81.1 million. This figure is a critical anchor for your analysis. The primary revenue sources are clearly defined by the nature of a banking operation: the spread on lending and fees from services.

• Net Interest Income (NII): The money made from loans and investments minus the interest paid on deposits and borrowings. This is the core engine.
• Noninterest Income: Fees from services like wealth management, credit card income, and service charges. This is the growth lever.

The year-over-year trend is where the realism comes in. The last twelve months (LTM) revenue ending September 30, 2025, was $210.72 million, marking a significant decline of nearly -30.0% year-over-year. This isn't just market noise; it's a structural shift. The annual revenue for 2024 was $254.52 million, already down -7.70% from 2023. Here's the quick math on the Q3 2025 contribution:

The biggest change is the surgical excision of risk. Midland States Bancorp, Inc. officially ceased equipment finance production effective September 30, 2025, a direct response to credit quality issues, particularly in the trucking industry. This move, while painful for immediate revenue, is a long-term de-risking strategy. They are also actively reducing their specialty finance exposure, aiming for it to be less than 10% of total loans.

Still, not all noninterest income is shrinking. The wealth management platform is a bright spot, showing positive revenue trends and driving the non-interest income segment to rise by 2.9% quarter-over-quarter in Q3 2025 (excluding credit enhancement income). This is where the company is focusing its future growth, alongside its core Community Banking operations in markets like St. Louis and Chicago. You can see their strategic intent in their Mission Statement, Vision, & Core Values of Midland States Bancorp, Inc. (MSBI).

What this estimate hides is the pressure on Net Interest Income (NII). While the reported NII for the 2024 fiscal year was $236.3 million, that was a $12.5 million decrease from the previous year, defintely due to higher interest expenses on deposits and borrowings, which outpaced the increase in interest income from loans. The good news is the net interest margin (NIM) improved to 3.79% in Q3 2025, driven by a decline in the cost of funding as the Federal Reserve Bank's rate cuts from late 2024 started to lower deposit costs to 2.12%. That's a positive sign for NII stabilization going forward.

Next step: Finance: Draft a pro-forma NII model that excludes the exited equipment finance revenue by the end of the week.

Profitability Metrics

You're looking for a clear-eyed view of Midland States Bancorp, Inc. (MSBI)'s profitability in 2025, and the headline is that while their core lending margin is strong, the bottom line is under pressure from credit issues and operational costs. For the first nine months of 2025 (9M 2025), the company generated $239.4 million in total revenue, but net income was just $27.7 million, reflecting a net profit margin of only 11.6%.

This is a tale of two metrics: a healthy core business battling specific portfolio risks. Your focus should be on the Pre-Provision Net Revenue (PPNR) trend, as it strips out the volatile loan loss provision (which hit hard in Q3) to show true operating performance.

Gross Profit, Operating Profit, and Net Profit Margins (9M 2025)

For a bank, the closest proxy for Gross Profit is Net Interest Income (NII)-the money earned from loans minus the interest paid on deposits. Operating Profit is best measured by Pre-Provision Net Revenue (PPNR), which is revenue minus all non-interest operating expenses, before accounting for credit losses or taxes. Here's the quick math for the first three quarters of 2025:

• Gross Profit Margin (NII Margin): The NII of $178.1 million against total revenue of $239.4 million yields a strong margin of approximately 74.4%.
• Operating Profit Margin (PPNR Margin): The PPNR of $90.5 million gives an Operating Profit Margin of about 37.8%.
• Net Profit Margin: The Net Income of $27.7 million results in a narrow Net Profit Margin of 11.6%.

The gap between the high NII margin and the low net profit margin is where you see the impact of operational costs and, crucially, the provision for credit losses, which hit $20.5 million in Q3 2025 alone.

Trends in Profitability and Operational Efficiency

The quarterly trend for Midland States Bancorp, Inc. (MSBI) shows a clear deceleration in net profitability throughout 2025, even as their core net interest margin (NIM) improved. This is defintely a red flag on risk management.

The Net Interest Margin (NIM) expanded to 3.79% in Q3 2025, driven by a decline in the cost of funding, which fell to 2.12% for deposits. However, Net Income plummeted from $12.6 million in Q1 to $5.3 million in Q3, largely due to a strategic decision to increase loss-given-default assumptions in the equipment finance portfolio, leading to a large provision expense. The company is actively addressing this by ceasing equipment finance production.

Comparison with Industry Averages

When you compare MSBI to its peers, the picture is mixed, highlighting the impact of their specific portfolio issues on overall efficiency. Midland States Bancorp, Inc. is a community bank, which typically targets higher margins.

• Net Interest Margin (NIM): MSBI's Q3 2025 NIM of 3.79% is strong. It sits comfortably within the typical 3.5% to 4.5% range for U.S. community banks and is well above the industry-wide average of 3.26% reported in Q2 2025. This shows solid core lending profitability.
• Operational Efficiency (Efficiency Ratio): MSBI's Q3 2025 Efficiency Ratio of approximately 61.4% is a concern. The industry aggregate efficiency ratio for U.S. banks was a much tighter 56.2% in Q1 2025. A higher ratio means the bank is spending more to generate each dollar of revenue. The company's noninterest expense was $49.8 million in Q3 2025, and they need to continue their focus on cost management to close this gap.

The company is profitable, but its operational efficiency lags the industry benchmark, and its net income is highly volatile due to credit provisions. For a deeper look at the balance sheet risks, you can read the full analysis at Breaking Down Midland States Bancorp, Inc. (MSBI) Financial Health: Key Insights for Investors.

Debt vs. Equity Structure

When you look at how Midland States Bancorp, Inc. (MSBI) funds its operations, the picture is one of measured leverage, which is typical for a regional bank, but one that is actively managing its debt profile. The direct takeaway is that the company is leaning slightly more on debt than the regional bank average, but its recent actions show a clear focus on reducing its higher-cost borrowings.

As of the third quarter of 2025, Midland States Bancorp, Inc.'s GAAP Total Shareholders' Equity stood at a solid $584.0 million. This is the core capital base, representing the shareholders' stake. To finance its growth and balance sheet assets, the company utilizes a mix of debt, primarily in the form of subordinated notes and other borrowings. Looking at the most recent data, the company's total debt (including both short-term and long-term borrowings) was approximately $353.7 million as of the second quarter of 2025.

Here's the quick math on the Debt-to-Equity (D/E) ratio (Total Debt / Total Equity):

• Total Debt: $353.7 million (Q2 2025)
• Total Equity: $584.0 million (Q3 2025)
• D/E Ratio: 0.61

What this estimate hides is the precise breakdown between short-term and long-term debt, but the resulting D/E ratio of 0.61 is the key metric here. For context, the average Debt-to-Equity ratio for the US Regional Banking industry is generally around 0.5 as of November 2025. Midland States Bancorp, Inc. is running a slightly higher leverage ratio than its peers, which means it uses a bit more debt relative to equity to generate returns.

Still, the company's regulatory capital ratios are strong and well above minimum requirements. As of September 30, 2025, the consolidated Common Equity Tier 1 (CET1) ratio was 9.37%, and the Total Capital ratio was 14.29%. The management's near-term focus is defintely on building that CET1 ratio to their target of over 10.0%.

Recent Debt Management and Refinancing Activity

The good news is that Midland States Bancorp, Inc. is actively deleveraging and managing its funding costs. This is a clear action that mitigates the slightly elevated D/E ratio. On September 30, 2025, the company completed the redemption of $50.75 million in subordinated notes (a form of long-term debt), using existing liquidity to do so. This move reduces both the total debt burden and the associated interest expense, which should positively impact the net interest margin going forward.

The balance between debt and equity is a constant trade-off. Debt financing, like the subordinated notes, is cheaper than issuing new common stock, but it adds interest rate risk and financial obligations. The company's strategy for the 2025 fiscal year has been to use cash flow to pay down debt-specifically, higher-cost notes-while also managing its deposit costs, which fell to 2.29% in the first quarter of 2025 due to Federal Reserve rate cuts in late 2024.

The company is prioritizing equity growth through retained earnings and capital management, aiming to improve its Tangible Common Equity to Tangible Assets ratio, which was 6.61% as of Q3 2025. This focus on organic capital growth, plus the strategic debt redemptions, shows a prudent approach to the capital structure. You can read more about the broader context in Breaking Down Midland States Bancorp, Inc. (MSBI) Financial Health: Key Insights for Investors.

Liquidity and Solvency

You're looking for a clear picture of Midland States Bancorp, Inc. (MSBI)'s ability to meet its near-term obligations, and honestly, for a bank, the standard Current and Quick Ratios are almost useless. They often spit out massive, misleading numbers because a bank's main assets (loans) and liabilities (deposits) are structured differently than a manufacturer's inventory and accounts payable.

Instead, we focus on banking-specific metrics. Midland States Bancorp, Inc.'s liquidity position is defintely strong, anchored by its Liquidity Coverage, which stood at a healthy 1.84x as of the second quarter of 2025. That means they have nearly twice the high-quality liquid assets needed to cover potential net cash outflows over a 30-day stress period. The bank also reported a total estimated liquidity of $2.62 billion as of December 31, 2024, which is a solid buffer.

Working Capital Trends: Strategic De-risking

The trend in what would be considered a bank's working capital-the balance of short-term assets and liabilities-shows a deliberate, strategic reduction in exposure. Total deposits decreased to $5.60 billion by September 30, 2025, a reduction of $342.1 million from the prior quarter. This drop was largely by design, as the bank actively reduced higher-cost funding sources like servicing deposits and brokered deposits by $368.3 million in the third quarter alone.

Here's the quick math on the balance sheet shift:

• Total Loans decreased to $4.87 billion at Q3 2025.
• The Community Bank's loan portfolio decreased by $39.2 million in Q3, due to large payoffs and nonperforming loan reduction.
• The bank ceased equipment finance production on September 30, 2025, to further reduce exposure to higher-risk asset classes.

This isn't a sign of distress; it's a controlled exit from riskier, non-core lending programs, which should improve future profitability and asset quality. You can read more about the drivers behind these decisions here: Exploring Midland States Bancorp, Inc. (MSBI) Investor Profile: Who's Buying and Why?

Cash Flow Statement Overview

Looking at the cash flow statement (CFS), the company's focus has been on managing its balance sheet and reducing debt. The Trailing Twelve Months (TTM) Operating Cash Flow was a positive $154.79 million as of June 2025, showing the core business is generating cash. Cash flow from investing activities reflects the strategic shifts in the loan and securities portfolios, including the sale of participation interests in the GreenSky loan portfolio earlier in 2025.

The most telling near-term cash flow action is in financing. In the third quarter of 2025, Midland States Bancorp, Inc. redeemed $51 million in subordinated notes. This is a strong signal: they used existing liquidity to pay down debt, which reduces future interest expense and strengthens the capital structure. Still, they rely heavily on customer deposits for funding, so a decline in that base remains a near-term risk.

Liquidity Strengths and Risks

The main strength is the high liquidity coverage of 1.84x, showing a significant cushion of liquid assets. Plus, the nonperforming assets to total assets ratio has decreased sharply to 1.02% as of September 30, 2025, down from 2.10% at the end of 2024. This credit quality improvement directly reduces future liquidity strain from problem loans. The risk, honestly, is the reliance on customer deposits for funding; a significant or rapid decline in available funding sources could impact their ability to originate new loans and execute strategic plans. But the recent reduction in high-cost brokered deposits shows management is prioritizing stability over expensive growth.

Valuation Analysis

You're looking at Midland States Bancorp, Inc. (MSBI) and wondering if the market has overreacted to their recent challenges, or if the stock is truly a value trap. Honestly, the valuation metrics as of late 2025 scream 'cheap,' but you have to dig into the context. The stock has been on a tough ride, still down significantly from its 52-week high, but the deep discount to book value suggests a potential opportunity if management can execute their credit cleanup.

The stock's performance over the last 12 months (LTM) has been brutal, showing a decline of 39.46%. This plunge is why the valuation multiples look so compelling. The current price of $15.27 sits just above its 52-week low of $14.24, which is a clear sign of market anxiety. But remember, price alone tells you nothing; you need the ratios.

Here's the quick math on the key valuation metrics:

• Price-to-Earnings (P/E): The trailing P/E ratio is 7.53. To be fair, this figure is artificially low because it follows a period of significant earnings volatility, including a large loss in late 2024. A P/E this low for a regional bank often flags risk, but it also signals a steep discount if earnings stabilize.
• Price-to-Book (P/B): The P/B ratio is a critical metric for banks, and MSBI's current ratio of 0.78 is the most compelling argument for potential undervaluation. This means the stock is trading at a 22% discount to its accounting book value, suggesting the market is valuing the company's net assets below their stated worth.
• Enterprise Value-to-EBITDA (EV/EBITDA): For a bank, the EV/EBITDA metric is less common than P/B. Instead, we look at the Enterprise Value-to-Sales (EV/Sales) ratio, which is estimated at 1.09x for 2025. This is a relatively modest multiple, again suggesting the market is not pricing in significant growth or high profitability.

The dividend story is a major factor here. Midland States Bancorp, Inc. is currently offering an eye-popping dividend yield of 10.28%, based on an annualized dividend of $1.28 per share. The forward-looking payout ratio, based on next year's earnings estimates, is a sustainable 45.55%. This high yield acts as a floor for the stock price and provides a significant income stream while you wait for a potential turnaround. A double-digit yield is defintely a risk signal, but the payout ratio suggests it's covered by future earnings.

The Wall Street consensus is cautious. Out of six analysts covering the stock, the consensus rating is a Reduce, with two 'Sell' ratings and four 'Hold' ratings. Nobody is pounding the table for a 'Buy' right now. The average 12-month price target is $19.25, which represents a potential upside of about 26.1% from the current price. This gap between the current price and the target is where the opportunity lies, but it hinges on management's ability to execute on their strategy. You can read more about their strategic direction here: Mission Statement, Vision, & Core Values of Midland States Bancorp, Inc. (MSBI).

What this estimate hides is the execution risk. The company has been working through accounting issues and credit cleanup, including ceasing equipment finance production in Q3 2025. While nonperforming assets decreased to 1.02% of total assets in Q3 2025, down from 2.10% at the end of 2024, the market is still waiting for sustained, clean earnings. The valuation is cheap, but it's cheap for a reason: the market needs to see the strategic initiatives translate into consistent profitability.

Risk Factors

You're looking for a clear picture of what could disrupt Midland States Bancorp, Inc. (MSBI)'s trajectory, and honestly, the biggest risks right now are less about the economy and more about cleaning up legacy issues. The bank is showing real progress, but you need to watch two things: credit quality fallout from past lending and ongoing regulatory compliance struggles.

Here's the quick math on why this matters: MSBI's net income for Q3 2025 dropped to just $5.3 million, down from $9.8 million in the prior quarter, which tells you the cleanup is still hitting the bottom line.

Operational and Financial Cleanup

The most pressing internal risk is the fallout from past lending decisions, specifically in the specialty finance and equipment financing units. This isn't just a paper loss; it's a tangible hit to earnings. The Provision for Credit Losses on loans for Q3 2025 was a significant $20.5 million, largely due to continued loss trends in the equipment finance portfolio. Plus, the bank expects to recognize a massive goodwill impairment expense between $135.0 million and $154.0 million in the first quarter of 2025, which, while not impacting regulatory capital, definitely signals a strategic misstep from the past.

The good news is management is taking clear, aggressive action. They have strategically exited $65 million of non-performing loans through July 2025, reducing the non-performing assets to total assets ratio to 1.02% as of September 30, 2025, a pronounced decline from 2.10% at the end of 2024.

• Ceased new originations in the equipment finance portfolio (effective September 30, 2025).
• Sold off a substantial portion of higher-risk loan portfolios, including GreenSky.
• Targeting a Common Equity Tier 1 (CET1) capital ratio over 10.0%, up from 9.4% in Q3 2025.

Regulatory and External Headwinds

The second major risk is regulatory and governance-related. The company received a deficiency notification from Nasdaq in August 2025 for failing to file its Q2 2025 quarterly report (10-Q) on time. This non-compliance, tied to ongoing restatement issues involving third-party lending arrangements, raises a red flag about operational discipline and investor confidence. You can't ignore a Nasdaq warning.

Externally, Midland States Bancorp, Inc. faces the same pressures as any regional bank, including intense competition from larger banks and nimble financial technology (FinTech) companies. They also remain exposed to interest rate risk, which can impact Net Interest Income (NII). To be fair, they use hedging activities, like interest rate swaps, to stabilize earnings against adverse market movements. Their core strategy is to focus on the community bank franchise and wealth management, the latter of which posted a record Q3 2025 revenue of $8 million, which helps diversify income away from pure lending.

If you want to dive deeper into the full financial context, check out the full post on Breaking Down Midland States Bancorp, Inc. (MSBI) Financial Health: Key Insights for Investors. Your next step should be to monitor the Q4 2025 filing date for the delayed Q2 10-Q; that will be the ultimate test of their operational control.

Growth Opportunities

You're looking for a clear path forward for Midland States Bancorp, Inc. (MSBI), especially after a mixed Q3 2025 where revenue of $81.33 million beat estimates, but the $0.24 EPS missed the consensus. The story here isn't about past performance; it's about a deliberate, strategic pivot to higher-quality earnings. That's the real opportunity.

The management team is executing a classic cleanup and refocus strategy. They've been aggressively shedding higher-risk, non-core assets to stabilize the balance sheet, which is a necessary, albeit painful, short-term move. For example, they ceased production in the equipment finance portfolio effective September 30, 2025, and sold off approximately $330 million of GreenSky loans in April 2025. This de-risking is what sets up the future growth.

The near-term forecasts reflect this turnaround effort. Analysts project the company's annual revenue to expand at 13.7% per year, which is significantly faster than the broader US market average. This momentum is defintely expected to translate to the bottom line, with earnings forecast to grow by a remarkable 106.16% annually, pushing the stock toward its estimated fair value of $31.32. Here's the quick math on the earnings per share (EPS) shift:

What this estimate hides is the source of that growth. It's not a broad-based lift; it's a targeted focus on two key areas that have shown solid performance: the Community Bank and the Wealth Management platform. You can see a deeper dive into the investor base driving this optimism at Exploring Midland States Bancorp, Inc. (MSBI) Investor Profile: Who's Buying and Why?

The strategic initiatives that will drive this growth are clear, and they leverage the bank's core strengths and geographic footprint in the Midwest. They're not chasing every shiny new loan; they're focusing on where they have a competitive edge.

• Community Bank Expansion: Loans originated by the Community Bank increased by $56.8 million in Q1 2025, showing strong pipelines in markets like St. Louis and Chicago.
• Wealth Management Acceleration: This platform is a consistent revenue engine, posting a record quarter with $8 million in revenue in Q3 2025. Assets under administration stood at approximately $4.18 billion as of June 30, 2025.
• Margin Improvement: The net interest margin (NIM) expanded to 3.79% in Q3 2025, partly due to the intentional reduction of higher-cost deposits like brokered and servicing deposits.
• Tech-Forward Strategy: The company is pursuing a tech-forward strategy, including a dedicated Fintech initiative to improve operational capabilities and customer experience.

Midland States Bancorp, Inc.'s competitive advantage isn't just about a few good quarters; it's structural. They operate with a diverse service offering-commercial banking, private wealth management, and trust services-which helps buffer against volatility in any single line of business. Plus, their history of 16 successful acquisitions since 2008 shows they know how to integrate new businesses and expand their footprint in stable, lower deposit cost midwestern markets. This is a bank building a foundation, not just riding a wave.